Glossary of Life Insurance terms

Whether or not you are looking to buy a life insurance, there is no denying the essence of having one’s life protected. This page aims to help you have a better grasp of the idea of life insurance and walk you through some of the most essential terms associated with it.

Before we do that, let us first define what life insurance is:

LIFE INSURANCE is a contract one makes with a life insurance company which agrees to pay a given amount to the insured’s beneficiaries on the event of his/her death, accident and/or dismemberment. (fidelity.com)

Here are the ABC’s of Life Insurance and what they signify:

Accident Insurance – a contract wherein a life insurance company agrees either to give coverage to another against personal injury resulting from an accident, or to pay another a certain sum of money in case of death caused by an accident. (Accident being the unintended, unexpected or unforeseeable cause of an injury)

Accidental Death & Dismemberment Benefit  this is the same as an Accident Insurance except that it has an annuity benefit.

Accidental Death Benefit  provides benefit for accidental death only.

Actuary – a technical expert on life insurance and related fields, particularly on the mathematics/calculations of life insurance.

Agents or Sales People  Life Insurance agents are people who officially represent a Life Insurance company in business and are licensed to sell their products.

Beneficiary  a person whom the insurance money is to be paid upon the death of the insured. The beneficiaries are often the family members of the insured (e.g. wife, kids, parents, siblings, etc.)

Certificate of Authority – a document issued by the Insurance Commission of the Philippines that helps assure the public that a certain life insurance company has complied with all their requirements and thus, is licensed to operate and transact business in the country. http://www.philippineprudential.com/philippine-prudential-receives-certificate-of-authority-from-the-insurance-commission/

Certificate of Life Insurance (Certificate of Coverage) – a statement of coverage and an evidence of life insurance.

Claim – a demand presented usually by a beneficiary for payment of the proceeds of a life insurance contract.

Claimant  an individual asserting a right or presenting a claim for a suffered loss; one who makes or presents a claim.

Concealment –the intentional withholding of any fact, which the insured, in honesty and good faith, should communicate to the sales agent/underwriter/life insurance company.

Face Amount – the amount or type of protection provided by an insurance policy.

Grace Period  30 days from the policy due date for payment premium within which period the insured is still covered even if he has not yet paid the premiums. After the said period and no premium is paid, the policy lapses (see Lapsed Policy), except when the non-forfeiture provisions of a policy are available.

Group Insurance – a plan for covering large number of people under one master policy.

Insured – the person given the coverage by the life insurance company. (see also: policy owner/holder)

Insurer – a life insurance company that gives coverage to another by a contract of insurance. For example: Philippine Prudential

Lapsed Policy – a policy terminated because of non-payment of premium.

Policy – a contract that exists between an insurance company and a person or organization buying insurance services; or, the document that lists the contract terms.

Policy dividend – a refund of part of the premiums on a participating life insurance policy. It is a share of the surplus earnings apportioned for distributions and reflects the differences between the premium charged and actual experience.

Policy in force – a policy in force is one that is active and has not lapsed.

Policy owner/Policyholder  the owner of the contract.

Policy reserves – the amounts that an insurance company allocates specifically for the fulfillment of its policy obligations. Reserves are also calculated that, together with future premiums and interest earnings, these will enable the company to pay all future claims.

Premium – the payment or one of the regular periodical payments a policyholder is required to make for an insurance policy.

Rider  a form attached to the policy when the company finds it necessary to alter or amend the applicant’s answer to any question in the application.

Single Premium – the amount that constitutes payment in full for a contract at its inception.

Single Premium Insurance – a life insurance contract which provides that, for the consideration of a premium paid only once, the insurance company will assume the liability on the contract.

Underwriting  is responsible for risk assessment. It is the process of: assessing and classifying the degree of risk represented by a proposed insured or a group of insured with respect to a specific insurance product; and, making a decision to accept or decline the risk.

Waiver of Premium – a clause added to an insurance policy providing Waiver of Premium if the premium payer dies or becomes disabled. For example, this option is available on insurance policies on a child’s life where the premium is paid by an adult, or, on life and health policies for adults.

 

Sources:

https://www.fidelity.com/life-insurance-planning/what-is-life-insurance

https://www.mainstreet.com/article/millennials-who-may-need-life-insurance-often-dont-buy-it-heres-why