Life insurance comes with a lot of vocabulary, and most of it you can safely ignore.
Four words you can't. They decide who is covered, who controls the policy, who gets paid, and how much. I've seen families caught out by every one of them, usually at the worst possible moment.
Here they are, in plain language.
1. The insured
The person whose life is covered. If this person dies (or, depending on the policy, becomes critically ill or disabled), the policy pays.
This is the person whose health questions were answered on the application, and whose age set the premium.
Simple enough. But note: the insured is not necessarily the person who owns or pays for the policy.
2. The owner
The person who controls the policy. The owner can change the beneficiary, borrow against the policy if it allows that, surrender it, and make most decisions about it.
Very often, the owner and the insured are the same person. But not always. A parent can own a policy on a child's life. A wife can own a policy on her husband's. A business can own one on a key employee.
This matters because control matters. If you're the insured but someone else is the owner, you don't get to decide what happens to that policy. I've seen this cause real problems after separations and family fallouts.
Check: who is the owner on your policy? Is that the person you want in control?
3. The beneficiary
The person, or people, who receive the money when the policy pays out.
This is the one most often left out of date. People name a beneficiary at twenty-five and never look again. Then life happens: a marriage, a child, a parent who passes away, a relationship that ends.
A few things worth knowing:
You can usually name more than one, and decide the share each gets.
Some designations are revocable and some are irrevocable. A revocable beneficiary can be changed by the owner at any time. An irrevocable one generally can't be changed without that beneficiary's consent. This is a bigger decision than it looks on the form, so ask about it before you tick the box.
Minors can be named, but there are practical complications around how the money is received and managed until they're of age. Ask your advisor how your insurer handles it.
Check: if this policy paid out tomorrow, is the money going to the right person?
4. The sum assured
The amount the policy pays. Sometimes called the face amount or the coverage amount.
This is the number that matters most, and it's the one people are least likely to know. They know their premium, because they pay it. They often don't know what it buys.
The question isn't whether the number sounds big. It's whether it's enough to do the job you need it to do: replace an income for some years, clear a debt, fund a child's education. A ₱500,000 policy sounds substantial until you divide it by the years a family would need it.
Check: do you know your sum assured? And is it enough for what it's meant to cover?
The ten-minute check
Get your policy out, or open your insurer's app. Find these four words. Write down who or what is next to each.
Then ask yourself three questions:
1. Is the owner the right person to be in control? 2. Is the beneficiary still the right person? 3. Is the sum assured enough for the people relying on it?
If any answer is no, call your advisor this week. Most of these are a form and a signature to fix. It's much easier now than after the claim.
