We are often asked to explain the jargon associated with life assurance.
There are two main types of mainstream life cover:
Mortgage Protection (also known as mortgage life cover)
Life Assurance (also known as term assurance)
The difference between a mortgage protection policy and life assurance is that a life assurance policy pays out an agreed lump sum to a surviving spouse or family on the death of the policyholder. A mortgage protection policy pays off the remaining balance on a mortgage loan to the bank if the policyholder dies before the mortgage is paid off.
It is important to realise that with life assurance the sum assured does not decrease, whereas with mortgage protection the sum assured decreases because the sum assured is equal to the balance on the mortgage loan account.
Most people who have a mortgage will have mortgage protection.
Mortgage Protection should not be confused with mortgage repayment protection which pays your mortgage for 12 months if you lose your job etc.
For life assurance there are two main types of cover dual cover and joint cover. Dual Life Cover is a life insurance policy that provides cover for two people and continues after the first person dies. It pays out benefits on each death. It could potentially pay out twice during the course of the policy. Joint cover will pay benefits on the first death of either insured person. As a result joint life cover is usually cheaper. All mortgage protection cover by nature is joint cover
There are also other options when taking out a life assurance policy:
- Convertible option
- Indexation
Convertible option – At the end of the term you have chosen you have the option to continue your life cover without the need for further medical information.
Indexation – This option allows you to increase your life cover in line with inflation. The indexation rates vary between providers and clients should always ask what indexation rate applies to their premium and their benefits.
SmartQuotes.ie compares the market to find the cheapest life assurance/ mortgage protection quote for you.
For further jargon translations a useful website is http://www.itsyourmoney.ie/jargonbuster