Types of Life Insurance

Life insurance includes 2 main types: 'investment-type' and 'term' insurance. Investment-type insurance pays out on a certain date or when the insured dies. Term insurance pays a lump sum if insured dies before a set date.

Term Life Insurance

Term insurance is usually a cheaper way of providing protection for your dependants in case of death, with the monthly payments generally being a lot lower.

Level Term Life Insurance Level Term Life Insurance sometimes also called Level Term Cover or Level Cover. This type of life insurance has fixed monthly payments for the whole period of life insurance term. Upon accidental death cash is paid to a policy beneficiary. Get Quote for Livel Term Life Insurance	Decreasing Term Life Insurance At the end of the life insurance term cash lump sum is paid to cover the outstanding balance of the mortgage. This type of policy has decreasing payment structure, which means that your monthly payments are decreasing in lines with your mortgage payments. Get Quote for Decreasing Term Life Insurance	Fixed Term Life Cover In case of accidental death the lump sum also known as a policy term is played within the term of the policy.  The amount of life cover remains the same throughout the policy term. Get Quote for Fixed Term Life Insurance
Mortgage Life Cover Mortgage Life Cover is often referred to as “mortgage protection” and unlike the Fixed Term policy, this type of life insurance has its premium decrease each year in line with outstanding balance on a standard repayment mortgage. Get Quote for Mortgage Life Insurance	Life + Critical Illness Cover life and critical illness cover pays out a lump sum if you either die or are diagnosed with a critical illness thats meets our policy definition. Usualy insurer only cover the critical illnesses they define in life and critical illness policy. Get Quote for Life + Critical Illness Insurance	Over 50 Live Insurance Plan life and critical illness cover pays out a lump sum if you either die or are diagnosed with a critical illness thats meets our policy definition. Usualy insurer only cover the critical illnesses they define in life and critical illness policy. Get Quote for Over 50 Life Insurance

Here you can look up explanations of life insurance terms, just look down the alphabetical list.

A

Appropriate personal pension
A pension plan that can be used to contract out of (leave) the State Second Pension (formerly SERPS).

Assurance
Life insurance – a contract between the policy owner and the insurer, whereby the insurer agrees to pay a sum of money when the policy owner dies.

Attendance Allowance
A tax-free benefit for people aged 65 or over who need help with personal care because they are physically or mentally disabled.

B

Bank assurance
The sale of insurance through a bank. The most common type of bank assurance is when a bank requires life insurance on mortgages. The borrower can buy the insurance directly from the bank.

Benefactor
See Beneficiary.

Beneficiary
The person who receives money or other assets from, for example, an insurance payout or inheritance on someone's death. The person who took out the insurance premium or owned the assets is the benefactor.

C

Capital units
When you buy life insurance, these are the units bought by the premiums in the first year or two which are subject to a higher annual management charge.

Citizens Advice Bureau
A voluntary organisation offering unbiased advice on money matters, including tax and benefits, legal and social issues etc.

Compulsory excess
Insurance quotes are partly dependent on the excess. The excess is the amount of any claim you would be willing to pay before the insurer steps in to cover the remaining costs. The compulsory excess is the amount stipulated on the insurance policy. Your voluntary excess may be added to the compulsory excess.

Contents insurance
Covers the cost of replacing possessions lost or damaged due to unforeseen events (as detailed in the insurance policy).

Contracting out
An agreement between you and a pension provider to have part of your National Insurance contributions paid into their scheme, which will pay you a pension instead of the State Second Pension.

Cooling-off period
The time you have to change your mind and have your money back when buying insurance or other financial products or services. The actual time varies, so check your paperwork.

Cover
The protection given by insurance.

Critical illness insurance
A long-term insurance policy designed to pay a lump sum on the diagnosis of certain life-threatening or debilitating (but not necessarily fatal) conditions.

D

Dental insurance
A type of health cash plan that focuses specifically on dental care expenses.

E

EHIC (European Health Insurance Card)
The card enables you to access reduced cost, sometimes free, state-provided healthcare in the European Economic Area and Switzerland, that becomes necessary during your trip because of either illness or an accident. It also covers you for pre-existing conditions.

Excess
The amount you agree to pay before your insurer pays the rest of the bill (for example, the first £100 of a claim).

Exclusions
Things that your insurance will not cover.

Extended warranties
An insurance policy to cover goods, eg TV or washing machine, against breakdown.

Friendly Society
A mutual benefit organisation which offers a variety of savings and insurance plans. Mutual organisations are owned by their members and are accountable to them rather than to shareholders.

FSAVCs (Free-Standing Additional Voluntary Contributions)
A pension top-up policy for an occupational pension, but separate from your employer’s pension scheme and normally run by an insurance firm.

G

General insurance
Most types of insurance including cover for cars, homes, contents and travel.

H

Health cash plans
Insurance that provides limited cash sums towards everyday healthcare bills.

I

Immediate care long-term-care insurance (LTCI)
A care plan you can buy with a lump sum when you've been medically assessed as needing care.

Income protection insurance (permanent health insurance)
Insurance that pays you a monthly income if you're unable to work due to illness or injury, until you are able to return to work, or retirement age, whichever is the sooner.

Insurance
A product you buy to pay you money if the something goes wrong. There are lots of insurance products available.

Investment/insurance bonds
A pooled investment; a lump-sum life-assurance investment. They can also be called life-assurance bonds and with-profits bonds.

J

Joint-life insurance
Typically, life cover usually taken out by two related individuals which pays out in the event of either or both people dying.

K

L

Liability insurance
Insurance that helps a business pay financial compensation to compensate customers or the public for any damage or harm the business causes.

Life insurance
Life insurance is a way to provide some financial security for people who depend on you if you died. There are different types, but the policy usually pays out a lump sum or an income when the person insured dies.

Investment Life insurance
Insurance which has two roles: to pay out when on death and to act as an investment.

Term Life insurance
Insurance which pays out if death happens within the time specified (the term).

Long-term care
Care you may need as a result of a permanent medical condition.

M

Married women’s reduced rate
National Insurance contributions payable at less than the standard rate. Some married women pay at this rate but in return do not build up their own State pension and must rely on their husbands for financial support in retirement. On divorce, the right to pay at this reduced rate stops.

Mortgage protection insurance
Accident, sickness and unemployment insurance (or payment protection insurance) used to cover your mortgage payments.

Motor insurance
Pays out if you injure someone or damage someone else's property while driving. It may also cover damage to your own car.

N

National Insurance contributions (NICs)
You pay NICs from your pay to qualify for certain social security benefits including the State Pension.

No claims discount
A discount (for example in motor insurance) if you haven't made a claim on your policy within a specified period of time (for example three years). However, the discounted premiums may still rise.

O

Open-market option
The option to shop around to compare annuity rates and arrangements offered by other insurance companies and buy an annuity from another provider if you find a better deal.

P

Payment protection insurance (PPI)
An insurance policy to help you keep up your loan repayments, for example on a loan or credit card, in the event you can't work because of redundancy, accident or illness.

Policy
The details of what your insurance covers, what it doesn't, and what it costs – normally provided separately.

Pre-funded long-term care insurance (LTCI)
An insurance policy you buy in case you might need care in the future. These policies may sometimes be linked to an investment plan.

Premium
The amount your insurer requires you to pay for insurance cover.

Private medical insurance (PMI)
Insurance that pays for you to receive private medical treatment.

S

Schedule
The specific details of what's covered, and what's excluded, by an insurance policy.

State Pension
A government-administered pension based on your National Insurance contributions.

T

Term insurance (or term assurance)
Life insurance giving protection for a specific amount of time (the 'term').

Third-party assistance
This is when an insurance firm contacts you directly to attempt to settle their client’s claim. Also known as third-party capture.

Third-party capture
See third-party assistance.

Travel insurance
Pays out if you unexpectedly have to cancel your holiday; are taken ill while away; accidentally injure somebody or damage somebody else's possessions; lose your own possessions; and so on.

V

Voluntary excess
Insurance quotes are partly dependent on the excess. The excess is the amount of any claim you would be willing to pay before the insurer steps in to cover the remaining costs. The voluntary excess is the amount you select when applying for a quote or policy.