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Life Insurance Jargon

 

Beneficiary – Someone who will benefit from your life insurance policy. There could be multiple beneficiaries. By writing your life insurance policy in trust or by writing a will, you can have control over who your beneficiaries are.

Critical Illness Cover (CIC) – will pay-out upon diagnosis of one of the critical illnesses covered as part of the policy taken out. Critical illnesses can include cancers, strokes, heart attacks and debilitating conditions like Parkinson disease. It can be added to a life insurance policy or taken out separately.

Decreasing Term – The sum insured (cover amount) is designed to reduce as your mortgage reduces. Often referred to as mortgage term life insurance.

Estate – Refers to your assets owned at the time of death, including property, personal possessions, financial benefit and Life Insurance. If your life insurance policy is written in trust then it doesn’t form part of the estate.

Family Income Benefit – Provides a replacement income for beneficiaries on your premature death. In the event of a claim, income can be paid monthly, quarterly or annually, and under current rules the income is tax-free.

Guaranteed Premiums – Where the premium remains the same throughout the term of the policy. This means you will always know how much you will be paying.

Income Protection – If you are unable to work due to sickness or injury then you may struggle financially. Income protection acts to pay a proportion of your salary for a set period of time, depending on your policy term.

Joint Life First Death – Joint Life Insurance cover which pays out on the first death. Once the policy has paid out, then cover is terminated.

Level Term – Provides a lump sum for your beneficiaries in the event of your death over a specified term. You choose the sum insured and the policy term, which is guaranteed at the outset and remains unchanged throughout the term.

Mortgage Protection Insurance – This is a form of decreasing term life cover, designed specifically to cover the amount of debt you have outstanding on your mortgage.

Relevant Life Cover – A tax efficient life insurance policy, allowing companies to offer a death-in-service benefit to its employees (including salaried directors). It’s set up by the company and pays out a tax-free, lump sum on the death (or diagnosis of a terminal illness) of the person insured. Written in trust on inception.

Sum Insured– The amount (of cover) your life is insured for.

Term – The length or period of time your life insurance policy runs for.

Terminal Illness Cover – Provides an earlier pay-out from your life insurance if diagnosed with less than 12 months to live. Policy would cease once this claim has been made.

Trust -By writing your Life Insurance in Trust you are creating a legal document that states who will be responsible for distributing your pay-out to your beneficiaries. The people responsible for this are named Trustees.

Trustee – Someone responsible for distributing a life insurance pay-out to the beneficiaries. A trustee is chosen by the policyholder when the policy is written in Trust.

Waiver of Premium – This is an add-on product. A clause in an insurance policy says that the insurance company will not require the insured to pay a fee to maintain the policy under certain conditions.

Whole of Life – Provides a guaranteed lump sum paid to your estate in the event of death. To avoid inheritance tax and probate delays, policies should be set up under an appropriate trust.