Frequently asked questions (FAQs)

A

Accidental death benefit
Money paid to the heirs if the insured person dies by accident.

Advance premiums
Premium that occurs when a policy has been processed, and the premium has been paid prior to the effective date. These are a liability to the company and not included in written premium or the unearned premium reserve.

Agent of record
Agent of the policy notes.

Assigner
An individual who transferred the asset.

Assignment
The transfer of all or part of a policy owner’s legal title and rights to a policy to another person. It is possible to change this type of transfer at a later date.

B

Beneficiary
An individual who become eligible to receive payment due to will, life insurance policy, retirement plan, annuity, trust, or other contract.

Beneficiary, contingent
An individual who become eligible to receive payment from the life insurance policy if the first recipient dies.

Beneficiary, irrevocable
Beneficiaries that cannot be changed without their permission.

Bond
Investment securities whereby an investor lends money to a company or government, in return of interest payments over a specified time frame, and repayment of principal at a later date.
*For Takaful plan, this is known as Sukuk.

C

Cash (surrender) value
The amount of money the life insurance policy owner will receive as a refund if the policy owner cancels the coverage and returns the policy to the company.

Certificate / Contract
An evidence of a contract between a participant and a takaful operator which sets out the terms and conditions of the particular certificate.
*For Conventional Insurance plan, this is known as Policy.

Cessation
Terminate cooperation.

Claim
An insured person asks the insurance company to pay him back for medical expenses or other expenses covered by the policy; or the recipient asks the insurance company to pay the death benefit in the life insurance policy.

Coinsurance
Insurance in which the insured party pays part of the bill and the insurance company pays the rest.

Collateral insurance
Insurance to pay back the insured person's loan for his death.

Commencement date
Start date.

Company risk
The risk that invented individual companies will not do as well as expected.

Contingent owner
The person who will have a life insurance policy if the owner dies before the policy ends.

Contribution
A monetary contribution provided once or periodically by a participant to a takaful operator for the purpose of investment and tabarru'.
*For Conventional Insurance plan, this is known as Premium.

Conversion right
Right to change a policy (to a different kind of policy).

Copayment
The amount of a certain fee to be paid by the participant, the amount stipulated in the policy with an agreement that only above that amount will be reimbursed.

Credit or default risk
A chance that the invested company will go bankrupt or have a credit rating lowered, making it more expensive for the company to borrow money.

Currency or exchange risk
Changes in currency values that affect a person's investment.

D

Death benefit
The money paid to the heirs when the insured person dies.

Decreasing term insurance
Temporary life insurance where the amount to be paid when the insured party dies down every year.

Designate
Selecting, setting.

Disburse
Paid.

Dismemberment
Loss of body parts.

Double insurance
Two policies that cover the same risk.

E

Eligible
Allowed.

Endorsement
Written evidence of any amendment, variation or change made to the policy.

Endowment policy
Life insurance policy will be paid to the insured if he is alive when his coverage ends.

Estate
Assets and liabilities (of the deceased).

Estate plan
Plan to transfer the insured's assets and liabilities when he dies.

Excess limits premium
Premiums to cover risks that are more expensive than the policies covered.

Exclusion
Something not covered / covered in a policy.

Executor
The person (mentioned in the will) to administer and distribute the assets of a deceased person to the beneficiaries.

G

Grace period
The length of time that the policy will remain in effect if the premium has not been paid.

Group insurance
Group insurance, usually in the form of members of a society or professional association, or the employees of a particular employer.

Guaranteed insurability
The ability to increase a person's coverage regardless of his or her health condition.

H

Hibah (Gift)
A transfer of ownership of an asset from a donor to a recipient during the lifetime of the donor without any consideration or reward.

I

Incontestability clause
The clause in the policy that says after two years, the insurance company can not claim that the policy is invalid unless there is fraud at the time of sale.

Inflation risk
The likelihood that the investment will not grow enough to cover the price increase over time (meaning today's money will not be worth as much in the future as it is worth now).

Insurable interest
Policy owner's economic or financial interest in the coverage of the life assured's life. Insurable interest exists when the life assured derives a financial or other kind of benefit from the continuous existence of the policy owner.

Insurance
A contract whereby an insurer undertakes to indemnify another against loss arising in specified contingencies.
*For Takaful plan, this is known as Takaful.

Insurer
A company that offers an insurance policy in return of premiums.
*For Takaful plan, this is known as Operator.

Interest
Earnings generated by investments.
*For Takaful plan, this is known as Profit (for investments).

Interest rate risk
The risk that changes in interest rates will affect your investment.

Intermediary
Agent, negotiator, representative.

Intestate
No wills.

L

Lapsed
Ended and not resumed/ cancelled.

Life assured
You as a person who is covered and protected in premiums.

Living benefit
Money paid in advance (of benefit amount) if the insured person is seriously ill.

Loan
An amount of money that is borrowed, and has to be paid back, usually together with an added interest and/or finance charges to the principal value.
*For Takaful plan, this is known as Qard.

Longevity risk
The possibility that someone will live longer.

M

Management expense ratio
Part of the expense of the mutual fund, including the salary of the mutual fund manager charged by the fund company before it is paid back to investors.

Market risk
Changes in market prices that affect investment.

Maturity date
The date at which the sum assured of a life insurance policy becomes payable

Minimum retained premium
The minimum amount of premium an insurance company will retain in the event the policy is cancelled prior to its expiry.

Mortgage life insurance
Insurance that at the time someone dies, pay the company that pays the mortgage.

N

Named insured
The person mentioned in the policy, and is covered by the policy.

Net asset value per share
The value of one unit in a mutual fund.

Non-concurrent insurance
Insurance covering different risks.

Non-disclosure
Policy owner does not provide important information to insurance company when apply for a new policy.

Non-insurable risk
Risks that are not covered by the insurance company.

O

Occupational accident
Work accident.

Occupational disease
Disease because of work.

Operator
Responsible to manage and administrate a takaful fund of behalf of participants and charges an upfront agreed fee to cover costs.
*For Conventional Insurance plan, this is known as Insurer.

P

Participating insurance
Life insurance that pays outgoing bonuses or dividends (money) to the policyholder if the company has surplus profits associated with life insurance, often referred to as "par insurance".

Payee
People get paid.

Payer
People who pay.

Percentage participation
The clause in the health insurance policy that says the percentage of claims that the insurance company will pay.

Permanent partial disability
A partial disability for life.

Physical hazard
Physical harm.

Policy
A contract that describes the rights and duties of the insurer and the insured.
*For Takaful plan, this is known as Certificate / Contract.

Policy anniversary
The same day and month each year to mark the starting policy.

Policy fund
The circumstance in which the payment earns interest based on the choice of selected investment account.

Policy limit
The maximum amount of money that the insurer will pay claims under the policy.

Policy provisions
Policy details.

Pre-existing condition
Any injury, illness, condition or symptom that existed before the start of the policy.

Preferred rates
A person gets a lower premium if he is less risky to be guaranteed (healthy, non-smoker).

Premium
Monthly or annual payment for life insurance policy.
*For Takaful plan, this is known as Contribution.

Premium discount plan
Get a discount for paying a premium before maturity.

Presumptive disability
Consider the loss of eyes or limbs or the ability to speak into total disability.

Profit (for investment)
In Islamic contracts, most of the contracts used for investment purposes are based on Mudarabah (profit sharing), Musyarakah (profit loss sharing/partnership), and Murabahah (sale and purchase with cost mark-up), which allows for profit elements.
*For Conventional Insurance plan, this is known as Interest.

Prohibited list/risk
List of corporate risks that are not covered by insurance.

Pro rata cancellation
Cancel policy and regain premium paid for unexcepted timeframe.

Pro rata clause
The clause that provides the cost to change or cancel the policy.

Prorating
Adjusting benefits given by mistake or other insurance covers the same.

Protection
Protection for people who follow insurance.

Proxy
Someone who acts for someone else.

Q

Qard
A contract of lending money by a lender to a borrower where the latter is bound to repay an equivalent replacement amount to the lender.
*For Conventional Insurance plan, this is known as Loan.

R

Rate of return
The profit or loss you make as a percentage of the total amount invested.

Remoteness of damage
The cause of the damage indirectly.

Renewal premium
The subsequent premiums that are paid by the life assured to the insurance company in order to keep the policy in operation and avail the benefits of the policy accordingly.

Return premium
Premium return process.

Rider
An added insurance policy provision that adds benefits to the basic insurance policy.

S

Stock company
Companies that issue shares.

Sukuk
Islamic securities
*For Conventional Insurance plan, this is known as Bond.

Sum assured
Coverage amount, amount of insurance.

Surrender
To cancel the policy before it expires, with the consent of both parties (the insured party, and the insurance company).

Surrender charge
The fee payable by the policyholder if he decides to monetize his policy.

T

Takaful
Mutual guarantee provided by a group of people against a defined risk or catastrophe befalling one’s life, property or any form of valuable assets.
*For Conventional Insurance plan, this is known as Insurance.

Term insurance benefit
Giving policyholders the ability to add insurance to a permanent or universal living policy to protect a person in temporary need.

Testate
Rights to own.

Testator
The person making the testament.

Total and permanent disability (TPD)
Disability for life.

Trust
An account where the asset is for the person who will receive the benefits.

Trustee
The person managing the account.

U

Underwrite
The process through an individual or institution takes on financial risk for a fee.

Underwriter
An individual tasked with the duty to assess the risk of the insurance proposal before issuing the policy.

Universal life insurance
Incorporating permanent life insurance plus the ability to make investments that grow without tax in policy.