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Life insurance
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The following are the main types of personal risk insurance. Insurance companies will package the insurances into their own insurance products and often give the products their own names.
LIFE INSURANCE
Term life insurancePays the insured amount only if death or terminal illness occurs within the period set out in the policy. The insured amount may be level for the period or increase or decrease on specified terms (e.g. increase with the CPI or decrease in line with the increased risk of death a level premium will purchase). The premium may be level in which case the insured amount may:
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Endowment insurancePays the sum insured during the period of the policy or if the insured person survives to a specified age (often 60 or 65). As the sum insured will be paid at some stage, the policy has a value if it is cancelled that increases the longer the policy is in force. For some policies the insured amount increases with bonuses declared by the insurance company. |
Whole of lifePays the sum insured whenever death occurs. As the sum insured will be paid at some stage, the policy has a value if it is cancelled that increases the longer the policy is in force. For some policies the insured amount increases with bonuses declared by the insurance company. |
LIVING INSURANCE
Critical illnessPays a lump sum when the individual suffers from one of a number of medical conditions listed in the policy (e.g. cancer, stroke, heart attack). |
Total and permanent disability (TPD)Pays a lump sum if your disablement is total and permanent and you are unlikely to be able to do your usual or similar work again. |
Disability incomePays a regular income to replace your usual income when you can’t work because of sickness or disability. Usually a maximum of 75% of pre-disability income is paid. You can choose a ‘waiting period’ until the insurance is paid and a maximum payment period (e.g. 2 years or up to age 65) that will affect the premium you pay. |
Home loan insurancePays your mortgage or mortgage repayments if you die or are ill or disabled. |
BUSINESS INSURANCE
Business insurance is the use of personal risk insurances to provide payments for the cost to a business of the sickness, disability or death of an owner or key employee. |
PERSONAL RISK INSURANCE TERMS
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