Life Insurance Glossary

Life Insurance, also known as Life Assurance or Life Cover, is an insurance policy that pays out a fixed lump sum (known as the sum assured) to your dependants if you die. There are many types of life insurance and various terms used to describe this vast area. These are explained/ covered briefly below:

C - Critical Illness Insurance

A type of insurance that pays out a lump sum if you are diagnosed as having a serious illness/medical condition, as specified in the policy.

D - Decreasing Term Insurance

Life insurance where the level of cover provided reduces at a flat rate each year.

F - Family Income Benefit

Life insurance that provides a tax-free monthly income until the end of the policy term, instead of a cash lump sum, in the event that you become terminally ill or die.

G - Guaranteed and Reviewable Premiums

Rates that are guaranteed will stay the same throughout the policy term, while reviewable rates can be assessed and changed at the insurer's discretion.

J - Joint life policy

A life insurance policy that covers two people.

L - Level Term Assurance

A type of life insurance that pays out a guaranteed fixed lump sum if you die within the specified period of the policy.

M - Mortgage Life Insurance (Mortgage Protection Insurance/Assurance)

Life cover where the sum assured reduces broadly in line with the outstanding balance of your mortgage. Designed to help cover mortgage repayments or pay off your mortgage if you die.

Mortgage Term Assurance

A form of mortgage life insurance designed to pay off your mortgage if you die, or if you're diagnosed with a terminal illness.

Mortgage Decreasing Term Assurance

Mortgage life insurance designed to protect a repayment mortgage. Unlike mortgage term assurance, the sum assured reduces throughout the policy term as your outstanding mortgage debt decreases.

P - Policy Term

The period that the policy runs for.

T - Terminal Illness Benefit

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

W - Waiver of Premium

An optional extra that covers the cost of life insurance premiums if you're unable to work and keep up the payments on your policy due to an illness or injury.

Whole of Life Insurance

Open ended life cover mainly used for inheritance tax planning that pays out when you die, rather than after a fixed time.

Writing Life Insurance in Trust

A process that ensures all the proceeds of the policy are paid swiftly and directly to your dependants without being subject to inheritance tax.