Life insurance terms, explained in plain English

How to use this page: jump to a group — Policy basics · The people on a policy · Types of life cover · The money terms · ULIP terms · Bonuses & values · Riders · Policy mechanics · Underwriting & disclosure · Legal protections · Claims · Tax — or read straight through.

A note on how we've defined things. Where a rule is set by law or the regulator — the three-year contestability clause, surrender-value floors, tax thresholds — we state it directly and cite it. Where a figure depends on the insurer or plan, we say so and tell you what to check. We never guess a number.

Policy basics

Life insurance

a contract where you pay premiums and the insurer pays an agreed sum to your family if you die during the covered period. Its core job is income replacement — keeping your dependants financially whole without you.

Sum assured

the guaranteed amount the insurer pays on a valid claim. In pure protection (term) plans this is the death benefit your nominee receives. Size it against what your family would actually need, not a round number.

Death benefit

the amount paid to your nominee if the life assured dies during the policy term. In term insurance this is the sum assured; in savings plans it may include bonuses.

Maturity benefit

the amount paid to you if you survive to the end of the policy term. Pure term plans have no maturity benefit — that's why they're cheap.

Survival benefit

payouts made during the term while you're alive, common in money-back plans.

Premium

what you pay for the cover, monthly, yearly or as a single lump sum. For term insurance it's small relative to the cover; for savings plans, most of it goes to the savings side, not protection.

Policy term

how long the cover runs (say, until age 60 or 65). For term insurance, match it to the years your family depends on your income.

Premium paying term (PPT)

how long you pay premiums, which can be shorter than the policy term (for example, pay for 10 years, covered for 30). Limited pay and single pay options let you finish paying early.

Rider

an optional add-on that expands what the base policy covers, for an extra premium (see Riders).

Policy document

the full contract. The pages that matter most: the schedule (your sum assured, term, premium, nominee) and the exclusions (chiefly the suicide clause).

The people on a policy

Getting these roles right is what makes a claim smooth — and getting them wrong is what makes it slow.

Life assured / life insured

the person whose life is covered. If they die during the term, the policy pays out.

Proposer / policyholder

the person who owns the policy and pays the premiums. Often the same as the life assured, but not always (a spouse may propose on another).

Nominee

the person you name to receive the death benefit. Keep it updated after every major life change; an outdated or missing nominee is the most common cause of a delayed death claim.

Beneficial nominee

since the 2015 amendment to the Insurance Act, close family nominees (spouse, children, parents) are beneficial nominees — they receive the money as owners, not just as collectors passing it to legal heirs. This strengthens your family's claim.

Assignee / assignment

transferring the rights under a policy to someone else (for example, a bank when a policy is used as loan security). The assignee's rights can override the nominee's — know the difference before you assign.

Appointee

the adult who receives the payout on behalf of a nominee who is a minor, until the child comes of age.

Types of life cover

The single most important distinction: is this plan protection or savings? Mixing the two usually gives you a little of each and not enough of either.

Term insurance

pure protection: a large sum assured for a low premium, paid to your nominee if you die during the term. No maturity payout if you survive. For most families, this is the plan that actually does the job.

Term with return of premium (TROP)

term insurance that refunds your premiums if you survive the term. The refund is funded by charging you a much higher premium throughout — usually poor value versus plain term plus investing the difference.

Whole life insurance

cover that runs to a very high age (often 99/100), so a payout is near-certain. Used more for estate planning than income replacement.

Endowment plan

a savings-plus-insurance plan paying a maturity benefit with bonuses if you survive, and a death benefit if you don't. Safe but low-return; the cover is usually small for the premium.

Money-back plan

an endowment variant that pays survival benefits at intervals during the term, plus a maturity amount. Same trade-off: modest returns, modest cover.

Unit Linked Insurance Plan (ULIP)

insurance combined with market-linked investment. Part of your premium buys cover; the rest is invested in funds you choose. Returns aren't guaranteed, and charges matter — read them (see ULIP terms).

Guaranteed / savings plan (non-par)

a plan promising a fixed, defined maturity payout. Predictable, but the guaranteed return is typically low; compare it honestly against simpler alternatives.

Participating (par) policy

a plan that shares in the insurer's surplus through bonuses, which are declared, not guaranteed.

Non-participating (non-par) policy

a plan with fixed, pre-defined benefits and no bonuses. What you're promised is what you get — no more, no less.

Annuity / pension plan

a plan that converts a lump sum into a regular income for life, used to fund retirement (see annuity under The money terms).

Group life insurance

cover provided to a group, usually by an employer. Convenient and cheap, but it ends when you leave — which is why it shouldn't be your only life cover.

Child plan

a savings plan structured to pay out at milestones in a child's education, often with a waiver of premium so the plan continues if the parent dies.

The money terms

Human Life Value (HLV)

an estimate of the financial value your future earnings represent to your family — a common way to size how much cover you need. A rough rule many advisors use is 10–15× your annual income, adjusted for loans and goals.

Rider sum assured

the additional cover a rider provides, separate from the base sum assured.

Lump sum payout

the whole death benefit paid as a single amount. Simple, but requires the family to manage a large sum.

Staggered / income payout

the death benefit paid as a monthly income (sometimes lump sum plus income), which can be easier for a family to live on. Chosen when you buy.

Annuity

a guaranteed income stream bought with a lump sum. An immediate annuity starts paying at once; a deferred annuity starts later. Annuity income is generally taxable as income.

Vesting age

in a pension plan, the age at which the accumulated corpus converts into annuity income.

ULIP-specific terms

If you're looking at a ULIP, these are the terms that decide what you actually keep.

Fund value

the current worth of your invested units — the number of units you hold times the NAV.

Net Asset Value (NAV)

the per-unit price of a ULIP fund, which moves with the market. Your fund value rises and falls with it.

Fund switch

moving your money between the ULIP's funds (equity, debt, balanced). A set number of switches a year is usually free.

Premium allocation charge

a charge deducted from your premium before it's invested. High allocation charges quietly reduce early returns.

Fund management charge (FMC)

an annual charge on your fund value for managing the investment, capped by the regulator.

Mortality charge

the cost of the actual life cover inside a ULIP, deducted from your fund. It rises with age.

Partial withdrawal

taking out part of your fund value after the lock-in, subject to conditions.

Lock-in period

the minimum time your money stays invested in a ULIP before you can withdraw — five years by regulation. Surrendering earlier means your money moves to a discontinuance fund.

Top-up premium

an extra, ad-hoc premium you add to a ULIP to invest more.

Bonuses and values

Bonus

in a participating plan, a share of the insurer's surplus added to your policy. It's declared each year, not guaranteed.

Reversionary bonus

a bonus declared annually and added to the policy, but paid only at maturity or on the claim (it "reverts" to you later).

Terminal bonus

an extra, discretionary bonus paid once, at maturity or on a death claim, as a loyalty reward for staying the full term.

Guaranteed additions

fixed amounts added to a non-par plan at a defined rate, guaranteed regardless of the insurer's performance.

Loyalty additions

extra amounts some plans add for policyholders who stay invested over the long term.

Paid-up value

if you stop paying premiums after the policy has acquired value, the cover doesn't vanish — it continues at a reduced paid-up sum assured based on premiums paid.

Surrender value

the amount the insurer pays if you exit a savings policy before maturity. It's the higher of the guaranteed and special surrender values below.

Guaranteed Surrender Value (GSV)

the minimum surrender value guaranteed by regulation, expressed as a percentage of premiums paid: broadly 30% in the second year, 35% in the third, 50% between years four and seven, and up to 90% in the last two years.

Special Surrender Value (SSV)

a value based on the policy's paid-up value, usually higher than the GSV. Under the 2024 norms (effective 1 October 2024), an enhanced SSV is payable even after just the first year's premium — earlier, surrendering in year one returned nothing. Why it matters: exiting a savings plan early still costs you, but less than it used to.

Cash value

the accumulated value inside a savings or ULIP plan that you can surrender or, in some plans, borrow against.

Riders — optional extra cover

Riders are where a plain term policy becomes a proper safety net. Add the ones that fit your risks; skip the ones that don't.

Accidental Death Benefit (ADB) rider

pays an additional sum if death is caused by an accident, on top of the base death benefit.

Accidental Total & Permanent Disability rider

pays out if an accident leaves you permanently unable to earn — sometimes the more valuable half of accident cover, since disability can hurt a family's finances more than death.

Critical Illness rider

pays a lump sum on diagnosis of a listed serious illness (cancer, heart attack, stroke and others), giving you money to stop working and focus on recovery.

Waiver of Premium (WOP) rider

if you become disabled or critically ill (or, in a child plan, die), future premiums are waived and the policy continues in full. Small cost, large peace of mind.

Income benefit rider

pays your family a regular monthly income for a set period after your death, in addition to the lump sum.

Terminal illness benefit

advances part or all of the death benefit if you're diagnosed as terminally ill, so the money helps while you're still alive. Often built into modern term plans.

Policy mechanics

Free-look period

a window after you receive the policy — now 30 days under the 2024 rules (up from 15) — to review it and cancel for a refund of premium (less small charges) if it isn't what you expected.

Grace period

extra time after a missed premium due date (commonly 15 days for monthly, 30 for other modes) during which cover continues and you can still pay.

Lapse

what happens when you don't pay within the grace period: the cover stops. A lapsed term policy pays nothing on a claim.

Revival / reinstatement

restarting a lapsed policy by paying overdue premiums (with interest) and meeting the insurer's health requirements, within the revival period.

Revival period

the window (now up to five years for many products) in which a lapsed policy can be revived. Importantly, a revived policy can restart the Section 45 contestability clock — see Legal protections.

Policy loan

borrowing against a savings policy's value. Under the 2024 norms, a policy-loan facility is now mandatory in all savings life products, giving policyholders a liquidity option without surrendering.

Nomination

naming or updating who receives the death benefit. Review it after marriage, a child, or a death in the family — this five-minute task prevents the most common claim delay.

Assignment

legally transferring policy rights to another party, often a lender. Unlike nomination, assignment can change who is legally entitled to the proceeds.

Underwriting & disclosure

Proposal form

your application, where you declare your age, income, health, habits (especially tobacco), occupation and family history. This document is the contract's foundation — complete it yourself, truthfully.

Underwriting

the insurer's assessment of your risk, which sets your premium and whether cover is offered, loaded or declined.

Material fact

anything that would change the insurer's decision or price: a medical condition, tobacco use, a hazardous job or hobby, existing cover elsewhere. If unsure, disclose it — it's the cheapest insurance you'll ever buy.

Non-disclosure / misrepresentation

leaving out or misstating a material fact. It's the leading reason death claims are contested — and it's entirely avoidable. Honest disclosure is what makes the Section 45 protection work for your family.

Medical examination

health tests the insurer may require before issuing cover, especially for larger sums assured or older applicants.

Insurable interest

the requirement that you'd suffer a genuine financial loss from the insured person's death (you have it in your own life, your spouse's, sometimes a business partner's). It's what separates insurance from a wager.

Smoker / non-smoker status

a key rating factor. Declaring tobacco use costs more now but protects the claim later; hiding it risks the whole payout.

Legal protections

The clauses the law puts on your side. These are worth understanding in full.

Section 45 of the Insurance Act, 1938 (the "three-year rule" / incontestability clause)

once a life policy has been in force for three years — counted from issuance, commencement of risk, revival, or a rider's addition, whichever is latest — the insurer can no longer question or repudiate the policy on any ground, including misstatement or non-disclosure. Within those three years, they can contest only for a stated, material reason and must give written grounds. Why it matters: after three honest years, your family's claim is legally protected from being reopened.

Contestability period

the first three years, during which Section 45 allows the insurer to investigate and question the policy for fraud or material misstatement, subject to the law's conditions and written-reason requirements. After that window, the policy cannot be called into question on any ground.

Suicide clause

the standard exclusion under which, if the life assured dies by suicide within the first 12 months of the policy (or revival), the nominee receives the premiums paid or the acquired value rather than the full sum assured. After 12 months, the full death benefit is payable.

Married Women's Property Act (MWP Act), 1874

a way to buy a life policy so its proceeds go only to your wife and/or children, protected from your creditors and other claimants. Worth considering if you have business liabilities or loans.

Grace, revival and Section 45 together

reviving a lapsed policy can reset the three-year clock from the revival date. It's a good reason not to let cover lapse in the first place.

Claims vocabulary

This is the part MITRA is built around — because a death claim lands on a family at their hardest moment. We have supported 25,000+ settled claims, with a 98% claims resolution rate.

Death claim

the nominee's request for the death benefit after the life assured dies. Intimate the insurer early and keep the documents together; a MITRA claim expert handles the paperwork and follow-up for the family.

Maturity claim

your request for the maturity benefit when a savings policy completes its term. Simpler than a death claim — mostly identity and policy documents.

Claim intimation

informing the insurer that a claim has arisen, with the policy number and basic details. The sooner, the smoother.

Death certificate

the primary document for a death claim, issued by the municipal authority. Most other requirements flow from it.

Claim documents

typically the death certificate, the policy document, the nominee's identity and bank details, and, depending on cause and timing, medical or police records. We give families a single, clear checklist rather than a moving target.

Repudiation

a rejected claim. It must come with written reasons and can be escalated to the Ombudsman. Most repudiations trace back to non-disclosure at the proposal stage — which is why we get disclosure right when you buy.

Claim Settlement Ratio (CSR)

the percentage of death claims an insurer settled out of those received in a year. For life insurance it's a genuinely useful signal of how reliably an insurer pays. Read it alongside the amount settled ratio.

Amount settled ratio

the percentage of claim value (not just count) paid. It guards against a high CSR built on settling many small claims while disputing large ones.

Insurance Ombudsman

a free, official forum to escalate an unresolved or unfairly rejected claim without going to court, within defined limits and timelines.

Bima Bharosa

the IRDAI's online grievance-redressal portal for policyholder complaints.

Tax

Life insurance has two distinct tax angles — on the premium you pay, and on the money that comes back. Both are worth knowing; neither is a reason on its own to buy.

Section 80C

a deduction of up to ₹1,50,000 a year for life insurance premiums (among other eligible items), available only under the old tax regime. The premium generally qualifies only if it's within 10% of the sum assured.

Section 10(10D)

the rule that makes life insurance payouts tax-free, with conditions. The death benefit is always tax-free, whatever the premium. Maturity proceeds are exempt only if the annual premium stays within 10% of the sum assured, and — for policies issued on or after 1 April 2023 (other than ULIPs) — only if the total annual premium across such policies is ₹5,00,000 or less. For ULIPs issued on or after 1 February 2021, the aggregate-premium threshold is ₹2,50,000; above it, gains are taxed as capital gains.

TDS under Section 194DA

where a life insurance payout is taxable (because it breaches the 10(10D) conditions), the insurer deducts tax at source on the income portion before paying you.

Income-tax Act, 2025

from 1 April 2026 the law is renumbered and simplified; the substance above is retained (Section 10(10D) is recodified, but the death-benefit exemption and premium thresholds carry over). This is general information, not tax advice — confirm the current year's rules and your own position before relying on them.

Quick comparisons

Term vs endowment vs ULIP

Participating vs non-participating

Nominee vs beneficiary vs assignee

Death benefit vs maturity benefit

Common misconceptions

"Term insurance is a waste because I get nothing back." You get the one thing that matters — a large payout for your family if you die young, for a small premium. The "nothing back" is the reason it's affordable. Buy term, invest the difference separately.

"Endowment and ULIP plans are the best of both worlds." More often they're the weakest of both — small cover and modest returns. Separating protection (term) from investing usually gives your family more of each.

"My employer's group cover is enough life insurance." It ends when the job does, is often just a few times salary, and isn't yours to keep. Treat it as a bonus on top of a personal term plan, not a replacement.

"Once I've paid for years, my claim can't be denied." After three years, Section 45 prevents the insurer from calling the policy into question. A claim must still satisfy the policy's covered-event conditions and exclusions, so this protection is not the same as automatic payment of every claim.

"Buying life insurance is a great tax-saving investment." The tax break is a nice extra, not the reason to buy. Choosing a poor plan for a deduction usually costs more in returns than it saves in tax.

Frequently asked questions

Keep going

• Health insurance terms → the companion A–Z glossary at /learn/health-insurance-terms
• Term insurance, done right → sizing, insurer choice and disclosure at /life/term
• How a life claim actually gets paid → step-by-step at /life/claim-process
• Life Insurance: The Complete Guide → the full topic map at /life/complete-guide
• Talk to a claim expert → /claims

A word on why this glossary exists

Anyone can sell you a life policy. Far fewer will still be there when your family has to claim on it — which is the only moment life insurance is really tested. We wrote this glossary because a policy you understood when you bought it is a policy your family can claim on cleanly when you're gone. Insurance is easy to buy. Claims are hard. Getting the words right is how we start making them effortless.

Not sure which plan or rider fits your family? A MITRA advisor will size your cover and explain the trade-offs honestly — free, unbiased, no pressure. Schedule a free call →