Insurance Terms Glossary

Life Insurance


START YOUR QUOTE

Critical Illness Insurance:

Critical illness cover is an insurance plan that pays out a guaranteed cash sum if you're diagnosed with a critical illness covered by the plan. This cover is usually 4-5 times more expensive than life insurance.

Decreasing Term Assurance (DTA):

Also known as mortgage life insurance, repayment mortgage protection or decreasing life cover, With decreasing life cover, this policy’s guaranteed assured sum decreases each year and is designed to help pay off a repayment mortgage. As the sum assured decreases year by year, the premiums for a decreasing term assurance policy are less than for level term assurance.

Decreasing Term Assurance (DTA):

With decreasing life cover (DTA - sometimes referred to as "Mortgage Life Insurance" or "Repayment Mortgage Protection) the sum assured decreases each year and is designed to help pay off a repayment mortgage. As the sum assured decreases year by year the premiums for a decreasing term assurance policy are less than they would be for level term assurance.

Family Income Benefit (FIB):

Instead of paying out a lump sum, this type of cover provides a tax-free annual income until the end of the policy.

Guaranteed Premiums:

This means the premiums are guaranteed to remain the same for the duration of the plan, unless you increase the amount of cover via indexation.

Level Term Assurance:

A policy wherein, unlike decreasing term assurance, the sum assured remains exactly the same throughout the policy term. This makes level term assurance the more expensive of the two.

Reviewable Premiums:

Should you select to take out a policy with reviewable premiums, then to begin with, the policy will be cheaper than a guaranteed premiums policy. These premiums are usually reviewed every five years by the insurance provider, and may be increased at that time. This price change is calculated by the number of claims made during that five year period.

Sum Assured:

The amount guaranteed to be paid out in the event of a claim.

Term:

The length of time that a policy is taken out for. If you take a policy out for 10 years, after 10 years the policy will end and you will get nothing back. Only if you die within the 10 years will the sum assured be paid out.

Terminal Illness Benefit (TIB):

Not to be confused with critical illness cover, this benefit simply allows those who are given less than 12 months to live to claim early on a life insurance policy. This benefit is often included with life cover at no extra cost.

Total and Permanent Disability (TPD):

Most critical illness policies will offer TPD, which covers any illnesses and medical conditions not initially named when the policy was taken out which have no long-term prospect of recovery.

Trusts:

A trust is an amount set aside for a particular beneficiary, looked after by a ‘trustee’ until that person is intended to receive the amount. It is a straightforward way of minimising the potential for disputes over life insurance entitlements.

Whole of Life:

Unlike term assurance, whole of life policies have no ‘term’ as such, because the policy agrees to pay out a lump sum regardless of when the policy holder dies. As the policy is definitely going to pay out at some point, the premiums for such a policy are more expensive than for other types of life insurance.

Buildings and Contents Insurance


Accidental Damage:

Any unintentional damage caused to your property by you or your family, such as drilling through a pipe or a spillage on a rug. Some insurers include accidental damage for items such as TVs, computers and audio equipment.

Approved Alarms:

A home alarm system, intruder alarm, CCTV system, access control system or fire alarm system approved and maintained by the National Approval Council for Security Systems. Having an approved alarm may result in a reduction in the cost of your buildings and contents insurance.

Approved Locks:

Any BS3621 door lock – most properties in the UK have these. Failure to have such a lock may result in the price of your buildings and contents insurance increasing.

Excess:

The amount of any claim which the policy holder agrees to pay.

Market Value:

The price one would expect to receive for their property should they sell it.

Personal Effects:

Everyday items that you take outside your home but may wish to include in your contents insurance. Typical examples include jewellery, credit cards, money and MP3 players.

Rebuild Value:

The cost of rebuilding your property should it be destroyed. The value of most buildings insurance is based on this. This sum should be reviewed annually.

Reinstatement:

The replacement of an insured item by the provider on a 'new for old' basis.

Responsible Party:

The person responsible for the losses or damage being claimed for.

Single Article Limit:

The maximum amount the insurer will pay for any one item unless otherwise specified.

Sum Insured:

The value of the item or items covered by the policy, which will form the basis of a claim settlement. For buildings insurance, the sum insured is usually the rebuild value. For contents insurance, it is the value of items which are not part of the fabric of the property – furniture, clothes etc.

Valuables:

High-risk items such as jewellery, furs, watches, sculptures, pictures, paintings or other works of art, articles made of gold, silver, precious metals/stones, clocks, and any collections of rare stamps, coins, medals or banknotes.

Other Terms


General Affordability:

Assessment of whether or not you are able to afford the monthly payments on your mortgage, taking into account your monthly income and all other expenses regularly incurred such as heating, food, etc. Many lenders now use affordability as a means of determining how much they will lend potential customers.

Employment Status:

The term used by lenders to describe potential borrowers' working arrangements. Self-employed applicants can be seen as a greater risk than employees, because their income may be less certain.

Financial Conduct Authority (FCA):

The governing body that oversees and regulates all insurance and mortgage providers.

Financial Ombudsman:

A body which exists to settle disputes between consumers and providers of financial services, such as banks, mortgage lenders and insurance providers.

Indexation:

An arrangement made for insurance benefit and premiums to increase annually, either in line with inflation or at a fixed percentage.

Indexed Linked:

A policy’s guaranteed sum increasing in line with inflation over time.

Insurer:

An organization which issues an insurance policy in exchange for a premium, and pays any eligible claims arising.

Insured:


The person who is, or whose property is, insured. Also known as the policy holder or proposer.

Policy:

The document which details what is covered and outlines both the circumstances under which a claim will be paid and the conditions governing payment. A policy is a contract which is binding on both the customer and the insurer.

Policyholder:

The person/persons named on the policy.

Policy Term:

The length of the policy.

Premium:

The amount paid by the customer to the insurer to be covered by the insurance.

Schedule:

An outline of what is covered by a policy.

Waiver of Premium:

A valuable extra which will ensure your cover continues should you be unable to work through illness, accident or injury without the need to pay the policy premiums.

Whole of Market:

A ‘whole of market’ advisor is an independent advisor able to introduce or recommend the most suitable product drawn from the entire market - and not simply from one lender or a restricted group of lenders.