Insurance terms, explained simply

Short, plain-English definitions of the terms you’ll meet across life, health, and motor insurance in the US and India.

Beneficiary (nominee)

The person who receives the payout from a life insurance policy when the insured person dies.

Cash value

The savings component of a permanent life policy that grows over time and can be borrowed against or withdrawn.

Claim settlement ratio

The share of claims an insurer paid out in a year. A high, steady ratio suggests claims are honoured reliably.

Co-pay

A share of each claim you agree to pay yourself, common in health insurance. A higher co-pay lowers your premium.

Comprehensive cover

Motor insurance that combines mandatory third-party liability with own-damage cover for your own vehicle.

Deductible

The amount you pay out of pocket on a claim before the insurer pays the rest. A higher deductible lowers your premium.

Family floater

A single health policy that shares one sum insured across all covered family members instead of separate policies.

IDV (Insured Declared Value)

The current market value of a vehicle, and the maximum a comprehensive motor policy pays if it is stolen or written off.

Liability coverage

Cover that pays for injury or damage you cause to other people or their property.

No-Claim Bonus (NCB)

A discount on your motor own-damage premium for each claim-free year, rising from 20% up to 50%.

Permanent insurance

Life insurance that lasts your whole life and builds cash value (for example whole life), unlike temporary term cover.

Pre-existing condition

A health condition you already have when buying cover. It may carry a waiting period or a higher premium.

Premium

The amount you pay — monthly or yearly — to keep an insurance policy active.

Rider

An optional add-on that extends a base policy, such as critical illness, accidental death, or waiver of premium.

Sum assured

The fixed amount a life insurance policy pays out on death — the headline cover amount.

Sum insured

The maximum a health or general insurance policy will pay in a single policy year.

Term insurance

Pure life cover for a fixed number of years with no maturity payout — the cheapest way to buy a large death benefit.

Third-party liability

Legally required motor cover that pays for damage or injury you cause to others, but not to your own vehicle.

Umbrella insurance

Extra liability cover that sits above the limits of your auto and home policies.

Underwriting

The insurer's process of assessing your risk to decide whether to cover you and at what premium.

Waiting period

A set time after buying health cover before certain conditions or treatments become claimable.

Whole life insurance

Permanent life cover for your entire life that also builds cash value, costing far more than term insurance.