10 Insurance Terms You Should Know

You are ready to purchase your first insurance policy . But it can be difficult to choose the best coverage if you don’t understand the difference between a premium and sum assured.

Source: Giphy

Before you make any decisions on which policy to sign up for, get to know the following 10 common insurance terms:  

1. Premium

A premium is the fee you pay to your insurance company for transferring the cost of a potential loss to them in exchange for the promise that they will pay for any valid claims. This payment is made on a scheduled basis e.g. annually or monthly. 

2. Life Assured

This refers to the person whose life is being insured.

3. Beneficiary

In life insurance, a beneficiary is the person whom you named in your policy as the recipient of the payout from your policy should the unexpected happen to you. The beneficiary can be your spouse, sibling, friend, or even an organisation.

4. Sum Assured

The sum assured is the predetermined amount (before any cash value or bonuses are added) which you or your policy’s beneficiary will receive from your insurer. The payout is made once an insured event takes place, your policy ends, or in case of your passing. The sum assured is also known as the coverage or the cover of your insurance policy. 

5. Policyholder

A policyholder is the person who owns an insurance policy and also may or may not be the life assured. For example, you are both the policyholder and life assured if you bought a policy under your name. If you purchased a policy for your spouse, he or she is the life assured while you are the policyholder.  

6. Maturity Age

This refers to the age of the life assured when their insurance policy ends. If the life assured is still alive, the sum assured will be paid out to them, along with any cash value and other bonuses.  

7. Riders

Riders are optional add-ons that provide additional benefits to your insurance policy, allowing you to further customise your coverage.

8. Grace Period

A grace period is basically an extension of your premium due date. If you missed a payment due to unavoidable circumstances, you will still have an opportunity to settle it during the grace period (usually 30 days). During this time, your policy will still remain in force. But if you miss the deadline again, this will result in lower pay-outs for claims, or cancellation of your policy. 

9. Free Look Period

After purchasing your insurance policy, you will be given a 15-day free look period to review your coverage along with the terms and conditions. If you are not satisfied, you may choose to cancel the policy and claim a full refund of your premium with no penalties, subject to the terms of your policy.

10. Claim Process

This process begins when you or your policy’s beneficiary submit a claim to your insurance company. It involves several administrative layers which include a review, investigation and other necessary adjustments before the claim is approved. 

With a clear understanding of what these insurance jargons mean, it should be easier for you to decide on a plan that meets your needs and fits within your budget. As always, we are available to assist if you have any further questions regarding insurance, reach out to us here and an FWD Wealth Advisor will contact you to arrange for an appointment.