Insurance terminology "A"
This section on Insurance terminology contains all the terminologies starting with alphabet A.
The insurance terminology Absolute Assignment means complete transfer of whole and sole rights of the policy from the assignor to the assignee without any further terms and conditions applicable.
It is an unforeseen and unintended event/ occurrence that has caused an injury to the insured.
A benefit that provides for payment of an additional benefit equal to the Accidental Benefit sum assured in installments or in lump sum due to an occurrence of a specified event.
Accidental Death Benefit
In the event of death of the life assured arising as a result of an accident during the term of the life insurance policy, the additional amount mentioned under this benefit that is paid to the nominee is called Accidental Death Benefit.
Accidental Death Benefit and Dismemberment
It is a supplementary benefit that provides an amount in addition to the policy’s basic death benefit. This additional amount is payable if the insured dies or loses any two limbs or sight of both eyes as a result of an accident.
Accidental Death Benefit Linked Rider
Under this rider, if the life assured dies due to an accident within the term of the Unit Linked Life Insurance Policy, the nominee receives an additional amount as mentioned under this benefit.
The life period of an annuity is divided into two phases: the accumulation phase and the income phase. The accumulation phase (also called as deferment period) is the time during which the annuitant has not started receiving pension from the annuity. During the accumulation phase, the annuitant pays periodic premiums into the annuity and the annuity accrues interest.
Actuarial Cost Assumptions
The assumptions an actuary makes when calculating the cost of providing insurance or a pension. Actuarial cost assumptions include the expected benefit of the insurance policy or pension policy. Assumptions are about rates of investment earnings, mortality, turnover, probable expenses, and distribution or actual age at which employees are likely to retire.
Actuarial Cost Method
A method used by actuaries to calculate the amount a company must pay periodically to cover its pension expenses.
The two main methods used are the Cost Approach and the Benefit Approach.
The Cost Approach calculates total final benefits based on several assumptions, including the rate of wage increase and when employee will retire. The amount of funding that will be needed to meet those future benefits is then determined. The Benefit Approach finds the present value of future benefits by discounting them.
Adjustable Life Insurance
As per the changing insurance needs of a policyholder, a form of life insurance that allows the policyholder to vary the type of insurance cover provided by the policy. It allows the policyholder to alter the period of protection, increase or decrease the sum assured, increase or decrease the premium amount and change the duration of the premium payment period.
Age at Entry
It is the proposer’s or life insured’s age at the time of filling the proposal form or entering into a contract.
Age at Maturity
It is the proposer’s or life insured’s age when the policy matures or the contract comes to an end.
Stipulated minimum and maximum age limits as stated by the insurance company. Based on the age limit, the insurance company will accept/ reject applications or renew policies.
Annual Premium Annuity
It is an annuity whose purchase price is paid in annual installments.
Annual Premium Payment Mode
When the policyholder chooses to pay the premium amount once in a year, the mode chosen is called Annual Premium Payment Mode and the premium amount is called Annual Premium.
The total amount of premium paid within 12 policy months.
For example, if the policyholder has chosen the quarterly payment mode with premium amount of ` 10,000, then the Annualised Premium will be ` 40,000.
Note: Except for annual premium payment mode, the Annualised Premium is always greater than the annual premium because of increased administrative costs. For annual premium payment mode policies, the Annualised Premium is always equal to the annual premium.
The person receiving annuity benefits from an annuity contract at fixed intervals of time (this can be on a yearly/ half yearly/ quarterly or monthly basis and based on the annuity option selected) is called as Annuitant.
Annuity (Retirement Option or Life Annuity)
An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s), till death or for a specified period. Annuities are paid in different ways, for example, Annuity for Life, Joint Life Annuity, Annuity with return of corpus, etc.
There are two basic types of Annuities:
- Deferred Annuity: In deferred annuity, there is usually an accumulation phase or deferment period which is till the vesting age, during which time the annuitant has to pay premiums. A corpus is accumulated during this period which is used at the time of vesting to buy an annuity of choice. The pension or annuity begins from the vesting age in the annuity mode chosen.
- Immediate Annuity: The proposer has to make a lump sum payment of single premium for an annuity which starts immediately in one year/ six months/ three months or one month after payment of premium, depending upon the annuity mode selected.
The person to whom the rights of the policy are being transferred by the policyholder (assignor) is called the Assignee.
Assignment means legal transference. It is a means whereby the beneficial interest, right and title under a life insurance policy get transferred from assignor to assignee.
‘Assignor’ is the policyholder who transfers the title and ‘Assignee’ is the person who derives the title from the assignor.
The person who transfers the rights of the life insurance policy to the assignee is called the Assignor.