Life insurance jargon – de-mystified
Don’t know the difference between decreasing terms, increasing terms, or family income benefits? Life insurance, also known as life assurance, has a lot of confusing terminology associated with it. TotallyMoney helps you understand your life insurance cover, explaining some common phrases.
Accidental death cover…
Provides financial assistance to a holder’s family should a fatal accident happen. Find out more.
Critical illness policy…
Insures against the diagnosis of a critical illness, from a set list. The holder will receive a lump sum upon diagnosis. This is often an add-on to standard term life insurance. Learn more about critical illness cover.
Decreasing term policy…
Usually used to cover mortgage repayments in the event of the holder’s death. The amount that will be paid out decreases over the period of the life insurance policy as the total mortgage debt falls. Some mortgage lenders insist that customers are covered by this form of life insurance. Required to get this cover? Here’s more information.
Endowment life insurance…
Guarantees a pay out after the end of a specified term or on a holder’s death, if it occurs before the term is over. As this type of cover is finite, potentially leaving you unprotected, take a moment to learn more about endowment life insurance.
Family income benefit policy…
Ensures a regular income for the family in the event of the policyholder’s death.
Guaranteed premium…
Provides a fixed cost for the full term of the life insurance policy.
Increasing term policy…
Allows the holder to increase their life insurance premiums throughout the term of the policy – reflecting changing circumstances such as a pay rise or having children.
Joint life insurance…
A type of cover purchased by couples, insuring the lives of both people in the relationship. Learn more about joint life cover.
Level term policy…
Offers a guaranteed lump sum pay out if the holder dies during the term of the life insurance policy – but not if they outlive it. The holder can choose the length of the policy and the amount of money paid out (this will affect the premium). Find out more.
Life assurance…
Another name for life insurance. This provides for a payment of a specific sum to a named beneficiary when the policyholder dies.
Life insurance with profits
Provides buyers the chance to benefit from profits generated by the investment of life insurance premium payments. As this can be riskier than more common life insurance products, learn more before you buy this type of cover.
Long-term life insurance…
A type of policy that provides cover for a set period of time, rather than for your whole life. If you’re looking for this cover, learn more about long-term life insurance.
Named beneficiary…
The person who receives the benefit paid out by the life insurance policy – this will be specified in the contract.
Short-term life insurance
A policy that generally lasts from 5 years to 30, short-term life cover is an option if you need cover at a lower price and are willing to get it only for a limited period. Because the coverage period is finite, learn more about short-term life insurance.
Whole of term policy…
Guarantees a lump sum payout as long as the life insurance premium continues to be paid throughout its term. This type of life insurance policy is commonly used to cover inheritance tax bills.
Policy term…
Length of time for which payments are made. The life insurance policy will pay out during this time, if the holder dies.
Premium…
The cost of insurance cover, your life insurance premium is what you pay for cover.
Reviewable premium…
Allows the cost of the life insurance policy to be reviewed – and increased – by the insurer at a future date.
Term life…
Pays fixed monthly premiums for the length of the policy and is one of the most common forms of life insurance in the UK. Get more informed about this popular type of life cover.
Whole of life policy…
Made up of two elements: insurance and investment. The insurance pays out a guaranteed lump sum when the policyholder dies. While the investment accumulates a cash value over time, which can either be withdrawn or borrowed against. If you’re considering this cover, take a moment to learn more.
Whole of term policy…
Guarantees a lump sum payout as long as the life insurance premium continues to be paid throughout its term. This type of life insurance policy is commonly used to cover inheritance tax bills.