Life insurance policies can be rife with complicated technical jargon that, even to those in the know, can be confusing. But don’t let the complexities deter you. With our glossary of key terms and definitions, you could quickly become an expert on everything related to life insurance.
Term life insurance
Term life cover is a type of policy that offers coverage for a predetermined amount of time. As a result, your beneficiaries only receive a payout if you pass away within this term.
Whole-of-life cover is a policy that covers the entirety of your life. It ensures that, regardless of when you pass away, your beneficiaries will receive a lump sum.
Joint life insurance
Joint life insurance refers to a policy that covers two people. It typically only pays out once upon the death of the first person. Or to the beneficiaries when both people die.
Critical illness cover
Critical illness cover is an insurance policy that pays out should you ever be diagnosed with a specific major illness. Depending on the policy and the insurer, different conditions and illnesses are covered.
Terminal illness cover
Terminal illness cover is usually included as a standard part of life insurance policies. So, if you receive a terminal diagnosis and your death is expected within 12 months, this coverage pays out.
Impaired life insurance
Impaired life insurance is an industry term used to describe people with non-standard health or medical history. This is usually due to a pre-existing condition or other factor such as smoking or a dangerous occupation.
Family income benefit
Family income benefit is a type of term life insurance that, in the event of your death within the policy term, pays out to your beneficiaries as regular income as opposed to a lump sum.
The sum assured refers to the minimum amount specified in your policy that will be paid to your beneficiaries in the event of your death.
Non-disclosure refers to purposely or accidentally withholding relevant information from your insurer. If the insurer finds out you did not disclose essential information, they are within their rights to void your policy.
Guaranteed insurability option
Guaranteed insurability option refers to a life insurance policy add-on that allows you to purchase more coverage without having to obtain a new policy, undergo a medical exam, or demonstrate your insurability.
The Financial Conduct Authority (FCA)
The Financial Conduct Authority (FCA) is a UK financial regulatory body. They work independently to protect consumers and stabilise the industry.
The waiting or qualifying period is the amount of time you must wait before their coverage comes into effect.
Waiver of premium
The waiver of premium is additional cover for the premiums you pay. It typically implies that your insurer will pay for your policy if you become ill and are unable to work for a period of six months.
Written in trust
Writing a life insurance policy in trust is a way of keeping your life insurance payout separate from the rest of your estate when you die. Therefore, depending on the individual situation, this can mean that your beneficiaries won’t have to pay inheritance tax on the lump sum payout.