Insurance Terms You Should Know (Made Simple)

CKP
Oct 6
5 min read

Insurance can feel overwhelming because of all the jargon thrown around in policies and conversations. To make it easier, here’s a simple glossary of key terms — explained in plain language — so you know exactly what you’re signing up for.

GENERIC TERMS USED IN INSURANCE

Primary Insurance Terms:

Insurer: The company or entity that provides insurance coverage and assumes the financial risk in exchange for a premium.
Insured: The person or entity whose life, property, or risk is covered by an insurance policy and who receives compensation in case of a covered loss.

Money-Related Terms

Premium The regular amount you pay (monthly, quarterly, or annually) to keep your insurance policy active.
Sum Insured The maximum financial protection your insurer promises to provide under the policy.
Deductible: The portion of a claim you pay out of your own pocket before the insurance company starts covering the rest. It helps reduce your premium by sharing some risk with the insurer.
Co-Pay A cost-sharing rule: you pay a certain percentage, and your insurer pays the rest.
No Claim Bonus (NCB) A reward you get (such as a reduced premium or increased coverage) if you don’t make any claims in a year.
Rider / Add-On An optional extra benefit you can attach to your policy, like zero debt, food or natural disaster cover, etc.

Claim-Related Terms

Claim A formal request you make to your insurer when a covered event happens (like hospitalisation or fire damage).
Claim Settlement The process where the insurer reviews your claim and pays the approved amount.
Repudiation When the insurer rejects your claim, usually due to exclusions or incorrect documentation.
Reimbursement Claim You pay the bills first, then submit them to your insurer for a refund.
Deficiency of Service When the insurer delays, underpays, or unfairly rejects a claim — something you can take to court, if need be.

Policy-Related Terms

Policy The contract between you and your insurer. It spells out what’s covered and what isn’t.
Exclusions Situations, conditions, or treatments your policy specifically does not cover.
Network Hospitals Hospitals that have tie-ups with your insurer to provide cashless treatment.
Grace Period Extra time (usually 15–30 days) given to pay your premium after the due date.
Lapsed Policy When your insurance becomes inactive because you didn’t pay your premium even within the grace period.

TERMS USED IN HEALTH INSURANCE

Primary Health Insurance Terms

Proposer (in Health Insurance): The person who applies for the health insurance policy and provides all necessary details to the insurer; they may be insuring themselves or family members.
Nominee (in Health Insurance): The person designated to receive the insurance benefits or claim amount in case the insured passes away or is unable to receive it themselves.

Hospitalization & Treatments

In-Patient Treatment
When you are admitted to a hospital for more than 24 hours, usually for surgery or serious illness.
Daycare Treatment
Medical procedures or surgeries that need less than 24 hours of hospitalization, such as cataract surgery, dialysis, or chemotherapy.
Pre-Hospitalization Expenses
These are costs for medical tests, doctor consultations, or treatments incurred before hospital admission, specifically for the same illness for which hospitalization is required. Most health insurance policies cover such expenses for up to 30 days prior to hospitalization, ensuring all preliminary care related to that particular illness is included in the claim.
Post-Hospitalization Expenses
These are costs for medicines, follow-up visits, or treatments incurred after discharge from the hospital, specifically for the same illness for which hospitalization was required. Most health insurance policies cover such expenses for up to 60 days after discharge, ensuring continued care related to that particular illness is included in the claim.
Domiciliary Care:
Medical treatment received at home when a patient cannot be moved to a hospital due to critical illness, injury, or frailty. Coverage is typically for hospital-level care at home, like IV therapy, dressings, or oxygen support.
Home Care:
Routine medical care provided at home for less severe conditions or post-hospitalization recovery, such as physiotherapy, nursing assistance, or medication management.
OPD Treatment
Covers medical expenses without hospitalization, like doctor consultations, diagnostic tests, or prescribed medicines.
Prolonged Hospitalization Benefit
Extra allowance if you stay in hospital beyond a certain period, e.g., 10+ days.
Daily Cash Benefit (Shared Accommodation)
Fixed cash allowance for each day you choose a shared/less expensive hospital room.
Daily Cash Benefit (Accompanying a Child)
Cash allowance for an adult staying with a hospitalized child.

Treatment & Coverage

Cashless Treatment
Treatment at a network hospital where you don’t pay upfront; the insurer directly settles the bill with the hospital.
Restoration Benefit
When your sum insured is fully used, the insurer automatically refills it for future claims within the same policy year.
Room Rent Limit
The maximum daily cost of a hospital room the insurer will cover. Example: If your limit is ₹5,000/day and you choose a ₹8,000/day room, you pay the difference i.e. ₹3,000.
Pre-Existing Disease (PED)
A health condition you already had before buying insurance, such as asthma or diabetes. These usually have a waiting period before coverage starts.
Waiting Period
The time you must wait before certain treatments or conditions are covered. Example: PED may have a 2–4 year waiting period.
Maternity Cover
Coverage for childbirth-related expenses, usually after a waiting period of 2–4 years.
Delivery Complications Cover
Covers unexpected medical complications during childbirth, such as C-section or premature delivery.
Vaccination Cover
Some policies cover costs of preventive vaccines, e.g., flu shots, child immunizations.
Wellness Program
Benefits such as free health check-ups, gym discounts, tele-consultations, or rewards linked to healthy living.

Family & Policy Types

Individual Policy
Each insured person has a separate sum insured under the policy.
Family Floater Policy
One sum insured is shared among all family members. Example: ₹10 lakh floater for 4 members → anyone or all can use it until ₹10 lakh is exhausted.
Top-up Plan
Extra coverage that activates once your deductible/base policy is crossed or used.
Critical Illness Cover
A plan that pays a lump sum if you are diagnosed with a major disease such as cancer or heart attack, regardless of hospital bills.

Other Important Terms

Cumulative Bonus If you don’t make a claim in a policy year, your sum insured increases the next year as a reward (without higher premium immediately).
Moratorium Period After 5 continuous years of holding a health policy, the insurer cannot reject claims (except for fraud).
Loading An extra charge on your premium due to higher risk (example: existing health conditions, risky profession).
Floater Sum Insured The total coverage is shared by all family members under a family floater plan.
Portability You can switch insurers without losing benefits like waiting periods you’ve already served.
Sub-limit A cap/limit on certain expenses. Example: Room rent capped at ₹5,000/day even if your total sum insured is ₹10 lakh.
Free Look Period Usually within 15 days of buying the policy → you can cancel and get most of your premium back if you’re unhappy.
Underwriting The process by which insurers assess your risk (health, lifestyle, medical history) before issuing/renewing a policy.
Claim Settlement Ratio (CSR) The percentage of claims an insurance company successfully settles out of the total claims received, indicating its reliability and efficiency in paying claims.
Ombudsman A government-appointed authority who helps resolve disputes between insurers and policyholders free of cost.
Consumables Cover Some insurers offer this add-on to cover single-use items like PPE kits, gloves, syringes, etc., which are usually excluded. Items not covered in claims, like gloves, masks, toiletries during hospitalization.
Restoration of Sum Insured When your full coverage is used, the insurer refills the sum insured for future claims in the same year.
Zone-based Premium Premiums differ by city category: Metro (higher), Tier-2 and Tier-3 (lower). Zone-Based Premium ensures fair pricing — you pay according to the risk level of your location. People in high-cost, high-risk areas contribute more, while those in lower-risk zones benefit from reduced premiums
Hypothecation
Pledging an asset (like a vehicle, ship, or cargo) as security for a loan without giving up possession, so the lender has a legal claim if the borrower defaults

Claim-Related Terms

Hospitalization & Treatments

In-Patient Treatment

When you are admitted to a hospital for more than 24 hours, usually for surgery or serious illness.

Daycare Treatment

Medical procedures or surgeries that need less than 24 hours of hospitalization, such as cataract surgery, dialysis, or chemotherapy.

Pre-Hospitalization Expenses

Post-Hospitalization Expenses

Domiciliary Care:

Medical treatment received at home when a patient cannot be moved to a hospital due to critical illness, injury, or frailty. Coverage is typically for hospital-level care at home, like IV therapy, dressings, or oxygen support.

Home Care:

Routine medical care provided at home for less severe conditions or post-hospitalization recovery, such as physiotherapy, nursing assistance, or medication management.

OPD Treatment

Covers medical expenses without hospitalization, like doctor consultations, diagnostic tests, or prescribed medicines.

Prolonged Hospitalization Benefit

Extra allowance if you stay in hospital beyond a certain period, e.g., 10+ days.

Daily Cash Benefit (Shared Accommodation)

Fixed cash allowance for each day you choose a shared/less expensive hospital room.

Daily Cash Benefit (Accompanying a Child)

Cash allowance for an adult staying with a hospitalized child.

Treatment & Coverage

Cashless Treatment

Treatment at a network hospital where you don’t pay upfront; the insurer directly settles the bill with the hospital.

Restoration Benefit

When your sum insured is fully used, the insurer automatically refills it for future claims within the same policy year.

Room Rent Limit

The maximum daily cost of a hospital room the insurer will cover. Example: If your limit is ₹5,000/day and you choose a ₹8,000/day room, you pay the difference i.e. ₹3,000.

Pre-Existing Disease (PED)

A health condition you already had before buying insurance, such as asthma or diabetes. These usually have a waiting period before coverage starts.

Waiting Period

The time you must wait before certain treatments or conditions are covered. Example: PED may have a 2–4 year waiting period.

Maternity Cover

Coverage for childbirth-related expenses, usually after a waiting period of 2–4 years.

Delivery Complications Cover

Covers unexpected medical complications during childbirth, such as C-section or premature delivery.

Vaccination Cover

Some policies cover costs of preventive vaccines, e.g., flu shots, child immunizations.

Wellness Program

Benefits such as free health check-ups, gym discounts, tele-consultations, or rewards linked to healthy living.

Family & Policy Types

Individual Policy

Each insured person has a separate sum insured under the policy.

Family Floater Policy

One sum insured is shared among all family members. Example: ₹10 lakh floater for 4 members → anyone or all can use it until ₹10 lakh is exhausted.

Top-up Plan

Extra coverage that activates once your deductible/base policy is crossed or used.

Critical Illness Cover

A plan that pays a lump sum if you are diagnosed with a major disease such as cancer or heart attack, regardless of hospital bills.

Cumulative Bonus If you don’t make a claim in a policy year, your sum insured increases the next year as a reward (without higher premium immediately).

Moratorium Period After 5 continuous years of holding a health policy, the insurer cannot reject claims (except for fraud).

Loading An extra charge on your premium due to higher risk (example: existing health conditions, risky profession).

Floater Sum Insured The total coverage is shared by all family members under a family floater plan.

Portability You can switch insurers without losing benefits like waiting periods you’ve already served.

Sub-limit A cap/limit on certain expenses. Example: Room rent capped at ₹5,000/day even if your total sum insured is ₹10 lakh.

Free Look Period Usually within 15 days of buying the policy → you can cancel and get most of your premium back if you’re unhappy.

Underwriting The process by which insurers assess your risk (health, lifestyle, medical history) before issuing/renewing a policy.

Claim Settlement Ratio (CSR) The percentage of claims an insurance company successfully settles out of the total claims received, indicating its reliability and efficiency in paying claims.

Ombudsman A government-appointed authority who helps resolve disputes between insurers and policyholders free of cost.

Consumables Cover Some insurers offer this add-on to cover single-use items like PPE kits, gloves, syringes, etc., which are usually excluded. Items not covered in claims, like gloves, masks, toiletries during hospitalization.

Restoration of Sum Insured When your full coverage is used, the insurer refills the sum insured for future claims in the same year.

Hypothecation

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