Life Insurance Vocabulary for Dummies
Article revised on 18 July 2017
Have you ever felt a little lost when your financial security advisor explains the terms of a new life or health insurance contract?
Even if you don’t need to know every life insurance word, it’s best to be aware of a few basic concepts to ensure that you understand what you are about to sign and what it involves. Here are a few key expressions you should know:
The conditions a consumer must satisfy in order for an insurer to cover him or her.
2. Life Insurance
A contract between the insurer and the insurance policyholder, in which the insurer agrees to pay the beneficiary the benefit provided for by the contract in exchange for premiums in the event of the insured’s death or his or her survival for a set period.
- Term: Life insurance that provides protection to the beneficiary for a limited period. It is usually renewable at fixed rates that increase from one period to the next.
- Permanent: Life Insurance that covers the insured until death. The premiums of this type of insurance are usually fixed, and the policy normally has a surrender value.
- Universal: Insurance that is not only life insurance but includes a savings portion. The insured pays a premium that is above the cost of insurance. This way, he or she builds a tax-sheltered fund.
A document attached to an insurance policy that contains any modifications made to the policy.
The person whom the policyholder has designated in the contract and who will receive the insured amount.
- Revocable: A beneficiary whose designation can be changed without his or her authorization.
- Irrevocable: A beneficiary whose designation cannot be changed without his or her authorization.
5. Insured amount
The amount of money named under the insurance contract that will be paid to the beneficiary if the covered risk occurs.
6. Elimination period
A period during which the insured is not entitled to insurance benefits, even though the covered risk has occurred.
The person who owns the insurance.
The amount an insured must pay so that the insurance comes into and remains in force.
9. Surrender value
An amount that the insured may receive if he or she voluntarily terminates a life insurance contract before it matures.
Your financial security advisor is an expert in this jargon. So if a term bewilders you, don’t hesitate to ask him or her: your advisor is there for you!
Source: Autorité des marchés financiers
Note: This article is intended for information purposes only and should not be construed as legal, financial, tax or other advice. The circumstances or factors may vary depending on your individual situation. Before taking action, we encourage you to consult a professional. La Capitale shall not be held liable for any consequences arising from any decision taken based on the content presented in this article.
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