Benefits offered on a ‘per Confinement’ basis relate to an individual incidence of hospitalisation, rather than an individual accident or illness. Confinement is defined as admission in a Hospital for a minimum period of 6 hours upon the recommendation of a Registered Medical Practitioner and continuous stay in a Hospital prior to the Insured’s discharge. Confinement may not include Day Surgery depending on your plan.
Interest that is earned or changed on interest. A fixed deposit with a principal of $100 and earning 1% interest per month has a balance of $101 at the end of the first month. SO in the second month, the 1% interest is earned on $101 – not $100.
Convertible term insurance gives the policyholder the right to convert a temporary insurance policy to a permanent insurance policy, i.e. a whole life or an endowment policy, without having to prove insurability. This option is particularly important because insurance needs change with time. The premiums of the new policy will be based on the then attained age of the insured.
Your reputation as a borrower, based on your credit history. If you’re prompt in making your credit card or other loan repayments, you have higher credit worthiness. If you often don’t make your repayments by the due date, you have lower credit worthiness.
In an insurance policy, the deductible is the portion of any claim that is not covered by the insurance provider. The deductible portion is usually a fixed amount that you have to pay first before the policy benefits are paid, up to a stipulated deductible limit each policy year. Co-insurance is the percentage of the medical bill that you have to pay after deducting the deductible amount. Here’s a simplified example:
Deductible amount = S$2,000
Co-insurance = 10%
Medical bill is S$5,000
Assuming no benefit, policy year, or other limits apply,
the insurance company will reimburse you for:
(S$5,000 - S$2,000) x 90% = (S$3,000 x 90%) = S$2,700
You will pay:
S$2,000 deductible + S$300 (co-insurance) = S$2,300
A fixed term life insurance policy that pays the sum assured and any bonuses or dividends that you may have earned at a pre-determined date in the future (also known as the maturity date). If you pass away during your policy term, your beneficiary will receive this payment. You may also be covered for illnesses, accidents or total and permanent disability that happen(s) during the policy term (depending on your policy). An endowment insurance policy always has a fixed maturity date (unlike whole life insurance). It may be a participating or non-participating policy (see definitions on page 18).
Endowment policies provide a combination of insurance protection and savings benefits for a stipulated period of time. The sum assured of the policy and accrued bonuses, if any, are paid upon death during the stipulated period of time. If the insured survives upon the maturity of the policy, the sum assured and accrued bonuses, including any maturity bonuses, are paid to the insured. Endowment policies are typically attractive to those saving for retirement or their children's higher education.
Most health insurance plans describe exclusions. These are things that will not be covered under the plan. A typical exclusion is that of pre-existing conditions.
A policy that pays an agreed amount of money if you become ill, or are injured or disabled. You may be reimbursed for your medical treatments, or paid a lump sum of money (depending on your policy). Some health insurance policies provide an income if you’re hospitalized, and/or cover the cost of medical care even after you leave the hospital.
When you sign up for a plan, you decide how much you want to be insured for (the Insured Amount). This may apply in total or to individual benefits, and it determines the amount(s) you may claim for. Your Insured Amount influences the amount of premium you will have to pay.
With investment-linked policies (ILPs), premiums paid are used to buy units in one or more funds offered by the insurance company. These funds are similar to unit trusts where investors' money is pooled and invested in various short and long-term investment facilities. Some examples of these facilities include listed equities of strong companies and fixed income securities.
The price of the units will depend on the investment performance of the ILP sub-funds. The benefits payable will depend on the price of the units prevailing at the time of surrender or death or maturity of the policy.
In addition to the cash value of the units, investment-linked policies usually provide a minimum guaranteed death benefit.
A life insurance plan that lets you decide how much of your premiums you wish to invest and how much goes to your insurance protection. The amount you invest is used to buy units of your choice in one or more managed funds (see ‘Managed funds’). If you terminate your policy, the amount of money you’ll receive depends on the number of units you have and their total cash value at the time. ILPs offer a choice of funds for different levels of risk. Some funds may get you higher returns, but the potential for loss is also higher. Returns aren’t guaranteed, and neither is your principal.
A fee charged on borrowed money. A credit card company usually charges an interest rate of up to 24% per annum.
A general increase in prices of goods and services over a period of time. This causes the value of a dollar to fall because you won’t be able to purchase as much with that dollar as you previously could. Inflation has a serious, erosive effect on your savings.
The minimum amount on your credit card bill that has to be paid, as required by the financial institution that issues your card. This is usually 3% to 5% of the outstanding balance or $50, whichever is higher.
A type of investment managed by a financial institution. The money is invested in a number of securities, giving each investor greater diversity in his or her investment portfolio. A fund manager determines the investments to buy or sell and the investors don’t have a day-today control.
A life insurance policy that doesn’t offer a share of the profits of the insurer. You don’t receive bonuses or dividends from the insurer.
The amount of money you pay for insurance cover. Premiums are paid at regular intervals, usually once a month, once every three months, once every six months or once a year.
Period of insurance cover.
A life insurance policy that offers a share of the profits of the insurer. Bonuses and dividends are declared once a year by the insurer. They aren’t guaranteed until they’re declared.
If you have a serious ailment or have been treated for a medical problem before you apply for health insurance, your insurance company could classify this as a ‘pre-existing condition’. This could make it difficult for you to be accepted into a medical insurance scheme, or the insurance company might not cover you for claims relating to the pre-existing condition. For example, AIA Complete Critical Cover is a plan that offers a lump sum payout in the event of being diagnosed with a critical illness, such as cancer. But if you already have cancer when you sign up for the plan, that would be judged to be a pre-existing condition and you may not be eligible to make a cancer related claim. This underlines the importance of signing up for health insurance when you are still healthy.
A payment made to policyholders of participating plans, based on an insurer’s earnings and surplus.
Life insurance policies are broadly categorised as participating and non-participating policies.
Participating policies are policies that entitle the policyholders to share in the profits of the insurance company, in consideration of the additional premiums they contribute. The profits given are generally called bonuses. The benefits from participating policies include a non-guaranteed element (i.e. bonus), which is determined by the performance of the insurance company.
Non-participating policies do not share in the profits of the company. An example of a non-participating policy is a term insurance policy.
Upon the maturity of a renewable term insurance policy, the insured has the right to renew the policy without having to prove insurability. This means that a new term policy will be issued by the insurance company regardless of the state of health of the insured then. The premiums of the new policy will be based on the then attained age of the insured.
Riders are supplementary plans that can be attached to basic insurance policies, such as whole life or endowment plans, with the payment of additional premiums. Riders give additional and enhanced coverage at a lower cost. They also provide flexibility of choice to meet individual needs. An example of a rider is the Critical Illness rider which pays a lump sum of money upon diagnosis of a major illness.
Charges are considered ‘Reasonable and Customary’ when they are charged for treatment, supplies or medical service that is medically necessary to treat the Insured’s condition, and are in accordance with the standards of good medical practice provided by a registered medical practitioner. Reasonable and Customary charges would not exceed the usual level of charges for similar treatment, supplies or medical services (a) in the locality where the fee or expense is incurred, or (b) based on Singapore standard charges, depending on your plan; and would not include charges that would not have been made if no insurance existed.
The amount of profit you could receive from an investment, expressed as a percentage of the total amount invested. This profit measures the income obtained from an investment compared to its purchase of market price.
For life insurance, this is the amount of money your beneficiary will receive if you pass away. For health insurance, this is the amount of money you’ll receive if you fall ill or are injured (depending on your policy).
A health insurance policy usually has an amount of cover for each benefit. For instance, a hospital expenses reimbursement benefit can give you a $10,000 amount of cover while a daily hospitalisation income benefit can give you a $300 cash allowance for each day that you’re hospitalised.
Term insurance provides temporary life insurance protection for a stipulated period of time. The sum assured of the policy is paid to the beneficiary when death occurs during the stipulated term. Nothing is paid upon the survival of the insured at the end of the stipulated term. Being the cheapest form of insurance, term policies are best suited for those who require insurance protection at the lowest cost, such as fresh graduates with relatively low disposable income. Term policies are not available to children below the age of 16.
Whole life policies offer a lifetime of insurance protection as well as long-term savings. The sum assured of the policy, and accrued bonuses, if any, are paid upon the insured's death, or where applicable, upon total and permanent disability of the insured. Should the need for permanent insurance protection diminish, or cease in later years, the whole life insurance policy may be surrendered at the policyholder's choice for its cash value - a ready pool of retirement funds! Whole life insurance policies are suitable for both children (even as young as newborns) and adults.