Understanding Insurance Terms and Conditions

• Insurance: It is a contract where the insurance company promises to pay for certain losses in return for regular payments called premiums.
• Insurer: The insurance company that provides protection and pays for losses.
• Policyholder: The person who buys the insurance policy.
• Policy: A legal document that explains all the rules, benefits, and limits of the insurance plan.
• Coverage: The protection or amount of loss that the insurance company will pay for.
• Exclusions: Things or situations that the policy does not cover.
• Premium: The amount of money you pay to keep your policy active.
• Premium Payment Term: The time period for which you need to pay your premium.
• Premium Loading: Extra charges are added to your premium if you have higher risks, like illness or a risky job.
• Policy Tenure: The total time your insurance policy stays active.
• Renewal: Extending your policy after it ends by paying again.
• Rider: An add-on that gives extra benefits like accident or illness coverage.
• Claim: A request you make to the company to get the money after a loss or damage.
• Claims Process: The steps you follow to file a claim and the documents you must submit.
• Deductible: The amount you pay first before the insurer pays the rest.
• Grace Period: Extra days you get to pay your premium after the due date, before the policy ends.
• Free-Look Period: A few days after getting the policy to review it and return it if you are not happy.
• Nominee: The person chosen by the policyholder to get the money if something happens to them.
• Beneficiary: The person or group that will receive the insurance amount.
• Maturity Benefit: The money you get when the policy period ends, if it offers that benefit.
• Reimbursement: The amount the insurer pays back for actual losses or expenses.
• Surrender Value: The money you get if you stop the policy before it ends.
• Claim Settlement Ratio (CSR): Shows the number of claims the company has paid out. A higher ratio means better reliability.
• Underwriting: The process the insurer uses to check risk and decide the premium.
• Lapse: When your policy becomes inactive because you did not pay the premium.
• Insurable Interest: Your financial connection to the person or thing insured, like your life or property.
• Peril: The event that causes a loss, such as an accident or fire.
• Pure Risk: A situation where there can only be loss, not profit, like illness or death.
• Proof of Loss: The documents you give to support your claim, such as bills or reports.
• Moral Hazard: When someone hides facts or gives false details to get money from the insurer.
• Negligence: When someone fails to take proper care, leading to damage or loss.
• Occupational Hazard: The risks linked to a job, like injury in construction or firefighting.
• Loss: The damage or harm for which a claim is made.
• Indemnity: A rule that ensures coverage of the loss made with no extra profit.
• Insurable Risk: A risk that can be insured because it involves measurable financial loss and uncertainty.
• Modal Factor: A number used to adjust the premium when you choose to pay monthly or quarterly instead of yearly.

• Helps to Choose the Right Policy: With key terms, you can compare and pick a plan that fits your needs.
• Avoid Claim Rejection: Once you understand the rules and exclusions, the chance of claim rejection reduces.
• Get Enough Coverage: Learning terms like co-pay and rider helps you choose better protection.
• Save Extra Costs: By knowing about premium and grace periods, you can prevent hidden charges.
• Easy Claim Process: Claim terms ensure faster and smoother payouts.
• Better Financial Planning: You can save money and stay protected when you know about tax benefits.

1Utmost Good Faith

Both you and the insurance company must share all important facts honestly. If anyone hides or gives wrong details, the policy can be canceled.

2Insurable Interest

You must have an interest in the subject matter, like your home, car, or life. It means you would face a loss if that item, car, bike, or person is harmed.

3Indemnity

The insurance company pays only for the actual loss. You get back to your earlier financial position, but there is no chance of profit.

4Subrogation

Once the insurer pays for your loss, they can recover that money from the person or company responsible for it.

5Proximate Cause

If many factors damaged the subject matter (covered item or human), the insurer pays only if the primary reason is covered in the policy.

6Contribution

If you have more than one insurance policy for the same thing, each company will share the cost fairly.