Insurance Jargon Buster
ABI
Association of British Insurers - represents the collective interests of the UK's insurance industry.
Actuary
The role of an actuary is to assess the risk from statistics and trends.
Any Occupation
Where a policy will pay out if you can't do "ANY" occupation.
Assignment
A policy is assigned when ownership of the policy is transferred to another person or organisation.
ASU
Accident, Sickness & Unemployment Cover - An annually reviewable policy providing short term cover if you are unable to work due to sickness, injury or redundancy. Similar but not to be confused with Income Protection as it does not pay out for as long (max 2 yrs) or pay out as much.
BMI (Body Mass Index)
The Body Mass Index (BMI) is a tool that can be used to tell how healthy a person's weight is. You can use the BMI to find out if you're a healthy weight for your height.
In order to calculate BMI: Divide the weight by the height squared.
For example, you might be 1.6m (5ft 3in) tall and weigh 65kg (10st 3lb).
The calculation would then be: 1.6 x 1.6 = 2.56.
BMI would be 65kg divided by 2.56 = 25.39.
Underweight = less than 18.5
Normal weight = 18.5-24.9
Overweight = 25-29.9
Obesity =>30
Check your BMI (Body Mass Index) value here using the NHS BMI calculator
CIC
Critical Illness Insurance or Critical Illness Cover (CIC) will pay the policyholder a lump sum on diagnosis of one of up to 30 or more specified illnesses - the illnesses covered vary but generally include the major illnesses like cancer, heart attack and stroke to deafness, loss of limb or loss of sight.
Convertable Term Assurance
A Term assurance or Life Assurance policy that includes an option to convert the policy to whole-of-life or endowment assurance without any additional underwriting.
DTA
Decreasing Term Assurance - a form of Life Assurance (Insurance) where the amount covered reduces over the term of the policy - often used to protect a Repayment (Capital & Interest) Mortgage.
FIB
Family Income Benefit is a form of Life Assurance (Insurance) that pays out a regular income in the event of the death of the policyholder. Having an income instead of a lump sum in the event of death takes away the worry about having to invest the lump sum. It is often used to replace a lost salary or cover set expenses such as school fees.
Guaranteed Premiums
Where the premium you pay do not increase over the policy term.
Increasing Term Assurance
A Term assurance or Life Assurance where the amount of cover increases by a fixed amount each year or by a certain percentage.
Index Linked
Where the level of cover provided under a policy increases over time - this is often used to "inflation proof" cover and often linked to the Retail Price Index (see RPI)
Insurable Interest
In general this means that a person cannot take out a life policy on someone else's life unless he can show that he will suffer a measurable financial loss if that person dies.
Intestate
See "Will"
Joint Life
Where a Life Insurance policy is covering two individuals.
Joint Life 1st Death
The sum assured is paid on the death of whichever of the two lives dies first. In this case the two lives assured are normally also joint policyholders, and the sum assured would be paid direct to the policyholder.
Life Assured
The person on whose life or death the payment of the sum assured depends. The life assured is not always same person as the policyholder.
Life of Another
If the life assured has no claim whatsoever to the ownership of the policy, it is said to be written on the "life of another basis". In this case, the rules of insurable interest apply.
LTA
Level Term Assurance - a form of Life Assurance (Insurance) where the amount covered under the policy remains constant over the policy term.
Morbidity Rate
The Morbidity Rate is the measure of risk of someone falling ill over a given period of time.
Mortality Rate
The Mortality rate is the measure of the number of deaths over a given period of time.
MPPI
Mortgage Payment Protection Insurance fundamentally the same thing as ASU - see above.
On Risk
The point at which you are covered.
Own Life
If the policyholder is the same as the Life Assured then the policy is written on an "'own life" basis.
Own Occupation
Where a policy will pay out if you can't do your OWN occupation - for example with an Income Protection policy
PHI
Permanent Health Insurance - also known as Income Protection or Income replacement policy. Income Protection provides the policyholder with a regular monthly income (of up to 50% of your earnings) should illness or accident prevent them from working. The Policyholder will receive the income until they return to work or retire.
Policy Holder
The Policyholder is the owner of the policy and responsible for paying the premiums. The sum assured will be paid to the policyholder unless other arrangements are made.
PPTA (Personal Pension Term Assurance)
A term assurance or Life Assurance policy with the benefit of getting tax relief on the premiums.
Proposal Form
The application form.
Provider
The Life Company that is providing the cover.
Renewable Term Assurance
A Term assurance or Life Assurance policy that contains an option, which can be exercised at the end of term, to renew the policy for the same sum assured without further medical evidence.
Reviewable Premiums
Where the premium is subject to review and potential increase over the term of the policy.
RPI
Retail Price Index - a measurement used to track inflation.
Sum Assured
The amount (sum) of cover provided under a protection policy.
Term Assurance
Term Assurance is basically the same as Life Assurance.
Terminal Illness
An option included in Life Assurance polices whereby the Life Company will pay out if the policyholder is terminally ill - NOT to be confused with Critical Illness cover (CIC)!
TPD (Total Permanent Disability)
An option often included under a Critical Illness Policy that covers you if you are Totally & Permanently disabled.
Trust
If a policy is written in Trust, then you can help determine to who the benefits of the policy are eventually paid.
Utmost Good Faith
Is a minimum standard that requires both the parties (life company & life assured) to act honestly toward each other and to not mislead or refrain from providing critical information to the other.
Underwriter
The role of the underwriter is to look at individuals based on knowledge of that individual - e.g. medical history, hereditary illnesses, occupation, sporting activities.
Will
If you do not make a Will then you will die Intestate and will lose control over the proceeds of your estate.
WOL
Whole of Life policy covers the life assured for the whole of their life and not just over a specified term (Term Assurance) WOL will pay out a lump sum on death whenever that occurs and for this reason it is often used to cover an inheritance tax bill. Premiums are often expensive and are generally reviewable. The policy can include an investment element as well as providing the life cover.
WOP
Waiver of Premium is an additional option that can be taken out with most forms for protection. The Insurance Company will pay the premiums due on a Life Assurance policy if the policyholder is unable to do so because they are unable to work due to accident or illness. The insurance company will pay the premiums for you until you are able to return to work.
1ST Class Life
i.e. a "normal" life, where the initial quotation accurately reflects the risk to the life company and therefore they will honour the quoted premium and not load it or exclude a certain condition from the cover.