Interpreting Your Insurance Documents
Key Takeaways
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Read the documents to know what you're buying
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Changed your mind? You have 14 days to review your policy documents
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Review your insurance portfolio every two years or when a significant life event happens, e.g., marriage, purchase of your first property, birth of your first child, loss of a dependant, etc.
Documents You Will Receive
When you buy an insurance policy, you'll come across most, if not all of these documents. Each document is created to give you a better understanding of what you're buying. Find out what each one is for.
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Cover page (to highlight salient information)
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Policy illustration, if relevant
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Product summary (features of product)
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Bundled Product Disclosure document (to compare the benefits of a bundled product against a term product)
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Product Highlights Sheet (for the sub-fund of an investment-linked plan)
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Know Your Client form (fact finding form)
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Application/Proposal form
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Policy contract/Endorsement
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Your Guide to Life Insurance or Your Guide to Health Insurance (from the Life Insurance Association)
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Direct Purchase Insurance factsheet and checklist
Free-Look Period
All life insurance companies grant a 14-day free-look period that starts from the day you receive the policy documents.
Take this time to read through your policy documents carefully to see if the policy meets your needs. If you decide that the policy is not suitable, the insurance company will refund all your premiums less medical and other expenses they have paid.
What Does It All Mean?
Your insurance contract is an important legal document. Read carefully before you agree to the terms and conditions.
Here is a guide to interpreting the common terms in your insurance document:
Policy number and NRIC number – Insurance companies track your records through these numbers. There could be more than one person with the same name, so it's important to check that your NRIC number is correct on the policy document.
Name of policyholder and name of insured – Names of policyholder and insured may be different in cases when a parent buys a policy for a child. The parent is the policyholder and the child, the insured.
Product name – This is the name of the product. The type of product may be part of the name. For endowment products, the name may include the term of the product.
Entry date, policy date – They mean the date the policy commences.
Term and maturity date – Most insurance companies use 'Term' or 'Duration' to state the number of years the policy will run. Some may state the maturity date as the end date of the policy.
Sum assured – The amount of money that is paid out when an insured event such as death or total permanent disability occurs. Also known as face amount, principal sum, or sum insured.
Benefits – This section states the policy benefits, and when and how the sum assured or cash value will be paid out. Note that a portion of the total illustrated cash values for participating plans and ILPs is not guaranteed.
The benefits section will also state if there are additional benefits, provisions, supplements or riders attached to the policy and where you can find them in the policy contract. Check for a detailed description of these add-ons in the sub-sections. The contract would often show a breakdown of premium in the list of benefits.
Premium and currency – The amount of premium you need to pay, how often (monthly, quarterly, half-yearly, or yearly) and for how long. You may change your mode of premium payment by informing the insurer. The contract will also state the currency of your premium as some offer other currency denomination, commonly USD or AUD.
Tips:
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Make a summary of your insurance plans to give yourself an overview of your coverage, maturity date and your cash values
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Review your insurance portfolio regularly (every two to three years), or when your circumstances change, e.g. if you're getting married, when your spouse has stopped working, or when your child is born
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Update your insurer if there are changes in your particulars, e.g. change of address, name, and occupation
