Glossary · 58 terms
Insurance
All insurance terms in the EquitiesIndia.com glossary — plain-English definitions written for Indian retail investors.
Annuity
An annuity is a financial contract, typically issued by a life insurance company, under which an individual pays a lump sum or series of premiums and in return receives periodic income payments — monthly, quarterly, or annually — for a fixed period or for the rest of their life.
Arogya Sanjeevani(Standard Health Insurance)
Arogya Sanjeevani is a standardised health insurance policy mandated by IRDAI effective April 1, 2020, requiring all general and health insurers to offer a uniform basic indemnity health product to eliminate feature complexity and facilitate genuine consumer comparison.
Ayushman Bharat PM-JAY(PM-JAY)
Ayushman Bharat Pradhan Mantri Jan Arogya Yojana (PM-JAY) is the world's largest government-funded health insurance scheme in India, providing cashless hospitalisation cover of Rs 5 lakh per family per year for secondary and tertiary care at empanelled public and private hospitals, targeting the bottom 40% of India's population by economic vulnerability.
Bima Sugam(Insurance Marketplace)
Bima Sugam is an IRDAI-proposed digital marketplace for insurance in India, envisioned as a unified electronic platform where customers can browse, compare, purchase, and service all types of insurance policies from multiple insurers through a single interface.
Bima Vistaar(Universal Insurance Product)
Bima Vistaar is an IRDAI-conceptualised universal insurance product designed to provide basic life, health, and property coverage to all Indian citizens — particularly rural and low-income households — through a single affordable, bundled policy.
Bonus Rate (Insurance)(Reversionary Bonus)
In the context of participating life insurance policies, the bonus rate is the addition to the sum assured (or fund) declared by the insurer from surplus profits, comprising a reversionary bonus declared annually and a terminal bonus payable at maturity or death.
Child Plan (Insurance)(education insurance plan)
A child plan is a combination insurance and savings product offered by life insurers in India that is designed to accumulate a corpus for a child's education or marriage, typically featuring a premium waiver benefit on the death of the parent (proposer), ensuring that the policy continues without further premiums and the child receives the maturity benefit at the predetermined age.
Claim Settlement Ratio(CSR)
The claim settlement ratio (CSR) is a metric that measures the percentage of insurance claims settled by an insurer out of the total claims received in a financial year, serving as an indicator of the insurer's reliability in honouring its policy commitments.
Combined Ratio(Claims Ratio plus Expense Ratio)
Combined Ratio is the primary profitability metric for general (non-life) insurance companies, calculated as the sum of the claims loss ratio and the expense ratio, with a figure below 100 per cent indicating underwriting profit and above 100 per cent indicating underwriting loss.
Critical Illness Cover(CI Cover)
Critical illness cover is an insurance benefit that pays a lump-sum amount upon the first diagnosis of a specified serious illness — such as cancer, heart attack, stroke, or kidney failure — regardless of actual treatment costs, providing financial support during recovery.
Crop Insurance (PMFBY)(PMFBY)
Pradhan Mantri Fasal Bima Yojana (PMFBY) is India's flagship crop insurance scheme launched in February 2016 that provides financial protection to farmers against crop loss from natural calamities, pests, and diseases, with farmers paying capped premiums of 2% for Kharif crops, 1.5% for Rabi crops, and 5% for commercial/horticulture crops, with the government subsidising the balance.
Cyber Insurance(cyber liability insurance India)
Cyber insurance is an insurance product that covers financial losses arising from cyberattacks, data breaches, ransomware incidents, online fraud, system outages, and related digital risks, and has emerged in India as a standalone product category regulated by IRDAI following the rapid digitisation of businesses and the rise of cybercrime targeting both corporate entities and individual consumers.
Deferred Annuity(Pension Annuity)
A deferred annuity is an annuity contract where premium payments are made over an accumulation phase — spanning years or decades — and the payout of regular income is deferred until a future date, typically retirement, when the accumulated corpus is converted into a pension stream.
Directors and Officers (D&O) Insurance(D&O insurance India)
Directors and Officers (D&O) insurance protects the personal assets of company directors and officers against claims alleging wrongful acts in their managerial capacity — including breach of fiduciary duty, misrepresentation, regulatory violations, and employment practices — with the policy covering legal defence costs and damages awarded against the individual.
Embedded Value (EV)(EV)
Embedded Value is the actuarially determined present value of future profits expected from an insurance company's in-force policy book plus its net asset value, and it is the foundational valuation metric for listed Indian life insurance companies.
Endowment Plan(Endowment Policy)
An endowment plan is a traditional life insurance policy that combines life cover with a savings element, paying out the sum assured either on the policyholder's death during the term or as a maturity benefit if the policyholder survives the full policy term.
FDI in Insurance(Foreign Investment in Insurance)
FDI in insurance refers to the regulatory limits on foreign direct investment in Indian insurance companies, which were progressively raised from 26% at sector opening in 2000 to 49% in 2015 and then to 74% in 2021, with a proposal to allow 100% FDI under discussion by 2025.
Fire Insurance(Standard Fire and Special Perils policy)
Fire insurance is a property insurance product that covers the insured's building, plant and machinery, stocks, furniture, and other contents against loss or damage arising from fire, lightning, explosion, and allied perils such as floods, storms, riots, and impact damage, with IRDAI regulating terms and the Standard Fire and Special Perils (SFSP) policy being the primary commercial instrument.
Free Look Period
The free look period is a regulatory window, mandated by IRDAI, during which a newly issued life or health insurance policyholder can review the policy document and return it to the insurer for a full refund of premium if they are dissatisfied with the terms and conditions.
Group Insurance(group term life India)
Group insurance is a single insurance contract issued to an employer, association, or institutional body covering a defined group of individuals — typically employees — under a master policy, with individual members receiving certificates of coverage rather than separate policies, and the premium typically subsidised or fully funded by the sponsoring organisation.
Health Insurance(Mediclaim)
Health insurance is an insurance product that covers the cost of medical treatment — hospitalisation, surgeries, diagnostic tests, and related expenses — up to a specified sum insured, in exchange for an annual premium paid by the policyholder.
Immediate Annuity(Single Premium Immediate Annuity)
An immediate annuity is an annuity contract where the income payments begin almost immediately — typically within one month — after the lump-sum premium is paid, making it the preferred instrument for retirees who need to convert an existing corpus into regular income at once.
Insurance Density (India)(Per Capita Insurance Premium)
Insurance density measures the total insurance premium per capita in a country, expressed in US dollars, reflecting the average annual insurance spend per person and indicating the depth of insurance adoption at the individual level.
Insurance Industry Overview (India)
India's insurance industry is one of the most underpenetrated among major economies, with life insurance penetration at ~3% of GDP and non-life at ~1%, dominated historically by LIC but increasingly competitive following private sector liberalisation in 2000 and the entry of 50+ insurers.
Insurance Mis-selling(Mis-sold Insurance)
Insurance mis-selling is the unethical practice of selling an insurance product through misrepresentation, concealment of material facts, or misleading communication — such as presenting a ULIP as a fixed-return instrument, omitting exclusions, or pressuring a customer into unsuitable products to earn commissions.
Insurance Penetration (India)(Insurance Penetration Rate)
Insurance penetration measures the total insurance premium collected in a country as a percentage of its GDP, serving as a standard international benchmark for assessing the depth of insurance adoption relative to economic size.
IRDAI(Insurance Regulatory and Development Authority of India)
The Insurance Regulatory and Development Authority of India (IRDAI) is the statutory body established under the IRDA Act 1999 that regulates and develops the insurance industry in India, overseeing insurers, intermediaries, and protecting the interests of policyholders.
IRDAI Regulatory Framework (Overview)(IRDA Framework)
The IRDAI regulatory framework encompasses the statutory and delegated legislative architecture — primarily the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999 — under which IRDAI licenses, supervises, and develops India's insurance sector.
Keyman Insurance(key person insurance India)
Keyman insurance is a life insurance policy taken by a business entity on the life of a key employee or director whose expertise, relationships, or leadership is critical to the organisation's continued operations and profitability, with the business as the proposer and premium payer and the claim proceeds received by the business upon the death of the insured individual.
Marine Insurance(cargo insurance India)
Marine insurance is one of the oldest branches of insurance in India, governed by the Marine Insurance Act, 1963, that indemnifies shipowners, cargo owners, freight forwarders, and other parties in the shipping and logistics chain against physical loss or damage to vessels, cargo, and freight, and against third-party liabilities arising from maritime operations.
Microinsurance(micro insurance India)
Microinsurance refers to low-premium, low-sum-assured insurance products specifically designed for individuals at the bottom of the economic pyramid in India, regulated by IRDAI under the IRDAI (Micro Insurance) Regulations, 2005, aimed at extending insurance penetration to rural populations, agricultural workers, and informal sector workers through simplified underwriting, reduced documentation, and affordable premiums.
Money Back Policy(survival benefit policy)
A money back policy is a traditional participating life insurance product in India that pays a percentage of the sum assured as survival benefits at regular intervals during the policy term — typically every five years — with the remaining sum assured plus accumulated bonuses paid as a lump sum on maturity or as a death claim if the insured dies during the policy term.
Mortality Charge(Cost of Insurance)
A mortality charge is the cost deducted from a life insurance policy — particularly unit-linked insurance plans (ULIPs) and term insurance — to pay for the life cover benefit, calculated based on the policyholder's age, sum at risk, and mortality rates derived from actuarial tables.
Motor Insurance(third party motor insurance)
Motor insurance in India comprises two components: mandatory Third Party (TP) liability insurance covering damage to a third party's person or property in an accident, and optional Own Damage (OD) insurance covering the insured vehicle itself, with premiums for TP coverage regulated by IRDAI and OD premiums determined by the insurer based on the vehicle's Insured Declared Value (IDV).
Paid-Up Value(Paid-Up Policy)
Paid-up value is the reduced sum assured a traditional life insurance policy carries when the policyholder stops paying premiums after the policy has acquired a surrender value, allowing the policy to continue in force with proportionally reduced benefits until maturity.
Pension Plan (Insurance)(Insurance Pension Plan)
A pension plan offered by a life insurance company is a long-term savings and annuity product designed to accumulate a retirement corpus during the subscriber's working years and provide a regular income stream after retirement, regulated by IRDAI as a life insurance product.
Persistency Ratio (Detailed)(Policy Persistency)
Persistency ratio measures the proportion of insurance policies that remain in force (premiums continue to be paid) at a defined policy anniversary, with the standard measurement cohorts being the 13th, 25th, 37th, 49th, and 61st months, serving as a key indicator of insurer quality and policyholder retention.
PM Vaya Vandana Yojana(PMVVY)
PM Vaya Vandana Yojana (PMVVY) was an LIC-administered government-guaranteed pension scheme for senior citizens aged 60 and above, offering assured returns of up to 7.4% per annum with monthly pension payment options, available for subscription from May 2017 and closed to new subscriptions after 31 March 2023.
Policy Lapse
A policy lapse occurs when a life insurance policy ceases to be in force due to non-payment of premium within the grace period, resulting in the loss of insurance cover and the forfeiture of accumulated benefits if the policy has not yet acquired a surrender value.
Policy Revival
Policy revival is the process by which a lapsed life insurance policy is reinstated to full in-force status by the policyholder paying all outstanding unpaid premiums, along with interest and any other charges specified by the insurer, within the revival period permitted under the policy terms.
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)(PMJJBY)
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) is a government-backed renewable one-year life insurance scheme offering a Rs 2 lakh death benefit cover for a premium of Rs 436 per annum (revised from Rs 330 in June 2022), available to individuals aged 18-50 with a savings bank account, enrolled through their bank.
Pradhan Mantri Suraksha Bima Yojana (PMSBY)(PMSBY)
Pradhan Mantri Suraksha Bima Yojana (PMSBY) is a government-backed renewable one-year personal accident insurance scheme offering Rs 2 lakh cover for accidental death or total permanent disability and Rs 1 lakh for partial permanent disability, at an annual premium of Rs 20, available to bank account holders aged 18-70.
Product Liability Insurance(product liability India)
Product liability insurance covers manufacturers, distributors, and retailers against third-party claims for bodily injury or property damage caused by defective products sold or supplied by the insured, and has gained increased significance in India following the enactment of the Consumer Protection Act, 2019, which introduced explicit product liability provisions and strict liability concepts.
Professional Indemnity Insurance(E&O insurance India)
Professional indemnity insurance (also called errors and omissions insurance) covers professionals — including doctors, chartered accountants, architects, lawyers, IT consultants, and engineers — against claims of negligence, error, or omission made by clients who suffered financial loss as a result of the professional's advice or services.
Reinsurance(GIC Re India)
Reinsurance is the practice by which a primary insurance company (the ceding insurer) transfers a portion of the risks it has underwritten to another insurance entity (the reinsurer), in exchange for a proportionate premium, to protect its own balance sheet against large or catastrophic losses and to enhance its capacity to underwrite large risks beyond its own retention limits.
Rider (Insurance)(Add-On Rider)
An insurance rider is an optional add-on benefit attached to a base insurance policy for an additional premium, extending or customising the coverage to include risks not covered by the standard policy — such as accidental death, critical illness, disability, or premium waiver.
Saral Jeevan Bima(Standard Term Plan)
Saral Jeevan Bima is a standardised, pure-term life insurance product mandated by IRDAI effective January 1, 2021, designed to provide a uniform minimum feature set across all life insurers to simplify customer choice and reduce complexity in term insurance.
Solvency Ratio (Insurance)(Insurance Solvency Margin)
The solvency ratio for insurance companies measures the ratio of available solvency margin (actual capital and surplus) to required solvency margin (minimum capital to cover insurance liabilities), with IRDAI mandating a minimum ratio of 1.5x (150%) for all Indian insurers.
Sum Assured(Sum Insured)
Sum assured is the guaranteed amount that an insurance company commits to pay to the policyholder or nominee upon the occurrence of the insured event — death, diagnosis of a critical illness, or policy maturity — as defined in the policy contract.
Surrender Value
Surrender value is the amount a policyholder receives from the insurance company if they terminate a life insurance or pension policy before its maturity date, typically representing a portion of the premiums paid after deducting charges and surrender penalties.
Term Insurance(Term Plan)
Term insurance is a pure life insurance plan that provides a large death benefit to nominated beneficiaries if the insured person dies within a specified policy period, with no maturity payout if the insured survives the term.
Top-Up Health Insurance(Super Top-Up)
A top-up health insurance plan provides additional coverage beyond a specified deductible threshold, activating only when medical expenses in a single hospitalisation exceed that threshold, offering a cost-effective way to enhance overall health coverage at lower premiums.
ULIP(Unit Linked Insurance Plan)
A Unit-Linked Insurance Plan (ULIP) is a hybrid financial product that combines life insurance coverage with market-linked investment, where a portion of the premium provides life cover and the remainder is invested in equity, debt, or balanced funds chosen by the policyholder.
Unit Fund Value(ULIP Fund Value)
Unit fund value is the total market value of units held in a unit-linked insurance plan (ULIP) at a given point in time, calculated by multiplying the number of units allocated to the policyholder by the prevailing net asset value (NAV) of the selected fund.
Unit-Linked vs Traditional Plans (Detailed)(ULIP vs Endowment)
Unit-linked insurance plans (ULIPs) combine life insurance cover with market-linked investment in equity, debt, or balanced funds, while traditional plans (endowment, money-back, whole life) provide guaranteed or non-guaranteed (bonus-based) returns with a savings and insurance bundle.
Value of New Business (VNB)(VNB)
Value of New Business is the present value of expected future profits from new insurance policies written during a period, representing the economic value created annually by the life insurer's new business franchise and the growth engine of embedded value.
VNB Margin(VNB Margin)
VNB Margin is the ratio of Value of New Business to Annualised Premium Equivalent expressed as a percentage, measuring how much economic value is created per unit of new premium written and reflecting the profitability quality of an Indian life insurer's new business mix.
Whole Life Insurance(whole life plan India)
Whole life insurance is a traditional life insurance product that provides lifelong coverage — typically until the policyholder reaches the age of 99 or 100 — with premiums payable for a defined period or throughout life, accumulating a cash value (also called the surrender value or paid-up value) over time through the insurer's participating fund.