Life Insurance Terms

life insurance terms

There are many terms of life insurance. Come on, get to know 10 of them so that insurance will be more fun for you.

Slowly but surely, life insurance has now increasingly become a part of life for Indonesians who want prosperous personal finance. Insurance is an important foundation if you intend to build healthy personal finances.

This is because life insurance can help you manage financial risks that can arise at any time and have an impact on personal finances. That way, financial management can be planned for the sake of realizing financial well-being.

However, it must be admitted, even though life insurance is increasingly familiar, not all people are familiar with the concept of life insurance, including various kinds of general terms in life insurance. So, to make insurance feel easier and more fun, it's time to recognize 10 important terms in life insurance that you must know. Come on, see below:

1. Life insurance policy

A life insurance policy is a written and legally enforceable cooperation agreement between the insurance company and the policyholder. In this case, the insurance company is willing to bear the risks of the insured within a certain period according to the agreement. The policyholder is obliged to pay a premium as a risk transfer fee.

Life insurance policies usually contain details of the contract agreement, among others, the rights and obligations of the insurance company as an insurance provider, the rights and obligations of policyholders, insurance protection coverage, protection exclusion rules, things that cancel insurance coverage, coverage sheets, general policy terms, conditions special and also a  copy of life insurance application letter.

An insurance policy is an important document that you must keep properly and easily accessible at any time as proof of an insurance contract. You will need it the next time you make a claim.

2. Insured life insurance

Insured means a person or party who is guaranteed a loss from a life insurance company when a risk occurs according to the agreed agreement. For example, in life insurance, the insured is the head of the family who has economic value.

So, when one day the head of the family as the insured person dies, the insurance company will issue a sum of the sum insured as compensation to the beneficiary.

The insured person is not necessarily the policyholder. Likewise, the policyholder does not necessarily act as the insured person. For example, suppose you buy health insurance for your wife and children. Here, you act as the policyholder as well as the insurance coverage. Meanwhile, the wife and children are the insured

3. Life insurance premiums

A premium is a number of payments stated in the policy approved by the policyholder to be paid to the insurance company. Premiums are a consequence of the transfer of risk by policyholders to insurance companies.

The size of the life insurance premium is influenced by various factors ranging from the type of product, age, and lifestyle of the insured person, gender to the insured's medical examination results.

Insurance companies usually provide payment options, from monthly, semester to yearly.

4. Acquisition costs

The fee you need to pay to get service as an insurance customer. Also commonly understood as the cost of issuing a policy, this includes the payment of agent fees and insurance company operational costs.

5. Rider (additional insurance benefit)

Rider  is an additional benefit that you can include in your basic insurance program. Rider is designed to provide additional protection at a lower cost. For example, a life insurance product usually has rider health insurance or critical illness insurance.

The addition of additional benefits also affects the amount of premium that you have to pay as a policyholder. The more riders have taken, usually the more expensive the premium you have to pay.

6. Cash Value

An amount of money that is the policy redemption value at a certain time period and is guaranteed as the right of the policyholder. The cash value is usually owned by insurance products such as life insurance in the form of unit-linked or endowment insurance ( endowment ). The cash value in unit-linked is formed from policyholder funds specifically allocated for investment.

7. Automatic Premium Loan

This term refers to the policy of automatically taking the cash value of a life insurance policy if the policyholder has not paid the premium until the grace period ends.

Because you are carrying a lot of expenses, you postpone premium payments until it is past the due date. In order for your insurance protection to remain valid and the policy is not forfeited  (lapse), automatically the cash value that has been formed will be taken to cover the premium. With a note, the cash value you have is sufficient to pay the premium. Even so, this feature is rarely used in unit link insurance.

8. Sum Assured

This term refers to the amount of money that must be paid by the insurance company in the event of a claim from the policyholder for risks that have been guaranteed in the insurance program.

The amount of money that must be paid by the insurance company in the event of a claim from the policyholder for the risks guaranteed in the insurance program

9. Lapse

When you have life insurance, you as the policyholder are required to pay a premium according to the agreement in the policy. If you don't pay the premium until it exceeds the grace period which is generally  45 days, then your life insurance policy will automatically be canceled or lapse. Avoid cancellation of the policy with the discipline of paying premiums according to the agreement.

When the policy status becomes lapse, insurance protection does not apply. This means that if there is a  lapse  and there is a risk, the insurance company does not bear the risk

You can activate the auto-debit feature available in your bank account to pay premiums automatically. That way,  you can minimize the risk of lapse.

Premiums that are not paid beyond the grace period can invalidate the policy (the effective period of the policy stops).

10. Claims

This term refers to the demands made by the policyholder to the insurance company to pay the policyholder's rights according to existing procedures. An easy example, you have life insurance with the addition of health insurance benefits. One time you came down with dengue fever and had to be hospitalized in the hospital.

Dengue fever is a risk that is borne by the insurance company. So, you can file a claim with the insurance company to pay financial compensation in the form of hospitalization and dengue fever treatment.

So, there are 10 important terms in life insurance that you must know and understand. By understanding the important terms in life insurance, you can optimize insurance benefits.

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