Most Common Insurance Terms | Must Know Insurance Glossary Singapore

Insurance

Here’s a glossary of the most common insurance terms to help you understand your policy. Don’t worry if you’ve ever been perplexed by your insurance policy (and who hasn’t?). Insurance contracts are notorious for being crammed full of jargon, technical terms, and phrasing that doesn’t always mean what you think it means.

Most Common Insurance Terms

Cash dividend

A cash dividend is a sum of money distributed to eligible policyholders as a result of earnings or profits. Only certain insurance policies pay out cash dividends, which can be guaranteed or not.

Cash value

The cash value of your policy is the amount of money you will receive when you surrender it. It is accumulated through the premiums you pay, fewer charges, and fees. Cash values typically accumulate over time, with the greatest growth occurring near the end of the policy’s term. As a result, cash values are typically low at the start and peak near the end.

No-claims bonus (NCD)

A reduction in your next premium if you have not made any claims in the preceding pre-defined period. For example, a three-year NCD motor insurance policy will provide a discount to drivers who have not made a claim in the previous three years. This reduction applies to their premiums for the fourth year.

Co-insurance

When a claim is filed, the policyholder agrees to pay a portion of the bill. This is referred to as co-insurance. For example, if your policy includes a hospitalization benefit with a 20% co-insurance and your bill is $10,000, you will pay $2,000 and your insurer will pay the rest. Co-insurance allows insurers to keep premiums low by requiring policyholders to pay their fair share when filing a claim. This term appears frequently in your Integrated Shield plans.

Exclusions

Exclusions are pre-defined events that your policy does not cover, and any claims for exclusions will be denied. Examples include pre-existing medical conditions (life insurance), specific occupations (personal injury), and terrorist acts (travel insurance). To determine whether a policy is appropriate for your needs, carefully examine its exclusions.

Free trial period – Most Common Insurance Terms

A period of time following the signing of an insurance policy during which you may withdraw from the contract without penalty. In Singapore, free-look periods for insurance policies typically last 14 days, but this may vary in some cases.

Deductible

A deductible is an amount that the insured must pay before any claims can be processed. The insurer will pay the deductible excess. No claims can be made if the amount is less than the deductible. This appears to be the same as co-insurance, but there is one minor difference. The first dollar of fees, up to the deductible amount, is referred to as the deductible. Co-insurance is the percentage of the hospital bill that is payable after the deductible has been met. Aside from Integrated Shield plans, you’ll see it a lot in auto insurance.

Front-end loading

Refers to the practice of insurers deducting costs and fees from the initial premium payments for a policy. Because of front-end loading, insurance policies have low cash values at the start.

Rider

A rider is an insurance benefit that is added to a base policy to broaden and extend the coverage. Riders are a good way to tailor a policy to your specific needs, and they are frequently cheaper when bundled rather than purchased separately.

Surrender value

How much your policy is worth in cash at the time of surrender? The surrender value is the cash value of your policy, and it is often best to wait until the cash value equals or exceeds the total amount paid in premiums before surrendering.

Personal liability

Personal liability insurance protects the policyholder against claims for damages, loss, or injuries. A common use for this type of insurance is for landlords who want to protect themselves from tenants who seek compensation for losses incurred while renting and staying in their property.

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