Top 200 Insurance Terms for NIACL AO, LIC AAO and Other Insurance Exams
Master the 200 most important Insurance terms frequently asked in NIACL AO, LIC AAO, NICL AO, UIIC AO, OICL AO, GIC Assistant Manager, and other Insurance examinations. This comprehensive resource covers life insurance, general insurance, health insurance, reinsurance, underwriting, risk management, IRDAI regulations, insurance products, claims, and key industry concepts. Each term is explained in a simple, exam-oriented manner with concise definitions and important facts, making it an ideal resource for building conceptual clarity, quick revision, and last-minute preparation.
Position as on August 2026. Caps, ceilings and ratios change with each amendment and each IRDAI annual report. Verify every figure on irdai.gov.in before your exam.
How to use this list
Three passes. First read a chapter end to end with every card open, to see how the terms connect. Second, collapse everything and use only the one line definitions, ticking the box on the left rail when you can restate a term without looking. Third, turn on the Not yet learnt filter and work only on what is left, then run the flashcard drill and the ten question test.
The tick marks and your dark mode choice are stored in your own browser, so they survive a refresh but are not shared across devices. The related term chips under each entry run a search and jump you to the first match, which is the fastest way to move between linked ideas.
Contents
Twelve chapters, 200 terms, numbered continuously from 001 to 200.
- Chapter 01 · 001 to 019History of insurance in India19 terms · 5 basic, 7 intermediate, 7 advanced
- Chapter 02 · 020 to 038What insurance is and its main types19 terms · 6 basic, 9 intermediate, 4 advanced
- Chapter 03 · 039 to 050Principles of insurance12 terms · 3 basic, 5 intermediate, 4 advanced
- Chapter 04 · 051 to 072Life insurance and its plans22 terms · 4 basic, 9 intermediate, 9 advanced
- Chapter 05 · 073 to 094Health, motor and property covers in detail22 terms · 5 basic, 11 intermediate, 6 advanced
- Chapter 06 · 095 to 112IRDAI and the regulatory framework18 terms · 4 basic, 8 intermediate, 6 advanced
- Chapter 07 · 113 to 122Insurance Ombudsman and grievance redressal10 terms · 2 basic, 5 intermediate, 3 advanced
- Chapter 08 · 123 to 141Insurance companies and institutions in India19 terms · 4 basic, 11 intermediate, 4 advanced
- Chapter 09 · 142 to 159Insurance terminology, part 1: the policy and the contract18 terms · 6 basic, 6 intermediate, 6 advanced
- Chapter 10 · 160 to 177Insurance terminology, part 2: premium, underwriting and claims18 terms · 3 basic, 10 intermediate, 5 advanced
- Chapter 11 · 178 to 190Insurance terminology, part 3: reinsurance, capital and market metrics13 terms · 4 basic, 5 intermediate, 4 advanced
- Chapter 12 · 191 to 200Government insurance and social security schemes10 terms · 4 basic, 4 intermediate, 2 advanced
History of insurance in India
The timeline from ancient risk pooling to nationalisation, liberalisation and the 2025 amendment. Dates and Act names are the most heavily asked part of insurance awareness.
- 001
Risk pooling in ancient India
The practice of contributing to a common fund that compensated members hit by fire, flood, famine or epidemic.Indian texts such as the Manusmriti, the Yagnavalkya Dharmashastra and Kautilya's Arthashastra describe groups setting aside resources for redistribution after a calamity. Traders, guilds and village communities carried each other's losses rather than leaving one family ruined. This is not insurance in the legal sense because there was no contract, no premium calculation and no insurer, but the economic idea is identical: many small contributions absorbing one large loss. Examiners use these three texts as a stock question, so link the names to the concept.
Related - 002
Bottomry and marine trade loans
An early arrangement where a lender financed a voyage and forfeited repayment if the ship was lost.Ancient Indian and Mediterranean merchants used bottomry bonds and carriers' contracts, which are the oldest traces of insurance found in Indian history. The lender charged a high rate of interest that included an implicit premium for the risk of total loss at sea. If the vessel sank, the loan was cancelled, so the lender effectively insured the cargo owner. Marine insurance therefore predates life and fire cover, which is why the Marine Insurance Act, 1963 sits on a much older body of custom.
Related - 003
Oriental Life Insurance Company, 1818
The first life insurance company established on Indian soil, set up at Calcutta in 1818.It was founded mainly to serve European widows, and Indian lives, when accepted at all, were charged heavier premiums. The company failed in 1834, so remember it as the first, not the oldest surviving. The year 1818 is the standard answer to any question on when life insurance business began in India. Do not confuse it with the Oriental Insurance Company Limited, a general insurer incorporated at Bombay in 1947.
Related - 004
Madras Equitable, 1829
The insurer that began transacting life insurance business in the Madras Presidency in 1829.It is the second landmark date in Indian life insurance after 1818 and appears in almost every insurance awareness capsule. The spread from Calcutta to Madras shows how the business followed the three Presidency towns. Bombay entered the picture later, in 1870, with the Bombay Mutual. Questions usually pair 1818 with Calcutta and 1829 with Madras, so fix the city alongside the year.
Related - 005
Triton Insurance Company, 1850
The first general insurance company in India, established by the British at Calcutta in 1850.General insurance reached India as a legacy of British trade, which had grown out of the Industrial Revolution and seventeenth century sea faring commerce. Triton wrote fire and marine risks for the trading houses of Calcutta. Pair it in memory with 1818, since the two dates mark the birth of life and non life business respectively. The first company to transact all classes of general insurance business came much later, in 1907.
Related - 006
Bombay Mutual Life Assurance Society, 1870
The first Indian owned life insurance company, which began business in 1870 in the Bombay Residency.It broke the practice of loading Indian lives with extra premium and insured them on normal terms, which is why it is remembered as a nationalist landmark and not merely a commercial one. The Oriental of 1874 and the Empire of India of 1897 followed in the same Residency. Foreign offices such as Albert Life Assurance, Royal Insurance and Liverpool and London Globe still dominated the market. Remember the sequence: Bombay Mutual 1870, Oriental 1874, Empire of India 1897.
Related - 007
Swadeshi movement and Indian insurers
The 1905 to 1907 nationalist upsurge that produced a wave of Indian owned insurance companies.United India in Madras, National Indian, National Insurance in Calcutta and the Co operative Assurance at Lahore were all established in 1906. In 1907 the Hindustan Co operative Insurance Company was born in a room of Jorasanko, the Calcutta house of Rabindranath Tagore, a detail examiners enjoy. Bharat Insurance Company Limited had already started at Delhi in 1896. The lesson to carry into an answer is that swadeshi capital entered insurance to keep Indian savings within India.
Related - 008
Indian Life Assurance Companies Act, 1912
The first statutory measure in India to regulate life insurance business.It required premium rate tables and periodical valuations to be certified by an actuary, which introduced actuarial discipline into Indian life offices for the first time. From 1914 the Government of India began publishing returns of insurance companies, so supervision now had data behind it. Note the contrast with 1928, which covered both life and non life but only for statistics. The 1912 Act is the correct answer whenever a question asks for the first statutory regulation of life business.
Related - 009
Indian Insurance Companies Act, 1928
The law that empowered the Government to collect statistical information on life and non life business transacted in India.It covered Indian and foreign insurers as well as provident insurance societies, giving the Government its first complete picture of the market. The Act was about information rather than control, so it did not prevent unsound practices. That gap is exactly what the Insurance Act, 1938 was written to close ten years later. In a comparison question, 1912 equals regulation of life, 1928 equals statistics for both, 1938 equals comprehensive control.
Related - 010
Insurance Act, 1938
The consolidating statute that remains the principal law governing the conduct of insurance business in India.It brought registration, accounts and returns, investment norms, limits on management expenses, prohibition of rebates, licensing of agents and surveyors and the Tariff Advisory Committee under one roof. Even today, sections that examiners ask about live here: Section 45 on incontestability, Section 64C on the insurance councils, Section 64U on the Tariff Advisory Committee and Section 114A on IRDAI's power to frame regulations. The Insurance Regulatory and Development Authority of India works through this Act as much as through its own 1999 statute. Every later amendment, including the 2025 one, amends the 1938 Act rather than replacing it.
Related - 011
Insurance Amendment Act, 1950
The amendment that abolished principal agencies and tightened control over life insurance companies.Principal agents held vast blocks of business and effectively controlled the insurers they sold for, which encouraged self dealing with policyholders' funds. Abolishing them was meant to clean up the market, but competition remained fierce and allegations of unfair trade practices continued. Those failures gave the Government its stated reason for nationalising life insurance six years later. The 1950 amendment is therefore the direct bridge between the 1938 Act and the LIC Act, 1956.
Related - 012
Nationalisation of life insurance, 1956
The takeover of the life insurance business by the State through an Ordinance of 19 January 1956 and the LIC Act, 1956.The Life Insurance Corporation Act was passed on 19 June 1956 and the Corporation came into existence on 1 September 1956 with a capital contribution of Rs 5 crore from the Government of India. LIC absorbed 154 Indian insurers, 16 non Indian insurers and 75 provident societies, a total of 245 entities. In its first year it worked through 5 zonal offices, 33 divisional offices and 212 branch offices. Remember the three dates together: Ordinance 19 January, Act 19 June, Corporation 1 September.
Related - 013
General Insurance Business (Nationalisation) Act, 1972
The Act, known as GIBNA, that nationalised general insurance business in India with effect from 1 January 1973.It amalgamated 107 insurers into four companies: National Insurance, New India Assurance, Oriental Insurance and United India Insurance. The General Insurance Corporation of India was incorporated on 22 November 1972 under Section 9(1) of GIBNA as the holding company and began business on 1 January 1973. A 2002 amendment transferred control of the four subsidiaries from GIC to the Central Government, making them independent. Note the split of years: the Act is 1972, the nationalisation takes effect in 1973.
Related - 014
General Insurance Council, 1957
The representative body of general insurers, formed in 1957 as a wing of the Insurance Association of India.Its first task was to frame a code of conduct for fair dealing and sound business practice at a time when tariffs and rate cutting were unregulated. It is constituted under Section 64C of the Insurance Act, 1938, and Section 64L(1) sets out its functions of advising insurers and reporting errant conduct to the regulator. Membership today covers all general insurers, standalone health insurers, reinsurers, foreign reinsurer branches and Lloyd's India. Its headquarters is at Mumbai, as is that of the Life Insurance Council.
Related - 015
Insurance Amendment Act, 1968
The 1968 amendment that regulated insurers' investments, set minimum solvency margins and created the Tariff Advisory Committee.Before it, general insurers competed by cutting rates below the level needed to pay claims, which threatened their ability to meet liabilities. The amendment forced a minimum margin of solvency and put fire, marine hull and motor rating under a statutory committee. The Tariff Advisory Committee was set up under Section 64U of the Insurance Act, 1938 with effect from the commencement of this amendment. Detariffing of most classes came only in 2007, long after IRDAI was created.
Related - 016
Malhotra Committee, 1993
The committee under former RBI Governor R. N. Malhotra that recommended reopening Indian insurance to private and foreign capital.It was appointed in 1993 to complement the wider financial sector reforms that followed the liberalisation of 1991 and submitted its report in 1994. Its two headline recommendations were that the private sector be permitted to enter insurance and that foreign companies enter by floating Indian companies, preferably as joint ventures with Indian partners. The IRDA Act, 1999 and the opening of the market in 2000 both flow directly from this report. Remember the pairing: Narasimham for banking, Malhotra for insurance.
Related - 017
Liberalisation of Indian insurance, 2000
The reopening of the Indian insurance market to private insurers, with registrations invited from August 2000.The Insurance Regulatory and Development Authority was constituted as an autonomous body in 1999 and incorporated as a statutory body in April 2000. It invited applications for registration in August 2000, and foreign ownership was capped at 26 per cent of paid up equity. Domestic groups such as HDFC, ICICI, Bajaj and the State Bank of India tied up with foreign insurers to enter the market. Nearly two centuries after 1818, the sector had come full circle from private to State monopoly and back to a regulated private market.
Related - 018
Insurance Laws (Amendment) Act, 2015
The amendment that raised the foreign investment cap to 49 per cent and rewrote several policyholder protection provisions.It allowed the four public sector general insurers, until then wholly Government owned, to raise capital subject to Government equity staying at or above 51 per cent. Penalties for mis selling and misrepresentation were raised sharply, from a maximum of Rs 1 crore to Rs 25 crore for some violations. It retained a capital requirement of Rs 100 crore for health insurers, opening the way for standalone health insurance as a separate vertical, and allowed foreign reinsurers to open branches in India. Appeals against IRDAI orders were routed to the Securities Appellate Tribunal.
Related - 019
Insurance (Amendment) Act, 2021
The amendment that raised the foreign direct investment limit in Indian insurance companies from 49 per cent to 74 per cent.It also removed the requirement that the Centre hold at least 51 per cent of the equity capital of public sector insurers, clearing the path for greater private participation. Conditions attached at the time included a majority of resident Indian directors, at least half of the board being independent and a specified share of profits retained as a general reserve. Separately, in September 2019 the Government had already allowed 100 per cent foreign investment in insurance intermediaries such as brokers. The 74 per cent cap stood until the Sabka Bima Sabki Raksha Act of 2025 replaced it with 100 per cent.
Related
What insurance is and its main types
The economics of risk transfer, the statutory classes of business and the standard classification of life, general, health, motor, fire and marine cover.
- 020
Insurance
A contract under which an insurer promises to compensate specified future losses in return for a premium.The owner of an asset who cannot bear a loss transfers that risk to an insurer who can, in return for a consideration called the premium. Insurance is a co operative device: the small contributions of many exposed persons pay the large losses of the few who actually suffer. It does not prevent the event, it only prevents the financial consequence from falling on one household. Keep the four elements ready for a descriptive answer: an uncertain event, a large group, a pooled fund and a contract of compensation.
Related - 021
Risk
The possibility of an adverse deviation from an expected outcome, measured by both its likelihood and its severity.Insurers separate pure risk, which can only produce loss or no loss, from speculative risk, which can also produce gain. Only pure risk is insurable, which is why a fire is insurable but a share purchase is not. Risk is managed in four ways: avoid it, reduce it, retain it or transfer it, and insurance is the classic transfer tool. A factory that installs sprinklers is reducing risk, and the fire policy it then buys is transferring what remains.
Related - 022
Peril and hazard
A peril is the cause of a loss, while a hazard is a condition that makes that loss more likely or more severe.Fire, flood, theft, windstorm and death are perils; storing petrol in a shop or a history of drunk driving are hazards. Hazards are classified as physical, arising from the property or the person, and moral, arising from the character or conduct of the insured. Underwriters price the peril but decline or load the hazard, which is why two identical godowns can attract different fire rates. The distinction is a favourite one line question, so keep the words apart in your mind.
Related - 023
Insurable risk
A risk that meets the conditions an insurer requires before it can be accepted under a policy.The loss must be accidental and unintentional, measurable in money, part of a large homogeneous group, not catastrophic to the whole pool at once, and the premium must be affordable. War risk and normal wear and tear fail these tests and are almost always excluded. Nuclear risk fails the catastrophe test, which is why it is handled through a special pool rather than ordinary policies. Use these criteria whenever a question asks why some risks cannot be insured.
Related - 024
Law of large numbers
The statistical principle that the larger the number of similar exposures, the closer actual losses come to expected losses.An insurer cannot predict whether a particular thirty year old will die this year, but it can predict quite accurately how many out of a hundred thousand will. This is what converts an unpredictable individual risk into a budgetable group cost. It also explains why insurers seek volume, why they group similar lives and properties, and why a very small portfolio is dangerous. Actuarial pricing, mortality tables and reserving all rest on this single principle.
Related - 025
Life insurance
A contract that pays a benefit on the death of the life assured, or on survival to a stated date, in return for premiums.The asset insured is the economic value of a human life, that is, the earning capacity that supports a family, an employer and dependants. Death is certain but its timing is not, so life insurance answers the risk of dying too early just as an annuity answers the risk of living too long. It is a contract of assurance rather than of indemnity, because a human life cannot be valued exactly and the full sum assured is paid regardless of actual financial loss. Standard exclusions include suicide within the first year, and death arising from war, terrorism or substance abuse in many contracts.
Related - 026
General insurance
Insurance of everything other than human life, covering financial loss to property, liability and health.It is also called non life insurance and, in several countries, property and casualty insurance. General policies are usually annual and renewable, and they are contracts of indemnity, so the payout cannot exceed the actual loss. Under the Insurance Act, 1938 general business is divided into fire, marine and miscellaneous, with miscellaneous absorbing motor, engineering, liability, burglary, fidelity, health and personal accident. In India accidents and illnesses are covered under non life health insurance, whereas many countries place them under life.
Related - 027
Fire insurance
A general insurance class that indemnifies loss or damage to property caused by fire and allied perils.The standard fire and special perils policy in India extends well beyond fire itself to lightning, explosion, aircraft damage, riot and strike, storm, cyclone, flood, landslide, bursting of water tanks and bush fire. Cover applies to the building, plant, stock and sometimes the surrounding structures. Common variants are the valued policy, the floating policy for goods lying at several places, the specific policy for an amount below full value and the comprehensive policy. For dwellings and small businesses these covers are now packaged under standard products such as Bharat Griha Raksha and Bharat Sookshma Udyam Suraksha.
Related - 028
Marine insurance
Insurance of cargo, ships, terminals and any transit by which property moves between origin and destination.It splits into cargo insurance, which covers the goods, and hull insurance, which covers the vessel, its machinery and equipment. Indian marine law is codified in the Marine Insurance Act, 1963, which closely follows the United Kingdom Marine Insurance Act, 1906. Policy forms include the time policy for a fixed period, usually a year and more common for hull, the voyage policy for a single trip, the mixed policy combining both and the port risk policy for a ship lying in port. A wager policy, where no insurable interest exists, is void in law.
Related - 029
Miscellaneous insurance
The residual class of general insurance covering every risk other than fire and marine.Motor, engineering, liability, burglary, fidelity guarantee, health and personal accident all sit here, and it is by far the largest class by premium in India because motor and health dominate the market. The label matters because the Insurance Act, 1938 and IRDAI returns classify business as fire, marine and miscellaneous. When a question asks which class motor insurance belongs to, the answer is miscellaneous, not a separate class of its own. Standalone health insurers write only the health part of this class.
Related - 030
Health insurance
A policy that reimburses or pays cashless hospitalisation, medical and surgical expenses arising from illness or injury.Indemnity plans pay actual expenses up to the sum insured, while fixed benefit plans such as critical illness or hospital daily cash pay a stated amount on the trigger event. The main forms are individual, family floater covering all members under one sum insured, group cover arranged by an employer and senior citizen plans. Since the GST Council's decision of 3 September 2025, individual health insurance premiums, including family floater and senior citizen policies, are exempt from GST with effect from 22 September 2025, while group policies continue to attract 18 per cent. Typical exclusions are cosmetic surgery, dental and eye surgery unless caused by accident and treatment during a stated waiting period.
Related - 031
Motor insurance
Cover against damage to a vehicle and against legal liability to third parties arising from its use.Third party liability cover is compulsory in India under the Motor Vehicles Act, 1988, and no insurer may refuse to underwrite it. Own damage cover for the vehicle itself is optional, and the two together form what the market calls comprehensive motor insurance. Cover extends to riot and strike, fire and burglary, terrorism, earthquake, landslide and flood or cyclone, but not to loss while driving under the influence, without a valid licence, for illegal use or outside India. Third party premium rates are notified by the Government, unlike own damage rates which insurers set themselves.
Related - 032
Personal accident insurance
A benefit policy paying stated amounts on accidental death, permanent total, permanent partial or temporary total disablement.It is a fixed benefit contract, so the sum is paid according to a scale of injuries and not against hospital bills. Typical add on expenditures include hospital daily cash, ambulance charges, repatriation of mortal remains, broken bones, burns, family transportation, education support and loan protection. Because it responds only to accidents, it is much cheaper than health insurance and is often bundled into bank accounts and travel products. Pradhan Mantri Suraksha Bima Yojana is the mass market version of this cover at a premium of Rs 20 a year.
Related - 033
Travel insurance
Cover for financial loss from medical and non medical emergencies during travel abroad or within India.It usually pays for loss of baggage, emergency medical expenses, loss of passport, hijack, flight delay and trip cancellation. A single trip policy covers one journey, commonly of up to 180 days depending on the insurer, while an annual multi trip policy covers repeated journeys in a year. Exclusions include travel against medical advice, baggage delay of less than a set number of hours, self inflicted injury, war or civil unrest at the destination and hazardous sports such as bungee jumping. Student travel and senior citizen travel variants adjust the medical limits and the excess.
Related - 034
Home insurance
A policy compensating damage to a dwelling and its contents from natural calamities, man made disasters and other perils.Structure cover protects the building and permanent fixtures such as kitchen and bathroom fittings, while content insurance covers movable items like a television or refrigerator. Public liability coverage inside the insured home pays for injury or property damage caused to another person. IRDAI's standard product Bharat Griha Raksha gives an automatic waiver of underinsurance if the sum insured is declared on the prescribed basis. Wilful demolition, wear and tear, loss of cash and nuclear war remain excluded.
Related - 035
Liability insurance
Cover for legal liability to pay damages to third parties for injury or property damage caused by the insured.It pays both the compensation awarded and the legal costs of defending the claim, which in professional cases often exceeds the award itself. Indian variants include public liability, product liability, professional indemnity for doctors and chartered accountants, directors and officers liability and employers liability. The Public Liability Insurance Act, 1991 makes cover compulsory on a no fault basis for handlers of hazardous substances. Motor third party cover is the largest liability class in the country by volume.
Related - 036
Crop insurance
Cover protecting agricultural producers against loss of expected yield or revenue from notified crops.Crop yield insurance protects the expected income lost when the harvest falls short, while crop revenue insurance also responds to a fall in market prices. India's flagship product is Pradhan Mantri Fasal Bima Yojana, which works on an area approach with defined areas for each notified crop. The Agriculture Insurance Company of India, incorporated on 20 December 2002 and operational from 1 April 2003, is the specialised public sector insurer for this line. Weather based crop insurance uses a rainfall or temperature index rather than an actual yield measurement.
Related - 037
Trade credit insurance
Cover for a seller against the risk of a buyer failing to pay for goods or services delivered on credit.The insurer covers a portfolio of buyers and pays an agreed percentage of an unpaid invoice, typically on insolvency, bankruptcy or protracted default. Political risks such as a moratorium, transfer restriction, war, import or export restriction, natural disaster or licence cancellation can be added for export business. In India ECGC Limited, set up in 1957 under the Ministry of Commerce and Industry, provides export credit insurance to exporters and banks. IRDAI liberalised the trade credit insurance guidelines in 2021 to let more general insurers write this business.
Related - 038
Microinsurance
Low premium, low sum insured products designed to protect low income households against defined risks.IRDAI regulates it separately so that distribution can run through self help groups, non governmental organisations, microfinance institutions and business correspondents rather than only through licensed agents. Products are deliberately simple, with short documents, small fixed sums insured and premiums collected in small instalments. Bima Vistaar, the composite rural cover under IRDAI's Bima Trinity, is the current flagship attempt to scale this idea, and its rollout has been phased alongside Bima Sugam. The Suresh Mathur committee was constituted to review the micro insurance framework, a fact that appears in committee based questions.
Related
Principles of insurance
The seven governing principles, plus the doctrines of contribution, subrogation and proximate cause that decide how much an insurer actually pays.
- 039
Utmost good faith
The duty of both parties to disclose every material fact voluntarily, whether or not the other party asks for it.Insurance contracts are described as contracts of uberrimae fidei, which is a higher standard than the caveat emptor rule that governs ordinary commercial contracts. The proposer must disclose existing illnesses, past claims and hazardous occupations, and the insurer must disclose the true scope and exclusions of the cover. A breach through non disclosure, concealment or misrepresentation of a material fact makes the contract voidable at the insurer's option. The duty continues while the contract is in force, for instance when a risk is materially altered mid term.
Related - 040
Insurable interest
The legal or financial interest of the policyholder in the subject matter, such that its loss causes them financial harm.Without it an insurance contract is a wager and is void, which is why you can insure your own house or your spouse's life but not your neighbour's car. In life insurance the interest must exist at the time of taking the policy, while in general insurance it must exist both at inception and at the time of loss, and in marine insurance only at the time of loss. A creditor has insurable interest in a debtor's life up to the amount of the debt, and an employer in the life of a key employee. This is the principle that separates insurance from gambling, so it belongs in the opening line of any answer on the subject.
Related - 041
Indemnity
The principle that the insured should be restored to the same financial position as before the loss, but not better.The payout is limited to the actual amount of loss and never exceeds the sum insured, so a Rs 10 lakh godown that suffers Rs 3 lakh of fire damage receives Rs 3 lakh. It prevents the insured from profiting from a loss, which would otherwise encourage deliberate destruction. Indemnity governs all general insurance but not life insurance and personal accident, because a life cannot be valued and the full sum assured is paid. Contribution and subrogation are both corollaries of indemnity, a link that examiners test repeatedly.
Related - 042
Contribution
The right of an insurer that has paid a loss to recover a proportionate share from other insurers covering the same risk.If a warehouse is insured with two insurers for Rs 20 lakh and Rs 30 lakh and suffers a Rs 10 lakh loss, they share it in the ratio 2 to 3. At common law the insured may claim the whole loss from any one insurer, so insurers include a contribution condition in their policies to fix the sharing in advance. The principle exists only to preserve indemnity: without it, an insured could recover the same loss twice. It does not apply to life insurance, where a person may hold several policies and every insurer pays in full.
Related - 043
Subrogation
The transfer to the insurer, after payment of a claim, of the insured's rights against the party responsible for the loss.If your car is damaged by a negligent lorry driver and your insurer pays the repair bill, the insurer may then sue the lorry driver in your place, stepping into your shoes. The insurer also takes ownership of salvage, so a totally damaged vehicle can be sold to recover part of the outgo. Subrogation arises only after the claim is settled and only up to the amount actually paid. Like contribution, it flows from indemnity and therefore does not apply to life insurance.
Related - 044
Proximate cause
The dominant and effective cause that sets in motion the chain of events leading to a loss.Also called causa proxima, it decides liability where several causes operate together, since the insurer pays only if the nearest effective cause is an insured peril. If a fire is put out with water and the goods are damaged by the water, the proximate cause remains fire and the claim is payable. If a wall weakened by an excluded flood collapses in an ordinary wind, the proximate cause is the flood and the claim fails. It is not the first cause or the last in time, but the most active in bringing about the result.
Related - 045
Loss minimisation
The duty of the insured to take all reasonable steps to limit a loss, as if the property were uninsured.A shopkeeper whose godown catches fire must call the fire brigade and move undamaged stock, not stand aside because the policy will pay. Failure to mitigate can lead to reduction or even repudiation of the claim, because it breaches the bond of good faith on which the contract rests. The reasonable cost of steps taken to reduce the loss, such as hiring a pump, is usually recoverable from the insurer. It is also called the principle of mitigation of loss.
Related - 046
Material fact
Any fact that would influence a prudent underwriter's decision to accept the risk or the rate charged.A history of heart disease, a previous rejected proposal, an unrepaired structural defect or a hazardous hobby such as scuba diving are all material. Materiality is judged from the insurer's point of view, not from what the proposer personally considered important. In health insurance IRDAI's 2024 master circular limits how far this can be pushed: after 60 months of continuous coverage the moratorium bars repudiation for non disclosure except in a proven case of fraud. Section 45 of the Insurance Act, 1938 gives a parallel protection in life insurance after three years.
Related - 047
Concealment
The failure to disclose a relevant fact that the insurer needed to know, whether done deliberately or not.It differs from misrepresentation, where a wrong statement is actually made, but both breach the duty of utmost good faith and can make the policy voidable. An applicant who omits a diagnosed diabetes from a health proposal has concealed, even if the form did not ask the question in those exact words. Insurers must prove that the fact was material and that the omission influenced their decision. IRDAI's customer information sheet requirement is intended to reduce disputes by putting key disclosures in plain language before the sale.
Related - 048
Moral hazard
The change in the insured's behaviour, caused by the existence of cover, that makes a loss more likely or more costly.A driver who parks carelessly because the car is fully insured, or a patient who opts for a longer hospital stay because the bill is cashless, are both examples. Insurers manage it through deductibles, co payments, no claim bonuses, waiting periods and careful underwriting of the proposer's character. It is distinct from morale hazard, which is simple carelessness rather than a calculated response to being insured. In an answer, tie it to the design of policy conditions, since that is where the concept actually bites.
Related - 049
Adverse selection
The tendency of those most likely to suffer a loss to be the most eager buyers of insurance.If an insurer prices a health product on average population risk, the sick will queue up and the healthy will stay away, driving claims above premium until the product fails. Underwriting questions, medical tests, waiting periods for pre existing diseases and group schemes with compulsory membership all exist to control it. It is a direct consequence of asymmetric information, which is why utmost good faith is a legal duty rather than a courtesy. Distinguish it from moral hazard: adverse selection happens before the contract, moral hazard after it.
Related - 050
Contract of indemnity and contract of assurance
A distinction between policies that repay actual loss and policies that pay a fixed sum on a certain event.Fire, marine, motor own damage and indemnity based health cover are contracts of indemnity, so the payout can never exceed the measured loss. Life insurance and personal accident are contracts of assurance or benefit, where the agreed sum is paid because the loss cannot be measured in money. This is why contribution and subrogation apply to the first group and not to the second. A valued marine policy sits between the two, since the agreed value is paid without proof of actual value, subject to there being no fraud.
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Life insurance and its plans
Term, endowment, money back, whole life, unit linked, pension and group products, with the charge structure and bonus mechanics that separate them.
- 051
Term life insurance
A pure risk plan that pays the sum assured only if the life assured dies during the policy term.Because there is no savings element, it buys the largest cover for the smallest premium, which is why a thirty year old can insure Rs 1 crore for a few thousand rupees a year. Nothing is paid if the life assured survives the term, and that surrender of maturity value is exactly what makes the premium low. Premiums paid qualify for deduction under Section 80C of the Income tax Act, 1961, and since 22 September 2025 individual life premiums carry no GST. Term cover is the recommended foundation of any protection portfolio before investment linked products are considered.
Related - 052
Level, decreasing and increasing term
Three term plan structures distinguished by whether the death benefit stays constant, falls or rises over the term.In a level term plan the premium and the death benefit both remain the same throughout, which is the standard family protection design. A decreasing term plan keeps the premium constant while the benefit reduces, so it suits a home loan whose outstanding balance falls each year, and mortgage redemption and credit life policies use this shape. An increasing term plan raises both the cover and the premium over time to keep pace with inflation and rising income. Matching the shape to the liability is the practical skill being tested here.
Related - 053
Term plan with return of premium
A term policy that refunds the premiums paid if the life assured survives the full policy term.Known in the market as TROPS, it answers the common objection that a plain term plan gives nothing back on survival. The refund is usually of the base premium excluding taxes and rider charges, and the premium itself is far higher than for the equivalent plain term cover. In effect the buyer is lending the insurer the difference for the whole term at a modest implicit return. It is worth explaining in an answer as a behavioural product rather than an efficient one.
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Endowment policy
A life plan that pays the sum assured on death during the term or on survival to the maturity date.It combines protection with a savings component, so the policyholder receives a lump sum with accrued bonuses if they outlive the term. Riders for critical illness, accidental death and waiver of premium can be attached to widen the cover. Bonuses come in two forms, the reversionary bonus declared each year and attached to the policy and the terminal bonus paid once at exit. Tax benefit under Section 80C is available on premiums, subject to the sum assured being at least ten times the annual premium for the maturity proceeds to stay exempt under Section 10(10D).
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Money back policy
An endowment variant that returns a part of the sum assured at fixed intervals during the term.These periodic payouts are called survival benefits, and the balance of the sum assured with vested bonuses is paid at maturity. Death during the term usually triggers the full sum assured, irrespective of survival benefits already received, which is a favourite trap in objective questions. The design suits a policyholder who wants liquidity at intervals rather than one lump sum at the end. LIC's Jeevan Tarun, which pays survival benefits from ages 20 to 24 and matures at 25, is the classic example built around a child's education.
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Whole life insurance
A plan that provides cover for the entire life of the insured rather than for a fixed number of years.The policy stays in force as long as premiums are paid, and the maturity age is usually set at 100 years, at which point the sum assured is paid if the insured is still living. Because a claim is certain to arise sooner or later, premiums are heavier than for term cover of the same amount. Whole life plans build a cash value against which a policy loan can be taken, and they are widely used for estate planning and legacy transfer. LIC's Jeevan Umang is a whole life plan that also pays annual survival benefits after the premium paying term.
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Unit linked insurance plan
A life policy in which part of the premium buys insurance cover and the rest is invested in market linked funds.The policyholder chooses the funds and bears the investment risk, so the cash value moves with the net asset value of the underlying assets. IRDAI raised the lock in period from three years to five years in 2010, and partial withdrawal is permitted only after that lock in. Unit linked products other than pension and annuity products must carry a minimum mortality cover or health cover. Because market risk sits with the buyer, mis selling in this class attracts the sharpest regulatory attention.
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ULIP fund options
The fund categories offered inside a unit linked plan, ranging from equity to cash, each with a different risk profile.Equity funds invest mainly in company shares and carry high risk with the aim of capital appreciation. Income, fixed interest and bond funds invest in government securities and corporate bonds and carry medium risk, while cash funds hold treasury bills, commercial paper and bank deposits and carry the lowest risk. Balanced funds combine equity and fixed income in a stated proportion. Switching between funds is permitted, usually with a set number of free switches each year, which is the feature that makes unit linked plans flexible.
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Type I and Type II ULIP
A classification of unit linked plans by whether the death benefit is the higher of, or the sum of, the sum assured and the fund value.A Type I plan pays the higher of the sum assured or the fund value, so as the fund grows the insurer's own risk falls and mortality charges reduce. A Type II plan pays the sum assured plus the fund value, so the insurer's risk stays constant and the mortality charge is higher throughout. The sum assured is described as the minimum guaranteed death benefit in both cases. This is a standard two mark distinction, so keep the words higher of and plus firmly separated.
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ULIP charges
The set of deductions an insurer makes from a unit linked plan, capped by IRDAI through a reduction in yield limit.The main heads are premium allocation charge, mortality charge, fund management charge, policy administration charge, partial withdrawal charge, fund switching charge, premium redirection charge and surrender charge. IRDAI caps the fund management charge at 1.35 per cent a year of the fund value, and it is adjusted from the net asset value daily. The net reduction in yield at maturity may not exceed 2.25 per cent for policies with a term above ten years and 3 per cent for terms of ten years or less. Reduction in yield is the concept to quote in an answer, because it caps the total cost regardless of how the charges are labelled.
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Minimum mortality cover in ULIP
The floor IRDAI sets on the sum assured in a unit linked plan relative to the premium paid.For a single premium contract the minimum sum assured is 125 per cent of the single premium where the age at entry is below 45 years and 110 per cent where it is 45 years or above. Where a health cover is provided instead, the minimum annual cover is five times the annualised premium or Rs 1,00,000 a year below age 45 and Rs 75,000 a year at 45 and above. The rule exists to stop unit linked plans from becoming pure investment products with a token insurance element. Loans under a unit linked policy are capped at 40 per cent of net asset value for equity oriented products and 50 per cent for debt oriented ones.
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Pension or retirement plan
A life insurance product that accumulates a corpus during working life and converts it into regular income after retirement.The accumulation phase runs from the first premium to the vesting date, after which the annuity or pension phase begins. Contributions attract deduction under Section 80CCC within the overall Section 80C ceiling of Rs 1.5 lakh, and a part of the corpus may be commuted as a lump sum at vesting with the balance compulsorily annuitised. Pradhan Mantri Vaya Vandana Yojana and Atal Pension Yojana are the Government backed versions of the same idea. Deferred annuity, immediate annuity and unit linked pension plans are the three common structures.
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Annuity
A contract under which the annuitant pays a purchase price and receives a stream of payments, usually for life.An immediate annuity starts paying soon after a single lump sum purchase, while a deferred annuity accumulates first and pays later. Common options are life annuity, which stops on death, life annuity with return of purchase price to the nominee, joint life annuity covering a spouse and annuity certain for a guaranteed number of years. Annuities insure longevity risk, the risk of outliving one's savings, which is the mirror image of the mortality risk covered by term insurance. In India annuity payments are taxable as income in the year of receipt.
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Vesting age and deferment period
The age at which pension payments begin, and the gap between buying the plan and the first pension instalment.The deferment period is the accumulation window during which premiums grow and no benefit is drawn. Vesting age is the point at which the accumulated corpus converts into an annuity, commonly available from 40 to 80 years depending on the product. Choosing a later vesting age gives a longer accumulation and a higher pension, but exposes the buyer to a longer period without income. In Atal Pension Yojana the vesting age is fixed at 60 and the guaranteed pension ranges from Rs 1,000 to Rs 5,000 a month.
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Child plan
An insurance cum investment plan that builds a corpus for a child's education or marriage and protects it if the parent dies.The distinguishing feature is the waiver of premium benefit: if the insured parent dies, the insurer pays the sum assured immediately and continues to fund the remaining premiums itself, so the maturity benefit still reaches the child on schedule. This double payout structure is what separates a child plan from an ordinary endowment. Payouts are usually timed to coincide with school leaving, graduation and post graduation years. LIC's Jeevan Tarun and similar market products follow this design.
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Group life insurance
A single master policy covering the members of a defined group, usually employees of one employer.Premiums per member are lower than for individual cover because the insurer's risk is spread across the group and acquisition costs are shared. Underwriting is done at the group level, so individual medical tests are often waived up to a free cover limit. The employer or association holds the master policy and members receive certificates of insurance. Group life and group health policies continue to attract 18 per cent GST even after the September 2025 exemption for individual policies.
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Joint life and single life plans
Policies covering two lives under one contract, as against a policy covering one life only.A joint life plan typically covers a married couple and pays on the first death, after which the survivor may continue with reduced or waived premiums depending on the product design. It is cheaper than two separate policies and simplifies administration, but the cover ends or reduces after the first claim. A single life policy covers one person and pays the chosen amount if that person dies within the term. For a family with two earners, two individual term plans usually give better total protection than one joint plan.
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Saral Jeevan Bima
A standard individual term life product with uniform features that IRDAI requires every life insurer to offer.The terms, exclusions and wording are identical across insurers, so a buyer can compare only on price and service rather than on fine print. Sum assured options run from Rs 5 lakh to Rs 25 lakh, entry ages from 18 to 65 and the policy term from 5 to 40 years, with a waiting period of 45 days except for accidental death. It sits alongside the general insurance standard products Arogya Sanjeevani for health, Saral Suraksha Bima for personal accident and Bharat Griha Raksha for home. The common purpose of all standard products is to make the first purchase simple for a first time buyer.
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Participating and non participating policies
A distinction between policies that share in the insurer's surplus through bonuses and those that do not.A participating or with profits policy entitles the holder to a share of the distributable surplus of the life fund, declared each year after actuarial valuation. A non participating policy pays only what the contract guarantees, so term plans and most annuities fall in this category. Participating policies carry higher premiums because part of the loading funds the future bonus. In an answer, connect this to the actuarial valuation cycle, since the bonus is a function of investment return, mortality experience and expense control.
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Reversionary bonus and terminal bonus
Two forms of bonus on participating policies: one added annually and vested, the other paid once at exit.A simple reversionary bonus is declared as a rate per thousand of sum assured each year and once declared it vests, meaning it cannot be taken away. A compound reversionary bonus applies the rate to the sum assured plus bonuses already attached, so it accumulates faster. The terminal bonus, also called a final additional bonus, is paid only on death, maturity or surrender and is not guaranteed in advance. Bonuses are attached to the policy but are payable only when the claim arises, which is why a surrender before maturity fetches only a fraction of them.
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Surrender value and paid up value
The cash amount payable on early exit, and the reduced sum assured that continues when premiums stop.Guaranteed surrender value becomes available after the minimum premiums prescribed for the product have been paid, and special surrender value, which is usually higher, is calculated on the insurer's own basis. If the policyholder simply stops paying, a traditional plan that has acquired value becomes paid up, meaning cover continues at a reduced sum assured in the ratio of premiums paid to premiums payable. IRDAI's 2024 regulations on actuarial, finance and investment functions raised early exit values on non linked savings products, so surrender in the first few years is now less punitive than before. A paid up policy can usually be revived within a stated period on payment of arrears with interest.
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Keyman insurance
A life policy taken by a business on the life of an employee or partner whose death would hurt its profits.The company is the proposer, the premium payer and the beneficiary, while the key employee is the life assured, which makes the insurable interest commercial rather than personal. Cover is normally taken as a term plan, and the sum assured is justified by reference to the person's contribution to turnover or profit. The premium is generally allowed as a business expense, but the proceeds are taxable in the hands of the company as business income. Unit linked plans are not permitted as keyman policies in India.
Related
Health, motor and property covers in detail
The working parts of the covers most Indians actually buy: waiting periods, cashless rules, no claim bonus, insured declared value, deductibles and the average clause.
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Family floater policy
A single health policy where one sum insured is shared by all covered members of a family.It is cheaper than separate individual policies because the insurer assumes that all members will not claim in the same year. The weakness is that one large hospitalisation can exhaust the entire sum insured for everyone, which is why an adequate floater is usually paired with a super top up. Premium is normally based on the age of the eldest member, so adding an elderly parent raises the cost for the whole family sharply. Since 22 September 2025 individual and family floater health premiums are exempt from GST.
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Super top up and top up
Low cost policies that start paying only after hospital expenses cross a stated threshold called the deductible.A top up applies the threshold to each single claim, so a Rs 5 lakh deductible defeats three separate claims of Rs 3 lakh each. A super top up applies the threshold to the total of all claims in the policy year, so the same three claims together cross Rs 5 lakh and the balance becomes payable. The premium is a fraction of a base policy of the same size because the insurer only faces the tail of the loss. The standard advice is a modest base policy plus a large super top up, which is a practical example worth carrying into an interview.
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Critical illness insurance
A fixed benefit policy paying a lump sum on the diagnosis of a listed serious illness.Cancer of specified severity, heart attack, stroke, kidney failure, major organ transplant, paralysis, coma and multiple sclerosis are the illnesses usually listed. The sum is paid on diagnosis and survival of a stated period, commonly 30 days, and it is paid whether or not the insured is hospitalised or spends anything. This is why it complements rather than duplicates an indemnity health policy: the money can replace lost income or fund care at home. It is sold either as a standalone plan or as a rider on a life or health policy.
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Hospital daily cash
A benefit that pays a fixed amount for each day of hospitalisation, regardless of the actual bill.It is designed to meet the costs a main policy will not reimburse, such as an attendant's food and travel or income lost by a family member. Payment is normally capped at a number of days per hospitalisation and per policy year, and a minimum stay of 24 or 48 hours is required. Because it is a benefit product rather than an indemnity one, it can be claimed alongside a full reimbursement from another insurer. Personal accident policies frequently bundle it as an add on.
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Pre existing disease and waiting period
A condition diagnosed or treated before the policy started, and the initial span during which it is not covered.IRDAI's master circular on health insurance of 29 May 2024 caps the waiting period for pre existing diseases at 36 months, reduced from the earlier maximum of 48 months. A separate initial waiting period of 30 days applies to all illnesses other than accidents, and specific ailments such as cataract, hernia and joint replacement carry their own waiting periods, usually of one to two years. Credit for waiting periods already served is carried forward on porting or migrating to another insurer. The same circular also removed the blanket maximum entry age, leaving insurers free to set product specific limits.
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Moratorium period
The span of continuous health cover after which a claim can no longer be rejected for non disclosure, except for proven fraud.The 2024 master circular reduced it from eight years to 60 months, that is five years of continuous coverage including any period carried over on porting or migration. After the moratorium the insurer cannot contest the policy or a claim on grounds of non disclosure or misrepresentation, so old proposal form errors stop mattering. It is the health insurance parallel of Section 45 of the Insurance Act, 1938, which makes a life policy incontestable after three years. If the sum insured is later enhanced, the moratorium for the enhanced portion counts from the date of enhancement.
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Cashless claim and network hospital
A settlement method where the insurer pays the hospital directly, so the patient does not pay and claim later.It works at hospitals in the insurer's network, which have agreed tariffs and a direct billing arrangement. Under the 2024 master circular the insurer must decide a cashless pre authorisation request within one hour of receiving it and grant final discharge authorisation within three hours, with any extra cost of delay borne by the insurer. The industry Cashless Everywhere initiative extends the facility to non network hospitals subject to intimation and insurer agreement. A rejected pre authorisation does not close the matter, since the treatment can still be paid for and claimed as reimbursement.
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Third party administrator
A licensed intermediary that processes health insurance claims and runs cashless services on behalf of insurers.It issues the health card, maintains the hospital network, grants pre authorisation and settles bills, but it does not underwrite risk or decide policy terms. Third party administrators are licensed and regulated by IRDAI under dedicated regulations and are counted among insurance intermediaries. Policyholders often mistake the administrator's decision for the insurer's, but liability for the claim remains with the insurer. Some insurers have moved to in house claim teams to control service quality.
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Reimbursement claim
A claim in which the insured pays the hospital first and is repaid by the insurer on submission of bills.It applies where the hospital is outside the network or where cashless authorisation was refused, and it requires original bills, discharge summary, investigation reports and the claim form. Under IRDAI rules the insurer must decide the claim within a set timeline and pay interest above the bank rate if it delays settlement beyond the permitted period. Intimation deadlines matter: most policies require notice within 24 to 48 hours of admission and submission of documents within 15 to 30 days of discharge. Keeping the original documents is essential, because a second insurer will accept attested copies only with the first insurer's settlement letter.
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Portability and migration
Moving a health policy to another insurer, or to another product of the same insurer, without losing accrued credits.Portability is a change of insurer and migration is a change of product within the same insurer, and in both cases waiting periods already served and the moratorium clock are carried forward. A porting request must be made at least 30 days before renewal, and the new insurer must respond within 15 days of receiving the data through the industry portal. Credit is given up to the sum insured of the previous policy, so any increase attracts fresh waiting periods on the increased portion. This right is what keeps insurers competitive on service and prevents policyholders being locked in by their own waiting periods.
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No claim bonus
A reward for a claim free year, given either as extra sum insured or as a discount on renewal premium.In health insurance the increase in sum insured is called a cumulative bonus and typically runs at 5 to 50 per cent, reducing after a claim year. In motor insurance the no claim bonus is a discount on the own damage premium, starting at 20 per cent after one claim free year and rising in steps to 50 per cent after five. Motor no claim bonus attaches to the owner and not to the vehicle, so it can be transferred when a new car is bought. Following the 2024 master circular the insurer must state in the policy document which form the health bonus takes, instead of deciding it later.
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Co payment
A stated share of every admissible claim that the policyholder must bear from their own pocket.A 20 per cent co payment on a Rs 2 lakh claim means the insurer pays Rs 1.6 lakh and the insured pays Rs 40,000. Insurers use it to control moral hazard and to make cover affordable for older entrants, and senior citizen products very often carry a mandatory co payment. Some policies apply it only in a higher class of city or only for specified treatments. It differs from a deductible, which is a fixed amount removed before the insurer pays anything, whereas a co payment is a percentage of each claim.
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Deductible
A fixed amount of loss that the insured bears before the insurer's liability begins.In motor own damage claims a compulsory excess is fixed by the policy schedule, and a voluntary deductible can be chosen to reduce the premium. In health insurance the deductible is the entry point of top up and super top up covers. Deductibles remove small nuisance claims from the system, cutting administration costs and encouraging care. Distinguish a per claim deductible from an aggregate deductible applied across the policy year, since super top up policies use the aggregate form.
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Room rent sub limit
A cap on the daily hospital room charge payable, expressed as an amount or a percentage of the sum insured.The trap is proportionate deduction: if the policy allows a room of Rs 5,000 a day and the patient occupies one at Rs 10,000, the insurer may cut every associated charge, including surgeon's fees and investigations, by the same proportion. A bill of Rs 4 lakh can therefore settle at around Rs 2 lakh even though the sum insured was never reached. The 2024 master circular requires such limits to be disclosed prominently in the customer information sheet. Policies with no room rent capping are more expensive but avoid this cascade entirely.
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Arogya Sanjeevani
The standard indemnity health product with identical features that every general and health insurer must offer.Cover is on an indemnity basis with a standard 5 per cent co payment, and insurers may offer a range of sum insured options with uniform wording and exclusions. Its purpose is to give first time buyers a simple product they can compare across companies on price alone. It belongs to the family of IRDAI standard products that includes Saral Suraksha Bima for personal accident, Corona Kavach in its time, Saral Jeevan Bima for term life, Bharat Griha Raksha for homes and Bharat Sookshma Udyam Suraksha for micro enterprises. Naming three or four of these correctly is often enough for a full mark in a descriptive answer.
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Customer information sheet
A one page summary of a health policy's key features that the insurer must give the policyholder in simple language.It sets out the sum insured, covered expenses, exclusions, waiting periods, sub limits, co payment, claim process and grievance route in a prescribed format. The 2024 master circular made it mandatory and required the policyholder's acknowledgement, so that disputes about what was and was not covered become harder. It is meant to be readable in the local language wherever possible. Treat it as the health insurance parallel of a key facts statement in banking.
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Insured declared value
The current market value of a vehicle fixed at policy inception, which is the maximum payable on total loss or theft.It is calculated as the manufacturer's listed selling price of the model less depreciation for age, with accessories added separately, and it is not the price paid at purchase. Depreciation runs at 5 per cent for vehicles up to six months old and rises in steps to 50 per cent at five years, beyond which it is mutually agreed. A lower declared value cuts the premium but also cuts the claim on total loss, so quoting it correctly is a practical judgement. The insured declared value also forms the base on which the own damage premium is rated.
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Own damage and third party cover
The two halves of a motor policy: damage to the insured's own vehicle, and legal liability to others.Third party cover is compulsory under the Motor Vehicles Act, 1988 and the premium rates are notified by the Government, so they are identical across insurers for a given engine capacity. Own damage cover is optional, priced by the insurer on the insured declared value, and it is what a policyholder actually buys when they ask for comprehensive insurance. Since 2018, following a Supreme Court direction, new cars must be sold with three years of third party cover and new two wheelers with five years. Third party liability for death or bodily injury is unlimited in amount, while property damage liability is capped at Rs 7.5 lakh.
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Zero depreciation cover
A motor add on under which the insurer pays the full cost of replaced parts without deducting depreciation.In an ordinary own damage claim the insurer depreciates plastic, rubber, glass and metal parts, so the policyholder pays a large share of a bumper or panel replacement. The add on removes that deduction, usually for the first five years of a vehicle's life and for a limited number of claims per year. It raises the premium by roughly 15 to 20 per cent but is worth it on a new or expensive car. Other common add ons are engine protection, return to invoice, roadside assistance and consumables cover.
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Owner driver personal accident cover
A compulsory personal accident cover for the registered owner driving the insured vehicle.IRDAI fixed the compulsory sum insured at Rs 15 lakh from 2018, and since 2019 a single owner driver policy can be taken separately instead of buying it with every vehicle owned. It pays a scaled benefit for accidental death and permanent disablement arising from the use of the vehicle. It does not cover passengers or paid drivers, for whom separate cover must be purchased. The requirement is easy to confuse with third party liability, so remember that this one protects the owner and third party cover protects everyone else.
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Average clause and underinsurance
A condition reducing a claim in proportion to the shortfall where the sum insured is less than the value at risk.If a factory worth Rs 1 crore is insured for Rs 60 lakh and suffers a Rs 20 lakh fire loss, the claim settles at Rs 12 lakh, that is 60 per cent of the loss. The clause exists because premium is charged on the sum insured, so an underinsured policyholder has paid for only part of the risk. It applies to property policies such as fire, marine cargo and burglary but not to benefit contracts. IRDAI's standard home product Bharat Griha Raksha waives the average clause if the sum insured is declared on the prescribed basis, which is a useful example to quote.
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General average and particular average
In marine insurance, a loss deliberately incurred for the common safety, and a partial loss borne by one interest alone.If cargo is jettisoned to save a ship in a storm, that is a general average sacrifice and every party to the voyage, ship and all cargo owners, contributes rateably to the loss. Particular average is an accidental partial loss falling only on the owner of the property damaged, such as one consignment spoiled by sea water. General average is one of the oldest doctrines in commercial law and survives in the York Antwerp Rules. The distinction is a standard advanced level question in insurance awareness papers.
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IRDAI and the regulatory framework
Composition, statutory powers, registration and capital norms, the foreign investment journey and the Sabka Bima Sabki Raksha Act, 2025.
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IRDAI
The statutory and autonomous authority that regulates and develops the insurance and reinsurance industry in India.The Insurance Regulatory and Development Authority was constituted in 1999 and incorporated as a statutory body in April 2000, and it was renamed the Insurance Regulatory and Development Authority of India after the Insurance Laws (Amendment) Ordinance of 2014, which the President promulgated on 26 December 2014. Its head office is at Hyderabad, with regional offices at New Delhi and Mumbai. The Delhi office handles consumer awareness, grievances and the licensing of surveyors and loss assessors for the northern region, and Mumbai performs the same role for the west. It functions under the Department of Financial Services, Ministry of Finance, and its current chairman is Ajay Seth, who assumed charge on 1 September 2025.
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IRDAI Act, 1999
The Act of Parliament that established the insurance regulator and reopened the sector to private participation.It followed the Malhotra Committee report and gave statutory form to a body that had been functioning as an interim regulatory authority. The Act also amended the Insurance Act, 1938 and the General Insurance Business (Nationalisation) Act, 1972, and it renotified the General Insurance Corporation of India as the national reinsurer. Section 4 sets out the composition of the Authority, Section 14 its duties, powers and functions, Section 24 the power under which the Insurance Ombudsman Rules were framed and Section 25 the Insurance Advisory Committee. Together with the Insurance Act, 1938 it forms the two pillar statutory base of Indian insurance regulation.
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Composition of IRDAI
The ten member structure of the Authority prescribed by Section 4 of the IRDAI Act, 1999.It consists of a chairperson, not more than five whole time members and not more than four part time members, and all ten are appointed by the Government of India. The chairperson holds office for five years subject to a maximum age of 65, and whole time and part time members hold office for five years subject to a maximum age of 62, with reappointment permitted. Members are drawn from life insurance, general insurance, actuarial science, finance, economics, law, accountancy and administration. The numbers five, four, 65 and 62 are the ones examiners want, so fix them precisely.
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Section 14 of the IRDAI Act, 1999
The provision listing the duties, powers and functions of the Authority.Sub section 1 places on the Authority the duty to regulate, promote and ensure the orderly growth of insurance and reinsurance business. Sub section 2 then lists specific powers: issuing, renewing, modifying, withdrawing, suspending or cancelling registration; protecting policyholder interests in assignment, nomination, insurable interest, claim settlement and surrender value; prescribing qualifications and codes of conduct for intermediaries, surveyors and loss assessors; calling for information and conducting inspections and audits; regulating rates for general business not controlled by the Tariff Advisory Committee; regulating investment of funds and margin of solvency; adjudicating disputes between insurers and intermediaries; supervising the Tariff Advisory Committee; and specifying the rural and social sector obligations of insurers. Levying fees and prescribing the form of accounts also sit here.
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Section 114A of the Insurance Act, 1938
The section that empowers the Authority to frame regulations under the Insurance Act.Every regulation the regulator has issued since 2000, from registration of insurers to protection of policyholders' interests, is made under this section. It is the reason IRDAI can regulate through delegated legislation rather than requiring a fresh Act each time. Section 14 of the IRDAI Act gives the Authority its functions, while Section 114A gives it the rule making instrument to carry them out. The Sabka Bima Sabki Raksha Act, 2025 added a standard operating procedure and a mandatory consultation process for making regulations.
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Insurance Advisory Committee
The statutory committee constituted under Section 25 of the IRDAI Act, 1999 to advise the Authority.It has not more than twenty five members excluding ex officio members, and the chairperson and members of IRDAI serve as its ex officio chairperson and members. Its role is to advise on regulations and on matters of general administration, drawing on representatives from commerce, industry, transport, agriculture, consumer bodies, surveyors, agents, intermediaries and organisations engaged in safety and loss prevention. It has an advisory function only, so its views do not bind the Authority. Do not confuse it with the Tariff Advisory Committee, which sits under the Insurance Act, 1938 and deals with rating.
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Tariff Advisory Committee
The statutory body under Section 64U of the Insurance Act, 1938 that controlled and regulated general insurance rates.It was established with effect from the commencement of the Insurance (Amendment) Act, 1968 to fix rates, advantages, terms and conditions offered by insurers in general insurance business. IRDAI supervises its functioning, a duty expressly listed in Section 14 of the IRDAI Act. India detariffed most general insurance classes from January 2007, so insurers now set their own rates within file and use norms, and motor third party remains priced by the Government. The Committee therefore survives in law and in exam questions even though its rating role has largely lapsed.
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Entities regulated by IRDAI
The insurers, reinsurers and intermediaries that require registration or licensing from the Authority.These are life insurance companies, general insurance companies including standalone health insurers, reinsurance companies, the agency channel and intermediaries. As of 31 March 2025 there were 74 registered insurers and reinsurers in India, made up of 26 life insurers, 25 general insurers, 8 standalone health insurers, 2 specialised insurers and 13 reinsurers and foreign reinsurance branches. The two specialised insurers are the Agriculture Insurance Company of India and ECGC Limited. Pension products of insurers are regulated by IRDAI, while the National Pension System sits with PFRDA, a distinction worth stating clearly.
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Intermediaries regulated by IRDAI
The licensed distributors and service providers who sit between the insurer and the policyholder.They include individual agents, corporate agents, insurance brokers, third party administrators, surveyors and loss assessors, insurance marketing firms, web aggregators and insurance repositories. An agent represents one insurer, a corporate agent may tie up with a limited number of insurers across life, general and health, and a broker represents the customer and can place business with any insurer. The broker concept was introduced through the Insurance Brokers Regulations of 2002, amended in 2013 and 2018. Since September 2019 foreign direct investment in insurance intermediaries has been permitted up to 100 per cent.
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Registration of insurers
The three stage process by which a company obtains a certificate of registration to carry on insurance business in India.The applicant files Form IRDAI R1 seeking in principle approval of promoters, business plan and governance, then Form R2 for the certificate of registration, and Form R3 for the annual renewal fee. Registration is granted for one class of business at a time under the class based framework, which the 2025 amendment retained after choosing not to introduce a composite licence. IRDAI may modify, withdraw, suspend or cancel registration under Section 14 of its Act, and the 2025 amendment moved intermediaries to one time registration with suspension rather than immediate cancellation. Only an Indian insurance company, a statutory body or a co operative society may be registered.
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Minimum capital requirement
The paid up equity capital an insurer must hold before it can be registered to write business.It is Rs 100 crore for a life insurer, a general insurer or a standalone health insurer, and Rs 200 crore for a reinsurer. Foreign reinsurance branches must maintain a net owned fund, which the Sabka Bima Sabki Raksha Act, 2025 reduced from Rs 5,000 crore to Rs 1,000 crore. The same Act removed the Rs 100 crore paid up capital requirement from the definition of an insurance co operative society, opening a lower cost route for co operative insurers. The Rs 100 crore floor for companies was not changed, a point critics highlight as an unfinished reform.
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Foreign direct investment in insurance
The ceiling on foreign shareholding in an Indian insurance company, now set at 100 per cent under the automatic route.The journey runs 26 per cent from 2000, 49 per cent under the Insurance Laws (Amendment) Act, 2015, 74 per cent under the Insurance (Amendment) Act, 2021 and 100 per cent under the Sabka Bima Sabki Raksha Act, 2025. The Finance Ministry notified 100 per cent foreign investment in insurance companies and intermediaries under the automatic route through the Foreign Exchange Management (Non debt Instruments) Second Amendment Rules, 2026, while the cap for the Life Insurance Corporation of India remains 20 per cent. Insurance intermediaries had already been opened to 100 per cent foreign investment in September 2019. Memorise the four figures with their years, because this is the single most asked current affairs item in insurance.
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Sabka Bima Sabki Raksha Act, 2025
The amending Act of 2025 that raised foreign investment to 100 per cent and rewrote parts of the three main insurance statutes.Parliament passed it on 17 December 2025, it received Presidential assent on 20 December 2025 and most provisions commenced on 5 February 2026, amending the Insurance Act, 1938, the LIC Act, 1956 and the IRDAI Act, 1999. Besides the 100 per cent limit, it cut the net owned fund requirement for foreign reinsurance branches from Rs 5,000 crore to Rs 1,000 crore, raised the threshold for prior approval of share transfers from 1 per cent to 5 per cent, introduced one time registration for intermediaries and gave LIC autonomy to open zonal offices. It created a Policyholders' Education and Protection Fund, aligned policyholder data handling with the Digital Personal Data Protection Act, 2023, gave IRDAI power to disgorge wrongful gains and mandated a consultative standard operating procedure for making regulations. Note the two things it did not do: it left the composite licence out and left the Rs 100 crore minimum capital for insurers unchanged.
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Solvency margin
The excess of an insurer's assets over its liabilities, held as a cushion against adverse claims experience.IRDAI requires every insurer to maintain a solvency ratio of at least 1.5, that is available solvency margin of at least 150 per cent of the required solvency margin. A control level of solvency is set at the same figure, and an insurer falling below it must file a financial plan with the Authority. Regulating the maintenance of the margin of solvency is expressly listed among the Authority's functions in Section 14, and the requirement dates back to the Insurance Amendment Act, 1968. India is moving from this factor based approach to a risk based capital framework, which links capital to the actual risk profile of each insurer.
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Rural and social sector obligations
The minimum share of business every insurer must write in rural areas and among specified vulnerable groups.Specifying the percentage of life and general insurance business to be undertaken in the rural or social sector is a statutory function of the Authority under Section 14 of the IRDAI Act, 1999. Life insurers meet the rural obligation as a percentage of policies written and general insurers as a percentage of gross direct premium, with targets rising in the initial years after registration. The social sector target is expressed in numbers of lives covered among unorganised workers, economically vulnerable groups and persons with disability. These obligations are the regulatory counterpart of priority sector lending in banking, a comparison worth making in an answer.
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Insurance for All by 2047
IRDAI's stated vision that every citizen has life, health and property cover and every enterprise is suitably covered by 2047.It was articulated under former chairman Debasish Panda and is aligned with the wider Viksit Bharat 2047 goal, the hundredth year of independence. The gap it addresses is stark: total insurance penetration was 3.7 per cent of gross domestic product in 2024-25 against a global average of about 7.3 per cent, and density was USD 97 against a global figure near USD 943. The Bima Trinity of Bima Sugam, Bima Vistaar and Bima Vahak is the main delivery vehicle, supported by state level insurance plans and the removal of GST on individual life and health premiums. Quote the penetration and density numbers when you use this phrase, since the vision alone carries no marks.
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Bima Trinity
IRDAI's three part reform package of Bima Sugam, Bima Vistaar and Bima Vahak.Bima Sugam is a digital public marketplace run by the not for profit Bima Sugam India Federation, which has an authorised capital of Rs 500 crore and paid up capital of about Rs 310 crore held by life, general and health insurers. Its website went live in September 2025 and the platform is being rolled out in phases from July 2026, with motor, health and term products targeted by the end of September 2026. Bima Vistaar is a bundled rural cover combining life, health, personal accident and property in one affordable policy, and its launch has been repeatedly deferred over pricing and integration issues. Bima Vahak is a women centred last mile distribution force that will sell Bima Vistaar through the Sugam platform, and former chairman Debasish Panda described Bima Sugam as insurance's UPI moment.
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Securities Appellate Tribunal
The tribunal to which an insurer or intermediary aggrieved by an order of IRDAI may appeal.The Insurance Laws (Amendment) Act, 2015 routed insurance appeals to this tribunal, which already heard appeals against SEBI and PFRDA orders. An appeal from the tribunal lies to the Supreme Court on a question of law. This route is for regulated entities, not for policyholders, whose grievances go to the insurer, then the Insurance Ombudsman and then the consumer commissions. Keeping the two ladders separate is a common exam trap.
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Insurance Ombudsman and grievance redressal
The free, quasi judicial route open to individual policyholders: jurisdiction, monetary limit, timelines and where the Ombudsman sits in the wider complaint ladder.
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Insurance Ombudsman
An independent, quasi judicial authority that settles disputes between individual policyholders and insurers free of cost.It is often called the Bima Lokpal, and its purpose is to resolve claim complaints out of court in a cost effective, efficient and impartial manner. There are 17 Ombudsman centres across India, at Ahmedabad, Bengaluru, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Kochi, Kolkata, Lucknow, Mumbai, Noida, Pune and Patna. The complainant does not pay a fee and no lawyer is permitted, which keeps the forum genuinely accessible. An Ombudsman is appointed for three years or until the age of 65, whichever is earlier, and reappointment is not permitted.
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Insurance Ombudsman Rules, 2017
The rules framed by the Central Government under Section 24 of the IRDAI Act, 1999 that govern the Ombudsman institution.They replaced the Redressal of Public Grievances Rules, 1998, which had been notified on 11 November 1998 under the Insurance Act, 1938. The 2017 rules widened coverage to include policies of sole proprietorships and micro enterprises and grievances against agents and intermediaries, not only insurers. A later amendment raised the monetary ceiling and allowed complaints to be filed and heard electronically. When a question asks under which provision the Ombudsman was set up, the answer is Section 24 of the IRDAI Act, 1999.
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Council for Insurance Ombudsmen
The body constituted under the Insurance Ombudsman Rules, 2017 that appoints and administers the Ombudsman offices.It selects Ombudsmen, allocates territorial jurisdiction, funds the offices and monitors their performance, and it is under the administrative oversight of the Ministry of Finance. Funding comes from insurers in proportion to their share of business, but the Ombudsmen decide independently. Before 2017 this function sat with a governing body of the insurance council. It also runs the common complaint portal through which policyholders can file and track their cases online.
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Jurisdiction of the Ombudsman
The classes of dispute and the monetary limit within which an Insurance Ombudsman can entertain a complaint.The Ombudsman can hear delay in claim settlement, partial or total repudiation of a claim, disputes over premium paid or payable, misrepresentation of policy terms, disputes on the legal construction of policies as they relate to claims, policy servicing grievances, issue of a policy at variance with the proposal form, non issue of a policy after receipt of premium and any other violation of the Insurance Act, 1938. The compensation sought must not exceed Rs 50 lakh, a ceiling raised from the earlier Rs 30 lakh. Complaints must be personal lines of insurance, group policies, or policies of sole proprietorships and micro enterprises, and matters already before a court, consumer forum or arbitrator are not maintainable. Above Rs 50 lakh, the consumer commissions are the correct forum.
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Recommendation and award
The two forms of outcome from an Ombudsman proceeding: a mediated recommendation and a binding decision.If both parties agree in writing to mediation, the Ombudsman issues a recommendation within one month of receiving that consent, and the complainant must accept it in writing within 15 days. If mediation does not happen or fails, the Ombudsman passes an award within three months of receiving all requirements from the complainant. The award binds the insurer, which must comply within 30 days and confirm compliance, and IRDAI's 2024 master circular added a penalty of Rs 5,000 per day of delay payable to the complainant. The award does not bind the policyholder, who remains free to approach a consumer commission or a civil court, and the Ombudsman cannot direct an ex gratia payment.
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Time limits before the Ombudsman
The deadlines a complainant must observe before and while approaching the Insurance Ombudsman.The complainant must first make a written representation to the insurer, and may approach the Ombudsman only after the insurer rejects it, or fails to reply within one month, or gives a reply the complainant is not satisfied with. The complaint must then be filed within one year of the insurer's final reply. It must be in writing, signed by the insured or the legal heirs, addressed to the Ombudsman in whose jurisdiction the insurer's branch or office lies, and supported by an estimate of the loss and the relief sought. Missing the one year window is the commonest reason a valid grievance fails, so the sequence rejection, one month wait, one year limit is worth memorising.
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Bima Bharosa
IRDAI's online grievance portal where policyholders can register and track complaints against insurers.It was earlier known as the Integrated Grievance Management System, and it links the regulator, the insurers and the complainant on one platform so that response times can be measured. Complaints registered here are routed to the insurer with a time limit, and unresolved cases become visible to the Authority. IRDAI's annual report for 2024-25 records 2,57,790 grievances on the portal, a rise of about 20 per cent over the previous year, with claims accounting for the largest share in general insurance. The IRDAI call centre on 155255 or 1800 4254 732 serves the same purpose by telephone.
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Internal insurance ombudsman
An independent reviewer appointed inside an insurance company to examine claim grievances before they leave the insurer.IRDAI has required insurers in operation for more than three years, other than reinsurers, to appoint one, so that a second and independent pair of eyes sees a rejected claim within the company. The decision is binding on the insurer and must be issued within a short prescribed period, while the policyholder remains free to go to the Insurance Ombudsman afterwards. Eligibility norms require a minimum age and long industry experience, and bar anyone who has worked for that insurer or its group. Banking has the same institution in the internal ombudsman required of banks by the Reserve Bank of India.
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Grievance redressal ladder
The sequence of forums a policyholder must use, from the insurer's own cell up to the courts.Step one is the insurer's grievance redressal officer, step two is escalation to the internal insurance ombudsman or to IRDAI through Bima Bharosa, step three is the Insurance Ombudsman and step four is a consumer commission or civil court. Each step has its own time limit, and skipping a step usually means the next forum will send the complaint back. The ladder exists because most disputes are documentation problems that can be closed without adjudication. Explaining the ladder in order is worth more marks than describing any one forum in isolation.
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Consumer Protection Act, 2019
The consumer law under which insurance is treated as a service and a policyholder as a consumer.It replaced the Consumer Protection Act, 1986 and created the Central Consumer Protection Authority along with a mediation route and rules for e commerce. Insurance disputes are heard by the district, state and national commissions according to the value of the claim, and deficiency in service is the usual ground. A policyholder may go to a consumer commission after rejecting an Ombudsman award, or directly where the amount exceeds the Ombudsman's Rs 50 lakh ceiling. Unlike the Ombudsman route, this forum can award compensation for mental agony and litigation costs.
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Insurance companies and institutions in India
The public sector insurers, the specialised insurers and the training, data and professional bodies whose founding years and headquarters are standard exam fare.
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Life Insurance Corporation of India
The only public sector life insurer in India, created by the LIC Act, 1956 and headquartered at Mumbai.It began with a capital contribution of Rs 5 crore from the Government of India and absorbed 245 Indian and foreign insurers and provident societies. Its objective was to spread life insurance widely, especially to rural areas, at a reasonable cost, and its motto is Yogakshemam Vahamyaham. LIC listed on the stock exchanges in May 2022, and after the Sabka Bima Sabki Raksha Act, 2025 the foreign investment cap specific to LIC is 20 per cent. R. Doraiswamy took charge as Chief Executive Officer and Managing Director on 14 July 2025 for a three year term.
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General Insurance Corporation of India
India's national reinsurer, incorporated on 22 November 1972 and headquartered at Mumbai.It was formed under Section 9(1) of the General Insurance Business (Nationalisation) Act, 1972 as a private company limited by shares to superintend and carry on general insurance, and it commenced business on 1 January 1973. The IRDA Act, 1999 amended GIBNA and renotified it as the Indian Reinsurer, ending its supervisory role over the four subsidiaries. Since 2000 it has exclusively undertaken reinsurance business, and Indian insurers must offer it a first right of refusal on cessions, known as the obligatory cession. Its first wholly owned foreign subsidiary, GIC Re South Africa, began underwriting from Johannesburg on 1 January 2015.
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New India Assurance
India's largest general insurer, founded by Sir Dorabji Tata in 1919 and headquartered at Mumbai.It opened its first overseas office in London in 1920 and remains the most internationally spread Indian general insurer. It is a co promoter of the Agriculture Insurance Company of India and of GIC Housing Finance, and it jointly promoted a common health third party administrator with other public sector insurers. Its tagline is India's Premier General Insurance Company. Pair the founder's name with the year, because the Tata link is a recurring one mark question.
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National Insurance Company
India's oldest general insurance company, incorporated at Kolkata on 5 December 1906.It was founded to serve the nationalist aspiration for swaraj during the swadeshi movement and remains headquartered at Kolkata. It was the first Indian insurer to enter strategic alliances with large manufacturers such as Maruti and Hero MotoCorp for motor insurance distribution. Its tagline, Trusted Since 1906, carries the founding date itself. Distinguish it from Triton of 1850, which was the first general insurance company in India but British owned.
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Oriental Insurance Company
A public sector general insurer incorporated at Bombay on 12 September 1947 and headquartered at New Delhi.It began as a wholly owned subsidiary of the Oriental Government Security Life Assurance Company to carry on general insurance business. It specialises in large project covers for power plants, petrochemical, steel and chemical installations, and it has overseas operations in Nepal, Kuwait and Dubai. Its tagline in the market is Prithvi, Agni, Jal, Akash, Sabhi ki Suraksha Hamare Paas. Note that its year of incorporation, 1947, is a month after independence, which makes it easy to recall.
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United India Insurance Company
A public sector general insurer incorporated on 18 February 1938 and headquartered at Chennai.At nationalisation it absorbed 12 Indian insurance companies, 4 co operative insurance societies and the Indian operations of 5 foreign insurers, along with the general insurance operations of the southern region of LIC. It has a strong presence in the southern states and in engineering and industrial risks. Its tagline is Rest Assured With Us. It is one of the four subsidiaries formed under GIBNA and made independent of GIC by the 2002 amendment.
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Agriculture Insurance Company of India
The specialised public sector insurer for crop and agriculture related risks, headquartered at New Delhi.It was incorporated on 20 December 2002 and commenced operations on 1 April 2003, with an authorised share capital of Rs 1,500 crore and paid up capital of Rs 200 crore. Its shareholding is General Insurance Corporation of India 35 per cent, NABARD 30 per cent and the four public sector general insurers 8.75 per cent each. It implements Pradhan Mantri Fasal Bima Yojana and the restructured weather based crop insurance scheme alongside private insurers. It is one of only two specialised insurers registered in India, the other being ECGC Limited.
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ECGC Limited
The specialised insurer that provides export credit insurance to Indian exporters and banks, headquartered at Mumbai.Formerly the Export Credit Guarantee Corporation of India, it was set up in 1957 and functions under the Ministry of Commerce and Industry, unlike most insurers which relate to the Ministry of Finance. It covers the risk of non payment by overseas buyers on commercial and political grounds and issues guarantees to banks that finance exports. By absorbing payment risk it improves the competitiveness of Indian exporters and helps them obtain packing credit at better terms. It is the second of the two specialised insurers registered with IRDAI.
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Employees' State Insurance Corporation
The statutory body under the ESI Act, 1948 that administers social security cover for organised sector workers.It is a self financing scheme funded by contributions from employers and employees calculated as a fixed percentage of wages paid monthly, with State Governments bearing one eighth of the cost of medical benefit. The wage limit for coverage prescribed by the Central Government is Rs 21,000 a month, and Rs 25,000 for employees with disability. Benefits include medical, sickness, maternity, disablement, dependants and funeral benefit, delivered through ESIC hospitals and dispensaries. It is headquartered at New Delhi and works under the Ministry of Labour and Employment.
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Deposit Insurance and Credit Guarantee Corporation
The wholly owned subsidiary of the Reserve Bank of India that insures bank deposits, headquartered at Mumbai.Established under the DICGC Act, 1961, it insures principal and interest together up to Rs 5 lakh per depositor per bank in the same right and same capacity, a limit raised from Rs 1 lakh with effect from 4 February 2020. Deposits across all branches of one bank are aggregated, and cover extends to commercial banks, small finance banks, payments banks, regional rural banks, local area banks and co operative banks. Deposits of foreign governments, Central and State Governments, inter bank deposits and any amount received outside India are excluded. Section 18A, inserted by the DICGC (Amendment) Act, 2021, requires interim payment to depositors within 90 days when the Reserve Bank places a bank under all inclusive directions.
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Life Insurance Council
The representative forum of Indian life insurers, constituted under Section 64C of the Insurance Act, 1938.It is headquartered at Mumbai, works through several sub committees and includes every registered life insurance company in India as a member. Its functions are to build public confidence in the industry, maintain standards of ethics and governance, promote awareness of life insurance, engage with Government and regulators, conduct research and publish monographs, and lead insurance education and training. It also publishes the monthly new business premium data used by analysts and by examiners. Its general insurance counterpart is the General Insurance Council, also at Mumbai and also constituted under Section 64C.
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Insurance Information Bureau of India
The data repository and analytics body for the Indian insurance industry, set up by IRDAI at Hyderabad.Every registered insurer must submit data on life, motor, health, fire and other miscellaneous lines to it, which gives the regulator and the industry a common evidence base. It publishes analytical reports on claims, fraud patterns, motor rating and hospital costs, and it supplies services to insurers through web applications. Its office is at Gachibowli, Hyderabad, in the same city as IRDAI's head office. Think of it as the credit bureau equivalent for insurance data.
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Institute of Actuaries of India
The statutory body established under the Actuaries Act, 2006 to regulate the actuarial profession in India.Its nodal ministry is the Department of Financial Services under the Ministry of Finance, and it is headquartered at Seawoods, Navi Mumbai. Its affairs are managed by a Council of 12 elected fellow members and 3 persons nominated by the Central Government. Its education and research arm, IAI Actuarial Education and Research Organisation, was incorporated on 5 August 2021 under Section 8 of the Companies Act, 2013, with the Institute holding 99.99 per cent. The professional designations it awards, Associate and Fellow, are prerequisites for the appointed actuary role in an insurer.
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Insurance Institute of India
The professional body for insurance education and examinations in India, located at Mumbai.It was established in 1955, formerly as the Federation of Insurance Institutes, to promote insurance education and training in the country. Its Licentiate, Associate and Fellowship examinations are the standard professional qualifications for Indian insurance staff, and its IC series papers such as IC 38 are the mandatory training route for agents. It also runs the College of Insurance for classroom and distance programmes. Do not confuse it with the National Insurance Academy, which is a research and management institute at Pune.
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National Insurance Academy
The apex institute for learning and research in insurance, pension and allied areas, located at Pune.It was established in 1980 at Mumbai jointly by the Ministry of Finance, LIC, GIC and the four public sector general insurers, and it shifted to Pune in 1990. It runs management development programmes for insurance executives, a post graduate diploma in management with an insurance focus and applied research for the industry. Senior officers of public sector insurers and regulators routinely train here. The pairing to remember is established 1980 at Mumbai, shifted 1990 to Pune.
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Institute of Insurance and Risk Management
A dedicated institution for education in insurance and actuarial science, promoted by IRDAI at Hyderabad.It was set up with the specific aim of building the workforce the entire insurance sector needs, and it offers programmes through regular and distance modes. It works closely with the regulator, which is also headquartered at Hyderabad, and collaborates with international insurance education bodies. Its focus on risk management alongside insurance distinguishes it from the older Insurance Institute of India. In institution based questions, remember the trio: IRDAI at Hyderabad, IIRM at Hyderabad, NIA at Pune.
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Indian Institute of Insurance Surveyors and Loss Assessors
The professional body of licensed surveyors and loss assessors, established on 4 October 2005 at Hyderabad.It was incorporated under Section 25 of the Companies Act, 1956, which corresponds to Section 8 of the Companies Act, 2013. A surveyor and loss assessor is an insurance intermediary licensed by IRDAI to investigate, manage, quantify, validate and deal with losses arising from any contingency, on behalf of the insurer or the insured, and to report thereon. Survey is compulsory for general insurance claims above a prescribed threshold, so the surveyor's report is the working document on which most non life claims are settled. Specifying the code of conduct for surveyors and loss assessors is an express function of IRDAI under Section 14.
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Insurance Brokers Association of India
The representative body of licensed insurance brokers in India, headquartered at Mumbai.It was incorporated as a company under Section 25 of the Companies Act, 1956 on 25 July 2001, shortly after the market opened to private participation. The broker concept itself was introduced by IRDAI through the Insurance Brokers Regulations, 2002, amended in 2013 and 2018, which define the functions and code of conduct of a broker. Unlike an agent, a broker acts for the client and may place business with any insurer, which is why broker remuneration and conflict of interest are closely regulated. Direct brokers, reinsurance brokers and composite brokers are the three categories.
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Private sector insurers in India
The insurance companies formed after 2000, usually as joint ventures between Indian groups and foreign insurers.Well known life insurers include HDFC Life, ICICI Prudential Life, SBI Life, Max Life, Kotak Mahindra Life, Aditya Birla Sun Life, Bajaj Allianz Life and Tata AIA Life, and taglines such as Sar Utha Ke Jiyo for HDFC Life, Zimmedari Ka Humsafar for ICICI Prudential and With Us You Are Sure for SBI Life recur in objective papers. On the general side, Bajaj Allianz General is at Pune, ICICI Lombard, HDFC ERGO and Tata AIG are at Mumbai and Cholamandalam MS is at Chennai. Standalone health insurers such as Star Health, Niva Bupa, Care Health and ManipalCigna write only health business. With foreign investment now permitted up to 100 per cent, several of these joint ventures may see changes in shareholding, so treat ownership details as time sensitive.
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Insurance terminology, part 1: the policy and the contract
The vocabulary of the contract itself: who the parties are, what the documents do, and the statutory protections that attach with time.
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Policyholder
The person who proposes the policy, pays the premium and owns the contract, whether or not they are the life assured.In life insurance the policyholder and the life assured are often the same person but need not be, as when a company insures a key employee or a parent insures a child. Ownership carries rights that the life assured does not have: nominating a beneficiary, assigning the policy, taking a loan against it and surrendering it. This is why examiners ask who can exercise a particular right, and the answer is almost always the policyholder. In general insurance the policyholder is also the insured, since the insurable interest is in property or liability.
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Insured and insurer
The insured is the person or firm whose interest is protected; the insurer is the company that accepts the risk.The insured is specifically named in the contract, and more than one entity may be designated as insured, for instance a borrower and a financing bank on a fire policy. The insurer is the registered company that underwrites the risk, holds the reserves and pays the claim. In life insurance the word assured is used instead of insured, reflecting that the contract assures a certain event rather than indemnifies an uncertain one. The intermediary who arranges the contract is neither, which is the point of the distinction.
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Proposal form
The application document in which a prospective policyholder gives the insurer the information needed to price the risk.It is the foundation of the contract, because the answers given form the basis on which the insurer accepts or rejects the risk and sets the premium. Every material fact must be disclosed here, even if no specific question is asked, because the duty of utmost good faith runs beyond the printed questions. A misstatement in the proposal form is what insurers rely on when repudiating a claim for non disclosure. IRDAI requires the form to be in simple language and, in health insurance, to be accompanied by a customer information sheet.
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Policy document
The written contract evidencing insurance, containing the schedule, the operative clause, conditions and exclusions.The schedule carries the personal details, sum insured, period and premium, while the standard wording sets out what is covered and what is not. Endorsements attached later modify the contract, and in case of conflict the endorsement usually overrides the printed wording. The declaration section of a property or liability policy states the name and address of the holder, the property insured, its location, the policy period and the premium. Policyholders should read the exclusions first, because that is where most claim disputes originate.
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Nomination
The naming of a person to receive the policy money on the death of the life assured.It is governed by Section 39 of the Insurance Act, 1938 and can be made at the time of proposal or later by endorsement. A nominee is ordinarily only a receiver of the money who holds it for the legal heirs, but a beneficial nominee, that is a parent, spouse or child named as such, takes the money beneficially in their own right. Nomination is automatically cancelled by an assignment of the policy, except an assignment to the insurer for a loan. A minor nominee requires an appointee to receive the money until majority.
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Assignment
The legal transfer of the rights and title in a policy from the policyholder to another person.It is governed by Section 38 of the Insurance Act, 1938 and may be made by endorsement on the policy document or by a separate deed, with notice to the insurer. An absolute assignment transfers all rights permanently, as when a policy is gifted, while a conditional assignment transfers them for a purpose and reverts them once that purpose is served, as when a policy is assigned to a bank as loan security. The party transferring is the assignor and the party receiving is the assignee. Assignment overrides an existing nomination, a point examiners test with short scenario questions.
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Free look period
The window after receiving the policy document during which the buyer may cancel and get a refund.IRDAI standardised it at 30 days from the date of receipt of the policy document for all life and health policies, extending what used to be 15 days for physical sales. On cancellation the insurer refunds the premium after deducting stamp duty, the proportionate risk premium for the days covered and any medical examination expenses. It is the main protection against mis selling, because it lets a buyer walk away after actually reading what was sold. For health insurance the 2024 master circular requires cancellation to be processed within seven days.
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Grace period
The additional time allowed after the premium due date during which an overdue premium may be paid without penalty.It is usually 15 days for monthly premium modes and 30 days for quarterly, half yearly and yearly modes in life insurance. The policy stays in force throughout the grace period, so a death claim during it is payable subject to deduction of the unpaid premium. In health insurance the 2024 master circular requires coverage to continue during the grace period, which protects continuity of waiting period credits. If the premium is still unpaid when the grace period ends, the policy lapses.
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Lapsed policy
A policy that has ceased to be in force because a premium was not paid by the end of the grace period.All benefits stop from that moment, so a death claim on a lapsed policy is not payable unless the policy had already acquired paid up value. The lapse ratio, that is the proportion of policies not renewed compared with those in force at the start of the period, is a key measure of an insurer's quality of sale. High early lapses usually indicate mis selling rather than customer preference, which is why IRDAI tracks persistency closely. A lapsed policy can normally be revived within a stated revival period on payment of arrears with interest and satisfactory evidence of health.
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Reinstatement
The process of restoring a lapsed policy to full force on payment of arrears and proof of continued insurability.The insurer may ask for a fresh declaration of good health or a medical examination, because the risk has to be re underwritten after the break. Interest is charged on the overdue premiums, and the insurer may impose new terms if health has deteriorated. Reinstatement is usually allowed within a fixed revival period, commonly five years from the first unpaid premium in life insurance. Section 45 protection restarts from the date of revival for the revived portion, which is an advanced point worth remembering.
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Sum assured and sum insured
The sum assured is the fixed amount payable in life insurance; the sum insured is the maximum payable in general insurance.In life insurance the full sum assured is paid on the insured event regardless of any measurement of loss, which is why the word assured is used. In general insurance the sum insured is only a ceiling, and the actual payment is whatever the loss turns out to be, subject to indemnity. Setting the sum insured too low in property insurance triggers the average clause and reduces every claim proportionately. This is the single most useful pair of words to keep straight when reading any policy document.
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Rider
An optional add on that extends or modifies the cover of a base policy for an extra premium.Common life riders are accidental death benefit, accidental total and permanent disability, critical illness, waiver of premium and hospital cash. IRDAI caps the total premium of health related riders at a percentage of the base premium, so riders cannot quietly become the main product. Riders are cheaper than standalone policies because they share the base policy's administration, but their cover usually ends when the base policy ends. In general insurance the equivalent term is an add on cover, such as zero depreciation in motor.
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Waiver of premium
A benefit under which the insurer pays the future premiums itself on the happening of a stated event.The trigger is usually the death of the proposer, permanent disability or the diagnosis of a critical illness, depending on the rider chosen. The policy continues in full force, so the maturity benefit and the death cover survive even though the family has stopped paying. It is the defining feature of a child plan, where the parent is the proposer and the child is the beneficiary. Without it, the death of an earning parent would end the very savings plan created for the child.
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Section 45 of the Insurance Act, 1938
The provision that makes a life insurance policy incontestable after three years from a stated starting point.No life policy may be called in question on any ground whatsoever after three years from the date of issue, the date of commencement of risk, the date of revival or the date of the rider, whichever is later. Within the three year window the insurer may repudiate for fraud or misstatement, but only after communicating the grounds in writing to the insured or the legal representative. Where the ground is misstatement rather than fraud, the premiums collected must be refunded within 90 days. The health insurance parallel is the 60 month moratorium introduced by IRDAI's 2024 master circular.
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Void and voidable contract
A void contract has no legal effect from the outset; a voidable contract is valid until the aggrieved party sets it aside.An insurance contract without insurable interest is void, because it is a wager and the law will not enforce it at all. A contract obtained by non disclosure or misrepresentation of a material fact is voidable at the option of the insurer, so it stands until the insurer chooses to avoid it. The difference decides who must act: nobody can enforce a void contract, whereas a voidable one binds the insurer unless it takes the step of avoiding. Section 45 limits how long the insurer retains that option in life insurance.
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Warranty and representation
A warranty is a promise that must be strictly complied with; a representation is a statement that must be substantially true.Breach of a warranty entitles the insurer to avoid liability even if the breach did not cause the loss, whereas a representation only matters if it was material and untrue. An affirmative warranty is a statement by the insured about facts existing at the time the policy is issued, while a promissory warranty is an undertaking about future conduct, such as keeping a fire alarm in working order. Warranties are strictly construed against the insurer because they are harsh in effect. Marine insurance retains the strongest form of warranty law, following the English tradition.
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Estoppel
A legal rule preventing a party from going back on a position that the other party has reasonably relied on.An insurer that has repeatedly accepted late premium payments may be estopped from cancelling the policy for late payment, because the insured was led to believe the practice was acceptable. It also applies where an agent's assurance about cover is acted upon by the customer and the insurer allows the impression to continue. Estoppel is a defensive doctrine, so it prevents an insurer from denying liability rather than creating cover that never existed. Waiver, the voluntary surrender of a known right, is the related doctrine usually studied alongside it.
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Insurance repository
A company licensed by IRDAI to hold insurance policies in electronic form on behalf of insurers.Policies held in an electronic insurance account, or e insurance account, can be viewed, serviced and claimed without handling paper, and an individual may hold only one such account. Repositories cannot sell or solicit insurance, they only maintain the service record of policies. An Approved Person is a point of sale appointed by a repository to extend its services to customers. The four active repositories are NSDL Database Management, CAMS Repository Services, Karvy Insurance Repository and Central Insurance Repository, and this list is worth checking before an exam since registrations change.
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Insurance terminology, part 3: reinsurance, capital and market metrics
How insurers insure themselves, how their capital adequacy is measured and the market wide numbers examiners expect you to quote.
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Reinsurance
An arrangement in which one insurer transfers part of a risk it has accepted to another insurer for a premium.It is insurance for insurance companies, and it lets a small insurer accept a large single risk such as a refinery or a satellite. The company transferring the risk is the ceding company or cedant and the company accepting it is the reinsurer. The Insurance Laws (Amendment) Act, 2015 defined reinsurance as the insurance of part of one insurer's risk by another for a mutually acceptable premium, which deliberately rules out ceding 100 per cent and acting as a mere front. General Insurance Corporation of India is the national reinsurer and enjoys a right of first refusal on Indian cessions.
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Facultative and treaty reinsurance
Facultative reinsurance is negotiated risk by risk; treaty reinsurance covers an agreed class of risks automatically.In facultative business the reinsurer can accept or reject each individual risk offered, which suits large or unusual exposures such as an aviation hull. In treaty business the cedant must cede and the reinsurer must accept every risk falling within the treaty terms, giving the insurer automatic capacity. Treaties are further split into proportional forms, where premium and losses are shared in a fixed ratio, such as quota share and surplus, and non proportional forms, where the reinsurer pays above a stated retention, such as excess of loss and stop loss. Catastrophe excess of loss is the form Indian insurers rely on for cyclone and flood seasons.
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Retention limit
The maximum amount of risk an insurer keeps on its own account before ceding the excess to a reinsurer.It is fixed with reference to the insurer's capital, its risk appetite and the volatility of the class, and it is reviewed annually as part of the reinsurance programme filed with IRDAI. The amount ceded is called the cession, and Indian insurers must first offer a prescribed obligatory cession to General Insurance Corporation of India. Retaining too little wastes premium and profit, while retaining too much exposes capital to a single large loss. In health insurance the word retention is also used loosely for the amount an insured bears, so read the context.
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Retrocession
The reinsurance of a reinsurer, where the reinsurer passes part of its accepted risk to another reinsurer.It spreads catastrophe exposure across the global market, so that a single cyclone does not concentrate on one balance sheet. The party ceding is the retrocedant and the party accepting is the retrocessionaire. GIC Re South Africa was set up in Johannesburg with a mandate to write inward reinsurance and retrocession business from sub Saharan Africa, and it began underwriting on 1 January 2015. Excessive retrocession chains can create spiral risk, where a loss returns to the original reinsurer through several hands.
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Coinsurance
An arrangement in which two or more insurers share a single large risk directly with the policyholder, each for a stated share.One insurer acts as the leader, issues the policy and handles the claim, while each coinsurer is liable only for its own percentage of premium and loss. It differs from reinsurance, where the policyholder has a contract with one insurer only and the reinsurance is invisible to them. It also differs from the health insurance use of the word coinsurance, which in that context means the percentage share of a claim the patient bears after the deductible. Large industrial and infrastructure risks in India are commonly written on a coinsurance basis.
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Actuary
A qualified professional who values financial risk and uncertainty using mathematical, statistical and financial techniques.In insurance, actuaries design and price products, value liabilities and reserves, manage asset liability matching and carry out the annual valuation that determines bonuses. They also work in pensions, employee benefits, social security, health benefits and Government schemes. The profession is regulated in India by the Institute of Actuaries of India, a statutory body under the Actuaries Act, 2006. Actuarial science is the discipline itself, that is the application of mathematical and statistical methods to assess risk.
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Appointed actuary
The actuary an insurer must appoint, with IRDAI approval, to certify its reserves, solvency and product pricing.The role is created by regulation and carries a duty to the policyholders and the regulator, not only to the employer, so the appointed actuary must report material concerns directly to IRDAI. Duties include certifying the actuarial report and abstract, the solvency position, the fairness of premium rates and the adequacy of reserves including incurred but not reported reserves. Only a Fellow of the Institute of Actuaries of India with prescribed experience may hold the post. The position is the actuarial equivalent of a statutory auditor in its independence.
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Net owned fund
The aggregate of paid up equity capital, free reserves, share premium and capital reserves from the sale of assets.It is the measure of an entity's own capital used to test whether it is substantial enough to accept insurance or reinsurance risk in India. The Sabka Bima Sabki Raksha Act, 2025 reduced the net owned fund requirement for foreign entities carrying on reinsurance business through branches from Rs 5,000 crore to Rs 1,000 crore. Lowering the threshold was intended to attract more foreign reinsurance capacity into India and reduce dependence on cross border placements. The same concept is used by the Reserve Bank of India for non banking financial companies, so the phrase will already be familiar.
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Risk based capital
A capital framework that ties an insurer's required capital to the specific risks in its own portfolio.The present Indian regime is factor based, requiring a solvency ratio of at least 1.5 calculated on prescribed factors applied to reserves and sums at risk. A risk based approach instead measures underwriting, market, credit and operational risk separately, so an insurer holding volatile assets or writing volatile lines must hold more capital. IRDAI has been moving the industry towards this framework alongside the adoption of Ind AS 117, the Indian version of the international insurance contracts accounting standard. The direction of travel matches Solvency II in Europe and the Basel framework in banking.
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Insurance penetration
The ratio of total insurance premium underwritten in a year to gross domestic product, expressed as a percentage.In 2024-25 India's overall penetration was 3.7 per cent, made up of 2.7 per cent for life and 1.0 per cent for non life, against a global average of about 7.3 per cent. Life penetration has fallen for three consecutive years from a pandemic peak of 4.2 per cent in 2021-22, even though life premium grew to about Rs 8.86 lakh crore in 2024-25. India remained the tenth largest insurance market in the world with a share of about 1.8 per cent of global premium. Penetration measures depth relative to the size of the economy, so a rising figure means insurance is growing faster than gross domestic product.
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Insurance density
The ratio of total insurance premium to population, that is premium per capita, usually stated in United States dollars.India's density rose from USD 95 in 2023-24 to USD 97 in 2024-25, with life at USD 72 and non life at USD 25, against a global figure of roughly USD 943. Density has risen steadily since 2016-17 even in years when penetration fell, because premium grew faster than population but slower than gross domestic product. Penetration and density are the twin indicators of how developed an insurance market is, and both appear in the IRDAI annual report and in the Swiss Re Sigma world insurance report. Quote them as a pair, because a question on one usually expects awareness of the other.
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Bancassurance
The distribution of insurance products through banks under a tie up between the bank and the insurer.The bank acts as a corporate agent, using its branch network and customer data to sell the tied insurer's products, and it earns commission for doing so. It is a low cost channel because the infrastructure already exists, and it has been the main growth engine for private life insurers in India. IRDAI's open architecture rules allow a corporate agent to tie up with a limited number of insurers in each of life, general and health, so a bank need not sell only one company's products. Mis selling of investment linked products at bank counters is the standing regulatory concern with this channel.
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Human life value
The present value of the future income a person would earn, used to decide how much life cover they need.It is calculated by taking annual income net of personal expenses and taxes, projecting it to retirement and discounting it to today, and it is the technically correct way to answer the question of how much cover is enough. A simpler market rule of thumb is ten to fifteen times annual income plus outstanding loans minus existing assets. The concept treats a person as an income generating asset, which is exactly how life insurance conceives of the subject matter insured. Underwriters use it in reverse as a financial underwriting limit, refusing cover far above a proposer's demonstrable economic value.
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Government insurance and social security schemes
The mass market schemes whose premiums, sums assured, age bands and launch dates are directly examinable, updated to the current position.
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Pradhan Mantri Jeevan Jyoti Bima Yojana
A one year renewable term life cover of Rs 2 lakh for savings bank account holders, at a premium of Rs 436 a year.It was launched on 9 May 2015 and the cover period runs from 1 June of each year to 31 May of the next. Entry is open to those aged 18 to 50 with a savings bank account and auto debit consent, and cover continues on annual renewal up to age 55. Death from any cause is covered, but there is a lien period of 30 days from enrolment during which only accidental death is covered. Pro rata premiums apply for mid year enrolment, at Rs 342, Rs 228 and Rs 114 for the September, December and March quarters respectively.
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Pradhan Mantri Suraksha Bima Yojana
A one year renewable accidental death and disability cover of Rs 2 lakh at a premium of Rs 20 a year.It was launched on 9 May 2015 alongside PMJJBY and is open to savings bank account holders aged 18 to 70. It pays Rs 2 lakh for accidental death or total permanent disability and Rs 1 lakh for partial permanent disability. The premium was revised from Rs 12 to Rs 20 a year with effect from 1 June 2022, and PMJJBY was revised from Rs 330 to Rs 436 at the same time. Enrolments under the scheme run into tens of crores, making it one of the largest personal accident pools in the world.
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Atal Pension Yojana
A guaranteed pension scheme for unorganised sector workers paying Rs 1,000 to Rs 5,000 a month from age 60.Launched in 2015 as a replacement for the Swavalamban Yojana, it is open to savings bank account holders aged 18 to 40, so the minimum contribution period is 20 years. The pension is guaranteed by the Government, and on the subscriber's death the same pension goes to the spouse and the accumulated corpus to the nominee. Funds are managed by pension fund managers appointed by PFRDA, not by IRDAI, which is why the scheme sits outside the insurance regulator's ambit. From October 2022 income tax payers have been barred from joining.
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Pradhan Mantri Fasal Bima Yojana
The national crop insurance scheme covering notified crops against non preventable natural risks at a subsidised premium.It was introduced on 13 January 2016 and operates on an area approach, with defined areas notified for each crop and widespread calamities assessed at that level. The farmer pays a maximum of 2 per cent of the sum insured for kharif food and oilseed crops, 1.5 per cent for rabi food and oilseed crops and 5 per cent for annual commercial and horticultural crops, with the balance of the actuarial premium shared by the Centre and the States. It is voluntary for all farmers following the 2020 revamp, having earlier been compulsory for loanee farmers. Agriculture Insurance Company of India and empanelled private insurers implement it, and the Government approved its continuation with a large multi year outlay.
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Ayushman Bharat PM-JAY
The centrally sponsored health assurance scheme giving Rs 5 lakh of family cover a year for secondary and tertiary hospitalisation.Launched on 23 September 2018 and administered by the National Health Authority, it provides cashless and paperless treatment at empanelled public and private hospitals. Premium is shared between the Centre and the States in a 60 to 40 ratio, and 90 to 10 for the north eastern and three Himalayan States, while Union Territories without a legislature are funded fully by the Centre. It covers around two thousand medical procedures with no waiting period for pre existing conditions and no cap on family size. It replaced the Rashtriya Swasthya Bima Yojana, which had offered only Rs 30,000 of floater cover for a family of five below the poverty line.
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Ayushman Vay Vandana Card
The extension of Ayushman Bharat PM-JAY that covers every citizen aged 70 years and above irrespective of income.It was launched on 29 October 2024 and gives Rs 5 lakh of annual cover, which is a separate top up for senior citizens in families already covered under PM-JAY. Because eligibility is based only on age as recorded in Aadhaar, it is the first universal element in what had been a targeted scheme. Enrolment crossed ten lakh senior citizens within three weeks of launch. A parliamentary standing committee has recommended lowering the age threshold to 60 years, a point worth noting in a discussion answer.
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Pradhan Mantri Vaya Vandana Yojana
A pension scheme for senior citizens aged 60 and above, operated exclusively by the Life Insurance Corporation of India.Launched on 4 May 2017, it provides an assured pension for a policy term of ten years, with pension payable monthly, quarterly, half yearly or yearly as chosen. The maximum purchase price is Rs 15 lakh per senior citizen, and the scheme returns the purchase price to the nominee at the end of the term or on death. A loan facility is available after three years up to 75 per cent of the purchase price, and premature exit for critical illness of self or spouse returns 98 per cent of the purchase price. The assured rate of return has been revised in successive extensions, so always verify the current rate before quoting it.
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Jan Dhan insurance cover
The accident and life cover attached to a basic savings account opened under Pradhan Mantri Jan Dhan Yojana.The scheme was launched on 28 August 2014 to bring every household into the banking system, and accounts can be opened with zero balance at any bank branch or business correspondent outlet. RuPay debit card holders receive accidental insurance cover, raised to Rs 2 lakh for cards issued on or after 28 August 2018 and Rs 1 lakh for earlier cards. A life cover of Rs 30,000 was available to accounts opened between 15 August 2014 and 31 January 2015. It is the clearest example of insurance being delivered as a by product of financial inclusion.
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Restructured Weather Based Crop Insurance Scheme
A crop insurance scheme that pays on deviations in weather parameters rather than on measured crop loss.Payouts are triggered by an index built from rainfall, temperature, humidity or wind speed recorded at a reference weather station, so no crop cutting experiment is needed. This makes settlement much faster than under a yield based scheme, but it introduces basis risk, that is the gap between the index outcome and the farmer's actual loss. It runs alongside Pradhan Mantri Fasal Bima Yojana with the same premium sharing structure and is often used for horticultural crops. Understanding basis risk is the key analytical point examiners look for here.
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Rashtriya Swasthya Bima Yojana
The earlier national health insurance scheme for below poverty line families, offering Rs 30,000 of floater hospitalisation cover.It was launched in 2008 under the Ministry of Labour and Employment and covered a family of five on a floater basis using a smart card at empanelled hospitals. Its limited sum insured and patchy hospital network made it inadequate against the real cost of secondary and tertiary care. Ayushman Bharat PM-JAY subsumed it in 2018 and raised the cover to Rs 5 lakh with no cap on family size. It is worth knowing as the reference point that shows how far public health assurance in India has moved in a decade.
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Ten question self test
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Which company was the first life insurance company established on Indian soil?
The Oriental Life Insurance Company was set up at Calcutta in 1818 and failed in 1834. The Bombay Mutual of 1870 was the first Indian owned life insurer.
Under Section 4 of the IRDAI Act, 1999, the Authority has a chairperson plus how many whole time and part time members?
Not more than five whole time members and not more than four part time members, making ten members in all, each appointed by the Government of India.
What is the present ceiling on foreign direct investment in an Indian insurance company?
The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 raised it from 74 per cent to 100 per cent under the automatic route, with 20 per cent remaining the cap for LIC.
What is the maximum compensation the Insurance Ombudsman can award?
The ceiling is Rs 50 lakh, raised from the earlier Rs 30 lakh. Disputes above this amount must go to a consumer commission or a civil court.
Under IRDAI's 2024 master circular, after how long can a health claim no longer be repudiated for non disclosure?
The moratorium was reduced from eight years to 60 months of continuous coverage. Only proven fraud remains open to challenge after that.
Which principle allows an insurer that has paid a claim to sue the party responsible for the loss?
Subrogation transfers the insured's rights against the wrongdoer to the insurer after settlement. Both subrogation and contribution flow from the principle of indemnity.
India's overall insurance penetration in 2024-25 was approximately:
Overall penetration was 3.7 per cent of gross domestic product, made up of 2.7 per cent life and 1.0 per cent non life. The global average is about 7.3 per cent.
The annual premium payable under Pradhan Mantri Jeevan Jyoti Bima Yojana is:
It was revised from Rs 330 to Rs 436 with effect from 1 June 2022. The Rs 20 figure belongs to Pradhan Mantri Suraksha Bima Yojana.
The General Insurance Corporation of India was incorporated on 22 November 1972 and commenced business on:
GIBNA nationalised general insurance with effect from 1 January 1973, the date GIC began business as the holding company of the four subsidiaries.
Which of the following was NOT introduced by the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025?
The composite licence was in the 2024 draft but was dropped from the final Act, which retained the existing class based registration framework.
Frequently asked questions
What is the current FDI limit in Indian insurance companies?
Foreign direct investment of up to 100 per cent is permitted in Indian insurance companies and intermediaries under the automatic route. The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 raised the cap from 74 per cent, and the Finance Ministry notified the change through the Foreign Exchange Management (Non debt Instruments) Second Amendment Rules, 2026. Foreign holding in the Life Insurance Corporation of India remains capped at 20 per cent.
How many Insurance Ombudsman offices are there and what can they award?
There are 17 Insurance Ombudsman centres across India, administered by the Council for Insurance Ombudsmen under the Insurance Ombudsman Rules, 2017. An Ombudsman can entertain a complaint where the compensation sought does not exceed Rs 50 lakh, must pass an award within three months of receiving all requirements, and the award binds the insurer but not the policyholder.
Is goods and services tax payable on insurance premiums in India?
Individual life insurance and individual health insurance premiums, including family floater and senior citizen policies, are exempt from goods and services tax with effect from 22 September 2025, following the decision of the 56th GST Council meeting held on 3 September 2025. The earlier rate was 18 per cent. Group life and group health policies continue to attract 18 per cent.
What is the difference between insurance penetration and insurance density?
Penetration is premium as a percentage of gross domestic product, so it measures depth relative to the size of the economy. Density is premium per head of population, usually stated in United States dollars. In 2024-25 India recorded penetration of 3.7 per cent and density of USD 97, against global figures of about 7.3 per cent and USD 943.
What is the minimum capital needed to start an insurance company in India?
The paid up equity capital requirement is Rs 100 crore for a life insurer, a general insurer or a standalone health insurer, and Rs 200 crore for a reinsurer. A foreign reinsurance branch must maintain a net owned fund, which the 2025 amendment reduced from Rs 5,000 crore to Rs 1,000 crore. The same amendment removed the Rs 100 crore requirement from the definition of an insurance co operative society.
What is the Bima Trinity?
It is IRDAI's three part reform package for the Insurance for All by 2047 goal. Bima Sugam is a digital public marketplace run by the Bima Sugam India Federation, Bima Vistaar is a bundled rural cover combining life, health, personal accident and property, and Bima Vahak is a women centred last mile distribution network that will sell Bima Vistaar through the Sugam platform.
How many insurers are registered in India?
As on 31 March 2025 there were 74 registered insurers and reinsurers: 26 life insurers, 25 general insurers, 8 standalone health insurers, 2 specialised insurers and 13 reinsurers and foreign reinsurance branches. The two specialised insurers are the Agriculture Insurance Company of India and ECGC Limited.
