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Plain-language reference

Insurance terms, decoded.

Forty of the terms that come up most often in Indian commercial insurance, written in plain language. Bookmark this page and link to a specific term in any client conversation.

ABCDEFGHILNOPRST
A
Average Clause
A property-policy provision that reduces a claim proportionally if the sum insured is below the actual value at risk (the under-insurance penalty). The most common cause of under-paid property claims in India. On the IRDAI standard fire wordings up to ₹50 crore, Clause F(3) waives underinsurance up to 15%, so it bites only below 85% of value.
B
Bailee's Liability
Cover for goods held by the insured on behalf of others (warehouse customers, freight in transit, cars in a service centre). Distinct from cover for the insured's own property.
Business Interruption (BI)
Cover for lost revenue and increased operating costs during the period the business cannot operate as normal due to an insured event. Sized against your operating margin and realistic recovery period.
C
CAR / EAR
Contractor's All Risk and Erection All Risk. Project-specific insurance for construction and equipment-installation works. Cover follows the project, not the contractor or the client.
Cashless Network
Hospitals or workshops where the insurer settles bills directly with the provider, removing the need for the policyholder to pay upfront and claim reimbursement.
CIF / CIP
Incoterms used in international trade. CIF (Cost, Insurance, Freight) applies to sea transport; CIP (Carriage and Insurance Paid To) applies to any mode. Both make the seller responsible for arranging marine cover.
Co-Insurance
Two or more insurers jointly underwriting a single risk, each taking a percentage share. Common in large industrial risks and reinsurance-backed placements.
Co-Payment
A percentage of every claim the insured shares with the insurer. Common in senior-citizen and pre-existing-condition health cover.
D
D&O Liability
Directors and Officers liability cover. Pays defence costs and settlements for claims arising from the conduct of named directors and senior officers. Increasingly required by listed and pre-IPO entities.
Data Fiduciary
Under the DPDPA, any organisation that determines the purpose and means of processing personal data. Carries the primary regulatory and statutory liability for breach events.
Deductible / Excess
The portion of every claim the insured pays before the insurer's cover begins. Higher deductibles reduce premium but transfer more risk to the policyholder.
Discovery Period
The window after a policy expires or an employee leaves during which losses can still be reported under fidelity, PI or D&O covers. Critical wording in long-tail liability claims.
DPDPA
The Digital Personal Data Protection Act, 2023. Creates mandatory breach-notification obligations and statutory penalties for data fiduciaries in India. The trigger for cyber-cover purchase across most Indian SMEs.
E
Employees' compensation, Code on Social Security, 2020
The Indian statute that creates strict employer liability for workplace death, disability and medical expenses of workers. Cover is structured against the statutory schedule and is required wherever there are employees.
ESIC Exemption
Permission for an employer to opt out of the Employees' State Insurance Corporation scheme by demonstrating equivalent or better private group health cover. The exemption requires specific cover structure including spouse and dependent children.
Excess of Loss / Layered Programme
A programme structure where multiple insurers underwrite different layers of cover. Common at large sums insured where no single insurer takes the full exposure.
F
Fidelity Guarantee
Cover for direct financial loss caused by employee fraud, dishonesty, embezzlement or theft. Placed on named-employee, position or blanket basis depending on workforce size.
FNOL
First Notification of Loss, the initial report from a policyholder to the insurer that an event has occurred. The timing of FNOL affects claim eligibility and indemnity period start.
FOB / EXW
Incoterms where the buyer takes responsibility for arranging insurance from the point of dispatch. Sellers under FOB or EXW typically need only inland cover up to the named delivery point.
G
Group Floater
A family health insurance structure where one sum insured is shared across all covered family members. Cheaper than individual covers but risks exhausting the limit on a single major claim.
H
Hazardous Substance Cover (PLI Act)
Mandatory public liability insurance under the Public Liability Insurance Act, 1991 for businesses handling hazardous substances above threshold quantities.
I
ICC-A / ICC-B / ICC-C Clauses
Institute Cargo Clauses. ICC-A is all-risk; ICC-B and ICC-C are named-perils covers with progressively narrower scope. For export marine, ICC-A is the default unless the buyer specifies otherwise.
IDV (Insured Declared Value)
The market value of a motor vehicle at the start of the policy period, used as the cap on payout in case of total loss or theft. Set against current market depreciation, not at the lowest defensible figure.
Indemnity Limit
The total amount of liability cover under a public, product or professional indemnity policy. Should be benchmarked against your sector's realistic worst-case claim, not against tender minimums.
Indemnity Period
The maximum length of time BI cover responds, typically 6, 12 or 18 months. Should match the realistic timeline for restoring full operations after a major property loss.
L
Loss of Profits
An alternative phrasing for business interruption, often used in marine and machinery breakdown contexts. The underwriting basis is gross profit, not just revenue.
N
No-Claim Bonus (NCB)
A discount on renewal premium for claim-free years. Builds up to 50% over five years on motor insurance and to 100%+ on health insurance via sum-insured increase.
O
Open Cover Policy
A marine policy structure for clients with regular shipments. One annual policy covers all transit within scope, with monthly value declarations replacing per-consignment paperwork.
P
Portability (Health)
The IRDAI right to switch health insurers at renewal while retaining waiting-period credits for pre-existing conditions. Must be requested 45 days before renewal.
Pre-Existing Condition (PED)
Any disease, illness or injury diagnosed within a defined period (usually 48 months) before the policy commencement. Subject to specific waiting periods that vary by insurer.
Product Liability
Liability cover for injury or damage caused by products manufactured, sold or supplied by the insured after they have left the insured's premises. Long-tail by nature.
Professional Indemnity (PI)
Cover for service-delivery errors, defective advice, faulty design, miscalculation. Long-tail discovery patterns mean claims can surface years after the engagement closes.
Public Liability
Legal liability cover for bodily injury to third parties (visitors, customers, passers-by) and damage to their property occurring at or from your business operations.
R
Reinstatement Cost Cover
A property-cover basis that pays the cost of replacing with new (or equivalent new) rather than the depreciated value of the original asset. Now standard in modern policies.
Reinstatement Value
The cost of restoring a damaged asset to its original condition, including labour, materials and contractor overhead. Property cover sized at reinstatement value avoids the depreciation-deduction trap at claims time.
RERA
Real Estate (Regulation and Development) Act, 2016. Mandates defects-liability cover for registered developers and creates enforceable consumer remedies. Reshapes the under-construction insurance market.
Retroactive Date
Under claims-made policies (PI, D&O, cyber), the earliest date from which incidents are eligible for cover. Setting this correctly at placement avoids unintended gaps.
S
Sub-limit
A cap inside a policy that limits payout for a specific category (e.g. room-rent in group health, fire damage to electrical equipment). The most common source of claim disputes in Indian commercial insurance.
Sum Insured
The maximum amount an insurer will pay on a claim. Setting this against current reinstatement cost, not historic invoice value, is the single most-overlooked placement decision.
Survey & Surveyor
An IRDAI-licensed surveyor inspects and assesses damage on a claim above a threshold value (typically ₹20,000+). The surveyor's report drives the settlement amount.
T
TPA (Third-Party Administrator)
An entity that administers health insurance claims and cashless networks on behalf of the insurer. The point of escalation when cashless requests are denied.

This glossary is published by Rakshit Financial Services under Creative Commons CC-BY 4.0, you are free to quote, link to, or republish definitions with attribution. Suggest a term we should add →