Quick glossary to life insurance

Protecting your life and health may involve some unfamiliar words and phrases. Here's a quick guide to some of the most common ones to help you.

Critical Illness Cover

Health insurance that pays out a lump sum if you are diagnosed with one of the specified illnesses covered under the policy and then survive for a specified amount of time, within the duration (term) of the policy. The number and severity level of illnesses covered differs from one insurer to another. Can be sold on its own or as part of a single policy with either Decreasing or Level Term Assurance (know then as Accelerated Critical Illness Cover).

Decreasing Term Assurance

Life insurance that pays out an amount that reduces over the duration (term) of the policy. Usually intended to coincide with the reducing balance of a capital repayment mortgage. Also known as Decreasing Temporary Assurance or Mortgage Assurance. Can be sold on its own or as part of a single policy with Critical Illness Cover.

Free Cover

Insurers sometimes offer cover, free of charge, between the signing of a Life/Health policy application and the first payment being taken. Free Cover is usually subject to terms and conditions.

Guaranteed Premiums

Some Life and Health insurance policies have guaranteed premiums. This means the amount your pay each month will remain the same for the duration (term) of the policy.

Health Assurance/Health Insurance

Interchangeable terms describing a policy that pays out when a particular event happens to the life assured. Examples are Critical Illness Cover and Income Protection.

Income Benefit

Life insurance that pays out a regular income for the duration (term) of the policy if the life assured dies within the policy term. Income is paid out to whoever is specified on the policy e.g. spouse or children of the life assured.

Income Protection

Health insurance that pays out a regular income if you are unable to work, generally if due to an illness or injury. Policies generally have a deferment period in which no income is paid. Payments continue until some pre-determined event such as the end of the policy, an upper age-limit is reached or you return to work.

Level Term Assurance

Life insurance that pays out a fixed amount within the duration (term) of the policy. Sometimes intended to pay off the outstanding balance on an interest only mortgage. Can be sold on its own or as part of a single policy with Critical Illness Cover.

Life Assurance/Life Insurance

Interchangeable terms describing a policy that pays out on the death of the life assured. Some examples are Decreasing/Level Term Assurance, Income Benefit and Whole Life Assurance.

Life Assured

The person covered by a Life or Health policy. This can usually be the person who sets up the policy (own life), someone different (life of another) or the person who sets up the policy along with someone else (joint life) such as a spouse or partner.

Reviewable Premiums

Some Life and Health insurance policies have reviewable premiums. After a set period your insurer will review the monthly payment you make and may alter the amount based on various factors such as their claims experience.

Tele-underwriting

A process used quite widely across the industry whereby details needed for underwriting a customer are collected over the phone, sometimes by a trained medical professional. It has generally replaced the need for a customer to fill out a medical questionnaire.

Term Assurance

Life insurance that pays out a set amount if the life assured dies within the term (i.e. the duration) of the policy. The duration is set when the policy is created. If the life assured survives for the term of the policy then no payment will be made (contrast with Whole Life Assurance).

Underwriting

The process whereby an insurer assesses how likely a customer is to make a claim against a policy and sets a price accordingly. For Life & Health insurance a customer will usually be asked questions about their medical history and lifestyle, along with questions about their family's medical history.

Whole Life Assurance

Life insurance that pays out a lump sum no matter when the life assured dies i.e. providing cover for the whole of your life. Will always pay out eventually (contrast with Term Assurance) providing you keep paying premiums.