GETTING TO KNOW YOUR INSURANCE POLICY OPTIONS
After purchasing a life insurance policy, you may come across various options for you to choose from- but you may not know what they mean! Here is a list of important terms that can help you understand your options better, allowing you to make informed decisions should the need arise.
Do you know who will receive your policy money should the unexpected happen?
To ensure that your policy benefits are paid out to your intended recipients, be sure to make a nomination in your policy. This refers to the person or persons you named in a life or personal accident policy to receive the benefits under the policy upon your demise.
Remember to keep your nominee updated about your life insurance policy, the changes made to it and where you keep your policy documents!
If your nominee (e.g. your child) is a minor, you are advised to appoint a trustee. A trustee is a person who will receive the policy money on behalf of the nominee(s) as an executor. The appointed trustee will be required to administer the money based on the instructionsas stated in the policy documents.
Third party policy
This type of policy covers the liability of the Life Assured towards the Policy Owner. For example, you can buy a life insurance policy on the life of your spouse. Upon your spouse’s demise, you will be entitled to the policy money. This is because the Life Assured (your spouse) does not own the life insurance policy enabling you to receive the entire amount. This may also apply to a parent buying insurance for a child.
Even after your plan has been in-force, you can add on supplementary benefits (known as rider) to enhance your protection.
Accident riders provide coverage for death, permanent disability or injuries caused by accidents.
Medical riders can cover you in hospitalisation, surgical expenses and other medical reimbursement.
Payer benefit waives premium in the event of death, total and permanent disability or critical illness of the person paying the premium for the policy. The person is usually a parent or a legal guardian for juvenile third party policies (where the Life Assured is still a minor).
Waiver waives premium in the event of death, total and permanent disability or critical illness of the Life Assured.
If your needs change at any point, here is what you can consider:
If you would like for another person to receive policy benefits beneficially and not as an executor, you can absolute assign the policy to him/her. This means that you will be transferring ownership rights of your life insurance policy to him/her.
Automatic Premium Loan (APL)
The APL option is available after your life insurance policy has accumulated a cash value. If you don’t pay your premiums within the grace period, the insurance company will automatically advance to you the premium amount using your policy’s cash value, provided that it is sufficient to cover the amount. However, you will have to pay back the APL amount, and with interest.
If your life insurance policy has accumulated a cash value, you can choose to stop paying future premiums and go for a reduced paid-up policy instead. The policy has a lower sum assured compared to the initial sum assured purchased. It also keeps you covered for the same policy term but without the hassle of premium commitment.
Extended term assurance
Another way to stop paying for future premiums is by converting to an extended term assurance using your life insurance policy’s cash value. This means that your policy will have a reduced policy term, but retains the original sum assured.
Note: Not all life insurance policies offer all the above options or accumulate cash value. You are advised to check with your servicing agent or the insurance company for detailed information regarding your policy.