Insurance Glossary of Terms

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Assured: Those who are covered under an insurance policy.

Benefit– Money paid to policyholders when they file a claim.

Bid price – This is the selling price or cash in value of your unit holdings.

Bonus– This refers to a policy with-profits. The money that is added to the benefit under the policy. The insurance company’s profits will determine the amount. Additional bonuses cannot be removed.

Convertible Terms Assurance This term insurance policy allows you to convert your existing policy without undergoing further medical examinations.

Critical Illness insurance – This policy pays a lump sum upon diagnosis of life-threatening conditions.

Decreasing Terms – This type of term life insurance reduces the death benefit each year according to your policy. Premiums remain level. This certificate is often used to purchase mortgage insurance. This policy does not have a surrender value.

Endowment insurance – A policy of insurance that pays a set amount upon expiration of a period of time or upon death of an insured, if that occurs within the specified period.

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Family Income benefit – This is a term assurance that pays money for the dependants of the life assured, instead of a lump sum.

Guaranteed bond – A bond where principal and interest are guaranteed to be paid by another entity than the issuer. Guaranteed Bonds may be income- or growth-oriented.

Increasing Terms – Cover and amount paid into the policy each year are increased by a certain percentage based on the original insured sum. This is a way to increase your life insurance as your earnings rise.

Investment Bond Combines investment and some life insurance. The insurance company’s unit-linked funds or with-profits (Life Funds) are where the payments you make to an investment bond or insurance policy, which is usually a lump sum. There are two types of bonds: the guaranteed bond and the unit-linked single premium bond. This investment is not to be confused with a government or company bond. It offers a fixed interest rate and allows you to choose where your Life Funds can be invested.

Life Fund This is usually used to refer to unit-linked Investment Funds. These funds are managed by Life Assurance and Pension Companies. These funds can be used by individuals who have life assurance policies to make investments. The fund’s assets are divided into units. Units are distributed to investors proportionally to the amount that an investor contributes to a Life Fund.

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Maturity A date at which an endowment policy is terminated and all proceeds, including bonuses, are payable.

Mutual is a life insurance company owned by its policyholders.

Price Offer – This is the price at which units of fund are purchased.

Premium is the amount paid to an insurance policy.

Proprietary A life insurance company which issues its profits to its shareholders.

Qualifying policy – This is a life insurance-based savings plan. It must be written for at least 10 years, and must meet certain qualifying criteria to ensure that the final payout is free from tax.

Renewable Term– Term Insurance that can be renewed for a new term without evidence of insurance.

Single Premium policy – A single lump sum that is used to pay for an insurance policy.

Sum Insured is the amount that is guaranteed to be paid under an insurer’s policy before any bonuses.

Surrender value – This is not applicable to all life insurance policies. Amount that an insurance policyholder can receive when he/she stops receiving coverage

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Term Insurance Provides protection only. Only a defined number of years is required for life insurance to be payable to the beneficiary. You do not get any payments if you live beyond the term. This type of insurance is considered to be the most affordable.

Terminal Bonus This bonus is awarded when a maturity or death claim has been made. The terminal bonus is usually only paid to policies that have been in force for at least one year. The insurance company’s profits will determine the amount.

Unitised With Profits Fund – Also known as a UnitLinked With Profits Fund. This type of Life Fund can be used to invest in UK or overseas shares, cash, fixed interest securities, and property. You purchase ‘units’ when you make an investment in this fund via an insurance policy. You can receive more units, or the daily unit price will increase if you have an annual bonus. The unit price of the bonus units does not reflect the actual value of the underlying investments.

Unit-Linked Also known as Unitised. Your insurance policy may be unit-linked. This means that some of your money can be used to buy ‘units’ from a fund. Your policy’s value at maturity will depend on the performance of the fund in the which it is invested. This generally refers to policies that provide protection and savings such as whole life insurance, endowment insurance, and investment bonds.

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Single Premium Bond A lump sum policy that insures you against death. Your investment can be spread across a variety of Life Funds.

Whole Life Insurance Whole life insurance offers a death benefit to the policyholder and builds up cash value. As long as the premiums are paid in accordance with the policy agreement, the policy will continue to be valid for the life of the insured. You have the option to choose insurance that pays out a certain sum upon death, plus any bonuses or any additional value derived from the growth of your funds.

Without Profits When a policy matures or the policyholder is unable to work, the amount that is paid out will be the basic guarantee sum. No bonuses would be granted to you.

With Profits– This refers to insurance policies which combine protection and investment. This policy will be entitled to a portion of the insurance company’s profits. The premiums are put into the with profit fund. Reversionary bonuses are usually applied on an annual basis to reflect the growth in fund assets. A terminal bonus may be added to the fund’s value upon death or maturity.

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With Profits bond – This is an insurance policy in which your lump sum is invested in a Unitised With Profits Fund. (This is covered under the Life Funds section).