8 common life insurance terms explained
Wrapping your head around insurance jargon can undoubtedly be confusing. In this guide, we’ve outlined 8 common terms that you may stumble upon when looking to purchase life insurance.
Having life insurance in place means that you can rest assured knowing that your loved ones are protected financially should the worst happen.
However, here at bonkers.ie we’re well aware that taking out a life insurance policy isn’t the most straightforward thing in the world. With that in mind, we decided to create a list of the most common terminology and jargon you may come across when reviewing life insurance policies.
This is the third guide in our six-part life insurance series. You can find the links to other guides in the series at the bottom of this article.
But before we jump in, let’s have a reminder about what exactly life insurance is.
What is life insurance?
Put simply, life insurance pays out a tax-free lump sum if you die during the term of the policy.
By having a life insurance policy in place, you can assure your loved ones that they will continue to be financially secure in the event you pass away.
1. Single vs. Joint vs. dual cover
When taking out life insurance, you’ll have the option to purchase a single, joint or dual policy.
Single cover: A single life insurance policy covers one person only and pays out the chosen amount of cover if that person dies during the length of the policy.
You’ll also have the option to add an additional person. You can either take our joint cover or dual cover.
Joint cover: This covers two lives, but there is only one payment made. The insurer will pay one lump sum when the first person dies and the policy will end.
Dual cover: This cover also insures two lives under one policy, but a claim can be paid out in the event of both deaths. After the first death, the policy continues.
Often dual life cover can be more expensive than joint cover, but sometimes it can be the same price.
Discover more about joint and dual cover in our guide on what to consider when taking out life insurance.
2. Term life insurance vs. whole-of-life cover
There are two different types of life insurance cover you’ll come across; whole-of-life cover, and term life cover.
Term life insurance:
- This is the most affordable form of life cover.
- It is taken out for a set period, e.g. 10, 20 or 30 years.
- Also known as life assurance, whole-of-life cover is more expensive than term cover.
- It can last for the duration of a person’s life.
- This insurance gives peace of mind that policy beneficiaries are guaranteed to receive a lump sum whenever the insured party passes away.
3. Terminal illness benefit
Some policies will have what's called a terminal illness benefit.
If you’re diagnosed with a terminal illness and have less than 12 months left to live, your insurer will either:
- Pay out the full amount of your life cover, or
- They will pay around 80%, with the remaining benefit being paid out after death.
4. Private Medical Attendants Report
When applying for life insurance, the insurer will ask you routine medical questions. If you answer ‘no’ to most questions, you’ll usually be offered cover quickly.
However, if they want to know more about any information you provide, they will send a Private Medical Attendants Report, also known as a PMAR, to your GP for completion.
PMARs can be a ‘general health’ questionnaire, or they can be tailored by the insurer to ask specific questions for a known health issue, for example, depression.
Insurers cover all costs associated with these reports.
5. Children's life cover
Children’s life cover provides free life cover in the event of the death of a child. The cover ranges from €2,500 to €7,000 depending on the insurer.
Usually, when you take out an insurance policy, children’s cover will be one of the benefits included. Children’s life insurance typically ends once the child reaches 21, but this can go up to the age of 25.
6. Convertible term
Convertible term cover allows you to extend the term of your policy at any point without having to undergo a new medical examination or provide any evidence of good health.
When purchasing life insurance cover, you’ll have the option to add indexation to your policy.
Indexation allows you to increase your life insurance cover in line with inflation.
Adding this to your cover ensures that the benefits of your life insurance policy increase by a certain percentage every year to keep up with inflation. This in turn helps to protect the real value of your cover over time.
Find out all about the ins and outs of indexation in this guide.
8. Guaranteed insurability option
Guaranteed insurability option (GIO) gives you the ability to increase your amount of cover without the need to undergo medical underwriting. GIO is available on certain life insurance and mortgage protection policies.
GIO is only available to use if one of the following events takes place:
- You take out a new mortgage or remortgage.
- You get married or divorced.
- The birth of a child or adoption.
- You change jobs or receive a promotion that results in a tax band change/salary increase.
- You receive an inheritance.
There will be other limitations in place when it comes to GIO, as well. These will vary depending on the insurer:
- With some insurers, this benefit is only available up to a certain age, e.g. 55 or 65.
- The cover increase is only available up to a maximum sum or up to a set percentage of your original sum insured.
- You have any premium payments outstanding.
It’s best to check with the insurer to determine when GIO is available and what restrictions are in place.
Get the best value life insurance on bonkers.ie
Here at bonkers.ie we want to help you get the best value for money when it comes to your life insurance.
Once you find the policy that best suits your needs, you can apply online and in some cases, you could even have cover in place in under one hour!
If you’re unsure about whether or not life insurance is right for you, you can review the benefits of life insurance in this guide.
Explore our other life insurance guides
This guide is just one of six in our series on comparing and applying for life insurance. If you found this guide helpful, make sure you check out the other articles in our series:
- Our Quickstart Guide outlines all the guides in our six-part life insurance series.
- Discover how to compare and apply for life insurance using the bonkers.ie comparison tool.
- We’ve compiled a list of the most common questions we get asked about applying for life insurance.
- Here are 10 important factors which will help you make an informed decision.
- You can learn all about the life insurance cooling-off period and how to cancel your policy here.