Glossary

Term Assurance

Term assurance policies cover the policy holder for a limited amount of time. The length of time for which a Term assurance policy will run is determined by the number of years that the policy is initially taken over. For instance, in most cases a Term assurance policy will be taken out to cover a mortgage. The number of years left on the mortgage will usually dictate how long the policy is taken out for.

The policy will pay out a lump sum in the event of death, and with some policies, on diagnosis of a terminal illness.

You may choose to select Critical illness cover to go on the policy as well. If you choose this option then the policy will usually only pay out on the first event. For example, if you are diagnosed with a critical illness the policy will pay out, though your cover will cease, and you will have nothing left to cover you in the event of your death. However this is not the case for all of the providers policies, so we recommend you read through the key features document of any policy before you make a decision. Some people choose to take out seperate Life and Critical illness policies to make sure they are covered in either event.

Joint life policies will usually only pay out on the event of the first death and then the policy will cease. Though in some cases you can choose for the policy to pay out on the second death. This means that nothing will be paid out after the first death, and the policy will only pay out after the second death. Having the policy pay out on the second death is an option commonly chosen by couples looking to cover against inheritance tax. It can also be a cheaper option as well.

It is worth noting that Term assurance policies are not investment policies. There is no financial return on a term assurance policy.

Level Term Assurance

With a Level Term assurance policy the amount of cover will always remain the same. The premium will also be fixed. This type of policy is usually taken by people looking to cover an interest only mortgage or leave a fixed sum of money to loved ones.

Decreasing Term Assurance, also known as Mortgage Protection.

For Decreasing Term assurance the premiums are fixed for the life of the policy. Though the amount of cover decreases in accordance with the reducing balance of a repayment mortgage.

Critical Illness Cover

Critical illness policies will pay out in the event that you are diagnosed with a defined critical illness, i.e. one that is covered on the policy. The various companies all cover a different number of illnesses, so you may wish to read through the providers “Key features” documents to ensure that the policy you choose covers precisely what you are after. All of the policies do cover the Association of British Insurers core critical illness conditions as a requirement. You can either take this policy with Term assurance attached, or opt to take it as a standalone (on its own).

Terminal Illness Cover

Terminal Illness cover comes with most life insurance policies. If you are diagnosed with a terminal illness and given less than 12 months to live you can put in your claim. In some cases there is a restriction on claiming for this if you are within either the last 18, or 12 months of your policy depending on which insurance company you choose to go with. Terminal Illness cover is usually included in Term assurance policies at no extra charge.

Additional options

Waiver of Premium, also known as Premium Protection

A Waiver of Premium is applied to cover you when you are unable to continue meeting your monthly premiums due to illness or injury. The insurance company will cover your payments until you are able to continue them yourself. Certain exclusions will apply. To take out this additional cover will increase your monthly premiums.

Renewable Term Assurance

Renewable Term assurance offers you the opportunity to extend your cover at the end of the policy term without having to provide any further lifestyle or medical evidence however the premium is likely to increase. Certain restrictions may apply depending on which Insurance company you choose to go with.

Index Linked

If you select this option your policy will be reviewed annually and the amount of cover, as well as the premium will be increased in line with inflation. Put simply, this will allow your policy to remain at its equivalent value throughout its term. This is not neccessarily beneficial for all policies, as in some cases you may only need to insure yourself for a specific sum regardless of when you may claim.