Life insurance jargon buster

Life insurance can feel confusing at the best of times but when there’s a tonne of words that just don’t seem to make sense, it can feel daunting. At Busy Bee we are here to ensure that sorting your life insurance doesn’t feel like a chore.

In this blog we have summarised the definitions of some phrases you might come across when looking into life insurance!

• Death in service benefit - This could be a life insurance benefit that your workplace provides for you on your behalf. This type of policy is typically recommended as a multiple of your yearly income (before tax). For example, if you earnt £20,000 a year and your workplace paid a multiple of five times your income, your death in service benefit would be £100,000.
  
  
• Joint life insurance - This is a type of life insurance policy that you share with someone else, typically your partner. Whilst the policy covers you both, there is usually only one pay-out and after a claim has been paid, the policy will end.
  
  
• Trust form - A trust is a simple legal document that allows you to gift your life insurance to someone else, if the worst were to happen.
  
  
• Sum assured - This is the amount that you are covered for and if you were to make a successful claim your policy, your loved ones could receive this pay-out if the worst were to happen to you.
  
  
• Critical illness insurance - This type policy covers you for a set list of critical illnesses and can pay out upon diagnosis, depending on if you meet the definition outlined by your insurer.
  
  
• Waiver of premium - This is insurance for your premium itself. It ensures that if you are unable to pay your premiums as a result of incapacity due to accident or illness then the insurance provider will pay them on your behalf, typically after you have been unable to work for around 6 months. until you return to work or the end of your policy.
  
  
• Beneficiary - Is the person or people that you would like to receive the money, if a claim was made on your policy. You can decide who your beneficiaries are, and the amount they will receive from the pay-out, in your trust form.
  
  
• Whole of life insurance - A whole of life policy covers you for the entirety of your life and is guaranteed to pay-out in the event of your death.
  
  
• Premium - Your premium is the amount you will pay to your life insurance provider each month. By missing payments for your life insurance policy, you could risk your cover ending!
  
  
• Underwriting - Underwriting is the process in which your health, lifestyle and occupation will be assessed when you apply for your life insurance policy. The monthly premiums that you pay will be determined following the underwriting process.
  
  
• Term length - This is the term length that your policy will be in place for. For example, if your term length is 10 years, then if the worst were to happen to you during the term of your policy, then your loved ones would be able to make a claim on your policy. However, if you survive your term length, then your policy will cease to exist (unless you extend your term)!
  
  
• Income protection insurance - Is a policy which can pay a selected percentage of your income each month if you were to become ill or injured and unable to work as a result. This policy would help ensure you are able to pay for the essentials and focus on your recovery.
  
  
• Decreasing term - A decreasing term length is typically associated with a repayment mortgage and pays out less over time. As you repay your mortgage, the balance decreases over time, as will the sum assured on your decreasing life insurance policy.
  
  
• Non-disclosure - Failure to provide honest information during the application process. This could lead to a claim not being paid or paid in full as a result.
  
  
• Indexation - When your policy is index-linked, this means that your policy can rise roughly in line with Retail Price Index (RPI). So as inflation rises, your sum assured and monthly premium will increase slightly each year to stay inline with it. Each provider's inflation rate is slightly different but you will be advised of this when arranging your policy and you have the option to opt out of this additional benefit at any time!
  
  
• Over 50’s life insurance - This type of life insurance is what it says on the tin. Although other types of life insurance may be available to those who are over the age of 50, these policies typically offer guaranteed acceptance and have no expiry date.