IC-38 Life flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Utmost good faith

A principle requiring both proposer and insurer to disclose all material facts honestly; breach by the proposer can make the life policy voidable at the insurer's option.

Insurable interest

A financial or legal relationship giving the policyholder a benefit from the continued life of the insured; it must exist at proposal and is presumed for one's own life.

Moral hazard

A condition of dishonesty or intent to gain from loss, such as fraud or deliberate concealment, which increases the risk and leads to extra premium loading.

Pure risk

A risk with only two outcomes, loss or no loss, with no possibility of gain; life insurance is designed to cover pure risk, not speculative risk.

Term insurance

A pure protection policy paying the sum assured only if death occurs during the chosen term; it builds no cash value and carries the lowest premium.

Endowment policy

A savings-linked policy paying the sum assured on survival to maturity or on earlier death, combining protection with a guaranteed maturity amount.

ULIP

A unit-linked insurance plan where part of the premium buys units in funds chosen by the policyholder, who bears the investment risk; charges are disclosed separately.

Annuity

A contract that converts a capital sum into periodic payments; a life annuity pays for the annuitant's lifetime and stops at death, the reverse of life insurance.

Reversionary bonus

A bonus declared annually on participating policies and added to the sum assured; it becomes payable on death or maturity along with the basic sum assured.

Rider

An add-on benefit attached to a base policy for an extra premium, such as critical illness or accidental death cover, usually capped as a percentage of the sum assured.

Free-look period

A period of typically 15 to 30 days after receiving the policy during which the policyholder may return it for a refund of premium less proportionate risk charges.

Grace period

A period, usually 15 to 30 days after the premium due date, during which payment can be made without lapse; death within it is paid after deducting unpaid premium.

Revival of policy

Restoration of a lapsed policy on payment of arrears with interest and evidence of continued insurability, subject to the insurer's conditions and time limits.

Paid-up value

A reduced sum assured payable at original maturity when a savings policy lapses after acquiring value, calculated in proportion to premiums actually paid.

Nomination

The policyholder's direction naming a person to receive the policy money on death; the nominee collects it and holds it for the legal heirs unless beneficially entitled.

Assignment of policy

Transfer of the policyholder's rights in the policy to another person; absolute assignment is irrevocable, while conditional assignment can be cancelled on notice.

Suicide exclusion clause

A policy condition limiting payment to premiums paid, or a stated percentage of the sum assured, if the insured dies by suicide within a specified period after commencement or revival.

Section 45 protection

After three years from issuance or revival, an insurer cannot repudiate a policy for misstatement or non-disclosure unless fraud is proved by the insurer.

Surrender value

The amount payable when a savings policy is discontinued after acquiring value; guaranteed surrender value is a set percentage of premiums paid, with special surrender value later.

Policy loan

A loan granted against the surrender value of a policy, usually up to a stated percentage of that value, with interest; outstanding loan and interest reduce the claim.

Rebating

Returning part of the commission or offering an inducement to a prospect to secure business; it is prohibited conduct for agents and attracts penalties.

Twisting

Inducing a policyholder to lapse or surrender an existing policy and buy a new one through misrepresentation, harming the client and prohibited under the code of conduct.

Fact-finding

The sales step of gathering information about a prospect's income, dependants, liabilities, existing cover, and goals before recommending a suitable policy.

Agent's confidential report

A report the agent submits to the insurer with the proposal, recording personal observations about the proposer's health, habits, and circumstances relevant to underwriting.

Net single premium

The present value of expected death benefits under a policy, calculated using mortality rates and the assumed interest rate, paid as a one-time premium.

Policy reserve

The insurer's liability for a policy, equal to the present value of future benefits minus the present value of future net premiums; it grows as the policy matures.

Asset share

The accumulated value per policy of premiums received less expenses, claims, and surrender payments, used to assess profitability and set surrender values.

Solvency margin

The excess of admissible assets over liabilities, which an insurer must maintain at or above the prescribed solvency ratio to demonstrate ability to meet claims.

Section 80C deduction

A deduction for life insurance premiums paid for self, spouse, or children, within the overall statutory limit, subject to the sum assured-to-premium condition.

Section 10(10D) exemption

Maturity and death proceeds of a life policy are generally exempt from income tax, provided annual premium does not exceed the prescribed percentage of sum assured.

MWP Act policy

A policy effected by a married man under the Married Women's Property Act for his wife and children; the proceeds are protected from his creditors and liabilities.

Persistency

The proportion of policies remaining in force over time; high persistency benefits policyholders, insurers, and agents through renewal commission and lower acquisition costs.