In the first part of the glossary we covered the basic concepts: policyholder, beneficiary, surrender value, underwriting. Here are the terms you will more often find in insurance rules and in the small print of a contract.
Deductible (franchise)
The part of a loss that the insurer does not cover. It is rare in life insurance and more common in accident insurance. For example, in the case of temporary incapacity for work, no payment may be made for the first few days of treatment.
Insurance rate
The rate used to calculate the premium per unit of the sum insured. It depends on age, gender, contract term, the set of risks and the results of underwriting.
Insurance reserve
Funds that an insurer is obliged to set aside to meet its future obligations to clients. Reserve requirements are set by the regulator, and it is the reserves that secure payouts many years later.
Waiting period
A period after the contract comes into force during which, for certain risks — for example, death from illness — no payout is made or it is made in a limited amount.
Exclusions
Events and circumstances in which no payout is made, even if the event looks like an insured event. The list of exclusions is always given in the contract or the insurance rules.
Additional risk (rider)
Cover that can be added to the main contract for an extra premium: accidents, disability, critical illness, waiver of premium.
Waiver of premium
An option under which, if the policyholder becomes disabled or dies, the contract remains in force and the insurer effectively takes over the premiums.
Grace period
A period after the due date of a premium during which the contract remains in force even though the premium has not yet been paid.
Paid-up policy (reduction)
Switching the contract to a mode with no further premiums and a proportionally reduced sum insured. An alternative to early termination.
Investment income
Additional income above the guaranteed return that the insurer may credit to clients’ savings based on its investment results. Unlike the guaranteed return, it is not promised in advance.
Actuary
A specialist who calculates rates and reserves using statistics and financial mathematics.
Insurance term
The period during which the cover is in force. It may differ from the premium payment term: for example, premiums are paid for several years while the cover lasts longer.
Indexation
A periodic increase in the sum insured and the premium so that the cover does not lose value due to inflation. The client can usually decline a particular indexation.
Insurance rules
An insurer’s document setting out the general terms for a class of insurance. The contract refers to the rules, so it is worth reading them together with the policy.
If any term in your contract remains unclear, a Dynasty consultant will explain it in plain words, and you can calculate the cost of a policy in our calculator.