This glossary is intended as a general aid to help you understand some of the commonly occurring phrases and jargon used in the insurance world.  If you have any questions about the use or meaning of a term or expression in any particular product or literature, you should raise them with the provider concerned.

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Guaranteed bond
You pay a lump sum into a guaranteed income fund and receive a guaranteed sum at the end of each year or after a set number of years. This is based on single premium, non-qualifying, without-profit endowment policies.
Guaranteed equity product
A single premium investment policy where the funds are linked to the equity index (a stock market index). In many cases ‘lock in’ points are incorporated into the policy, so that once a fund reaches a certain level the policy is guaranteed to pay out that dividend at the end of the term.
Guaranteed minimum pension
People who were contracted out of the State Earnings Related Pension Scheme (SERPS) at any time between 1978 and 1997 were entitled to Guaranteed Minimum Pension, which meant that there were certain conditions on how the pension was paid. For more information, see the Gov.UK website.
Guaranteed premiums
These are premiums that will stay the same over a set time frame.
Holiday insurance
policy which covers certain risks when you go on holiday, for example the cost of unavoidable cancellation, personal accident, medical treatment abroad and lost or stolen luggage.
Home foreign policy
This is where insurance is bought in one country, but the risk or event would happen in a different country.
Inception date
This is the date your insurance cover starts.
Income drawdown
This is an option available from some defined contribution pension schemes, which allows you to take an income directly from your pension fund rather than using it to buy an annuity. Your pension fund remains invested and so is subject to investment risks and returns. The amount of income you can take is subject to minimum and maximum limits which are set by the government and reviewed periodically. The income you receive is taxable. (Also called income withdrawal).
Income tax
This is tax you pay on money you earn, such as your salary or interest on savings or rent paid to you.
Increasing term
A term insurance policy in which the cover goes up every year by a fixed amount. This policy is designed to increase the policyholder’s life cover as their earnings or debt increase. (Also known as increasing cover).
This is when someone promises to pay for loss or damage they cause someone else.
Independent financial adviser
A qualified person or firm that can give you independent advice on life insurancepensions and other investment products.  They are not tied to a particular company and must be able to advise on products across the market.


If something (for example, government bonds or pension funds) is linked to an index, then it means changes are made in proportion to the changes in the relevant index, such the retail price index or other measures of living such as interest rates or wages.
Individual policy
Cover for an individual person as opposed to a couple or a family.
Individual savings account
A type of savings account that allows individuals to save a certain amount each year tax free.
This is the percentage change in the cost of living over time, measured through the Consumer Prices Index (CPI) or Retail Prices Index (RPI). As prices rise, the value of money falls.
A lack of financial resources to pay back debts.
When a person or organisation owes money but cannot pay it.
Insurable interest
The interest that a person has in something such as a particular property or another individual, which means that the person would suffer a loss should that property or individual be harmed. In insurance law, you can only buy insurance for something or someone in which you have an insurable interest.
Insurance is a financial product sold by insurance companies to safeguard individuals, organisations and / or their property against the risk of loss, damage or theft (such as floodingburglary or accidents). When you buy a policy you make regular payments, known as premiums, to the insurer. If you make a claim your insurer will pay out for the loss that is covered under the policy.
Insurance company
A company that creates insurance products to take on risks in return for the payment of premiums. Companies may be mutual (owned by a group of policyholders) or proprietary (owned by shareholders). (Also known as insurer or provider).
The person who the insurance covers. (Also known as policyholder).
Insured turnover
Insurance covering how much a company makes over a set time frame, on average
See insurance company
Intangible assets
Assets that have no physical form, such as patent rights.
Intellectual property rights
The general name given to rights such as copyrights and patents.
Any person or firm that sells insurance but is not an insurance company themselves. This can include brokers, independent financial advisers, banks, comparison websites and trade unions
Intestate or intestacy
When someone dies without leaving a will. The estate is divided up by government following the rules set out by law.
An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth.
Investment income
Income coming from interest payments, dividends, capital gains collected on the sale of a security or other assets, and any other profit that is made through an investment vehicle of any kind.
Investment-linked annuity
An annuity where the retirement income you receive is linked to investments (such as stocks and shares). Your pension income may vary to reflect the changes in the value of investments.
Investment trust
A limited company whose business is the investment of shareholders' funds, the shares being traded like those of any other public company.
Irrecoverable loss
A loss or damage that cannot be recovered, repaired or retrieved.
Joint life
policy that covers two people and pays out when the first person dies.
Joint life annuity
This pays you a regular retirement income for the rest of your life. When you die, it provides a regular retirement income (at the same or a reduced amount) to your surviving husband, wife, civil partner or dependants.
Joint life last survivor
A life insurance policy that covers two people’s lives and pays out on the death of the second person.
Key facts document
A document that insurance and investment firms are required by the regulator to produce. It sets out the main features of a plan or product. (Also known as a key features document).
Key person insurance
In the event of the death of a key employee on whom the business depends for its continued profitability or even existence, this type of cover provides a sum of money which can be used to pay for the cost of finding and training a successor. It can also pay out for reduced profitability.
Where the customer stops paying premiums or a policy that is not renewed.
Legal expenses insurance
An insurance policy which covers the cost of legal advice or the legal costs involved in pursuing or defending a civil claim.
Level annuity
A type of annuity that pays you the same amount of regular income from the start of your retirement until the end of any guarantee period, or until you die.
Level premium
A payment that stays at the same amount throughout the term of a policy.
Liability insurance covers business owners, independent professionals and self-employed people against the cost of compensation claims following fault of negligence brought against them by employees, clients, customers, shareholders, investors, or members of the public. Liability insurance usually covers the cost of compensation to a third party for personal injury and loss of or damage to property.
Life expectancy
This is the length of time you are likely to live, taking into account factors such as your age, gender, health and occupation.
Life fund
The pool of money into which all life insurance premiums are paid and out of which all claims are paid.
Life of another
When the owner of the policy is not the person covered by the policy, for example a policy that is owned by a wife but covers her husband’s life.
Lifetime allowance

This is the total amount you can save in your lifetime while still getting tax relief. If you exceed this allowance, your pension savings can be subject to additional taxation. This allowance may be reviewed and changed by government – it is currently £1.055 million.

The process of closing down a company by paying its debts and distributing any money left over.
Lloyds of London
The largest British insurance and reinsurance market.
This is an increase to a premium if your risk is higher than normal, for example if you are in a dangerous job or have serious health conditions.
Injury or damage to an insured property or person as a result of an accident or misfortune.
Loss adjuster
Professional appointed by your insurer to confirm the circumstances of your claim and the extent of any damage caused, and to make sure the claim is covered by your policy. The loss adjuster will tell your insurer the amount that should be paid out for your claim.
Loss assessor
An independent person who evaluates and negotiates claims on behalf of the policyholder.
Managed fund
A pool of money managed by a fund manager and spread in investments across a range of assets such as company shares, government bonds or property. These managed investment funds can be accessed through life insurance or pension plans.
Market value
The price you could expect to get if you sold your property or goods.
Market value adjustment
A reduction made to the value of a with-profits fund if you cash in some or all of your with-profits investment before your selected pension age. Firms use MVRs to help ensure that policyholders who cash in some or all of their with-profits investment before the end of the policy term do not disadvantage the remaining policyholders. (Also called market value adjustment).
Market value excess of investments
This is the difference between the market value and the (account) book value of a company’s investments.
Material damage
A term used to describe physical loss or destruction to property or contents.
Material fact
An important fact about you or your circumstances that would influence an insurer’s decision on whether to issue a policy and on what terms. Non-disclosure or misrepresentation of such facts can result in your policy being cancelled or your claim being declined.
When a policy (such as life insurance or a pension) reaches its agreed time limit, it comes to an end and the value is paid out.
Mechanical breakdown
Covers the cost of home appliances or motor vehicles breaking down.
Medical expenses insurance
This reimburses all or some of the costs of treatment for medical conditions. (Also known as health insurance).
A period of time during which insurance will not cover a specific risk (such as a pre-existing medical condition) or the insurer will not use specific information (in relation to genetic testing for example).
Mortality rate
A measure of the number of deaths (in general, or due to a specific cause) in a population during a given period of time.
Motor insurance anti-fraud and theft database
A computerised record of claims for stolen or written off vehicles. The database is used by insurers to detect patterns such as multiple or fraudulent claims.
An insurance company that is owned by its customers.
National brokers
These are intermediaries who operate on a national level, as opposed to regional brokers who work locally. National brokers’ usually specialise in offering a service in many different sectors of the insurance market, rather than specialising in one particular type of insurance. Their clients are often corporate bodies.
National Insurance contributions
Most employees, employers and the self-employed pay National Insurance. The government uses workers’ National Insurance contributions to fund many social benefits.
A failure to take proper (or reasonable) care in doing something, resulting in damage or injury to you or someone else.
Net is the value of something minus any costs related to it.
New for old

New for old policies replace damaged or stolen possessions at their original purchase price regardless of how old they are or what condition they're in at the time you make a claim. They differ from indemnity policies which take wear and tear into account, replacing items at their current value. 

No claims discount
A reduction in the cost of a person’s premium at renewal to reflect a claim-free period of driving. No claims discounts are common, but insurers are not obliged to offer them. (Also know as no claims bonus).
This is when a customer does not tell their insurer something that might affect the insurer’s decision to provide cover or how much the cover costs.
Occupational pension scheme
Another term for a workplace pension scheme where the funds are governed by a board of trustees.
Offer price
This is how much you pay for each unit when investing in a set investment fund.
Open ended investment company
A type of company or fund in the UK that is structured to invest in other companies with the ability to adjust constantly its investment criteria and fund size. The company's shares are listed on the London Stock Exchange, meaning there are no bids and ask quotes on the OEIC shares – buyers and sellers receive the same price.
Open market option
If you are approaching retirement, this allows you to shop around for an annuity to turn your pension pot into an annuity rather than accept the rate offered by your pension provider.
Opting out
When someone chooses not to remain in a workplace pension after being automatically enrolled.
When someone buys cover for more than the value of the items insured.
PAYE - Pay as you earn
An employer automatically takes Income Tax and National Insurance contributions from your salary and pays it to HM Revenue and Customs (HMRC).
Pecuniary loss
Loss of money.
This is a tax-efficient way to save money for when you have retired, or for later life when you are no longer able to earn.
Pension benefits
The sums of money you get from your pension schemes.
A peril is the cause of damage, such as earthquakes, flooding, storm or fire.
Permanent health insurance
Pays out an income if you, as the policyholder, suffer from a long-term illness or disability and have a loss of income. (Also known as income protection insurance).
Personal accident
policy that will cover you for accidental death or a specified injury.
Personal lines
This refers to any insurance policy taken out by an individual in a private capacity as opposed to for business or professional use.
Personal money
All of your financial income and outgoing transactions including what you earn, what you spend, what you save, and your assets and liabilities.
Phased retirement
You can draw benefits from your pension gradually, either through annuities or drawdown. Part of the income is provided as tax-free cash, so the level of income tax paid is managed and the balance of your fund is invested in a tax-efficient way. Speak to a financial adviser for more information about phased retirement.
The insurance cover as agreed between the insurance company and customer.
Policy schedule
This is an outline of the cover provided under a policy. It will show details of the policyholder and the kind of cover given.
The person or organisation that is taking out an insurance policy (and paying the premiums).
Pool re
A government-backed company that meets the cost of business property claims over £100,000 resulting from terrorist attacks in Great Britain.
Pre-existing medical condition
Any health condition you have now or had in the past; have been diagnosed with or are waiting for a diagnosis of; have been treated for or are having treatment for before the start date of any health insurance or income replacement insurance cover.
The amount to be paid by a customer for an agreed amount of insurance cover.
Product liability policy
Product liability insurance covers the cost of compensating anyone who is injured by a faulty product that a business designs, manufactures or supplies.
Profit and loss account
This information shows the money a business has earned minus any cost or spending.
Generally refers to the buildings (including roof, walls, windows and permanent fixtures such as fitted kitchen units, bathroom suites and fitted wardrobes) as well as the surrounding grounds (including driveways, patios, conservatories and outbuildings).
Proposal form
An application for insurance cover.
The person who is applying for cover.