The COVID-19 pandemic is changing the way Canadian think about health care and insurance. More and more people are actively seeking the best option of insurance policy to protect themselves and their families against unexpected events. In case you are confused about many technical Insurance terms in the Insurance Industry, start with this article to have a basic understanding of essential Insurance terms that you need to know!
1. Insurance contract: An agreement between a purchaser of insurance and an insurance company, whereby a purchaser of insurance (policyholder) must pay a premium, an insurance company (insurer) must pay a premium for the beneficiary or indemnify the beneficiary(ies) when an insurance event occurs.
2. Policyholder: A person, group or corporation in whose name an insurance policy is held. The term ‘Policyholders’ is usually used for the party of the contract who fills in the Proposal and signs, commits to fulfil the terms mentioned in the agreement and pays the premium. The policyholder may or may not be the insured who is being covered against the risk under the policy.
For example, a husband can purchase a term life insurance policy for his wife. In this case, this husband is the policyholder, and he controls the life insurance policy.
3. Life Insurance company (also called insurer): An enterprise established and operating under the provisions of the Law and other relevant law provisions for Insurance and Reinsurance business.
4. Insured (also called Assured, Life assured): A person whose health and life are the main insured subject of a life insurance policy.
Currently, a Life Insurance policy (individual type) has only one main insured (except for insurance products for pregnant women). Mostly, when it comes to life insurance, the breadwinner of the family is the life assured. The insured or assured may or may not be the policyholder.
For instance, a wife purchases a life insurance policy for her husband because he is the primary source of income for her family. Therefore, in this case, the wife is not the insured but the policyholder, while her husband is the life assured.
5. Insurance buyer: An organization or individual who enters into an insurance contract with an insurance enterprise and pays periodic premiums to maintain the contract. The insured is not necessarily the insurance buyer. And the purchaser of insurance can be either the insured or the beneficiary at the same time.
6. Beneficiary: An organization or individual designated by an insurance buyer to receive insurance benefits under the insurance contract. When it comes to a life insurance policy, the beneficiary gets the sum assured when the policyholder passes away while on the insurance plan.
7. Sum assured (is also called coverage): The term used for an amount of money the insurer agrees to pay for the beneficiary and is recorded in the insurance contract on any insured event or the insured’s death during the insurance policy period.
The sum assured (coverage) is chosen by the insurance buyer when purchasing and signing the contract.
8. Underwriting: A process where an insurance company evaluates the risk of insuring the applicant. The applicant can be a person, a part of the human body or an asset such as a house, car, etc. Then they will review whether it is profitable for the insurance carrier to cover this person/thing, then determines the final rate based on a specific formula.
9. Premium: The amount of money that the insurance buyer has to pay periodically for the privilege of maintaining the insurance contract active. Usually, the higher the premium, the higher your coverage and vice versa. Some people choose to pay their premium every month, and the others pay once every quarter or every year.
10. Insurance agency (also called insurance brokerage/ broker or independent agency) is an organization or individual authorized by an insurance enterprise based on an insurance agency contract to perform insurance agency activities under the Law on Insurance Business and relevant laws.
Life Insurance Quote, Insurance Direct Canada and Best Insurance Online belong to one same independent insurance broker. We do not work for any individual insurance carrier such as Sunlife, Manulife, etc. We consider and analyze all Insurance carriers in Canada objectively, then pick out which insurance carriers we would like to present and recommend to our customers. Therefore, clients can find the best coverage and available updated price through us.
11. Insurance Carrier (also called an insurance provider or an insurance company) is the issuer of the insurance policy you intend to join and will pay for your insurance coverage, the one who is behind the underwriting, claims, pricing, etc. While the insurance agency supports you with the advice, the insurance carrier bears the financial risk. Hence, it is essential to know and remember the name of your insurance provider and be aware of the method to contact them in case anything happens that you need them. In Canada, as you may know, some popular Insurance Carriers are Manulife, Sun Life, Canada Life, Desjardins,…
Read more about Best Insurance Companies in Canada in 2021.
Take the example of Samsung and Amazon. If you were to buy a Samsung Note cell phone from Amazon, then Samsung would be your Insurance Carrier, and Amazon acts the same role as Insurance Direct Canada – the insurance Agency. Amazon helps you to find a list of relevant products based on your needs and make a price comparison, while Samsung is the one who manufactures the phone and is responsible for the guarantee.
We hope that you now have a firm understanding of several essential insurance terms that you will often encounter. Should you require any other terms, comment below!