Life insurance is one of the most complex sectors in business industry. Sometimes, it takes ten experts’ advices to completely understand what insurance is all about. Even how insurance works is another pain in the head. But most of the time, the terminology used in life insurance transactions is what makes it more difficult to comprehend.
If you are planning to avail a life insurance, might as well, require yourself to be aware of the common or rarely used terminologies in life insurance. Failure to do so may result to misconception and overwhelming expectations. Remember, buying a life insurance is not just one click away. It takes a series of processes that include important elements such as monetary funds, investments, mortgages that do not cost you just a cent. It’s more serious than that. Because you are about to put your money into risk of regular payments for future reimbursements when you die. And you don’t just let go of your money without completely knowing what you can get out of it. Of course, to make sure that everything will put into place in the future, take the first step of preparing yourself through comprehensive research on the insurance company and familiarization with the terminologies used in the proposal. If there are jargons that you don’t understand, ask the agent/expert right away.
The following are the basic jargons used in life insurance. Once you’re through with number 10, you are expected to learn and understand what these jargons are all about.
Life Insurance Policy
Life insurance is the agreement between the policyholder (See Number 4) and the insurance company or the insurer. The term ‘policy’ is the contract itself. It contains all the information agreed upon by parties involved.
Term Insurance / Whole-life Insurance
Term insurance, as the name suggests is the type of policy that has a certain duration of validity. It means term insurance may expire depending on how long the agreement runs for. Whole-life insurance, on the other hand, has no expiry date. However, it is a way expensive and price may vary over time.
The term ‘approved’ is implied when the application for life insurance has been accepted. This means the applicant is eligible to avail his/her chosen policy and take advantage of the perks and bonuses that it covers.
Never be confused between the Policyholder and the Life Assured (See Number 5). Take note that a policyholder can be a life assured or may be not. This person (can be an organization) is the one who registered for life insurance whether for himself or on behalf of his wife, any of his family members, or his employees as well. Meaning to say not all life assured are considered as policyholder or the way around. You have to be familiarized with the difference for there are factors that are eligible only for a policyholder or a life assured alone.
The term life assured is referred to as the insured person or to whom the insurance cover belongs to.
The beneficiary is the person appointed by the life assured to receive the death benefits and payouts after the insured person’s passing.
The insurance claim covers the all the death benefits of the policy. Only the enlisted person(s) or beneficiary(ies) is/are allowed to request for insurance claims.
A policyholder has an option whether to buy the full amount of insurance or make a regular monthly payment that will guarantee same benefits after death. Buying the full amount of life insurance is called Single-Premium Life. This can cost a large amount of money that most locals may hardly afford. Otherwise, the policyholder/life assured shall settle the monthly payment for premium – term referred to as the amount of money paid to avail the insurance policy.
For a regular payment method, the policy has a grace period of 30 days after the due date. Therefore, the policyholder or life assured is expected to make the required amount of payment after every 30 days on regular monthly basis. The grace period is usually included in the contract as a reference.
Failure to settle the monthly bill may tend the insurance to lapse. It means that the insurance company will no longer provide the death benefits once you miss to pay within the grace period. You will then receive a lapse notice from the insurer.
By: Sarah Contreras
The author holds a bachelor’s degree in Communication with expertise in certain fields like advertising and media marketing. She currently works as a web content contributor for Insure Me Now, an award-winning life insurance company in Australia. What motivates Sarah to keep writing is her passion of providing information to all readers out there.