Terminology
Inheritance Tax Liability – You can take out Life Insurance to off-set against this tax. Inheritance tax is a 40% tax on the deceased estate that’s over the value of £325,000. There are some exceptions which can be found on www.gov.uk/inheritance-tax.
Over 50’s plan
This is a Life Insurance option that could be used to help with funeral expenses, this plan pays out a tax-free cash lump sum upon Death.
- No medical questions required for this plan.
- Cover can be taken out between the ages of 50 to 80.
- Guaranteed fix premiums.
- Only pay premiums up to the age of 90 but cover continued until death.
- Two years exclusion period.
- There is a possibility you may pay more into the policy than they payout.
Whole Of Life Assurance – Is permanent Life Insurance which covers you up until the day you die if you continue to pay the monthly premiums. As this is a guaranteed chance of payout (everyone will die at some point) the monthly premiums tend to be more expensive. This cover is more ideal for unique circumstances for example if Inheritance Tax needs to be covered.
Guaranteed Insurability – Allows you to increase your Life Insurance cover amount in the future without any further medical underwriting. This must be used before age 55 and only available for some of life’s special moments: New mortgage or additional borrowing on the mortgage, Marriage/divorce/ separation, new children to the family, significant pay increase or promotion.
Premiums – This means the monthly amount you’ll pay for having the Life Insurance or Income Protection policy in place. You can opt to pay yearly which will be discounted.
Fixed Guarantee Premiums – This means the monthly premiums will remain the same over the term of the policy.
Reviewable Premiums – The insurer will review the monthly premiums every 3-5 years and the premiums may increase or decrease. *We’ve rarely seen it decrease.
Age Costed Premiums –This means the premiums increase every year with age. There are some scenarios where this is beneficial more so with income protection and higher risk job types. Please request a callback for further information.
Terminal illness cover – Not to be confused with Critical Illness Cover, Terminal Illness means if you are told by a medical specialist that you have 12 months or less to live the insurer usually will pay out before death. This benefit is automatically included in Life Insurance policies.
Total permanent disability – This is an additional feature of Critical Illness Cover where a payout is made if you are permanently & irreversibly disabled for the remainder of your working life. Some insurers add this as standard and some charges a fee to have this facility.
Children Critical Illness Cover – Your children are covered if they were to become critically ill which means you can take time off work to make sure they receive the adequate care they need.
Critical Illness Cover – Pays out a tax-free lump sum if you’re diagnosed with one of the insurers pre-set illnesses such as cancer, heart attack, stroke as well as many other conditions.
Waiver of premiums – Your monthly premiums are paid/waived if you’re incapacitated and unable to work. Or as one of our clients put it ‘’insurance for your insurance’’
Indexation – The premiums & sum that pays out increases to reflect the increasing yearly cost of living usually in line with Retail price index (RPI)
Solo Name – Means that only one person is named on the insurance policy.
Joint Name – means if one of you were to pass away then the policy pays out once, and the policy stops. Once the policy has paid out, the surviving person is no longer insured.
Split Name – is made up of two sole policies. This means if both parties pass away then both individual plans will pay out – or if one of you were to pass away then the surviving person is still insured.
Trust – This is a service that gives you control over who will receive the Life Insurance payout and also helps avoid paying for inheritance tax.
Repayment Mortgage – This means your monthly mortgage payments include the interest you’re paying and the amount you borrowed. At the end of the mortgage payments, you should own the home with £0 balance on the mortgage.
Interest-Only Mortgage – This means your mortgage payments is only the interest from the amount you borrowed, you’ll owe the original amount you borrowed at the end of your mortgage.
Cover Term – This means the number of years you’ll be insured for. The longer the cover term, the more the monthly premiums will be. A question that’s often asked is ‘Would I receive any money at the end of the term?’ – Much like a car, home and other insurances, there aren’t any payments to be reimbursed at the end of the policy.
Decreasing Policy – This means the amount that pays out reduces to £0 over time, this usually runs alongside a repayment mortgage.
Level Policy – This means the amount that pays out stays the same over the term of the policy.
Sum Assured – This means the amount that you are insured for or the amount that pays-out in event of a claim.
Standard Term – After you’ve completed the medical questionnaire the insurer will come back with a decision. If you’ve made medical a disclosure the premiums could change. Standard terms mean the quote has been fully underwritten and the insurer are happy to keep the premiums the same as the initial quote and there are no exclusions.
Rated – After you’ve completed the medical questionnaire the insurer will come back with a decision. If you’ve made medical a disclosure the premiums could change. If the policy has been rated, this means the insurer is happy to accept you but the premiums have increased due to the risk factors associated with your medical disclosure. A life insurance broker would help you find the right insurer for your medical conditions.
Referred – After you’ve completed the medical questionnaire the insurer will come back with a decision. If you’ve made medical a disclosure the premiums could change. When a case has been ‘referred’ it means the insurer’s underwriters will need a human to look at the disclosed made before given us a decision.
Life Insurance – This is a way of financially preparing your family in the event of your death. It’s the unexpected death that can leave a family financially devastated and life insurance can alleviate that pressure on your surviving loved ones.
Income Protection – This is an insurance policy which covers you if you’re unable to work through accident or sickness. If you have to make a claim the policy pays out a set amount of money per month over a set period of time.
Family Income Benefit – This is an insurance policy which is designed to cover the family’s monthly cost of living should you pass away. If you have to make a claim the policy pays out a set amount of money per month over a set period of time.
Mortgage Protection Insurance – This is the exact same as a decreasing policy. To expand further on how it works, the policy decreasing in line with your mortgage with the assumption that your mortgage interest rate is 8%. As long as your actual mortgage interest rate doesn’t rise above 8% there should be enough funds in the payout pot to clear the mortgage and overpayment fees.
Age Limits – Every insurer has their own minimum & maximum age they would allow you to apply for a cover, this could change depending on the type of protection you want. The minimum age for all insurers is 18 years old. Whilst we are on the topic of age, it’s worth noting the younger you are the less you’ll pay for protection.
Age Sum Assured Limits (ASA) – Although your health records may be squeaky clean, the insurers may still request medical information based on the amount you want to cover yourself for. This figure is usually high but decreases if you try to take out cover in your later years. Each insurer has their own ASA limits.
Association of British Insurers (ABI definitions) – This is the body that sets out the definitions under which you can make a claim that all insurers must adhere to. You may see some insurers with ABI++ or ABI***, In the spirit of being competitive, those ‘+’ & ‘*’ define the insurer’s extra leniency towards paying out for critical illness definitions.
Beneficiary – This is the person or organisation who will receive the funds in the event of you passing away. You can decide beforehand who you want to be the beneficiary by setting up a Trust.
Quote – This is the initial estimated price for life insurance usually based on your age and smoking status.
Short Term – or – Budget – This defines how long an income protection policy will pay-out which is usually set at 2 years, however, there are options for 1,3,5 years depending on the insurer.
Long Term – or – Full – This defines how long an income protection policy will pay-out. The payout length for a long term policy is up until you’re able to return to work or until the policy ends, which ever is sooner.
Any occupation – This defines what circumstances income protection policy will pay-out. We DON’T offer this option because the insurer may ask you to return to work in an alternative role if they feel you can perform the task.
Own occupation – This defines what circumstances income protection policy will pay-out. This means you’re covered for any medical conditions that prevent you from doing your daily occupation, this includes injuries as well as illness.
Monthly Benefit – This is the amount the policy will pay out each month under and income protection or family income benefit life insurance.
Deferred period – This is the set amount of waiting before the income protection policy begins to payout
Stepped Benefit – With some employers they may offer you 3 months full sick pay then 3 months half pay, the stepped benefit would top up the half-pay phase before the income protection policy begins the full payout.
Exclusions – Life Insurance & income protection policies may not cover you for a pre-existing medical condition and this is referred to as an exclusion.