Glossary of Common Insurance Terms
Accidental Death Benefit - A supplementary life insurance policy benefit under which the insurer pays the benefit rider beneficiary an amount of money in addition to the basic death benefit if the insured dies as the result of an accident.
Accelerated Death Benefit - A life insurance policy benefit where policy proceeds are paid before death, if the insured is terminally ill. The insured has the option of getting his or her death benefit while still alive, and presumably during a time of need, instead of having the money paid out only after death to a beneficiary or the estate.
Activities of Daily Living (For Eldershield) - Bathing, preparing and eating meals, moving from room to room, getting into and out of beds or chairs, dressing, using a toilet.
Anniversary Date - The anniversary of the effective date of the policy specified in the Policy Schedule.
Annuity - A life insurance product that provides a regular income for life. Usually, a lump sum is invested in return for the lifelong income.
Annuitant - The person(s) who receives the income from an annuity contract. Usually the owner of the contract or his or her spouse.
Assignee - The person to whom policy rights are assigned in whole or in part of the policy.
Assignment - A transfer of legal and policy rights under, or interest in, an insurance policy to another party. In most instances, the assignment of such rights can only be effected with the written consent of the insurer.
Assignor - The policyholder who transfers his rights in a policy to another party by means of an assignment.
Attained age - The current age of the life insured.
Automatic Premium Loan - An optional provision in life insurance that authorize the insurer to pay from the cash value any premium due at the end of the grace period. This provision is useful in preventing inadvertent lapse of the policy. Interest may be charged on the amount of premium loan outstanding.
Benefit Illustration - Document, often in the form of a computer printout that illustrates the pattern of premiums and benefits payable under the policy during the policy term.
Beneficiary - The person or party designated to receive life insurance policy proceeds.
Cash Value - The amount available in cash when a policyholder surrender a life insurance policy before it becomes payable upon death or maturity.
Capital Guaranteed - Policy feature that guarantees to return the base capital invested, usually after a certain period of time or at particular points of time.
Certificate of Insurance (COI) - Document issued by an insurance company, it certifies that an insurance policy has been bought and shows an abstract of the most important provisions of the insurance contract.
Claim - A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.
Claimant - Someone who has suffered a financial loss and asserts a legal right to be indemnified or compensated for that loss.
Co-Insurance - Arrangement by which the insurer and the insured share, in a specified ratio, payment for losses covered by the policy after the deductible is met. Sometimes it is also referred to as co-payment.
Commission - Remuneration paid by the insurer to its agents, brokers or intermediaries, or by the reinsurer to the insurer, for costs in connection with the acquisition and administration of insurance business.
Convertible Term Life Insurance - Term life insurance coverage that can be converted into permanent insurance regardless of an insured's physical condition and without a medical examination. The individual cannot be denied coverage or charged an additional premium for any health problems.
Cover Note - A temporary document providing evidence insurance cover while the actual policy and insurance certificate are being prepared.
Coverage - The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.
Date of Inception - The date that coverage begins on an insurance policy.
Death Benefit - The amount of benefit that will be paid in the event of the death of a covered person.
Decreasing Term Life Insurance - A term life insurance policy that provides a death benefit that decreases over the term of the coverage.
Deductible - The amount of loss paid by the policyholder. Either a specified dollar amount or a percentage of the claim amount. The bigger the deductible, the lower the premium charged for the same coverage. It is commonly used in health insurance policy.
Deferred Annuity - Type of annuity that defers the conversion of the premium to the income stream for some period of time. The annuity payments to the annuitant will only begin after a specified period of time has elapsed after the purchase date.
Dependants' Protection Scheme (DPS) - An affordable term insurance scheme that provides insured members and their families with some money to get through the first few years should the insured members become permanently incapacitated or pass away. The scheme is extended to CPF members who are Singapore citizens or Permanent Residents, between 16 and 60, when they make their first CPF contribution.
Disability - A condition that curtails to some degree a person’s ability to carry on his normal pursuits. A disability may be partial or total, and temporary or permanent.
Disability Benefit - The benefit payable under Disability Income policy or a provision of some other policy, such as Life Insurance Contract.
Dismemberment - The loss of, or loss of use of, specified members of the body resulting from accidental bodily injury.
Distribution Cost - Total costs that the insurer expects to incur on the policy. It includes cash payments in the form of commission, cost of benefits and costs of services paid to the distribution channel.
Eldershield - An insurance scheme introduced by the Ministry of Health (MOH) to provide financial help to those who are unable to take care of themselves because of severe disabilities.
Employee Benefits Programme - A programme through which benefits are offered to employees by an employer covering such contingencies as medical expenses, disability, retirement and death. Part or all of the premiums are paid by the employer.
Endorsement - Amendments to an insurance policy that becomes a part of the insurance contract and expands or limits the benefits payable.
Endowment - Insurance plan with a fixed maturity date that combines insurance protection with a savings element for policyholders.
Extended Term Insurance - A provision in most policies which provides the option of continuing the existing amount of insurance as term insurance for as long a period of time as the contract's cash value will purchase based on the insured's attained age. It is one of the non-forfeiture options available to the insured in case a premium, is not paid within the grace period.
Estate - Total assets of a deceased person, which can be valued in monetary terms. It consists of movable and immovable property.
Estate Planning - The process of developing a plan to transfer property from one generation to the next, or within a generation (e.g. from husband to wife).
Evidence of Insurability - Any statement of proof of a person's physical condition and/or other factual information affecting his/her acceptance for insurance.
Excess - Amount the insured will be required to contribute before they can make a claim. Commonly used in Motor Insurance Policy.
Exclusion Clause - A contractual provision specifying the conditions for which the insurer will not pay any benefits in the event of a claim arising as a result of the occurrence of the condition.
Fidelity Insurance - A type of insurance which is designed to protect a firm from losses caused by the dishonest acts of its employees.
Fire Insurance - Insurance against fire, lightning or explosion; it can also include insurance against windstorm, earthquake, flood and other natural hazards or political risk.
Free-look Period - The policy may be cancelled by written request to the insurer within the stated period after the policyholder has received the policy document (for life policy it is 14 days). Premium paid (less any medical fees incurred if applicable or necessary in assessing the insurance application) will be refunded to the policyholder.
Fund Management Fee - Fee paid to the fund manager for portfolio supervision and for general management of the fund's affairs.
General Liability Insurance - Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured's premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.
Grace Period - The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force.
Group Insurance - Insurance protecting a group of persons under a single contract. Usually they are all employed by the same employer or similarly related.
Guaranteed Insurability Option - Life and health insurance provisions that guarantee the insured the right to buy additional coverage without proving insurability.
Guaranteed Renewable - A policy provision in many products which guarantees the policyholder the right to renew coverage at every policy anniversary date.
Health Insurance - A type of insurance that provides protection against the risk of financial loss resulting from the insured person's sickness, accidental injury or disability.
Home Insurance - A type of insurance that protects an insured from the financial losses resulting from damage to the insured’s home or contents or resulting from being held liable for the losses of others suffered while on the insured’s property.
Hull Policy - A contract that provides indemnification for damage sustained to or loss of an insured vessel.
Immediate Annuity - Annuities that are designed primarily to convert a lump sum of money into a guaranteed income stream. The income stream starts immediately one annuity period after the annuity is purchased.
Incontestability - Provision introduced by the insurers on a voluntary basis to provide greater assurance to the public whereby the insurer undertakes not to dispute the validity of a life insurance contract and voiding it after the policy has been in force for a specified period of time with the exception of fraud.
Increasing Term Life Insurance - Term life insurance that provides a death benefit that increases by some specified amount or percentage at stated intervals over the policy term.
Indemnify - To restore the victim of a loss to the same financial position as before the loss occurred.
Insurable Interest - The interest arising when one person has a reasonable expectation of benefiting from the continuance of another person’s life or of suffering a loss at his or her death.
Insurance Policy - The document which contains written evidence of the contract between an insurer and an insured.
Insurer - The party to an insurance arrangement who undertakes to indemnify for losses provide pecuniary benefits, or render services.
Insured Perils - It mean fire, lightning, explosions, impact by aircraft, impact by road vehicle, bursting or overflowing of domestic water tank apparatus or piping, washing machine, water mains, actual or attempted theft accompanied by forcible and violent entry only, hurricane, earthquake, volcanic eruption, flood, riot, strike, malicious damage.
Intestate - When a person dies without leaving a will.
Investment-linked Plan - The premiums paid are used to purchase life insurance protection as well as units in an investment fund. The price of the units will depend on the investment performance of the fund.
Lapsed /Lapsation - A policy terminated for non-payment occurring before the policy has a cash or other surrender value.
Level Term Life Insurance - A term life insurance policy that provides a death benefit that remains the same over the term of coverage.
Lien - Applicable to sub-standard risks under which a standard premium is paid but less than the full face amount of the policy will be payable if death occurs within a specified number of years.
Life Insured - A person whose life is covered under a life insurance policy.
Life Insurance - A policy under which the insurance company promises to pay a benefit upon the death or total and permanent disablement of the insured person or upon the maturity of the policy.
Limited Payment Policy - Life Insurance providing full life protection but requiring premiums for only part of the customer’s lifetime.
Material Facts - In insurance, it refers to a fact which is so important that the disclosure of it would change the decision of an insurance company, either with respect to writing a coverage, setting a loss, or determining a premium. Usually, the misrepresentation of a material fact will void a policy.
Maturity Date - An agreed date on which an insurance company pays out a lump sum.
Marine Insurance - Line of insurance which includes coverage for property in transit (cargo), means of transportation (except aircraft and motor vehicles), offshore installations and valuables, as well as liabilities associated with marine risks and professions.
Medisave - A national medical savings scheme which helps individuals put aside part of their income into their Medisave Accounts to meet their future personal or immediate family's hospitalization, day surgery and certain outpatient expenses
Medishield - A lost cost catastrophic illness insurance scheme. Introduced in 1990, the government designed MediShield to help members meet medical expenses from major illnesses, which could not be sufficiently covered by their Medisave balance. MediShield operates on aco-payment anddeductible system to avoid problems associated with first-dollar, comprehensive insurance. Premiums are paid by Medisave.
Motor Insurance - Line of insurance which offers coverage for property, accident and liability losses involving motor vehicles.
Mortgage Reducing Term - A reducing term life assurance that provides home financing borrowers with financial protection in the event of premature death or total permanent disability
Non-Forfeiture Loan - For those policy that had acquired cash value and if a premium is not paid within the 30 days of grace period, the policy will be kept in force by the non forfeiture loan. Interest on such loan will be charged at a rate to be determined by the company. As cash value is utilized, it will reduce the overall benefit of the policy.
Paid-Up Value - Provision that entitles the policyholder to discontinue payment of future premiums after the policy has acquired a cash value. The policy remains in force for a reduced sum assured.
Payment Mode - Means by which a payment is made, such as cash, check, or credit card.
Payout Period - (1) The period during which a payee receives payments. (2) The period during which an insurer makes annuity benefits payments.
Personal Lines - Insurance for individuals and families, such as private-passenger auto and homeowners insurance.
Policy - The written contract effecting insurance, including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
Policyholder - Person listed as the owner of the policy and who is responsible for premium payment.
Policy Period (or Term) - The period during which the policy contract affords protection.
Policy Loan - A policyholder in temporary need of cash may apply to the insurer for a policy loan against the security of the policy. This will normally be granted as long as the policy has acquired a cash value. Interest will be charged for such a loan.
Policy Schedule - A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.
Pre-Existing Condition - A coverage limitation included in many life and health policies which states that certain physical or mental conditions, either previously diagnosed or which would normally be expected to require treatment prior to issue, will not be covered under the new policy for a specified period of time.
Premium - The price of an insurance policy, typically quoted on an annual, semi-annual, quarterly or monthly basis.
Premium Holiday - Applicable to an investment linked policy in which the policyholder can choose to stop paying his regular premium for a certain period of time for as long as the cash value of that policy is enough to cover his premium and the charges.
Premium Notice - A statement sent by the insurance company informing the insured that the premium on a policy is due.
Proposer - The person who applies for an insurance policy
Product Summary - Summary of the features and benefits of a specific insurance policy being considered for purchase.
Reduced Paid-Up Insurance - A form of insurance available as a no forfeiture option. It provides for continuation of the original insurance plan, but for a reduced amount.
Regular Premium Policy - A policy that requires periodic premium payments for example, monthly, quarterly, half-yearly or yearly.
Reinstatement - The process by which an insurer puts back into force a life or health insurance policy that has been terminated for non-payment of premiums or a life insurance policy that has been continued as an extended term or reduced paid-up insurance.
Renewable Term Insurance - Term Insurance which can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. The rates increase at each renewal as the age of the Insured increases.
Renewal - The automatic re-establishment of in-force status effected by the payment of next premium.
Reserve - The funds that an insurance company is required by law to hold specifically for the fulfillment of its policy obligations.
Reversionary Bonus - An amount payable on top of the basic sum assured on death or on the maturity date (in the case of an endowment policy). The reversionary bonus declared each year is determined by the Appointed Actuary and approved by the Board of Directors.
Rider - A supplementary plan that can be attached to a basic insurance plan, such as whole life or endowment. It is designed to give additional financial protection at lower cost.
Standard Risk - A person, who, according to a company's underwriting standards, is entitled to purchase insurance protection without extra rating or special restrictions.
Single Premium Policy - A policy that only requires a one-time upfront payment.
Substandard Risk - A risk that cannot meet the normal requirements of a standard insurance policy. Protection is provided in consideration of a waiver, a special policy form, or a higher premium charge.
Suicide Clause - Most insurance policies provide that if the insured commits suicide within a specified period, usually one or two years after date of issue, the company’s liability will be limited to a return of the premiums paid.
Sum Assured - The guaranteed amount that the policyholder is insured for.
Surrender - The process by which a policy-owner may cash in his policy. Once the insurer has paid the surrender value, then no other premiums will be payable and the insurance contract will be canceled.
Switching/Twisting - The act of an agent inducing an insured through misrepresentation to drop an existing policy and take a similar policy from him.
Term Life Insurance - Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn't build up any of the non-forfeiture values associated with whole life policies.
Terminal Bonus - Additional benefits declared by the Cooperative each year for participating policies that will reach maturity or have claims in that year.
Third-party Policy - An insurance policy which is taken up on the life of a person other than the payer or owner of the policy.
Travel Insurance - A form of Health Insurance limiting coverage to accidents occurring while the insured is traveling (Travel policies normally include other risks as well, e.g. loss of luggage, personal accident, personal liability, etc)
Underwriter - An insurer or an individual who determines the acceptability of an insurance and specific terms for it.
Underwriting - The process of assessing and classifying the degree of risk represented by the proposed insured and making the decision to accept or decline the risk.
Utmost Good Faith - Insurance contracts require the parties (insurer and insured) to exercise the utmost good faith in their dealing with each other. Specifically the proposer of an insurance must disclose all material facts which would influence a prudent insurer in deciding whether to accept the insurance and if so, on what terms.
A term used to describe a contract that is completely free of all legal effect.
Waiting Period - The time which must pass after filing a claim before policyholder can collect insurance benefits. This is commonly found in hospital and surgical insurance whereby waiting period can range from 30 days to 6 months but commonly set at 90 days.
Waiver of Premium Rider - A supplementary benefit under which the Insurer gives up its right to collect renewal premiums that become due while the insured is totally disabled.
Whole Life Insurance - Life insurance which might be kept in force for a person's whole life and which pays a benefit upon the person's death, whenever that might be.
With Profits/Participating Policies - With-profits policies are entitled to share in the profits of the participating fund. In Singapore, these profits are usually distributed via bonus declarations at the discretion of the Insurance Company.
Without Profits/Non Participating Policies - Without-profits policies are not entitled to share in the profits of the insurance fund. All charges and benefits are fixed at the onset of the policy.
Workmen's Compensation - Insurance agreeing to pay benefits under Workmen's Compensation law on behalf of the insured employer.