Most of us don't use financial terms everyday, so they can seem a bit confusing. To make life a little easier, we've explained all the financial terms we use in clear English for you. We hope this helps.
In traditional policies, you pay a regular premium and you receive the benefits on maturity. Alternatively, the beneficiaries receive the benefits when the insured passes away. When you have a plan with an accelerated payout option, it means that the benefits are paid directly to the insured in certain situations e.g. if he is terminally or chronically ill or is confined to a nursing home. The amount of accelerated benefits paid out varies (it could be lump sum or a series of payments) depending on the type of policy.
Accidental Death Benefits
This is usually a supplementary benefit that provides for an amount of money in addition to the basic death benefit of a life insurance policy. This additional amount is payable only if the insured dies as the result of an accident
A series of periodic benefit payments (either annual or monthly) that begins at retirement and continues throughout the participant's lifetime. A joint and survivor benefit wherein the participant's spouse will keep receiving annuities can also be provided.
The person(s) entitled to receive benefits under the given circumstances/ conditions stated in the Policy. The Beneficiary is stated in the policy application.
Capital Growth Dividend
The insurance company may declare a Capital Growth Dividend on any anniversary of the policy. This dividend would apply only to policies that are in force and where all premiums due have been paid on such anniversary.
The Capital Growth Dividend can be in the form of an addition to the face amount of the policy, in which case, the benefits payable to you at the maturity of the policy or to the beneficiaries at death of the insured will increase.
Capital Growth Dividends will not be applied if the policy is cash-surrendered within twenty years from the policy date under the "Cash Surrender" provision of the policy.
In a whole life insurance policy, this is the amount of money that the policy holder will receive if he / she cancels the coverage and surrenders the policy to the insurance company. The Cash Value is determined by the insurance company on any date as equal to the Account Value on that date less any surrender charges and processing fees deducted upon surrender.
Policy owners can, in some cases and subject to the policy terms, borrow against the cash value of the policy. Also called "Cash Surrender Value".
The conditions which are not covered by the insurance policy and for which no insurance benefits will be paid by the insurance company.
This is the basic insurance amount shown on the "Policy Specification Schedule". The Insurance Company is obligated to pay this amount to the insured at maturity of the policy, if this is specified in the policy, or to the beneficiaries in case of death of the insured.
The amount is generally shown on the first page of the policy. It is also called "face value"
It does not include additional amounts payable under accidental death or other special provisions, or acquired through accumulation of funds
The grace period is applied when a premium payment on a policy is due but unpaid. In such cases, the insurance company looks at the Surrender Value of the policy as on the due date. If this surrender value is not sufficient to cover the premium amount due, then a grace period will be allowed for the policy holder to make the payment.
During this time (usually 31 days) the policy, including all riders, remains in force. If the premium is paid before the end of the grace period, the premium is considered to have been paid on time.
If the insured dies within the grace period, the amount of overdue premium will be deducted from the proceeds.
If the premium is not paid by the end of the grace period, all coverage under the policy will terminate and the policy will end without value.
Juvenile insurance policy
A life insurance policy purchased by an adult to cover the life of a minor child.
This is an amount equal to the cash surrender value of a life insurance policy plus any paid-up additions, minus any existing indebtedness, including accrued interest and charges.
No lapse guarantee
This is an agreement by the insurance company to keep the policy in force, even if the Cash Value becomes zero or less than zero, provided you have made a specific minimum contribution to the plan within the stipulated time frame. The no-lapse guarantees are usually for a specific period of time.
Partial withdrawal refers to the act of withdrawing a portion of the account value. The partial withdrawal will result in a reduction in the account value to the extent of the amount withdrawn and any associated charges. Details regarding when partial withdrawals can be made, the related charges, the minimum and maximum withdrawal permitted etc vary from policy to policy and can be found in the policy contract.
A form of long-term investment, usually tax-exempt, wherein regular or periodic contributions made by employers and employees are invested in a pool of funds set aside for the employee's future retirement benefit. The capital and accrued interest will be paid at retirement either as a cash lump sum or in the form of annuities.
The Policyholder is the owner of the policy. This is the person who has the responsibility of paying the premiums to the insurance company. Usually the policyholder is the same person as the insured.
Return of Premium
Return of Premium is a feature of certain policies whereby the policy holder is refunded, in part or in full, the premium that was paid during the lifetime of the policy on the date of maturity, if the covered risk does not materialise.
An addition to an insurance policy that becomes part of the contract and that either expands or limits the benefits that would otherwise be paid under the policy terms.
A form of permanent life insurance in which premiums are fixed, but death benefits and other values may vary, reflecting the performance of the sub-accounts in an insurer’s separate account.
Variable Universal Life Insurance
A type of variable life insurance where the premiums are flexible and benefits fluctuate based on the value of underlying investments. Premiums and benefits are adjustable at the option of the policyholder.
The length of time between when an injury or illness occurs and when the benefit payments are received from the insurer. Also known as the "elimination or qualifying period".
Waiver of Premium
This is a provision that waives the remaining premiums due in the event of death or permanent disability of the insured. It is usually offered in a supplementary contract.
The first premium so waived shall be the one falling due immediately after the date on which death or permanent disability occurs. The waiver of premium for disability remains in effect as long as the insured is disabled and premiums are due.
Whole Life Insurance
Life insurance with level premiums 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.