Life Insurance - Help?!
Article published on 2nd April 2014
The Life Insurance industry is full of technical jargon that can become very confusing to understand, especially when you are first looking for cover and are faced with all the different policy types available.
When you take out Life Insurance you need to consider the insurable interest that you have. Simply put, not everyone can insure themselves for millions of pounds, though that would be rather nice. For high sum policies insurance providers will want to establish that there are genuine reasons for the amount of cover you are asking for, however most individuals insurance interest will fall within these guidelines:
- Mortgage liability
- Standards of living of dependents i.e. children under the age of 18
- Other loans i.e. car repayments
- Funeral expenses
If your next of kin would struggle to meet the financial liability associated with any of your loans, maintain their standard of living if you are the main earner for the household, or find it hard to pay for your funeral, then some form of Life Insurance is right for you. There are a number of Life Insurance policies available and the ones that you need to primarily consider for personal cover are:
- Level Life Insurance
- Decreasing Life Insurance
- Increasing Life Insurance
- Family Income Benefit
- Whole of Life cover
Below we have taken the most common terms used in Life Insurance and provided a brief and hopefully simple explanation as to what they mean.
Decreasing Life Insurance
Sometimes known as Mortgage Life Insurance, this policy is often used for Capital and Repayment mortgages. The policy sum assured decreases each year as does your mortgage.
Family Income Benefit
A protection policy that provides a monthly income to your family in the event of your death. The policy is typically set up to match your annual salary, ending at your expected retirement age.
Increasing Life Insurance
A policy that includes an increase in the policy sum assured on an annual basis, in line with RPI.
Key Features Document
The primary terms and conditions of your policy document, detailing the circumstances where you can and cannot make a claim. This is an important document and you should read this thoroughly when you receive your policy documents.
Level Life Insurance
A protection policy that pays a tax free lump sum to your beneficiaries upon your death, or to yourself upon diagnosis of a terminal illness (a prognosis of 12 months or less). The policy is popular for those with an Interest Only mortgage.
Your application will need to detail your medical history that must be detailed accurately during the application process. If you place an application with an insurer and your health changes between the application date and the policy start date, you must inform the insurer of this change.
This is when an insurance application is accepted at standard terms, meaning that you are being offered cover at the basic premium for someone in your circumstances.
Over 50s Plan
A protection policy that is not medically underwritten and provides a lump sum benefit to your loved ones on the event of your death.
This document indicates the basic premium that is available for the insurance applied for, before your application is made. Depending upon your individual circumstances the policy premium indicated in this document may alter once underwriting of your application has occurred.
The official certificate of your insurance policy. You will require the original of this at the point of claim.
The length of time that your insurance policy is active for. Also known as the benefit term.
If you have smoked within the last 12 months you are classed as a smoker. This includes any form of nicotine replacement product including e-cigarettes.
This is when an insurance application is accepted at rated terms. This can include health exclusions, premium increases, a maximum sum assured and/or a maximum policy term.
The amount of money that you are insured for. Also known as the policy benefit.
Terminal Illness Cover
Typically included in many Life Insurance policies which will result in you receiving a policy payout if you are diagnosed with 12 months or less to live.
The process where an insurance provider considers the acceptance terms that they can offer on an insurance application.
Whole of Life
A protection policy that provides a lump sum payout upon your death at any age; provided that policy premiums are up to date and the original application is fully accurate.
We hope that you have found this set of Life Insurance keywords useful in providing a quick run-down of the terms you will face when applying for insurance. There are many many more technical terms that could be thrown at you when you apply for Life Insurance. Our advice to you is to speak with someone who explains the products you are looking for in a manner that suits you and is understandable. You should not commit to a Life Insurance policy and walk away thinking, what on earth have I just bought?!
Our insurance advisors have worked within the industry for years and will have no difficulty explaining the ins and outs of Life Insurance to you, without making you feel befuddled. Please feel free to contact us for a no obligation quote so that we can help you start your Life Insurance application.
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