We thought it may be useful to breakdown some of the terms that are often used in the industry with brief explanations as to what they all actually mean. So here we go…..

Insurance/Assurance – Insurance is something that might happen. Assurance is something that will definitely happen. Although very commonly referred to as Life Insurance the correct terminology is in fact Life Assurance.

Level Term Assurance (LTA) – The amount paid out in the event of a claim is the same throughout the term of the policy.

Decreasing Term Assurance (DTA) – The amount paid out in the event of a claim reduces over the term of the policy. This type of life assurance is used to cover a repayment mortgage balance. Also sometimes referred to as Mortgage Life Insurance.

Mortgage Life Insurance – Is a phrase sometimes used to describe either Level or Decreasing Term Assurance when the purpose of the cover is to protect an outstanding mortgage balance.

Whole of Life – As the name suggests, is a life assurance policy that does not have a predetermined term (as opposed to Level & Decreasing Term Assurance policies), but rather runs indefinitely and so is for the whole of life.

Family Income Benefit – Life Assurance &/or Critical Illness Cover that pays out set amounts monthly rather than a lump sum in one go. Often used as a way of replacing an income that may be lost to a household.

Critical Illness Cover – A policy that will pay out if the holder is diagnosed with a critical illness that the policy covers. Note – critical illness polices vary from provider to provider with different numbers of conditions being covered as well as how severe a condition needs to be before a claim can be made.

Terminal Illness – A benefit included into most Life Assurance policies that pays the sum assured if a person has 12 or less months to live. Not to be confused with Critical Illness Cover.

Over 50’s Plan – A life Assurance Policy designed for people of 50 years old and above. Typically less in-depth medical history questionnaire on application and so those suffering from medical conditions that could exclude them from other options have a greater chance of acceptance. Typically, one of the most expensive variations of life assurance.

Term – The number of years a term assurance policy is taken over.

Premium – The monthly or annual cost of the cover.

Guaranteed Premium – A premium that will remain the same for the term of the policy without any fluctuation.

Reviewable Premium – A premium that typically remains the same for the first 5 years of a policy but after which is reviewed by the insurer on an annual basis. These types of premiums can go down as well as up.

Waiver of Premium (WOP) – An insurance policy option you can build into your life assurance policy that will pay your monthly premiums for you if you have an accident or illness that mean you can’t work. It usually comes into force after 6 mths of incapacitation.

Index Linking – An option to have the sum assured increase on an annual basis so that the level of protection stays in line to some degree with inflation. This option can sometimes increase by a fixed percentage or linked to the Retail Price Index (RPI).

Single Policy – A policy that covers one individual only.

Joint Policy – A policy that covers two people, normally on a ‘First Event’ basis, meaning the policy will pay out on the first death, diagnosis with a Terminal Illness or if also included, Critical Illness.

Health & Lifestyle Questionnaire – The series of questions an insurer requires to be answered by all the applicants on a Life Assurance and or Critical Illness Cover application. Varying slightly from provider to provider but always along the lines of personal medical history, occupation, residency, dangerous pastimes and/or pursuits and in most cases immediate family medical history.

Standard Terms/Non Standard Terms – Standard terms means an insurer has assessed an applicant’s personal details and offered them an insurance product without amending the terms in any way. No Standard Terms is an offer of insurance with amended terms, usually because the insurer has identified a greater risk to insure that individual. The amendments can include rating and/or exclusion.

Exclusion – When a medical condition and/or circumstance that would normally be included in an offer of insurance is removed, for example because of a pre-existing medical condition.

Rating – An increase in the cost of the premium because of a greater risk to insure an individual for reasons such as a dangerous occupation, a higher Body Mass Index or pre-existing medical condition.

Postponement – Not a decline and not an offer of insurance. A life assurance application can be postponed at point of application if for example a person is undergoing medical tests that are as yet inconclusive. The insurer does not have all the information they require to make a decision and so they postpone that decision to a later date.

Decline – When an insurer thinks there is too greater a risk to insure a person that they decline to do so.