Life and Critical Illness Insurance Glossary

All the basic technical terms linked with life insurance and critical illness insurance are explained below:

Adjustable Life Insurance

This type of cover allows the type of cover to be changed as insurance needs change.

Beneficiary

The person the owner of an insurance policy names as the person who will receive the policy benefit if they die.

Convertible Term Insurance

This type of cover gives you the flexibility of changing from a level term policy to a whole life or endowment assurance policy if you want to do so in the future. The major benefit is that the policyholder can convert without any further proof of health.

Critical Illness Cover

With critical illness cover a lump sum benefit will be paid out on diagnosis of specified conditions such as cancer, or heart attack. Although this type of insurance does not come as part of a standard policy, it will offer a lump sum should you contract one of the specified illnesses during the term of the policy.

Decreasing Term Insurance

The initial sum assured decreases annually, usually on a fixed-rate basis. Policies known as Mortgage Protection Policies will decrease broadly in line with your capital and interest repayment mortgage which means that the sum assured will decrease slowly in the early years and faster in the later years of your mortgage. It it sometimes offers a convertibility option.

Family Income Benefit

This is a type of life insurance, but instead of paying your family a lump sum on your death a Family Income Benefit policy provides a tax free annual income until the end of the term specified at outset.

Guaranteed Premiums

With guaranteed cover the assured rate will remain the same for the duration of the life insurance policy. Reviewable premiums will be guaranteed for the first ten years (generally) at which point they will be reviewed and will then be reviewed every five years thereafter.

Increasing Term Assurance

The sum assured will escalate with this type of cover and is determined either by a set percentage or by a set amount each time it is renewed. People generally go for this policy if they feel they may require additional cover as the years go on, in line with increases in their income and inflation. Contributions are also likely to increase.

Indexation

Indexation is where the premiums and benefits of a life insurance policy increase annually in line with inflation, or a pre-determined fixed rate.

Level Term Insurance

Level cover pays out a lump sum if the policyholder dies during the term of the policy. Both the cost of the policy and the amount paid out remain flat.

Mortgage Protection Insurance

This is a variation of decreasing term insurance; it is life cover where the lump sum reduces in line with the outstanding mortgage balance.

Renewable Term Insurance

This a short term life insurance policy that can be renewed, without medical underwriting, generally every 5 - 15 years.

Terminal Illness Benefit

This is not the same as critical illness; terminal illness benefit allows those with life insurance who are diagnosed with less than 12 months to live to claim early on their policy.

Total and Permanent Disability

Total and Permanent Disability is defined as being unable to work due to permanent disability arising from any illness or injury (regardless of whether it is listed in the policy), the actual definition of which will vary depending on the insurance company.

Whole of Life Cover

This type of plan pays out the sum assured on death whenever it occurs, provided that contributions are up to date. This type of plan is likely to include an investment element and contributions are generally guaranteed for the first ten years and then reviewed at that point and every five years thereafter. There are plans where contributions are fixed throughout life but these can be more expensive.