Whether you are an experienced buyer of insurance or looking for a policy for the first time, understanding the different terminology can be quite challenging. This is why Claybrooke has assembled a list of the most common terms you will see throughout our website in regard to insurance policies.
If after reading through these terms you are still unsure or confused about terminology, or any question for that matter, please feel free to contact us for more information.
Acceptance – this is the approval of the application. Depending upon the company and/or type of insurance, it may be instant or can take as long as two weeks for approval or denial of the application.
Accident, Sickness, and Unemployment – generally, this is a one-year policy that is paid if any of these situations occur. Clients will use this to cover everyday expenses such as their mortgage and car insurance.
Convertible Term Life Insurance – this type of policy is a term life insurance policy that can later be converted to a different type of coverage. For example, someone in his or her 20s that cannot yet afford a whole life insurance policy may start with this policy and then convert it over to a whole life insurance policy as his or her finances improve.
Critical Illness Cover – this cover will pay off if the policyholder becomes disabled or is diagnosed with some type of terminal illness during the term of the policy. It is one of the more popular types of cover in that the policyholder does not need to be deceased in order to receive a payout. Some conditions that would qualify for payout would be terminal cancer, organ transplant, heart attack, and organ failure.
Decreasing Term Life Insurance – this is also referred to as Mortgage Payment Protection Insurance (MPPI). For this type of policy, the benefit at the beginning of the policy is actually larger than the benefit at the end of the policy. The payout is meant to coincide with the principal owed on the home.
Diabetes Life Insurance – this policy is meant specifically for individuals with diabetes, as coverage can be difficult to secure with this condition.
Family Income Benefit Life Insurance – instead of an immediate lump sum payout, this policy continues to pay benefits throughout the term of the policy. It can serve as the income lost to family by the initial policyholder.
Group Life Insurance – policies such as this will cover a larger group of people instead of just one person. This is a common type of policy for business owners to insure their employees. In most cases, the policy will need to be for at least 20-25 people, although some companies will make an exception. Compared to an individual policy, this type of policy will often have friendlier terms and premiums on a per person average.
Guaranteed Premium – the rates of the policy will remain the same throughout the term of the policy.
HIV Life Insurance – this is another specialty cover that allows individuals already positive with HIV to be able to secure cover. Please note there are sometimes very specific conditions (meaning you may need to be enrolled in the HAART program) for companies to consider cover.
Income Protection Coverage – an additional type of coverage that allows the policyholder to collect an income in the case of temporary injury or extended illness. When the policyholder is able to return to work, benefits will no longer be paid.
Increasing Term Insurance – works in the opposite manner of the decreasing term insurance policy. This policy actually increases in benefit value each year by a predetermined value. This can help accommodate the cost of living and inflation.
Indexation – this type of policy has a benefit based on inflation, however, the premiums will also increase as the payout increases.
Insurable Interest – this cover is common in marriages and business relationships with one person’s financial well-being relying heavily on the second individual.
Key Person Life Insurance – common in business, key personnel for the company are insured as their passing could dramatically affect the overall wellbeing of the business. For example, a CFO or CEO may be insured to protect the company in event of their sudden death.
Lapse – When premiums are missed, it is called a lapse, at which point coverage ceases.
Level Term Life Insurance – if the insured dies within a stated period, the policy has a fixed lump sum that is paid to the beneficiary.
Life of Another – when one person tries to secure an insurance policy on a second party, such as a Key Person Life Insurance Policy. When this type of policy is requested, the person or company securing the policy will be required to provide proof of their financial reliability of the proposed insured.
Mortgage Protection Life Insurance – see Decreasing Term Life Insurance.
Renewable Term Life Insurance – a term policy that can be renewed during shorter coverage spans without medical examination.
Settlor – This individual establishes assets under a trust. He or she agrees to abide by all provisions provided by the trust as well as designating beneficiaries and appointing trustees.
Terminal Illness Benefit – this is generally included in all life insurance policies free. It pays the benefit if the insured individual is given a year or less to live after being diagnosed with a terminal illness.
Total and Permanent Disability – when someone is diagnosed with a disability/illness with no hope of recovery, this clause allows the benefit to be paid in full.
Trust – trusts are established outside of the estate and are generally not subject to an inheritance tax. The policy benefit payout terms will be outlined in the trust deed. For example, an individual may set up a £1,000,000 policy in trust for a grandchild that pays out at £100,000 per year for ten years after they turn 21.
Trustees – these are the individuals entrusted with the ownership of the assets to be paid out to the beneficiaries according to the terms laid out in the trust deed.
Waiver of Premium – this provides the policyholder with some peace of mind in the event they become ill or unemployed. If this clause is in the policy, the holder will have the premiums waved by the company until their situation changes.
Whole of Life – instead of expiring after a specific term, this policy is guaranteed to pay out the benefit as long as the death is not included as one of the exceptions in the policy (such as suicide). Because of the guaranteed payout, the premium for the policy is generally significantly higher than a term policy but also often viewed as a type of investment.
Will – the legal declaration made by an individual stating the management and/or beneficiaries of his or her assets after death.