Life insurance jargon can sometimes feel like a secret language, right? But here’s a little secret for you: even some (less-seasoned) brokers get tripped up by the life insurance jargon maze.
To ensure you're not left scratching your head, we've crafted an A-Z guide, packed with all the life insurance jargon deciphered into friendly terms.
Ever been stumped by words like 'underwriting' or wondered if 'beneficiaries' are people who get a lifetime supply of cake? Life insurance jargon has befuddled many a brave soul. But with our handy guide, you'll be speaking as fluently as a native broker.
So, the next time you chat about 'premiums', you'll do it with a cheeky grin, making even the most seasoned brokers take notice. With every term you master, you'll feel more confident discussing policies, making the life insurance jargon feel like just another friendly chat.
Need to decode a term? Jump straight to the word you're curious about:
A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - W
A
Age Limits - Life insurance policies have specific age boundaries you should keep in mind. You must fall within these age ranges to qualify. Typically, you should be at least 18 to get regular life insurance, while those seeking over 50s life insurance usually need to be between 50 and 80 years old.
Assurance - This refers to a financial arrangement that guarantees a payout, usually upon a certain event such as the policyholder's death. These types of insurance policies are referred to as 'whole of life' and are often more expensive.
B
Beneficiary - A beneficiary is the person or entity you choose to receive the payout from your life insurance policy if you pass away.
Broker - An individual or firm that helps clients find suitable insurance policies and coverage. Just like More Than Diabetes!
C
Claim - A request made by the beneficiary to receive the payout upon the insured's death.
Cooling-Off Period - A period during which you can cancel an insurance contract without any penalties, often 14 days from the start of the policy.
Critical Illness Cover - Insurance that provides a lump sum if you’re diagnosed with one of the specific illnesses or conditions listed in the policy.
D
Death Benefit - The payout that beneficiaries receive upon the death of the insured.
Decreasing Term Insurance - A term life insurance policy where the death benefit decreases over time, often used to match the decreasing outstanding amount on a mortgage.
Dependent - A person who relies on the policyholder for financial support, such as a child or spouse.
E
Estate - The total assets and liabilities left by an individual at death.
Exclusions - Specific conditions or circumstances for which the policy won’t pay a benefit. Common exclusions might include death from suicide within a certain time frame after the policy starts or death resulting from a specific hazardous activity.
Executor - An individual or institution named in a will who is legally responsible for carrying out the deceased's wishes, settling debts, paying taxes, and distributing assets and life insurance proceeds according to the will.
F
Family Income Benefit - This is a type of life insurance policy that, instead of paying out a lump sum upon death, provides a regular monthly or annual income for the beneficiaries until the policy term ends. It's designed to replace the lost income of the deceased, ensuring the family can maintain their standard of living for a certain number of years after the policyholder's death. This type of policy can be especially useful for families with young children, where ongoing financial support is critical.
G
GPR (General Practitioners Report) - A report from your doctor that life insurance companies ask for. It gives them a picture of your health and helps them decide the cost of your insurance.
Guaranteed Insurability - A feature that allows the insured to buy additional amounts of life insurance at specified times without undergoing a new health examination or providing evidence of insurability.
Guaranteed Life Insurance - A type of life insurance policy where acceptance is guaranteed, regardless of health status. This means you don't have to undergo a medical examination or answer health-related questions to get coverage. However, because the insurer is taking on more risk (since they don't know the state of your health), these policies can come with higher premiums and/or lower coverage limits. Another feature of many guaranteed life insurance policies is a waiting period. If the insured person passes away within this period (typically 1-2 years from the start of the policy), the beneficiary might only receive a refund of premiums paid rather than the full death benefit. This is to prevent individuals who know they are terminally ill from obtaining a policy and passing away shortly after, causing a significant payout for the insurance company.
H
Health Declaration - A statement or form where you detail your health conditions and medical history when applying for life insurance. It helps the insurer assess the risk of insuring you.
High Risk - Refers to activities, jobs, or health conditions that increase the likelihood of an accident, injury, or health complications, potentially leading to higher insurance premiums or specific exclusions in a life insurance policy.
I
Indexation - In the context of life insurance, indexation refers to the automatic adjustment of the sum assured (the amount the policy promises to pay out) in line with inflation. This ensures that the value of the life insurance benefit remains relevant over time, as the purchasing power of money can decrease due to inflation. By having an indexation option in your policy, the coverage will rise each year, typically in line with an official measure of inflation like the Consumer Price Index (CPI) in the UK.
Invalid - A term used to describe a policy or claim that is not legally recognised, often due to misinformation, fraud, or non-compliance with the policy's terms and conditions. An invalid policy or claim will not provide the coverage or benefits initially promised.
J
Joint Life Policy - A life insurance policy that covers two people, typically a couple. It pays out on the first death, after which the policy ends.
K
Key Person Insurance - A life or disability insurance policy taken out by a business to compensate for potential financial losses that could arise if an important member of the business, typically an owner, executive, or significant contributor, were to pass away or become disabled.
L
Lapse - The termination of a life insurance policy due to non-payment of premiums.
Level Term Life Insurance - A type of term insurance where the death benefit remains constant throughout the duration of the policy.
Life Assured - The person whose life is covered by the insurance policy. If they pass away, the policy pays out to the beneficiary.
Life Expectancy - An estimate of how long a person will live, often used in determining policy premiums or annuity payments.
Life Insurance - A contract between an individual and an insurer where, in exchange for regular payments (premiums), the insurer agrees to pay a designated beneficiary a sum of money upon the death of the insured person.
M
Medical Examination - A health check that some insurance companies require applicants to undergo before they grant coverage. This helps them assess the risk.
Mortgage Protection Insurance - Also known as decreasing life insurance, this type of life insurance tailored to cover the balance of your mortgage. If you were to pass away, it ensures your family can clear the outstanding mortgage amount, securing their residence in the family home.
N
Non-Disclosure - Failure of the policyholder or applicant to reveal significant information or providing false information during the application process. Non-disclosure can lead to the policy being voided.
O
Optional Benefits - Extra benefits or coverage you can add to your primary life insurance policy, typically at an added cost.
Outstanding Premium - The yet-to-be-paid amount by the policyholder for their life insurance.
Over 50's Plan - A life insurance specifically for those aged 50 and above. Usually, these plans offer guaranteed acceptance without the need for medical checks.
Own Occupation - A term in some insurance policies defining disability. If someone can't work in their "own occupation" due to injury or sickness, they might be eligible for benefits.
P
Payout - The amount an insurance company pays to beneficiaries when the insured person passes away.
Policy - The formal document issued by an insurer that contains terms and conditions of the insurance.
Policyholder - The person who owns the insurance policy. This person may or may not be the insured.
Power of Attorney - A legal document that allows one person to act on behalf of another, often used in cases where the insured may become incapacitated.
Pre-existing Medical Condition - A health issue or condition that was diagnosed or treated before the start of an insurance policy. Such conditions might affect the terms, coverage, or premiums of a life insurance policy.
Premium - The amount of money the policyholder pays for the insurance coverage.
Probate - The legal process of verifying a will after someone dies, which often involves settling debts and distributing assets as stated in the will.
Q
Quote - An estimate of the cost of insurance based on the information provided by the applicant.
R
Renewable Term Insurance - A term life insurance policy that allows the policyholder to renew at the end of the term without undergoing a medical exam.
Rider - An additional provision added to a policy that provides extra benefits or coverage, sometimes at an additional cost.
Risk Class - A category into which an insured is placed, determining their premiums. It's based on health, lifestyle, and other factors.
Rate Guarantee Period - The period during which the premium rate on an insurance policy is guaranteed not to increase.
Reinstatement - The process by which a policyholder can get a lapsed policy back in force by catching up on premium payments.
S
Single Premium Policy - A life insurance policy where the entire premium is paid as a lump sum at the beginning instead of periodic payments.
Standard Risk - Refers to an individual who, according to a company's underwriting standards, does not carry any higher or lower risk than the average person.
Substandard Risk - This term indicates an individual who poses a higher risk for the insurer due to health, occupation, or other reasons. They may be charged higher premiums as a result.
Suicide Clause - A clause in a life insurance policy which states that if the insured commits suicide within a specific period after the policy starts (usually two years), no death benefit will be paid, but the premiums may be returned.
Sum Assured - The guaranteed amount that the policy will pay out, either upon the death of the insured or at the policy's maturity.
Survivorship Life Insurance - Also known as second-to-die insurance, it covers two people and pays out upon the death of the second person. It's often used in estate planning.
T
Term Insurance - A type of life insurance that provides coverage for a specific period or "term," often ranging from 10 to 30 years. If the policyholder dies within the term, a death benefit is paid out, but if they outlive the term, no benefit is paid.
Total Permanent Disability - A condition where an individual becomes completely and permanently unable to work due to illness or injury. Some life insurance policies offer a rider to provide benefits in case of TPD.
Trust - A legal arrangement where one person (the trustee) holds and manages assets for the benefit of another person or group. Life insurance policies can be placed in trust to ensure they're used as intended, such as paying for a child's education or ensuring funds go directly to beneficiaries.
Trustee - The individual or institution responsible for managing the assets of a trust in accordance with the wishes of the person who established it.
U
Underwriter - An individual or team responsible for evaluating and assessing the risks involved in insuring a person or asset. In the context of life insurance, underwriters review an applicant's medical history, lifestyle, and other factors to determine coverage eligibility and premium rates.
Underwriting - The process insurers use to determine the risk of insuring someone. This involves evaluating medical information, lifestyle choices, and other factors to set premiums or determine eligibility.
W
Waiting Period - A set amount of time that must pass before certain insurance policy benefits become available.
Whole Life Insurance - A type of permanent life insurance that provides coverage for the policyholder's entire life, often including a savings component, known as cash value.
Waiver of Premium - An add-on to a life insurance policy that waives the policy premiums if the policyholder becomes seriously ill or disabled and can't work.
Will - A legal document that sets out instructions for how a person's assets and belongings should be distributed after their death.