Insurance Jargon Deciphered – An A-Z Guide
Understanding insurance terminology can feel like learning a new language. This comprehensive A-Z guide aims to help you navigate the complex language of insurance with ease.
Actuary: A professional who calculates risk and premiums for insurance companies based on statistical data.
Acceptance Terms: The final offer provided by a provider after all underwriting has taken place. Accidental Death Benefit: Many Insurers in the UK will offer this benefit whilst medical underwriting is taking place. Whilst Providers assess your application, they will offer Accidental Death Benefit so you have some form of protection in place whilst they underwrite your case.
Beneficiary: The person or entity who will receive the death benefit pay-out from a life insurance policy.
Benefit: The amount of cover that will be paid following a successful claim.
Claim: A request made by the insured to the insurance company for compensation based on the terms of the policy.
Cooling off Period:The period after a policy starts (typically 30 days) you are able to cancel with no repercussions, any paid premiums will be refunded.
Critical Illness Cover: A type of policy designed to pay a monetary figure in the event of certain medical diagnoses (the most common claims in the UK are Cancer, Heart Attacks, Stroked & Multiple Sclerosis).
Commission: A monetary amount, Brokers, Intermediaries or Financial Advisers will receive for arranging your policy.
Death Benefit: The pay-out that the beneficiary receives from a life insurance policy when the insured person dies.
DTA: A policy typically taken out to protect a repayment mortgage, the Sum Assured starts at a certain level and reduces every month in line with your mortgage as it is repaid.
Exclusions: Specific conditions or circumstances for which the policy will not provide benefits.
Face Amount: The initial amount of life insurance coverage as stated in the policy.
Grace Period: The length of time (usually 30 days) after the due date for a premium during which the policy remains in effect.
Guaranteed Insurability Options: A benefit often included with Protection policies; this gives the plan holder the ability to increase their cover level without the need for additional medical underwriting. It can usually be actioned in the event of a major life event such as; change of mortgage, Job, birth of a child etc…
Guaranteed: Your premiums will remain fixed over the duration of the policy.
High Risk: Individuals who pose a higher risk to insurers due to their health, occupation, lifestyle, or other factors.
Incontestability Clause: A clause in a life insurance policy that prevents the insurer from disputing the policy’s validity after a certain period, even if there was a misstatement on the application.
Income Protection: A type of policy designed to replace your income if you are unable to work through Accident or Injury.
Indexation: A way of futureproofing your cover level; the Sum assured (along with your premium) will increase annually in line with inflation.
Joint Life Insurance: A life insurance policy that covers two people, typically spouses, with the death benefit payable upon the first death.
Key Person Insurance: Life insurance on a key employee, partner, or proprietor on whom the continuation of a business depends.
Lapse: The termination of an insurance policy due to non-payment of premiums.
Life Assured: The person who is covered under the policy.
Loading: Another term used to describe the premium increase on a policy.
Level Term: This type of policy means the Sum Assures remains fixed over the policy term.
Mortality Rate: The number of deaths in a group of people over a certain period of time.
Non-Disclosure: Failure to disclose relevant information to an insurance company.
On Risk: the date on which the policy goes “Live” and cover commences.
Policyholder: The person who owns the insurance policy (this does not need to be the Life Assured, it could be a third party of company).
Protection Policy: A term used to describe policies such as Life, Critical Illness & Income Protection.
Quote: An estimate of the cost of insurance based on information supplied to the insurer.
Rating: A term used when a premium is increased because of either; Medical Disclosures, BMI, Family History, Hazardous Pursuits etc…
Surrender: To voluntarily cancel a life insurance policy before the maturity date.
Sum Assured: The monetary amount that will be paid in the event of a claim.
Term Life Insurance: Life insurance that pays a benefit if the policyholder dies during a specified term.
Trust: Benefits from a policy can be paid into a Trust rather than direct to a beneficiary, this can be a great way of ensuring the right person receives the fund and can even have Inheritance Tax benefits as the proceeds of the policy won’t be added to your estate during probate.
Terminal Illness Benefit: If a Life Assured is diagnosed with 12 months or less to live, most of the time a claim can be submitted, and pay-out received before the person passes away.
Total Permanent Disability: Typically included with Critical Illness Policies, Total Permanent Disability It’s a benefit that pays out an agreed sum of money if you have an illness or injury that means you’re permanently incapacitated.
Underwriting: The process by which an insurer determines the risk of insuring a potential policyholder.
Variable Life Insurance: A type of life insurance where the policyholder directs the distribution of money between a fixed account and various investment options.
Waiting Period: The time which must pass before some or all your cover takes affect (often seen if Over 50’s policies).
Waiver of Premium: An addable benefit to protection policies meaning your premiums will be paid by the insurer if you are unable to work because of illness or injury.
Expiry: The date on which a term life insurance policy’s coverage ends.
Yearly Renewable Term (YRT): A type of term life insurance policy that can be renewed each year without evidence of insurability up to a specified age.
Zero Day Rescission: A feature of some policies where the insurer can’t cancel the policy after it’s been in force for a certain number of days, typically 60 or 90 days, except for non-payment of premiums.
We hope this A-Z guide helps you to better understand life insurance terminology. Keep this guide handy as you navigate the world of life insurance. If you would like to discuss your protection needs, Give us a call or enquire today.