Understand Policy Terms

  • accidental death benefit

    An extra payment made under a life insurance policy if death is caused by an accident. The additional amount is usually equal to the face value of the policy.

  • achieved profit

    Achieved profit is designed to recognise profit as it is earned over the lifetime of an insurance policy. Achieved profit is made up of operating profit plus investment variances, changes in economic assumptions and any exceptional items. It reflects the current value of in-force business and the net worth of long-term savings operations, adjusted for dividends paid out or capital reinvested. From year-end 2004, Aviva plc reports using European embedded value methodology and not achieved profit. See also embedded value.

  • active fund management

    A style of investment management where the fund manger seeks to improve returns or reduce costs by using their expertise to choose which stocks or bonds to buy and sell. The opposite of passive management, where the manager aims to match the performance of a market or index by replicating the composition of that market or index in their fund.

  • actuary

    Someone who uses applied mathematics (in particular, probability) to provide solutions to insurance-related problems. Actuarial techniques are used to design new insurance products and to assess the profitability of new and existing business.

  • adding shareholder value

    Running a company in a way that seeks to increase the value of each shareholder's stake in the business.

  • additional value of in-force long-term business

    An estimate of future profits that will emerge over the remaining term of all existing life and pensions policies for which premiums are being paid or have been paid at the balance sheet date.

  • agent

    An individual or firm authorised to carry out transactions on behalf of another, such as the sale of insurance policies. Agents usually earn commission or a fee on the sale of a policy. They may be tied to a particular company and offer a limited selection of products.

  • amortisation

    An accountancy term for the gradual reduction in value of an asset caused by the passage of time. If something is amortised, it is written off. If the cause is not solely related to time, the effect is described as depreciation.

  • annual premium

    Annual contribution towards an insurance policy.

  • annual premium equivalent (APE)

    A UK industry standard formula for calculating levels of life and pensions new business over a period of time, to smooth out the effect of large, one-off payments. It is the total of new annual premiums plus 10% of single premiums. For the time being, Aviva will report life and pensions new business using both APE and present value of new business premiums.

  • annuity

    Another word for "pension". An annuity is a regular payment from an insurance company designed to give the policyholder an income for life after retirement. It is paid for by a lump sum saved during the policyholder's working lifetime. Annuity rates are based on yields on gilt-edged securities at the time of purchase. On death, any remaining investments usually become the property of the annuity provider.

  • asset allocation

    The process of dividing investments among different kinds of securities, such as stocks, bonds, property and cash. The choices made reflect investment aims and attitude to risk.

  • asset management

    Investment management service provided by financial institutions on behalf of their clients.

  • assignments

    This is the process by which, the owner of the rights under the policy known as the assignor transfers the right to another person known as the assignee by executing a deed of assignment.

  • assurance

    A term sometimes used instead of "insurance", generally in connection with life business, since assurance implies the certainty of an event (such as death) and insurance only the probability

  • automatic asset allocation (AAA)

    Automatic switching between funds to reduce exposure to risk.

    • balance sheet

      A statement showing the financial position of a business on a specific date by listing its assets (what it owns) and its liabilities (the claims on its assets, or what it owes).

    • bancassurance

      An arrangement whereby banks and building societies sell insurance and investment products to their customers on behalf of other financial providers.

    • bear

      An investor who expects share prices to fall or, more generally, has a pessimistic outlook about the market. A bear market is a period of falling share prices.

    • benchmark

      Typically a stock market index (for example, the Sensex, Nifty) against which an investment fund compares its performance and mix of assets.

    • beneficiary

      The person who receives the benefit of a policy in case of death during the term or the policyholder who receives the benefit on maturity

    • bid price

      What the market will pay, or what a seller will receive, for a particular share.

    • bid/offer spread

      The difference between the buying price (bid) and the selling price (offer) of units in an investment. The mid-price is the middle point between the two and is often the price quoted in newspapers. Also called the bid/ask spread.

    • blue chip

      A description applied to the biggest and most highly regarded companies quoted on the stock market. Shares in such companies are usually considered a reliable and profitable investment.

    • body mass index (BMI)

      Used for underwriting purposes in evaluating build and determining overweight and obesity. It tells us the person's health constitution. It is expressed as weight in Kg divided by height in meters to the power of two or Kg/height2

    • bonus rate

      The rate of return on a with-profit policy set by an insurance company's actuary. The rate may vary from year to year.

    • bull

      An investor who expects share prices to rise or, more generally, has an optimistic outlook. A bull market is a period of rising share prices. The opposite of bear.

      • capital

        Money invested typically in buildings and machinery.

      • capital gain

        The profit made on the sale of investments, such as shares or property.

      • capital gains tax

        The tax paid on any profit or gain made by selling something for more than it was bought.

      • capital growth

        Increase in the value of an investment reflected in the higher selling price.

      • claim

        Money invetsed typically in buildings and machinery.

      • capital gain

        The profit made on the sale of investments, such as shares or property.

      • capital gains tax

        The tax paid on any profit or gain made by selling something for more than it was bought.

      • capital growth

        Increase in the value of an investment reflected in the higher selling price.

      • claim

        Notification to an insurance company of a call by a policyholder to the benefits due under the terms of an insurance policy or scheme.

      • claims incurred

        The total of all claims sustained during an accounting period, whether paid or not. Also known as losses incurred.

      • claims ratio

        Claims incurred, adjusted for any reinsurance, expressed as a percentage of net premiums earned. Sometimes referred to as loss ratio.

      • combined operating ratio (COR)

        A financial measure of insurance underwriting profitability that expresses the total of claim costs, commission and expenses as a percentage of premiums. A COR below 100% indicates profitable underwriting. Companies with a COR over 100% can still be profitable if they earn sufficient investment income from the premiums paid by policyholders.

      • commission

        Payment made to a salesman, agent or other intermediary, normally in return for selling an insurance or investment policy.

      • compounding

        Earnings on an investment's earnings. Over time, compounding can produce significant growth in value of an investment.

      • corporate responsibility (CR)

        An umbrella heading for how companies approach their involvement with issues such as environmental management, local communities, employees, human rights, health and safety at work, suppliers, customers and standards of business conduct.

      • corpus

        Fund value or total benefit amount available on maturity or death.

      • coroner

        The coroner is the person who is legally authorized by the government to determine the cause of death, when this is in doubt, or if there has been death which is not deemed to be due from normal illnesses. He or she does it by examining the evidence submitted including autopsy or post mortem reports, medical reports and statements from witnesses. The coroner is usually a magistrate or someone who possess legal qualification.

      • critical illness cover

        A life insurance policy with the benefits payable on diagnosis of one of a number of specified medical conditions.

        • date of commencement

          The date on which cover begins, following acceptance of the risk by the insurer.

        • declaration

          This is the statement or section of the form where the person is required to declare that the statements or answers are given fully and truthfully and that if it were not so, there would be legal consequences.

        • debenture

          A fixed interest security issued by a company or government agency, usually secured on its assets, with a long-term redemption (repayment) date between 10 and 40 years ahead. If a company goes bust, debenture stockholders are first in line to be repaid before the other stockholders and shareholders.

        • deferred annuity

          An annuity (or pension) due to be paid from a future date or when the policyholder reaches a specified age. A deferred annuity may be funded by the policyholder by payment of a series of regular contributions or by a capital sum.

        • defined benefit scheme

          A pension scheme that set out the benefits payable to members irrespective of any contributions paid or investment gains made. An example is a final salary pension scheme, where payments are calculated as a proportion of the member's earnings at or near the date of retirement.

        • defined contribution scheme

          A pension plan where the benefits depend on the amount and frequency of contributions paid into the scheme, the investment gain on those contributions, and annuity rates at the time of retirement. The exact amount of pension will not be known until retirement. Also known as a money purchase scheme.

        • dependant

          A person who depends upon another for financial support. A child is normally a dependant at least until reaching the age of 18.

        • derivatives

          Financial instruments that gives the investor the option to buy or sell an asset. Derivatives include futures and options contracts. Futures contracts require delivery of a commodity or currency at a specified date. Options entitle the holder to buy or sell shares or commodities at a fixed price within a given period of time.

        • direct debits

          Fixed or variable amounts collected automatically from a bank account for premiums, investment contributions and other regular payments.

        • doctrine of Utmost Good Faith

          Insurance contract is issued on the basis that the applicant truthfully and fully discloses everything he or she knows about his or her health. This arises from the recognition that the insurance company is in a disadvantageous position, as the insurer does not know anything about the applicant. Similarly, the insurance company should deal with the applicant with honesty and integrity.

          • earned premiums

            Premium payments received by an insurer for cover provided during the current accounting period. Premiums received for future insurance coverage are known as unearned premiums.

          • earnings

            Another word for profit. Broadly calculated as revenues minus costs, operating expenses and taxes, minority interests, extraordinary items and dividends on preference stock.

          • earnings per share (EPS)

            Earnings per share - net profit attributable to shareholders holding ordinary shares divided by the number of shares issued - is a guide to how well a company is performing. Companies often use a weighted average of shares outstanding over the reporting term.

          • economic value added

            A financial performance measure used to evaluate a company's true profit and the creation of wealth for shareholders.

          • embedded value

            A way of measuring the current value of future profits. Embedded value represents the total of the profits expected to emerge in the future and the net assets already invetsed in the business. See also European embedded value.

          • emerging markets

            Developing economies such as those in Latin America and Asia that do not have a long history of equity investment and stable, reliable returns. Speculative investors prepared to accept a higher level of risk see such markets as having attractive potential for rapid growth. See also mature markets.

          • endowment plan

            A plan in which the amount is paid to a policyholder if he outlives the tenure of the contract or to the beneficiary if the insured person dies before the date on which the policy matures.

          • equity

            Another word for " share". A shareholder’s equity is the value of the shares they hold. Also, a house owner’s equity is the value of their home minus the unpaid mortgage – so negative equity occurs if the house is worth less than the outstanding loan.

          • European embedded value (EEV)

            Embedded value is a way of measuring the current value to shareholders of the future profits from a life and pensions business. EEV was launched in May 2004 by the CFO Forum (which represents chief financial officers of the biggest European insurers) as an improvement on the achieved profit method used to calculate embedded value results. EEV reports the value of business written based on a set of realistic assumptions, allowing for the impact of uncertainty in future investment returns, and so is designed to provide a more accurate reflection of the performance of long-term savings business.

          • ex-gratia claim

            This occurs where strict liability has not been proved but the insurer may decide that it would be unduly harsh or cause hardship, not to make some payment. Such payments are made out of goodwill, without admission of liability.

          • expense ratio

            Expenses associated with running an insurance business, such as commission, professional fees and other administrative costs, expressed as a percentage of premiums. Also the annual operating costs of an investment fund, expressed as a percentage of assets.

          • ex-gratia payments

            These are payments made by a company where the claim is a gray area, doubt exists but it may be to the benefit of the claimant and the company feels out of goodwill that some form of payment should be made. The claim is made without any admission of liability. Payment is only made on the understanding that the claimant accepts the amount in full satisfaction of all claims he or she may have on the policy.

             

          • exclusion

            A condition under which the benefit is not paid is referred to as exclusion. This is to avoid any misunderstanding. For example, for accidental policies, there is usually exclusion for suicide or self-inflicted injuries by the life insured.

            • family history

              The medical history affecting the applicant's immediate family. It is to look for illness that is hereditary. Focus should be on illness where the onset is before the age of 50.

            • final bonus

              A bonus payable under with-profit policies at the time of a claim. It can be altered according to investment conditions at the time. Also called "additional" or "terminal" bonus.

            • final dividend

              The dividend paid by a company to shareholders at the end of the financial year. Normally added to the interim dividend to produce the total dividend for the year.

            • fiscal policy

              Means by which a government can influence the national economy through changes in tax and public spending.

            • fixed interest

              A guaranteed rate of interest paid over the term of an investment or loan. A fixed interest security is an investment such as a government bond that provides a set level of income and usually has a redemption value, paid at maturity.

            • flotation

              When a company's shares are sold to investors and quoted on the stock market for the first time. Sometimes known as an initial public offering (IPO).

            • forex

              Abbreviation of Foreign Exchange

            • free look period

              A free look period gives the client an option to review the terms and conditions of the policy within 15 days from the date of receipt of the policy document. Where he disagrees with the terms and conditions stated in the policy, he has the option to return the policy, stating the reasons for objection. In such a case the Policy would then be cancelled and the premium paid by the client would be refunded to him, after deducting: proportionate risk premium for the period on cover, expenses incurred by the Insurance Company on medical examination of the client and stamp duty charges.

            • front-end loading

              When all or most of the charges and commissions on an insurance policy or loan become payable when the contract is first taken out.

            • fund

              A pool of financial assets into which premiums are invested to produce an investment return. Examples include property funds, managed funds and with-profit funds. Strictly speaking, these are "investment funds" rather than just "funds". Fund management is the act of actively looking after such investments on behalf of individual and institutional customers.

            • fund value

              Total benefit amount available on maturity or death.

            • fund management

              Management of money invested, typically, in stocks and shares, fixed interest, property and cash on behalf of individual and institutional customers. Also known as asset management or investment management.

            • futures contract

              A financial contract to buy or sell something on a specified future date for a pre-agreed price. futures markets exist for currencies, government bonds and commodities such as coffee, cocoa, copper and tin.

              • general insurance

                Non-life insurance mainly concerned with protecting the policyholder from loss or damage caused by specific risks. Examples include motor or auto insurance, household, contents and buildings insurance, and business or commercial insurance. Normally renewable annually. Known in some markets as property and casualty insurance.

              • grace Period

                This provision offers the policy holder additional period of time after the due date, during which the premium can be paid. The policy continues to remain in force during this grace period and the premium continues to be payable.

              • gratuity

                Lumpsum benefit payable by company after a certain period of employment.

              • gross

                Before tax has been deducted. The opposite of net.

              • gross domestic product (GDP)

                The total value of all goods and services produced domestically by a country each year. Can be calculated as gross national product minus income from abroad. A key measure of national economic health. US official statistics use gross national product (GNP).

              • gross national product (GNP)

                Total value of goods and services produced each year by a country. Real growth in GNP reflects increase in output after taking away the effect of inflation.

              • gross premium income

                Income from business written during the year, before any reinsurance is taken into account.

              • gross premiums written

                The total earnings or revenue generated by sales of insurance products, before any reinsurance is taken into account. Not all premiums written will necessarily be treated as income in the current financial year, because some of them could relate to insurance cover for a subsequent period. See also net premiums written.

              • group pension scheme

                A pension scheme which an employer sets up for the benefit of his employees. All staff can become members of the same scheme. Group personal pension schemes are individual policies taken out by people working for the same employer that are grouped together for administrative convenience.

              • growth fund

                An investment fund whose aim is to achieve capital gains, rather than income, by investing in growth stocks. Typically it will focus on companies that demonstrate significant earnings or revenue growth, rather than companies paying high dividends. Growth funds can be more volatile than other types, rising more in bull markets and falling further in bear markets.

                 

                • health insurance

                  Provides cover against loss from illness or bodily injury. Can pay for medicine, visits to the doctor, hospital stays, other medical expenses and loss of earnings, depending on the conditions covered and the benefits and choices of treatment available on the policy.

                • hedging

                  Protecting against the risk of losses in one investment by taking up other investment positions that will reduce the risk run by the first commitment. This can mean investing in opposite positions in the same or equivalent stock or markets using complicated packages of futures. Though speculative, hedging is actually a cautious action which sets out to reduce the risk run by the investor.

                • human Life Value

                  The present value of the family's share of the breadwinner's future earnings is considered as Human Life Value, for purposes of life insurance.

                  • income fund

                    An investment fund that aims to generate current income in the form of dividends or payments from stocks and bonds, rather than capital growth. Income funds are regarded as conservative investment, and tend to be popular with retirees and other investors looking for a steady cash flow without taking on too much risk.

                  • illustration

                    Explanation of benefits of an insurance plan

                  • indexation

                    It is a tool which can be used to offset the effect of inflation on one's investments.

                  • inflation

                    An increase in the general level of prices over a period of time. Opposite of deflation.

                  • in force

                    An insurance policy is "in force" from its start date until the date it is terminated.

                  • initial charge

                    A set-up fee paid on some unit-linked investment policies.

                  • initial public offering (IPO)

                    The first time a company lists on the stock exchange, and asks investors to buy shares in it, is known as an IPO, new share issue, or flotation.

                  • insurance

                    A contract taken out with an insurer to protect against loss from a perceived risk. The person taking out the insurance is called the insured. Payments for the policy are called premiums.

                  • interest rate

                    Percentage rate at which money is added to savings or borrowings. The cost of borrowing or lending money.

                  • investment

                    Buying and holding assets, such as shares, bonds, property and commodities, to earn income or to make capital gains.

                    • joint life

                      An insurance contract where two people are insured against death.

                      • keyman insurance

                        Also known as keyperson insurance. Cover designed to protect or compensate a business in the event of the death or incapacity of an important employee regarded as crucial to that organisation.

                        • liabilities

                          A company's debts and obligations, shown on the balance sheet as claims on its assets.

                        • life achieved profit

                          The economic earnings of a life insurance business.

                        • life cover

                          Amount payable on death of life insured.

                        • life insurance

                          Promises the payment of an agreed sum of money upon the death of the insured within a specified period of time. Also known as life assurance.

                        • long-term savings

                          Collective term for life insurance, pensions, savings, investments and related business.

                        • loyalty additions

                          Guaranteed addition to the fund to enhance benefits.

                        • lump sum benefit

                          A benefit arising in the form of a single, once-and-for-all payment rather than a series of payments.

                          • market

                            The place where transactions take place in a particular type of commodity, such as a stock exchange

                          • market capitalisation

                            The value of a company calculated by multiplying the number of shares the company has in circulation by the market price of those shares.

                          • master policy holder

                            policy holder (employer) in case of group policies.

                          • maturity

                            The date that an insurance policy or other financial contract finishes or "matures", and the proceeds, sometimes known as the maturity value, become payable.

                          • misrepresentation of material facts

                            Providing the wrong facts or not giving the entire truth of a matter. This is more serious that non-disclosure. It refers to the applicant stating wrong facts or giving half-truths. They are material because if the underwriter knew of it this information, the decision might be different.

                          • money market instrument

                            A short-term debt obligation, such as a banker's certificate of deposit, commercial paper or government security, generally regarded as a low-risk, low-return investment for the holder.

                          • morbidity

                            The probability of disability of a life or group of lives.

                          • mortality

                            The probability of death of a life or group of lives.

                          • mortgage

                            A loan to buy a home. Technically, it is the security provided by a borrower to a lender in return for funds advanced - usually the property in question. Typically there are two forms of mortgage: repayment (or capital and interest), where the homeowner pays back both the loan and interest in stages; and interest only, where the homeowner pays just the interest until the end of the loan period, when the capital is also due to be repaid.

                          • multinational

                            Company with subsidiaries or operations in several different countries.

                            • national debt

                              The central government debt.

                            • net asset value

                              The value of a company calculated by subtracting its liabilities from its assets. The difference is the capital, that is, the funds that would be available to ordinary shareholders if the company were wound up.

                            • net premiums earned

                              The proportion of net premiums written recognised for accounting purposes as income in a given period.

                            • net premiums written

                              Total gross premiums written for a given period, minus premiums paid over or "ceded" to reinsurers.

                            • net profit

                              The amount left over after deducting tax, interest, depreciation, fees, minority interests and extraordinary charges from sales revenue. Also known as net earnings, or net income.

                            • new business

                              Term used to describe the value of long-term savings policies sold to new and existing customers. Includes premium increases on existing business.

                            • new business strain

                              The technical name given to an initial depletion of cash and/or erosion of shareholders' net assets at the moment an insurance contract is sold. This "strain" arises because, in addition to meeting costs associated with the sale of contracts, insurance companies must make actuarial provisions at the outset of a contract that are often significantly higher than the premiums received. To begin with, therefore, cash outflows exceed inflows, creating a strain.

                            • nominal return

                              Return that does not take account of the effects of inflation.

                            • nominee

                              Someone nominated to act on your behalf. Insurers usually determine the insurable interest while nominating.

                            • non-profit

                              Insurance cover guaranteeing certain benefits but for which the policyholder bears no investment risk and does not gain or lose if returns differ from expectations. Pure risk business, such as term assurance, annuities, health insurance and disability cover, is normally written on a non-profit basis.

                            • non forfeiture option

                              A clause whereby the insurers do not generally forfeit all the premia paid, in case of a lapse of policy. This benefit is accorded to policy holders because of higher premia paid during the early years and the interest earned on these premia by the insurance companies.

                            • non participating policies

                              These are also called "non-par policies" or "policies without participation in profits". These policies are not entitled for any share in surplus (profits) during the term of the policy

                            • non-standard life

                              An individual who cannot be granted a policy under normal rates of premia.

                              • occupational pension scheme

                                A pension scheme arranged by an employer for the benefit of one or more employees. Membership is optional.

                              • offer price

                                The price an investor must pay, or what the market demands, for buying a share or a unit in an investment fund.

                              • open market option

                                The difference between total income/revenue and total running costs/operating expenses from continuing operations. Excludes non-operational items, such as one-off gains or losses from the sale of assets or acquisition costs. Also called earnings before interest and taxes (EBIT), or operating income.

                                • participating policies

                                  These are also called "par policies" or "policies with participation in profits". These policies are not non-par policies and are entitled for any share in surplus (profits) during the term of the policy.

                                • policyholder

                                  The person who owns the policy, in this case, a life insurance policy.

                                • prospect

                                  A potential new customer who can be approached for buying an insurance policy.

                                • partnership

                                  A business association formed by two or more people. Often known as a firm. A partnership is not an incorporated company, and has no standalone legal basis, which means that the partners (or "general partners") usually have unlimited responsibility for any debts incurred by the business. An exception is limited partners who, like shareholders, are liable only for what they have invested in the business.

                                • pension

                                  A regular payment received by an individual during their retirement until they die. Also known as an annuity. It is usually bought through payment of regular contributions during the individual's working lifetime.

                                • pension fund

                                  Refers to a pool of pensions contributions invested for growth. Also used to refer to a type of institutional investor who administers and investsfunds for pension plans.

                                • pension provider

                                  A financial institution (such as a bank or insurance company) authorised to provide pensions contracts.

                                • per capita

                                  Average per person. Per capita income represents the average earnings for each person in a population, and is often used to measure a country's standard of living.

                                • policy document

                                  A booklet that details the full product information and terms and conditions of an insurance policy, and the policy schedule(s) which provides the specific benefits/premiums/payment conditions covered. It provides evidence that a contract exists between the insured and insurer.

                                • policy term

                                  The period for which insurance cover is available.

                                • portfolio

                                  A collection of financial assets - investments in shares, fixed interest stocks, cash and property - held by an investor.

                                • premium

                                  The monetary amount paid for an insurance policy. The payment a policyholder makes in return for insurance cover. Usually paid monthly, annually or as a single lump sum. Also, if the market price of a new share is higher than its issue price, it is said to be trading at a premium (the opposite of discount).

                                • premium allocation

                                  Distributions of premium amount after deducting charges.

                                • premium holiday

                                  Period for which one is not required to pay the premium while the life cover continues.

                                • premium payment term

                                  Period for which you are committed to pay towards your insurance cover or to build a corpus.

                                • present value of new business premiums (PVNBP)

                                  PVNBP is a measure of life and pension sales using the European embedded value method of financial reporting. It represents the total single premium sales received in a year plus the discounted value of premiums expected to be received over the term of the new regular premium contracts, expressed at the point of sale. For the time being, Aviva will report life and pensions new business using both annual premium equivalent and PVNBP.

                                • price/earnings ratio (P/E ratio)

                                  Share price divided by earnings per share over the latest 12-month period. The result offers investors a way of comparing companies' prospects. For example, a high P/E ratio might suggest a company has strong growth potential, and investors will pay more for a share if they think that the company's earnings will rise rapidly.

                                • principal

                                  A term for the original investment, or the amount borrowed, or the part of the amount borrowed that remains unpaid (excluding interest).

                                • private company

                                  A company which is not allowed to offer its shares to the general public.

                                • profit

                                  Excess of income over expenses for a particular period. Figures may be given as gross profit, net profit before tax, net profit after tax, and earnings.

                                • profit and loss account

                                  An account compiled at the end of the financial year showing that year's revenue and expense items, and indicating gross and net profit or loss.

                                • profit before tax

                                  All profits earned in a period, including investment gains.

                                • public company

                                  A company whose shares are available to members of the public.

                                    • rally

                                      A sharp rise in the value of a stock market or particular share. Sometimes followed by a fall in price (also known as a "reaction" or "correction") as investors sell to take profits.

                                    • rate of return

                                      The change in value of an investment over a period of time, taking into account income from it and any change in its market value. Normally expressed as an equivalent annual percentage of the total amount invested. Also the yield from a fixed income security.

                                    • real-time quote

                                      The actual price of an investment at that moment. Most share prices displayed on websites are delayed by at least 15-20 minutes.

                                    • reinstatement

                                      To restore the policy after the insurance policy has lapsed.

                                    • reinsurance

                                      A form of insurance bought by insurance companies to protect themselves from the risk of large losses. One insurer pays to place part of an insured risk or an entire book of business with one or more other insurance companies, known as the reinsurers.

                                    • regular premiums

                                      Regular \ contribution towards and insurance policy

                                    • return

                                      For savings, the difference between the original sum invested and the final value of income or capital growth, given as a percentage. For shares, the overall investment performance based on the movement in the price of the shares (gain or loss) and the dividend income from the shares.

                                    • return on capital employed (ROCE)

                                      Usually calculated as pre-tax profit divided by capital employed (total assets minus current liabilities), expressed as a percentage. Indicates how efficiently a company's management uses its assets to generate profits over a period of time.

                                    • rider

                                      An add-on benefit available at the option of the policyholders that may alter certain features of a policy by increasing or restricting benefits.

                                    • risk

                                      The measurable probability of loss or less-than-expected returns from an investment, asset or business activity.

                                    • reversionary bonuses

                                      Guaranteed additions to the policy depending on the company performance.

                                    • rule of 72

                                      The formula for approximating the time it will take for a given amount of money to double at a given compound interest rate. The formula is simply 72 divided by the interest rate. In six years, Rs. 1000/- will double at a compound annual rate of 12% (72 divided by 12 equals 6)

                                      • single premium

                                        Lumpsum contribution towards life insurance policy.

                                      • stamp duty

                                        Tax on the buying of shares and other assets, such as houses.

                                      • statutory presumption of death

                                        The laws in most countries provide that in the event of a person who has gone missing for a certain number of years a court order can be made to declare the person as legally dead. This is usually set as seven years. It has to be proved to the court that he or she has not been heard of by anyone including those who would naturally have heard if he or she had been alive.

                                      • sum at risk

                                        Amount payable by the company in case of death of policyholder.

                                      • sum assured

                                        The lump sum benefit payable under an insurance policy or contract in circumstances defined within the policy (usually it represents an amount payable on death).

                                      • surrender

                                        The act of cancelling or cashing in the proceeds of an insurance contract before it becomes payable or reaches its maturity date for a surrender value.

                                      • surrender value

                                        The amount of money payable on cancellation ("surrender") of a policy with an investment element, before the benefit becomes payable (normally on death or maturity). Surrender values will depend on premiums paid and time elapsed.

                                      • systematic transfer plan (STP)

                                        Option to switch from one fund to the othere depending on one's risk appetite.

                                        • term insurance

                                          Also known as temporary insurance. A type of life insurance where the benefit (sum assured) is paid only if death occurs during a specific period of time.

                                        • terminal bonus

                                          Bonus given by the insurance company on termination(death, maturity) of policy depending upon the company's profitablity.

                                        • top ups

                                          Addition to your contribution toward your insurance policy.

                                          • underwriter

                                            Someone willing to assume an insurance risk in exchange for payment of a premium. The term derives from the practice of the person who accepted the risk signing their name under the amount they insured (thereby entering into a contract).

                                          • underwriting

                                            The process of selecting which risks an insurance company can cover, and deciding the premiums and terms of acceptance. On the stock exchange, an arrangement by which a company is guaranteed that an issue of shares will raise a given amount of money, because the underwriters promise to buy any of the issue not taken up by the public.

                                          • underwriting profit

                                            The difference between insurance premiums earned and claims and expenses paid over a given period. If premiums are the higher figure, there is an underwriting profit; if they are lower, there is an underwriting loss. Underwriting profit excludes investment income, so is a commonly used method of evaluating the performance of a general insurance company.

                                          • unearned premiums

                                            Premiums received by an insurer relating to cover provided outside the current accounting period. Such premiums are not normally treated as income until they have been "earned" during the period to which they relate.

                                          • unitised

                                            Investment policy under which contributions are used to buy units in a chosen investment fund. See unit linked.

                                          • unitised with-profit

                                            A unitised investment contract where the unit price increases daily in line with a declared bonus rate. The unit price is guaranteed not to fall (and may even be guaranteed to grow at a particular rate) and therefore the unit price is not directly related to the value of the assets in the fund.

                                          • unit-linked

                                            A type of long-term savings plan where premiums are used to buy units in an investment fund, such as a unit trust. The assets in the fund can be a mix of stocks, shares, bonds, property or other securities. The value of the units and the return from them can fluctuate in line with the investment performance of the assets in the fund, and there is no guarantee on the amount of capital that will be returned.

                                            • variable rate

                                              An interest rate that fluctuates or is periodically reset.

                                            • vesting age

                                              This is the age when the rights under the policy vests with the name individual.

                                               

                                            • volatility

                                              The variable amount by which a share price or market value rises and falls during a period of time.

                                            • venture capital

                                              A specialist form of high-risk financing provided for small, new companies by speculative investors.

                                            • volume

                                              The total number of shares traded (bought and sold) in a given period.

                                              • whole life insurance

                                                An insurance contract where the benefit is payable on death, whenever it occurs. Distinct from term insurance, which pays out only if death occurs within a specific period.

                                              • with-profit

                                                A type of investment plan in which extra amounts may be added to the main benefit (known as the sum assured) to reflect profits earned during the course of the contract. Regular or "reversionary" bonuses may be added, usually each year, and once declared are guaranteed. A final or "terminal" bonus may be added when the policy becomes payable. With-profit funds are typically invested in a mixture of equities, property and fixed income investments. Under poor stock market conditions a "market value adjustment" (MVA) may be applied to the value of the policy if it is surrendered before the maturity date.

                                                  • yield

                                                    Rate of return on an investment in percentage terms, taking into account annual income and any change in capital value. Also the dividend payable on a share expressed as a percentage of the market price.

                                                  • yield to maturity (YTM)

                                                    Yield to maturity is the rate of return expected if a bond or other dated investment is held for the full term of the contract, or until the maturity date.

                                                  • YTD

                                                    Abbreviation for "year to date". Usually means the period starting 1 January of the current year and ending today.

                                                    • zero coupon bond

                                                      A bond that does not pay interest and matures at face value. It provides an investment return normally by being bought at a discounted price.

                                                    • zero dividend preference share

                                                      A share that pays no, or "zero", dividends. Instead, it is bought at one price and redeemed later for a higher price agreed in advance.