The language of life insurance can be confusing, so here's a simple guide to some of the key terms.

A

Age limits

The maximum or minimum age that an insurer will issue a policy or continue one that's already in place.

Applicant

The person applying for the insurance policy.

Application

An application for life insurance is made after receiving a quote. You'll usually need to answer questions about your health and lifestyle as part of the application.

B

Beneficiary

The person or organisation that will receive the insurance policy payout if you pass away within the policy term and the claim is successful.

Benefit

The amount of money paid to the beneficiary when the insured person passes away. The payout is sometimes called the death benefit.

C

Cash-in value

Some whole of life insurance policies include a savings feature that means that if the policy is cancelled early, the policyholder receives the policy's cash-in value.

Claim

When you apply for a payout from the insurer that held the life insurance policy of the person who's passed away, or has a terminal illness, within the policy term.

Cover amount

This is how much the life insurance will pay out when a claim is successful.

Critical illness

Critical illness cover can support you and your loved ones financially if you're diagnosed with a specific illness or medical condition. You'll receive a tax-free lump sum to help with things like bills and treatment costs.

You can take out life insurance and critical illness cover at the same time, as they cover you for different things.

D

Death in service benefit

Part of an employer's benefits package, this gives your beneficiary a tax-free lump sum if you pass away while working for the company. You don't usually have to pay for it, but if you leave your job for any reason, you may lose the benefit.

Decreasing term life insurance

With decreasing term life insurance, the value of your policy gradually reduces over time until it reaches £0, but your premiums stay the same. This tends to be used to cover a mortgage or repayment loan.

E

Estate

The property and money left by someone who has passed away.

Executor

A person or company named in your will responsible for handling your estate and carrying out your instructions when you pass away. Their duties include arranging the funeral, dealing with assets, paying unpaid bills and distributing the estate to beneficiaries.

G

Guaranteed life insurance

A type of life insurance that you'll be accepted for, regardless of your health. So you won't be turned down, and there's no medical exam.

I

Income protection

A type of insurance that pays you a regular monthly income if you can't work due to sickness or injury.

Inflation

When the price of goods and services increases over time. If you're looking to buy life insurance, you can choose to protect your cover from the effects of inflation.

Insurance risk

How likely something that you're insured for will happen, meaning the insurer must pay out. For life insurance, this risk is the possibility that the policyholder will pass away before their policy term ends.

Insured

The named person who is covered by the life insurance policy.

J

Joint life insurance

A policy that covers two people's lives for one monthly premium. With joint life insurance the policy usually pays out and ends when the first person passes away. If you and your partner have separate life insurance policies, the surviving partner's policy will continue.

L

Length of cover

The amount of time you'll be covered for by an insurance policy, also called the policy term.

Level term life insurance

With level cover, you pay the same monthly amount throughout the policy's lifetime, and the cover amount stays the same. This insurance has no cash-in value.

Life assurance

Like life insurance, this pays out when the person insured on the policy passes away. The main difference is that life insurance is designed to provide cover for a specific time period, while life assurance runs for a person's lifetime.

Life insurance

Life insurance is a policy that pays out if the policyholder passes away while they're covered. Some policies also include a payout for terminal illness.

The lump sum might be used to help pay off a mortgage or go towards general living costs.

Life insurance company

A provider of life insurance policies.

Lump sum

The benefit that a life insurance company pays out in one amount when the insured person passes away.

M

Medical exam

When you apply for life insurance, you'll be asked about your health and lifestyle. In some cases, you may be asked to have a medical exam.

Medical referral

Your insurer may need some additional medical information to assess your application, this could either be in the form of a medical report or an exam conducted by a nurse or doctor. If more information is needed, this is called a referral.

Mortgage protection insurance

A type of term life insurance that's also called decreasing life cover. A mortgage usually goes down over time, and this cover decreases over time, too. So, if you pass away during the policy term and before the mortgage is paid off, the payout could be enough to help your loved ones pay off the rest of the loan and stay in the family home.

O

Over 50 life insurance

A type of life insurance for people over the age of 50. It provides cover for life and lets you leave a guaranteed lump sum for your loved ones when you pass away.

P

Policy anniversary

The anniversary of the date that your policy was issued. You'll find this in your policy documents.

Policyholder/Policy owner

The person, or people, taking out the life insurance policy.

Power of attorney

A legal document that lets you nominate someone to make important legal and financial decisions for you if you're unable to. If you want someone to act on your behalf, you'll need to give them power of attorney over your affairs.

Pre-existing medical condition

An illness, injury or disease you have when you take out a life insurance policy, also called an existing medical condition. When applying for a life insurance policy, you should answer all questions truthfully, to make sure your policy is valid.

Premium

The amount that you pay your insurer for cover. It's usually paid monthly, but some insurers allow annual or twice-yearly payment.

Probate

Probate is the process of proving a will and dealing with the estate of a person who has passed away. If you're a named executor in a will, you may need to apply for probate so you can gather their assets, pay any unpaid bills, and share out what's left to the beneficiaries.

Q

Quote

A life insurance quote is an estimate of your premium that's based on things like the type of life insurance, the amount of cover and the length of the policy.

S

Separation option

This is an option when you take out joint life insurance. It lets you split the policy into two if you and your partner are no longer together, and then both or either of you can take out a new policy without answering any more medical questions. You both need to agree to use this option.

Single life insurance

A policy for one person, with one cover amount and one payment each month, which pays out if you pass away during the policy term.

Sum assured

The total cover amount that an insurance policy will pay out as a lump sum if you pass away within the policy term.

T

Term

The length of time a life insurance policy runs for.

Terminal illness

An illness that you're not expected to recover from. Most life insurance plans include terminal illness benefit that pays out if you're not expected to live longer than 12 months. Once the payment has been made, the insurance policy ends.

Term life insurance

This will pay your beneficiaries a set amount if you pass away during the policy term. You pay a regular premium, usually monthly, to your insurer for the duration of that term.

Trust

A way to leave something of value to someone without handing them full control. You can put assets like money, investments and property, as well as your life insurance policy, into a trust. This is known as writing life insurance in trust, or a policy written in trust. A trust won't be counted as part of your estate when you pass away.

U

Underwriter

A trained expert or company that works out the risk of insuring someone. They decide the amount of cover the insured person can get, and how much they should pay for it. In some cases, they may decide the risk is too great to insure them.

Underwriting

The process used by an insurer that includes asking applicants health and lifestyle questions, so they can work out the financial risk of insuring them, and how much they should pay and be covered for.

W

Whole of life insurance

A policy that lasts the lifetime of the person that's insured. It's also known as permanent or traditional life insurance.

Will

A legal document that sets out how you'd like your estate to be managed and distributed when you pass away. You can name executors in your will to carry this out.

Get in touch with our friendly and knowledgeable team for more information.