Definitions

Insurable interest

The legal requirement that a policyholder must suffer a direct financial loss if the insured event occurs. Must exist at inception for life policies.

Utmost Good Faith (Uberrimae Fidei)

The historical common law duty requiring both insurer and applicant to disclose all material facts fully and honestly.

CIDRA

Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA)

Consumer Insurance (Disclosure and Representations) Act 2012 (CIDRA)

Legislation replacing utmost good faith for individual consumers, requiring them only to take reasonable care not to make a misrepresentation.

Insurance Act 2015

Legislation defining the duty of fair presentation for non-consumer and business insurance contracts.

Material Fact

Any detail about an applicant's health, lifestyle, or occupation that would influence an underwriter's decision to accept the risk or set the premium.

Indemnity

The insurance principle of restoring the insured to the exact financial position they held immediately prior to a loss.

Misrepresentation

An untrue statement made during policy application; categorized as deliberate/reckless, careless, or innocent under CIDRA 2012.

Proportionate Remedy

A statutory power allowing insurers to adjust claims payouts or premiums proportionally if a non-disclosure was careless rather than deliberate.

Assignment

The legal transfer of policy rights or ownership from one party to another (e.g., assigning a life policy to a lender).

Consumer duty FCA

The regulatory requirement for financial firms to act to deliver good outcomes for retail customers across protection products, pricing, and claims services.

Level Term Assurance

A policy paying a fixed lump sum if death occurs within a set term; premiums remain fixed throughout.

Decreasing Teem Assurance

A policy where the sum assured reduces over time (typically used alongside a capital-and-interest repayment mortgage).

Increasing / Indexed Term Assurance

A policy where the sum assured increases annually (often linked to RPI or CPI) to prevent inflation from eroding cover.

Family Income Benefit FIB

A decreasing term policy that pays a regular tax-free income from the date of death until the end of the specified policy term.

Gift Inter Vivos Cover

A specialized decreasing term policy designed to cover the tapering Inheritance Tax (IHT) liability created by large lifetime gifts made within 7 years of death.

While of life Assurance

A policy guaranteed to pay out whenever death occurs, provided premiums continue to be paid.

Guaranteed premium

Premium rates locked in at policy inception that cannot be altered by the insurer.

What is the cap on personal income protection

Fixed % typically between 50-70% of pre disability gross income to maintain an incentive to work

Stat sick pay

3 waiting days

Paid up to 28 weeks

Reviewable Premium

Premium rates periodically reassessed by the insurer, which may rise based on claims experience or fund performance.

Qualifying Policy

A life policy meeting specific tax rules (e.g., maximum term, premium limits) whose proceeds are completely free from Income Tax.

Non-Qualifying Policy

A policy failing to meet qualifying rules, potentially subjecting gains to Income Tax upon payout or surrender.

Waiver of premium

An optional policy add-on that pays ongoing premiums if the policyholder becomes unable to work due to illness or injury.

Terminal Illness Benefits

An advance payout of the full life assurance sum assured if the policyholder is diagnosed with an incurable condition with a life expectancy under 12 months.

Income Protection IP

A policy paying a regular, tax-free replacement income if the policyholder is unable to work due to illness or injury.

Deferred Period

The waiting period between stopping work and when IP benefit payments begin (commonly 4, 13, 26, or 52 weeks).

Own Occupation

The broadest incapacity definition; pays out if unable to perform the specific duties of your existing job.

Suited Occupation

Pays out only if unable to perform your own job or another job to which you are reasonably suited by education, training, or experience.

Any Occupation

The strictest incapacity definition; pays out only if unable to perform any gainful work whatsoever.

Activities of Daily Living (ADLs)

Basic functional tests (e.g., washing, dressing, mobility) used to assess incapacity for non-working individuals or severe claims.

Critical illness Cover

A policy paying a tax-free lump sum upon diagnosis of a specific, severe condition listed in the policy definition.

Stand-alone CIC

A critical illness policy issued completely independent of life cover.