August 9, 2017 0

Know some of the Common Terms Used in Insurance and Takaful

Know some of the Common Terms Used in Insurance and Takaful

It is good that nowadays most people have the awareness in buying a good Insurance policy or participating in a Takaful plan. Some have one policy and some others have more than one policies at a time. But as a consumer, we have to be careful not to put too much trusts on the agents or the product sellers without  knowing what plan actually we signed on. Please take note on the following terminologies used when taking up an Insurance and/or Takaful plan.

As a consumer, we must educate ourselves to know the whats and whys before we buy an Insurance policy or participating in a Takaful plan.

 

What is Insurance?

“Insurance is the transfer of risk by an individual, such as yourself, or an organisation, such as your business, to the insurance company. You or your organisation will thus be known as the policy owner. The insurance company receives payment in the form of premium and will compensate you in the event of losses or damages sustained by you. ”

Source: Definition by insuranceinfo: http://www.insuranceinfo.com.my/learn_the_basics/insurance_made_clear.php

 

What is Takaful?

“Takaful is a protection plan based on Shariah principles. By contributing a sum of money to a common takaful fund in the form of participative contribution (tabarru’), you undertake a contract (aqad) to become one of the participants by agreeing to mutually help each other, should any of the participants suffer a defined loss.”

Source: Definition by insuranceinfo: http://www.insuranceinfo.com.my/learn_the_basics/insurance_made_clear.php

 

Why we should know some of the common terminologies used in Insurance and Takaful?

So that we don’t get misinformed or misled by the intermediaries that propose or sell the Insurance policy or participating in a Takaful plan. If you have already bought an Insurance policy or participated in a Takaful plan, please do check first that whatever benefits you take meet your requirements or not. If yes, good for you. If not, please check with your agent or you can also talk to me to help review your policies by clicking here.

This list mainly focuses on LIFE INSURANCE, FAMILY TAKAFUL and MEDICAL & HEALTH products in Malaysia.

Let’s start …

 Terminologies  Simple Definition and Comment
 Basic Sum Cover/Sum Assured

 

This is the minimum amount to be received on death or when the Person Covered become disabled. The sum covered may be increased subject to the terms and conditions to be determined by the Insurance or Takaful companies at that time.

The purpose of having this is primarily for use by our dependents.

 Critical Illness (CI)

 

CI policies can be sold as a stand-alone policy or as a rider attached to a main policy. Benefits will be paid only if the policyholder suffers from any of the 36 Critical Illnesses that meets the standard definition as defined by LIAM (Life Insurance Association of Malaysia).

1) Stroke
2) Cancer
3) Heart Attack
4) Coronary Artery By-Pass Surgery
5) Other Serious Coronary Artery Disease
6) Angioplasty and Other Invasive Treatment for Major Coronary Artery Disease
7) Heart Valve Surgery
8) Fulminant Viral Hepatitis
9) End Stage Liver Failure
10) Primary Pulmonary Arterial Hypertension
11) End Stage Lung Disease
12) End Stage Kidney Failure
13) Surgery to Aorta
14) Chronic Aplastic Anemia
15) Major Organ/Bone Marrow Transplant
16) Blindness/Total Loss of Sight
17) Deafness/Loss of Hearing
18) Loss of Speech
19) Coma
20) Major Burns
21) Multiple Sclerosis
22) Paralysis/Paraplegia
23) Muscular Dystrophy
24) Alzheimer’s Disease/Irreversible Organic Degenerative Brain Disorders
25) Motor Neuron Disease
26) Parkinson’s Disease
27) Terminal Illness
28) Encephalitis
29) Benign Brain Tumor
30) Major Head Trauma
31) Bacterial Meningitis
32) Medullary Cystic Disease
33) Brain Surgery
34) Loss of Independent Existence
35) HIV Due to Blood Transfusion
36) Severe Cardiomyopathy

Note that the reason why we take the CI cover is mainly to take care of us.

 Early-Stage Critical Illness (Early CI)

 

Early CI Rider pays multiple claims across different critical illness or across severity levels within the same critical illness, subject to the fulfillment of the pre-defined conditions. Typically upon occurrence of any of the critical illnesses, a percentage of the Sum Covered will be payable, subject to terms and conditions. Payment commitments are normally higher due to higher probability of claims. The list of illnesses are normally more than the standard 36 plans, most companies are covering more than 100 types of critical illnesses.

Why take this cover? Firstly, it is possible, especially at an early stage, for full recovery to be made. The payouts will help with the medical expenses at this stage. Secondly, it helps the person deal with living expenses in the event that the person needs to take a break from working.

There is no right or wrong if we don’t take this option. Plan your commitment wisely.

 Total Permanent Disability (TPD)

 

The payout occurs when the Policy or Certificate owner totally and irrecoverably loses both sights, or severance anyone limb above or at ankle or wrist or both limbs. Typically in order to get the payout benefit, the disability must be permanent and lasts for 6 consecutive months.

Certain companies will have this clause in the document, payout occurs when the Policy or Certificate owner becomes permanently and completely unable to engage in any occupation and unable to perform any work for profit.

 Partial Disability Typically upon occurrence of any Disability, such as losing a finger, a percentage of the Sum Covered will be payable, subject to terms and conditions. Read your policy documents or certificates for full list.
 Hospital Benefit (HB) /
Daily Cash Allowance
This option typically provides daily cash benefit (“hospitalisation benefit”) in the event of hospitalisation due to illness or accidental injury.
 Waiting Period
The eligibility for a benefit due to illness to start how many days after the effective date. Typically for critical illnesses, 120 days waiting period shall apply, hospitalisation normally 30 days. Accident cases normally do not have waiting period. Check your documents before claiming your benefits. Get your agent to brief you about this.
 Hospital Room & Board

 

This is the room price we can go into when hospitalised. For example if we take up the RM200 plan, we will be admitted to the rooms priced RM200 per day and below. If we request to be admitted in rooms higher than RM200 per day, the insurance or Takaful company may not cover the room charges.

Please also take note on the day limits of a plan. If for whatever reason, we overstayed the day limits, insurance and Takaful companies will not cover the charges.

 Pre & Post-Hospitalisation

 

This feature allows policy or certificate owners to claim medical expenses before & after hospital admission. It is normally based on Pay & Claim basis, and only allowed to claim expenses related to the illnesses he or she is admitted.

Most companies give 2 months pre-hospitalisation and 3 months post-hospitalisation.

 Deductible Deductible is a fixed amount policyholder pays before the health insurance company will begin paying for medical expenses. For example, if the plan is subject to a deductible of RM3,000, you will have to pay the first RM3,000 of the total medical expenses. The remaining balance will be paid by the health insurance company up to the annual limit.
 Co-Insurance/Co-Takaful

 

This means you will be required to pay a certain amount of money while the Insurance or Takaful company will cover the outstanding balance. Some older plans require us to bear 10% or 20% hospital charges with limit of RM500 or RM1000 per hospital visit.
 Annual and Lifetime Limit

 

Some companies will have the limit or how much we can claim from our Medical Card annually. Please check before agreeing on a plan. If somehow we exceed the annual  limit of a Medical Card, we have to pay the difference on our own, using cash, credit card or other Medical Cards that we have.

Lifetime Limit is the limit of the claims we can do in our lifetime. Read the policy documents or certificates for details when we exceed the limit.

 Waiver/ Provider/ Contributor/ Payor
In the event of Total Permanent Disability and/or Critical Illness, the future payment commitments of the insurance policy or Takaful certificate will be paid off, so that the policy or certificate owner can focus on the treatments.
 Child Lien/Juvenile Claim If the Person Covered dies/TPD/diagnosed with CI before attaining age 4 years old,
a reduced Sum Covered using percentages (%) on benefits is payable.
 Reasonable & Customary Charges (RCC)

 

This term is mainly used in Pay & Claim situation. This is usually due to admission to non-panel hospitals or treatment done outside Malaysia.

The RCC is based on the Private HealthCare Facilities and Services (Private Hospitals and other Private HealthCare Facilities) Regulation 2006 of Malaysia

 Free Look Period

 

A period, usually 14 days, from the receipt of the policy documents during which the policyholder can exercise the rights to cancel the policy and any premiums paid will be refunded less any medical examination fees incurred, which has to be borne by the policyholder.

It is always advisable to check the Quotation documents before signing and also to check the Insurance Policy or Takaful Certificate to know what is covered and what is not covered within the Free Look Period.

One very important note when applying an Insurance policy or Takaful certificate, please disclose any illnesses that you have, because the Insurance and Takaful companies have the right not to pay any benefits if you do not disclose any pre-existing illnesses.

 

A simple guide by insuranceinfo when buying an insurance policy or participating in a Takaful plan:

1. Understand the policy or plan including the product features, conditions, benefits limitations and exclusions

2. Ensure that the premium or contribution payable is affordable

3. Ensure that the amount of coverage taken is adequate and suits your needs

4. Ensure that all material facts are fully disclosed

5. Deal only with registered agents/licensed brokers or directly with an insurance company or takaful operators

6. Monitor the period of coverage and time for payment of premium or contribution

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