Choosing life insurance of any kind can be a very confusing yet very important decision. It seems a lot of the confusion surrounding life insurance is due to the use of overcomplicated terminology.
To help guide you through the intricate language used in the industry, we have created a Jargon Buster; a detailed list of the more commonly used, commonly misunderstood terms used by insurers:
Beneficiary – The person or people who receive the pay-out from a life insurance policy. You are entitled to choose your beneficiaries; most people choose family or loved ones.
Critical Illness Insurance – This is cover that pays out in the case of serious illness or injury. It is paid to the policy holder, not a beneficiary.
Dependant – A person who is financially dependent on the policy holder, usually spouse and/or children.
Income Protection – Insurance taken out to cover the income of a policy holder in the event of injury or redundancy.
Inheritance Tax – Tax paid on a lump sum of money inherited.
Income Protection Insurance – A policy that pays out in monthly sums in the event that the policy holder fall seriously ill or is injured, this policy also covers redundancy.
Joint Policy – Where two people, typically a couple are insured on the same policy.
Life Insurance – A general term to describe all policies that offer a pay-out in the event of death or injury.
Life Assurance – A term to describe an insurance policy that pays out after assured or certain life events such as death.
Mortgage Life Insurance – An insurance policy that pays off any outstanding amounts to debtors in the case of policy holder death.
Mortgage Payment Protection Insurance – An insurance policy that pays mortgage repayments in the event that the policy holder falls ill or is injured.
Premium – The amount paid out each month or year for the policy taken out.
Term Insurance – A form of life insurance that covers a certain period of time. The most common of life insurance policies that pays-out a lump sum to the beneficiaries in the event of policy holder death.
Whole of Life Insurance – A policy that pays out a lump sum to beneficiaries in the event of policy holder death. This amount is definite and the policy usually lasts a life time. It is an accumulative amount that is lendable against.