Last Updated on June 15, 2023 by Tree of Wealth

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You need time to shop around and compare insurance product brochures to purchase whole life insurance. But with so much jargon, it may feel like a completely alien language!

So in this article, we’ve put together a brief glossary of the industry’s common terms. For those needing a refresher, read our previous article on eight common terms used in whole life insurance. And for more information on whole life insurance products, you can refer to our informative insurance page.

ASSIGNMENT

If you want to transfer your policy to someone else, you can do so. In simple terms, assigning a policy means transferring of legal rights of an insurance policy to another party. The policy owner who assigns the policy is called the Assignor, whereas the one to whom the policy is assigned is the Assignee. They should also be over 18 years old, and if either party is under 18, you will need to write to your insurer to check if the company can do the assignment. There might be many reasons why someone wants to assign a policy. Whichever the reason, be sure to write in if you want to assign a policy to another person. The life insurance company is not responsible for ensuring the transfer is valid. If you fail to inform them, any claim payments will be invalid.

AGE

You might wonder what happens if you state your age incorrectly when you buy the policy. In this case, you must write to the insurer and let them know because it can affect the policy proceeds. The insurance company will adjust the policy proceeds accordingly.

APPLICATION FORM

When you fill in an application form, you will have to declare important facts about your health. Sensitive information, for instance, the surgeries you go through and medications you take, will also appear on the form. Other pertinent information will also be required, such as your employment, marital status, and lifestyle habits (smoking or drinking). You must give the information accurately. The life insurance contract is based on “good faith”, so we rely on you to tell us in the application form important facts you know and to give us the information that we need. If you are unsure whether the information is essential, do tell us in any case, including any information you have verbally told your financial advisory representative. Before the insurer accepts the application, if there is a change in your health or a change to the information given in your application form, you need to inform the company without delay.

BUNDLED PRODUCT DISCLOSURE DOCUMENT

From 2 July 2018 onwards, this is a required document to be given to you when you buy a participating policy (Endowment or Whole Life) or a non-participating policy (Endowment or Whole Life). A bundled product comprises two parts: Protection coverage and Investment Component. The bundled product disclosure document details a bundled product and assesses whether you should buy the bundled product. Questions at each checkpoint in the document help you decide if the bundled product in question or an alternative product is suitable for you.

COVERAGE

Life insurance is a contract between you, the policyholder, and an insurance company. It’s designed to help cover your bills and debts in the event of your death. Your coverage will depend on your age, health status and other factors. Coverage refers to the amount of money and length of time the plan protects the policyholder. If the policy owner falls sick and has a terminal illness or becomes disabled, they can get a payout which helps cover the costs incurred. If they die while they’re covered by life insurance, their nominated beneficiary receives money from the policy. Whichever the issue, coverage indicates the scope of protection provided by an insurance policy. For life insurance, living and death benefits are listed.

CUSTOMER KNOWLEDGE ASSESSMENT (CKA)

The Customer Knowledge Assessment (CKA) is mandated by the Monetary Authority of Singapore (MAS). It is a set of questions that potential customers must answer before they can buy certain investment products, such as investment-linked insurance. Since whole life insurance products may have investment components, you need to answer a CKA when you purchase a whole life insurance product online or in person. The questions will determine your investment experience, working experience and education qualification. If you have “Investment Experience”, “Working Experience”, or “Education Qualification”, as defined by the law, you may buy investment-linked policies without taking advice.

DEATH BENEFIT

The death benefit is the payout paid to nominated beneficiaries if the policy owner dies.

DISABILITY

Some whole life insurance products offer disability coverage within the plan or as an add-on. This protection helps to safeguard your financial loss if a physical or mental condition prevents you from performing one or more occupational activities temporarily (short-term), long-term, or totally (total disability). Occupational activities refer to the actions you take at work. Total Disability(TPD) is generally defined as a condition in which an individual can no longer work due to injuries. The claimant must also prove that the TPD prevents them from working permanently before making any payout.

DISABILITY BENEFIT

A feature added to some life insurance policies provides for the waiver of premium or payment of monthly income if you become totally and permanently disabled.

DISABILITY INCOME INSURANCE

Disability income insurance pays a fixed amount each month to replace part of the income you would lose if you cannot work due to an accident or illness. Some policies define disability as the inability to perform your usual work, while others define it as not being able to do any work. In addition, there may be a deferment period during which nothing is payable from the policy. Payment usually starts after you have been continuously disabled for longer than the deferment period. Payment stops once you can work again, or the insurer may reduce it in proportion to your recovery.

ENDOWMENT POLICY

Whole life insurance can also be an endowment plan. An endowment covers the policyholder for a set period. It provides protection and savings as it pays the sum insured and any bonuses built up at the end of the specified period (the maturity date) or when the insured dies or becomes “Totally and Permanently Disabled” if TPD benefit is provided during this period.

Even though some policies use endowment and whole life interchangeably, endowment plans usually have a shorter coverage period and mature sooner, usually in 10 to 20 years. On the other hand, whole-life policies are designed to last for the insured’s whole life, so they mature when the insured policyholder reaches the age of 95 or 100.

EXCLUSIONS

If you’ve seen this word, ‘exclusions’, it is essentially the circumstances in which the insurer will not pay benefits. Exclusions vary from policy to policy.

An example of a common exclusion is a pre-existing condition. This means The insurer will not cover any illness or disability you have, or have had, at the time you sign up for the policy. The definition of “pre-existing condition” can vary from policy to policy.

If you already have a medical condition when you apply for health insurance, you must give details of this condition in your application. The life insurance company decides whether or not to cover that medical condition fully.

FACT-FIND PROCESS

A fact-find is a process performed by a financial advisory representative to assess your financial situation, including your income and expenses, and assets and liabilities, to identify your financial needs and goals before he makes a recommendation(s).

FREE LOOK

There’s a free look period when deciding whether to keep the policy. A free look period is 14 days from the date you receive the policy to be sure that you want to keep the policy. If it is posted or emailed to you, the 14 days will start seven days from the date of posting or emailing. You may cancel the policy within this period and get a refund of the premium without interest, minus expenses such as medical examination fees and any administration charge. For an investment-linked policy, the amount to be refunded is based on the market value of your selected funds, which could mean you get back less than the premium paid.

For Integrated Shield Plans (IPs), you are given 21 days to review them.

GRACE PERIOD

The grace period (usually 30 days) after the premium due date, given by the life insurance company, is the time that allows you to pay the premium to renew your policy. During this period, the policy, including any riders, remains in force.

INTERIM COVER AGAINST DEATH BY ACCIDENT

The interim cover is the Insurance coverage in the event of the policyholder’s death caused directly and solely by accident in Singapore between the time the insurance company receives the completed and signed application form and full payment for the first premium and the start date of that policy.

MATURITY DATE

An agreed date on which the policy ends and the insurance company pays out the applicable benefit amount.

NOMINATION OF INSURANCE BENEFICIARY

The policy owners of life insurance policies or accident & health insurance policies with death benefits, or those intending to buy such policies, have a clear and affordable legal means to distribute the policy payouts to nominees of their choice. The policy owner must be the life insured under the policy and at least 18 years old.

You can choose from two options: “Trust nomination” or “Revocable nomination” In a trust nomination, the policy owner loses all rights to the ownership of the policy. The policy owner can only revoke a trust nomination with the consent of all nominees. In a revocable nomination, the policy owner is free to change, add or remove nominees without their consent.

PAID-UP VALUE

If your policy has built up a cash value, this feature allows you to change your policy to a paid-up policy. You stop paying premiums and keep your policy going for the rest of the term with a reduced sum insured. The conditions for doing this will vary from insurer to insurer.

POLICY

A life insurance policy is a legal contract you sign with the life insurance company. You pay a certain amount (premium) for a set period. In return, the company will pay an agreed amount to you (or your estate if you die) if the specified event occurs. The policy contract sets out all the terms and conditions.

POLICY ILLUSTRATION

The policy illustration illustrates the guaranteed and non-guaranteed benefits and the costs and charges of the policy you are buying, including the cost of the death benefit and cost of distribution, which takes into account the commission to be paid to your financial advisory representative.

Two interest rates of return are used but are not the upper and lower limits of the investment performance of the insurance fund.

For participating policies, the actual return on your policy depends on the investment performance of the participating fund.

POLICY LOAN

You can borrow money from your life insurance policy. An insurance company issues a policy loan using the cash value of a person’s life insurance policy as collateral. You may apply to the life insurance company for a loan if your policy has a cash value. The company will charge interest on the policy loan. Some types of insurance may not provide this option.

Some insurance plans also have an automatic loan to pay for your premiums.

This is a loan that kicks in when something happens, and you do not pay your premium within the grace period. As long as your policy has sufficient cash value, the life insurance company will automatically pay your overdue premium by taking a loan against the policy’s cash value. By doing this, your policy continues to be in force. You will have to pay interest on this loan. Only some types of insurance may provide this option.

PREMIUM

The premium is the specified amount(s) of payment required by an insurance company to provide coverage under a given insurance plan for a defined period.

PRODUCT SUMMARY

The product summary describes the features, benefits, fees and charges of the product you are buying.

REGULAR PREMIUM POLICY

A regular premium policy requires periodic premium payments, for example, monthly, quarterly, half-yearly or yearly.

REINSTATEMENT

A life insurance policy will “lapse” when premium payments are missed, and any cash surrender value is used to pay premiums. As a result, the policy will no longer pay a benefit or provide any coverage.

You may reinstate the lapsed policy within a certain period if you meet certain conditions.

RIDER

For an extra premium, a policy rider provides additional coverage or benefits attached to your basic insurance policy.

For example, some riders provide a disability waiver of premium, which allows you to stop paying premiums for a policy if you become disabled. There might also be available riders for an additional benefit in the event of death resulting from an accident. Another type of rider is a family income benefit, which provides your family with a monthly income if you die.

SINGLE PREMIUM POLICY

A policy that only requires a one-time upfront payment.

And there you have it, our A-Z list of common life insurance jargon that you may see. If the product information still needs to be clarified, why not fill in the form below and chat with our experienced financial advisors? Don’t let the jargon stop you from purchasing important protection for your wealth!

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