Life Insurance Jargon Explained

What is the difference between life assurance and life insurance?

Strictly speaking insurance is used to cover you in case something happens eg you might die within the set term of your life insurance policy. Assurance is used to cover an event that will definitely happen eg a whole of life assurance policy is designed to pay out when you die. In reality these terms have become very blurred and both are used for the same thing, even by the life companies themselves.

Term
The number of years you choose for the policy to run.

Premium
The amount you pay every month by direct debit - some companies will accept an annual payment (usually a bit cheaper).

Terminal Illness Cover
This is automatically included with most policies - it means that your life policy will pay out before you die if the life insurance company have medical evidence that your life expectancy is less than 12 months. It will not apply during the last 18 months of the policy.

Decreasing Term Assurance
The sum assured decreases every year - usually in line with your repayment mortgage or loan.

Level Term Assurance
The sum assured remains the same for the whole of the policy term.

Joint Life Second Death
The policy is in two names and pays out on the second death. Joint policies usually pay out on the first death but this one can be set up to pay out when the second policy holder dies.

Whole of life assurance
Life assurance to cover you for the whole of your life. Pension term assurance-tax relief used to be available on your monthly life assurance premiums but this changed in December 2006. Tax efficient life assurance-see pension term assurance.

Critical illness cover
Will pay if you are diagnosed with one of the critical illness specified in your policy. Income protection - pays a monthly income if you are unable to work due to accident or illness.

Permanent Health Insurance
See income protection.

Increasing Term Assurance
The sum assured increases every year, usually in line with the Retail Price Index - your monthly premium will also increase at the same rate.

Renewable Term Assurance
Allows you the option of renewing your term assurance after a set period.

Convertible Term Assurance
Allows you the option of converting your term policy to a whole of life policy.

Mortgage Life Insurance
Life insurance to cover your outstanding mortgage if you die. Mortgage payment protection - covers your monthly mortgage payments in the event of accident, sickness and/or unemployment.