Financial dictionary

Get clear, easy-to-understand financial terms and definitions. This comprehensive glossary explains the most important concepts related to insurance, investments, and beyond.

Advisor 

A Financial Advisor is a professional and caring partner who can guide you towards achieving your goals. They do this by helping you make smart money choices that fit your lifestyle and needs. Our financial advisors’ goal is to help people live brighter lives through financial wellness.

 

Anticipated Endowment

An anticipated endowment, also known as guaranteed endowment benefit, cash benefit, or cash payout, is usually equivalent to a percentage of your Face Amount. This is paid out by the Company on a regular basis at specific intervals specified in your policy contract. Not all policies have this feature.

Example: Anticipated endowment = 20% of the Face Amount with payout schedule starting at the end of the second policy year and every two (2) years thereafter. 

 

Automatic Premium Advance (APA)

The cash value of your policy is used to pay for an unpaid premium. This is considered an advance subject to interest charges. You can check your policy contract for more details. 

 

Back-End Load 

A “back-end load” is the service fee charged to you when you claim the profits of your mutual fund investment.

This is a fixed or variable fee that will be charged when you sell a part of (or all) your mutual fund investment. Ask your Advisor if this is the best financial decision for your needs.

 

Balanced Fund 

From its name, a balanced fund offers you a balanced mix between aggressive & conservative investment portfolio. This mix enables your fund to have a steady profit that is not greatly affected by economic fluctuations, making it perfect for those with a moderate risk tolerance.

If your risk appetite is between conservative and risky, you can invest in a mix of equity and high-quality debts, which this type of Mutual Fund can deliver.

 

Beneficiary 

A beneficiary is the person who is entitled to claim and receive the value of your insurance or investment fund should something happen to you. They are the people who would benefit from these, so they should be those people you work hard for.

Upon availing an insurance policy or mutual fund investment, you have the privilege to name a child, spouse, relative, or partner to receive its benefits after a certain time or if something happens to you.

 

Cancellation (in insurance)

The termination of insurance coverage. 

 

Cash surrender value / Policy surrender

For a participating insurance policy, it is the amount of money adjusted for factors such as policy advances or unpaid premiums (APA) that the Policy Owner will receive if he/she surrenders the policy to the insurance company.

For a variable unit-linked insurance policy, it means the withdrawal of the entire Fund Value calculated by multiplying the unit price of investment fund where the Policy Owner's funds are invested by the total number of units in said investment fund (i.e. unit price x total number of units) that the Policy Owner will receive if he/she surrenders the policy to the insurance company. This may be subject to surrender charges, if applicable 

A policy that has been surrendered can no longer be reinstated.

 

Cash value

For participating insurance policy, this is the guaranteed amount available in cash upon surrender of a policy before it becomes payable upon death or maturity. Once this guaranteed amount is paid out, the policy is terminated.

 

Change in Fund Allocation 

This refers to changing the fund type of your investment. For example, your VUL’s existing fund (made up of your premiums) are placed in Balanced Fund. However, you want future premiums to be invested in an Index Fund. You can request a Change in Fund Allocation from your financial advisor. Note that this is different from Fund Switching.

 

Critical illnesses

A critical illness is a type of disease that may require long-term hospitalization and recovery or may even result in the patient's demise.

 

Critical Illness Insurance 

This type of insurance helps you cover the high cost of being sick. There are policies under this that let you claim a lump sum upon diagnosis of specific illnesses. See Sun Fit and Well (link to product page) as an example.

 

D.E.A.L.

Digital. Easy. Affordable. Life Insurance (D.E.A.L) is Sun Life’s suite of digital insurance products. We envision touching more Filipino lives by making insurance as easy as possible.

 

Death proceeds

The amount of money payable to the beneficiary upon death of the life insured. 

Digital partnerships.

 

Digital partnerships

Sun Life is developing digital distribution capabilities by collaborating with different industry players in financial technology and InsurTech that have good market base, solid value proposition, and high growth potential.

 

Dividend

A dividend is an amount of money given to the Policy Owner of a participating insurance policy. It results when actual mortality, investment earnings, expenses, and other factors are more favorable than expected when premiums were set. Policy dividends are not guaranteed.

Only participating policies earn dividends. 

A Policy Owner has the following options in using dividends: 

If you are a participating Policy Owner, you have the following options on how to use your dividends: 

1. Paid-Up Addition - Dividends are used to purchase additional insurance coverage. 

2. Premium Reduction - Dividends are used to pay the current year/s premium. If the dividend is insufficient to pay the full year/s premium, you will be billed for the difference. If the dividend is in excess, this amount will be given to you in the form of a check. 

3. Dividend Accumulation - Dividends are left with the Company to accumulate at the declared rate. 

4. Cash - Dividends are paid yearly to the Policy Owner in the form of a check. 

 

Effective date (life insurance policy)

This refers to the month, day, and year your policy takes effect. This is also called issue date. 

 

Emergency fund 

Emergency fund are savings intended to be used for unexpected life situations such as health issues, loss of income, calamities, even death. Having an emergency fund helps you deal with sudden financial needs without wiping away your savings.

 

Endowment Insurance 

This is a type of insurance that endows or gives you a lump sum upon maturity of contract, or death of policyholder. In general, endowment refers to assets such as income or property that you hand down to your heirs.

 

Equity Fund 

If your risk appetite is aggressive, you can invest in a “high stakes, high reward” type of Mutual Fund invested in high-quality equity securities.

 

Estate planning

Estate planning is the process of making the necessary arrangements for the distribution of an individual's assets in the event of the individual’s death or if he/she becomes incapacitated. 

 

Evidence of insurability

Statement or proof of past and current condition and other factual information to support one's application for insurance, additional benefits, reinstatement, etc. 

 

Excess premiums

Excess premiums are additional premiums made for an investment-linked insurance plan that you may use to increase your life insurance coverage and investments, or replenish decreasing Fund Value, if applicable. On top of your regular or single premium, excess premiums are used to purchase additional units of your chosen fund resulting in an increase in policy benefits.

Excess Premiums can be a one-time payment, or these can be billed regularly together with your regular premiums. These may require evidence of insurability. 

 

Expiry date (insurance policy)

The date on which the policy or its additional benefits ends. 

 

Extended Grace Period feature (for VUL policies)

The Extended Grace Period feature keeps the policy in-force even if the Fund Value is exhausted. However, this is subject to the following conditions:

1. The Policy is within its first policy year. 

2. Regular premiums are paid on or before every premium due date.

3. Total amount of fund withdrawals is not higher than the total excess premiums paid. 

 

Face amount / value 

This is the basis of the amount of coverage of an insurance policy. 

In most cases, the Face Amount is also the death benefit, but there are policies in which the death benefit is expressed as a certain percentage of the Face Amount.

E.g. Death Benefit = 200% of the Face Amount 

 

Forward pricing

Forward pricing is the way in which investment-linked products like mutual funds or VUL insurance are valued for clients who bought or redeemed (sold) their shares/units. The applicable NAVPS/NAVPU (Offering Price) used to price these shares/units is only determined at the end of every business day when all orders are in and markets have closed. 

This means that you do not know the purchase or redemption price until the next business day. This is because the share/unit price will remain static throughout market hours. But when markets close, the closing market prices of each of its underlying assets will determine the share/unit end-of-day price. 

 

Front-End Load 

When you purchase mutual fund shares, there is a sales charge, and it is referred to as front-end load. Different mutual funds companies can have different front-end loads. Since this reduces the amount of your investment (investment - front end load), it is a good idea to inquire about this fee and other charges before purchasing mutual funds with the help of your financial advisor.

 

Fund Allocation (a.k.a. Asset Allocation)

Fund or asset allocation refers to how much money you want to invest and in which investment product. For example, if you have PhP 100,000 and you want to allocate or distribute 50% in a balance mutual fund and 50% in an index mutual fund. This will help you create a portfolio or collection of investments that is right for your financial goals and risk tolerance.

 

Fund Selection Risk 

Each mutual fund carries different risks and potential returns. So, when choosing a fund, always keep in mind your goal while considering historical performances, company/fund manager reputation, as well as fees and charges that you might incur. You can always seek the help of a trusted financial partner (e.g. Financial Advisor – put in link) to help you make a bright decision.

 

Fund Switch 

As a mutual fund investor, you can decide to switch from one fund to another, from Balanced Fund to Index Fund. Doing so may be free of charge up to a certain limit, depending on your policy or mutual fund company.

 

Fund Value 

The fund value is the monetary value of your investment. Its values change over time, ideally growing as time progresses. Fund values can be guaranteed or variable. In the case of mutual funds, fund value can differ daily depending on the NAVPUs or the Net Asset Value Per Unit which depends on several factors, including economic and market performance.

 

Grace period

This is the extended period of time that the Policy Owner is still allowed to pay and keep the policy in-force when payment is missed on the actual due date. For a VUL insurance policy, this is the period when the fund's value is no longer sufficient to cover applicable fees and charges. 

 

Guaranteed Fund Value 

In a life insurance policy, this is the assured amount that you or your beneficiaries will receive upon maturity or in case of death.

 

Health insurance

Health insurance is a type of insurance coverage that provides protection for contingencies such as accidental death, disability, and/or illnesses. The full coverage will depend on your insurance policy. Please contact your advisor for full details. 

 

Income Protection 

The state of being able to provide a steady flow of income for yourself or for your dependents should something happen to you.

Commonly used to describe a benefit of insurance and investment, it refers to one’s capability to support dependents in periods without gainful employment due to sickness or injury.

 

Index Fund 

A fund that mimics the performance of the Philippines Stock Exchange Index. This fund chooses to invest your money in the country’s biggest companies.

 

Insurance advisor

An authorized and licensed representative of an insurance company who sells and services insurance contracts.

Also referred to as financial advisor or insurance advisor. 

 

Insurance benefit

The amount payable by the insurance company to a claimant, assignee, or beneficiary. 

 

Insurance charge

Charge for providing insurance coverage including any additional benefits.

 

Insurance claim

When the Policy Owner or beneficiary asks the insurance company to pay the benefits covered by the insurance policy as they become due/payable. 

 

Insurance coverage

Insurance coverage is the amount of risk or liability that is covered for an individual or entity by way of insurance services.

 

Insurance policy advance/loan

This is an amount borrowed from the policy's cash value at a specified interest rate. It can be repaid at any time. Any unpaid advance/loan plus interest will be deducted from the insurance benefit when it becomes payable. 

Also referred to as Advances in your policy contract.

 

Insurance policy anniversary

Anniversary of the policy's Effective Date. It is the same month and day each year. 

 

Insurance policy contract

Document which states all the benefits, terms and conditions of the policy. 

 

Insurance policy owner

Owner of a life insurance policy.

 

Insurance policy single premium

Lump-sum or one-time payment for an insurance policy. 

 

Insurance Premium 

This is the cash amount you pay for your insurance.

The amount you need to pay monthly, quarterly, or annually when you buy an insurance policy. It is important to pay on time because they can affect the validity of your insurance protection and benefits.

 

Insurance premium charge

Cost of sales transactions and other expenses for the acquisition of a VUL policy.

 

Insurance premium payment default options

These are options that allow the Policy Owner to keep the policy in-force despite nonpayment of premiums. 

 

Investment fund for a VUL insurance policy

The fund in which one's premiums are invested in a VUL policy.

 

Investment fund unit

A unit represents your ownership in the fund and is used to determine the fund's value at any given point throughout the duration of your policy.

 

Investment fund valuation date

The date on which the net asset value of the investment fund of a VUL policy is determined. 

 

Lapse

Termination of coverage due to non-payment of premiums.

For an insurance policy, the policy lapses when you stop paying your policy's premium and the Grace Period has expired. 

For a variable unit-linked insurance policy, the policy lapses if no payment is received during the Grace Period, and the Fund Value is insufficient to cover the relevant charges, and the Extended Grace Period feature is no longer in effect.

 

Life Insurance 

Life insurance is all about paying money (premiums) in advance, so you can receive a bigger guaranteed payout in the future. It is a way of ensuring that you have funds in the future, no matter what happens. Receivable money can be used in many ways, like using it as a fund for education, for a milestone, for retirement, or for paying health costs. It is also a way of ensuring income protection for your loved ones should something happen to you.

As a form of financial protection, you pay a Premium within a specific period to ensure a guaranteed payout upon maturity, death, or disability. You can use this for Income Protection, estate tax payment, health cost, and other benefits.

 

Life insured

The person whose life is insured under the policy. 

 

Life Stage 

Each one of us has our own unique timeline when it comes to getting started with one’s independence, moving up, preparing ahead, and leaving a legacy towards one’s retirement years. Every life stage has its own opportunities and challenges, prompting one to be financially ready for its milestones.

 

Loyalty Incentive 

A loyalty incentive is a bonus given to you for being able to consistently pay your due premiums. This incentive can be in the form of additional investment shares or an amount equal to 2% of your average monthly fund balance for the past 5 or 10 years.

Sticking with your insurance policy can give you a bonus called Loyalty Incentive. If you do not cancel your insurance policy or give up paying your premiums for a given period, you can be entitled to additional investment units/shares or an amount equal to 2% of your average monthly fund balance for the past five or ten years.

 

Maturity 

When your insurance policy matures, it means that your premium’s invested money has become equal to your Face Amount.

 

Monthly periodic charge

Cost of maintaining and administering the policy. 

 

Mutual Fund 

It is a financial instrument where investors pool their money together to make investments more accessible and affordable. It empowers ordinary Filipinos to invest in different companies or funds that usually require higher investment capital. It is easy, affordable, and less risky since your money is managed by professional fund managers.

 

NAVPS (Net Asset Value Per Share) 

When you invest in Mutual Funds (link), you are actually buying units of shares called NAVPS. The price of each share can appreciate or depreciate based on several market and economic factors.

 

NAVPU (Net Asset Value Per Unit) 

Short for net asset value per unit, the NAVPU is the price per unit of the chosen investment fund created for every relevant valuation or trading date from your VUL policy. 

You receive shares/units of participation in a mutual fund/VUL policy in exchange for the cash you contribute/pay.

NAVPS/NAVPU = (Total Value of Fund Assets – Fund Liabilities) / Number of Outstanding Shares or Units

 

Non-participating insurance

A type of insurance policy that has no dividends.

E.g. Term Insurance. 

 

Offer price 

This is the amount that an investor needs to pay to make an investment, like a Mutual Fund (link). Usually, it’s the same price as the Net Asset Value Per Share (NAVPS) (link).

 

Paid-up insurance

This is a non-forfeiture option that takes effect when premiums can no longer be paid by the policy owner. This is where the available cash value is used to continue the insurance policy, keeping the original coverage period but at a reduced insurance amount. 

 

Paid-up term insurance

This is a premium payment default option in which the cash value is used to purchase term insurance with generally the same amount of coverage but for a shorter period.

 

Participating insurance

A type of insurance policy that earns dividends. 

 

Pre-existing condition

A pre-existing condition is an existing health condition or illness that the insured has before applying for a new health insurance policy or before coverage takes effect. 

 

Rated or Extra-Risk policy

A type of insurance policy that is also often referred to as a “substandard” policy, where the insurance policy is issued at a premium rate higher than usual.

 

Regular premiums

These are annual, semi-annual, or quarterly payments for a VUL policy. It consists of the basic and additional benefit premiums.

 

Risk appetite 

There are five types of investor each with unique goals, available funds, and attitude toward risk. They are classified as:

• Conservative (low risk)

• Moderate (medium risk)

• Balanced

• Growth

• Aggressive (high risk)

  Knowing your type will greatly help you be successful with your investments.

 

ROI (Return of Investment) 

These are your gains proportional to your investments. You should seek the help of a financial advisor so you can weigh your options when investing.

 

Social Security System (SSS)

The Social Security System (SSS) is a state-funded system where all income-earning members contribute monthly to the fund based on their salary range. The fund is then used for insurance benefits such as sickness, maternity, disability, retirement, death, and funeral expenses. 

 

Term insurance

A type of insurance policy that provides insurance coverage for a limited period as specified in the contract. This is not a participating policy. 

 

Trust 

It is an agreement or contract on how your assets will be managed and distributed upon death or disability. For example, a mother can set up a Trust where a trustee will legally distribute assets to her children, in case something happens to her.

 

UITF (Unit Investment Trust Fund) 

A UITF allows you to pool your money with other investors in order to invest in a basket of different investment products under the care of professional fund managers. Unlike Mutual Funds (link), these are mostly managed and offered by banks.

 

Variable Fund Value 

This is the projected value of your fund after a specific number of years. This also takes into consideration the contribution of the investment tied to your VUL.

 

Variable unit-linked policy (VUL)

Variable unit-linked insurance (VUL) is an insurance policy with benefits directly linked to the performance of underlying funds. It is also called "variable universal life policy," "equity-linked policy", "investment-linked policy", or "variable unit-link policy".

 

VUL fund allocation

A portion of the premiums you paid, allocated to your chosen investment fund/s, after deducting the insurance premium charge. 

 

Zero Coupon 

When you invest in a zero-coupon bond, you will yield a return after a specified maturity date only. This is usually recommended for long-term financial goals like an education fund or for your retirement.