Glossary of Life Insurance Terms​

Life insurance lingo is often hard to grasp at first, but once you know what you’re dealing with, everything becomes much clearer. Here’s our life insurance glossary with all the key terms you’re likely to come across before and during your journey.

Age limits

The minimum and maximum ages at which you can start or maintain a life insurance policy. These limits vary between insurers and policy types.

Beneficiary

The person or people who receive the payout from your life insurance policy after your death. This often includes family, partners, or a trust.

Claim

The process of requesting the payout from a policy after a triggering event such as death or critical illness.

Cooling-off period

A set period (usually 14 days in the UK) after purchasing a policy during which you can cancel it and receive a full refund of premiums.

Convertible term assurance

A type of term life insurance that allows you to convert your policy into a whole life or permanent policy without undergoing additional medical underwriting.

Contestable period

The initial period of a policy (often two years) during which the insurer can investigate claims and deny payout if false information was given.

Cover amount/sum assured

The amount of money paid out when a claim is made. It can be a lump sum payment or structured as a series of payments, depending on the policy.

Critical illness cover

A policy feature that pays out a lump sum if you’re diagnosed with a serious illness listed in your plan, like a heart attack, cancer or a stroke.

Learn more about critical illness cover.

Deferred premium

An arrangement where premium payments are postponed to a later date, often used when financial circumstances change.

Death benefit/lump sum

The payment made to your family and/or loved ones on your death. Can be a single lump sum or paid in instalments, depending on the policy.

Death in service benefit

A type of employer-provided cover where your loved ones receive a payout if you die while employed, often a multiple of your salary.

Declined risk

When an insurer refuses to provide cover due to perceived high risk, such as serious health issues, a dangerous hobby or occupation.

This article explains what you can do if you’ve been declined life insurance.

Dependant

A person who relies on your income for financial support, such as a spouse, partner, or child.

Decreasing term life insurance

A type of term life insurance where the sum assured reduces over the life of the policy, typically in line with a repayment mortgage or other decreasing debt.

Learn more about how decreasing term cover works.

Endowment policy

A policy that pays out a lump sum either on death or at the end of a fixed term, often used to save for a specific financial goal.

Exclusion

Situations or causes of death not covered by your policy. For example, suicide within the first year of cover is a common exclusion.

Family income benefit

A type of life cover designed to provide your loved ones with a regular income rather than a single lump sum if you die during the term of the policy. 

Group life insurance

A policy covering multiple employees under one scheme, often provided by an employer as part of employee benefits. 

For more information see our guide: Group Life Insurance: How does it work?

Guaranteed life insurance

Policies that provide a guaranteed payout, typically without medical underwriting. Guaranteed life insurance is often aimed at older applicants or those with pre-existing conditions.

Guaranteed premiums

Premiums that remain fixed throughout the term of the policy, regardless of changes in age, health, or inflation.

Income protection

A policy designed to replace a portion of your income if you are unable to work due to illness or injury. Payments for income protection usually continue until you can return to work or until the end of the policy term.

Increasing term life insurance

A term policy where the sum assured increases over time, often in line with inflation, so the payout maintains its value.

Learn more about increasing term life insurance.

Index-linked

Also known as ‘indexation’. This is a policy feature where the sum assured or premiums are linked to an inflation index, helping maintain the real value of your cover.

Insurance risk

The risk an insurer takes on by providing cover, based on your health, age, occupation, and lifestyle factors.

Intermediary

A financial adviser or broker who helps you find, compare, and apply for life insurance policies.

Insurer

The life insurance company providing cover, responsible for paying out claims under the terms of the policy.

Lapse

When a policy ends because premiums haven’t been paid, causing potential loss of cover.

Length of cover/term

The amount of time for which the policy provides protection.

Life expectancy

The predicted number of years a person is expected to live, based on statistical averages and personal health.

Lifetime cover/whole of life insurance

A policy that provides cover for the insured’s entire life, paying out a lump sum when the insured dies, provided premiums are maintained. It’s also known by insurers as ‘life assurance’.

Learn more about whole life insurance.

Medical exam

A health assessment required by some insurers to evaluate risk, often including blood pressure, weight, and blood tests.

This article explains what you can do if you fail a life insurance medical.

Mortgage life insurance

A form of life insurance designed specifically to pay off all or part of your mortgage in the event of your death. The sum assured often mirrors the outstanding mortgage balance.

Learn more about mortgage life insurance.

Over 50 life insurance

Cover designed for people over 50, often without medical underwriting. Typically provides a guaranteed payout.

Learn more about how life insurance for over 50s works.

Overinsured

When the sum assured on a policy is higher than necessary, possibly leading to unnecessarily high premiums.

Permanent Life Insurance

Another term for whole-of-life insurance, providing lifelong cover with fixed premiums.

Policy

The legal contract between the insured and the insurer, outlining cover, premiums, term, and conditions.

Policy holder

The person who owns the policy and is responsible for paying premiums. They can also make changes to cover or beneficiaries.

Power of attorney

A legal arrangement allowing someone to act on your behalf for financial or legal matters, including managing life insurance.

Pre-existing medical condition

Health issues present before applying for cover which may affect premiums or ability  to receive cover.

Examples can include:

• Heart attack

• Cancer

• Stroke

• Mental health conditions

• Diabetes

• High blood pressure

Probate

The legal process of validating a will. Policies written in trust bypasses probate, typically allowing beneficiaries to receive funds faster.

Quote

An estimate of the premium you would pay for a life insurance policy based on your age, medical history, lifestyle, and cover amount.

Term life insurance

A policy that provides cover for a set time period, often between 5-50 years. If the policyholder dies during the term, a lump sum payout is issued. If the term expires and the holder is still alive, no payout is made.

Renewable term life Insurance

A term policy that can be renewed at the end of the term without a medical exam, though premiums often rise with age.

Tax-free lump sum

Most life insurance payouts in the UK are free from income tax.

Terminal illness

A condition where the insured is expected to live for a limited time. Many life insurance policies pay out early if a terminal diagnosis is confirmed.

Underinsurance

When the sum assured is too low to cover financial commitments, leaving dependants at risk.

Underwriter

The person who on behalf of the insurer, assesses your application, health, lifestyle, and risk to decide eligibility and premium rates.

Void

A policy that is treated as invalid, usually if the applicant provided false information when applying.

For more information, please see: What happens if you lie on your life insurance application​?

Waiver of premium

A policy feature where the insurer pays premiums if you cannot work due to illness or disability, keeping your cover active.

With-profits policy

A life insurance policy that participates in the insurer’s profits, potentially increasing the payout through bonuses or dividends over time.