What follows are some simple explanations of some of the words that are commonly used in life insurance market and in life insurance polices. Each insurer might use a slightly different variation in their own policy wordings so these examples are purely there to assist and help and should not be read as being actual legal definitions.
Life insured. This the person whose life is insured. If this persons dies during the policy period then that is when the policy will pay out.
Insured. This is the original owner of the life insurance policy and usually the person who took the policy out. So for instance a wife may as the ‘insured’ take a life policy out on her husband who would be the ‘life insured’.
Life office. This simply means the insurance company who is issuing the life insurance policy.
Sum insured. The amount that is payable if the ‘life insured’ dies during the period of the policy.
Premium. The cost of the life insurance policy. Usually described as a certain amount each month .
Underwriting. This is the process where the insurance company look at your details and decided whether or not to accept the risk and agree to issue you with a life insurance policy. This might be a quick and simple process or it may take some time and involve medical reports with perhaps the insurance company imposing certain extra terms to the policy. .
Proposer. This is the person who applies for a life insurance policy.
Term life policy. This refers to a life insurance policy which pays out on the death of the ‘life insured’ if that person dies within the ‘term’ (period) of the policy. The policy for example could run for ten, twenty or twenty five years.
Decreasing term life policy. This refers to a ‘term life insurance policy’ where the sum insured reduces at a pre-agreed rate. This type pf policy is often used to cover the reducing outstanding balance of a repayment mortgage.
Level term life policy. This refers to a term life insurance policy where the sum insured remains level during the period.
Joint life. This refers to a life policy which covers not one but two or more ‘life insured’s’. Quite often used by couples who appreciate that the family would suffer if either of them was to die.
Critical illness. This refers to a type of coverage which would pay out the sum insured if the insured life was to be diagnosed with a ‘critical illness’ being an illness which appears on a pre-agreed list of critical illnesses. For some illnesses there is a set level which the illness may have to attain to be regarded as critical. All the illnesses are spelt out and agreed in the policy. Critical illness may be added as an extension to a life policy or sold as a separate policy.
Terminal illness. Terminal illness refers to an extension to a life insurance policy. Under terminal illness the policy will payout if the life insured is diagnosed as having terminal illness and not expected to survive for a set period of months. This extension in cover usually expires 18 months before the actual term life cover is due to expire.
Luke Ashworth writes for Protected.co.uk, offering views on life insurance in the UK, visit www.protected.co.uk today and compare life insurance plans in minutes.
