Common Life Insurance Terms You May Want to Know Part 2

In the last edition, we introduced some basic terms commonly used in an insurance contract.  In this edition, we shall talk about several more common insurance terms.

Free-Look Period - (also known as “cooling-off period”) is a period of time in which a new life insurance policyholder can cancel the policy without having to pay any penalty. When you cancel your policy, the insurer will refund you the initial premium you have paid less any medical fee associated with your insurance application.  Insurance companies typically offer free-look period ranging from 10 to 21 days from the policy effective date.

Grace Period - is the provision in most life insurance contracts that allows premium to be received for a certain period of time after the actual due date. If the policyholder pays the due premium during this period, no late fees or interest are charged, and the late payment does not result in default or cancellation of the policy. A typical grace period is 30 days.

Cash Surrender Value - is the sum of money an insurance company pays to a policyholder in the event that he or she voluntarily terminates the policy before its maturity or an insured event occurs. In Lao Insurance Law, insurance policies will have no cash surrender value in the first two years of the policy term.

Lapsed Policy - A life insurance policy will lapse when premium payments are missed and cash surrender value is exhausted on a life insurance policy. When a policy is in a “lapsed” status, the insurer will no longer provide any insurance coverage to the life assured.  

Reinstatement - If a policyholder fails to pay the premium due to various circumstances and as a result the insurance policy gets terminated, then the insurance coverage can be renewed. This process of putting the insurance policy back after a lapse is known as reinstatement.  In order for the insurer to reinstate your policy, the policyholder needs to pay up the arrears premiums and the life assured is in good health.

Exclusions are cases for which the insurance company does not provide coverage, hence, no insurance benefit will be paid out. These are the conditions excluded from the insured events. Examples of exclusions are: death because of war, drunken driving, engaging in criminal activities, and other pre-existing diseases.  

If you have any question, please send it to info@prudential.la