Glossary

Accidental Death & Injury Benefit

In the event that death, or injury results from accidental causes, this benefit makes provision for additional benefits to be paid, over and above the basic sum assured.

Accidental Death

Where the death or injury is caused solely and directly, by violent, accidental, external & visible means.

Actuary

A statistical expert who calculates insurance risks. He/she uses mortality tables and predictions of future interest rates, to calculate the premium rates in our rate books.

Agent

A representative of an insurer. He/she may be an independent contractor or an employee.

Amendment

Any alteration or change to the original application for life assurance. Applicants must authorise all amendments by signing their name in full, next to each change/amendment. 

Ancillary Benefit

Also known as rider benefit. An extra benefit, attached to the basic policy.

Annual Inflation Update

Also called premium update or premium escalation. This is an automatic increase in premiums at each policy anniversary by a specified percentage.

Annuity

A fixed sum of money paid at regular intervals (usually monthly) to the annuitant (i.e the person owning the annuity).

Applicant

The applicant is the person who applies for the policy.

Basic Benefit

Benefit that is compulsory for this product.

Beneficiary

Person nominated to receive the benefits under the policy when the life assured dies.

Broker

An agent who is licensed to represent and sell the policies of one or more life assurance companies. The broker is employed by the policy owner rather than the life insurance company.

Capital Disability

Total and permanent disability such that the person is unable to continue working.

Claimant

The person who comes into the office to make a claim. This person must be entitled to this role.

Cedant

Direct insurer, which passes on (cedes) shares of its insured risks to a reinsurer in exchange for a premium.

Cession

A transfer of the assured's interest or ownership to a third party. When you transfer the ownership, you cede the policy to somebody, the cessionary. You must remember that although the cessionary becomes the owner of the policy, you remain the life assured, i.e. the person who has to die, or live till maturity, before the proceeds become payable. A cession overrides the appointment of a beneficiary, so that if you die (or survive to maturity), and the cession is still in force, the cessionary is entitled to the proceeds of the policy.

Child

A child by birth to the insured, including a posthumous child, a stepchild, or an adopted child, providing that proof satisfactory to BLIL is submitted for the latter two (2) categories. All unmarried children under the age of 21 may be covered. Cover is extended to age 25 if the child is registered full time at a recognised educational institution and is still classified as a dependent. Mentally retarded as well as permanent and totally disabled children may be covered under this benefit irrespective of their age.

Commencement Date

The date on which the cover commences.

Commission

Is a fee paid to an agent or broker for the agent’s services.

Compulsory Annuity

An annuity purchased from the proceeds of a pension fund. This is compulsory because it is a statutory requirement that a certain portion of pension money be used to purchase an annuity. In Botswana, at least 2/3 of the pension fund should be applied to purchase an annuity.

Credit Life Insurance

A single or recurring premium term life assurance policy taken out by borrowers. Its purpose is to cover payment of outstanding loan balances in the event of their dying, or on the happening of other specified events.

Days Of Grace

The period allowed, during which the assured may pay an overdue premium without the policy lapsing.

Death Claim

A requirement for the life insurer to pay benefit as a result of the death of the life insured.

Debit Order

A written, signed authority, given by a policyholder to the assurance company, to deduct the premium amount from his/her bank account.

Disability

A physical or mental condition that makes an insured person incapable of performing one or more duties of his/her occupation. Such disability may be partial, temporary or total.

Dread Disease

Every life assurer has his own approach to dread disease benefits, but the following are generally considered to be the dread diseases:

  • Heart attack
  • Stroke
  • Certain types of cancer
  • Coronary artery disease requiring surgery
  • Renal failure
  • Major organ transplants
  • Paraplegia
  • Blindness
  • AIDS
Endorsement

Any alteration, amendment or other condition affecting the clauses and conditions of a policy. All endorsements must be written on the policy document and be properly dated and signed by the life insured, and by an authorised person of the assurer.

Exclusions

Causes of death or injury for which the insurer will not pay the benefits.

Ex Gratia Payments

This occurs when the assurer is not legally obliged to pay a claim, but does so for commercial/moral obligations.

Funeral Insurance

Low level of life insurance that can be used to pay for funeral expenses. There is usually no medical underwriting for this type of product and benefits are paid within a very short time after claim is submitted.

Group Life Assurance

Life assurance issued to a group of persons with related interests; for example, working for the same company.

Insurable Interest

This is the financial interest that the applicant has in the life to be insured. Obviously, a person has financial, and thus insurable interest in his own life. Other insurable interests are: life of a spouse, life of a relative, life of a debtor, life of a partner, etc.

Investment Value

The value of the units purchased under a policy. Calculated as the number of units multiplied by the current unit price.

Maturity Date

This is the date at the end of the policy term, when the policy matures. Risk benefits cease and investment value becomes payable to the policy owner.

Medical Requirements

The medical evidence required by the underwriter to assess the risk involved in offering a policy and therefore the rates which must be applied.

Minimum Premium

The smallest premium an insurer will accept.

Misrepresentation

Failure to disclose all relevant and accurate information regarding the policy by the agent/broker; or failure to disclose all relevant and accurate conditions by the buyer, which would affect the premium rating for the policy. Misrepresentation would render the policy contract null and void.

Mortality Tables

Tables showing the probability of death based on age and based on past experience. These figures are used to calculate the risk the insurer takes, and also to calculate premiums.

Reassurance

An agreement whereby an insurance company transfers part or all of its risk of loss under insurance policies it writes by means of a separate contract or treaty with another insurance company or re-assurer.

Recurring Premium Policy

A life assurance policy in which premiums are made at regular intervals; e.g monthly or yearly.

Reinstatement

When a lapsed policy is put back in force and benefits are reinstated.

Repudiate

To refuse to admit liability to a claim.

Retirement Annuity

A policy designed specifically to provide a person with money to finance an income in retirement. The contributions made, are tax deductible, although the income itself is taxable.

Lapse

Cancellation of a policy by the life insurer as a result of non payment of premium by the premium payer.

Life Insured

The person on whose life all risk benefits will be paid.

Loading

Additional premium that is payable on a policy because the insured risk is greater than the standard risk acceptable to the insurer.

Loan (Policy Loan)

A loan made by a life insurance company from its general funds to a policy owner on the security of the investment value of a policy. It is payable during the term of the policy or at policy termination by a reduction in termination benefits.

Non Forfeiture Loan

A loan that is raised against the investment value of the policy if premiums are not paid within the days of grace to ensure that the policy doesn't lapse.

NTU (Not taken up)

Where the policy is at the underwriting stage and there are outstanding requirements. After a period of three (3) months, this policy will automatically go to NTU.

Paid-Up Option

After the policy has passed the initial period; and provided the policy has a cash value; the policy can be made paid-up, for a reduced benefit, to be agreed upon at the time of conversion.

Persistency

An internal measure of how ‘persistent’ the recurring premium policies are staying on the books of the company. Usually, if policies have been appropriately sold by agents and brokers , then the persistency would be high.

Policy Document

The document which describes in detail the terms and conditions of the contract between the Insurer and the Insured.

Policy Anniversary

The date of commencement of the assurance, and each anniversary thereof.

Policy Owner

The person who has all contractual obligations under the policy. The policyholder is not necessarily the life assured.

Premium

Payments due to the insurance company from the policy owner in exchange for benefits.

Premium Due Date

The date on which the premium is payable.

Pure Endowment

An investment policy that has no life cover.

Single Premium Policy

A policy whereby one premium is paid at the commencement of the policy. The amount is considerably larger than policies receiving regular premiums.

Standard Risk

Person who, according to an insurance company’s underwriting standards , is entitled to insurance protection without extra rating or special restrictions.

Stop Order

A method of paying premiums whereby a deduction is made from the premium payer's salary, by his/her employer, and paid directly to the insurer.

Sum Assured

The amount that becomes payable in the event of a claim.

Surrender Value

The surrender value of a policy is that amount of money that a policy owner will receive out of the investment account if he/she decides to cancel the policy.

Term

The period for which a policyholder agrees to pay premiums in return for which the assurer guarantees benefits; i.e. how long the policy will last. 

Twisting

A form of malpractice in selling life assurance where a salesman persuades a policyholder to terminate an existing policy with a company, and buy another one. As an introducer of the new policy, the salesman will thus earn fresh commission. As it is nearly always against the policyholder's interest to do so, this practice is heavily frowned upon.

Uberrima Fides

Latin phrase for the principle of "utmost good faith", on which life insurance is based. Essentially, it means that for the insurance contract to be valid, both the insurance company and the applicant must be totally and completely honest in their dealings with each other.

Underwriter

The person who assesses the risk for the insurer, by examining and interpreting the medical evidence and information contained in the application to determine the terms that should be offered the applicant.

Universal Life Insurance

A flexible premium life insurance policy under which the policy owner may build a policy to cover all their life insurance needs by choosing different rider benefits.