Insurance and mutual fund terms, in plain words.

A

Add-on General

An optional extra bought with a policy — such as zero depreciation on a motor policy or maternity cover on a health policy — with its own price, terms and waiting periods.

AYUSH treatment Health

Ayurveda, Yoga, Unani, Siddha and Homeopathy. Health policies can cover inpatient AYUSH treatment at qualifying institutions, subject to their terms.

B

Bima Bharosa General

IRDAI’s system for registering and tracking a complaint against an insurer or an intermediary, at bimabharosa.irdai.gov.in.

C

Cashless treatment Health

Treatment at a hospital in the insurer’s network, where the insurer settles the approved amount directly with the hospital. Deductions and excluded items may still be yours to pay.

Claim settlement ratio General

The share of claims an insurer settled in a period, by number or by amount. Read it with its period and basis; it does not guarantee that an individual claim will be paid.

Co-payment Health

A fixed percentage of each admissible claim that you pay yourself, common in policies for senior citizens.

Critical illness cover Health

Cover that pays a lump sum when you are diagnosed with an illness on the policy’s list, as the policy defines it, usually after a survival period.

D

Deductible General

An amount you meet before the cover pays anything. Check whether it applies to each claim or to the whole policy year.

Direct plan Mutual funds

The version of a mutual fund scheme bought without a distributor. It pays no distributor commission, so its expense ratio is lower than the regular plan’s.

E

ELSS Mutual funds

Equity Linked Savings Scheme: an equity mutual fund that qualifies for a tax deduction under the old tax regime, with a three-year lock-in on each investment.

Exclusion General

Something a policy does not cover. Policies have permanent exclusions and, often, exclusions that apply only in the early years.

Exit load Mutual funds

A charge for redeeming mutual fund units within a stated period after buying them, set out in the scheme document.

Expense ratio Mutual funds

The yearly cost of running a mutual fund scheme, taken out of the fund and already reflected in its NAV.

F

Family floater Health

A health policy with one sum insured shared by every member it covers.

Free-look period General

A period after you receive a new policy document during which you can return it and have the premium refunded, less permitted deductions.

G

Grace period General

Time allowed after a premium falls due to pay it without the policy lapsing. For life insurance it is thirty days, or fifteen for monthly payment; whether cover continues during it depends on the policy.

I

IDV (insured declared value) Motor

The value of a vehicle agreed in a motor policy, and the most payable if it is stolen or written off. It falls as the vehicle ages.

Insurance Ombudsman General

A free, independent route for resolving a complaint against an insurer, available within the limits and time the Ombudsman rules set.

K

KYC General

Know Your Customer: identity and address verification required before investing in mutual funds and for many insurance policies.

L

Lock-in Mutual funds

A period during which an investment cannot be withdrawn. An ELSS locks each investment for three years.

M

Moratorium period Health

In health insurance, after 60 continuous months of cover, a policy or claim cannot be contested for non-disclosure or misrepresentation except for established fraud.

N

NAV (net asset value) Mutual funds

The price of one unit of a mutual fund scheme, worked out each business day from the value of what the scheme holds.

Network hospital Health

A hospital with an arrangement with the insurer, where cashless treatment is available.

No-claim bonus General

A reward for a claim-free year: in motor insurance a discount on the own-damage premium, rising to 50% after five years; in health insurance often an increase in the sum insured.

Nominee General

The person named to receive the money from a policy or an investment if the holder dies.

O

Own-damage cover Motor

The part of a motor policy that pays for damage to, or theft of, your own vehicle.

P

Portability Health

Moving a health policy to another insurer while carrying eligible waiting-period credits across, subject to the new insurer’s underwriting.

Pre-existing disease Health

A condition diagnosed, or for which advice or treatment was received, within the 36 months before a policy starts. A disclosed one is covered after a waiting period of no more than 36 months.

Premium General

The amount paid for an insurance policy, yearly or in instalments.

Proposal form General

The application for an insurance policy. What you disclose on it decides whether claims can later be questioned.

R

Regular plan Mutual funds

The version of a mutual fund scheme bought through a distributor. Regular plans involve payment of commission to distributors, so their expense ratio is higher than the direct plan’s.

Restoration benefit Health

A health insurance feature that refills the sum insured after it has been used, under conditions the policy states.

Rider Life

An optional addition to a life policy, such as critical illness or waiver of premium, with its own terms.

Riskometer Mutual funds

The scale every mutual fund scheme must publish, from Low to Very High, showing its level of risk.

Room rent limit Health

A cap on the hospital room category or daily rent. Exceeding it can reduce other related charges in proportion.

S

SIP Mutual funds

Systematic investment plan: investing a fixed amount in a mutual fund scheme at regular intervals, usually monthly.

Sub-limit Health

A cap on what a policy pays for a particular treatment or charge, which applies even when the sum insured is not used up.

Sum assured Life

The amount a life insurance policy pays on a claim.

Sum insured Health

The most a health or general insurance policy pays in a policy year.

Super top-up Health

A health policy that pays once the year’s total claims pass a chosen deductible, up to its own sum insured.

Surrender value Life

What a life insurer pays if you end a policy early. It is often far less than the premiums paid.

T

Term insurance Life

Life insurance that pays a sum assured if the insured person dies during the policy term, and nothing if they survive it.

Third-party cover Motor

Motor insurance for injury or damage you cause to other people or their property. It is compulsory by law.

W

Waiting period Health

A period at the start of a policy during which stated conditions or treatments are not covered.

Z

Zero depreciation Motor

A motor add-on under which the insurer pays the full cost of replaced parts, without deducting depreciation, usually for a limited number of claims a year.