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  • 11 Essential Life Insurance Terms You Need to Know

    04 August 2020


    11 Essential Life Insurance Terms You Need to Know

    Whether it’s in a bank or at a booth in the mall, some insurance agents tend to use industry-specific jargon when selling their products that can sometimes sound intimidating. It creates confusion and decreases the chances of availing a policy—no one is confident enough to buy a product they don’t fully understand, after all.

    Life insurance is an essential investment to secure you and your loved ones’ future. However, unless you’re already set on getting one, insurance advisors don’t usually have the opportunity or time to explain every term they throw out.

    If you want to do a bit of self-study before committing, you came to the right place. You should understand what a policy entails before signing on the dotted line. Picking the right life insurance product is crucial, and you want to do thorough research before sealing the deal.

    With that, here are terms you should know to ensure you and your advisor are on the same page.

    11 Essential Life Insurance Terms You Need to Know

    A Short Glossary of Essential Life Insurance Terms

    Life insurance

    Life insurance is a contract between you (the insured) and an insurance company, which guarantees payment to your beneficiaries when you pass away. It is bound by a policy or a contract. 

    Policy

    The policy is your insurance contract that shows information like your coverage period, premiums, and benefits.

    Bancassurance

    For banks to sell life insurance products to their clients, they partner up with an insurance company. This makes it easier for payments or life insurance products that have cash out perks. The bank is not your insurance provider; instead, they are your insurance advisors.

    You can check out this post to gain a deeper understanding of the concept of bancassurance.

    Beneficiary

    These are the people whom the insurer specifies to receive the death benefit. It could be your spouse, children, parents, or siblings. Usually, these are the people who depend on you for financial support.

    Claim

    A claim is an official notification to the insurance company that the payout of the benefit is due. In other words, it’s a formal request to the insurance company, granting you coverage or compensation for a covered loss or policy event. Once the claim is validated, the payment is issued to you or a qualified party on your behalf.

    ➔     Read: 5 Things to Remember When Filing a Claim

    A paid insurance claim is set to indemnify or secure a policyholder from financial loss. This works by paying a premium that you need to complete with the insurance company.

    Contestability Period

    The life insurance contestability period is a short window wherein the insurance company can investigate and deny a claim if material misrepresentations are found in the application. It begins as soon as the policy takes effect and usually covers one to two years.

    If you pass on within the contestability period, the insurance company can start looking into your policy as they try to find out if you gave the correct information on your life insurance application.

    If the company finds out you lied, you can be denied the death benefit, even if the cause of death has nothing to do with the misrepresentation done on your application.

    Death benefit

    This is the actual amount paid out to the beneficiaries when you pass away. When it comes to life insurance policies, death benefits are not subject to income tax, and beneficiaries usually receive the benefit as a lump sum payment.

    A beneficiary must submit both proofs of death and coverage of the deceased to qualify for the benefit. You can decide on the payment structure that the insurer will pay your beneficiary. It can be specified that the beneficiary receives half of the payment upon death and another half a year after, or other payment options instead of a lump sum.

    Endowment

    An endowment policy is a type of life insurance that provides both a death and living benefit when you are alive at the end of your policy’s term. It is often marked as a savings plan so that you can be paid a lump sum on the maturity date or in the event of your death.

    While an endowment policy doesn’t earn interest throughout its term, a benefit of that is the individual will not need a medical exam to qualify.

    Maturity Date

    The maturity date is either the exact day when the policy expires upon the death of the insured or the end of the availed term insurance. How it works is different in each type of life insurance coverage.

    • Term Life Insurance - If you are still alive at the end of the insurance period or maturity date, no payment will be made to you, and the policy will expire. But, if you pass on during the insurance period, the agreed benefit amount will be paid as a lump sum to the beneficiaries, then expire.

    • Variable Universal Life Insurance - It can mature in two ways:

      1. When you pass away, the policy will mature and expire, and the benefits will be paid.
      2. If you become terminally ill, you are given the option to “cash in” the policy for a portion of the death benefit.
         
    • Whole Life Insurance - This policy provides both death benefits and cash value. The difference is the two are linked and only payable if you pass on or outlive the maturity date. If you survive the maturity date, you will be paid a lump sum that may be lower than the death benefit.

    Premium

    A premium is how much you will pay the insurance company for the benefits stated in the policy. Once earned, it is income for the insurance company. However, it’s also a liability on the part of the insurer as you must provide coverage for claims being made against the policy. If you fail to pay the premium, this may result in the cancellation of the policy.

    Once you sign up for an insurance policy, you will be charged with a premium. This is the amount you need to pay for the policy or the total cost of your insurance. You are presented several payment options, with some insurers allowing installment basis, while others are requiring full payment before the coverage starts.

    Term Life Insurance

    This type of life insurance has limited coverage, ranging from five to 30 years. You can renew your policy after its maturity date, but it’ll cost higher. Having term life insurance also means that the death benefit will only be released if the insured dies within their term.

    VUL Insurance

    Variable Universal Life (VUL) insurance comes with investment, allowing the insured to have an option for financial growth during their lifetime. It’s a popular product because of its living and death benefits. This policy covers you for life, typically until your 100th to 125th birthday.

    Whole Life Insurance

    This type of life insurance covers you until you pass away. It is usually more expensive than other types of life insurance. This accumulates a cash value. If you want to cancel your lifetime policy for whatever reason, you can receive the accumulated cash value to use however you wish.

    Information is Power

    It’s better to do your homework before you commit to a life insurance policy. This ensures you’re getting what you need, and that it can support both short-term and long-term goals.

    If you’re ready to explore different life insurance products, you can easily have a chat with any BPI AIA Bancassurance Sales Executive to further assist you with your policy needs. Secure your future with proper life insurance today.

    Did you know?

    You can buy a life insurance at any BPI branch nationwide! Talk to a bancassurance sales executive now!

    RECOMMENDED PRODUCTS

    Life Ready Plus

    Protection

    Get the power to protect yourself and your family with an affordable life insurance plan. Life Ready Plus is easy on the budget, but offers coverage of up to 30 times your yearly payment to support the financial needs of your loved ones.

    The plan gives you fast access to coverage and benefits and can match your long-term financial goals when maintained within an appropriate term.

    Philam Life Vitality

    Critical Care Max

    Health

    Critical Care Max will help you make more memories by providing financial aid during the early stages of a critical illness. This unit-linked life and health insurance plan offers assistance on your recovery. You can build a health fund that grows over time, depending on your chosen investment, to pay for other medical costs.

     

    In addition, it comes with a hospital confinement benefit that will replace lost income due to hospitalization. This daily cash benefit may also come with optional benefits like cash payout for surgery-related expenses, allowance for consultation fees, and many others.

    Philam Life Vitality

    Build Estate Plus

    Life Protection

    Let your loved ones enjoy the fruits of your labor even when you’re no longer around. Build Estate Plus is a unit-linked protection plan that will cover your estate taxes after your passing so that you can ease your family’s burden.

    It doubles as an investment savings fund that builds Account Value as you pay. It is also integrated with AIA Vitality that provides additional upfront coverage of 20% to your policy and add-ons.

    Philam Life Vitality

    CRITICAL CARE PLUS

    Health

    Be in good hands in times of sickness. Let Critical Care Plus, a unit-linked health and life insurance plan, take care of you with financial aid in case of a major illness, so you can focus on getting better and spending more time with your loved ones.

     

    It even gives you more benefits for having good health through the AIA Vitality program that adds 20% upfront coverage and supplemental benefits on your policy. 

     

     

    Philam Life Vitality
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