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Glossary of Terms

Lifebroker have put together a Glossary of Terms to make your choice of life insurance and income protection more informed. Please refer to this page if you are not sure about some of the jargon that is used in the Financial Services industry. Of course, if it is not here please request for a Lifeboker Life Insurance Consultant to call you.

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Acceptance - this is when the life insurance company has accepted your application. This can be instantly or in some more complex cases a week or two.

Accident, Sickness and Unemployment - also known as Mortgage Payment Protection Insurance (MPPI). Replacement income to cover the monthly mortgage payments and other regular outgoings, in the event of ill-health or unemployment, usually for up to one year.

Covertible Term Life Insurance - level term life cover with the built in option to convert the policy into something different, such as a Whole of life policy, at a later stage.

Critical Illness Cover - pays out on diagnosis of a specified condition regardless of the level or speed of recovery. The specified conditons will be different one life insurance company to the next - more...

Decreasing Term Life Insurance - decreasing life cover that reduces at a fixed rate each year as opposed to matching a mortgage, which typically decreases more slowly in the early yearsFamily Income Benefit Life Insurance - instead of paying out a lump sum, this type of cover provides an income until the end of the term - more...

Group Life Insurance - Group Life Insurance is where a large number of people, typically from the same employer unite to obtain insurance. They are able to access more lenient underwriting limits through a group life policy - more...

Guaranteed and Reviewable Premiums - guaranteed rates will stay the same throughout the term of the policy. Reviewable rates can be reviewed at the insurer's discretion (usually after the first five years).

HIV Life Insurance - This is life insurance for people living with HIV. Lifebroker offer this insurance, but you must be on the HAART program to qualify - more...

Income Protection Insurance - replacement income in the event of ill health until you either return to work, retire, the policy term expires, or death - more...

Increasing Term Insurance - the cover increases every year without the need for a medical. Used by clients that may require additional cover in line with increases in their income and inflation.

Indexation - policies can be linked to inflation where premiums and benefits increase annually.

Insurable Interest - insurable interest exists when one party has a close and/or dependent financial relationship to the other. Common examples of insurable interest are those between spouses, a company on its key persons, director shareholders on the other director shareholders in a close company and anyone who is financially dependent on a particular person.

Keyperson Life Insurance - a keyperson is someone in a company who makes a considerable contribution to the company's market position. This might be a sales director for example who makes a significant personal contribution to the company's turnover through his own business contacts. If he were to die prematurely or be forced to stop working due to illness the company would find it difficult to replace him quickly and suffer financial loss as a result - more...

Lapse - a policy lapses or comes to an end as a result of non payment of the premiums.

Level Term Life Insurance - pays out a fixed lump sum (sum assured) if the person insured dies within the specified period of the policy - more...

Life of Another - an application for life insurance can be made by a person who is not to be the life assured. In this case the application is referred to as one of life of another. The insurance company will need evidence that the applicant has an insurable interest in the life assured before accepting the application.

Mortgage Protection Life Insurance - life Cover where the lump sum reduces in line with the outstanding mortgage balance over time - more...

Renewable Term Life Insurance - short term cover that can be renewed, without medical underwriting, every 5 - 10 years.
Terminal Illness Benefit - many clients confuse this with critical illness cover. This benefit simply allows those who are diagnosed with less than 12 months to live to claim early on a life insurance policy. The benefit is often included with life cover at no extra cost.

Reviewable Premiums  - there premiums are subject to review, normally after 10 years and every 5 years thereafter. If the value of the policy is low there may have to be an increase in the premium to meet the additional cost of life cover based on the assured's older age.

Often there are guaranteed options built in to these policies which permit the sum assured to be increased without further evidence of health. These events are usually confined to childbirth, an increased mortgage and marriage.

Settlor - a settlor is the term given to an individual setting up assets under a trust. The settlor agrees the provisions of the trust deed, appoints the trustees and specifies the beneficiaries under the trust.

Total and Permanent Disability (TPD) - most critical illness policies will offer Total and Permanent Disability (TPD), which covers any illnesses and medical conditions not listed, where there is no long term prospect of recovery - more...

Trust - trusts are important if, on your death, you wish the proceeds of your life insurance policy to be paid to your dependants in a straightforward manner.

Trustees - trustees are those persons or a corporate body which have been appointed by the settlor of a trust to administer the trust in accordance with it's terms and conditions. The trustees are the legal owners of the trust assets but hold them on trust for the benefit of the beneficiaries.

Trusts - trusts are used in many ways and are often used with life assurance policies, particularly where the policy is taken out to provide family protection, inheritance tax funding, partnership and shareholder protection etc.

If the life assurance policy is set up under a trust the proceeds are paid to the trustees who then pass them on to the beneficiaries in accordance with the terms of the trust deed.

There are advantages in setting up the policy under a trust. These are, first, the proceeds are, subject to certain conditions, paid outside of the deceased's estate and therefore avoid any potential inheritance tax charge. Secondly, the trust funds can be paid to the trustees without the need for Grant of Representation. This means that the proceeds can be paid by the insurance company within a matter of days after production of the death certificate.

The most commonly used trust for life assurance policies is a flexible power of appointment trust. This gives the settlor power to change beneficial interest and appoint new trustees during his/her lifetime.

This is a complex subject and you are advised to seek professional advice before considering using a trust.

Waiver of Premium - covers the cost of premiums during periods of ill health at an additonal cost.

Whole of Life - open ended life cover. Available either with an investment element or as a more expensive guaranteed rate, non-investment contract (Lifebroker only offers non investment policies) - more...

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