The Life Insurance Glossary from Low.ie

The Life Insurance Glossary from Low.ie

 

noun

 

Accelerated Serious Illness Cover - This is where you add serious illness cover to your Life Insurance /Mortgage Protection policy. Any serious illness claim will reduce the amount of life insurance or mortgage protection cover in place by the amount of the claim. Moreover, if it is done with a mortgage protection policy – the monies won’t go to you laid up in hospital but to your bank to reduce your mortgage. Remember the bank always wins!

Assignment – not something like your teacher used to give you to do but assigning a policy is when you allow the bank to have first dabs on your policy so that they get the financial benefit when you pass away. All mortgage protection policies are assigned to banks via a Notice or Deed of Assignment.

Beneficiary - This is the person who benefits when you die and your life insurance policy pays out. This person is called a “beneficiary” and typically is the partner or children of the deceased. 

Broker – the insurance intermediary that most people get their cover from. Short for insurance broker and always make sure and go with one that covers the whole market.

Cover – Simply the amount in monetary terms that you wish to have insurance in place for e.g. €100,000 of life insurance for 10 years means your life is covered for €100,000 for that period of time. 

Cancer Cover – The stats are alarming to quote from the home page of the Irish Cancer Society..’ Every 3 minutes in Ireland someone gets a cancer diagnosis. Every hour someone dies from cancer.’. Cancer cover can be done on a stand- alone basis or purchased as an additional benefit. It is cheaper than serious illness cover and can be done on a single, joint or dual life basis.

Children’s cover – every adult life cover policy in Ireland provides a free benefit which is a portion of life cover for children. It ranges from €5,000 to €7,000 and this sum is paid out on the death of a child typically up to age 18 or 21 if in full time education. Cover naturally you never want to have to use.

Convertible Term - Convertible Term Life Insurance is where your life insurance has what​ is called a ‘Conversion Option’. This allows you to extend your cover beyond the term at any time before the expiry of your existing policy without medical underwriting. In short, you can set up a new policy without having to supply any medical information. It is typically a bit more expensive but worth it as one’s health tends to get worse as we get older, sadly. 

Co-Directors Insurance - As its name implies it is cover that is only relevant to companies owned by shareholders as it can provide the funds to enable the surviving shareholders to buy out the shares of a shareholder on his or her death. A legally binding agreement is drawn up, and one or more life cover policies are put in place. This ensures that funds are available to the surviving shareholders to buy the deceased shareholder’s shares, when needed. It ensures a company can continue its operations with minimal disruption while also ensuring the poor deceased ‘s next of kin get the value of the deceased’s shareholding.

Critical Illness Cover – Simply another name for serious illness cover as the life insurance industry felt it needed to confuse people even more.

Decreasing term life insurance – All mortgage protection policies are decreasing term as your life cover reduces over the term of the policy and hits zero at maturity but your premiums stay the same throughout the term of the policy. It is typically the cheapest form of life insurance.

Deferred Period – The deferred period is the period of time from when a person has become unable to work until the time that the benefit begins to be paid. It is the period of time an employee has to be out of work due to illness or injury before any claim payment will be made. Applies particularly to Income Protection cover.

Dual Life Cover – unlike a joint life cover scenario where there is only one pay out, with dual life cover there can be two pay outs as each life is covered individually. You should always do your life cover and mortgage protection on a dual life basis as its effectively double the cover for a negligible difference in price.

Funeral Cover – This is life insurance usually taken out by people who want to cover their funeral expenses so that they don’t burden their next of kin with the cost. Typically, the amounts are relatively small e.g. €5,000 - €30,000 and the cover is guaranteed for the whole of the insured’s life. Usually there is no underwriting involved but as a result premiums are more expensive than the norm. 

Guaranteed Insurability - This is a very attractive option that allows you to increase your life cover by a certain amount, with no medical underwriting, at certain key life event moments e.g. moving house, getting married or having or adopting a child. It is available on life insurance, mortgage protection and other types of policies.

Health – very important when it comes to life insurance. The healthier you are the cheaper your cover so stay off the fags and go easy on the booze and use that gym membership!

Income Protection – as that Ronseal ad says..’it does exactly what it says on the tin’ i.e. this is life insurance that gives you up to 75% of your salary/income if you are out of work due to any accident , illness or disability. Vital cover for the self- employed to have and it kicks in after the chosen deferred period with these starting from 4 weeks up to 52 weeks. You pay a higher premium the shorter the deferred period.

Indexation - Indexation is an optional benefit that allows you to increase your life cover each year in line with inflation. Very handy to have when inflation is galloping ahead and usually your cover will increase by c. 3% every year but your premium will go up by a little bit more i.e.  c.4%.

Insured – The person(s) whose life is actually covered by the relevant policy. 

Joint Life Cover – Nothing to do with marijuana but simply it is where two people are covered and the life cover is payable on one death within the term of the policy. When the claim is paid, the proceeds will be paid to the other policy holder or in the case of mortgage protection cover, to the bank.

 

Keyperson Cover - Having Keyperson cover in place on the lives of key employees ensures peace of mind for a company. It is simply life insurance taken out by a company on the life of one or more employees who they view as being vital to the company’s continuing success and viability. It is cover many of us feel like triggering when the boss is giving us a headache!

Level Term - Level Cover cover is where your life insurance cover does not change over the term of the policy nor does the cost of your cover (i.e. the premiums) change. Most life insurance is written on this basis.

Life Insurance – cover that pays out a lump sum payment on the passing of the person(s) covered. Can be free of the Revenue taking a slice of it but depends on type of cover and who paid the premiums on the cover.

Maximum age – The word maximum features a bit in the life industry as there are certain ages beyond which mature people cannot start life insurance policies nor can they trigger their conversion option nor indeed can they actually get life cover if they are taking out a term cover policy. In broad brush terms from the age of 74 to 90, life companies prefer if you went to Tesco rather than to them for your shopping.

Mortgage Protection – a specific type of life insurance cover that is specifically linked to the size of the mortgage loan from your bank. As you pay off your mortgage loan over time so does your cover drop in line with the reduction in your loan. It is compulsory cover and is in place to cover the bank’s rear end so that their house loan is paid off if you or your partner depart this world. Any payout goes straight to them.

Over 50’s life cover – This this is identical to funeral cover in that it is available to people aged 50 + and there is no underwriting involved with the maximum sums insured being small e.g. up to €30,000. An Post promote their funeral cover as an over 50’s product.

Partnership Insurance- This is the first cousin of Co- Director insurance only it relates to partners e.g. in a law firm or accountancy practice. It is life insurance which can provide the funds to enable the remaining partners to buy out the share of a partner on his or her death. A legally binding agreement is drawn up, and one or more life cover policies are put in place so as to ensure that the funds are available to the remaining partners to buy the deceased Partner’s share of the firm.

Partial Cover – Childrens’ life cover can be viewed as partial cover and so too is serious illness If serious illness cover has been chosen by the policyholder. Here the life company will provide a partial portion (typically c.€25,000) of free serious illness cover for the policyholder’s children if diagnosed with one of the partial payment illnesses listed.

Partial Payments – We are all partial to getting a few euro and this relates to serious illness cover where the provider will allow partial payments to the policyholder if they are diagnosed with an illness where partial payments are part of the cover attaching to that illness. 

Pension Term Cover – This is term life insurance that is structured to take account of the tax relief available under pensions legislation. It is available to the self-employed or people working in non- pensionable employment. It is very cost effective   with the only downside being that you cannot assign it to a financial institution. If you claim full tax relief, at your marginal tax rate, on all premiums paid into this policy, you may pay as much as 40% less than a regular life insurance policy under current tax legislation.

PMA (Private Medical Attendant’s Report) - Another term from a different era that people find confusing as it is simply  a report that the life company underwriting you request from your doctor to ascertain how healthy you are. Only a fraction of people (c. 10%) will have health conditions that require the life company to request a PMA from their doctor. 

Premium – The amount you pay each month for your cover be it life insurance, serious illness etc. Most premiums are paid monthly but some people prefer to pay annually.

Reinstatement - This is where premiums have been unpaid for some time and the policyholder or their legal representatives have the right to pay the unpaid premiums due on the policy within 6 or 12 months of the date on which the first unpaid premium was due and have the policy reinstated. The policy can be reinstated even if a claim has arisen. Naturally, this provision doesn’t apply if the policy is cancelled by the policyholder(s). After a certain period e.g.  100 days a Declaration of Health will also be required.

Reviewable Plan – Mainly applies with regard to Income Protection where there are two different types of plan available. A reviewable plan means that the premium is fixed only for a certain initial period. This means that the premium can be reviewed regularly by the provider after the plan has been put in place. The terms for implementing the review will be determined by the terms and conditions of the plan. A guaranteed plan, on the other hand, means that the premium payable will be guaranteed not to change throughout the term of the plan.

Rolling conversion – This is where you can extend your cover at any stage of the policy term without providing any evidence of your health.

Section 72 Life Policy - This is a Revenue approved, whole of life insurance policy where the proceeds are tax-free if used to pay an inheritance tax bill. By designating a whole of life policy as a Section 72 policy – it enables people to plan for the payment of inheritance tax efficiently and in advance.

Serious Illness cover – This is the most widely used term for critical illness cover as can also be called specified illness cover as why not have three terms when one will do! Serious illness cover pays a tax free cash lump sum if you are diagnosed as suffering any illness from a specific list of illnesses that the relevant life company provides

Standalone Serious illness – This is simplywhere the serious illness policy is established on its own with no life cover attached.

Switching Cover - Like many types of insurance it can pay to switch your cover to another provider and can potentially save you sizable amounts. Be careful to ensure there is no dilution in your cover or the benefits attaching to it as there can be differences between the various life companies in them. Also be aware that as our age rises our health starts falling and cover becomes more expensive so do not relinquish your existing cover until you have done all the maths. Caveat emptor in short!

Taxation – A word close to all our hearts and one we prefer to see teamed with the word zero or nil. Life insurance policy claims are paid tax free and there is also tax relief available on premium payments of pension term and income protection policies. In all cases make sure and take independent tax advice before commencing any of these types of cover so you know exactly where you stand vis a vis the Revenue.

Temporary accidental death benefit –This is where a person applying for cover can get instant temporary life cover for a certain amount and the life company will provide a lump sum in the event of their accidental death prior to the inception of their policy.

Terminal Illness – This is where the life company will pay out the sum insured under the policy if the insured has been diagnosed with a terminal illness. It can also apply to income protection policies where the benefits would be paid immediately. It is a standard benefit amongst all the life insurance companies.

Waiver of Premium – This is a valuable benefit and it isn’t offered by every insurance company. If through serious injury or illness, you are unable to pay the premiums on your policy, the life company will still pay your premiums i.e. maintain your cover. Payments typically stop on earliest of recovery, end of policy term, 60th birthday or death.

Whole of Life Cover – Yes you guessed it! there is no policy term here as cover is for the whole of your life.