The world of insurance can be confusing, especially if you are trying to take out cover and find terms that you don’t understand. Here, we’ve debunked some of the most common terms you’ll come across when trying to purchase life insurance cover.

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Life insurance

An insurance policy that is used to cover you and your family’s living expenses, bills, mortgage and funeral costs in the event that you should die and leave dependants who rely on you financially. The insurance policy is taken out for a specific term.

Life assurance/whole of life assurance

Life assurance is the same as life insurance, expect the policy lasts you for your entire life rather than a set term. Both terms are used interchangeably by life insurance providers.

Premiums

The amount(s) you pay every month to receive your cover for life insurance. Your premiums will be paid annually or monthly, usually by direct debit, depending on the policy you have with your life insurance provider.

Term

The length of time (in years) that you choose for your policy to remain valid.

Terminal illness cover

This type of cover means that your life insurance policy will pay out a lump sum in the event that you are diagnosed with a terminal condition and the insurer has evidence that your life expectancy is less than a year. Terminal illness cover is usually invalid during the last 18 months of a life insurance policy.

Decreasing term assurance

This means that the overall sum assured goes down every year in accordance with a repayment mortgage or loan.

Increasing term assurance

The sum assured increases each year, and your monthly premiums will also increase in accordance with the Retail Price Index.

Level term assurance

For the duration of the policy, the sum assured remains the same.

Joint life second death

This describes a ‘joint life’ policy, which means that the life policy is in two names, e.g. you and a spouse. The policy will pay out when the second person dies. It is also possible to set up a joint policy so that it pays out when the first person dies.

Critical illness cover

This type of policy pays out and covers you if you are diagnosed with one of the illnesses stated in your terms and conditions.

Income protection

Cover that pays out and protects your monthly wage if you can’t work because of an injury, accident or illness.

Renewable term assurance

After a certain amount of time, you can choose to renew your term assurance.

Convertible term assurance

You can covert your term policy (for a set period) to whole of life cover.

Mortgage life insurance

This type of cover pays off your outstanding mortgage in the event that you should pass away. You can also opt for ‘mortgage payment protection’, in which your insurance covers your mortgage if you can’t work for any reason.