• Insurance Terms and Definitions

    If you are taking any insurance, you will come across some terms which is commonly used by the agents and in your application form and the brochures. It is important that you understand the terms. The following guide will help you understand the insurance jargons that are commonly used.

    In the features you will come across the following terms:

    Term Meaning
    Policy Policy is a document that states the terms and conditions of the insurance contract.
    Policyholder Refers to an organisation or an individual in the name the insurance policy is registered to.
    Premium Premium is the amount you are supposed to pay as a lump sum. This amount can be paid in instalments as well. If you don’t pay the premium, your insurance will lapse. It is reinstated once the outstanding amount is paid in full.
    Sum assured It is a fixed lump sum amount that is promised by the insurer to the policyholder in the event the insured event takes place.
    Sum insured This is the cap of how much the insurer is willing to pay you for the circumstances that the policy covers.
    Annuity Annuity is the periodic income that will be paid to for the term dependent in the event the insured dies.
    Annual limit This is the maximum amount that can be paid to settle your claims for a year. If your annual limit is higher, the premiums will be higher.
    Face amount This is a lump sum amount the insurer promises to pay the policyholder when the insured event takes place.
    Free look period Policyholder gets 15 days period to review the policy. If he or she is not happy with the policy, it can be exchanged and a full return minus the claims will be refunded.
    Grace period Policyholder gets 30 days after the premium due date to pay the premium in full to keep the policy in force.
    Guaranteed premiums The premiums will stay the same unless you alter your policy.
    Reviewable premiums The premiums will be guaranteed for the first 5 years of the policy.
    Lapse Termination of policy on failure to pay the premium. The policy lapses because it hasn’t developed any cash value.
    Investment linked insurance This is an insurance policy where the policy value depends on the value of the underlying assets at any time. The policy value will vary in this case.
    Indemnity Restoring the same financial position after loss or damage by giving replacement, payment or repair.
    Maturity date This is the date at which the policy will have completed its full term. The face amount becomes payable provided the insured survives to that date.
    Maturity value This is the amount that is paid to the living insured person at the end of the endowment period or to the owner of the whole life policy if he lives past a certain age as specifies in the policy document.
    No claim bonus This is a reward paid to the policyholder for not making any claims against the policy. This will reflect in reduction of premium or increase in the coverage limit. This will depend on the insurance type.
    Nomination Choosing a beneficiary for the life or personal accident insurance policy.
    Nominee It is a person who is named to receive the benefits under the life or personal accident policy.
    Paid up policy Policy which does not require any further premium payments. It is not terminated by death or maturity.
    Participating policy This is a policy that shares surplus of the life insurance company. You acquire dividends or bonuses.
    Policy loan Policyholder can get a loan which is secured by the cash value of the policy.
    Surrender Surrender is giving up life policy. The cash value is paid to the insured, if any.
    Surrender value or Cash value This is the amount that is available in cash upon involuntary termination of the policy before it is payable on death or maturity.
    Waiting period This is the period that one must wait to get coverage for terms outlined in the policy. The policy activation generally takes 30 days.
    Wakalah This is an agreement where the takaful operator will act as an agent on behalf of the policyholder. The operator will earn a certain fee for the services. The fee is either fixed or determined on an agreed profit ratio.
    Whole life insurance It is a combination of lifelong protection, savings and investment that can be used as a retirement fund. The policy will not expire as long as the premiums are paid.
    Claim This is a notification to the insurance company that a payment for the amount is due as per the terms of the policy.
    Commission This is the remuneration that is paid to the agent by the insurance company for his or her services.
    Compensation This is the amount paid as determined according to the response to a claim put forth by the policyholder.
    Contribution This is a monetary consideration paid once or periodically by the participant to takaful operator for his participation in the takaful scheme.
    Deductible or excess This is the portion of insured loss borne by the policyholder before he is permitted to recover from the insurance company.
    Disability benefit Benefit that is paid upon disablement of the insured under disability income policy. Disability benefit can also be a provision of life insurance or takaful family plan.
    Rider This is an attachment to a policy that modifies the conditions of the policy by expanding the benefits.
    Waiver This is a rider waiving liability for the stated cause of sickness or injuring under the provisions of the policy or the rider agreeing to waive premiums during the disability period.

    Exclusions will include the following terms:

    Term Meaning
    Act of God Act of God is an event that is arising out of natural causes and not by human intervention. Example, flood, earthquakes or lightning.
    Activities of daily life Activities of daily life is being able to get around, ability to move from one room to another, ability to voluntarily control bowel movements, being able to put on and take off clothes, being able to wash and take a bath and being able to get food into the body.
    Pre-existing condition Exclusion included in medical and health policies that states and illness or injury that existed before the effective date of the policy for which the insured is getting the treatment. The symptoms will not be insured. If the insured is unaware of the condition, it is negligible.
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