GLOSSARY OF COMMON TERMS
This option allows a policy to be changed to a different policy, at the end of the policy term. This can be done without new evidence of health, which benefits older people changing their policies. This option must be selected at the time of the original application, and makes a premium more expensive.
An option to adjust premiums & insured amount for inflation. This option aims to allow the original amount to maintain its value over time. This option increases the cost of premiums over time, and may also increase at a rate that outstrips actual inflation, eg indexation option increases premiums by 3% p/a, but inflation is .6% p/a for the same period.
“ACCIDENTAL DEATH BENEFIT”
A benefit in some policies where the life insured is covered for accidental death in the period between their application for the policy, and the issuing of policy/collection of first premium (the actual start of cover).
“TERMINAL ILLNESS BENEFIT”
A benefit offered by some life companies where a diagnosis of terminal illness, potentially confirmed by the life company’s doctors, will cause a payment of the insured amount on a life cover policy.
A benefit offered by some life companies, whereby missed payments up to a stated time, eg 6 months, does not cease cover & terminate the policy. The policy can be reinstated & continued providing missing payments are paid, including any charges incurred. Evidence of continuing good health may also be sought.
“GUARANTEED INSURABILITY OPTION”
An automatic benefit offered by some life companies. It allows the policy-holder to increase their life cover to reflect new life events, such as a new legal partnership, birth or adoption of a child, or moving house (an increase in debt, etc).
“SECTION 72 POLICIES”
This is a life cover policy specifically used to cover inheritance tax liability for the estate of a policy-holder. The amount of cover required is calculated based on an assessment of the estate’s future assets, to pay the 33% inheritance tax that will be owed. While the policy pays out on death of the policy-holder/s, the policy is not suitable for Specified Illness Cover, etc. Tax relief may be claimed on the premium (as the policy payout itself will go towards a future tax bill), and the policy is best served by being made payable to a trust, rather than a spouse, or the estate, etc.
“SINGLE / DUAL / JOINT LIFE COVER”
A Single Life policy covers one life only. A Joint Life policy covers two people, but pays out in full on the first death, (eg Mortgage Protection, as the mortgage will only have to be repaid once). A Dual Life policy provides cover on two lives independently, (eg a couple with €100,000 cover each. The death of the first partner results in a payment of €100,000, but there is still cover of €100,000 on the surviving partner.)
“STANDALONE / ACCELERATED SERIOUS ILLNESS ”
A Standalone Serious Illness policy is one whereby a claim does not affect the Life Cover amount insured, eg a Life Cover policy of €100,000, with Standalone Serious Illness Cover of €75,000. In the event of a Serious Illness claim on the policy, €100,000 of Life Cover will still remain. On the other hand, a Life Cover policy of €100,000, with an Accelerated Serious Illness Cover of €75,000, will be reduced to €25,000 of Life Cover, if a Serious Illness claim is made.
“EXECUTION-ONLY BROKERAGE SERVICE”
A service offered by Insurance Brokers & Agents whereby they arrange the policy on behalf of the customer, but without giving any advice. A service only counts as ‘Execution-Only’ if the customer specifies the product, the insurance company, AND has not received any assistance from the broker in choosing either the firm, or the product. A specific explanation of whether a firm is an adviser, or only offers ‘Execution-Only’ services will be found on the ‘Terms of Business’ section on the firm’s website.
“TERMS OF BUSINESS”
This is a document that sets out the basis upon which a firm provides financial services. It provides details on the legal names & contact details of the business. It also explains the level of services provided by the company, & details the authorisation of the firm. Every new client of a financial adviser / insurance broker must receive a copy of the firm’s ‘Terms of Business’, before they receive any financial service, or advice from the firm. In practice, for a ‘Bricks & Mortar’ business, a copy will be handed to the client at the first meeting. For web-based businesses, where contact occurs on-line, the ‘Terms of Business’ are left permanently available on the site. A link to them is usually provided at the bottom of the homepage, or in the ‘About Us’ section.
“KNOWING THE CUSTOMER / FACT FINDING”
The process of asking the customer relevant information, such as age, marital status, income, etc. This allows the Financial Adviser / Broker, to match the client’s needs against the available products on the market. The ‘Fact Find’ is kept on the customer’s file, in line with Data Protection Laws.
Following the ‘Fact Find’, recommendations will be made to the customer for strategies to suit their needs. All recommendations will have an explanation of how & why the recommendations will suit their needs & requirements. A ‘Letter of Suitability’ is then sent out to the customer with the recommendations & explanations.
“30 DAY COOLING-OFF PERIOD”
This is a legal protection for customers who use a format known as ‘Distance Marketing’ to purchase certain financial products. The ‘Cooling-Off Period’ is usually 14 days for ‘Distance Financial Contracts’, but for Life Assurance & Pensions, it’s 30 days. It means that a customer for these products can request a full refund & cancellation of the policy within 30 days.
‘Fair Analysis’ refers to how a broker or agent will examine products on the market, and recommend those that are most suitable for individual customers’ needs. It’s defined in the Consumer Protection Code, and while it doesn’t stipulate a minimum amount of insurers/products, a ‘Tied Agent’, only able to sell one company’s products, would not be an example of ‘Fair Analysis’.