The financial industry is known to use jargon that can leave you feeling overwhelmed and confused. When it comes to life insurance, we break down commonly used terms that life insurers use to help you find the right cover without the confusion.
Insured Life
If you take out life cover under your name, you are what is known as the life insured. It is usually someone who has people who rely on them financially or someone who wishes to ensure that their loved ones will not be at a loss financially when they die. It also means that you get to nominate the list of beneficiaries on your cover.
Beneficiary
A life insurer will ask you to list beneficiaries who will benefit from your life cover. These are people who you would like to receive a portion or all of the payout from your life cover when you pass on. Most people usually elect their partners, children, a friend or a close family relative. It is possible to list a charity if you do not have any family members as a beneficiary. Just remember to keep the list updated to make sure that the payout goes to the right person.
Policyholder
A policyholder is someone responsible for the premiums of the life cover. In some cases, people choose to take out life cover on behalf of someone else. The person may be unable to pay for the premiums themselves, but they could have someone else pay their policy and remain as the policyholder. The payout will not be paid to the policyholder but the life insured's listed beneficiaries.
Premiums
Paying your premiums, also known as monthly payments or instalments, will make sure that the policy remains active. If you are unable to meet a premium, it is important to inform your insurer.
Sum assured
Once your policy has been processed your insurer will let you know the amount you have been assured for, also known as the sum assured. It is the amount that your beneficiaries will receive. You do have the option of choosing how much each beneficiary will receive from the payout. For example:
If you have been insured for R5 million, are married and have two children, you can choose to have your partner receive R3 million and R1 million each for your children or however you see fit.
Age related premiums
Life insurers use your age to determine premiums because the older you get the more likely you are to develop diseases and injuries that could put your life at risk. You can find out more about this from our Age-related premiums blog that explains in detail.
Exclusions
Exclusions form part of the terms and conditions that come with life cover. Take your time to read these carefully as it will explain what your insurer will not cover to avoid having your claim denied.
Loadings
Loadings are a safety net for both insurers and the life insured when they are applying for life insurance. If you have a pre-existing medical condition, and you inform your insurer about this during the underwriting process, loading could be added. This will increase your premiums slightly compared to a healthy person of the same age.
Grace period
Should you miss a premium on the due date for whatever reason a grace period will be applied. It means you will be given additional time, usually 15 days, to make a payment before your policy becomes inactive.
High Risk
Being high-risk means that it's possible that a life insurer will not cover you if your condition falls within the exclusions due to your lifestyle, occupation or health that poses a threat to your life. However, some insurers may still cover you but a loading will be added to your premiums making you pay more. Find out more about how this affects your chances of getting life cover from our informative blog post.
Cooling-off period
It is a period to give you time to decide if you are certain about the product and would like to continue with it. You are usually given 30 days to decide if you still want to continue with your life cover from an insurer.
Waiting period
It is common for many people to confuse the cooling-off period with the waiting period, but these are two different things. A waiting period is a time frame in which you must wait before you can claim or have an insurance benefit paid out.
Remember that you can always ask your life insurer or agent to explain what a term means so that you have a full understanding of what you are getting yourself into before you put your name on the dotted line.
