50 Basic Insurance Terms Everyone Should Know

I know you all have heard the name insurance anywhere in your life but do you know these 50 basic insurance terms let’s see how much you know about insurance let’s do a quick test. Listen there are lots of insurance terms in the insurance market. But for a newbie, these 50 basic insurance terms can help them to kickstart their insurance journey.

List of 50 Basic Insurance Terms / Terminology

One of the most basic insurance terms that everyone has heard let’s start with itself.

1. Insurance

Insurance is a legal contract between the insurance company and the insured person. You can say that insurance is a way to lower your financial risk in upcoming future which can happen Who knows? It acts as protection for you and your family.

2. Contract

It is a document that represents or you can say promises the insurance company will provide to the insured person by the law.

3. Insurer

The insurer is someone who sells the company policy to the insured person.

4. Insured

Insured is someone who signs the insurance policy after going through it.

5. Insurance Agent

An insurance agent is a professional who sells Insurance company products to the customer to earn a small amount of commission in return.

6. IRDA

IRDA stands for Insurance Regulatory and Development Authority. IRDA is called IRDAI 2014 which is the insurance regulatory and development authority of India. Basically, IRDAI looks towards the growth and management of the insurance in simple what you can say.

7. Policyholder

Policyholders who have purchased the policy in their name can be individuals or group.

8. Ombudsman

The ombudsman is another platform that resolves the grievances of agreived policyholders. It can be on personal lines or groups etc. against any insurance company.

9. Par Product

Policyholders get profit as an annual dividend from the insurance company basically it is called per product. In other words, you can say that it is a small profit shared with the policyholder by the insurance company.

10. Non-Par Product

In contrast to Par Product, in non-par products, policyholders don’t get a single profit from the company as a dividend.

11. TPA

TPA stands for Third Party Administration. You can say that TPA acts as a mediator. TPA is an agency that gets a license from IRDA to manage the claim and cashless process of Health Insurance.

12. Claim

One of the popular basic insurance terms is claim. Request or a formal request by the policyholder to the insurance company to cover the losses which are there according to their legal contract.

13. Coverage

Insurance companies provide coverage to the policyholders in the form of any amount of risk, liabilities, financial loss, or potential loss that is protected by insurance.

14. Liability

When you look at the word liability the meaning of liability means that liabilities are something that takes away money from your pocket. Here your liabilities can be anything like property damages, financial losses, injury, or other medical expenses which are covered by the insurance company.

15. Assets

Let’s see what is the meaning of assets. Assets are something that put money in your pocket. Your assets can be like any house, any other property, or any vehicle whatever. It is not wrong to say that you are also an asset to your family. Isn’t it?

16. Life Insurance

Life insurance is an insurance which is a legal contract between the policyholder and insurance company so that if the person is demies then the insurance company will provide the amount to their family according to the contract.

17. Term Insurance

Term insurance is insurance that is again legal contract between the policyholder and the insurance company. If the insured person is no more, the insurance company will provide the amount to the family. But here thing is the death happens in that particular period of duration according to the policy then only that insured person will get the benefit otherwise you don’t get it.

18. Policy

The policy is for a particular period of time it will remain active. Let’s say if you have a policy of 20 years then it will be active for 20 years after that it will be of no use for you unless you renew or extend.

19. Policy Tenure

It is the duration for which the coverage is provided by the insurance company. Policy tenure can be anywhere between 1 year to 100 years or you can say the whole life but it depends on the insurance plan for that policy.

20. Premium

Premium is a fixed amount of money that an individual or group of people need to pay for the insurance policy every month or year depending on the policy.

21. Insurable Interest

Insurable interest is a kind of risk pooling to protect the policyholder against any financial losses that may occur.

22. Risk Pooling

Risk Pooling is the sharing of all risk among the group of insurance companies.

23. Consumer Forum

Consumer forum work is to investigate customer complaints about services or products regarding the policy or any other things that the customers may face.

24. PPN

PPN stands for preferred provided network. Lots of hospitals tie up to the health insurance company and provide cashless and claims settlements to the policyholders.

25. Cashless

Medical expansion hospital charges are directly between an insurance company and the hospital

26. Settlement

Settlement is done by the insurance company if there is some due for that insured person then they will fulfill the dues that are pending.

27. Claim Settlement Ratio

Claim settlement ratio is simply the percentage of claim insurance providers settled throughout the year of the total number of claims. If you ask me what is a good settlement issue to look at before purchasing any policy from the company. So the average settlement claim settlement ratio is 95 to 99% which is said good. When you look at the Bajaj Allianz claim settlement ratio it is 99.09% in 2022 which is remarkable.

28. Utmost Good Faith

Everyone likes faith right? Simply having honesty, transparency, and knowing everything about the policy between the insurance company and the insured person before signing the policy is known as at most good faith.

29. IGMS

IGMS stands for Integrated Grievances Management System. Basically it is in online consumer complaint registration system which is created by IRDA.

30. Grace Period

Let’s understand this point by doing it simple. When you fail to pay the premium on time then the insurance company provides additional time or extra time to pay the premium and that particular extra time is called as Grace period.

31. Sum Assured

Sum Assured short is a fixed amount that is paid to the nominee if the issued person is no more.

32. Nominee

The person who receives the benefit in the cause of the demise of the insured person is called a nominee.

33. Maturity

Most likely when we use the mature word we say that this guy has matured. We simply mean that the guy has grown up. In the same way, maturity here means your money has grown up. You can say that it completes that decided period according to the contract. In that case insurance provider gives the lump sum amount of money to the insured person.

34. Lumpsum

In simple words, lumpsum is nothing but money paid all at once. For example, you get a lumpsum amount of 5 Lakh Rupees.

35. Indemnities

Agreement that provide coverage of loss damages by another party is known as indemnity. The best example of indemnity is property insurance.

36. Lapse

A situation where one cannot get the benefit of the insurance policy. For example, if the grace period is completed and you have not paid your premium yet then in that case you will not get any benefit of the insurance.

37. Revival

One can restore the policy that was broken due to the non-payment of premium on time is called revival.

38. Endowment

Insurance that offers life covers and helps to grow your money is known as Endowment.

39. Misrepresentation

The false statement or you can say intentionally providing fake formation before purchasing the life insurance is called misrepresentation. Doing that which is not right can result in bad consequences for them.

40. ULIP

ULIP stands for Unit Link Insurance Plan. ULIP is a combo why I say because it provides you with insurance and investment which is great.

41. Reimbursement

The company provides the refund amount of money that it owes to the policyholder. For example business expenses like food, travel, etc.

42. Paid Up

If the paid-up policyholder stops paying the premium then they can continue to enjoy insurance coverage.

43. Whole Life

As the name suggests means lifetime insurance. One can get lifetime insurance throughout the duration of their life as long as they pay the premium on time.

44. Inpatient

If the patient is getting treatment and medical expenses for more than 24 hours then it is called an inpatient. Also known as IPD Inpatient Department.

45. Outpatient

A person visits the hospital to get medical treatment and get out of the hospital within 24 hours then it is considered an outpatient. Also known as OPD Outpatient Department.

46. Appointee

The person who will receive the benefit of the nominee when the nominee is minor is known as an appointee.

47. Mortality Charge

Fees that are charged by the life insurance company to provide life coverage to the policyholder are basically called mortality charges.

48. Assignment

The transfer of certain rights from a policyholder to another person is called assignment in simple words.

49. Umbrella Insurance

In umbrella insurance, one can get extra insurance or you can say extra protection beyond the existing limit which is not there in the coverage of policy or other policy. For example injuries, property, liabilities, etc

50. Morbidity

Morbidity is a rate one can say where the disease occurs over a period of time in a group of people.

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I hope you now know the 50 basic insurance terms. If you like don’t forget to share because sharing is caring.