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Glossary

Welcome to our glossary!

We are passionate about making insurance simpler and easier for everyone to understand. So we thought it would be helpful to explain some of the unfamiliar terms that we have to use to ensure we are accurate.

We would love this to become the most comprehensive glossary in the industry so if you spot a term not listed here, please send a note to insurancemadesimple@manulife.com

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Simplifying the language we use is critical to our mission. We found that we couldn’t avoid using some technical terms because it’s the language of our industry and changing them might cause confusion. Instead, we have explained each using plain language. This glossary is intended to help you understand insurance terms which may be confusing or complex. It isn’t intended to replace conversations with our agents or partners, who are equipped to help you make the right decisions for your needs.

Accrued benefits

This is a form of payment you receive from your policy, but it's an amount that's not immediately paid. The longer you have your plan, the more this money should increase.

Asset class

This refers to a group of investments that are classified in a similar way. For example, stocks or bonds would be financial asset classes.

Attained age

This is the age at which you're able to take action to withdraw funds or receive benefits.

Beneficiary

This refers to someone who is entitled to receive money from an insurance policy. There are two main types of beneficiaries - primary and secondary.

For example, Mr. Wong takes a life insurance policy. He selects Mrs Wong (his wife) as the primary beneficiary and his only child, Alice, as the secondary beneficiary.

When Mr. Wong passes away, Mrs. Wong is entitled to receive the proceeds of the policy (or the 'death benefit'). If Mrs. Wong has also passed away then Alice, the secondary beneficiary, is entitled to the death benefit.

Benefit

A benefit, also referred to as 'pay-out', is the amount of money we'll pay according to the terms of a policy.

This is typically the reason why you would invest in an insurance policy, allowing you to plan for the future and giving you peace of mind.

Cash value

This is the amount of money we will pay you when your policy ends and the policy is eligible. The cash value can be calculated at maturity (at the pre-agreed end of the policy), when you surrender the policy earlier than the agreed maturity date, or when the risk insured happens.

We understand that circumstances change and perhaps you need to cancel your policy before it is supposed to end. The cash surrender value (also known as 'surrender value') is the amount of money we'll pay in that situation.

Cancelling the policy in the early years might result in penalty charges. This means that the cash surrender value could be smaller that the cumulative amount you've paid into your policy.

Compound interest

There are two types of interest: simple and compound.

Simple interest calculates the interest on the initial sum invested, every year.

With a compound interest, we will pay interest on the interest already earned and the initial sum invested, helping you grow your savings faster.

For example, you invest $100 at 5% annual interest. In the case of a simple interest, we will pay you $5 every year. With a compound interest, we will pay you $5 in the first year. In year 2, you will earn an interest of $5.25 (5% on $105), and so on.

Cool-off period / Cooling off period / Free look period

This means you can cancel your policy if you change your mind without any financial penalty. It's usually limited to a short period of time e.g. 21 days or one month.

Cover coverage / Coverage

This is the scope of your insurance policy. You pay us a premium to protect you and your loved ones against unexpected events. If these events take place, we fulfil the promise of the policy.

It is important that you discuss your needs with us before choosing a policy. It's also critical that you read your policy terms and conditions to understand what is included and what is excluded.

Coverage class

This refers to the different types of insurance that you can choose from, depending on your needs and circumstances. For example, life insurance or health insurance.

Critical illness

This expression has different meanings in different industries. When we refer to 'critical illness', we mean a serious physical or mental health issue (for example cancer, a heart attack or Alzheimer disease).

Different policies will cover different critical illnesses, so it's important that you discuss your needs with us before choosing a policy. It's also important that you read your policy terms and conditions, so you know both what is included and what is excluded.

Death benefit

A death benefit is typically the reason why you would invest in a life insurance policy, allowing you to plan for the future and giving you peace of mind. When you pass away, your beneficiary will receive the proceeds of the policy, which is called a death benefit.

Dividend

An insurance policy dividend is a sum of money that is paid to you (usually annually) from the profits of the policy. Dividends are not guaranteed.

Grace period

This is the amount of time that we continue to cover you if you stop paying your premium. It is really important that you reinstate your premium payments before this period ends so that you continue to be protected.

Guaranteed cash value

This is the minimum amount that your policy is worth at a specific moment in time. You will receive this when you cancel your policy or the term ends. The guaranteed cash value is typically lower than the cumulative amount of your contributions, due to the cost of protection.

Immediate family member

This is the legally recognized parent, child or spouse of the person insured.

Incontestability provision

If you have made a mistake in your policy details, this clause prevents us from cancelling the cover after a certain period of time, typically 2 years.

Individual insurance policy

This is a personal insurance policy that you choose and pay for yourself. It is different from a group insurance policy which is typically provided to you by your employer.

Initial premium

This is the first payment made by you, as the policyholder, under a new insurance policy.

Insurability

This refers to how eligible you are for insurance. We take into consideration factors like health, life expectancy and risk profile before making a decision.

Issue age

This refers to an insurance policy where the premium you pay depends on your age. Typically, the older you are, the higher the premium.

Lapse

This means that you are no longer covered by your policy. It happens when you stop paying your premium and any potential grace period has expired. If this has happened please contact us immediately.

Level premium

This is a type of life insurance where premiums stay the same throughout the term of the policy.

Life insurance policy

Let's face it: life insurance is not fun to think or talk about, but like taxes or visiting the dentist, planning for the future is an essential part of being an adult.

If people depend on you for financial support, then life insurance is an important way of keeping them protected. At Manulife, we've made it our mission to help you make easier decisions, so that we can support you and your loved ones.

Life insured

This describes a person who is covered by an insurance policy. They are also known as the policyholder or owner.

Participating policy

A participating policy is an insurance contract where you 'participate' in the profits of the insurance investment, which means that you may receive dividends. These profits are not guaranteed.

Pay-out

This is a sum of money we pay to a beneficiary. For example, this could be a cash pay-out to cover hospital expenses, which means you can focus on treatment and recovery without financial worries. A compassionate death pay-out will help your family cope with the immediate expenses associated with your death, for example funeral costs. This is paid to your family before the claims process completes. A 'max critical illness pay-out' is the maximum amount of money you can be paid if you were to have a serious illness such as cancer or heart disease.

Permanent partial disability vs. Permanent total disability

The term 'disabilities' can be classified as temporary or permanent, and as partial or total, depending on circumstances.

Temporary disabilities means that you are either unable to work full-time (this is called 'temporary partial disability') or unable to work at all for a period of time (this is referred to as 'temporary total disability'). In either of these situations, you are expecting to make a full recovery and return to work as normal at a later stage.

In the case of a permanent disability, you would never be able to work in the same capacity as before you were ill and/or injured. A permanent disability would prevent you from being able to work full-time for the rest of your life (this is called 'permanent partial disability'), whereas a total permanent disability means that the you will never work again.

It is important for you to understand which of these 4 types of disabilities are covered by your policy, so be sure to read and understand the terms and conditions.

Policy loan

A life insurance policy loan is just a loan from the insurer in which the cash value of your policy is used as collateral. It is important that you keep up the payments on your loan so that we do not need to reduce the final pay-out.

Policy year

This is the 12-month period starting from the day on which the policy was first taken out.

Policyholder

A policyholder (also known as 'policy owner') is the person in whose name the insurance policy is held.

So, if you buy an insurance policy under your own name, you’re the policyholder. As the policyholder, you can sometimes add more people to your policy. These would become additional 'people insured' under the policy.

Pre-existing condition

This is a health condition (either physical or mental) that is diagnosed before you take out a policy with us. It is important that you declare these conditions, so that we can confirm whether we can cover them. If you do not declare these conditions upfront, your policy may become invalid.

Premium

This is the cost of your insurance policy, usually paid on a monthly basis.

Premium paying period

This is the total number of periods (eg. years) that a policyholder will need to pay premiums. It will vary depending on the type of policy you choose.

Premium rate

This is the amount of money you need to spend for your policy. This may vary from year to year, depending on the level of cover and your risk profile. Premium rates can be fixed, we call these 'level premiums'.

Rider

This refers to an additional provision to your insurance policy. It is optional and can either increase or restrict the level of your coverage. If a rider increases your coverage, it will usually require an increased premium.

Risk profile

This is something that we use to determine your willingness and ability to take risks with the way you invest your money. It helps us make sure we invest your money in a way that is appropriate for you.

Supplementary benefit

This refers to an additional provision to your insurance policy and is often called a 'rider'. It is optional and can either increase or restrict the level of your coverage. If a rider increases your coverage, it will usually require an increased premium.

Surrender

This simply means to cancel a policy.

Surrender value

We understand that circumstances change and perhaps you need to cancel your policy before it is supposed to end. The surrender value (also know as 'cash surrender value') only applies to eligible policies. It is the amount of money we'll pay you if you cancel your policy.

Cancelling the policy in the early years might result in penalty charges. This means that the cash surrender value could be smaller that the cumulative amount you've paid into your policy.

Term life insurance

There are two types of life insurance policy: term life and whole life.

Term life means we cover you for a defined period of time (for example, 25 years) whereas whole life means we cover you for your entire life.

Term protection

This applies to a term life insurance policy and is used to explain the number of years you will be protected for.

Valuation day

This is the day that we buy or sell assets on your behalf, which means that it is the date the value of the assets is determined. This date may vary from fund to fund.

Variable life products

These products combine life insurance with investment features, so a portion of the insurance premiums are invested into a designated investment fund or funds.

Waiting period

These are risk assessment experts and they are really important in the world of insurance. Their role is to understand your risk profile so that they can determine the right price for your insurance. It's important for them to know all of the facts (such as pre-existing conditions) so that they can make a fair evaluation.

Waiver of premium option

This option continues to pay your premium if you are unable to pay for it yourself due to disability or illness. It's an optional benefit (also known as rider) that you'll find on several of our term life policies.

Whole life insurance

There are two types of life insurance policy: term life and whole life.

Term life simply means that we cover you for a defined period of time (for example, 25 years), whereas whole life means we cover you for your entire life. Typically, a whole life insurance is more expensive than a term life.

This glossary has been created for informational purposes and should not be considered as legal or financial advice. Contractual terms and conditions will prevail should any of the content in this glossary conflict with your policy documents.