Insurance Terms You Need to Understand (Part 2)

5. Claim

Claim is a claim submitted by the Policy Holder to the Insurance company as the Insurance Insurer, to fulfill the Policy Holder's rights as stated in the Policy. An easy example, you have Health Insurance that covers typhus disease benefits. When one day you fall sick and have to be hospitalized because of typhus, then you can submit a benefit claim to the Insurance Provider. The Insurer will pay financial compensation in the form of hospitalization costs and other costs according to the definition of benefits stated in the Insurance Policy.

Insurance providers usually limit the period of insurance claims. For Health Insurance, for example, the Insurer gives a maximum claim time of 30 days after the Insured carries out treatment.

6. Acquisition Cost

This term refers to the fees that must be paid by the Policy Holder to obtain services as an Insurance customer. In addition to "acquisition costs", the same costs are usually referred to as policy issuance costs. The cost of issuing a policy includes the cost of paying the insurance agent fee and the operational costs of the insurance company.

7. Lapse

The Policy Holder is required to pay a certain amount of Premium to the Insurance Provider according to the agreement in the Policy, so that the Insurance Benefits can still be obtained during the contract. Now, if the Policy Holder does not pay the required Premium beyond the Grace Period (generally 45 days), then the Insurance Policy owned will automatically be canceled or lapse. Avoid policy cancellations by ensuring premium payments are on time according to the payment term you have chosen.

Lapse makes insurance protection impossible for you to get. When a risk occurs when the Insurance is in lapse status, the Insurance Provider is no longer obliged to bear the loss.

8. Cash Value

This term is usually found in unit-linked life insurance or endowment insurance. Cash value is the amount of money that can be redeemed by the policyholder in a certain period of time. For example, in end-of-life insurance products such as education insurance, there is usually a cash value that can be disbursed by the policyholder when the policy is 3 years old, 6 years old and so on.

In unit-linked life insurance, which is life insurance that has both protection and investment features, cash value means investment returns formed from investment funds that are routinely deposited by policyholders.

9. Additional Insurance (Rider)

This is a term to describe the Additional Benefits that you can add to the Basic Insurance program. Riders usually have cheaper premiums because they are complementary to the main insurance. For example, Life Insurance products are generally equipped with riders in the form of Health Insurance, Critical Illness Insurance or waiver of premium.

Only, you need to remember, the more riders you take, the wider the Insurance Benefits you enjoy. That brings consequences to the more expensive Premium Fees you have to pay.

10. Premium Leave (Premium Holiday)

Premium leave refers to a certain period of time during which the policyholder is allowed not to pay premiums or stop paying premiums without losing the insurance benefits. Premium leave actually does not mean that the policyholder does not pay premiums at all. Premium leave is possible in insurance that has investment features such as unitlink. When the premium leave is run, the insurer actually uses the cash value that has been formed from the unit-linked investment, to cover the premium costs. Premium leave is possible if the cash value of a policy is sufficient to pay the premium costs.

So if the cash value that has been formed is not sufficient to pay the premium, then the policyholder must return to pay the premium or top-up his investment so that the insurance benefits remain valid and avoid lapse.

Well, those are 10 important terms in insurance that you need to understand and can be a guide so you can better understand the insurance products that you will or have purchased.

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