do-you-understand-these-7-insurance-jargons

Do You Understand These 7 Insurance Jargons?

Understand key life insurance terms in simple language: Ideal for first-time buyers and investors looking to make informed policy decision

Written by : Knowledge Centre Team

2026-01-08

879 Views

5 minutes read

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Insurance can be overwhelming for anyone trying to decipher the legal and technical maze of the industry. However, for common investors and taxpayers, understanding a few commonly used terms is more practical than delving into the deeper concepts.

Whether you're buying your first policy or reviewing your existing cover, knowing the basic terms can help you make more confident, informed decisions. It can also prevent misunderstandings about what your policy actually offers.

So, here are the seven most common life insurance terms with their meanings, explained in simple language, with examples of how they apply to various insurance plans.

Key Takeaways

  • Premium Payment Term refers to how long you’ll need to pay premiums, which can be shorter than the policy term.

  • Payment Mode determines the frequency of premium payments, monthly, quarterly, or annually and how benefits are received.

  • Terminal Illness is an incurable, fast-progressing condition that may be covered under some life insurance plans.

  • Total and Permanent Disability refers to irreversible physical impairment, often triggering a full benefit payout.

  • Reading the policy document thoroughly is just as important as understanding the terms. It helps prevent future claim disputes or misunderstandings.

1. Premium Payment Term

Each life insurance plan has a policy term and a premium payment term. While the policy term defines the length of time the cover will continue, the premium payment term (PPT) defines the length of time you will need to continue paying the premiums.

For example, you can buy a 30-year life cover with a premium payment term of only 15 years. This means that in 15 years, you will pay all the premiums for the 30-year life cover.

In general, the premium payment term is equal to the policy term, and this combination is called a regular pay policy. But you can choose to pay the premiums faster by choosing a limited pay option, which allows for faster premium payment.

Paying premiums early provides you with two benefits: Savings on the total premium payable and a stress-free life with a life cover without the worry of a lapse

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2. Premium Payment Mode

Life insurance policies use the term ‘mode’ to represent the frequency of payment. For example, the 'mode' is used as ‘premium payment mode’ or ‘the mode of benefit pay-out’. In both places, the meaning of the term ‘mode’ remains the same.

The mode of premium payment could be monthly, quarterly, or annually. In case of benefit amount payout, the modes can be a lump sum, a one-time payment or monthly, which is also called the regular payment mode.

Online term insurance plans, such as iSelect Smart360 Term Plan byCanara HSBC Life Insurance, offer the payout of the death claim benefit to the family in a lump sum and a regular income mode. Regular income payout is quite useful for the family which needs this regular income to run the household expenses and meet their regular needs.

3. Terminal Illness

Terminal illness is the term given to a rapidly progressing illness that is often incurable or at least does not yet have a definite cure. Some of these dreaded illnesses are various types of cancer, renal failure, and heart attack..

Because these illnesses do not have a definitive cure and the treatment costs alone could ruin a family’s financial future, you can insure yourself against them using critical illness insurance.

Cover for these terminal illnesses is automatically included in the iSelect Smart 360 Term Plan by Canara HSBC Life Insurance. However, you can also purchase a separate cover in case you already have term insurance and only need to protect against these illnesses.

4. Total & Permanent Disability

Disability is a broad term in an insurance contract which needs to be defined in each situation with scientific accuracy. Thus, the term ‘disability’ has been assigned a few prefixes, which help determine the type and severity of the disability.

For example, a fractured bone in the leg is also a disability, but it’s a temporary one and a partial disability, as the person can still move around on their own. However, a fracture in both legs would turn it into a temporary total disability.

Similarly, insurance contracts define a total bodily inability to move as a total and permanent disability when it becomes incurable. Causes of such a disability could be an accident or a terminal illness.

Under life insurance, total and permanent disability is treated severely enough for the policy to pay the entire benefit amount under the claim.

In the case of less severe disabilities, the policy will pay a lower amount.

5. Paid-Up Value

Paid-up value is the value a policy acquires after you have paid a specific number of premiums. The number of premiums may vary from policy to policy. However, the general period is two to three years. Paid-up value is a reduced sum assured value.

For example, you purchase a policy with a sum assured of ₹20 lakhs, for 20 years, and are expected to pay the premiums for the next 10 years. If you stop paying the premiums after, say, three years, the policy will acquire paid-up value close to 30% of its original sum assured. That is, equal to the percentage of total premiums you have paid.

Different policies will treat this sum differently, however. For instance, a savings plan may use this value to estimate your surrender value of the policy.

On the other hand, a ULIP may work entirely differently. You may receive a minimum guaranteed interest rate on this amount until you either revive or surrender the policy.

6. Grace Period

You need to pay the premium on or before the due date for any life insurance policy. If the due premium is not paid for a policy, it is assumed to be in paid-up and the benefits are limited for the policy.

However, the policy will not acquire paid-up value if you can deposit the premium within the grace period after the due date. If you are paying the premium in annual mode, the grace period for you will be 30 days after the premium due date. In any other mode, the grace period is limited to 15 days.

7. Lock-in Period

Lock-in period usually applies to Unit-Linked Insurance Plans and other investments, other than life insurance. This period refers to the time when fund movement will be limited to inflows to the policy. So, you can invest in the policy within the lock-in period, but withdrawals are not allowed.

The lock-in period for ULIPs is five years. So, any partial withdrawal from the accumulated funds is possible only after the policy completes five years.

This lock-in period for ULIPs is also the minimum investment period offered in ULIPs. If you stop paying the premiums within the lock-in period, the policy will discontinue, and the funds moved to a discontinued policy fund.

Conclusion

Insurance can seem complex until you begin to understand the terms used across policies. As with any financial product, clarity in language helps in making better decisions and avoiding unexpected surprises later.

While understanding key terms is essential, it’s equally important to read the policy document thoroughly before signing up. Many crucial details, such as exclusions, waiting periods, or conditions for claims, are found in the fine print, and skipping them may lead to confusion or disputes in the future.

So, along with learning the basic terminology, make it a habit to review your policy documents carefully or seek guidance to ensure that your insurance plan truly aligns with your expectations.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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