Insurance Terms

A

Age

  • If you stated your age incorrectly when you bought the policy, the insurance company will adjust the policy proceeds accordingly.

Annuity

  • Pays a regular income for the rest of your life. Usually you pay a lump sum which is invested by the insurance company in return for the monthly payouts.
  • Annuities for Central Provident Fund (CPF) members under the CPF Minimum Sum Scheme or Minimum Sum Plus Scheme are available.

Application Form

  • Life insurance contract is based on “good faith”, so we rely on you to tell us in the application form important facts you know or ought to know, and to give us the information that we ask for. If you are not sure whether the information is important, do tell us in any case, and this includes any information you have verbally told your financial advisory representative.
  • Before the application is accepted by us, if there is a change in your health or a change to the information given in your application form, you need to inform us without delay.

Synonyms: Proposal Form

Assignment

  • You can transfer (assign) your policy to another person or organisation.
  • The life insurance company is not responsible for making sure that the transfer is valid.
  • You must write to inform the life insurance company of the assignment. Failure to inform makes the transfer invalid when it comes to paying a claim.

 

B

Bancassurance

  • This refers to the selling of life insurance products by banks.

Bundled Product Disclosure document

  • From 2 July 2018 onwards, this is a required document to be given to you when you are buying a participating policy (Endowment or Whole Life) or a non-participating policy (Endowment or Whole Life).
  • A bundled product is made up of two parts: Protection coverage, and Investment Component.
  • Helps you understand what a bundled product is and assess whether you should buy the bundled product.
  • Questions at each checkpoint in the document are to help you decide if the bundled product in question or an alternative product is suitable for you.

C

CareShield Life

  • To be launched in 2020, it provides financial support to those with severe disability.
  • National long-term care insurance scheme that automatically covers everyone between 30 and 40 years of age. Thereafter, future cohorts will join at the age of 30. For these, CareShield Life replaces “ElderShield”.
  • Pays at least $600 a month for as long as care is needed.
  • People above 40 in 2020 can choose to stay with ElderShield or switch to CareShield Life.

Cash Dividend

  • Some participating policies provide non-guaranteed cash dividends that are paid out when declared.

Cash Value

  • The amount of money you will be paid if you surrender (cash in) a policy that has a savings feature.
  • Cash value is built up only after the first few years.
  • Cash value for investment-linked insurance depends on the current value of the investment units in the funds.

Synonyms: Surrender Value

Claim

  • A completed form from the insured or estate for payment of the benefits provided by the policy. Information and instructions are found on websites of life insurance companies. You can also contact your representative or call the company.

Co-Insurance

  • Commonly found in a medical expense insurance policy, co-insurance is the amount of the hospital bill that is not covered by the policy and which you need to pay after the deductible (see below on what is a deductible) is met. It is usually expressed as a percentage of the expenses.

Commission

  • Fee paid to the distributor/ financial advisory representative as a percentage of the policy premium. The percentage varies depending on coverage, the insurance company and the distribution channel.

compareFIRST

  • compareFIRST at comparefirst.sg provides information on life insurance products offered to retail customers by life insurance companies in Singapore.
  • A project by Consumers Association of Singapore (CASE), Monetary Authority of Singapore (MAS), Life Insurance Association Singapore (LIA) and MoneySENSE.
  • Compare Direct Purchase Insurance (DPI), term life, whole life and endowment products.
  • Obtain general information on investment-linked products.
  • Buy the product(s) from the life insurance companies or their financial advisory representatives.

Cover Page

  • From 2 July 2018 onwards, this is a required document to be given to you when you are buying a participating policy or a non-participating policy.
  • Highlights the key features and risks of the product.

Coverage

  • The scope of protection provided by an insurance policy. For life insurance, living and death benefits are listed.

CPF DPS

  • The Dependants Protection Scheme covers eligible CPF members up to 60 years old for up to $46,000.
  • Pays insured CPF members or their families should the insured suffer from Terminal Illness or Total Permanent Disability, or pass away.

CPF LIFE

  • The CPF Lifelong Income For The Elderly (CPF LIFE) Scheme is a life annuity scheme that provides Singapore Citizens and Permanent Residents with lifelong monthly payouts.
  • Three CPF LIFE plans for you to choose from – the LIFE Standard Plan, the LIFE Basic Plan and the LIFE Escalating Plan.

Critical Illness Insurance

  • Major illnesses and types of surgery usually covered include major cancers, heart attack of specified severity, coronary artery bypass surgery, stroke and kidney failure.
  • Each critical illness or surgery is precisely defined in the policy.
  • Pays you only if your condition or surgery meets the stated definition. 
  • The amount paid may be different, depending on the various stages of a critical illness.
  • A waiting period, typically 90 days from start date of coverage, usually applies to certain illnesses or types of surgery, for example, major cancers, heart attack of specified severity and coronary artery bypass surgery. If any such illness is diagnosed or surgery is carried out during the waiting period, nothing is payable from the policy.

Customer Knowledge Assessment (CKA)

  • To safeguard consumers’ interest, life insurance companies have to assess your financial knowledge and experience to see if you understand the risks and features of certain investment products including investment-linked insurance.
  • If you have “Investment Experience”, or “Working Experience”, or “Education Qualification” as defined by the law, you may buy investment-linked policies without taking advice.

D

Death Benefit

  • The amount of payout paid to your beneficiaries in the event of your death.

Deductibles

  • The minimum amount you need to pay (for a hospital/medical bill) out of pocket when you make a claim. It applies to the claimable amount rather than the incurred hospital bill. You only need to pay the deductible once in a policy year.

Direct Purchase Insurance (DPI)

  • Direct Purchase Insurance (DPI) is a class of broadly standardised products offering term insurance or whole life insurance, and which include Total and Permanent Disability (TPD) coverage.
  • Also provides Critical Illness (CI) coverage if you opt for it.
  • DPI is identified by the prefix “DIRECT” in the product name.
  • Buy from the customer service centre, or website if available, of life insurance companies. Sold without financial advice.

Disability

  • Physical or mental condition that prevents you from performing one or more occupational activities temporarily (short-term), long-term, or totally (total disability).

Disability Benefit

  • A feature added to some life insurance policies providing for the waiver of premium, or to payment of monthly income, if you become totally and permanently disabled.

Disability Income Insurance

  • To ease your financial burden, it pays a fixed amount each month to replace part of the income you would lose if you are not able to work as a result of an accident or illness. 
  • Some policies define disability as not being able to perform your usual work, while others define it as not being able to do any work at all. 
  • There may be a deferment period of time during which nothing is payable from the policy. Payment usually starts after you have been continuously disabled for longer than the deferment period. Payment stops once you are able to work again or it may be reduced in proportion to the recovery you are making.

Dispute Resolution

  • Financial Industry Disputes Resolution Centre Ltd (FIDReC)
    36 Robinson Road #15-01
    City House, Singapore 068877
    (65) 6327 8878 | [email protected]
  • FIDReC was set up by the financial services sector and is an independent organisation for resolving disputes between financial institutions and consumers.
  • If you have a dispute with your life insurer that you haven't been able to resolve or that hasn't been resolved to your satisfaction, you may approach FIDReC within six months of receiving the final letter from the life insurer.
  • If you are dissatisfied with the final decision of FIDReC, you are free to reject the decision and pursue your complaint through other recourse, including taking legal action.
  • FIDReC does not take on all types of complaints or disputes. Contact FIDReC for more information.

 

E

ElderShield

  • Long-term care insurance scheme that provides financial support to those with severe disability.
  • Depending on the plan, ElderShield pays $300 a month for up to 60 months or $400 a month for up to 72 months to help cover care-giving expenses.
  • ElderShield Supplements - ElderShield insurers also offer optional additional coverage with extra premiums.
  • People above 40 in 2020 can choose to stay with ElderShield or switch to CareShield Life.

Endowment Policy

  • Covers you for a set period of time.
  • Provides a combination of protection and savings.
  • Pays the sum insured and any bonuses built up at the end of the set period of time (the maturity date), or when you die or become “Totally and Permanently Disabled” if TPD benefit is provided during this period.

Exclusions

  • Health insurance policies have some “exclusions” setting out the circumstances in which benefits will not be paid. Exclusions vary from policy to policy.
  • “Pre-existing condition” exclusion is common. Any illness or disability that you have, or have had, at the time when you sign up for the policy will not be covered. Definition of “pre-existing condition” can vary from policy to policy.
  • If you already have a medical condition when you apply for health insurance, you must give details of this condition in your application. The life insurance company decides whether or not to fully cover that medical condition.

F

Fact-Find Process

  • A process performed by a financial advisory representative to assess your financial situation, including your income and expenses, and assets and liabilities, so as to identify your financial needs and goals before he makes a recommendation(s).

Financial Advisory (FA) Representative

  • A certified professional who advises individuals on financial planning goals, including life/health insurance, savings and investment, and retirement.

Forfeiture

  • When premiums due are not paid, the policy is no longer in effect and the premiums already paid are forfeited.

Free Look

  • You are given at least 14 days from the date you receive the policy to be sure that you want to keep the policy. If it is posted or emailed to you, the 14 days will start seven days from the date of posting or emailing.
  • For Integrated Shield Plans (IPs), you are given 21 days to review it.
  • You may cancel the policy within this period and get a refund of premium without interest, less expenses incurred such as medical examination fee and any administration charge.
  • For an investment-linked policy, the amount to be refunded is based on the market value of your selected funds and this could mean that you get back less than the premium paid.

G

Grace Period

  • The length of time (usually 30 days) after the premium due date, given by the life insurance company, to allow you to pay the premium to renew your policy.
  • During this period, the policy, including any riders, remains in force.

H

Hospital Cash Insurance

  • Hospital cash or hospital income insurance pays a fixed amount of cash for each day you are in hospital, regardless of the actual expenses incurred.
  • There may be a waiting period of time (from the start date of coverage) during which nothing is payable from the policy.
  • Payments may be for only a set number of days each year or for the life of the policy.
  • Waiting periods and payment limits may vary from policy to policy.

I

Indemnity

  • Restoration to the victim of a loss by payment, repair or replacement.

Integrated Shield Plans

  • Integrated Shield Plans (IPs) provide higher coverage than MediShield Life. IPs comprise two parts - the basic MediShield Life, and an additional private insurance portion run by private insurers, typically to cover Class A/ B1 wards in public hospitals or wards in private hospitals.
  • No duplication of coverage or premiums between IP and MediShield Life.

Interim Cover against Death by Accident

  • Insurance coverage in the event of your death caused directly and solely by an accident in Singapore between the time when the insurance company receives the completed and signed application form together with full payment for the first premium and the start date of that policy.

Investment-Linked Insurance

  • Provides a flexible combination of death coverage (protection) and investment. You decide on the level of death benefit you want.
  • Premiums are used to buy insurance protection and investment units in a managed fund. Depending on your risk appetite, you invest your premiums in the funds of your choice.
  • The price of your investment units depends on how the funds perform. What the policy pays depends on the price of the units at the time of death or when you cash it in.

L

Living Benefits

  • Under certain circumstances, you receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care, or nursing home residence.

Synonyms: Accelerated death benefits

Long-Term Care Insurance

  • Pays a fixed amount each month when you are unable to perform “activities of daily living” (ADLs) such as bathing, dressing, feeding, going to the toilet and moving around.
  • Definitions of ADLs and the minimum number of activities you must not be able to perform to qualify for payment vary from one policy to another. Payment stops if the number of activities you cannot perform falls below the minimum stated in the policy. 
  • Some policies pay for up to a set number of years. Other policies pay for life as long as you meet the qualifying conditions.
  • There may be a waiting period of time during which nothing is payable from the policy. Payment usually starts after you have not been able to perform the minimum number of ADLs for at least a set period of time.

M

Maturity Date

  • An agreed date on which the policy ends and the insurance company pays out the benefit amount.

Medical Expense Insurance

  • Reimburses medical costs incurred as a result of an accident or illness. Medical expense insurance will not pay you more than the actual medical expenses incurred, regardless of the number of such policies you have. 
  • Pays for inpatient medical treatment or surgery, some outpatient charges for day surgery, consultation with specialists before and after your hospital stay, and X-rays and laboratory tests. 
  • May have limits on the amount you can claim.
  • Major medical expense insurance pays for longer hospital stays due to a major illness or major surgery such as heart bypass surgery or organ transplant.

Medisave

  • National savings scheme to help CPF members save for medical expenses, especially for retirement years.
  • You contribute a part of your monthly salary to your MediSave Account. If you earn yearly Net Trade Income (NTI) of more than $6,000 as a Self-Employed Person, you will also need to contribute to MediSave.

MediShield Life

  • National basic healthcare insurance scheme run by the Central Provident Fund Board. MediShield Life replaced MediShield from 1 November 2015, and covers all Singapore Citizens and Permanent Residents for life.
  • Pays for bills of Class B2/ C wards and certain outpatient treatments such as kidney dialysis and chemotherapy for cancer in public hospitals.
  • Pays for bills of Class A/ B1/ B2+ wards in public hospitals or wards in private hospitals, as sized to the equivalent Class B2/C bills and then subject to MediShield Life claim limits.

N

Nomination of insurance beneficiary

  • Policyowners of life insurance policy or accident & health insurance policy with death benefits, or those intending to buy such policies, have a clear and affordable legal means to distribute the policy payouts to nominees of their choice.
  • Policyowner must be the life insured under the policy and at least 18 years old.
  • Choose from two options: “Trust nomination” or “Revocable nomination”
  • In a trust nomination, the policyowner loses all rights to the ownership of the policy. The policyowner can only revoke a trust nomination with the consent of all nominees.
  • In a revocable nomination, the policyowner is free to change, add or remove nominees without their consent.

Non-Forfeiture Values

  • The value of the policy if cancelled, either in cash or in another form of insurance.

Non-Participating Policy

  • Not entitled to profits, if any, made by the life insurance company's fund.

P

Paid-up Value

  • If your policy has built up a cash value, this feature allows you to change your policy to a paid-up policy. You stop paying premiums and keep your policy going for the rest of the policy term with a reduced sum insured. The conditions for doing this will vary from insurer to insurer.

Participating Policy

  • Profits, if any, of the life insurance company's participating fund are shared with policyholders. Your share of the profits is paid in the form of “bonus” or “dividend”.
  • However, they are not guaranteed as it depends on how the fund’s investments are performing, how many claims are paid out by the fund and expenses incurred.

Policy

  • A life insurance policy is a legal contract you sign with the life insurance company. You pay a certain amount (premium) for a set period. In return, the company will pay an agreed amount to you (or your estate if you die) if the specified event takes place.
  • The policy contract sets out all the terms and conditions.

Policy Illustration

  • Illustrates the benefits, both guaranteed and non-guaranteed, and the costs and charges of the policy you are buying, including cost of the death benefit, and cost of distribution, which takes into account the commission to be paid to your financial advisory representative.
  • Two interest rates of return are used but they are not the upper and lower limits of the investment performance of the insurance fund.
  • For participating policies, the actual return on your policy depends on the actual investment performance of the participating fund.

Policy Loan

  • You may apply to the life insurance company for a loan as long as your policy has a cash value. The company will charge interest on the policy loan. Some types of insurance may not provide this option.
  • Automatic loan to pay for your premiums
    If premium is not paid within the period of grace and as long as your policy has sufficient cash value, the life insurance company will automatically pay your overdue premium by taking a loan against the policy’s cash value. By doing this, your policy continues to be in force. You will have to pay interest on this loan. Some types of insurance may not provide this option.

Premium

  • The specified amount(s) of payment required by an insurance company to provide coverage under a given insurance plan for a defined period of time.

Product Summary

  • Describes the features, benefits, fees and charges of the product you are buying.

R

Regular Premium Policy

  • A policy that requires periodic premium payments, for example, monthly, quarterly, half-yearly or yearly.

Reinstatement

  • A life insurance policy will “lapse” when premium payments are missed and any cash surrender value is used up in lieu of non-payment. The policy will no longer pay a benefit or provide any coverage.
  • You may reinstate the lapsed policy within a certain period of time as long as you meet certain conditions.

Reports on your Policy

  • If you have an investment-linked policy, you will receive regular statements on the units you hold in your policy. You will also receive regular fund performance reports.
  • If you have a participating policy, you will receive a yearly statement on the annual bonus or dividend, if any.

Reversionary Bonus

  • Participating policies commonly provide non-guaranteed reversionary bonuses. They are added annually to your policy. Once added, they are guaranteed benefits in your policy.

Rider

  • For extra premium, a policy rider provides additional coverage or benefit that is attached to your basic insurance policy.
  • Common examples include disability waiver of premium, which allows you to stop paying premiums for a policy if you become disabled for a period of time; additional benefit in the event of death resulting from an accident; family income benefit, which provides your family with a monthly income if you die.

Risk Profile

  • This refers to how much investment risk you are willing to take - the amount of capital you are prepared to lose in return for a potential profit.
  • Re-assess at different points of time as your risk profile changes over time - as you grow older, as your financial situation or investment objectives change.

S

Selected Client

  • You are a “Selected Client” if you meet any two of the following three criteria:
    - 62 years of age or older
    - not proficient in spoken or written English
  • have below GCE ‘O’ level or ‘N’ level, or equivalent academic qualifications
  • To safeguard Selected Clients, the life insurance company will call you to make sure you had received good advice.
  • If your financial advisory representative uses a language you are proficient in and gives you sales documents in that language, criterion ii) does not apply.
  • If you meet any two of the above criteria but are assessed to have adequate investment experience and knowledge of the product being recommended, you will not be considered a Selected Client.

Single Premium Policy

  • A policy that only requires a one-time upfront payment.

Suicide

  • If you commit suicide within a certain period of time stated in the policy, the insurance company will not pay the policy proceeds.

Sum Insured

  • The guaranteed amount that the policyholder is insured for.

T

Term Insurance

  • Covers you for a set period of time.
  • Typically, no “cash value” is payable if you decide to terminate the policy.
  • Pays the sum insured when you die or become “Totally and Permanently Disabled” if TPD benefit is provided. 

Terminal Bonus

  • Some participating policies provide terminal bonuses. They may be payable when you surrender the policy, make a claim that is paid or when the policy ends (matures).

Time Horizon

  • This refers to the period you can stay invested before you expect to cash out your investment.

U

Unit Trust

  • A financial product where money from investors is pooled together and invested collectively in investments such as shares and bonds.

Synonyms: Collective Investment Scheme (CIS)

Universal Life Insurance

  • Universal life is a form of 'interest sensitive' whole life insurance that offer a death benefit and provides the opportunity to build cash values which you can borrow from or withdraw.
  • The cash value earns interest at a declared rate, which may change over time. Notwithstanding that, most universal life plans guarantee a minimum interest crediting rate.
  • Gives you flexibility to support your financial goals over time by varying the amount, method and timing of premium payments.

V

Voiding a policy

  • After your policy has been in force for a certain period of time (usually one or two years), the insurance company cannot treat the policy as if it had never been issued. However, the company can contest the policy if fraud is proven, in which case it has the right to end the policy at any time, even after that certain period of time.

W

Waiver of Premium

  • Some insurance policies will waive future premiums while keeping the policy going if you become unable to work due to an accident or injury.

Whole Life Insurance

  • Covers you for your lifetime.
  • Also provides long-term savings, as the insurance company invests on your behalf.
  • Pays a “cash value” if you decide to terminate the policy.
  • Pays the sum insured and any bonuses built up when you die or become “Totally and Permanently Disabled” if TPD benefit is provided.  
  • You pay premiums throughout your life, but this can be changed to a limited payment period.