AIA Malaysia

Glossary

Assignee

The party to whom all or certain rights are transferred under an absolute assignment.



Attending physician's statement (APS)

A report from a physician consulted by the proposed insured either for routine physical examinations or for specific health problems. The report provides the company with information relevant to underwriting the risk or settling a claim.



Attained age

The current age of the insured. The age of the insured at the time the insured party's policy was issued plus the number of years elapsed since the policy was issued.



Absolute assignment

A procedure in which a policy owner transfers all rights of policy ownership to another person or organisation. Absolute assignment is irrevocable.



Application

A form which must be completed by an individual or other party who is seeking insurance coverage. It provides the insurance company with information relevant to the decision to accept or reject the risk. It is usually attached to and forms part of the policy. Also called a proposal form.



Automatic premium loan (APL)

A policy loan authorized in advance by the policy owner to be used only to pay a premium which remains unpaid at the end of a grace period. Also see non-forfeiture options.



Anti-selection

The tendency of people with a greater likelihood of loss to apply for or continue insurance to a greater extent than others.



Assignment

The legal transfer of ownership rights under a life insurance policy or other contract from one party to another.



Beneficiary

The person/s or other entity designated to receive policy proceeds. See also irrevocable beneficiary and revocable beneficiary.



Basic policy (or coverage)

The primary insurance coverage that must be purchased by the insured before any other coverage or supplementary benefits.



Coverage

The guarantee against specific losses provided under the terms of an insurance policy. The terms coverage, insurance and protection are frequently used interchangeably.



Conversion privilege

A provision in an insurance policy that gives an insured the right to convert coverage from one policy to another, such as from a term policy to a permanent plan of insurance.



Counter offer

The insurance company may issue an alternative offer to an applicant if it cannot accept the insurance as applied for but may offer insurance at a different plan, amount or higher premium on account of the applicant's health, occupation, income or living conditions.



Cashout

The extra amount of loan requested in addition to the previous outstanding loan balance.



Certificate of insurance

A document which is given to insured members of a group insurance plan and which outlines the plan coverage and member's rights.



Contestable period

The time limit during which an insurer may contest or challenge the validity of a policy because of misrepresentation in the application. The length of the period is specified in the incontestability provision of the policy.



Cash surrender value (CSV)

Subject to a policy being in force for a number of years, the amount of money which will be refunded if the policy owner cancels the coverage and surrenders the policy to the company. Also referred to as cash value or surrender value.



Death claim

When an insured dies, the person entitled to the proceeds must complete certain claim forms giving due proof of the death and establishing the claimant's right to such proceeds. When filed with the company, the company is said to have a death claim.



Dividend

It is a share of the surplus earned which is apportioned for distribution and reflects the difference between the premium charged and the actual experience. Also called policy dividend.



Dividend option

One of several choices available to the owner of a participating policy concerning the disposition of the policy owner's share of the insurance company's divisible surplus. Common options are cash payment, premium reduction, dividend accumulation and paid-up addition.



Disappearing premium option (DPO)

A premium payment option elected by a policyholder who is covered under a participating policy. Out of pocket premium payment is no longer required after a critical year is reached by automatic annual premium deductions from past dividend accumulations or future dividends. Also known as vanishing premium option.



Dread disease rider

This rider provides specified benefits in the event that the insured is diagnosed to be suffering from a dread disease, such as cancer or stroke, which is named in the policy.



Extended term insurance (ETI) option

A non-forfeiture benefit under which the net cash value of the policy is used to purchase term insurance for the amount of coverage available under the original policy for a limited period.



Evidence of insurability

The evidence describing the risk of the proposed insured. In life insurance, it is concerned mainly with the health details of the insured.



Endorsement

A provision added to a policy, usually written on the printed page or in the form of a rider. No endorsement is valid unless signed by an executive of the insurer and attached to and forming a part of the policy.



Endowment insurance

This is a combination of protection and investment. Endowment periods are usually for 10, 15, 20, 25 or 30 years or until age 55, 60 or 65. Premiums are payable until maturity of the policy or prior to death of the insured. The face amount is payable at maturity or upon the death of the insured.



Exclusion clause

Provision of part of the policy contract limiting the scope of the coverage. Also refers to certain clauses and conditions listed in the policy, which are not covered.



Face amount (FA)

The amount stated in the policy as payable at the death of the insured or at the maturity of the contract. The amount is generally shown on the first page of the policy. Also known as face value or sum assured.



Future premium deposit fund (FPDF)

Advance deposits made by the policyholder for future premium payments. Deposits will accrue interest at specified interest rates.



Flat extra premium

A method of rating a sub-standard life insurance risk when the extra risk is considered to be constant or temporary.



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. If a premium is paid during this time, the premium is considered to have been paid "on time".



Group insurance

An insurance plan by which a number of employees (and their dependents) or other homogeneous group, are insured under a single policy, issued to their employer or leader with individual certificates given to each insured individual or family unit.



Hospital & surgical (H&S) rider

This rider provides benefits related directly to hospitalisation costs and associated medical expenses incurred by an insured for treatment of a sickness or injury.



Hospitalisation benefits (HB) rider

This rider provides a fixed daily income benefit when the insured is hospitalized.



Health certificate

A statement which is filed together with a request for reinstatement of a lapsed policy. It is concerned with the health of the insured as of the date of the statement.



Irrevocable beneficiary

A named beneficiary whose rights to life insurance policy proceeds are vested and whose rights cannot be revoked by the policy owner without the beneficiary's consent.



Incontestability provision

A provision that specifies a time limit on the insurer's right to dispute the validity of a policy based on material misstatements in the application.



Insurable interest

A condition in which the person applying for an insurance policy and the beneficiary will suffer an emotional or financial loss if the event insured against occurs.



Insured

An individual or business organisation protected in case of loss of property or life under the terms of the insurance policy. Also called assured.



Juvenile policy

An insurance policy which is issued on the life of a child.



Juvenile lien endorsement

An endorsement attached to policies issued on children below four years of age. It states the graded death benefits payable at the time of claim, typically from 20% to 80% of the face amount for the insured in that age group.



Key-man insurance

Life insurance purchased by a business on the life of a person (usually an employee) whose continued participation in the business is viewed as necessary to the firm's success and whose death or disability would cause financial loss to the firm.



Lapse

Termination of a policy due to non-payment of renewal premiums. If the policy has cash value, then the coverage may remain effective as extended term or reduced paid-up insurance through the application of a non-forfeiture option.



Misstatement of age or sex provision

Individual insurance policy wording which gives the insurer the right to modify the policy benefit amount if the insured's age or sex misstatement has resulted in an incorrect premium for the amount of insurance purchased.



Maturity date

The date on which a matured endowment policy has reached the end of its term and becomes payable.



Master contract

A life insurance policy that insures a number of people under a single insurance contract. A contract between an insurer and a group policyholder in which the individuals insured are not parties to the contract.



Misrepresentation

The act of deliberately making false or misleading statements of material facts concerning an insurance application.



Major medical insurance

A type of medical insurance for hospital, surgical and medical bills according to specified terms and conditions.



Mortgage Reducing Term Assurance (MRTA)

A type of reducing term insurance which covers the life of the person taking out the mortgage so that if death occurs during the term of insurance, the policy proceeds will approximate the remaining amount of the loan.



Non-smoker discount (NSD)

A discount on premium granted to a healthy individual who is applying for specific life insurance policies.



Non-forfeiture values

The benefits that the insurer guarantees to the policy owner if premium payments are stopped as printed in a life insurance policy. These amounts may be used in a variety of non-forfeiture options.



Non-forfeiture options (NFO)

The choices available to a policyholder to apply the cash value if the policy lapses. The typical options are cash surrender, extended term insurance and reduced paid-up.



Net cash value

The cash surrender value available to the policyholder after adjustments have been made to account for policy loans and dividends.



Non-participating policy

A life insurance policy which does not participate in the company's surplus.



Occupation class

Class of occupations that present a similar risk to an insurer. If all other factors are equal, people in the same occupation class will pay the same premium rates.



Offer and acceptance

In life insurance, the "offer" may be made by the applicant through signing of application, submitting to a medical examination and pre-payment of the first premium. Policy issuance, as applied for, constitutes "acceptance" by the insurer. Alternatively, the "offer" may be made by the insurer where no premium payment has been submitted with application and medical examination. Premium payment on the offered policy then constitutes "acceptance" by the applicant.



Participating policy

An insurance policy which shares in the company's surplus by way of dividends or bonuses.



Payor benefit (PB)

A rider often included in juvenile policies which provides that the insurer will give up its rights to collect the policy premiums if the policyowner or payor dies or becomes disabled.



Policy information page (PIP)

The first (face) page of an insurance policy. It normally contains the insured's name and age, policyowner's name (if different from the insured), premium, policy number, and policy issue date.



Policy

The contract between the insurance company and the policyowner under which the insurer agrees to pay the policy benefit when specific losses occur, provided the insurer receives the required premiums.



Pay life (PL) policy

A modification of the whole life plan where the premiums are payable for a limited period. After expiry of the selected premium payment period, the policy continues in force as a paid up policy with the face amount payable at death.



Paid-up additions (PUA)

Additional amounts of insurance purchased using dividends. These amounts require no further premium payments.



Policyholder

The person or party who owns an individual insurance policy. The policyholder is not necessarily the person whose life is insured, but often is. The employer or other party that applies for and is issued a group insurance policy is also a policyholder. The terms policyholder and policyowner are used interchangeably.



Premium notice

Notice of premium due sent out by the insurer to the policyholder.



Pre-existing condition

A condition which existed prior to policy issuance, usually health-related.



Policy anniversary

The anniversary of the date on which the policy was issued.



Policy change

A request from the policyowner for update to the policy record (change of name, address, beneficiary, face amount, type of coverage, mode of premium payment, etc.).



Package policy

A type of policy which contains permanent basic coverage, as well as other inherent coverages or supplementary benefits with insurance amounts, in a pre defined ratio to the basic amount. It must be sold as a package to the insured.



Partial disability

Partial loss of function as a result of an injury or disease which partially incapacitates an individual from carrying out his or her work.



Policy loan

An advance made by an insurer to a policyowner. It is secured by the policy cash value and shall bear interest at a rate determined by the insurer.



Paid-up (PU) policy

An in-force policy for which no further premium payments are required.



Proof of loss

A written statement made by the insured complying with certain conditions and given to the insurer. The purpose is to provide sufficient information to the insurer concerning the loss in order to determine its liability under the policy.



Premium

The payment or one of the regular periodic payments a policyholder is required to make to the insurer in order to put and keep a policy in force.



Pure endowment (PE)

A type of coverage that pays a benefit only upon the insured surviving a certain period of time; no payment is made in the event of the insured's death within that time period.



Proceeds

The amount of money that the insurer is obligated to pay for the settlement of a policy.



Rated policy

A policy issued to insure a person classified as having a greater risk than normal. The policy may be issued with special exclusions and / or a premium rate higher than for a standard policy.



Rider

An addition to the insurance policy which expands the benefits otherwise payable.



Renewal provision

An individual life insurance policy provision that gives the policyowner the right to continue the coverage at the end of the specified term without submitting evidence of insurability.



Renewable term insurance policy

A policy that gives the policyholder the option to renew the coverage at the end of the term. Common renewable periods are one year and five years.



Reduced paid-up insurance

A non-forfeiture option under which the net cash value of the policy is used as a net single premium to purchase life insurance of the same plan as the original policy but with reduced sum assured and for which no more premiums are required.



Reinsurance

Insurance that one insurer buys from another insurer to cover part or all of a risk that the original insurer will not or cannot undertake.



Reversionary bonus (RB)

A form of surplus sharing payable for selected permanent plans. It provides additional paid-up insurance at a stipulated percentage of the face amount (simple or compounded) on each policy anniversary.



Reinstatement

The process by which a life insurance company puts back in force a policy which has lapsed because of non-payment of renewal premiums.



Standard premium rate

The premium rate charged for insurance on a healthy individual.



Surgical schedule

The part of a health insurance policy that describes the maximum benefits payable for specified surgical services.



Settlement options

Choices given to the policyowner or the beneficiary of a life insurance policy regarding the method by which the insurer will pay policy proceeds. Instead of receiving the proceeds in a lump sum, the policyowner or the beneficiary may elect that the proceeds be retained by the insurer to be distributed under one of the following common options:

  • earn interest
  • pay out in specified installments
  • pay out in equal installments for a specified period
  • pay out in equal installments for life


Sub-standard premium rate

The higher premium rate charged for insurance on a person classified as having a greater likelihood of loss than normal.



Sales illustration (SI)

A printed proposal of a policy's rates, cash values and applicable dividends over a specified number of years. It is presented by the agent to the prospective client.



Suicide clause

Life insurance policy wording which specifies that the proceeds of the policy will not be paid if the insured takes his or her own life within a stipulated time frame, usually one year from the policy issue date.



Term insurance

Life insurance under which the benefit is payable only if the insured dies during a specified period and nothing will be paid if the insured survives to the end of that period. It contains no loan, cash surrender or non-forfeiture provisions. A number of term plans are convertible to permanent plans without the need for medical examination or other evidence of insurability.



Total and permanent disability (TPD)

Total and permanent loss of function as a result of an injury or disease which totally and permanently incapacitates an individual from performing his work resulting in permanent loss of earning capacity. The actual definition would depend on the actual wordings in the policy contract.



Twisting

Practice of inducing a policyholder to lapse or cancel a policy for the purpose of replacing such policy with another to the detriment of the policyholder. The practice is considered unethical.



Underwriting

The process of assessing and classifying the degree of risk that a proposed insured represents. This is the duty of the underwriter.



Variable life insurance policy

A form of whole life insurance under which the face amount and the cash value of the policy vary according to the investment performance of a separate account fund.



Voidable contract

A contract that can be legally rejected (avoided) by a party to the contract.



Void

A term used in law to describe something, such as a contract, which never had validity.



Waiver of premium

A rider or a policy provision under which the insurer promises to give up its right to collect the policy premiums if the conditions are met, as laid down in the contract, with coverage and benefits still offered as normal.



Whole life (WL) insurance

Life insurance coverage which remains in force during the insured's lifetime, provided premiums are paid as specified in the policy.



Yearly renewable term (YRT)

One-year term insurance providing the right to renew at the end of the year without evidence of insurability. The premium rate increases at each renewal as the insured's age increases.



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