Term Definition
Accrued bonuses paid
This is the total amount of bonuses added to the policy so far. Each year the life company usually sends a bonus declaration and this contains the latest information.
Assurance
In the UK, the term 'assurance' tends to be used where insurance is taken out against something that will inevitably occur for example death and thus life assurance.
Assured + Life Assured
In the UK, the assure (also known as the insured) is the person who has entered into a life insurance contract with a life office and can also be the policyholder. The person on whose life the policy is taken out is known as the life assured. The life assured can be the assured, or another party so long as insurable interest exists. On the death of the life assured, the face amount of the policy passes to the policy holder who is the beneficiary, or if the assured and the life assured are the same, their beneficiaries.
Basic Sum Assured (SA) or (BSA)
This is the minimum amount that is guaranteed to be paid when the policy matures providing all premiums are paid in full. Bonuses are added to this amount throughout the term of the policy.
Cash Surrender Value (CSV) or (SV)
The value quoted by the issuing life office to cash in the endowment before the maturity date. This is usually lower than the 'locked in' value of the policy i.e. the basic sum assured and the current bonuses to date. This amount may not reflect the true value of the policy but is the amount that the life insurance company is willing to pay out as cash.
Clear title
This means that no one else has any financial interest in the policy, and all documents required to sell the policy
have been received. The buyer's solicitors can then grant clear title for the policy to be sold.
Commencement date
The date that the policy started.
Contract note
A legally binding contract between the buyer and seller of a policy. This contract confirms the buyer's agreement to purchase the policy at the offered price. This takes the form of Integrity's Offer Contract and Terms and Conditions.
Current attached bonuses
The total amount of all annual bonuses that have been added to the policy to date. These bonuses cannot be reduced or taken away.
Death benefit
This is the amount that will be paid out on the death of the life assured.
Deed of absolute assignment
A legal assignment that transfers the ownership of the policy from the seller to the buyer.
Endowment
An investment vehicle with regular premiums also including life cover in the majority of cases. Endowments are usually used as repayment of a mortgage but could also be used as a savings plan.
Endowment assurance
Endowment assurance is a fixed term life insurance policy in which provision is made for premiums to pay for life cover plus a savings or investment element. The policy pays out a sum of money (the sum assured) on the death of the life assured or at the maturity date. If an endowment policy is cashed in, any proceeds returnable to the policyholder, particularly in its early years, will normally be below the value of the premiums paid in up until the point of cancellation.
Endowment mortgage
An endowment mortgage is an interest only mortgage ultimately repaid by the proceeds of an endowment policy that is assigned to the lender providing the mortgage. The policyholder pays the lender's interest only for the term of the mortgage. The sum assured, which is payable on maturity or death of the policyholder, is used to repay the mortgage. Policies are usually with profits, unit linked or unitised with profits. Policies can mature and provide additional capital for the policyholder after the lender has been repaid.
Full endowment
A full endowment is a policy which has a greater amount of savings than normal.
Gross premium
The original amount stated on a policy before deduction of tax relief. Applicable on policies starting before 13th of April 1984.
IFA
Independent Financial Adviser.
Income endowment
An income endowment is a policy that gives the option at maturity for the proceeds to be paid in the form of a regular income rather than a lump sum.
Insurable Interest
An interest in a person or item that will support the issuance of an insurance policy; an interest in the survival of the insured or in the perservation of the item that is insured. You cannot issue something you do not have an insurable interest in, or something you don't own.
Letter of No Further Interest (LONFI)
Legal document from a third party e.g. a building society declaring that they no longer have an interest in a policy and that it is therefore free from debt.
Life Office/Company
The insurance company that sold the policy to you.
Low Start Premium
A policy where premiums initially start at a low level then increase during the early years of the term.
Maturity date
This is the date when the policy matures, no more premiums are payable, and the proceeds are paid out to the policy owner.
Net premium
The amount you actually pay to the life company.
Paid up policy
This is a policy which still has an investment value but is no longer receiving monthly premiums and no longer provides life assurance. The policy value which may be reduced, is still likely to grow but at a slower rate. The policy will continue to run to its original maturity date.
Policy document or policy schedule
This is the legal document that explains the terms of the policy, e.g. the amount of monthly contributions, amount of life insurance, the number of years the policy is to run.
Policy number
Each policy has its own identification number. This is normally found on the policy document.
Policyholder/owner
The policyholder is the current owner of the with profits endowment policy.
Premium
The amount that is payable to the life office throughout the term of the policy. The frequency of the premium will be monthly, quarterly, half-yearly or yearly.
Reversionary bonus
This bonus is added to the policy annually and is a reflection of the performance of the fund where the policy premiums are invested. Once the bonus is added it cannot be amended or taken away from the policy.
Sum Assured (SA)
This is the minimum amount that is guaranteed to be paid when the policy matures providing all premiums are paid in full. Bonuses are added to this amount throughout the term of the policy.
Surrender value date
The date that the surrender value is provided from the life company is important. Surrender values can change on a regular basis. This can be due to new bonus rate announcements or simply as a result of a further premiums being paid. It is important that a surrender value is supplied to us which has been quoted in the last three months, or since the most recent bonus declaration, whichever is the most recent. Surrender values can fall as well as rise.
TEP
TEP means Traded Endowment Policy which is a policy that is sold to an investor before it matures rather than being surrendered.
Terminal bonus
This bonus may be applied when the policy matures.
Transfer of title
This is the process by which ownership of the policy is transferred from the seller to the buyer.
Unit linked
Premiums are usually invested as units in stock market funds. There are usually no guarantees and the value of the policy goes up and down in line with the performance of your particular fund.
Unitised
Premiums are used to buy units in the life companies with profits fund. Companies operate funds in many different ways.
With profits
The policy gains from the profits of the life offices with profits fund by adding bonuses each year and at maturity.
