Rentenanstalt / Swiss Life Glossary

The A-Z of key insurance terms The glossary "The A-Z of key insurance terms" was produced using authoritative in-house and external sources, and generally recognised terminology methods. We specifically point out that the terms appearing in this glossary are context-dependent. For that reason, we recommend that their use in any other specific context be reviewed. Swiss Life/Rentenanstalt can accept no claim or liability based on the use of a term referred to in this glossary. A accumulated interest Dividend system in which the allocated annual dividends are credited to an interest-bearing dividend account and paid out upon expiry or cancellation of the underlying insurance contract. actuarial interest rate Minimum interest rate applicable to the savings portion of cash value life insurance premiums and guaranteed over the entire insurance term. actuarial reserve Reserve calculated on actuarial principles to cover the insurer's obligations. AHV cf. old age and surviving dependants insurance annuity Periodically payable income benefit which is due either for a specified period of time or for the life of the insured person. anticipatory tax cf. withholding tax application cf. insurance application auditors Experts who are independent of the employee benefits institution and also of the employer, in the case of company-owned employee benefits institutions, and who annually formally audit the management of the employee benefits institution, its books and accounts, and its investment of assets. AVIG cf. Federal Law on Mandatory Unemployment Insurance and Insolvency Compensation B beneficiary Person designated by the policyholder by means of the beneficiary clause, who then is entitled in his/her own right to the insured benefits and able to make claims directly against the insurer. beneficiary clause Provision for the policyholder to designate beneficiaries to whom the benefits should be paid in the event of the policyholder's death or, if so agreed, survival. BVG cf. Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans C cash value life insurance Insurance that covers both death and survival benefits and always contains a savings element and a guaranteed capital payout, which becomes due on a date stipulated in advance. commutation right Provision in the regulations allowing the persons entitled to claim benefits to request a lump-sum payment of their retirement savings instead of a retirement pension, widow's pension or disability income. compensation for grievous and permanent bodily and/or mental injury Lump-sum payment within the framework of the UVG made to insured persons having suffered lasting damage to their physical or mental integrity due to an accident. contract on the life of a third party Insurance in which the policyholder differs from the insured person and gets no coverage. conversion to paid-up insurance Reduction of benefits during the term of insurance to such an extent that no more premiums are due for the remainder of the term. coordinated salary Part of the participant's annual salary which must be insured in accordance with the BVG, ranging from 100% to 300% of the maximum AHV retirement pension and which corresponds to the pensionable earnings minus the maximum AHV retirement pension, with its lower limit fixed at 12.5% and its upper limit at 200% of the maximum AHV retirement pension. coordination offset Sum of money which corresponds to the maximum AHV retirement pension and is deducted from the annual salary in order to calculate the maximum insured annual salary. cost of living adjustment Adjustment of current pensions to price increases which is mandatory for surviving dependants' benefits and disability income. coverage Protection that is guaranteed by the insurer under an insurance contract and consists of previously agreed benefits. current premium account Account with an insurance company which consists of funds of the account holder, earns interest and is used to cover part or all of the future premiums in advance, as well as any interest owed on a policy loan, with premium and loan interest payments being debited to the account as they become due and from which withdrawals are possible. D deferral period Interval before a deferred benefit becomes due. defined benefit Benefits system in which benefits are fixed by formula in advance and are used to calculate the premiums. defined contribution Benefits system in which the benefits paid by employee benefits institutions are determined by the contributions which are defined by formula as a percentage of the participant's insured salary. designation of beneficiaries Unilateral, revocable act embodying the right of the policyholder to dispose of the insurance benefit in favour of third parties, and of which the insurer has to be notified for the provision to become valid. disability State of an insured person who, as a result of a medically established illness or accident, is entirely or partially unable to exercise his/her profession or any other reasonable remunerative occupation which corresponds to his/her position in life, knowledge and abilities. disability income insurance Insurance that provides regular substitute income payments in the form of a waiver of premium, an annuity, a pension or a lump sum for the insured person, when his/her wage income is interrupted or terminated because of a medically established illness or accident. disability insurance (IV) Mandatory federal insurance, for all persons insured within the AHV framework, to cover an expected permanent or long-lasting loss of earning capacity resulting from physical or mental damage due to a congenital defect, illness or an accident. dividend distribution Policyholder participation in surpluses generated by the insurance company, which can be allocated according to various dividend systems. dividend system Procedure for the allocation of dividends to policyholders according to various methods. E ELG cf. Federal Law on Supplementary Benefits to the Old Age and Surviving Dependants Insurance endowment insurance Insurance where benefits are not only paid immediately in the event of death of the insured person but also on his/her survival at the policy's term. entry age Number corresponding to the difference between the inception date of the policy and the insured person's birthday, used to determine the applicable premium rate and expressed in whole years. entry generation Totality of participants, having reached the age of 25 years at the time of the effective date of the BVG on 01.01.1985, but who have not yet reached retirement age and who therefore cannot attain the contribution limit required for mandatory benefits coverage. Within its financial means, each employee benefits institution is obliged to issue special provisions in favour of the entry generation, and to give preferential treatment to older participants, especially to those with low incomes. exemption from creditors' claims Privilege granted to protect families so that their insurance entitlement is excluded from execution of a court order for enforcement of debt and that can be invoked by spouses and/or descendants of the policyholder, if he/she has previously named them as beneficiaries. F face amount cf. sum insured fact that is relevant to a risk assessment Fact of major importance in evaluating a risk and influencing such risk, the recording of which permits the insurer to make a concrete assessment of the probability of an insured event's occurring to a specific insured person. failure to observe the disclosure requirement Failure to disclose or wrongful disclosure of facts relevant to a risk assessment which were known, or must reasonably be supposed to have been known to the applicant at the time of concluding an insurance contract and which should have been disclosed to the insurer in writing. Federal Law on Accident Insurance (UVG) Federal law on mandatory insurance for employees who work in Switzerland to cover benefits in the event of occupational accidents, non-occupational accidents and occupational diseases. Federal Law on Mandatory Unemployment Insurance and Insolvency Compensation (AVIG) Federal law intended to grant insured persons adequate compensation for the loss of earnings due to unemployment, a temporary reduction in working hours, bad weather or insolvency of the employer and to prevent impending or fight existing unemployment through labour market measures. Federal Law on Occupational Retirement, Survivors' and Disability Pension Plans (BVG) Swiss federal law regulating occupational provisions with the objective of enabling aged persons, survivors and disabled persons to maintain their accustomed standard of living in an adequate manner, together with the Swiss Federal Social Security benefits. Federal Law on Supplementary Benefits to the Old Age and Surviving Dependants Insurance (ELG) Federal law on supplementary benefits, provided in accordance with the AHV to which Swiss citizens who are usually resident in Switzerland are entitled, as long as their qualifying annual income does not exceed a limit to be fixed according to certain conditions. Federal Office of Private Insurance (FOPI) Supervisory authority assigned by the Federal Council to monitor private insurance companies, which complements the Federal Department of Justice and Police in being responsible for monitoring compliance with directives. final age Age of the insured person at expiry of the insurance contract. final dividends Bonus system in which allocated dividends are credited to a separate interest-bearing account with the company and paid out in the event of death, or, if so agreed, survival, but not in the case of early termination of the insurance contract. FOPI cf. Federal Office of Private Insurance fully funded system Funding method used by insurance institutions and employee benefits institutions to calculate premiums on the basis of future insurance entitlements and legal rights to future pension payments, while the pensions correspond to the contributions accrued and invested at interest during the participant's active professional life. future provisions Totality of the measures enacted by the Swiss Confederation to cover old age, survivorship and disability, which are based on the Three Pillar System in conformity with the Swiss Federal Constitution, Art. 111. G General Policy Conditions (GPC) Standard clauses which are formulated for various insurance contracts and define the general rights and obligations of the parties. GPC cf. General Policy Conditions I in advance Feature denoting that a payment is due before or at the inception of a payment period. in arrears Feature denoting that a payment is due at the end of a payment period. increase of benefits Bonus system in which dividends are used to increase the sum insured. inheritance benefit Protection from the insured person's creditors, accorded by law to a designated beneficiary whom the policyholder must also have named as an heir to his/her estate before his/her decease. insurance application First professed intention of the prospective policyholder to apply to the insurer for an insurance contract, by which the applicant is bound for two weeks, or, if there is a medical examination by a doctor, for four weeks, during which period the insurer has to accept or reject the applicant's proposal. insurance benefit Monetary indemnity in the form of a lump sum or a pension, or service, which is due from an insurer under the terms of an insurance contract and to which an insured person, a policyholder or other entitled person submits a claim following the occurrence of the insured event or - in some forms of life insurance - when the date specified in the policy has been reached. insurance contract Contract in which the insurance company undertakes a legal obligation to pay out benefits to the insured person or to a beneficiary in return for a premium, if a stipulated peril materialises. insurance policy Written agreement stating the obligations and responsibilities of each contracting party which is the basis for concluding an insurance contract and serves as proof of such a contract. In particular, the insurance policy contains the particulars of the policyholder, the insured person and the beneficiary as well as details on the inception, period and term of the contract, the insurance benefits, premiums and, possibly, special terms and conditions. insurance year Twelve-month period whose beginning and end do not necessarily coincide with the calendar year. insured event In a general insurance context, case in which a risk, i.e. an event against which insurance was taken out, has materialised, giving rise to an entitlement to the insurance benefits. Within the BVG framework, vicissitudes in human life which represent the basis for occupational provisions and arise when one of the risks of old age, death or disability materialises and a claim to an insurance benefit ensues. insured peril cf. insured risk insured person Party covered by an insurance policy and who is granted protection against certain, feared risks as stated in the insurance contract. insured risk Uncertain future event that is detrimental and may eventually materialise, and therefore constitutes an element of the insurance contract that is essential to coverage. insurer Contracting party legally bound to the policyholder to make payments if the insured event materialises. IV cf. disability insurance J joint administration Rules within the BVG framework according to which employers' and employed persons' representatives must be present in equal numbers in those bodies of a registered employee benefits institution that pass plan rules and decide on funding and asset management. L life insurance Risk insurance intended as protection against the financial consequences of the death of the insured person which takes the form of payment of a previously agreed lump sum or pension to a beneficiary, if the insured person dies during the term of insurance. In the case of pure life insurance, without any endowment insurance component, no payments are due if the insured person survives the term of insurance. M mathematical reserve Sum of money accumulating gradually during the term of the insurance from the savings premiums and the interest earned during the insurance term to form the endowment sum. medical examination Medical assessment consisting of a health questionnaire and possibly a physical checkup, both of which applicants for insurance must furnish in order for the insurer to ascertain if they meet its underwriting standards. morbidity table Chart showing incidence of death and loss of health experienced for a given group of insured persons over time and constituting the foundation upon which the expected costs of life insurance and health insurance are based. mortality table Chart showing the rate of death at each age in terms of number of deaths per thousand and which is used to set rates for pension insurance. O occupational disease Illness that is wholly or mainly employment-related and due to contact with harmful substances or the performance of certain tasks. occupational provisions Form of future provisions stipulated in the Swiss Federal Constitution, intended to enable aged persons, survivors and disabled persons to maintain their accustomed standard of living when combined with Swiss Federal Social Security (AHV/IV), and which obliges employers to insure their employed persons with an employee benefits institution for enterprises, state administrative offices and associations, or at a similar institution, and to assume at least half of the contributions. offset system Dividend system in which the annual bonus is used to reduce premiums for the current insurance year. old age and surviving dependants insurance (AHV) Mandatory state insurance to provide future cover for basic subsistence requirements, and giving benefits coverage for old age and death for the entire population. P participant cf. insured person pay as you go basis Procedure by which the benefits for pensioners are financed on a yearly basis from the contributions of the active population and the employers as a percentage of salaries and from taxes and subsidies levied by the state, and in which no funds can be set aside for the payment of future obligations, as income must equal expenditure in each year. pension cf. annuity peril cf. risk policy cf. insurance policy policy loan Prepayment amounting at most to the cash surrender value of an insurance policy which the policyholder can borrow at interest from the insurer either by pledging the policy as security or as set out in BVG Art. 30a-f on encouraging home ownership. Policyholder Party that concluded the insurance contract under which the party itself and/or other natural or legal persons receive coverage. Pool Association of insurers, sharing business according to a defined formula in order to increase their insurance capacity for particular risks or losses. Premium Sum of money which is paid once or periodically by the policyholder in order to receive coverage by the insurance company. premium deposit account Account with an insurance company which consists of funds of the account holder, earns interest and is used exclusively to cover part or all of the future premiums in advance, as well as any interest owed on a policy loan, with premiums and interest being debited to the account as they become due, and from which withdrawals may not be made. premium payer Person to whom premium notes and, if necessary, reminder notices shall be forwarded by the insurer. premium rate Sum of all actuarial elements necessary to describe the financial coverage of a risk. present value Current worth of a certain sum of money due on a specified future date, after taking interest into consideration. pure endowment Insurance policy under which the sum due at maturity is payable only if the insured person survives to the end of the stated endowment period, while no benefit is paid if the insured person dies during the endowment period, thereby representing insurance for retirement provisions only. R rate Premium payable for CHF 1.00 in insurance benefits. reinstatement Restoration of a lapsed policy in whole or in part, so that the sum insured is equal to or less than previously. reinsurance Coverage that insurance companies buy for their own protection, corresponding to a sharing of insurance between insurers and reinsurers. retirement savings Sum of money forming the basis for the retirement pension according to the BVG and consisting of the retirement credits plus interest for the period during which the participant has belonged to an employee benefits institution and the vested benefits plus interest credited to the participant by previous employee benefits institutions. risk Possibility that an expected or feared, uncertain and generally random event will materialise and, consequently, trigger a need for financial means that will be covered by the insurer.The main risks in life insurance are old age, disability and death. risk insurance Insurance which covers the risks of death or disability. S savings premium Part of the net premium in cash value life insurance that, together with interest, determines the annual increase of the mathematical reserve. single allocation Within the framework of group insurance, a contribution paid to the employee benefits institution which is used, in particular, as a supplementary payment to purchase e.g. years of employment, or as an extraordinary contribution in the event of an increase in salary. single premium Within the framework of individual insurance, premium paid once and the insurance policy is fully paid up with no further premiums required. social security administration office Agency of the federal government, a canton or a Swiss professional association, operating as a public entity and responsible for administering old age and surviving dependants insurance and disability insurance, for setting the level and handling the payment of contributions, attendance allowances and pensions covered, as well as for maintaining individual accounts. special measures Sum of money to be made available by every employee benefits institution and amounting to 1% of the coordinated salary of all the participants required to contribute to retirement benefits, which serves in particular to improve the entry generation's benefits and to adjust current pensions to increases in the cost of living. subrogation Right of the employee benefits institution to demand that a participant or his/her dependants assign their claims against any liable third party or its liability insurer to the employee benefits institution in cases of personal injury to such a participant, provided that this right has been stipulated in the regulations. sum insured Maximum amount agreed upon by the parties, which will be paid by the insurer at the occurrence of the insured event and which in property insurance is determined by the value of the insured property, while it corresponds to the insurance benefit in personal insurance. supervisory authority Federal authority which is responsible for supervising employee benefits institutions of national or international character as well as those providing benefits for state-owned companies under the occupational provisions framework and which is embodied by the Federal Office of Social Insurance. surrender Right of the entitled person to demand that the insurer buy back, in whole or in part, an insurance policy in which the insured event will materialise with certainty, provided that premiums have been paid for at least 3 years or, in the case of a term shorter than 30 years, for at least 1/10th of the term specified in the contract. surrender value Sum of money corresponding to the actuarial reserve minus the surrender charge. T Three Pillar System The Swiss concept of future provisions for aged persons, survivors and disabled persons which is based on three pillars comprising Swiss Federal Social Security (AHV/IV), occupational provisions and individual private provisions. transfer of entitlement A legal act in written form by which a right under an insurance contract is transferred to a third party, accompanied by the transfer of the policy and by a written notice to the insurer. U underwriting Process of examining, accepting or rejecting applicants and persons to be insured on the basis of their state of health and their economic circumstances, and classifying those selected, in order to charge the proper, i.e. normal, high or discounted rate for each. UVG cf. Federal Law on Accident Insurance V vested benefits insurance Insurance which is concluded in order to maintain partial coverage of occupational provisions, if vested benefits which fall due when a participant withdraws from an employee benefits institution may not or cannot be transferred to the employee benefits institution of his/her new employer, in accordance with the Federal Law on Vested Benefits and the Ordinance on Vesting in Pension Plans. W waiting period Time between the materialisation of the insured event and the moment the insurance company's obligation to pay benefits begins. waiver of premium Release of an insured person from the payment of premiums due, in the event of his/her disability occurring during the term of insurance. withholding tax A federal tax on the returns of moveable property, lottery winnings and insurance benefits which is levied at source and which is refunded by the Swiss Confederation or the relevant canton to the recipients of payments that have been diminished by such taxation in accordance with the Federal Law on Withholding Tax.