free page hit counter

10 Important Insurance Terms to Know

Artikel diperbarui pada 20 Maret 2023.

In underwriting services, there are several terms in insurance that you must know. This insurance is one of the important needs if you want stable and healthy personal finances.

In addition to adequate emergency funds, ownership of protection is something that should not be delayed. By having insurance, finance can be protected from various risks of loss.

For example, when dealing with a condition that requires large costs such as an accident and requires medical expenses and this is where insurance can be utilized.

Insurance Terms Must Be Understood

Understanding various insurance terms will help you find the most appropriate product and according to your needs, including the following:

1. Insurance Policy

Policy is a term that refers to a written cooperation agreement between the company (insurer) and the policyholder customer.

All contracts whether life, health, or accident insurance, are called policies. The content of the cooperation contract contained in the guarantee is an agreement that the insurer is willing to bear the risk of the insured.

It has been mentioned that the term in insurance is a policy within a certain contract period. To get protection from the insurer, the policyholder must pay the agreed premium.

The service also contains the general terms of the policy, details of the rights and obligations of the insurer, the policyholder, the scope of benefits provided, articles mentioning exclusions of protection, articles mentioning things that can cancel the policy.

2. Insurance Premium

To obtain coverage, the policyholder must pay a premium to the insurer. The premium is defined as the amount of payment that has been determined as the cost of transferring risk from the service to the provider.

The amount of the premium is determined by the provider and approved by the policyholder. The amount of the premium is determined by many factors such as the level of protection provided by the insured, the age of the insured, the lifestyle, the working area of the insured.

The more comprehensive and extensive the policy coverage, usually the more expensive the premium. Likewise, the premium as a term in insurance becomes more expensive if the insured is classified as high risk.

Policyholders usually have a choice of premium payment options. They are: monthly premium payments, quarterly, semi-annual or annual premiums.

3. Insured

What is meant by “insured” in the agreement is the person or party receiving compensation from the service provider for losses at the time of the occurrence of the risk determined by the policy.

In the case of such services, the insured is the head of the family or family members with economic value. In health services, the insured can be anyone.

For example, employees, children, wives, parents, and so on. So if there is a risk protected by the policy, which is the term in insurance, the insured will receive compensation.

For example, if the head of the insured family dies, the sum insured is paid by the insurer to the heirs mentioned in the policy agreement.

4. Benefits

This benefit is the protection received by the insured and provided by the service provider. For example, a healthcare provider pays for medical treatment, outpatient care and surgical services.

This means that if the insured falls ill and requires treatment, the insurer will reimburse the medical expenses. In addition, there are benefits in the form of allowances and compensation.

5. Claims

Claim is a term in insurance where a demand is made by the contract holder to the company as the carrier of the service in order to fulfill the rights of the policy holder under the contract.

A simple example, you have health insurance that covers typhoid benefits. If one day you are sick with typhoid and need to be hospitalized, you can claim benefits from the company.

The insurer pays monetary compensation in the form of hospitalization and other expenses as defined in the definition of benefits in the agreement.

6. Acquisition Cost

This term refers to the fees payable by the policyholder in order to acquire the benefits of being a customer. Apart from ‘acquisition cost’, the same payment is also commonly referred to as policy issue cost.

7. Lapse

The policyholder or lapse as it is called in insurance is obliged to pay the agreed amount of premium on the contract to the provider in order to continue receiving benefits during the contract period.

Thus, if the contract holder fails to pay the required premium after the grace period (generally 45 days), his contract will be automatically canceled or expired.

Avoid contract cancellation by making premium payments on time according to the payment term you choose. Lapse restrictions make it impossible for the insured to obtain coverage.

8. Cash Value

This term is usually found in unit-linked life insurance or capital life insurance. Cash value is the amount of money that the contract holder can redeem over a certain period of time.

For example, with endowment products such as education guarantees, there is usually a cash value term in the insurance that can be paid by the contract holder when it is 3 years old, 6 years old, and so on.

In unit-linked life insurance, which has a protection feature and an investment feature, present value means that investment income is formed from investment funds that have been deposited regularly by the policyholder.

9. Rider

This term refers to additional services that customers can add to the basic service. Riders usually have cheaper premiums as they are complementary to the main service.

However, remember that the more services you carry, the more insurance benefits you will enjoy. This has an impact on the high premium that customers have to pay.

10. Premium Leave

Premium leave refers to a certain period of time where the policyholder cannot pay premiums or stop paying premiums without having to lose insurance benefits.

Premium leave does not actually mean that the contract holder has not paid the premium at all. Premium leave as a term in insurance is possible in companies that have investment features such as Unit link.