Buying insurance is confusing because the industry uses terms that most people don’t encounter anywhere else. Whether you’re choosing car insurance, bike insurance, health cover, term insurance, or travel protection, the terminology can create unnecessary complexity.
This guide explains the most important insurance terms in simple, everyday language, so you can make confident decisions when comparing policies, selecting coverage, or filing a claim.
Each definition is written for Indian customers and aligned with the terms used across major insurers and IRDAI guidelines.
1. Essential Insurance Terms Everyone Should Know
Premium
The amount you pay to keep your policy active. It may be annual, monthly, or a single payment.
Sum Assured / Sum Insured
The maximum amount the insurer will pay for a covered claim.
Sum Assured = Life/Term policies
Sum Insured = Health and General Insurance (e.g., car, bike, travel)
Policy Period
The duration for which your policy is valid, usually one year for motor and health and longer for term life.
Coverage
The events, damages, costs, or risks the insurer agrees to pay for.
Exclusions
Events or damages the insurer does not cover.
Riders / Add-ons
Optional benefits you can attach to your policy to enhance coverage.
Endorsements
Any change or update made to the policy after it is issued.
Claim
A request you file with the insurer when you experience a covered loss or event.
Cashless Facility
A feature where approved hospitals or garages settle the bill directly with the insurer.
Deductible / Co-Pay
The amount you pay out of pocket before the insurer pays the remaining amount.
2. Car & Bike Insurance Terms You Must Know
IDV (Insured Declared Value)
Your vehicle’s current market value. It determines your own-damage premium and is the maximum payout in total loss or theft.
NCB (No Claim Bonus)
A discount on your next premium if you did not make any claims in the previous year.
Zero Depreciation Cover
An add-on that allows you to receive full claim amounts without depreciation cuts on parts.
Third-Party Insurance
Mandatory by law. Covers damage or injury caused to others, but not your vehicle.
Comprehensive Policy
Includes third-party liability and own-damage (accidents, fire, theft, natural disasters).
Engine Protect Cover
Helps cover engine damage not included in standard policies, such as water ingression.
Cashless Garage
A network garage where repairs happen without you paying upfront.
3. Health Insurance Terms Explained
Pre-Existing Disease (PED)
Any illness you already had before buying the policy.
Waiting Period
Time during which certain treatments or conditions won’t be covered.
Cashless Hospitalization
Treatment at a network hospital where the insurer directly settles the bill.
Co-Pay
A fixed percentage of the hospital bill you agree to pay.
Sum Insured Refill / Restore
Feature where the insurer “refills” your coverage amount if it gets exhausted.
Day Care Procedures
Treatments requiring less than 24 hours of hospitalization.
Room Rent Limit
Maximum room cost covered per day; exceeding it triggers proportionate deductions.
4. Term & Life Insurance Terms
Term Plan
Pure life cover with no maturity benefit; offers high coverage at low premium.
Maturity Benefit
Amount paid at the end of policy term (only in return-of-premium or savings plans).
Nominee
Person who receives the sum assured in case of the policyholder’s death.
Paid-Up Value
Reduced benefit amount if you stop paying premiums midway.
Critical Illness Rider
Lump sum payout on diagnosis of a specified severe disease.
Accidental Death Benefit Rider
Extra payout if death occurs due to an accident.
5. Travel Insurance Terms
Trip Cancellation Cover
Covers non-refundable expenses when you cancel the trip due to covered reasons.
Medical Emergency Cover
Covers medical expenses abroad, including hospitalization.
Baggage Loss / Delay
Provides compensation if your luggage is lost or delayed.
Passport Loss Cover
Covers expenses for obtaining a duplicate or replacement passport.
6. How These Terms Affect Your Premium
Insurance premiums depend on how each of these factors interact:
- Higher IDV increases premium but increases payout
- More add-ons increase premium but improve coverage
- Higher sum insured increases health insurance cost
- Pre-existing conditions may lead to waiting periods
- Zero Dep increases motor premiums but boosts claim payout
- Co-pay reduces premium but increases your share during claims
- Younger age = lower life and health insurance premiums
Understanding these terms helps you select the right balance between coverage and cost.
7. Why You Should Review the Glossary Before Buying a Policy
Insurance language should not stand between you and the right policy. PolicyBachat built a Glossary specifically to help customers:
- Decode insurer terminology quickly
- Compare plans fairly
- Understand add-ons
- Evaluate exclusions
- Avoid claim surprises
- Make informed decisions
If you’d like to review any of these terms with simple definitions, you can refer to the Glossary.