LIFE INSURANCE TERMINOLOGY
the insurance company to decide whether or not to insure you and may include information related to your health, lifestyle, smoking and other personal information.
Sandeep Ahuja
Premium It is the amount of periodic payment that the policyholder agrees to pay to the insurance company. As per the policy terms, the policy owner may pay the premium in one payment or a series of payments
H
uman life is precious and it’s important to secure it. Insurance is a valuable product/service that saves us and our family from the financial constraints arising from an illness, injury or death. You must have often heard about insurance from your friends and financial advisors. To help you gain a basic understanding of the concept, I have explained below the common terms used in insurance. Hopefully, these will clarify your idea about life insurance.
Claim It is a formal request that we submit to the insurance company for the payment of an insurance benefit. Contestability
Life Insurance A kind of insurance which pays out a lump sum death benefit if the life insured dies. Disability Insurance An insurance which pays out a monthly benefit to replace the income of the insured if he is unable to work due to an injury or a sickness. Critical Illness Insurance An insurance product which pays a lump sum benefit if the insured suffers from one of the life altering illnesses covered under the insurance contract. Accident and Sickness Insurance A type of insurance that pays a benefit in case the insured falls ill, suffers an injury or dies from an accident. Term Life Insurance A kind of life insurance that offers a low-cost, temporary insurance protection for a specified period of time. It offers coverage option either for a set number of years such as Term 20, 30, 40 or till a certain age such as age 65. A term insurance has no cash value. It is generally used to meet a temporary need such as mortgage protection or a need for a large amount of insurance at the lowest possible initial price. Permanent Life Insurance Permanent life insurance provides you coverage for the duration of your life. On the death of the insured, the insurance company pays the beneficiary the promised death benefit. This can be the face amount or the increased value, as per the options selected by the owner during the purchase of the policy.
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Participating Life Insurance
and the insurance company in which the terms of your coverage are set.
It is a permanent life insurance contract which builds up cash value by using the dividends (profits) that the company earns. It offers greater flexibility to the insured. As per his needs, the insured can chose to have increased coverage, extend the coverage duration, surrender the policy for the built up cash surrender value, or can take policy loan against the surrender value.
Policy owner
Annuity
The person who receives payments from an annuity or on whose life the payments are based.
It is a contract that pays a periodic income at regular intervals, in exchange for an upfront payment. This income is usually for life and you can chose to start it right away or some time in future. Advisor/Agent He is the representative licensed by the provincial authorities to sell life insurance, accident and sickness insurance, group insurance and annuities, including segregated funds. Insurer The insurer is the insurance company that issues different kinds of policies and promises to pay death benefit to the insured. Face Amount It is the amount of the sum assured that the insurance company pledges to pay the insured/ beneficiary in case of death, critical illness, accident or disability, as per the insurance plan chosen by the insured. Contract It is a legal agreement between you
The person who owns the insurance policy, pays the premiums and can make necessary decisions for the policy. Life Insured The person on whose life the insurance contract is based. Annuitant
Beneficiary The person who is paid out a lump sum benefit if the life insured dies. For a disability insurance and critical illness insurance policy, the insured can be the beneficiary himself, since these are the living benefits. Contingent policy owner The person who owns the policy if the main policyholder dies. The ownership of the policy is transferred to him in this case. Contingent beneficiary The person who is paid out the death benefit if the primary beneficiary dies. Cash surrender value It is the amount of cash value built up within a permanent participating life insurance policy, which the insured can surrender to receive the cash back. Evidence of insurability It is the information used by
It is the legal right of the insurance company by which it can question your insurance coverage. If it discovers that you provided incomplete or incorrect information during the purchase of insurance, it may cancel the coverage and can deny claims, if the information would have impacted their decision to insure you. Most policies have a twoyear contestability period. Underwriting It is the process by which the insurance company decides to insure someone or not. I hope the above mentioned description has simplified the concept of life insurance for you and would help you gain a better understanding of how it works for your protection. As an independent insurance advisor working through Punjab Insurance Agency, I deal with different insurance companies offering plans for different types of insurance. I can explain to you in detail, the insurance plan options and coverage that are suitable for your needs and resources. Besides, I can also help you to purchase mortgage insurance, super visa insurance, disability insurance, critical illness insurance, extended medical plans, group medical plans, RESP, RRSP, travel insurance, TFSA accounts, health and dental plans along with estate planning suitable for your needs and resources. For a no obligation appointment, please call me at 604-996-6862 or email me at sandeepahuja@ punjabinsurance.ca This article is © Copyrighted 2022-03-25 and can be reproduced only with prior permission.
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Email: sandeepahuja@punjabinsurance.ca www.entertainmentmagazine.ca
