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Life insurance shouldn’t be complicated! But the jargon, terms and conditions, can make life cover seem confusing and complex! We’ve identified the most important insurance terms so you can understand how a life cover policy works.
Why is life insurance important and how does life cover work?
Life insurance is really important, especially for new parents who want to make sure that their family’s future financial needs, such as housing and education costs, can be met if they were no longer around. The pay-out from a life insurance policy for a valid claim can cover these costs, giving a young family peace of mind as they know future expenses will be covered!
One or both parents can take out a life policy for a sum assured that will be paid to a beneficiary on their death, for a valid claim. This is how life cover works – the sum assured is paid to the beneficiary on the death of the life assured.
A life insurance policy is a legal contract, which means it will include insurance terminology that can be difficult to understand.
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Key life insurance terms explained
These are the most common and important insurance terms you need to know so you can understand how life cover policies work.
Premium
This is the cost of the life insurance policy that is paid monthly via debit order. Include your insurance premium in your budget as you would other expenses, such as electricity. Your insurance premium is insuring your family’s financial future so should be considered an essential expense. If you miss a premium payment, you need to make it up in the grace period of 30 days or your cover will be suspended and your policy may lapse.
Beneficiary
This is the person who is paid the proceeds for a valid claim. For example, if you name your spouse as beneficiary, they will be paid the sum assured for a valid claim when you pass away. You can name more than one beneficiary and specify the amount or percentage of the pay-out they should receive. Ideally, beneficiaries should be older than 18 years, as the proceeds from a pay-out cannot be paid to minors. Your financial adviser or lawyer can advise on how to care for minors’ financial needs by setting up a trust to manage funds after your passing.
Sum assured
This is the amount you are covered for. If you have cover of R1 million, when you pass your beneficiary will receive R1 million if all the policy terms and conditions have been met.
Underwriting
This is when the insurance company assesses your risk using the information you shared in your application. The insurance company’s underwriters will determine the level of cover the insurer is prepared to offer, taking into consideration various financial limits based on age, gender, education, occupation, income, current life insurance cover, hazardous pursuits / hobbies, personal health status, family health history and insurable interest.
Always answer questions honestly, giving all the details requested, when completing forms or talking to an insurance consultant on the phone or applying online. If you don’t disclose important information, such as having a chronic condition, a claim on your policy may be declined.
Waiting periods and exclusions
A waiting period is a time during which premiums must be paid but claims cannot be paid. An exclusion is where a claim will not be paid because the cause of death is excluded. All life insurance policies exclude claims where the life assured is engaged in a criminal or illegal activity. Your insurance company must advise you of any waiting periods and exclusions, and list these in your policy documents.
1Life Insurance for your family’s needs
1Life Insurance offers life cover policies for sums assured of up to R10 million. You can tailor your policy to meet your needs and budget, and there are options to increase your life cover should your needs change. 1Life Insurance uses plain language in its contracts, explains terms and conditions and has a glossary of insurance terms on their website that you can refer to at any time.
Secure your family’s financial future today
Make sure you understand these terms, and any others listed in your policy document when you take out a life cover policy. This way, you can be sure your life cover policy will be there for your loved ones when they need it! You can find out more about how life cover policies work on the 1Life Insurance website. Talk to a skilled 1Life Insurance consultant today or buy your cover online and save up to 13% on your monthly premiums. Do it today and secure your family’s future!