Insurance 101: Jargons & Terms, Defined

If you’ve ever struggled over figuring out how things work in insurance, don’t be afraid to ask for a helping hand from us. We know things can get complicated, especially with certain complex terms popping. To help you better understand and navigate the world of insurance, we’ve compiled a list of terms and their definitions:

Life

Sum assured: Refer to “Coverage Amount”

Beneficiary: A person who will be getting the proceeds or the benefits from something (such as a life insurance policy)

Claimant: A person making a claim for a benefit

Coverage Amount: Also known as the coverage amount or sum assured, this is the pre-determined amount that is detailed in your policy and will be paid out to your beneficiary in the event of a claim.

Coverage Term: The duration of your insurance policy.

Premium: The amount that you pay monthly, quarterly or annually for your insurance plan.

Lump Sum: A large, one-time payment from an insurance policy in the event of a claim.

Maturity: The date for when your insurance plan coverage matures/ comes to an end.

Maturity Benefit: The amount to be paid to the policyholder when their insurance policy matures

Maturity Booster: An additional amount to be paid to the policyholder at maturity, on top of the maturity value

Total & Permanent Disability: When a person suffers an irreversible sickness or injury that prevents them from working.

Policy: This is a legal document that details the contract between you and your insurance provider. It includes all the particulars of your insurance coverage as well as the terms and conditions that you have agreed to.

Death Benefit: This is the amount of money that will be paid to the policyholder’s next of kin after they pass away.

Riders: These are optional add-on plans that help expand the coverage of your basic insurance plan at an additional cost and premium.

Waiver: If the policyholder is unable to pay their insurance premium due to total or permanent disability or other conditions as specified in the policy, the waiver clause ensures that insurance the policy is still in effect.

Investment-linked

Investment-Linked: A policy that combines life protection and investment through the buying of funds units.

Account Value: This is the value gains from the investment returns. The life insurance company puts some of the money you pay as premiums into various types of investments, with the expectations that they'll gain in value.

Allocated Premium: An amount set aside from the premium paid, which is used to purchase units or invest in the investment-linked funds of your selection.

Dividend Payment: An amount paid out to the policyholder, from the performance of the investment. Usually paid out annually.

Critical illness

Critical illness: Life-threatening conditions and sicknesses that are defined in your policy contract. A lump sum payment will be issued should there be a claim.

Recovery Reward:If you are diagnosed with a disease, your insurance provider will give you a certain percentage of your coverage amount after the first 6 and 12 months as a reward for your recovery process.

Extended Recovery Income: An annual payment valued at a certain percentage of your coverage amount will be paid to you for the next 5 years to help you on your path to recovery.

Benefit Illustration: This is a year-by-year summary of the costs and benefits of an insurance plan that includes items such as policy premiums, death benefits, cash values, and other information that can affect your cost of buying insurance.

Medical

Lifetime Limit: The amount you can claim throughout your lifetime under your medical plan.

Annual Limit: The maximum amount your insurer will pay in a year for your medical plan. Likewise, a medical plan’s Lifetime Limit is the maximum amount you can claim throughout your lifetime.

Underwriting: A process where insurers assess the amount of risk you might have in relation to the cost of the coverage.

Waiting period: This is the time period where the insurance company will not pay for certain claims. This period typically falls within 30 – 90 days from the commencement of the medical plan.

Deductible: An upfront amount that you will have to pay for healthcare services before your medical insurance begins to pay. This is applicable for most medical insurance plans with the exception of zero deductible plans, where the insurer pays 100% of medical expenses that are covered under the medical plan.

Zero deductible: The person covered will not have to pay any portion of the medical charges, as the insurer pays 100% of medical expenses covered under the medical plan.

Referral Emergency Assistance: Also known as REA, it is a programme that provides international and domestic medical assistance for emergency medical evacuation and repatriation. It may also include emergency car, home and travel assistance.

Hospital Room & Board: The benefit provided by a medical insurance plan for the hospital room and boarding of the policyholder

Pre-Existing Illness: Past or existing illnesses which a person has at the time of buying a medical insurance policy, which insurers do not provide coverage for.

Outpatient Treatment: Treatment at a hospital, clinic or medical facility that does not require admission to hospital for an overnight stay.

Cost Sharing: When both you and your insurer pay part of your medical expense, it’s called cost sharing. Deductible and Co-insurance are examples of how cost sharing may work in a typical medical plan.

Deductible: An upfront amount that you will have to pay for healthcare services before your medical insurance begins to pay. This is applicable for most medical insurance plans with the exception of those with zero deductible, where the insurer pays 100% of medical expenses that are covered under the medical plan.

Co-Insurance (also known as Co-Takaful in Takaful plans): A fixed amount that is usually a percentage of your total medical expenses. For example, if your medical bill is RM5,000, a % of the total medical expense cost will be charged to you. The remainder will be covered by your insurer based on the coverage of your policy. Similar to deductible, there are medical insurance plans with zero co-insurance as well.

References

http://www.ambest.com/resource/glossary.html#P

http://www.livemint.com/Money/xfXiLlZ9BtMXWMbqGkoVYO/How-to-use-the-benefit-illustration-of...

https://www.aia.com.my/content/dam/my/en/docs/individuals/savings/A-InvestLink.pdf

The above articles are intended for informational purposes only. AIA accepts no responsibility for loss, which may arise from reliance on information contained in the articles.