Insurance serves as a mechanism to protect your finances against unexpected risks. It is essential to understand insurance terms to make informed decisions when selecting a product that meets your needs. Here are some basic insurance terms to know:
1. Policy
A policy is an official document that outlines the agreement between the Policyholder (the individual purchasing the insurance) and the Insurer (the insurance company). This document includes details of the agreement, the scope of benefits, the rights and obligations of both parties, as well as the premium amount to be paid.
2. Premium
The premium is the fee paid by the Policyholder to the Insurer in exchange for insurance protection.
3. Parties Involved in Insurance
A. The Insured is the person who receives protection from insurance when a risk event occurs.
- Obligations: provide accurate health information and follow the established claim procedures
- Rights : Receive protection as specified in the insurance policy.
B. The Policyholder is the individual responsible for making premium payments and controlling the terms of the insurance policy.
- Obligations : Pay premiums on time and understand the terms, conditions, and exclusions outlined in the insurance company.
- Rights:
- Free look Period
- Grace Period:
- Reinstatement:
Policyholders have a 14-working-day period to review the terms and conditions of the policy after receiving it.
A grace period of 90 days is allowed for premium payments after the policy’s maturity. During this time, coverage remains active, and the policyholder may pay the premium to maintain the policy.
Policyholders have the right to reactivate a policy that has lapsed due to non-payment of the premium. The reinstatement period typically ranges from 30 to 90 days, depending on the insurance company.
The Policyholder and the Insured can be the same person or different individuals. For example, a father may purchase health insurance for his children. In this case, the father acts as the Policyholder, while his children are the Insured and receive protection.
Both the Insured and the Policyholder must meet certain conditions, including:
- Age Limit: The age limit varies depending on the insurance company and the specific product chosen, and it includes both minimum and maximum age requirements for both the Insured and the Policyholder.
- Medical History: is a key factor and requirement in the insurance application process.
C. Beneficiary: the person designated by the Policyholder and listed in the policy to receive the insurance benefits.
All three parties – the Policyholder, Insured, and Beneficiary – must have an insurable interest. The legal relationship is necessary to obtain insurance and may include:
- A legal relationship, such as familial ties, which can be evidenced by official documents.
- An economic relationship, such as that between a Company acting as the Policyholder and an Employee acting as the Insured
If the Policyholder does not have a spouse, parent, or blood relative to name as a Beneficiary, they may appoint someone who is economically dependent on them through a "Court Determination Letter". Additionally, some insurance products allow Policyholders to designate a foundation as a Beneficiary.
4. Sum Assured
The Sum Assured is different from the Premium; it is the amount of money that the Insurer will pay to the Beneficiary as specified in the Policy.
5. Claim
The Policyholder or Insured submits a claim to receive insurance benefits as outlined in the Policy. The insurance company will then verify the claim. If the claim is valid, the benefits will be paid according to the terms of the Policy.
6. Lapse
An insurance policy becomes inactive (lapse) if the policyholder fails to pay the premium according to the provisions and exceeds the grace period. In this case, the insurance company is not obligated to cover any losses, and the Policyholder will not be able to receive protection benefits.
We hope this article helps you determine which insurance products best meet your needs.