NIA Life Agent flashcards
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32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Insurable interest
- A legal right or relationship such that the policyholder benefits from the continued life of the insured. In life insurance it must exist at inception, not at death.
- Utmost good faith
- The duty on both insurer and proposer to disclose all material facts. Breach by the proposer allows the insurer to repudiate the policy within the contestability period.
- Moral hazard
- The risk that the insured's dishonest intent or behaviour increases the chance of a claim. Underwriters screen for it through occupation, income, and claims history.
- Adverse selection
- A situation where persons with higher-than-average risk buy insurance disproportionately. Insurers counter it through medical underwriting and risk classification.
- Endowment policy
- A life insurance policy that pays the sum assured plus bonuses on survival to maturity, or to the nominee if the life assured dies earlier.
- ULIP
- Unit Linked Insurance Plan. Part of the premium buys life cover and the balance is invested in units at NAV, with charges capped by IRDAI regulations.
- Reversionary bonus
- A bonus declared annually on participating policies and added to the sum assured. It is paid only at death or maturity, not in cash each year.
- Paid-up value
- The reduced sum assured payable on death when premium payment stops after the policy has acquired a surrender value. It is proportionate to premiums paid.
- Rated-up age
- An underwriting method where an extra premium is charged by treating the life assured as older than actual age. It reflects higher expected mortality.
- Flat extra premium
- An additional premium charged per thousand of sum assured for a specified period, used for substandard risks such as hazardous occupations or medical conditions.
- Financial underwriting
- Assessment of whether the sum assured is justified by the proposer's income, liabilities, and existing cover. It prevents over-insurance and moral hazard.
- Contestability period
- The period, typically three years from issuance or revival, during which the insurer may repudiate a policy for material misstatement or non-disclosure under Section 45.
- Free-look period
- Fifteen days (thirty for distance marketing) from receipt of the policy within which the policyholder may return it for a refund, less proportionate risk and expenses.
- Grace period
- Fifteen days for monthly mode and thirty days for other modes after the premium due date, during which the policy remains in force if premium is paid.
- Revival of policy
- Restoration of a lapsed policy within five years of the first unpaid premium, on payment of arrears with interest and evidence of continued insurability.
- Section 45 Insurance Act
- After three years from issuance or revival, a life policy cannot be called in question on grounds of misstatement or non-disclosure, except for fraud.
- Early claim
- A death claim arising within three years of issuance or revival. It is investigated more thoroughly, including hospital, employer, and neighbourhood verification.
- Claim settlement timeline
- Insurers must settle or reject a claim within thirty days of receiving all documents, or forty-five days where investigation is required, with interest for delay.
- Nomination
- Under Section 39, the policyholder names a person to receive the policy money on death. The nominee holds it as trustee for the legal heirs.
- Appointee
- A person appointed to receive policy money on behalf of a nominee who is a minor. The appointee acts until the nominee attains majority.
- Conditional assignment
- An assignment under Section 38 where rights transfer only on a condition, such as a bank's security interest. Rights revert to the policyholder when the condition is met.
- Agent licence validity
- An IRDAI-issued insurance agent licence is valid for three years and must be renewed with the prescribed fee and training requirements before expiry.
- Rebating
- Sharing commission or offering inducements to a prospect to buy a policy. It is prohibited under the Insurance Act and is grounds for licence cancellation.
- Multi-level marketing
- Recruiting sub-agents to sell policies for commission. An individual insurance agent is not permitted to appoint or operate such a structure.
- Twisting
- Inducing a policyholder to replace an existing policy without full disclosure of the disadvantages, such as new contestability and loss of bonuses.
- Mis-selling
- Selling a policy by misrepresenting benefits, charges, or returns, or selling a product unsuitable for the customer's needs and affordability.
- Confidentiality duty
- An agent must keep personal, medical, and financial information of the prospect confidential and use it only for underwriting and servicing the policy.
- Section 80C deduction
- A deduction up to one and a half lakh rupees per year for life insurance premium, capped at ten percent of the sum assured for policies issued after 2012.
- Section 10(10D)
- Exemption of death and maturity proceeds from tax, subject to premium limits. Proceeds become taxable where annual premium exceeds the prescribed thresholds.
- Cash premium limit
- Insurers cannot accept cash premiums above ten thousand rupees. Higher amounts must be paid through banking channels to meet anti-money-laundering rules.
- Insurance Ombudsman
- A quasi-judicial authority under the Insurance Ombudsman Rules 2017 that hears complaints up to fifty lakh rupees after the insurer's grievance process fails.
- Human life value
- The present value of the insured's future income available to dependants, after personal expenses, discounted at a chosen rate. It sizes the required sum assured.