Breaking Down Insurance Jargon: A Guide for the Filipino Consumer

Navigating the world of insurance in the Philippines can seem like you’re trying to understand a new language. For many people, the complicated terms and phrases used in insurance policies can be confusing. This confusion often makes it hard for families to make well-informed choices about their coverage. This article aims to break down common insurance terms. With this guide, you will learn the essential language of insurance, which can help you and your family make the right choices when it comes to protecting your future.

Understanding Basic Insurance Concepts

Before we get into specific insurance terms, let’s first look at some key concepts that are the foundation of insurance:

• Insurance: Think of insurance as a financial safety net. It helps you protect yourself against possible financial losses that can come from unexpected events. You pay a certain amount, called a premium, to get this protection.
• Risk: Risk refers to the chance that something bad can happen, which may cause you financial loss. Insurance helps you deal with these risks by providing support when they actually occur.
• Policy: A policy is a formal agreement between you (the person who buys the insurance, also known as the policyholder) and the insurance company. It explains what is covered and what is not, as well as other important details.
• Premium: This is the fee you pay to the insurance company to keep your coverage active. You can usually choose to make this payment monthly, quarterly, semi-annually, or annually.
• Claim: A claim is a request you send to your insurance company asking them to pay for a covered loss. You file this request after a particular event that your policy covers has happened.

Common Insurance Jargon Demystified

Coverage Terms

• Coverage: This terms refers to the specific losses or risks that your insurance policy will pay for. It explains what protections your policy offers.
• Inclusions: Inclusions are basically the events or items that your insurance policy will directly cover. They’re what you can expect your insurance to protect you against.
• Exclusions: These are the specific situations, events, or items that are clearly stated as not being covered by your insurance policy. It’s very important to read through exclusions so you know what is not protected.
• Limits of Coverage: This defines the highest amount of money an insurance policy will pay out for a covered loss. Often, each specific event that is covered will have its own limits.
• Policy Period or Term: The policy period is the amount of time that your insurance policy is valid. Depending on what you choose, this can last for a few months to several years.
• Renewable: Renewable policies give you the option to extend your coverage for another term, which may come with changes to your premium.

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• Non-Renewable: These policies do not allow you to extend coverage once it has expired. You would need to buy a new policy if you want to have insurance again.

Financial Terms

• Deductible: This is the amount you have to pay out of your own pocket when making a claim before the insurance takes over. Generally, a higher deductible allows you to pay lower premiums and vice versa.
• Co-payment: This is a fixed amount you pay when you receive certain services, like visiting a doctor, which is covered by your health insurance. This amount is paid during the service.
• Co-insurance: This is when you pay a certain percentage of the covered medical bills after your deductible has been met. The insurance company covers the rest, up to certain limits.
• Cash Value: This term usually applies to life insurance policies. It refers to the money that has accumulated within your policy that you can access.
• Sum Insured or Face Value: This is the highest amount the insurance company will pay if a covered loss takes place. It’s basically the total benefit your policy offers.
• Benefit: This is what your insurance plan provides to you when a covered event happens, in terms of payment or services.

Life Insurance Terms

• Beneficiary: This is the person or organization that will receive the benefits from your life insurance policy if you pass away.
• Term Life Insurance: This type of insurance gives you coverage for a specific term or period, usually at a lower premium, but it only offers a death benefit and doesn’t build cash value.
• Whole Life Insurance: This type provides coverage for your whole life, builds cash value, and offers a death benefit, but generally comes with higher premiums.
• Universal Life Insurance: This is a flexible type of life insurance that includes a component for cash value that can grow depending on market conditions.
• Riders: These are optional add-ons to your life insurance policy that provide extra coverage, like protection for accidental death or critical illness.

Health Insurance Terms

• Pre-Existing Condition: A pre-existing condition is a health problem that you had before obtaining your insurance. Some policies may not cover these conditions, or they may impose waiting times before coverage kicks in.

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• Network of Providers: This is a list of healthcare providers, like doctors and hospitals, that are included in your insurance plan. Staying within this network usually means lower costs for you.
• Out-of-Network: These are health providers not connected to your insurance plan’s network. Services from them may cost much more and might not always be covered entirely.
• Pre-Authorization: This is approval from the insurance company you might need before receiving certain treatments, procedures, or hospital stays.
• Health Maintenance Organization (HMO): An HMO is a health insurance plan where you need to select a primary care doctor who takes charge of coordinating your healthcare.

Other Important Terms

• Policy Lapse: This occurs when your insurance coverage ends because you fail to pay the premiums. A lapsed policy means you are no longer protected.
• Grace Period: This is the time allowed after your premium’s due date during which you can still make a payment without losing your coverage.
• Waiting Period: This is the time you must wait after your policy starts before some coverages take effect.
• Underwriting: This is the process the insurance company uses to evaluate the risk of insuring you and set your premiums based on that assessment.
• Agent or Broker: An agent represents one insurance company while a broker can help you explore various options from different insurance providers. They can assist you in finding the best coverage.

Choosing the Right Insurance in the Philippines

When selecting insurance in the Philippines, it’s important to keep these tips in mind:

• Assess Your Needs: Think about where you are in life, your family situation, and your financial commitments. If you’re young and single, your insurance needs will be different from those of someone married with children.
• Family Protection is Key: Many Filipinos care deeply about their family’s well-being. It’s important to consider life insurance, health insurance, and personal accident policies to cover family members.
• Budget Wisely: Make sure you don’t overstretch yourself financially with high premiums. Find a balance between getting enough coverage and what you can comfortably pay each month.
• Know Your Covered Areas: Especially with health insurance, check if the plan covers the hospitals and clinics near you. Choose plans that are convenient and the best fit for your location.
• Read the Policy Carefully: Always read and understand the full terms and conditions of any policy, including benefits, exclusions, and any waiting periods. If something is unclear, ask for clarification before signing.
• Get Professional Advice: Seek help from independent agents or brokers who can talk you through various policy options from different providers, helping you make well-informed decisions.

Frequently Asked Questions (FAQ)

What is the difference between a “term” policy and a “whole life” policy?
A term life policy provides coverage for a specific period of time, while a whole life policy covers you for your entire life and has a cash value component.

What does “pre-existing condition” mean in health insurance and how does it affect my plan?
A pre-existing condition refers to any health issues you had before you took out your insurance. Some plans may exclude these conditions or have waiting periods before offering coverage.

What is a deductible? How does it impact my coverage?
A deductible is the amount of money you must pay out of pocket before your insurance starts to pay. Usually, a higher deductible leads to lower premiums.

Can I have multiple beneficiaries under my life insurance policy?
Yes, you can usually designate multiple beneficiaries, and you can also specify how the death benefit will be distributed among them.

If I live in the province, can I still apply for health insurance?
Yes, most health insurance companies offer nationwide coverage or plans that cater to people living in the provinces. Just be sure to check the network of providers available in your area.

References

This article was prepared using publicly available resources about insurance and related terminology.

• Philippine Insurance Commission – General Information
• Insurance Industry Handbooks
• Various Insurance Policy Sample Documents