It is a wise decision on your part, if you have decided to buy a life insurance policy to support your loved ones, in case you meet with an accident or death.
However, you must possess a clear understanding of life insurance terms to avail the best product.
Given below is a glossary of various life insurance terms so that you become fully aware of what life insurance is all about. This would also make it easier for you to discuss the policy with an advisor and understand his/her advice better, without wasting much time.
- Assured: The term refers to a person who is insured as per the terms of an insurance policy.
- Benefit: The term indicates the money offered to the policyholder when a claim is made.
- Bid Price: Bid price refers to the actual selling price or cash-in value of your unit holdings.
- Bonus: The term associates to a with-profits policy. It is actually the amount of money added to the benefit payable under the policy. This amount depends on the profits made by the insurance company.
- Convertible term assurance: This is a term insurance policy that offers you the option to convert your current policy to a whole-life or endowment insurance policy, that too without having to take further medical examinations.
- Critical illness insurance: As per this policy, the insurance company pays out a lump sum on the diagnosis of life threatening illness as mentioned in terms of the plan.
- Decreasing term: Under this scheme, the death benefit decreases each year as per your policy. Premiums however remain the same.
- Endowment insurance: This type of a policy pays a stated amount of a stipulated period or upon the death of the insurance in case it occurs within that period.
- Family income benefit: The dependents of the life insured get an amount for a set period.
- Guaranteed Bond: Here, both principal & interest are assured by an entity.
- Increasing Term: Here the cover & the payable amount get an increment each year.
- Investment Bond: This bond is a combination of investment & life cover. The investments you make towards insurance policy are actually invested in the insurance company’s with profits of unit-linked funds.
- Life fund: The term refers to unit linked investment funds run by life assurance or pension companies and used for individual holding life assurance policies to invest in.
Maturity: The term refer to an agreed date when an endowment policy ends & the proceeds are payable.
- Offer price: The buying price of fund units.
- Premium: Amount paid to insurance company.
- Proprietary: A life insurance company responsible for issuing its profits to its shareholders.
- Qualifying Policy: A savings plan based on life assurance that is supported to be written for a minimum of 10-years & requires to meet certain qualifying policy criteria.
- Renewable Term: Term insurance that may be renewed for another term without evidence or insurability.
- Single premium policy: Here only one lump sum is paid for an insurance policy.
- Sum Insured: The guaranteed amount of money that is pay under an insurance policy prior to any bonuses added to it.
- Surrender value: The amount entitled to an insurance policyholder on discontinuation of the coverage. The term is not applicable to all types of life insurance policy.
- Terminal bonus: A extra bonus determined upon a death or maturity claim payment. The amount depends on the profits made by the company.
- Utilized with profits fund: The policy can be invested in UK & overseas shares, property, fixed interest securities & cash.
- Unit-linked: Also known as unitized, the term refers to a state where some of your money is utilized towards purchasing ‘units’ in a fund.
- Whole life insurance: The insurance offers a death benefit to the policyholder as it builds up cash value.
- Without profits: The term indicates the amount of money paid out when a policy reaches maturity or upon the death of policyholder.
- With profits: Associates to insurance policies that combine investment with protection.
- With profits bond: Under this policy your lump sum is often invested in a unitized with profits fund.