If your looking into Personal Protection we felt it would be useful to provide a quick and easy jargon buster to make sure you understand all the phrases and terminology often used when talking about it.
Additional Benefits - These are ‘add-ons’ that will either come at additional cost or be added to a plan free of charge & will differ with each provider. Examples of some additional benefits available are - access to remote GP’s 24/7, second medical opinions, cover for children, retail discounts, counselling, bereavement support and many more.
Budget Planner - As part of the advice process, we look at your income & expenditure to help you find out what budget you have available to meet your needs.
Critical Illness Cover (CIC) - Pays out either a lump sum or monthly payments (both tax free), upon diagnosis of a critical illness. These include cancer, heart attack and stroke, along with many other conditions.
Decreasing Term Assurance (DTA) -
This is sometimes also known as Mortgage Protection Insurance. This policy imitates the profile of a repayment mortgage, meaning that each monthly premium that is paid reduces the benefit amount in line with the balance of the mortgage. Therefore, at any point a claim is made during the term of the policy, the full outstanding mortgage amount will be repaid.
It should be noted that there are two reasons why there may be insufficient funds to be able to repay the outstanding mortgage amount and these are as follows:
Deferred Period - This is a term used with income protection plans & is the agreed the period of time that you would wait before receiving any income in the event of a claim, if you were unable to work due to illness or injury. The deferred period is usually 4, 13, 26 or 52 weeks. The longer the deferred period, the cheaper the premium.
Exclusions - These can be put in place by the providers if you have any pre-existing health conditions. If you have any exclusions on your cover, then it means that the provider will not pay out on any claims made in relation to these. For example, it is unlikely that an insurance company will provide cover for cancer if the prospective policyholder has had cancer in the past.
Family Income Benefit (FIB) - This is a life assurance plan that can be paid out monthly (like a wage), quarterly or annually to replace the income of the person that has passed away. This would mean that there would be income coming in to pay for bills, loans, childcare, clubs, birthdays, Christmas’ etc.
Financial Conduct Authority (FCA) - Bradleys Financial Management are authorised by the Financial Conduct Authority (FCA) which is the regulator of the financial services industry. Their oversight of everything we advise on means that you are fully protected in the advice process.
General Practitioner (GP) Report - If you have any pre-existing health conditions then providers may request a GP Report from your Doctor which provides them with your full medical history to help them decide on what terms of cover they offer you.
Global Treatment - This is where no further medical evidence is required when an existing policy is to be amended. Not all providers offer this benefit & certain terms will apply
Income Protection - This type of plan pays a tax-free monthly income when you are unable to work due to illness or injury. Some benefits of having an income protection policy in place are that in the event of loss of income it helps cover the cost of mortgage or rental payments, ensures that your household bills can still be paid, and helps maintain your lifestyle. It is important to note that an Income Protection Policy does not cover redundancy or loss of a job.
Joint or Single Policies - Both joint and single policies are available. Even if you are a couple and/or have a family, there may be reasons why 2 single policies may be more appropriate than a joint one. We would offer you the appropriate advice for your needs.
Level Term Assurance (LTA) – This plan provides a constant level of life cover for a fixed premium throughout the whole term of the plan. Level Term Assurance can be taken out for a specified period of time and can be used to protect mortgages, loans, overdrafts etc. This plan is often used with interest-only mortgages where the outstanding capital remains the same.
Loadings – After an underwriter has assessed a protection application, it may be that the final premium is more expensive than the initial quote provided due to the answers provided on the application form itself. This is called a loading and can be anywhere from 25% on top of the initial quote to over 150%.
Medical Disclosures – These are medical conditions that you may have had in the past or have now, that you would need to let to tell an insurance company know about, prior to taking out a new personal protection policy. Failure to disclose health conditions could result in the policy being invalid.
Occupation Class – This applies to Income Protection in the main. Some occupations carry a higher risk to employees than others. For example, someone that carries out a manual job, such as a builder, plumber, electrician etc, is more likely to be exposed to harm than that of someone that carries out an administrative role. Therefore, those clients with higher risk occupations can be more likely to claim on a policy making them more of a risk to the insurance providers; this in turn can impact the premium provided.
PortPre-existing Medical Condition – These are medical conditions that you have been diagnosed with & still have. Failure to disclose these, will result in the policy being invalid.
Premium – This is the monthly amount that comes out of your bank account for any plan that you have taken out.
Questionnaire/Data Capture Form – This is a document that is completed as part of the application process. This is where you must answer all personal health & lifestyle questions honestly and accurately. Remember that failure to disclose health conditions could result in the policy being invalid.
Retail Price Index (RPI) – having this on a plan means that the level of cover will increase in line with inflation. It is important to note, however, that this does mean that the monthly premiums can increase as the level of cover increases.
Shortfall Analysis – This is an analysis of your personal & financial circumstances, helping to identify areas where you have a potential protection need.
Sum Assured – This is the amount of the benefit you are insured for. For example, if you had a mortgage of £200,000 and you were looking at obtaining a life insurance policy to cover it, then the sum assured would be £200,000.
Targeted General Practitioner (GP) Report – If you have any pre-existing health conditions, then a targeted medical report may be requested by the insurer you have applied to, giving them specific information relating to the health conditions disclosed only. This will help them decide on the terms they offer you.
Total Permanent Disability - Also known as TPD. This is an additional benefit that can be added onto a plan which has Critical Illness included. This benefit will pay out an agreed sum of money if you are diagnosed with an illness or suffer an injury that leaves you permanently incapacitated.
Trust – A trust is a legal arrangement where one or more people or a company controls the money and/or assets of one or more people. A trust can make sure that the right people receive the correct money at the right time. Most insurers will provide a trust arrangement for any plan, free of charge. A trust can also be set up by a solicitor.
Underwriting – Once an application is submitted, some providers will issue terms straight away. If, however, health disclosures are made, then the application may have to be considered by an underwriter to be assessed manually. Also, if a GP Report is required, then the underwriters will need to assess this document prior to issuing a decision on terms that they can offer. This is known as the underwriting process.
Unique Selling Point (USP) – Insurance providers will offer individual benefits that enables them to stand out from each other. In addition to the cover that has been applied for, some companies may also offer access to a GP 24/7 free of charge, whereas others may offer counselling and bereavement support.
Waiver of Premium (WOP) – This is an added-on benefit to any protection plan, usually at a small additional cost. It is activated when you are incapacitated & unable to work, WOP will pay the premiums after a certain period; usually 6 months. This benefit is subject to underwriting.