The insurance industry is vast and ever changing. New products are constantly produced by insurance companies and refined as the insurance landscape changes. But deep down at its core, these products are all based on a few basic principles. To help guide you through these fundamentals, I’ve compiled a list of some of the common insurance terms.
Qualifying event: An event that triggers the payment of benefit. eg: death, suffer from covered critical illness. Details of the qualifying events for each type of insurance will be provided in their specific pages.
Coverage, face amount, benefit amount, death benefit: These all refer to amount of benefit your beneficiaries will receive should the qualifying event occur.
Premium: The amount you pay for the policy, expressed as either monthly or annually. The annual pay method is less costly than monthly pay to factor in the time value of money (insurance company receive premium immediately instead of over a year) and the increased administrative costs of processing premiums 12 times a year instead of once.
Rated policy: An insurance policy issued at a higher premium rate than standard because of undesirable lifestyles or health conditions.
Declined: The insurance company rejects the application for insurance due to undesirable lifestyles or health conditions.
Claim: A demand made by the beneficiary for payment of benefits.
Insurer: The insurance company. It can also be known as the carrier.
Insured: The policyowner/policyholder who pays the premiums.
Life insured: The person upon whose life the policy is based (usually same person as insured).
Beneficiary: The individual to whom the benefit is paid. It could be a person (himself if critical illness/disability/long-term care, family member if life), an organization (favourite charity), or the estate of the policyowner.
Health insurance: Refers to critical illness, disability, long-term care, and extended health and dental insurance. Also known as living benefits.
Benefit period: In health insurance, the number of days, weeks, months, or years for which benefits will be paid.
Elimination or waiting period: In health insurance, the number of days, weeks, months, or years for qualifying event to last before benefits are paid.
Underwriter: The insurance company’s employee trained to evaluate an individual’s risk and determining premium rates.
Underwriting requirements: Additional health information required by the insurance company in order to accurately assess the health of the life insured so that it can properly determine the risk of insuring him/her. Examples include a blood profile or urine sample.
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