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Key provisions in a life policy

PREMIUM

This is the money you pay to the life insurance company for coverage. You can choose how often you want to pay this premium - once a year (annually), every six months (semi-annually), every three months (quarterly) or every month.

PARTICIPATING OR NON-PARTICIPATING POLICY

The premium that you need to pay for a participating policy is higher than a non-participating policy, as it lets you share in the profits of the life insurance company, which is usually paid as dividends or bonus. A non-participating policy does not provide this.

BONUS

This is the extra money paid with the final benefit for participating policies. You will be paid a certain amount for every RM1,000 assured under your participating policy. The insurance company can increase or decrease this amount, depending on the economic environment and returns from investments.

YOUR AGE

You have to state your age correctly. Although the insurance company may not cancel the policy due to the incorrect age, your policy benefit will be adjusted to the correct age.

CASH/SURRENDER VALUE

When your life insurance policy has been in force for a number of years (normally a minimum of three years), it acquires a cash value (also known as a surrender value). This is the cash amount a life insurance company will pay you when you cancel your policy. You will lose if you surrender your policy before the maturity period.

POLICY LOAN

This is granted as long as your policy has a cash value. Interest will be charged on such a loan. You can choose how to repay the loan and the interest - as a lump sum or in instalments or not at all. Upon demise or on maturity of your policy, any unpaid portion of the loan taken, including the interest, will be deducted from the proceeds.

GRACE PERIOD

This is an additional period of time after the due date for the premium payment. The grace period for monthly premium payments is 15 days. For other frequency of payments such as semi-annually or annually, it is 30 days. If premium is still not paid within the grace period, your policy may lapse or be subject to reduced paid-up or automatic premium loans (as explained below).

REDUCED PAID-UP

You can stop paying future premiums after your policy has acquired a cash value. The policy will continue to remain in force but the sum assured is reduced.

AUTOMATIC PREMIUM LOAN

If you do not pay your premium within the grace period, and provided your policy has sufficient cash value, some life insurance companies will automatically advance to you the premium amount. Interest will be charged on the amount of premium loan outstanding. An automatic premium loan will reduce your cash value.

SUICIDE

Nothing will be payable to a nominee if death was due to suicide within a period, usually one year, as stated in the policy.

INCONTESTABILITY

The life insurance company cannot dispute the validity of a life policy after the policy has been in force for two years. If the insurance company refuses to pay, it must prove that the policy was obtained through fraud.

FREE LOOK

You may cancel your life insurance policy by returning the policy to your insurance company within 15 days after you received the document. The premium that you have paid (less any medical fees incurred) will be refunded to you.

REINSTATEMENT

When your life insurance policy has lapsed, you may revive or reinstate it to full force within a period of time and under certain conditions, such as declaration of your state of health at the time of reinstatement.

ASSIGNMENT

You may transfer your life insurance policy to another person or organisation. A written notice must be given to your life insurance company.

CONFIDENTIALITY OF INFORMATION

All your personal information, including medical information, is confidential and your life insurance company is strictly not allowed to divulge such information to third parties.

(source: www.insuranceinfo.com.my)

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