In Filipino, affixing a ‘-naryo’ at the end of a 6-figure digit (or more) means you’re up for some fortune and goodies. In this blog, I shall introduce you to the basic terminologies in insurance so you can be well-versed while building up your fortune.
Without further ado, here are the words you need to add to your vocabulary.
Account Value - Value of your withdrawable money in an investment-linked policy at the time of valuation.
Actuary - key person/team responsible for the creation of premiums table for an insurance plan.
Ask price - Also offer/ buying price; The price of a unit from a merchant. Represents the supply.
Beneficiary - The list of persons assigned to receive the benefits upon loss/ death.
Bid price - Also selling price; ‘sell on bid’. If you bought a mango and wanted to sell it back to the merchant, the price is the bid price and is usually lower than the offer/ask price. Represents the demand.
Bid-Offer Spread - Also Ask-Bid spread; the difference between the buying and selling price. If percentage, the denominator is the offer price.
Capital Appreciation - increase in value of assets.
Compound Interest - principle to accrue greater returns by making use of the interest from previous years.
Cost of Insurance - COI; see NAR
Distributor - (also ‘Financial Advisor’, ‘Insurance Agent’) is a third-party entity whose duty is to obtain policies for the insurance company.
Diversification - risk management technique by mixing investments for the creation of a balanced portfolio. It is the opposite of “Placing your eggs in one basket.”
Dividends - Also ‘Surplus Distribution’; just a bonus from the company as a part-owner.
Indemnity - protection against loss.
Inflation - rate of loss of a currencies’ purchasing power, also rate of the rise of goods’ and services’ prices.
Insurable Interest - a relationship established when two parties gain when one side gains and both suffer if a specified loss occurs.
Insured - the policy-owner.
Insurer - the insurance company.
Investment - any asset acquired. Insurance companies invest to protect the money from inflation through capital appreciation.
Life Expectancy - average age that a person in a particular group (nationality, working-class, residence, etc.) will reach.
Mortality - relating to death. Males have lower mortality age for they engage more in laborious works. The mortality rate is one of the main factors in computing your premium (Higher age, higher mortality rate).
Morbidity - relating to sickness and health risks. Females, on the other hand, are more prone to morbidity due to pregnancy and childbirth.
Net Amount at Risk - dictates the Cost of Insurance (COI). It is the amount you still need to pay to fund your death benefit. If your account value happens to be bigger than your sum insured, then your account doesn’t need to pay for NAR/ COI.
Policy - the contract signed by the insured and the insurer.
Pooled fund - any fund gathered/aggregated
Portfolio - Financial portfolio is a collection of all of your financial investments (cash, stocks, bonds, etc.)
Premium - (also ‘consideration’) is the amount paid to keep the policy in force
Single-Premium - One-time payment.
Sum Insured - SI; also Death Benefit, the amount payable by the insurer to your beneficiaries upon your death.
Level - fixed death benefit
Increasing - will also increase the COI/NAR; therefore a higher portion of your premiums will be allocated for the insurance portion compared to level DB.
Traditional - Basic form of insurance. Targets financial coverage; no investment portion.
Term-plan - Temporary Plans; cover and payable up to a short period only.
Underwriting - a process of applicant’s risk assessment, thereby accepting or rejecting the liability of guaranteeing a sum upon an applicant’s loss.
Unit Pricing - the price of a unit for buying and selling. “Price of a mango for example.” The unit is the mango, the selling price and buying price differ on how the market performs.
Variable Life Fund - Also Unit-linked; a fund where the policy is linked.
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