Glossary
Glossary Of Term Insurance
There are a plenty of terms used when you approach an insurance company to buy a term policy. A glossary of term insurance policy vital terms is given below.
Annuity – A lump some of money is paid by the purchaser to the life insurance company which will be made available to you on a monthly basis for a specific period. You may get this like an interest for a deposited amount every month.
Annuitant – A person on whose life the annuity is paid monthly. If your employer is entering this policy by paying lump some on you behalf to get the benefit at the time of your retirement, you will be the annuitant.
Application – A written and signed declaration, purchaser giving facts about health, income etc. Based on the information insurance company will decide to issue policy or not. If you are the purchaser you will be making use this is application.
Assuris - This is an organization which protects a Canadian policy holder in the event of the insurance company becoming insolvent. Also it protects policy holder’s benefits and transfers their policy to another working insurance company where the benefits will be continued. This facility is available only to resident Canadian citizens. If you are resident Canadian then your policy will be protected in the event of the insurance company going bankrupt.
Back dating – This procedure is adopted to make the effective date of the policy earlier than the date of application. This process facilitates the policy holder to pay lesser premium.
Beneficiary – This person will get the benefits according to the terms of the insurance policy. Spouse, children, parents or grand children are known as preferred beneficiary. If you are the policy holder you have the choice of nominating any person as the beneficiary.
Contingent beneficiary – This is a person who received the benefits in case the policy holder dies before maturity of the policy. Usually this is considered when a husband and wife make each other as beneficiary. This is husband nominating wife and wife nominating husband for their respective assets.
Conversion right – This is an option available in term insurance, which facilitates to convert from one plan to another after some period of specified time. If you are the insurer you get this option to change the plan to another after a period of time.
Contingent owner – This a facility to transfer the owner ship of the policy in the event of death of the policy holder. If you are the policy holder your policy will be kept alive by transferring this to a nominated person in the event of death.
Differed annuity – This facility is to get the income payment in a later specified date. This is like getting your pension after your retirement.
Dividend – This is the difference between anticipated and actual operating expenses or difference between anticipated and actual claim and interest earned over and above the required rate. This is just similar to dividend in a share market.
Group life insurance – This is largely found in employees of an organization usually one year renewable term life insurance. The cost of coverage depends on the average age of the group. This is similar to employees or workers insurance in India.
Inspection Report – This is an interview with the person who has applied for the life insurance by the authorized person of the insurance company. The questions will be related to the applicant’s habits such as smoking or alcoholic, income, confirmation of employment etc. This is a general review interview.
Insured – This is a person on whom the policy is covered. If the insured dies the benefits will go to the nominee. If you are the person who applied for the insurance, you will be covered by the policy and you will be called insured.
Endowment – This is a life insurance payable to policy holder if living or to the nominee if died before maturity. For example if term of maturity is at the age of 60 years amount will be paid in cash to the policy holder which is taxable and if policy holder dies before sixty years the cash paid to the beneficiary is tax free.
Grace period – This is a time allowed to pay the premium beyond the due date which is usually thirty days from due date. If you fail to pay the premium before the due date you are permitted to pay premium beyond the due date.
Lapse – If a premium is not paid even after the grace period the policy will be terminated. This policy may be revived provided all the dues are paid.
Non Medical Limit – For a certain amount of the sum assured policy is issued without taking a medical examination. For example if the policy value is less than $1,000 the applicant need not go for a medical examination.
Premium – This is the amount you have to pay for the cost of insurance periodically. You have an option to pay it monthly, quarterly, half yearly or yearly. For example if the policy value is $10,000, your monthly premium for twenty years may be $10 a month, $ 30 for a quarterly, $60 for half yearly and $120 for yearly.
Policy Holder – This is the person who is the owner of the policy or the insured person. For example if you purchase term insurance policy and if you are issued with a policy, you are the policy holder.
Registered retirement savings plan – Under this plan the amount deposited is fully tax free in the year of depositing and fully taxable in the year of receiving. For example if you deposit say $10000 in the year 2008 the amount you pay is not taxed for year 2008. You may receive in the year 2028 and the amount is taxed.
Term Life Insurance – The duration of policy to cover the insured and need not be for the entire life. You may purchase a policy for twenty five years at the age of thirty so that the tem will be calculated as twenty five years. At the age of fifty five years you will get the policy value with interest by full settlement.
Waiver of Premium – This is a special option available to the applicant of insurance which keeps the policy in force even if the premium is not paid under certain conditions. Policy holder might have been totally disabled for period say six months. Then premium will be waived for that period and the policy is kept alive.
Yearly renewable term insurance - This type of insurance system is term life insurance which may be renewed every year without stating age.
Mortality table – This is a statistical table used by insurance companies which shows the probable age of death for all ages.
Non smoker discount - This benefit is offered to a policy holder who is not a smoker for twelve months before applying for covering this benefit. The benefit is about fifty percent of the normal premium. That is if a person need to pay a premium of $ 100 year normally will pay only $ 50 if he or she is a non smoker.
Reinstatement – This is used to restore a lapsed policy after verification for a good health condition of the policy holder and after the defaulted premium along with interest is paid. That is if the premium not paid for two years the total premium amount along with two years interest are paid by the policy holder with proof of good health.