Jargon Buster

Accident, Sickness and Unemployment (ASU) – also known as Mortgage Payment Protection Insurance (MPPI)
A form of tax free replacement income to payments such as monthly mortgage payments, regular outgoings or credit such as loan payments. This insurance pays out in the event of ill-health or unemployment, usually for up to one year.

Amount of cover
The amount paid out if the policyholder dies during the term of the policy. This term is often known as Guaranteed Sum Assured.

Life insurance is a contract between the policy provider and the applicant, whereby the insurer agrees to pay a sum of money when the policy owner dies.

Bank assurance
The sale of insurance through a bank. The most common type of bank assurance offered by banks is for mortgage repayments and is normally offered when the mortgage is first taken out. The applicant can buy the insurance directly from the bank.

This title is given to the person who will receive the payout if the person whose life is insured dies during the term of the policy.

Business Life Insurance
Commonly used to protect a business loan or mortgage and will pay out a lump sum in the event of the life insured dying. It can also be used to protect shares by company directors.

The sum assured provided by your insurance policy.

Critical Illness Cover
This is used to provide protection in the event that you are diagnosed with a specified critical illness. In this case the policy will pay a lump sum or alternatively a regular income. Critical illness cover can be bought either as an add on to life insurance or as a stand alone policy.

Convertible Term Assurance
This is a form of term life assurance that allows the policy holder to convert a level term insurance policy into a whole of life policy, investment or endowment insurance element. This will provide an investment that matures or a form of savings on death or when the policy comes to and end.

Critical Illness Only
Also know as a stand alone critical illness policy, this insurance pays out only when the policy holder is diagnosed with having one of the specified illnesses. These illnesses usually include heart, disease, stroke and cancer but differs between insurance providers.

Death in Service
Typically 4 times the employees salary, this insurance providers a lump sum cover by an employer in the event of an employees death.

Decreasing term insurance
This type of policy is one in which the amount you are insured for decreases at a flat fixed rate over the term. It is often used to protect a repayment mortgage.

An individual who relies on you for financial support.

Disability Cover
Disability Cover provides the applicant with a lump sum if you suffer from conditions or illnesses leading to disability.

A life insurance policy that pays out a lump sum of money in the event of the person insured dying or if the policy matures. They are often described as a combination of savings and insurance in which the money will be invested in stocks and shares.

Refers to the property, money and possessions of a person.

Things that your insurance provider will not cover.

Family Income Benefit
T these insurance policies pay a regular, tax free, fixed monthly or annual income to your family in the event of your death within the insurance policies term. They are especially attractive to policy holders with families and can be arranged as an add-on to a term life insurance or as standalone insurance.

Guaranteed critical illness cover
Sometimes know as level premium policies this means that your monthly or anuual payments will not increase throughout the term of the insurance policy.

Increasing Term Assurance
Will pay out a lump sum should the policy holder die. The sum assured will increase each year with that of the Retail Price Index.

Income Protection
This will provide you with a tax-free monthly income based on a proportion of your salary, should you be unable to work due to sickness, an accident or injury. Income protection insurance pays out benefit until you are able to return to work until the retirement age of 60-65.

Inheritance Tax
A form of tax that is paid on a person’s estate when they die or the assets are transferred.

Increasing Term Assurance
Also know as increasing benefit this is a way to compensate for the adverse effects of inflation over the term of the insurance by increasing the benefits of the plan yearly inline with inflation. No medical checks are required.

index-linking allows your premiums and the sum assured to be increased in line with the Retail Price Index (RPI).

Joint Policy
Two people are insured on the same policy and pays out on the first death. After this the policy expires.

Key Man Insurance
This term refers to an insurance policy used to cover an employee considered to be a key employee or business partner.

Key features document (KFD)
Important information about the insurance policy that you’re buying. It describes the main aspects of the product, such as any additional benefits or exclusions.

Level Term Assurance
This is the simplest form of life insurance whereby the policy holder pays the premium and the insurance provider pays out a fixed lump sum in the event of the policy holder’s death within the specified term.

Life Insurance
Life insurance is a way of providing financial security for dependendants in the event of your death. There are different types, but the policy usually pays out a lump sum or an income when the insured dies.

Life Assurance
Interchangeable with Life Insurance Life cover that provides a guarantee or promise of cover in the event of the policy holder’s death.

Life insurance (investment-backed)
Insurance which acts as an investments and also pays out in the event of death.

Minimum Protected Account
An additional benefit offered by some providers, for an extra premium, this option can top your cover back up to your original sum assured after a claim, giving you extra reassurance that you’ll have more cover in place should you need it again.

Mortgage Protection Assurance
This is a form of life assurance intended to ensure that your mortgage is paid fully in the event that you died before you had had the opportunity to pay it off. This type of insurance is also linked to decreasing term insurance.

Pension Term Assurance
A form of insurance set up alongside a personal pension plan which gives tax relief on the premiums paid at either basic or higher rate tax. This can mean that the premiums after tax relief can be lower than normal term assurance. The premiums cannot exceed more than 5% per year and the payment of premiums is dependant on the income earned. Any pension term assurance taken out after June 2007 are not entitled to tax relief on premiums.

The amount your insurer requires you to pay for insurance cover made either monthyl or annually.

Repayment mortgage
A mortgage that pays off both the the interest that accumulates and the initial loantaken out with the mortgage. If you make all the payments the mortgage will be fully repaid.

Renewable Term Assurance
Typically short term cover that gives the policy holder an option to renew the insurance at its expiry date and continue without having to provide a medical report, the normal term period is 5-10 years.

Used to describe the chance of the life insured making a claim. This is assessed using your current health, age, occupation, lifestyle, sex and family medical history.

The named person who will set up a Trust.

Payments made on severity pay out between 10-100% of the sum assured depending on the stage of the illness.

Single Policy
Where only one person is insured on a policy.

Sum assured
The amount of cover that you request to be insured for.

The length of time you are insured for.

Term Insurance
Life insurance for a set term which will pay out a tax free lump sum in the event of the death of the policy holder.

Terminal Illness Benefit
N normally included at no extra cost, a payment is made in the event that the policy holder is diagnosed with a terminal illness within the term of the insurance. Not to be confused with critical illness cover, this benefit only pays out if you have less than 12 months to live. Terminal illness benefit does not normally apply in the last 18 months of the policy.

Total and Permanent Disability
Most critical illness policies will offer total and permanent disability cover which gives protection in the form of a lump sum payment if the policy holder suffers a total and permanent disability during the policies term.

A Trust is a method of putting your life insurance policy aside to ensure the money goes to the people you want in the event of your death.. If the policy isn’t owned under trust it automatically becomes part of your estate and will therefore become exposed to inheritance tax before the remainder is paid to beneficiaries.

Unemployment Cover
If you lose your job through redundancy, unemployment Cover provides you with an income for up to two years; or alternatively if you are self-employed and your business goes into liquidation.

Unit Linked Policy
This is where the premiums you pay go into an investment fund which is divided up into units. The value of your policy depends on how these units perform and in turn, depends on the value of the underlying investments in the fund.

Waiver of Premium
This can be offered as an additional benefit to your insurance policy that provides continued life insurance coverage without further premium payments if the you become unable to meet your premiums due to injury, sickness or unemployment.

Whole of Life
Whole of life insurance is the most common form of permanent life assurance, providing a guaranteed amount of death benefit and a guaranteed return on cash values. Premiums are also fixed and guaranteed not to increase.