As with any area, personal finance has its jargon. Unfortunately, given the nature of personal finance, confusion over terminology can intimidate consumers and make it more difficult for them to choose the most appropriate products.
In an occasional series Family Money will look to break through the mystique of industry jargon. We start today with some critically important insurance industry terms.
Term Assurance: This is the simplest form of life assurance and is purely a protection product. A term assurance policy is taken out for a set period of time (e.g. 10, 20 or 25 years) and guarantees to pay out a specified sum if you die during that period of time. If you survive the term of the policy, no payment is made.
Whole of Life Assurance: As with term assurance, whole of life assurance is a protection product that promises to pay out an agreed sum on the death of the assured. However, in this case, there is no time limit on the term of the policy.
Once the policy is taken out, it continues uninterrupted and for the rest of the policyholder's life, as long as the premiums continue to be paid.
Endowment Insurance: Endowment policies usually combine an element of life assurance protection with a larger element of savings. The idea is to invest an amount of money on a regular basis in an endowment policy so that, at the end of a specified term, the policyholder will receive a lump sum that will reflect a good return on the premiums paid. The insurance element of the policy is generally subsidiary.
More insurance terms definitions are available in the glossary of the Irish Insurance Federation website www.iif.ie.
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