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Insurance Glossary of Terms

Insurance Glossary of Terms by: Darren Yates Assured - Those insured under the terms of an insurance policy. Benefit - The money paid to the policyholder when a claim is made. Bid Price - The selling price or cash-in value of your unit holdings.

Bonus - Relates to a with-profits policy. The amount of money added to the benefit payable under the policy. The amount is dependent upon the profits made by the insurance company.


Added bonuses cannot be taken away.
Convertible Term Assurance - A term insurance policy which gives you the option to convert your current policy to a whole-life or endowment insurance policy, without having to take further medical examinations. Critical Illness Insurance - A policy that pays out a lump sum on the diagnosis of life threatening illnesses indicated in the terms of the plan.

Decreasing Term - A form of term life insurance where the death benefit decreases each year as per your policy. Premiums remain level.
This type of certificate is frequently sold as mortgage insurance.
There is no surrender value for this policy.

Endowment Insurance - An insurance policy that pays a stated amount at the end of a specified period or upon the death of the insured if it occurs within that period. Family Income Benefit - Term assurance which pays money to the life assureds dependants for a set period, rather than paying a lump sum.

Guaranteed Bond - A bond in which principal and interest are guaranteed by an entity other than the issuer. Guaranteed Bonds can be income or growth. Increasing Term - The cover and the amount you pay into the policy are increased by a specific percentage each year calculated on the original sum insured.

Designed as a way to increase your life cover as your earnings increase.
Investment Bond - Combines investment with some life cover.

The payments you make into an insurance policy or investment bond, usually a lump sum, are invested in the insurance company's with-profits or unit-linked funds (Life Funds).
Different types of bonds include the guaranteed bond and unit-linked single premium bond. Not to be confused with a company or government bond, an investment that offers a fixed rate of interest and an area where your chosen Life Funds may be invested.
Life Fund - This usually refers to Unit linked Investment Funds.
These are funds run by Life Assurance or Pension Companies. Such funds are used for individuals holding life assurance policies to invest in. The assets held within the fund are divided into a number of units.


When an investor contributes to a Life Fund, units are allocated to investors in proportion to their investment. Maturity - An agreed date when an endowment policy ends and the proceeds, including any bonuses, are payable. Mutual - A life insurance company that is owned by its with-profits policyholders.
Offer Price - The price at which fund units are bought.
Premium - The amount of money paid into an insurance policy. Proprietary - A life insurance company that issues its profits to its shareholders.
Qualifying Policy - A life assurance based savings plan that has to be written for a minimum of 10 years and must fulfil certain qualifying policy criteria to ensure the final payout is tax free.

Renewable Term - Term Insurance that may be renewed for another term without evidence of insurability.
Single Premium Policy - Where a single lump sum is paid for an insurance policy.

Sum Insured - The amount of money that is guaranteed to be paid under an insurance policy, before any bonuses are added. Surrender Value - Not applicable to all life insurance policies. The amount that an insurance policyholder is entitled to receive when he or she discontinues coverage Term Insurance - Provides policyholder with protection only.

Life insurance payable to a beneficiary only when an insured dies within a specified number of years (the term). If you live beyond the term you do not receive any payment.

This is thought to be the cheapest type of insurance.
Terminal Bonus - This is an extra bonus determined when a death or maturity claim is paid.
Terminal bonus is often only paid if the policy has been in-force for a minimum number of years at claim time. The amount is dependent upon the profits made by the insurance company.

Unitised With Profits Fund - Also known as a Unit-Linked With Profits Fund. A type of Life Fund that can invest in UK and overseas shares, property, fixed interest securities and cash.
When you invest in this fund through an insurance policy, you buy 'units'.


When an annual bonus is declared, you can either receive more units or it is added to the unit price on a daily basis. Due to the addition of bonuses the unit price does not reflect the value of the underlying investments. Unit-Linked - Also called Unitised.

If your insurance policy is unit-linked, some of your money is used to purchase 'units' in a fund. The value of your policy at maturity is dependent upon the growth of the fund in which the policy is invested. Generally refers to policies that offer protection and saving such as endowment insurance, whole life insurance and investment bonds.

Unit-Linked Single Premium Bond - A single lump sum life insurance policy where your investment is spread over a number of Life Funds.

Whole Life Insurance - Whole life insurance provides a death benefit for the policyholder as it builds up cash value. The policy remains in force for the lifetime of the insured, as long as premiums are paid according to the policy agreement.
You can choose insurance that pays out on death a guaranteed sum only, the sum plus any bonuses that have been added, or the sum plus any additional value from the growth of the funds invested in. Without Profits - When a policy reaches maturity or the policyholder dies, the amount paid out is the basic guaranteed sum only.
You would not be entitled to any bonuses.
With Profits - Relates to insurance policies that combine investment with protection. This type of policy is entitled to a share of the profits made by the insurance company.

Premiums are invested in the with profit fund, reversionary bonuses are applied usually on an annual basis which reflect the investment growth of the fund assets.

On death and/or maturity a further terminal bonus might be applied to the fund value. With Profits Bond - An insurance policy where your lump sum is in most cases invested in a Unitised With Profits Fund (which is listed under the Life Funds section). About The Author Darren Yates First Hand Insurance are Life Insurance (http://www.
firsthandinsurance.
com/Life-Insurance.php) and House Insurance (http://www.


firsthandinsurance.com/House-Insurance.
php) specialists in the UK.

This article comes with reprint rights. Feel free to reprint and distribute as you like. All that we ask is that you do not make any changes, that this resource text is include, and that the link above is intact.

articlesubs@gmail.

com This article was posted on August 19, 2005 .