Glossary - Life Insurance

Accelerated Death Benefit
A provision or rider that allows the policyowner to receive all or part of the benefits of his life insurance benefits while he is still alive in the event of a terminal illness.

Accidental death and dismemberment insurance
A policy that pays the beneficiaries a set amount, under the terms of the policy, for certain serious injuries or death resulting from a covered accident.

Actuary
An expert trained in the mathematics approaches to anticipate, measure and manage risk.

Administrative expense charge
An amount charged by the insurer and/or administrator (sometimes separately delineated) to pay the costs of administering the policy.

Age
Age is shown on the first schedule which can be either the Insured's age next birthday, or last birthday, or nearest birthday.

Agent
An insurance salesperson who sells and services policies on behalf of the insurance commpany. He is paid on a commission basis.

Annual limits
Maximums on the dollar amounts the plan will pay for any given year.
Proposal Form A signed request for life insurance giving information about the prospective policyholder, including age, sex, and if it is subject to underwriting, it will also asks a series of health related questions.

Assignment
Assignment is a written notice to the insurer informing that the policy owner has assigned or given his legal rights of his policy to a third party. The insurer is not legally responsible for the validity or sufficiency of the assignment.

Automatic Premium Loan (APL)
If Insured is unable to pay premium and policy has acquired a cash value, the insurance company will deduct the premium from the cash value. Interest is charged on the amount of premium loan outstanding. An automatic premium loan will reduce the cash value.


B

Backdating of commencement date
Insurance policy backdated to an earlier date (not more than 6 months) to benefit the proposer.

Beneficiary
The person, persons or entity designated to receive the death benefits from a life insurance policy when you die.
Bonus It is a form of surplus distribution by the Company.


C

Cancellation
A termination of a policy before its normal expiration date.

Cash Dividends (CD)
Money paid annually to policy holder for policies that participates in the insurance co’s surplus or profits.

Cash Value
The money that accumulates in the life insurance policy while the policy is in force, (normally after 3 years)

Claim
A request for reimbursement for damages on an insured loss.

Commencement of risk
The risk on the policy starts when the policy is issued and the insurer receives the first premium in full.

Compound Revisionary Bonus (CRB)
Bonus declared as a percentage of the sum assured with compounded interest added plus bonuses to date.

Convertible term insurance
A term life policy that gives the policyowner the option of exchanging it for another plan without providing evidence of insurability (e.g., a current medical report and exam and underwriting).

Cooling off period
15 days grace period where the policy owner may cancel his policy by a written request.

Cost of insurance
see “mortality charge”

Counter Offer Letter
A document given by the insurance company indicating that a loading is required on top of the normal charges.

Critical Year Term
A forecasted premium paying term for a participating policy with the assumption that the policy owner keeps all dividends declared or cash value with the insurer for future premium paying purposes


D

Death benefit
Amount paid to the beneficiary upon your death.

Declarations page
The front page of your policy containing information such as the exact name of your insurance company, the policy number, your coverages, the amounts of your coverages, and your deductibles.

Dismemberment riders
Dismemberment riders are those that provide benefits on the occurrence of dismemberment (and usually on death also).

Dividend
Money paid annually to a policyholder of participating policies reflecting the insurance company’s favorable operating experience. Dividends are usually not guaranteed.



E

Effective Date
The date the insurance coverage begins

Elimination period
The number of days of care that you pay before your insurance plan picks up the benefits.

Encashment Bonus
Bonus declared by the insurance company from their investment surplus. It is declared in addition to cash value and is payable upon surrender of policy.

Endorsement
An addition to a policy that modifies its benefits.

Endowment
Life insurance payable to the policyholder if living, on the maturity date stated in the policy, or to a nominee if the insured dies prior to that date.

Enrollment period
The period during which individuals may enroll for an insurance policy, Medicare, HMO benefits.

Evidence of insurability
Statement or proof of a person’s health, finances, lifestyle, habits, or job to the extent that they affect his or her acceptability for insurance.

Exclusions
Conditions or procedures that are not covered. Every health care plan has its own list of exclusions and limitations. Some of the more common ones are experimental medications/treatments/procedures, sickness or injury as a result of war, attempted suicide, cosmetic surgery, etc.


F

Female Discount
Premium rates applicable to females. It has been statistically proven that females generally live longer than males of the same age group, consequently lower risk. This spells a lower premium rate for females.

Free look
The period during which you may reconsider the purchase of an insurance policy, cancel, and get a full refund. The clock starts running the day you receive the policy.



G

Grace Period
The period of time following the premium date which allows the policy holder to pay his overdue premium without penalty (normally 30 days). Policy remains in force.

Group life
Life insurance plans provided often through one’s job, association, or other organization where the individual members of the group receive certificates rather than policies as evidence of their insurance.
Guaranteed renewable An agreement by an insurance company to insure a person for as long as premiums are paid.


I
Illustration
A computer-generated printout of an insurance company’s explanation of how the life insurance policy will work for a prospective policyholder. It may project each year’s premium payment, cost index, dividends, and death benefit as well as guaranteed interest payments (if any). Sometimes called a “ledger statement”.

Incontestability Clause
This clause prevents the insurer from calling into question a policy, after the expiry of two years from the Effective Date of the policy or Reinstatement Date, whichever is later, on grounds of misrepresentation in the proposal form, medical report or any document which led to the issuance of the policy. Insurer can void the policy even after expiry of the contestable period if fraudulent misrepresentation on a material fact can be proven.

Insured
An insured (or assured) is the person whose life is insured under the policy and whom the proceeds of a claim will be forwarded to. Insured can be more than 1 person.


L

Lapse
Termination of a policy upon the policy owner’s failure to pay the premium within the grace period.

Lapsed policy
A policy terminated because of failure to pay the premium(s).

Level Premium
Premium charged is uniformed throughout the duration of the policy.

Loading
Additional costs on top of the normal premium due to speecial risk.

Loan
Borrowing against your policy’s accumulated cash value.

Loan interest
A charge made on the loan.



M

Maturity
The time at which the insurance company makes payment to the policy holder if he is still alive.

Modal Premium
Adjustments (Mode of Payment) Adjustments made to the annual premium in order to determine the appropriate amount to be paid at each premium due date for the mode of payment chosen. For example, if a policyholder decides to on a half-yearly basis, the modal premium would be slightly more than half of the annual premium.

Mortality charge
The charges a company makes against the policy to cover the policy’s share of the cost of death claims, based upon a mortality table used by the insurance company. Also called the “cost of insurance”.


N

Nominee
A nominee may be referred to a person nominated by the policyholder to receive the policy money either to receive it beneficially or as an executor.

Non-Forfeiture Provisions (NPF)
After a policy has acquired a cash value and during the lifetime of the insured, the policy owner may elect one of the following non-forfeiture options: - Option 1 To surrender the policy for its cash value. Option 2 To continue the basic policy as non-participating paid-up insurance for a reduced amount payable. The reduced amount will represent the amount of coverage, which the cash value will purchase as a single premium.

Non-participating policy
A life insurance policy, which is not eligible for the distribution of dividends paid out of the surplus earnings of the company.

Non-smoker Adjustment / Discount
A discount or reduction in the premiums payable by non-smokers. It is generally accepted that non-smokers, on average, live longer than smokers, thus lower risk.
Notice of claim Written document to make a claim and filed to the insurance company within 90 days of the occurrence of the claim.



O

Ordinary life insurance
Usually applied to level premium whole life policies.


P

Paid Up Value
The policy holder stops paying future premium and converts the cash value into payment of future premiums.

Paid-up Insurance
Insurance on which all required premiums have been paid. The term is frequently used to mean the reduced paid-up insurance available as a nonforfeiture option.

Participating
The policy owner participates in the distribution of surplus.

Participating Policy
A policy in which the policy owner is entitled to receive dividend paid out of the company's surplus earnings

Payor
The person who pays the premium. This term is usually used when the person making the premium payments is different from the insured. Exaple: Payor is the father, insured is the son.
Physical examination Physical examination and/or medical history that is required to qualify for health insurance.

Policy
The document that stipulates the terms and conditions of the insurance contract. It includes the policy book and Supplementary Contracts (if any)

Policy Anniversary
Policy Anniversary is any anniversary of the Policy Date shown on the First Schedule.

Policy Loan
Loan made by the insurance company to the policy holder on the cash value of his policy

Policy Owner
The Policy Owner is the person in whose name the policy is made out to. The name is found in the First Schedule. If it is subsequently changed, it will be found under the assignment clause.

Policy Period
The amount of time the policy provides coverage

Policy reserves
Funds held by a life insurance company specifically to fulfill its policy obligations.

Policy Size Adjustment / Large Sum Assured Discount
A premium reduction given as an incentive to a policy owner who purchases a policy with a large sum insured.

Policy Term
Period for which an insurance policy provides coverage

Pre-existing Condition (For Critical Illness Rider)
A physical and/or mental condition of an insured which first manifested itself prior to the issuance of the policy or which existed prior to issuance and for which treatment was received.

Premium
The amount paid by the insured to buy the insurance policy.

Premium date
Premium date is the date on which a premium falls due.

Premium expense charges
An amount deducted from each premium payment that reduces the amount credited to the policy.

Premium waiver provision
An optional provision that takes effect if the policy owner becomes disabled. The disabled person will not have to pay premiums for the duration of the disability, including lifetime disability

Primary Assurance
Also known as basic policy.

Proof of loss
Documents that you give the insurer to support your request for payment of losses.

Proposal Form
A signed request for life insurance giving information about the prospective policyholder, including age, sex, and if it is subject to underwriting, it will also asks a series of health related questions


R

Rating tables
Tables that companies use to classify risks

Reinstatement
The resumption of coverage under a policy that has lapsed because of nonpayment of the premium after the grace period has ended

Renewability
Group health insurance plans are normally 1 year term. Insurers generally review the claims experience of the group at each renewal date and make a renewal offer – often at a different premium. The company then decides whether to accept the renewal offer.

Renewable term
A term policy that guarantees the policy owner the right to renew coverage at the end of the term, without presenting evidence of insurability. Premiums increase at each renewal since the insured’s age increases.

Reversionary Bonus (RB)
Bonus declared by the insurance company from their investment surplus. It is declared in addition to the sum assured and payable upon death or total permanent disability of the insured.

Rider
Also known as supplementary contracts. Extensions to the basic policy for additional charge which is incorporated in the First Schedule and forms part of the policy.

Risk
Risk is the chance of loss.

Risk factor
A factor that is expected, possibly with support of statistical evidence, to have an influence on the intensity of risk in insurance contract. Example: smoking is a factor that increases risk; working in an oil-rig in the middle of an ocean is a factor that increases risk.


S

Simple Revisionary Bonus (SRB)
Bonus that is declared base on a percentage of the sum assured only.

Stamp Duty
Stamp duty is the tax that is levied on the policy document.

Suicide Clause
Provision that excludes coverage on suicide within a year of policy issuance.

Sum Assured
The amount payable upon the death of the insured or upon any other contingencies covered under the terms of the basic policy.

Supplementary Contracts
Also known as rider. Extensions to the basic policy for additional charge which is incorporated in the First Schedule and forms part of the policy.

Surrender
Terminating or canceling a policy before its maturity date and cashing in its cash surrender value
Surrender charges Fees that are deducted if your life insurance policy is cashed in prematurely

Surrender Value
Amount payable on termination of policy.


T

Terminal or Maturity Bonus
Bonus payable at policy maturity. This is in addition to the sum of the annual bonuses declared at the end of every year during the term of the policy. However, this type of bonus is not payable on death or total and permanent disability. The rate is at the discretion of the company.

Temporary Partial & Continous Disability
Insured is only capable of performing only part of his/her usual occupation after the occurrence of his/her injury. The disability is both partial and temporary.

Temporary Total & Continous Disability
Temporary total disablement is disabilities that prevent the insured from performing all of his/her job functions. This means that the insured is totally disabled, but only temporarily.

Term Insurance
A Life insurance policy which provides a stated benefit payable to a nominee/assignee only when an insured dies within a specified period. No maturity value if insured survives at the end of the term.

Terminal Bonus or Terminal Dividend
A Bonus/Dividend that may be payable on death/surrender/maturity of a particpating policy. The amount payable is not guaranteed and depends on the performance of the Company at the time of event.

Total & Permanent Disability (TPD)
Disability that renders the insured incapable of work or occupation by which he earns a living provided that such disability lasts not less than six months. At the end of the 6 months he must be certified total and permanently disabled (TPD). If insured is a minor, TPD is defined as totally unable by reason of accident or sickness to perform independently his activities of daily living without frequent attention of a third party and is likely to remain permanently disabled. Such disability must last more than six months.


U

Underwriter
An individual in an insurance company who assesses insurance risks on which can be accepted and on what terms.

Underwriting
The insurance company’s process for determining whom it will insure and on what term.


W

Waiting period
The time that must pass after becoming insured before the policy will begin to pay benefits for a pre-existing condition or specified illness.

Waiver
An amendment to a policy that excludes coverage for certain medical conditions.

Whole Life Insurance
A Life time protection for life assured. Normally it is 85 years of age. The benefit is payable upon death, TPD or at maturity (if any) of the life assured.