ask the expert

Investing in Insurance

Questions Answered (9)


Yashish Dahiya

CEO & Co-Founder

At your age, you should ideally buy a ULIP plan. This will help you build a handsome corpus amount.Difference between a normal ULIP plan and a plan specific for pension is the withdrawal at the time of maturity. For a normal plan, the return is paid out at maturity. This is all tax free and can then be utilized to buy annuity. For a pension plan, it is about discipline. At maturity, only one- third of the amount can be withdrawn and rest two-third needs to be put under annuity of the same insurer or any other insurer of your choice. Breaking this structure makes the withdrawal amount accountable for tax.

Hi, I want to know investing in ULIP or Term and MF. Which option is best one ?

Yashish Dahiya

CEO & Co-Founder

This is a long debate actually and various investment advisors will have different things to say. You might also get a feeling that people chose the side in which they are. However, facts will help us deal with the question in a better way.Unit Linked Insurance PlansULIPs basically are very much like fund operated investment tools in which charges are deducted for operational matters and rest goes as investment in various funds. Every ULIP thus has a cost linked with it.-Essentially they have insurance/ Life cover linked with it.-They provide transparency and flexibility as compared to other investment options in insurance segment-Triple tax benefit structure is applicable. -Initial tax is saved under 80 C. so premium paid upto 1 lakh can save upto 30K depending on tax bracket.-The final amount at maturity is tax free under section 10(10D). Thus the income is tax free for self as well as the nominee. -The whole investment amount does not bear any service tax other than the mortality charge.Mutual Funds Term PlanMutual funds are again market linked products maintained by fund managers helping with investments in right instruments, thus helping in balancing risk.Like UIIP, MFs too has cost attached. Term plan added brings additional cost.-Life cover is provided by the term cover (mortality cost turns out to be cheaper for a healthy, young, non smoker individual)-Transparent product. All costs are declared.-80C is provided by specific schemes only. These schemes have a lock in for 3 years essentially. Cost structure work differently for these schemes and are on a higher side.-Long term/ short term capital gain taxes are applicable.-Other than these tax saving ones, lock in is not applicableHere, you can clearly see that ULIP has higher cost in the initial 4 years post which MF plus term takes over. *Please note that term cover will have a constant life cover of 5 lakhs here throughout these 20 years whereas ULIP product has 5 Lakhs or Fund value whichever is higher paid out. Hence, in later years life cover of ULIP has decreased. There are few ULIPs (Typre II Ulip) which has a constant life cover too. I have not taken those while calculating here.* Also note that tax saving has not been taken into consideration while showing the illustration. ULIPs will come out to be much more attractive in that case. You can simply deduct the tax saving from the premium you pay to get a glimpse of what that offers. The return is tax free as well.Another fact to note is, ULIPs have a lock in for 5 years. The regulator beliefs the risk to be too high, in case policyholder opts out of the policy in the initial 5 years. Thus the restriction is in place. Market trend shows the same. In Mutual fund there is no such restriction. This enables the policyholder to opt out any time he wishes to. However, someone who does not track market that often, this can turn out to be a very risky business.In my opinion, the most valuable point offered by ULIPs is investment discipline. You know that you have to pay premium by due date in order to avoid policy from getting lapsed. This will make you pay these premiums. Thus a regularized saving is ensured. Thus, a big corpus amount by the end. In Mutual funds there is no such restriction. You can rater opt for Systematic investment plans so as to get into a habit. Still, there are no penalties in case you opt out. So to summarize, one should look up to investing in ULIPs if they belong to any of these categories:-They have tax savings to do under 80 -They plan to invest longer than 10 years.

Tell me about whole life term insurence for a spouse with health insurance & accidental insurance

Yashish Dahiya

CEO & Co-Founder

Whole life Insurance provides life cover till a defined age (generally 85 years or 99 years) and the money paid as a premium is invested in company funds. If there is any bonus earned by the company, the same is paid. This translates into income as well.You can buy it for your spouse. These policies allow few riders as well and thus very well customizable. Most common riders are:-Waiver of Premium Rider (WoP)(Waives off premium in cases of death, policy continues to run and pays to the nominee)-Term Plus rider (Provides additional life cover at nominal cost)-Accidental death benefit rider (ADB) (Provides additional cover in the event of accidental death)-Critical Illness rider (CI) (Pays fixed amount for treatment/support on getting diagnosed with one of the listed critical illnesses)If you want to purchase a whole life insurance, you have choices amongst Bharti Axa eAjeevan Sampatti , Edelweiss Tokio Cash Income

Is there any policy with which I can plan for my retirement?

Yashish Dahiya

CEO & Co-Founder

Now being a defense person, you are provided good medical coverage and support at military hospitals. However, this may often not be sufficient for your case. The problem is that not all insurance companies would offer medical insurance to defense personnel, however, you should get individual (or family floaters) for your non defense family members (parents, children, spouse). If you are personally not part of the insurance cover, then the companies would offer this protection. You should also look at investing your money into multiple investment tools, these could be investment insurance products or could even look at non insurance alternatives for investment mediums. Look at long term investments that can help you with financial needs on different stages of life (marriage, birth of children, children education and retirement). It is critical that this is started as early as possible. Long term investment of monies can gives some really good returns which make life a lot easier in the times to come.Is there any policy with which I can plan for my retirement? You have not mentioned your age, family and financial status. Hence it will be difficult to pin point on a plan. However, I will talk of a thumb rule. If you are less than 40, get a ULIP plan. You have options of ULIP pension plan by HDFC and ICICI etc. You could also buy online ULIP plans with low cost structures so that the return is maximum. The amount you thus get at maturity can be then utilized to buy annuity products. These will serve as pension to you. You can assume 7% rate for calculation purposes of your annuity. If you are above 40 years, go for a mix. Get a traditional guaranteed structure product for half the amount you plan to invest. Plans like Reliance Super Endowment and HDFC Sanchay will help you with their flexible structure in opting for a product which can suit your retirement age. These allow policy for a range starting 15 years to 30 years. The much needed life cover will be an add on for you.Mix this with HDFC Personal pension plus. This product will give you ULIP mix along with a mix of guarantee on capital paid. IS LIC good for long term insurance?In my opinion the real question here should be based not on a company, but on particular products. Every company has some great products, some good products, some not so good products and some bad products. Insurance products have evolved over the years and now every company has good products, especially if you are willing to invest for the a long period of time. For investment/insurance policies, if you are willing to invest for a long term, then there are some very good new ULIP policies that have been launched recently (Aviva, Max Life have launched) which give returns which are comparable and often can beat Mutual Funds and at the same time give you the added advantage of insurance cover.Now LIC products have recently been on the more expensive side when compared to the returns they give. However, a lot of customers still prefer LIC due to the fact that LIC is perceived to be more stable as a company and a brand since. Now in this aspect, I always suggest to customers that if you are willing to pay a little extra premium for having mental peace for the next 23-30 years of your policy period, then LIC is definitely an option for you to explore. Many customers are vary of buying insurance from private players since they are not convinced that these players would be around 20-30 years from now. Now while this ideally shouldnt be a concern for the customer, since IRDA does make rules that ensure that customers are taken care of incase any company does want to exit, it is a call which each customer must make for themselves. LIC does have good stable products which may not necessarily give you the best returns in the market, but do offer you good returns.

If I have health insurance, is there a need to take personal accidental insurance?

Yashish Dahiya

CEO & Co-Founder

Personal Accident insurance is a product which should definitely be part of your insurance portfolio regardless of whether you have a health insurance or not. It is a product which covers a very different need. A health insurance will give you good medical expense coverage in the event you need to be hospitalized for certain diseases and illnesses. PA cover would provide you with a lump sum payment in the event of an temporary or permanent total or partial disability due to an accident or injury. While there are certain portions of these products which may over lap, most of the benefits of a PA insurance are independent on medical insurance. There are many companies which offer these products online and depending on the sum assured chosen and the profile of the customer, the policy may be issued instantly online. Some PA insurance policies also provide a cover for legal expenses, transportation expenses and give a payout in event of death. So as you can see, a PA policy has aspects of health and life insurance along with its own properties and can be bought with no medical tests (as it does not offer payout for illness or disease). So all in all, please consider buying a good personal accident cover for yourself.

I need to take an insurance policy for my parents. The age of my dad is 59 and mom is 51. Please suggest me insurance that can cover preexisting condition with less duration and having critical illness cover with low premium.

Yashish Dahiya

CEO & Co-Founder

incase your parents have a pre existing condition, then the products you should consider would be Religare Care, and L

How much insurance do I insure me and my family for?

Yashish Dahiya

CEO & Co-Founder

Since you have not provided any information about your age, income and family details, I would unfortunately not be able to give you a customized recommendation. I can however give you a broad rule of thumb you should follow.There are 4 basic products which should be part of your overall insurance portfolio. They are: Term Insurance: This is a risk only cover for your life. There are no returns associated with this product, however, it offers you a huge sum assured at very nominal premiums (if bought online). Ideally, the amount of insurance required should be calculated on the following rule. Your annual income into 10, plus any outstanding loans/debts. For eg, if you annual income is Rs. 15 lakhs and you have a 50 lakh home loan still outstanding (which isnt secured), then you should have (15 X 10) 50 = Rs. 200 lakhs (Rs. 2 crores) as your term insurance amount. If you dont have any home loan, car loan, educational loan etc, then in the example above a Rs. 1.5 cr cover would be sufficient. This for a 30 year old healthy non smoker male, can come at a premium of as low as Rs. 7-8 thousand a year. This product should ideally be bought for each earning member of the family. Health Insurance: Assuming you have a spouse and 2 children, then you should look at buying a family floater of approximately Rs. 10 lakhs minimum to cover your entire family. There are many options available from Religare, Max Bupa, Apollo Munich, HDFC, Reliance, L

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Birla Sun life Insurance company is a part of which group?

Bharti group


Aditya Birla Group

Yash Birla Group




How much should I insure for?

The amount you insure for is called the sum assured. Normally a policy should cover the value of the asset - either the market value while insuring, or the cost of replacing the asset should it be lost or destroyed. The premium will depend on the sum assured.

I am already covered by my Employer in a Group Mediclaim policy, do I need to buy a separate policy ? In case of a claim will I get paid from both policies?

- It's good that your employer covers you under a group mediclaim but generally the SI of such policies is very low. This amount seems to be insufficient in today's scenario where the cost of treatment is increasing every year. - Most of the group mediclaim policies has clauses of co-pay and deductibles built in and due to these the insured has to pay from his pocket. - There are times when you change job and then you get covered under a new policy. As a result of this insured losses on his pre-existing benefit that he has accrued over the period. - There is always a time gap between joining a new job when the individual and his family is not covered. This makes them susceptible to risk situation - The insured might even think of starting his own business and this he and his family will no longer be covered under any insurance policy.

What coverage available under health insurance plan?

Hospitalization expenses for treatment of disease and accident for min of 24 hrs, pre and post hospitalization expenses generally upto 30 days are paid max upto sum assured. Hospitalization expense includes Room Rent, Medicine Expenses, Doctor Fees, Diagnostic Expenses and other medical expenses related to treatment. Expenses which are not paid by insurance company are registration charges, service charges/ nursing care chares, personal expenses such as telephone, fax, refreshment etc., taxes levied by government from time to time and other expenses which are not related to treatment.

Is it compulsory to issue policies in only electronic form? (i.e. is dematerialization of insurance policies compulsory, as in the case of shares?)

No, it is not (yet) compulsory to issue insurance policies only in electronic form. Policy holders can choose the form in which they want their policies issued - paper or electronic.

How do I understand a life insurance Policy?

It is necessary to know the following terms in order to understand a life insurance policy: Premium - the amount of money you have to pay to continue your insurance coverage. The premium amount depends upon • Your age • Policy selected • Mode of premium payment • Term of premium payment • Term of the policy You could choose to pay premium monthly (as a deduction from your salary), quarterly, half yearly or annually. However, there are Single premium policies where you pay premium once only (hence you do not have the facility to make the effort of paying premium regularly). Term - the number of years you choose to insure yourself. The longer the term the lower the premium. Policy terms vary from a single year to a maximum of 55 years. Not all policies offer you a range of terms. Premium paying term - the number of years you pay premium on your policy. The longer the premium paying term, the lower the premium. Usually the premium paying term is the same as the policy term. However, some policies offer you the option of selecting a premium paying term that is lower than the policy term. Sum Assured / Face amount - the amount of insurance cover you have or the minimum amount your family receives in the event of your demise. Your family could get more than this amount based on the type of policy or riders that you select. Bonus / Participating profit - is declared by the insurance company each year as a proportion of the sum assured. This amount could vary; it could be different for different policies and terms. Although declared each year, the bonus is a lump sum payment made to the insured person upon maturity or to his family upon death, in addition to the sum assured. Bonus is based on an insurance company's assumptions about the future performance. Like any other assumption, actual results will be more or less favourable. The longer the time being projected, the greater the likelihood of variance from the predicted values. Not all companies guarantee the amount of bonus on each policy. Guaranteed Addition - is a declaration made by the insurance company; it states that irrespective of the financial results of the company, the company will pay the guaranteed amount of money, to the insured or his nominee. Like the bonus amount, this is a lump sum payment made to the insured upon maturity or to his family upon death, in addition to the sum assured. Survival Benefit - is the amount of money received at pre-fixed, regular intervals by the insured person, upon survival of the term of the policy. Often, money received upon maturity or at the end of the term of the policy is also referred to as Survival benefit. Maturity Benefit - is the amount of money received by the insured, upon survival of the term of the policy. In case of policies that offer a bonus, the sum assured plus the bonus for the term of the policy is paid to the insured upon maturity. In addition, some policies offer a loyalty addition, which is paid as a proportion of the sum assured and is based on the term of the policy. In case of policies that offer no bonus, upon maturity, the sum assured or a refund of the premium or no money is receivable by the insured (depending on the type of policy selected). Cover or Death Benefit - is the amount of money the nominee receives from the insurance company upon the insured's death. In addition to the sum assured, this would include the bonus, if any. If additional riders such as Accident Death Benefit or Additional Sum Assured have been selected, the amount of money receivable by the nominee could be higher. Returns or Pre-tax yields - Interest earned on the premium, on a compounded basis, is the pre-tax yield. Post-tax yields - If the premium paid for a life insurance policy is used as a tax deduction under section 80C, then the effective premium paid by the insured is lower. Interest earned on the effective premium, on a compounded basis, is known as the post-tax yield. Source: SBI Life Insurance

I have not paid premium for some time. Can I revive my policy?

For a regular premium paying policy, premium has to be paid within 30 days of the due date (15 days if the mode selected is monthly). The insurance company provides a grace period during which you can pay the premium and keep the policy in force. If the premium has not been paid within the grace period, the policy is considered lapsed. Insurance companies offer various schemes that facilitate the process of reviving lapsed policies. A few are mentioned below - • Paying all the arrears of premium and the interest for the same period can revive the policy. In certain cases, the company may offer installment revival schemes, where you pay a part of the arrear along with the regular premium, and the balance of the revival amount is paid in instalments spread over a year of two years. • Under another scheme, a money-back policy can be revived by using the survival benefit under the policy (the money receivable from the insurance company at regular intervals) to pay premium plus interest. (If the survival benefit amount is lower than the revival value, you have to pay the shortfall. If it is higher, you receive the excess amount.) Source: SBI Life Insurance

Should I buy a life insurance policy even if my employer has insured me in a group insurance scheme?

It is always sensible to buy an individual life insurance policy because a. The amount of insurance covered by your company may not be a very large cover b. If your employer decides to cut cost then you may no longer be covered c. If you quit the company then you may no longer be insured d. Age also plays a role. The premium goes high as you start getting older.

I am healthy. Why should I take health insurance?

Insurance cover is always available for uncertain event; once we suffer from any disease it is difficult to take coverage for such disease. Life is full of uncertainties we do not know when we will be suffer from diseases and accident so, it is better to take health insurance when we are healthy. When we are healthy we have number of choices available and we can choose the best and affordable plan for us.

Can anyone become or set up an Insurance Repository?

No, only entities approved by Insurance Regulatory and Development Authority (IRDA) can become an Insurance Repository. Insurance Companies cannot set up an Insurance Repository on their own nor can they hold more than 10% stake in any Insurance Repository. Source: CAMS

What is insurance?

We face a lot of risks in our daily lives. Some of these lead to financial losses. Insurance is a way of protecting against these financial losses. For a payment (premium), an insurance company will take the responsibility of compensating your financial losses.

Why do different people have different premiums ?

The premium is calculated on the extent and nature of the cover you want. A higher sum insured means a higher rate of premium. Similarly a higher risk will be charged a higher premium. An example of this is that an older person will have to pay a higher premium for health insurance for the same sum insured. Sometimes the risk is higher depending on the location of risks - for example in motor insurance in areas where accidents are higher. So the premium will vary according to the nature and severity of the risk. If I buy a policy and don't make a claim, it is a loss. So, why should I buy insurance? General insurance is not meant to be for savings or investment returns. It is meant for protection. What you pay for is the protection against a risk. To approach it as something from which returns should be obtained is not the correct approach as there is a price to pay for protecting a property worth lakhs for a few hundred rupees.

Will my premium amount increase after I have bought a policy?

Once you buy an insurance policy, a contract is signed between the policy buyer and the insurance company to pay a fixed amount of premium and get the insurance cover. Hence, the premium amount is fixed before the policy is taken and the insurance company cannot increase the same later. However, the Finance Ministry levied a service tax on insurance companies in 2002-03 which could have led to increase in premium.

Can I take health insurance plan for my parents who are senior citizen? Is there any tax benefit available if I pay premium for them?

Yes, you can take health insurance plan for your parents who are senior citizen. Now a day's so many insurance company has designed product especially for senior citizens. You are also eligible to claim tax deduction u/s 80D upto Rs 20000/- P.A. if you pay premium for them. Source:CAMS

Which type of policy is best suited for me ?

The type of policy that suits you best depends on many factors, such as your insurance objectives, your income, assets, liabilities, number of dependent members in your family and family expense. Life insurance policies are broadly classified in to three categories Endowment policies Whole life policies Pension policies Endowment policies Endowment policies cover the insured for a specified period. Thus, the insured may select to insure himself until retirement; e.g. if he is 25 years old, he may choose to insure himself for 35 years, until he reaches the age of 60. • Upon the death of the insured (during the term of the policy), the nominee receives the sum assured plus the bonus, if any. Bonus is paid for the number of years the policy was in force. • Upon surviving the term of the policy, i.e. upon maturity, the insured receives the sum assured plus the bonus for the term of the policy, if any. Thereafter, the insured is not covered by the policy. • Endowment policies are usually more expensive in comparison to whole life policies. Endowment policies are broadly classified into two types - Endowment - Without profit and Endowment - With profit. • Endowment - Without profit or Term products - offer the nominee the sum assured only, upon death of the insured. Upon surviving the term of the policy or upon maturity, the insured may receive the sum assured or a portion of the sum assured or a refund of the premium only. Typically, such policies are low-cost policies. • Endowment - With profit policies - offer a bonus (which could be guaranteed) in addition to the sum assured, upon death of the insured or at the end of the term of the policy. These policies cost more than the Endowment - Without profit policies. Currently, four types of Endowment - With profit policies are offered in the market: Endowment with profit policies • Upon death of the insured, the nominee receives sum assured plus bonus for the number of years the policy was in force. • Upon surviving the term of the policy or upon maturity, the insured receives sum assured plus bonus for the term of the policy. The amount receivable upon maturity is tax-free. • Many people prefer to buy such policies for terms that mature during their retirement period. Often, the maturity amount is utilized to supplement the pension income (pension income is taxable). Money back policies During the term of the policy, the insured receives a fixed portion (percentage) of the sum assured at regular intervals. This money received during the term of the policy is tax-free. Upon surviving the term of the policy or upon maturity, the insured receives the balance amount of the sum assured plus bonus for the term of the policy. Upon death of the insured, the nominee receives full sum assured plus bonus for the number of years the policy was in force. (Money received by the insured during the term of the policy is not deducted from the amount paid to the nominee.) Money back policies cost more than Endowment - With profit policies. Many people prefer to purchase such a policy to utilize the money receivable for going on a holiday, re-furnishing their homes or even re-investing the same amount. Child Plans • The child receives sum assured plus bonus (if any) at a pre-determined time. This money is receivable irrespective of the fact that the proposer is dead or alive. • The proposer for such a policy could be the parent/guardian/grand parent; he pays the premium for the policy. • In the event of death of proposer, usually no further premiums need to be paid by the family. However, depending upon the policy type, the child may or may not receive the sum assured upon the death of the insured. However, the policy continues and the child receives the sum assured plus bonus, if any, at the pre-determined time of the policy. • Upon survival of the term of the policy, the child receives money at the pre-determined time. • Such policies are best suited for planning children's higher education and marriage expenses. Unit-linked Insurance Plans • A portion of the premium is invested in the stock market or in a mutual fund. Thus, the returns earned on such a policy are transparent (unit-linked) since they can be tracked on a daily basis. • The company utilizes balance part of the premium to cover insurance and administrative costs. • In the event of death of insured, the nominee receives sum assured plus returns earned in the market by the insurance company. • Upon surviving the term of the policy, the insured receives the returns earned in the stock market by the insurance company. Whole life Plans Whole life policies provide insurance until the death of the insured person. • Upon the death of the insured, the nominee receives the sum assured plus the bonus, if any. • Whole life policies typically offer no survival benefits, since there is no definitive term to the policy. However, the insured could make withdrawals or take loans against the cash value of the policy. • Typically, the cash value (the interest or bonus earned on the premium) of a Whole Life policy is higher than that of an Endowment with Profit policy. • Moreover, the premium for a Whole Life policy is paid for a longer duration of time (since the insurance coverage term is longer). However, the insured has the option of selecting the premium paying term. Pension Plans • Pension policies provide a regular sum of money to the insured or to his nominee for a fixed period. • The insured has the option of selecting when and for how long (term) she or he would like to receive the pension amount. • In the event of death of the insured during the term of the policy, the nominee has the option of taking a lump sum amount or receiving a regular pension for the remaining term of the policy. It is advisable to have a portfolio of policies with varied benefits, as a single policy cannot meet all your insurance objectives. Source: SBI Life Insurance

How long will it take for the Insurance Repository to open AN e Insurance Account?

The Insurance Repository will open an e Insurance Account within 7 business days from the date of receiving the eIA application form. On opening the e IA, the Insurance Repository will inform the applicant the particulars of the e Insurance Account and usage instructions through email and by post.

How do I convert my existing paper policy into electronic form?

On opening an e IA, you just need to write out a request, addressed to the Insurer, for converting your existing paper policy to electronic mode. Request Forms for policy conversion are available in all offices of the respective Insurance Repositories. They can also be downloaded from respective websites. You need to fill out a separate request for each paper policy that you wish to convert to electronic form. These requests, duly signed, can be submitted at the respective Insurance Company or at any Insurance Repository office. If you do not have an e IA, you can submit an e IA opening form with the necessary supporting documents along with the request for converting paper policy to electronic mode.

If I get heart attack, cancer, stroke will I get covered in a health Insurance policy ?

Yes, all these would be covered under health insurance if it has not happened as a result of any pre-existing disease. All the pre-existing diseases would be covered after 4 continuous years of coverage.

What are the basic elements of Life Insurance?

The two basic elements of life insurance are Risk coverage (i.e. Term Insurance) and savings for the future (i.e. Pure Endowment)

What are the tax benefits on Health insurance policy ? any additional tax benefits in proposed DTC ?

Individual can claim maximum benefit of Rs 15,000 under sec 80 D and this can go upto Rs 20,000 in case coverage is opted for senior citizens.

Who should buy general insurance?

Anyone who owns an asset can buy insurance to protect it against losses due to fire or theft and so on. Each one of us can insure our and our dependents' health and well being through hospitalisation and personal accident policies. To buy a policy the person should be the one who will bear financial losses if they occur. This is called insurable interest.

What is the right age to buy a Health Insurance Policy ?

Today's fast paced life leaves us with little time to take care of our health. High stress life, irregular & unhealthy eating habits and no physical exercise make us susceptible to health concerns. People across the age groups run the risk of falling ill at regular intervals. Even though we now have cures for most of the diseases but it has also lead to increasing medical cost year on year. This has direct impact on our savings. Health insurance provides us the required support in these times of need so that an individual can be with his family giving emotional support rather than being concerned of financial burden.

Is it compulsory for all Insurance Companies to offer electronic policies?

Yes. It is the policy holder's prerogative to opt for a policy in electronic form. If a policy holder wants his/her policy (either new purchase or existing) in electronic form, then the Insurer is bound to fulfill his / her requirement. The choice of a Repository for opening an e IA is the prerogative of the policy holder and hence all Insurance Companies will need to work with all the Insurance Repositories. Initially, repository service will be available for life insurance only; over time, health and general insurance (personal lines only) will also be brought within the ambit of repository services.

What is the guaranteed Savings/bonus applicable under a Life Insurance Policy?

There are some insurance policies that guarantee the amount of money you would receive upon maturity. Typically, this amount is a proportion of the sum assured such as a bonus or a guaranteed addition. Lets say bonus is Rs 50 per Rs 1000 of the sum assured and you have an insurance policy for a sum assured of Rs 100,000 then you earn a bonus of Rs 5,000 each year on the sum assured. Other policies may offer you a guaranteed bonus as a percentage such as a guaranteed addition of 3.5% per annum on a compounded basis.

Why should I buy life insurance?

Life Insurance provides you and your family with protection against all the risks involved, moreover providing you an opportunity to grow your investments. It could be viewed as a long-term investment to provide for your child's future expenses or your expenses, post retirement. Source: SBI Life Insurance

What is Grace Period?

It is a provision given to the policy holders to pay premium in the next 15-30 days since he fails to pay it before due date. This period of 15-30 days is called as grace period.



A brief history of title to land

Accelerated death benefit

A percentage of the policy?s face amount, discounted for interest, that can be paid to the insured prior to death, under specified circumstances. This is in lieu of a traditional policy that pays beneficiaries after the insured?s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.

Accident & Accidental Death Benefit

In the context of life insurance, accident or accidental death is defined as a sudden and unforeseen happening that causes disability or death of the policyholder.

Accident and health insurance

Coverage for acci-dental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses, and catastrophic care, with limits.

Accidental death benefit

An endorsement that pays the beneficiary an additional benefit if the insured dies from an accident.

Accidental Death Insurance

Accidental Death Insurance provides coverage in the event of death due to accidental injuries, but not illness. In the event of death, payment is made to the insured's beneficiary. And most of these covers provide for cases for bodily injury (e.g., the loss of a limb), where the insured receives a specificed sum.

Accounts receivable (debtors) insurance

Indemnifies for losses that are due to an inability to collect from open commercial account debtors because records have been destroyed by an insured peril.

Accumulation Period

The time interval between the commencement of the policy and the time when benefits are paid out. It is established by the insured.

Activities of daily living

Activities-such as eating, bathing, toileting, dressing, and continence-that trig-ger payment in a long-term care insurance policy, if at least some of them cannot be performed by the insured.

Acts of god

Perils that cannot reasonably be guarded against, such as floods and earthquakes.

Actual cash value

A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation.

Actual loss ratio

The ratio of losses incurred to premiums earned actually experienced in a given line of insurance activity in a previous time period.

Actuarial cost assumptions

Assumptions about rates of investment earnings, mortality, turnover, salpatterns, probable expenses, and distribution or actual ages at which employees are likely to retire.

Actuarial Cost Method

A method that determines contributions that would be made under an insurance plan.


An insurance professional skilled in the analysis, evaluation, and management of statistical information. Evaluates insurance firms? reserves, determines rates and rating methods, and determines other business and financial risks.


Accidental Death and Dismemberment Benefits

Additional insureds

Persons who have an insurable interest in the property/person covered in a policy and who are covered against the losses outlined in the policy. They usually receive less coverage than the pri-mary named insured.

Additional living expenses

Extra charges covered by homeowners policies over and above the policy-holder?s customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.

Adjustable Life Insurance

A facility allowing a life insurance policy owner to change the insurance plan, increase or decrease the premium and make changes in the protection period.


An individual employed by a property/cas-ualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyhold-ers, and receive a portion of a claims settlement. Inde-pendent adjusters are independent contractors who adjust claims for different insurance companies.

Admitted company

An insurance company licensed and authorized to do business in a particular state or country.

Adverse selection

The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all. In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance. works best when risk is shared among large numbers of policyholders.

Affinity sales

Selling insurance through groups such as professional and business associations.

Affirmative warranty

An agreement between an insurance company and an agent, granting the agent authority to write insurance from that company. It specifies the duties, rights, and obligations of both parties.

After Tax Rupees

This refers to the disposable income that the policy holder has in his hands after paying all tax dues during a particular financial year under the Income Tax Act.

Age Limits

The maximum and minimum ages above or below which an insurance company will not accept applications for insurance from or will not renew a policy with a person.


Insurance is sold by two types of agents: inde-pendent agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.

Agent (Life Advisor)

A representative of an insurance company authorized to sell insurance policies.

Aggregate deductible

A type of deductible that applies for an entire year in which the insured absorbs all losses until the deductible level is reached, at which point the insurer pays for all loses over the specified amount.

Aggregate limits

A yearly limit, rather than a ?per occurrence? limit. Once an insurance company has paid up to the limit, it will pay no more during that year.

Aleatory contract

A legal contract in which the outcome depends on an uncertain event. Insurance contracts are aleatory in nature.

All-risk agreement

A property or liability insur-ance contract in which all risks of loss are covered except those specifically excluded; also called ?open perils policy.?

Alternative dispute resolution (ADR)

Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.

Alternative markets

Mechanisms used to fund self-insurance. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance, are also a form of self-insurance.

Ancillary charges

In hospital insurance, covered charges other than room and board.

Annual statement

Summary of an insurer?s or rein-surer?s financial operations for a particular year, including a balance sheet.

Annual-premium annuity

An annuity whose purchase price is paid in annual installments.


: An individual receiving benefits under an annuity.

Annuity Certain

An insurance contract that provides an annuity for a certain number of years, irrespective of whether the insured is alive or dead.

Annuity Consideration

The payment that an annuitant makes for an annuity.

Annuity units

A measure used in valuing a variable annuity during the time it is being paid to the annui-tant. Each unit?s value fluctuates with the performance of an investment portfolio.


The dividing of a loss proportion-ately among two or more insurers that cover the same loss.


A survey to determine a property?s insura-ble value, or the amount of a loss.


Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.


The deliberate setting of a fire

Assessable policy

A policy subject to additional charges, or assessments, on all policyholders in the company.

Asset-backed securities

Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.


To use life insurance policy benefits as collat-eral for a loan.


Assignee is the person to whom the title, rights and benefits under a life policy are assigned.


Assignor is the policyholder who transfers the title, beneficial interest and rights under the policy to another individual.

Asymmetric information

An insured?s knowledge of likely losses that is unavailable to insurers.

Attained Age

It is your current age.Your attained age is one of the factors life insurance companies use to determine your premiums. As the older you are, the probability of death during the period of insurance cover i.e life insurance risk increases and so does the premium. Higher the risk, higher the premium.


The Insurance Regulatory and Development authority, IRDA established under sub-section (1) of section 3 of the Insurance Regulatory and Development Authority Act, 1999 is the regulator for the insurance sector.

Auto insurance premium

The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses.

Automatic coverage

An insurer agrees to cover accidents from all machinery of the same type as that specifically listed in the endorsement.

Automatic treaty

An agreement whereby the ceding company is required to cede some certain amounts of business and the reinsurer is required to accept them.

Average adjusters

A name applied to claims adjusters in the field of marine insurance.

Aviation insurance

Commercial airlines hold prop-erty insurance on aeroplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.

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