The older we get, the more fine print we have to learn to understand! It’s a fact of life that if you don’t want to get stung by the consequences that accompany signing documents that you don’t fully understand, you’ve got to do the research on the terminology. Insurance jargon can be confusing, and even more frustrating is that it can differ from company to company. As a life insurance customer, cutting through the jargon can be time consuming and we’re all time poor these days. Well, we’ve done the work for you! We’ve compiled the most common life insurance terms that you need to know before you go signing on any dotted lines! Read on and by the end of this article you’ll know exactly what you’re signing up for when you buy your life insurance policy with Cigna!
Why is the language so confusing?
Good question! Life insurance companies aren’t making the language confusing on purpose. In fact, a life insurance is a legal document, as such it follows the guidelines of written law. Terms like "critical illness rider" don’t give any indication of a clear definition! This kind of confusing terminology prevents people from understanding the necessity of having a life insurance policy, which is detrimental to the customers as well as the companies providing the services. While many people get put off by the language, others sign up without fully comprehending the policy which isn’t any better. If you don’t fully understand your policy you’re putting yourself and your family at risk of not having the proper coverage if something unfortunate were to happen.
Terms to know
While contracts differ from insurance company to insurance company, there are some standard terms that stay the same. Once you know the ins and outs of this life insurance alphabet, you’ll be confident when shopping around for the right policy. And speaking of ‘policy’ let’s starts with you –the policy owner.
The policy owner is the person who buys the insurance policy and therefore controls it. Only the policy owner can change details on the policy like the cover level. As a policy owner, your life may not be the one you’re insuring. You could take out a policy on your spouse, for example, and still remain the policy owner, which is not to be confused with the Insured Person.
The insured person refers to the life being insured. Remember, this isn’t the same thing as the policy owner! The insured person has no legal right to change the beneficiary.
Life benefit / Cover Amount
The life insurance money that is paid to the estate or policy owner is known as the Life Benefit or Cover amount. This is the amount that the policy owner agreed on when setting up the policy. It gets paid out in the unfortunate event of the death of the insured person. How you choose the level of Cover can depend on many factors including things like how many dependants you have, your mortgage and other debts, your Insurance Consultant or Financial Adviser can help you work it out.
Terminal Illness benefit
The Terminal Illness benefit is a policy feature that enables you to receive some of the life insurance payout early if you are diagnosed as terminally ill with less than 12 months to live. You’ll find that some insurers have modernised the terminology and refer to this policy feature as a “living benefit”. It’s a great option to have and you want to make sure it’s in any policy you sign. Also, it’s a free feature, so it doesn’t cost you any extra money to have it, therefore, make sure you’re covered.
Your premium is the amount of money you pay for insurance, generally quoted per month or per year. Your premiums can be set up to come out of your account on an automatic basis, which is great because if you miss a payment, also known as defaulting, you could be out of pocket if something goes wrong and you’re not up to date. The cost of your premium is determined during the risk assessment. These results from the underwriting process determine the amount of money you pay based on how high of a risk you are to the insurance company. So, if you have a pre-existing medical condition that is likely to lead to a premature death, your premium will be higher than that of someone who is in perfect health. Other factors such as health history, your age and your career will also affect how much you pay for a premium.
A few extra things to know
No, we’re not done yet! Here are two extra terms that you should know before you go signing any documentation.
Riders are add-ons to your policy that provide additional coverage with an extra price-tag. For example, with a Critical Illness benefit rider, you receive a lump sum if you are diagnosed with one of the listed conditions described in the Critical Illness Benefit section of your policy. Riders are like insurance policy accessories – you can either choose to have them or not.
It is your duty to be truthful with your insurance company as they rely on the information you give them to provide the cover and them pay any claim. If you do not provide a full history or required detail, know has full disclosure, it could result in a decline of your claim or cancelation of your policy. Conditions or life event you may not consider material your insurance company may so it’s better to let them know everything.
Last but not least, we’ve got underwriting, which is the process by which insurance companies are able to evaluate the risk of insuring you and thereby determining your premium. They often access your medical records, medical history, leisure activities and even medication history. Age and other factors come into play as well, but it depends on the insurance company.
We understand that life insurance policy terminology can be difficult to understand at time, and we don’t want you to feel that this is on purpose to trick you into signing something you don’t fully understand. As your trusted insurance company, Cigna is here to help you nut out the terms that you don’t feel comfortable with before you sign with us. If you have any questions about the wording in your polices with us, get in touch! That’s what we’re here for – guiding you through the insurance process seamlessly and painlessly.
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