Life Insurance

Life Assurance Online

Life Assurance Online is a site designed to help British Expats obtain a cheap quote for Life Insurance, Critical Illness Insurance, International Medical Insurance, Income Protection Insurance and other insurance products. All requests and information you provide through this site will be dealt with by Face to Face Finance (Anglia) Ltd which is regulated by the Financial Conduct Authority and recorded in the Register under no 439288. They are able to research the whole British Expats life insurance market on your behalf.

This site is intended for British Expats and those intending to become British Expats.

British Expats Guide to Life Insurance Terms

The following is intended as a guide to the definitions of each term. If you require further clarification please click here: Advice.

Capped Mortgage

One where the rate of interest charged cannot exceed a specified figure, usually during a fixed period of time or to a certain date. After the capped period the mortgage rate charged normally reverts to the lender's standard variable rate.

Critical Illnesses

These are illnesses which are regarded by the medical profession as being life threatening. The most common illnesses covered are heart attack, stroke, cancer, major organ transplant, coronary artery by-pass surgery, major organ transplant and kidney failure. Many more than this are now covered in most policies. Make sure you check the details of any specific policy before committing.

Convertible Term Assurance

Life assurance for a fixed term usually on a level basis. At the end of the term the assured has the option of either taking out a whole of life assurance policy or an endowment for the same sum assured without the need for further evidence of health. The premium will be a little higher than ordinary term assurance to cover the additional risk.

Decreasing Term Assurance

Life assurance for a fixed period of time or specified age but where the sum assured decreases each year. At the end of the term the sum assured has decreased to a very low level and the policy comes to an end without value. This type of policy is normally used to protect a capital repayment mortgage and is commonly known as mortgage protection assurance.

Discounted Rate Mortgage

This is where the lender's standard variable rate is discounted or reduced by a specified amount for a fixed period of time or to a specified date. When the discount period ends the borrower normally pays the lender's standard variable rate.

Fixed Rate Mortgage

One where the rate charged at the start of the mortgage is fixed for a specified period of time or to a certain date. During the fixed rate period the rate does not change irrespective of the general movement of mortgage rates. When the fixed period comes to an end the standard variable rate is normally paid.

Insurable Interest

Insurable interest exists when one party has a close and/or dependent financial relationship to the other. Common examples of insurable interest are those between spouses, a company on its key persons, director shareholders on the other director shareholders in a close company and anyone who is financially dependant on a particular person.

Keyperson

A keyperson is someone in a company who makes a considerable contribution to the company's market position. This might be a sales director for example who makes a significant personal contribution to the company's turnover through his own business contacts. If he were to die prematurely or be forced to stop working due to illness the company would find it difficult to replace him quickly and suffer financial loss as a result.

Lapse

A policy lapses or comes to an end as a result of non payment of the premiums.

Level Term Assurance

Life assurance for a fixed period of time or until a specified date. This is usually expressed in years or to a certain age. At the end of the term the policy will normally cease without value.

Some companies provide the facility for the sum assured to keep pace with inflation (indexed) by an automatic increase each year without the need for further evidence of health. The premium will also increase.

Life of Another

An application for life assurance can be made by a person who is not to be the life assured. In this case the application is referred to as one of life of another. The insurance company will need evidence that the applicant has an insurable interest in the life assured before accepting the application.

A common example of this would be a wife making an application to insure her husband. There is obviously an insurable interest and in the event of a claim the proceeds are paid outside the deceased's estate directly to the policyholder. In this case the deceased's wife. The wife is the policyholder and owns the policy.

MIG (Mortgage Indemnity Guarantee Premium)

This is the premium which some lenders will insist on if the % of the loan to the value of the property is above a certain level. Typically this could be from 75% upwards depending on the policy of the lender.

The insurance is taken out to protect the lender, but usually paid by the borrower, in the event of default and subsequent repossession of the property. If the proceeds of the sale are insufficient to cover the outstanding mortgage then the lender can claim indemnification against the policy and the insurer would make up the shorfall.

Paid Up

This refers to the state of a life assurance policy where no further premiums are being paid but life cover continues. It applies to policies with an investment element such as most whole of life policies and endowments. The premium is taken from the accumulated investment fund(s).

Pension Term Assurance

A special type of level term assurance which is set up under a personal pension plan. The main advantage of this type of arrangement is that tax relief is given on the premiums at basic rate for basic rate taxpayers and higher rate for higher rate tax payers. This can mean that premiums after tax relief could be lower than normal term assurance.

The disadvantages are that the premiums must not exceed in any one year, more than 5% of the individuals maximum allowance for personal pension contributions. The payment of premiums is also dependent on having earned income. If the policyholder were to lose his/her job, payment of the premiums could be disqualified and the plan would have to cease.

The policy would also have to come to an end if the policyholder ceased to be a resident in the UK for tax purposes.

Premium

The cost of the life cover. Usually paid monthly but can be paid annually and sometimes quarterly. For most policies the plan will come to an end if the premium is not paid for 1 month.

Redemption Penalties

These are penalties imposed by a lender under a mortgage usually in the event of redemption of all or part of the loan before a specified period of time. Early redemption penalties are commonly imposed where a lender provides special rates or some other financial incentive under the mortgage.

The penalty is designed to make it difficult for a borrower to change the mortgage to another provider during a certain period of time from the start of the loan.

Settlor

A settlor is the term given to an individual setting up assets under a trust. The settlor agrees the provisions of the trust deed, appoints the trustees and specifies the beneficiaries under the trust.

Trustees

Trustees are those persons or a corporate body which have been appointed by the settlor of a trust to administer the trust in accordance with it's terms and conditions. The trustees are the legal owners of the trust assets but hold them on trust for the benefit of the beneficiaries.

Trusts

Trusts are used in many ways and are often used with life assurance policies, particularly where the policy is taken out to provide family protection, inheritance tax funding, partnership and shareholder protection etc.

If the life assurance policy is set up under a trust the proceeds are paid to the trustees who then pass them on to the beneficiaries in accordance with the terms of the trust deed.

There are advantages in setting up the policy under a trust. These are, first, the proceeds are, subject to certain conditions, paid outside of the deceased's estate and therefore avoid any potential inheritance tax charge. Secondly, the trust funds can be paid to the trustees without the need for Grant of Representation. This means that the proceeds can be paid by the insurance company within a matter of days after production of the death certificate.

The most commonly used trust for life assurance policies is a flexible power of appointment trust. This gives the settlor power to change beneficial interest and appoint new trustees during his/her lifetime.

This is a complex subject and you are advised to seek professional advice before considering using a trust.

Waiver of Premium

A feature on a life assurance policy (and other plans e.g. personal pension) which is designed to protect payment of the premiums. If the assured should lose his or her income due to illness/disability for usually more that 6 months, the insurance company will pay (waive) the premiums until the assured returns to work or the policy comes to an end.

The waiver of premium feature is designed to cover the risk either on an own occupation basis or any occupation. If it is on an 'any occupation' basis, the insurance company may consider that the assured can follow another occupation. In this case the company would not normally meet the claim unless the assured were unable to work at all.

Whole of Life Assurance

Life assurance which is for all of life, i.e. no fixed or specified term. Most of these policies are investment based. The premiums buy units in a unit trust fund and grow in value depending on the performance of the fund(s). The cost of the risk is paid for by the insurance company by cancelling some of the units to pay for the life cover.

Premiums are subject to review, normally after 10 years and every 5 years thereafter. If the value of the policy is low there may have to be an increase in the premium to meet the additional cost of life cover based on the assured's older age.

Often there are guaranteed options built in to these policies which permit the sum assured to be increased without further evidence of health. These events are usually confined to childbirth, an increased mortgage and marriage.

Your home may be repossessed if you do not keep up repayments on your mortgage.

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