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Glossary

Personal Loan

  • Amortization: The repayment of a Personal loan or debt in regular installments. Each installment is split into two components- one of principal repayment and the other of interest.
  • Credit History: A record of an individual's credit payment and debt history, a credit history helps a lender to determine the credit worthiness of an individual who has applied for credit.
  • Deduction Against Salary (DAS): An arrangement where a salaried employee allows to the employer to deduct the personal loan installment from the salary and pay it to the lender. This is done with the mutual consent of the employer and the lender.
  • EMI: EMI stands for equated monthly installments it includes principal amount and Interest amount to be paid within specified or calculated months.
  • Interest Rate: The percentage at which interest is charged on a loan, or paid out on savings the rate will vary according to the type of loan or savings plan and may be linked to a base rate.
  • Lending Rate: The interest charged by the financier on the amount financed.
  • Loan Agreement: A written contract between a lender and a borrower that specifies the rights and obligations of each party regarding a specified loan.
  • Loan Tenure: The loan term just simply mean the duration of time that you take to completely repay the loan.
  • Monthly Repayment: This is the amount you agree to pay back each month including the initial Personal loan amount plus interest. The monthly Personal loan repayments will come out of your bank account each month by Direct Debit.
  • Post Dated Cheques (PDC): Cheques issued in favor of the financier for repayment of Personal loan.
  • Pre-payment Penalty: A penalty fee charged to a borrower who pays off a loan before the term of the Personal loan is complete.
  • Principal: The amount of money that is borrowed, excluding the interest charge, that remains unpaid. Principal also may be part of a monthly payment that reduces the outstanding balance of a loan.
  • Processing Charges: Service charge collected by the lender which is collected upfront before the loan is paid out.
  • Statutory Charges: Charges like stamp duty, sales tax, etc., that are imposed by the government.
  • Term: The length of time a Personal loan is repaid over, usually specified in months.
  • Unsecured Personal Loan: A fixed interest rate personal loan that requires no collateral or security.

Home Loan

  • Amortization: The repayment of a Home loan or debt in regular installments. Each installment is split into two components- one of principal repayment and the other of interest.
  • Co-applicant: A co-applicant is one who applies along with the borrower for a Home loan. A borrower has the option of having a co-applicant to a Home loan along with himself.
  • Collateral (or security): Personal property pledged as a guarantee that you will repay your Home loan. Property such as houses, cars, savings accounts, bonds, or certificates of deposit are commonly used as collateral.
  • Credit History: A record of an individual's credit payment and debt history, a credit history helps a lender to determine the credit worthiness of an individual who has applied for credit.
  • Credit report: A report about an individual's payment history that is supplied by a credit bureau.
  • Deduction Against Salary (DAS): An arrangement where a salaried employee allows to the employer to deduct the Home loan installment from the salary and pay it to the lender. This is done with the mutual consent of the employer and the lender.
  • Down Payment: Housing Finance Companies/Banks normally give loans up to 80-85% of the value of the property. The balance would have to be paid by the buyer, as a payment before he draws on the Home loan amount. Down payment is known as “Margin Money”.
  • EMI: EMI stands for equated monthly installments it includes principal amount and Interest amount to be paid within specified or calculated months.
  • Fixed Rate: In a fixed rate loan the interest rate on the Home loan charged by the bank is constant over the tenure of the loan.
  • Floating rate: In a floating rate the interest rate charged by the lender keeps changing with respect to the rates in the market over the tenure of the Home loan.
  • Guarantee: An agreement by which a person (guarantor) promises to meet the obligations of another person (Borrower) on Default. Lenders in some circumstances require a Guarantee of the Borrower's obligations under a Home Loan Agreement.
  • Interest Rate: The percentage at which interest is charged on a loan, or paid out on savings the rate will vary according to the type of loan or savings plan and may be linked to a base rate.
  • Lending Rate: The interest charged by the financier on the amount financed.
  • Loan Agreement: A written contract between a lender and a borrower that specifies the rights and obligations of each party regarding a specified loan.
  • Loan Tenure: The loan term just simply mean the duration of time that you take to completely repay the Home loan.
  • Loan to Value (LTV) and Loan to Cost (LTC): They are terms used by various housing finance institutions to signify the Home loan amount that a person is eligible for on the total value as well as the total cost of the property. There is a limit on the maximum loan amount that a person can get for a property irrespective of the home loan eligibility. The balance amount for purchase of the property is to be funded by the customer from his own sources.
  • Market Value: This is the value of the property as per the prevailing market value.
  • Monthly Repayment: This is the amount you agree to pay back each month including the initial Home loan amount plus interest. The monthly Home loan repayments will come out of your bank account each month by Direct Debit.
  • Post Dated Cheques(PDC): PDC Cheques issued in favor of the financier for repayment of Home loan. The customer usually gives cheques with the specified EMI amount for a period in the future. The repayment can be either made through PDC cheques or through an electronic clearing (ECS) if you maintain a savings/current account with the same bank from whom you have taken the home loan.
  • Pre payment Charges: Pre payment charges is charges that you incur when you pay back the loan before the completion of the tenure.
  • Pre-payment Penalty: A penalty fee charged to a borrower who pays off a Home loan before the term of the Home loan is complete.
  • Principal: The amount of money that is borrowed, excluding the interest charge, that remains unpaid. Principal also may be part of a monthly payment that reduces the outstanding balance of a loan
  • Processing Charges: Service charge collected by the lender, it is collected upfront before the Home loan is paid out.
  • Sale Agreement: Sale Agreement is an agreement which is entered in between the parties dealing with the property and which creates a right to obtain a sale deed mentioning the property. Generally it precedes a sale deed and normally it fixes a time for completion, payment of earnest money or part payment of purchase consideration.
  • Sale Deed: This is an instrument in writing which transfers the ownership of the property/properties in exchange for a price paid or considered. This document is required to be registered compulsorily.
  • Sanction Letter: This is the letter which communicates the sanctioned terms and conditions once the Home loan is approved.
  • Statutory Charges: Charges like stamp duty, sales tax, etc., that are imposed by the government.
  • Stamp Duty: It is the duty/fee payable on the different instruments / documents as per the prescribed rate. The adequacy of stamp duty should be ensured to make a document valid and enforceable.
  • Term: The length of time a loan is repaid over, usually specified in months.

Credit cards

  • Affinity card: A Credit card that offers rewards that benefit groups and organizations.
  • Annual fee: A yearly fee that may be charged for having a credit card. Some card issuers assess the fee in monthly installments.
  • Annual percentage rate (APR): For credit cards, the APR is the cost of credit expressed as a yearly interest rate. Each billing period (usually about a month), the company charges a fraction of the annual rate, called the periodic rate.
  • Application fee: A fee charged when you apply for a credit card.
  • Cash card: It is a prepaid card that can be used as a credit card for transactions wherever it is accepted. A cardholder can prepay it with any amount that is desired.
  • Credit card: A payment device that allows you to make a purchase when you don't have cash on hand. Your Credit card's terms and conditions and any additional features will be outlined in your credit card agreement.
  • Credit card number: It is a unique 16-digit number printed in front of a credit card.
  • Credit History: A record of an individual's credit payment and debt history, a credit history helps a lender to determine the credit worthiness of an individual who has applied for credit.
  • Credit limit: The maximum amount that may be borrowed on a credit card.
  • Credit report: A report about an individual's payment history that is supplied by a credit bureau.
  • Eligibility: Eligibility refers to the minimum age and income levels necessary to own a credit card. An individual normally needs to be at least 21 years of age and should have a minimum income.
  • Grace Period: The period between the date of the credit card billing statement and the date payment in full must be received before interest begins to accrue on new purchases.
  • Interest: Interest is the fee for borrowing money. Interest is listed on your credit card statement as Interest Charge.
  • Joining fee: A one-time fee charged by a credit card company to its customers at the time of joining. Thereafter, the company may charge an annual fee depending upon the Credit card you choose. Some companies do not charge any joining fees or annual fees on certain Credit cards.
  • Late payment fees: Late payment fees are levied in the event of any delay in the repayment of the outstanding amount on your credit card after the interest-free period is over.
  • Outstanding Balance: The amount you owe on your credit card. This is the balance used to calculate payments and on which interest is charged.
  • Reward Cards: Some credit card companies reward their cardholders/customers by crediting points based on their expenditure through the Credit card. These reward points can usually be exchanged for cash or other privileges which the customers might be entitled to under the credit card (e.g., air tickets, movie tickets, cash back facilities, etc.).
  • Transaction date: The actual date when a transaction happened using your credit card.

Balance Transfer

  • Amortization: The repayment of a Home loan or debt in regular installments. Each installment is split into two components- one of principal repayment and the other of interest.
  • Balance transfer loan: Balance Transfer loans help you pay off an existing home loan with a higher interest rate, and avail of a loan with a lower rate of interest.
  • Co-applicant: A co-applicant is one who applies along with the borrower for a Home loan. A borrower has the option of having a co-applicant to a Home loan along with himself.
  • Credit History: A record of an individual's credit payment and debt history, a credit history helps a lender to determine the credit worthiness of an individual who has applied for credit.
  • Credit report: A report about an individual's payment history that is supplied by a credit bureau.
  • Deduction Against Salary (DAS): An arrangement where a salaried employee allows to the employer to deduct the personal loan installment from the salary and pay it to the lender. This is done with the mutual consent of the employer and the lender.
  • Down Payment: Housing Finance Companies/Banks normally give loans up to 80-85% of the value of the property. The balance would have to be paid by the buyer, as a payment before he draws on the Home loan amount. Down payment is known as “Margin Money”.
  • Loan to Value (LTV) and Loan to Cost (LCR): They are terms used by various housing finance institutions to signify the loan amount that a person is eligible for on the total value as well as the total cost of the property. There is a limit on the maximum Home loan amount that a person can get for a property irrespective of the home loan eligibility. The balance amount for purchase of the property is to be funded by the customer from his own sources.
  • Market Value: This is the value of the property as per the prevailing market value.
  • Monthly Repayment: This is the amount you agree to pay back each month including the initial Home loan amount plus interest. The monthly loan repayments will come out of your bank account each month by Direct Debit.

Education Loan

  • Accrued Interest: The amount of interest that accumulates on an unpaid Education loan over time.
  • Collateral: Collateral are assets like immovable property, pledged to secure an Education loan. If the borrower defaults on the loan, the lender can seize the collateral.
  • Cost of attendance: The total estimated amount it should cost the student to attend Columbia University. Also known as the budget, this amount may include tuition and fees, room, board, allowances for books, supplies, transportation, personal and incidental expenses.
  • Co-signer/Co-Borrower: A person who signs a credit agreement besides the borrower and is legally obligated to take responsibility for Education loan repayment if the borrower does not make payments.
  • Credit rating: An evaluation of the likelihood of the student borrower to default on a Education loan. Borrowers who make all their payments on time are considered good credit risks. Borrowers who are frequently delinquent in making their payments are considered bad credit risks.
  • Deferment: The postponement of repaying a loan, under certain conditions.
  • Grace Period: The time period between a student's graduation (and termination) and the beginning of Education loan repayment. It usually lasts six to nine months.
  • Holiday Period: The period between the date of completion of the course and the beginning of actual Education loan repayment. For instance, if your course ends in March and you start repaying the loan from October, then the period of six months, i.e. from April to September, is your holiday period.
  • Promissory note: A legally binding contract between a lender and a borrower. The promissory note contains the terms and conditions of the Education loan, including how and when the loan must be repaid.
  • Repayment period (term): The time period in which a student must pay off his/her Education loan.
  • Scholarships: A financial aid award that does not have to be repaid. Scholarships are generally made based on an applicant meeting certain eligibility criteria.
  • Security: Security is some form of providing comfort to the lending institution against default or failure of repayment. It could be by way of collateral or guarantee.

Business Loan

  • Amortization: The repayment of a Business loan or debt in regular installments. Each installment is split into two components- one of principal repayment and the other of interest.
  • Business Loan :Businesses require an adequate amount of capital to fund startup expenses or pay for expansions. As such, companies take out business loans to gain the financial assistance they need. A business loan is debt that the company is obligated to repay according to the loan’s terms and conditions.
  • Capacity :Borrower’s ability to repay a debt.
  • Cash Flow : Money available from a business operations to satisfy cash needs. It is the primary source for monthly payments on a loan.
  • Collateral: Specific property, securities, or other assets pledged by a borrower to a lender as a backup source of loan repayment.
  • Credit History: A record of an individual's credit payment and debt history, a credit history helps a lender to determine the credit worthiness of an individual who has applied for credit.
  • Credit Rating: An individual’s worthiness for credit as determined by a credit reporting agency. In addition to the information these agencies provide, lenders use tax returns and other financial statements to determine your credit worthiness.
  • EMI:EMI stands for equated monthly installments it includes principal amount and Interest amount to be paid within specified or calculated months.
  • Financial Statement: Reports showing the financial condition of a business on a particular date or for a period of time (such as one year). Lenders review the Balance Sheets and Income Statements.
  • Guarantor:A guarantor has the same responsibilities as a co-signer. If the loan goes into default and is not paid by the signer(s) of the loan, the guarantor is responsible.
  • Goodwill:The difference between the value of the hard assets and the business selling price. Also called “blue sky.”
  • Interest Rate: The percentage at which interest is charged on a loan, or paid out on savings the rate will vary according to the type of loan or savings plan and may be linked to a base rate.
  • Loan Tenure: The loan term just simply mean the duration of time that you take to completely repay the loan.
  • Income Statement: Financial statement showing a business profit and loss over a period of time (usually a month or a year).
  • Loan Agreement:The document or contract of the parties that reflects the commitment
  • Limited Partnership :Partner that invests in a business and receives a share of the profits (or losses). A partner’s liability is limited by amount of his or her investment. A limited partner does not have any management authority in the operation of the business; the role is purely that of an investor.
  • Net Profit: Money left after all expenses have been paid. Used to pay loans and to grow the company.
  • Net Sales: Revenue or income from sales after returns and allowances are deducted.
  • Tangible Asset: Real property such as buildings and machinery.Trademarks, goodwill, or accounts receivable are not considered tangible assets
  • Working Capital:Difference between current assets and current liabilities.An indication of liquidity and the ability to meet current obligations.

Fixed Deposits

  • Bank deposits: Deposits that are collected from investors by banks for a specific time period are known as bank fixed deposits or bank term deposits. These form the main area of raising funds for banks.
  • Company Fixed Deposit: Company Fixed Deposit is the deposit placed by investors with companies for a fixed term carrying a prescribed rate of interest.
  • Compound Interest: The ability of a fixed deposit in India to generate interest, which is then reinvested in order to generate further earnings, is known as compound interest.
  • Deposits: It is a sum of money lodged in a bank for the purpose of earning interest. A deposit is repayable according to terms of acceptance.
  • Future Value: The original amount plus the compound interest thereon, stated as of a specific future date.
  • Interest payout: A process whereby the interest earned on the Fixed deposit is paid out to the investor at specified time intervals. This can be a quarter, six months or a year, depending upon the details specified in the deposit. The investor gets the cash in this situation.
  • Interest rate: This is the amount calculated as a specified percentage of the amount lent that is paid to the lender or the investor. This represents the rate of return for the person or entity lending the money and is a key figure that is considered in selecting a fixed deposit.
  • Know Your Customer (KYC): KYC norms were introduced by the RBI to ensure customer identification and help control financial frauds, identify money laundering & suspicious activities. To comply with this requirement, banks require the following documents for new depositors – photos, PAN card copy, identification proof and address proof.
  • Maturity: This is the time at which the amount in the fixed deposit has to be returned to the investor. The fixed deposit is given for a time period that is decided at the time of making the investment and at the expiry this has to be given back.
  • Nomination: Banks ask their account holders to make nominations which mean that they should nominate persons to whom the money lying in their accounts should go in the event of their death. Nomination can be made in account opening form itself or on a separate form indicating the name and address of the nominee. The account holders can change the nomination any time.
  • Principal: The original amount invested is called the principal amount.
  • Repayment: This is the action of giving the original amount that is invested back to the investor when the specified time period is over. The process of repayment will complete the entire fixed deposit cycle.
  • Simple Interest: Simple interest is calculated by multiplying the interest rate by the principal by the number of periods. It ignores the effect of compounding and is suitable for calculating interest on short term Fixed deposits.
  • Tax Deducted at Source (TDS): A method of payment where the tax applicable at a specific rate is cut from the amount of interest or other payment and then the net amount is paid to the person who has to receive the amount. The tax is then deposited with the government along with the permanent account number of the receiver.
  • Tax-saving fixed deposits: A special category of fixed deposits where the investor gets the benefit of a tax break when they invest a sum of money in the deposit. The maximum benefit is available up to an investment of Rs 1 lakh and there is a lock-in period of 5 years in the deposit.

Bonds

  • Annual Yield: Is the effective annual rate of return taking into account the effect of compounding interest. Its utility lies in its ability to standardize varying interest-rate arrangements into an annualized percentage number for comparison.
  • Bond: A bond is a debt instrument in which the issuer promises to pay to the bondholder principal and interest according to the terms and conditions of the bond.
  • Callable: If a bond can be called (redeemed) prior to maturity, the bond is said to be callable. If a bond cannot be called prior to maturity, it is said to be non-callable.
  • Call Risk: The cash flow risk resulting from the possibility that a callable bond will be redeemed before maturity. Callable bonds can be called by the company that issued them, meaning the bonds have to be redeemed by the bondholder, usually so that the issuer can issue new bonds at a lower interest rate. This forces the investor to reinvest the principal sooner than expected, usually at a lower interest rate.
  • Convertible bond: A bond with the option to convert into shares of common stock of the same issuer at a pre-established price.
  • Corporate bond: A bond issued by a corporation to raise money for capital expenditures, operations and acquisitions.
  • Credit Risk: The possibility that a bond issuer or other borrower will default and fail to pay the principal and interest when due. Credit risk plays a major part in setting the interest rate on a loan; the longer the term and the lower the credit rating of the borrower the higher the interest rate.
  • Currency Risk: The potential for losses arising from adverse moves in exchange rates.
  • Discount: A bond that is selling for less than the price it will mature at.
  • High-yield bond: Bonds issued by lower-rated corporations, sovereign countries and other entities rated BA or BB or below and offering a higher yield than more creditworthy securities; sometimes known as junk bonds.
  • Inflation Risk: The possibility that the value of assets or income will decrease as inflation shrinks the purchasing power of a currency. Inflation causes money to decrease in value at some rate, and does so whether the money is invested or not.
  • Interest rate Risk: The possibility of a reduction in the value of a security, especially a bond, resulting from a rise in interest rates. This risk can be reduced by diversifying the durations of the fixed-income investments that are held at a given time.
  • Liquidity Risk: The risk that investor may not be able to take or unwind a position at a particular time because of insufficient market volume or the absence of willing counter parties.
  • Market Risk: The possibility for an investor to experience losses due to factors that affect the overall performance of the financial markets. Market risk, also called "systematic risk," cannot be eliminated through diversification, though it can be hedged against. The risk that a major natural disaster will cause a decline in the market as a whole is an example of market risk. Other sources of market risk include recessions, political turmoil, changes in interest rates and terrorist attacks.
  • Maturity date: A maturity date is the date when the principal amount of a bond, note or other debt instrument is typically repaid to the investor along with the final interest payment.
  • Municipal bond: A bond issued by states, cities, counties and towns to fund public capital projects like roads and schools, as well as operating budgets. These bonds are typically exempt from federal taxation and, for investors who reside in the state where the bond is issued, from state and local taxes, too.
  • Non-callable bond: A feature of some bonds that stipulates the bond cannot be redeemed (called) before its maturity date.
  • Par value: An amount equal to the nominal or face value of a security.
  • TIPS: U.S. government securities designed to protect investors and the future value of their fixed-income investments from the adverse effects of inflation. Using the Consumer Price Index (CPI) as a guide, the value of the bond's principal is adjusted upward to keep pace with inflation.
  • Treasury bill: Non-interest bearing (zero-coupon) debt security issued by the U.S. government with a maturity of four, 13 or 26 weeks. Also called a T-bill.
  • Treasury bond: Long-term debt security issued by the U.S. government with a maturity of 10 to 30 years, paying a fixed interest rate semiannually.
  • Yield: The return earned on a bond, expressed as an annual percentage rate.
  • Yield to maturity (YTM): The overall interest rate earned by an investor who buys a bond at the market price and holds it until maturity. Mathematically, it is the discount rate at which the sum of all future cash flows (from coupons and principal repayment) equals the price of the bond.
  • Zero coupon bonds: A bond that has no coupon payments. It pays only a single cash flow at maturity.

Mutual Funds

  • Annualized return: The return a fund would have generated over a year on a compounded basis. This method is the best indicator to measure the performance of a fund.
  • Asset Allocation: A systematic approach for dividing the portfolio into stocks, bonds and cash, including appropriate sub-categories. Factors such as age, investment horizon, risk tolerance, and portfolio size determine an individual's asset allocation. This strategy is designed to minimize the danger of asset-class risk.
  • Asset management fee : The fee charged by the asset management company (AMC) for portfolio management. The fee charged on an annual basis is calculated as percentage of net assets under management.
  • Balanced fund: A fund that invests substantially both in debt and equity.
  • Benchmark: The investment performance of the scheme needs to be compared in relative terms against some indicator, which is called as the benchmark for the scheme. For example, the performance of an equity fund is benchmarked against the BSE Sensex.
  • Close-ended schemes: Schemes which have a fixed tenor of maturity.
  • Custodian: The independent organization, often a bank, that is responsible for the handling and safekeeping of a fund’s cash and securities.
  • Diversification/Spreading the risk: Diversification, i.e. investing across a number of asset classes, assets within an asset class, helps in reducing the risk.
  • Entry Load: It is the load charged by the fund when one invests into the fund. It increases the price of the units to more than the NAV and is expressed as a percentage of NAV.
  • Equity Linked Savings Scheme (ELSS): A special product offered by mutual funds. The Equity Linked Savings Schemes (ELSS) gives their investors the option of saving tax while participating in the growth of the capital market. An investment of up to 1, 00,000 under ELSS qualifies under Section 80C of the Income Tax Act, 1961. As per the ELSS guidelines issued by the Central government, mutual funds have to ensure that at least 80 percent of the funds are invested in equities and equity-related instruments. Investors can sell back their units to the mutual fund at the NAV-based repurchase price after the lock-in-period of three years. The long term capital gains on sale of units are not taxable in the hands of the investor.
  • Exit Load: It is the load charged by the fund when one redeems the units from the fund. It reduces the price of the units to less than the NAV and is expressed as a percentage of NAV.
  • Fund Manager: A professional manager appointed by the Asset Management Company to invest money in accordance with the objects of the scheme.
  • Net Asset Value Per Share: The current market worth of a mutual fund share. Calculated daily by taking the funds total assets securities, cash and any accrued earnings deducting liabilities, and dividing the remainder by the number of shares outstanding.
  • No Load: It refers to the fund that does not charge any load for buying or selling its units, i.e. the investor can transact at the NAV.
  • Offer Document: It is the official document issued by mutual funds prior to the launch of a fund describing the characteristics of the proposed scheme/fund to all its prospective investors. It contains information required by SEBI pertaining to issues such as investment objective and policies, services, and fees.
  • Open Ended Fund/Scheme: It is a type of a scheme/fund where purchase or sale of units is offered on a continued basis at NAV related prices.
  • Performance: Performance of an investment indicates the returns from an investment. The returns can come by way of income distributions as well as appreciation in the value of the investment.
  • Portfolio: The basket of investments in which the funds of a scheme are deployed.
  • Redemption: An investor wishing to withdraw his/her investment from a scheme/fund gives a redemption transaction. The investor is paid a NAV linked price.
  • Registrar: An agent appointed by the trustees of a mutual fund in consultation with the AMC or by the companies for the purpose of handling the records of the unit holders or shareholders.
  • Securities transaction tax (STT): Tax levied on your equity mutual fund investment, equity shares and derivatives.
  • Systematic investment plan (SIP): A systematic investment plan allows an investor to buy units of a mutual fund scheme on a regular basis by means of periodic investments into that scheme in a manner similar to installments paid on purchase of normal goods. The investor is allotted units on a predetermined date specified in the offer document of the scheme. Here the plan allows the investor to take advantage of the rupee cost averaging methodology.
  • Trustee: The Trustees comprise the Trust and having an overall supervisory authority over the AMC. They ensure that the AMC follow the trust deed, the SEBI regulations and the offer document and the assets of the funds are held safely.

Small Savings

  • Interest rate: This is the amount calculated as a specified percentage of the amount lent that is paid to the investor.
  • Tax Deducted at Source: A method of payment where the tax applicable at a specific rate is cut from the amount of interest or other payment and then the net amount is paid to the person who has to receive the amount. The tax is then deposited with the government along with the permanent account number of the receiver.
  • Nomination: Nomination can be made in account opening form itself or on a separate form indicating the name and address of the nominee. The account holders can change the nomination any time.
  • Principal: The original amount invested is called the principal amount.
  • Pre closure/Pre Maturity:Encash the amount before the maturity period of the certificate.

Life Insurances

  • Agent: An authorized and licensed representative of an insurance company who sells and services insurance policies Agents represent the insurance company and typically only sell policies from that company.
  • Assignee: The person or institution to which the policy is transferred is known as Assignee.
  • Assignment: The transfer of the ownership rights of a life insurance policy from one person to another.
  • Assignor: The person who transfers their title in the insurance policy is known as the Assignor.
  • Annuity: An annuity is a contract between you (the annuity owner) and an insurance company. In return for your payment, the insurance company agrees to provide either a regular stream of income or a lump sum pay-out at some future time.
  • Bonus: The additional sum that the policyholder will get during the term of the insurance plan or at maturity of the plan provided he has paid all premium amounts due for a specified minimum number of years. Bonus is the amount added to the basic sum assured under a with-profit life insurance policy.
  • Claim: A claim is the payment made by the insurer to the insured or claimant on the occurrence of the event specified in the contract, in return for the premiums paid for the insured.
  • Coverage: The scope of protection provided under a contract of insurance; any of several risks covered by a policy.
  • Date of policy of commencement: The date on which the policy was actually accepted and the initial deposit is converted to first premium. This is the date from which the insurance company accepts the risk on the life of the assured.
  • Death Benefit: The Sum Assured along with accrued guaranteed additions and vested simple reversionary bonuses and Terminal Bonus, if any, is payable in a lump sum on death of the life assured during the policy term.
  • Fixed Annuity: An insurance contract in which the insurance company makes fixed payments to the annuitant for the term of the contract, usually until the annuitant dies.
  • Free Look In Period: As per this rules, customers will have the test period of 15 days for the life insurance policy. In that time if they don’t want to continue the policy, they can return it to the insurer and get their premium refunded. However the charges for health check up and any other processing fees will not be refunded.
  • Grace Period: The period of time between a premium's due date and the date the policy will lapse if the premium remains unpaid. This period is usually 30 days. If the insured dies during the grace period, the unpaid premium is deducted from the policy proceeds.
  • Insurance: A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients' risks to make payments more affordable for the insured.
  • Insured: The person who takes the insurance policy from the insurance company.
  • Insurer: This is also referred to as the Insurance Company. A Company that provides insurance coverage through the issuance of insurance policies.
  • IRDA: IRDA is Insurance Regulatory Development Authority, that has been set up to protect the interests of the policy holders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto.
  • Life Insurance: A protection against the loss of income that would result if the insured passed away. The named beneficiary receives the proceeds and is thereby safeguarded from the financial impact of the death of the insured.
  • Lock in Period: As per IRDA guidelines, there is a lock-in period of three years during which the policy holder cannot surrender the policy.
  • Lump Sum: The primary method of the settlement of a life insurance policy. The policy proceeds are paid to the beneficiary(s) all at once rather than in installment payments.
  • Maturity Benefit: The Sum Assured along with accrued guaranteed additions and vested simple reversionary bonuses and Terminal Bonus, if any, is payable in a lump sum on survival to the end of the policy term.
  • Mode of Payment: The method of making payments towards the risk covered under an insurance policy. For example monthly, quarterly, half-yearly and annually.
  • Nomination: Nomination is a right conferred on the holder of the policy of life insurance on his own life to appoint a person or persons to receive the policy moneys in the event of the policy becoming a claim by death.
  • Nominee: The person designated by the policyholder to receive the proceeds of an insurance policy, upon the death of the insured.
  • Paid up value: When the premium for a Life Insurance policy is not paid on time and it lapses, then the Policy acquires a Paid up Value and it is considered a Paid up Policy, such that the Sum Assured of the policy is reduced in proportionate with the number of premiums paid and total number of premiums of the policy. A Paid up policy acquires a Paid up Value. If a policy needs to be surrendered or a loan needs to be availed, it is taken as a percentage of the Paid up Value.
  • Policy: The written document issued by an insurance company to a policy owner. The policy represents the insurance contract between the insurance company and the policy owner.
  • Policyholder: The person who has entered into a contract of insurance with the insurance company he is the person who is liable to pay the periodical premium to the insurance company on the policy taken.
  • Policy Term: Period for which an insurance policy provides coverage. In some policies, the benefit becomes payable at the end of the Policy Term, if the specified event has not occurred.
  • Policy Lapse: A policy lapses when the policy holder fails to pay the premium even within the grace period. In this case, the policy loses all its benefits.
  • Policy Owner: The individual who owns an insurance policy and who has all contractual rights related to the insurance policy. The policy owner may or may not be the same person as the insured or beneficiary.
  • Premium: Financial cost of obtaining an insurance cover, paid as a lump sum or in installments during the duration of the policy. A failure to pay premium when due automatically cancels the insurance policy which, upon payment of the outstanding amount within a certain period, may be restored.
  • Riders: Riders are additional benefits that can be attached onto your basic life insurance policy. These riders give you the benefit of increasing your risk cover in case of certain events happening.
  • Risk Cover: Insurance policy that covers losses from all causes not specifically excluded in the policy.
  • Sum Assured: In a life assurance policy, the sum assured is the minimum amount payable to the assured or his/her dependants on the death of the life assured.
  • Surrender Value: It is the amount the policyholder will get from the life insurance company if he decides to exit the policy before maturity.
  • Term Life Insurance: A life insurance product that provides death benefit protection for a specified period of time. The policy pays benefits only if the insured dies during the term.
  • Top-Up: Top-ups are one-time payments. You have the flexibility to make an additional investment through a top-up, which is over and above your regular premium payments. You can make a top-up at any time while your policy is in force. The applicable norms for top-ups may differ for every product. For product-specific details on the same, please refer to the product brochures available in the Products section of the website.
  • Waiver of Premium Rider (WP): An optional policy rider that provides for the continuation of life insurance coverage without further premium payments if the insured becomes totally disabled.

health Insurance

  • Beneficiary: A person eligible for benefit under a health insurance policy.
  • Benefit: Amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss.
  • Claim: The process of applying to the insurer for reimbursement of the expenses incurred for treatment is called “filing a claim”. Usually, this process is handled by a service provider to the health insurance company. This service provider is called a “Third Party Administrator”.
  • Co-insurance: Cost-sharing arrangement between an insured person and the health insurance company in which the insured person is required to pay a percentage of the cost for the health care services received.
  • Effective Date: The date health insurance coverage begins.
  • Exclusion: Exclusion is a provision within a health insurance policy that eliminates coverage for certain acts, property, types of damage or locations.
  • Health Insurance: A type of Health insurance coverage that pays for medical and surgical expenses that are incurred by the insured Health insurance can either reimburse the insured for expenses incurred from illness or injury or pay the care provider directly.
  • Network: Groups of physicians, hospitals and other health care providers working with the health plan to offer care at negotiated rates.
  • Policy: The Health insurance agreement or contract.
  • Policy Year: The twelve month period beginning with the effective date or renewal date of the policy.
  • Pre-existing Disease: A pre - existing disease is any ailment or disease that a person is already suffering from at the time of purchasing health insurance.
  • Premium: The amount paid to a health plan or insurance company by an employer or beneficiary for health insurance coverage.
  • Reimbursement: Under a Health Insurance policy, the cost of various hospital charges (such as bed charges, medicines, lab tests, surgeon's fees etc) are paid back to the insured that makes the claim. In other words, the insured pays the (hospital) expenses incurred, but thereafter gets reimbursed by the Health insurance company.
  • Renewal: Health insurance policies are usually annual contracts. At the end of the policy period, the policy has to be renewed by the insurers. But renewing a contract of insurance is at the discretion of the insurer. There should be continuous renewal of the policies. If there is a break in insurance, the insured would lose the benefits of Health insurance in the event of any contingency.
  • Third Party Administrator (TPA): Third Party Administrators are the authorized claim settling agents of the Insurer. They scrutinize the expenses incurred vis-a-vis coverage under the policy. And ensure compliance of the policy terms and conditions and warranties and subject to the limit of sum insured. The insured needs to interact with them for settlement of claims. The TPA also empanels hospitals to be part of the network to facilitate cashless settlement of claims.

Car Insurance

  • Accident: Any Unforeseen and unexpected event is considered an accident.
  • Agent: An individual who acts as a representative for the company and sells Car insurance, usually on a commission basis.
  • Benefit: A benefit is the amount paid by a car insurance company to you or your beneficiary when you file a car insurance claim.
  • Claim: Notice to an Car insurance company that a loss has occurred which may be covered under the terms and conditions of the policy.
  • Comprehensive Coverage: Generally, Car insurance pays for theft or damage to your car from hazards including fire, flood, and vandalism or striking an animal. Most banks or lenders require you to buy this coverage to receive a car loan. There are various levels of deductible to purchase.
  • Coverage: The scope of protection provided under a contract of Car insurance; any of several risks covered by a policy.
  • Cumulative Bonus: The percentage at which the sum assured gets increased annually, without additional premium.
  • Damage: Loss or harm to a person or property.
  • Deductible: The amount a policyholder is responsible to pay up-front before covered benefits from the insurance company are payable. This is applicable to comprehensive or collision coverage only.
  • Depreciation: A non cash expense that reduces the value of an asset as a result of wear and tear, age or obsolescence.
  • Endorsement: A document, which is attached to the policy and modifies or changes the original policy in some way.
  • Exclusions: Specific conditions or circumstances for which the policy will not provide benefits.
  • Insured: The person(s) entitled to covered benefits in case of an accident or loss.
  • Insured Declared Value (IDV): The premium is calculated on the basis of the IDV of the vehicle, which is basically the depreciated value of the vehicle agreed upon by the insurer and the policyholder. The IDV of a vehicle reduces with age.
  • Insurer: The insurance company who issues the insurance and agrees to pay for losses and provide covered benefits.
  • Liability: Damages payable for acts of omission, commission or negligence.
  • No Claim Bonus (NCB): If you do not make a claim during the policy period, a No Claim Bonus is offered on renewals. Insurers reward policyholders by giving them substantial discounts on the Own Damage Premium. However the NCB is applicable only if the policy is renewed within 90 days of the expiry date of the previous policy.
  • Own Damage Premium (OD): Payment of OD premium entitles you to claim compensation in case of theft or damage of your vehicle due to fire, earthquake, etc.
  • Third Party: An individual other than the policyholder or the insurance company who has suffered a loss and may be able to collect compensation under the policy, due to the negligent acts or omissions of the policyholder.
  • Third Party Claim: Claims for injury or damage to property of a third party alleged to have been caused by the insured.

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