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Insurance, explained

A dictionary of key life insurance terms, simplified.

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Accidental death benefit

An optional provision on a life insurance policy that pays out if the life insured dies due to an accident within 30 days.

Additional benefit

Optional covers that can be added to a policy for free or for an additional charge, depending on the type of policy purchased. Some examples are critical illness, permanent and total disability and hospitalisation cover.

Additional life cover

An increase in the life cover amount on a joint life policy due to changing financial protection needs of the lives insured. It is paid out on the death of the first life insured of the joint life policy.

Aeroplane cover

A free benefit that pays out a lumpsum amount if the life insured dies due to an aeroplane crash.

Assets under management

Assets under management (AUM) is the total market value of the investments that a financial institution manages on behalf of their clients. 

Beneficiary

The person or entity who will receive a claim amount if the life insured passes away, becomes seriously ill or permanently disabled, depending on what conditions they are covered for within the policy.

Benefit

The claim amount that an insurer would pay to the beneficiary/ies upon the death of the life insured or to the life insured if s/he suffers from a condition covered under the policy, such as critical illness or permanent and total disability.

Cancer cover benefit

The cover amount an insurer will pay out if the life insured is diagnosed with or undergoes a medical procedure to treat cancer. 

Critical illness cover

The amount an insurer pays out to the life insured if s/he is diagnosed with a serious illness or undergoes a medical procedure to treat such a condition, depending on what conditions s/he is covered for.

Dismemberment benefit

A provision where an insurer will pay out if the life insured suffers loss of limbs or loss of senses such as eyesight or hearing, due to an accident.

Family income benefit

A regular cash amount the insurer pays out upon the death of the life insured over a specific period to his/her family members.

Fixed term income benefit

A regular payment made by an insurer to the beneficiary/ies over a fixed period of time after the death of the life insured.

Free look period

The timeframe after an insurance policy has been issued during which the policyholder can terminate the policy without any charges or penalty. This interval is usually 30 working days.

Funeral coverage

An immediate, advance payment of up to USD7,500 paid out from the death claim proceeds to the beneficiaries upon the death of the life insured. This payment is designed to cover any immediate funeral costs or repatriation expenses. 

Fund

A unitised portfolio of investments managed by an asset manager.

Hospitalisation benefit

The amount an insurer will pay to the life insured if s/he gets admitted to a hospital for a surgical procedure or for certain medical treatments.

Life insured

The person who is covered against health risks such as death or critical illness under a life insurance policy and receives benefit payments if such a condition occurs. 

Lifetime insurance

An insurance plan where the insurer pays the cover amount to the beneficiaries upon the death of the life insured, regardless of when this might happen, provided all the premiums were paid. This is also called Whole of life insurance.

Permanent and total disability benefit

The cover an insurer will pay if the life insured is diagnosed with a permanent and total disability and is unable to work in his/her area of expertise due to this disability.

Premium

The payment/s due on an insurance policy over a fixed or flexible term.  The amount depends on the type and amount of cover, age and any existing medical conditions.

Policyholder

The person who owns an insurance policy, pays the insurance premiums and under whom the policy is registered.

Surrender

The amount an insurer will pay if the policyholder decides to terminate the policy before the maturity date. The rate will depend on the policy value and any applicable surrender charges.

Switching funds

The transferring of an investment amount from one fund into another based on the policyholder’s investment preference.

Term insurance

An insurance plan where the policyholder is covered for a specific term and the insurer will pay the cover amount to the beneficiaries if the life insured’s death occurs during the policy term.

Vanishing premium

An option to pay regular premiums on a whole of life insurance policy  over a fixed period of time. 

Whole of life insurance

An insurance plan where the insurer pays the cover amount to the beneficiaries upon the death of the life insured, regardless of when this might happen, provided all the premiums were paid. This is also called lifetime insurance.

 

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