Here are a few common life insurance terms that you may have come across, and what they all mean.


A term interchangeable with insurance but generally used in connection with life cover as assurance implies the certainty of an event and insurance the probability.

Cash Sum

The amount of money your insurance product pays after a successful claim, provided in a lump sum payment. Can also be known as Benefit Payment, Level of Cover, Sum Insured or Cover Amount.

Cooling off period

The period of time immediately after you receive your policy documents, during which you can cancel the policy for a full refund of any premiums paid.

Compensation Scheme

If a firm is authorised by the Financial Conduct Authority or the Prudential Regulation Authority, you will have access to the Financial Services Compensation Scheme (FSCS). The FCSC can pay you compensation if a financial services firm is unable, or likely to be unable, to pay claims against it.

Decreasing Term Insurance

Life insurance for a fixed period of time or specified age but where the sum insured decreases each year. At the end of the term, the sum insured may have fallen away, meaning the policy has no remaining value. Typically used as a Mortgage Protection Plan.

Financial Conduct Authority (FCA)

The Financial Conduct Authority – known as the FCA, regulates the financial services industry in the UK. Their aim is to protect consumers, ensure the industry remains stable and promote healthy competition between financial services providers.

Financial Ombudsman Service (FOS)

The FOS was set up by law as an independent public body. The FOS helps to settle individual disputes between consumers and businesses providing financial services - fairly, reasonably, quickly and informally.

Financial Services Authority (FSA)

The FSA has now become two separate regulatory authorities; the Financial Conduct Authority and the Prudential Regulation Authority.


In respect of a life insured means the insurance benefit amount(s) that have been applied for by the policyowner and accepted by Scottish Friendly Assurance as indicated on the schedule.


Cannot be reasonably improved upon by medical treatment and/or surgical procedures used by the National Health Service (NHS) in the United Kingdom (or if appropriate, the equivalent to the NHS if the insured event occurs in another country) at the time of the claim.

Joint plan

This plan applies if there is a key life insured and a partner life insured as detailed on the schedule.

Key life insured

A person named in the schedule as the key life insured.


The non-renewal of a policy for any reason.

Life Assurance

The word "assurance" describes the types of life insurance that pay out when someone dies or a cash sum becomes payable. "Insurance" policies will only pay out in the event of an unforeseen event. 

Life Insurance

A policy that will pay a specified sum to legal beneficiaries upon the death of the insured.


The legal contract between the policyowner and Scottish Friendly Assurance. The Policy Terms and Conditions, your application, any future application accepted by Scottish Friendly Assurance, the statement of fact, the current schedule, and any special conditions, amendments, or endorsements make up the policy.

Policy Document

A contract of insurance between the insurer and the and the policyowner. It usually consists of the policy Terms and Conditions and a policy Schedule which is provided to the policyowner upon purchasing the policy.


The person in whose name the policy is issued. ( See also insured and assured).

Prudential Regulation Authority (PRA)

The Prudential Regulation Authority – known as the PRA, is a part of the Bank of England and responsible for the regulation and supervision of banks, building societies, credit unions, insurers and major investment firms. It sets standards and supervises financial institutions.


The amount of money you pay to secure your insurance cover. You must maintain your premium payments if you wish to maintain the cover.

  • Age based premium: Only pay for cover you need today. Premiums reflect your current age at the time of the policy start and at each renewal.
  • Guaranteed premium: Term used to indicate that the premiums for an insurance policy do not change over the term of the policy. By taking a policy with guaranteed premiums you’ll know exactly what your monthly premiums will be for the full length of the contract. The only reasons that guaranteed premiums may change is if you change your amount of cover or if you have an index-linked policy (increasing benefit policy).
  • Reviewable premium: Specifies that insurance premiums will be reviewed at pre-determined times from a policy start date. Normally insurers will review premiums every five years however some companies do review them annually. With reviewable premiums, your payments may increase, stay the same or decrease after the company makes the review. The advantage of reviewable premiums is that the cost may start lower than a guaranteed rate.


The schedule to this policy, or any replacement schedule, issued by Sorted Insurance and showing the details of the cover provided by this Policy.

Smoker Ratings

Insurers will give a lower premium rate to buyers who do not smoke or use tobacco. If you smoked in the past, most insurers will consider you a non-smoker if you have not smoked for a period of one year prior to applying for cover.

Surrender Value

This is the amount you get back, after the deduction of any charges, if you cash in investments before the end of the term.

Term Life Insurance

Life Insurance protection for a limited number of years (the term); expiring without value if the insured survives the stated period.


A Trust is an arrangement which allows designated trustees to administer the payout from a life insurance policy in the event of the death of the life assured. The process of a trust is that in the event of the death of the grantee (policyholder), the life insurance trust is passed to the trustees, the policy then pays out to the trust and then finally the money is distributed accordingly by the trustees. The three main advantages of writing a life insurance policy in trust are to:

  • Avoid estate taxes such as inheritance tax.
  • Nominate multiple beneficiaries.
  • Avoid time and costs associated with probate.

Probably the most useful reason for writing life insurance into trust is to avoid IHT (Inheritance Tax). There are different types of trust available that have different uses dependent upon your requirements for example split, flexible, stakeholder and absolute.


Underwriting is a term used to describe the process of assessing insurance risk prior to issuing a policy. It usually takes the form of questions about your occupation, medical history and current pastimes/activities. Underwriting is designed to ensure the premiums and cover terms for your insurance plan are appropriate for your own medical situation, lifestyle, occupation and pursuits.

United Kingdom

England, Northern Ireland, Scotland or Wales.

Waiver of premium

Sometimes this option is included within the product you buy. Generally speaking, if you become disabled or ill & unable to work for a set deferred period - usually 6 months, the insurance company will pay the premiums for you, but only for a limited period which would be defined.

Whole of life Insurance

A policy that you can keep all your life (providing you continuously pay your premiums). Many insurance companies design products that build up a cash sum as well, so they are often treated as investment based products. In later life many people take out these plans as a way of paying for their funeral – sometimes known as a "funeral expenses plan".

Yearly Renewable Term Insurance (YRT)

This is a life insurance policy that gives the owner the option to renew the contract each year. In most cases a term must have been predetermined as a maximum policy length and once this has been reached, the policy can no longer be renewed.

The advantage of a Yearly Renewable Term Insurance policy is that the premiums often start quite low, this however is offset by the fact that your premiums are likely to increase each year and there is no limit on the increase. This makes the policies risky in comparison to term life insurance with guaranteed premiums, whereby your premiums are guaranteed and will not increase throughout the term of the policy.