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Glossary / Jargon Buster

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Term Definition
Accelerated Specified Illness Cover Most life cover only pays out on the death of the person insured. However, if the policy includes accelerated specified illness cover, some or all of the life cover amount will be paid out early if the person covered is diagnosed as having one of a number of specified medical conditions, as defined in the policy. The life cover benefit is then reduced by the amount paid out.
Acceptance Terms/Underwriting Terms The terms covering life assurance or other benefits upon which the life assurance company and the owner of the policy agree before the policy is issued.
Actuary A person who calculates insurance risks and premiums for the life assurance company.
Administration Fee/Switching Fee Usually refers to a fee payable when you switch all or part of your premium or fund (for example from a medium risk fund to a lower risk fund).
Allocation Rate A percentage of a person?s money that has been invested in a fund, the remainder is spent on charges.
Alteration This occurs when either the owner of the policy or the life assurance company alters the contract between them. This is subject to underwriting requirements and policy terms and conditions.
Annual Premium Equivalent (APE) An industry standard formula for measuring new business income It is the total of new annual premiums plus 10% of single premiums.
Annuity An annuity is a type of policy that pays regular income for life in return for the payment of a lump sum at outset. A pension annuity pays a regular income for life using the value of your pension fund at retirement.
Annuity Options If a customer decides to buy an annuity on retirement, there are different annuity options available. These may include the option of paying an income to a spouse or dependent in the event of the death of the customer.
Annuity Rate The rate applied to a lump sum to calculate the level of regular income payments that the lump sum will provide you with. The income may be payable for the whole of the remainder of a person?s life or for a fixed period of time. The rate applied to a lump sum to calculate the level of regular.
Application/Proposal Form If you wish to buy a policy, you will be asked to complete a form by the life assurance company. The form will ask for details of the cover required and in some cases for medical and lifestyle information. The form should be signed and returned to the company.
Appointed Actuary The actuary appointed by the life assurance company in accordance with Section 34 of the Insurance Act 1989. The Appointed Actuary advises the life assurance company on how the interests of the policyholder should be taken into account.
ARF Approved Retirement Fund ? an investment plan that selfemployed people and proprietary directors can purchase with the proceeds of their pension plan when they retire, which they can allow to grow or can cash in from time to time to provide an income. The proceeds of an additional voluntary contribution (AVC) can also be invested in an approved retirement fund (ARF) if the trustees of the scheme allow this.
Assignee Any third party that has a legal interest in a policy because of an assignment.
Assignment This is the legal transfer of ownership of the policy and its benefits to a third party. Usually, this third party is a bank or building society. When this happens, the customer continues to pay the premiums and needs the approval of the assignee to change the contract. The assignee may reverse the assignment by completing a Release of Assignment Form.
Assurance A term sometimes used instead of ?insurance?, generally in connection with life business, since assurance implies the certainty of an event (such as death) and insurance only the possibility.
Automatic Income The surrendering of units on a unit linked policy to provide a regular income.
Automatic Fund Switching Some life assurance companies offer the facility to automatically switch a portion of your fund value into a more secure fund as the policy nears maturity.
AVC (Additional Voluntary Contribution) Members of pension schemes can make additional payments into their existing pension scheme (or into a separate special pension arrangement) to supplement the pension benefits they will receive on retirement. These are subject to limits the Revenue Commissioners have set on the level of additional payments individuals can make in any one year.
Bear Someone who sells shares now, expecting the share price to fall in the future so they can buy the shares back later at a lower price.
Benefactor A person who gives a gift, for example in a will.
Beneficiary Anyone nominated to receive some or all of the benefits payable under a policy.
Bid/Offer Spread An initial investment charge applying to some unit linked life and pension policies, that refers to the difference between the buying and selling price of a unit on any given day. Where a bid/offer spread exists, the difference is commonly about 5% with the offer price always the higher.
Bid Price The price that a life office will give for the units if a policyholder of a unit linked policy wishes to cash in all or part of the units allocated to the policy.
Broker A self-employed person or company who can offer their client the products of five or more insurance companies.
Bull Someone who buys shares now, expecting that their value will rise in the future so that they can sell the shares for a profit at a later date.
Cancellation Notice This is a document given to a new policyholder telling them the details of their contract and their right to cancel their policy without any cost. It must be cancelled within a certain time. The notice is sometimes called a cooling off notice.
Chosen Retirement Date The date on which a policyholder intends to retire. This must be within the normal retirement age limits set by the Revenue.
Complaints Procedure If a customer has a complaint against their life assurance company, they should contact the company. If the problem isn't resolved to their satisfaction, they can go to the Financial Services Ombudsman. The Financial Services Ombudsman is an independent person who investigates complaints against insurance companies free of charge. The Ombudsman can issue rulings which are binding on the life assurance company but not on the customer who may still refer the case to the courts. You may contact the Financial Services Ombudsman Bureau at: 32 Upper Merrion Street, Dublin 2. Telephone 01 662 0889
Consumer Price Index (CPI) This is a measure of inflation prepared by the Central Statistics Office of Ireland. It compares the price of goods in one year (the base year) to the price of the same goods in the current year.
Contract This is the legal agreement between the life assurance company and the owner of the policy.
Convertible Term Assurance Term assurance that carries the option (for which you pay extra) to convert before expiry to a whole of life policy, without further evidence of health.
Cooling Off Period Customers have a number of days from the date a policy is issued during which they are entitled to change their mind. If they decide to cancel their policy during this period (usually 30 days) they will receive a refund.
Critical Illness/Serious Illness Cover If the person covered by the policy has this benefit and is diagnosed with any of a specified number of illnesses, the life company will pay an agreed lump sum. The illnesses covered vary widely between companies.
Current value Monetary value of a policy with regard to the bid value of the units. Adjustments such as market value adjustments or early encashment are not taken into account.
Data Protection Act A law that protects a person?s personal information and prevents companies from sharing it with other companies without the person?s knowledge.
Death Benefit The amount paid by the life assurance company on the death of the person covered by the policy.
Death in Service Death of a member of a company pension scheme before their retirement date, while still employed by the company.
Declaration When completing an application form, the customer signs this statement verifying that the answers they have given on the form are truthful.
Defined Benefit Scheme A pension scheme where retirement benefits are clearly stated and defined from the outset. These benefits are normally based on the scheme member?s salary and years of service.
Defined Contribution Scheme A pension scheme where the owner of the policy and/or their employer pays a regular premium or contribution. The retirement benefit is not guaranteed and will depend upon contributions made, performance of the fund in which the contributions are invested and the annuity rates available on retirement.
Dependant A dependant is defined as a spouse or a child up to age 18. If the child is in full time education, the age limit increases to 21.
Dependant?s Pension A pension which is paid to a dependant from a deceased member?s pension arrangement.
Direct Debit A method of paying bills regularly, by giving permission to a company or organisation to take money straight from a bank or building society account on a date specified by the company or organisation.
Dual Life A dual life policy refers to a policy where benefits will be paid out on the death of each of the insured individuals.
Duty of Disclosure The policyholder is obliged to tell the life company all relevant facts when making an application for life assurance. This is so the life company can be objective when assessing their application. If the customer fails to disclose relevant facts it could later lead to a claim under the policy being rejected.
Early Retirement The retirement of a person with immediate pension benefits before normal retirement date. The benefit may be reduced for early payment of pension benefits.
Eligibility Rules These are rules which allow an employee to join and remain a member of a pension arrangement.
Embedded Value A way of measuring the current value of future profits of a life assurance company. Embedded value represents the total of the profits expected to emerge in the future and the net assets already invested in the business.
Endowment Policy This is a life assurance policy which also incorporates an element of saving towards a lump sum which is payable at a specified date. The lump sum is often used to pay off a mortgage or another loan. As such savings are in unit linked funds, returns are not guaranteed.
Endowment Mortgage This is where the borrower only pays the interest on a mortgage during the mortgage term. It is usually associated with an endowment policy where the borrower pays a premium into an endowment policy in order to save towards a lump sum amount which is used to pay off the mortgage at the end of the mortgage term. Endowment mortgages are no longer regarded as suitable for funding the purchase of a person?s principle private residence.
Equity Another word for ?share?. A shareholder?s equity is the value of the shares they hold. Also, a house owner?s equity is the value of their home minus the unpaid mortgage ? so negative equity occurs if the house is worth less than the outstanding loan.
Ethical Investment An investment in desirable activities, such as those that might benefit the environment or help disadvantaged communities.
Exclusion Some event or health condition, for example, that is not covered by an insurance policy.
Execution Only Where a customer has either received no financial advice, or has received financial advice but has decided to ignore it, and wishes to take out a policy on their own instruction.
Exit Charge/Penalty A charge that a person pays if they cash in their savings or investments before they mature.
Exit Tax Exit tax is payable on any growth on a savings or investment policy when money is withdrawn. Non residents are exempt from this tax.
Expired Term This is the length of time which has elapsed since the policy was taken out.
Factfind This is used at the point of sale to identify a customer?s specific financial needs.
Final Bonus A bonus payable under with profit policies at the time of a claim, dependent on investment conditions at the time. Also called ?additional? or ?terminal? bonus.
Financial Adviser A person who provides advice in respect of a range of financial products on a professional basis.
Financial Regulator Main regulatory body appointed by the government to oversee the financial services industry in Ireland, formally known as IFSRA.
Fund A pool of financial assets into which premiums are invested to produce an investment return. Examples include property funds, managed funds and with profit funds. Strictly speaking, these are ?investment funds? rather than just ?funds?.
Fund Management Management of money invested, typically, in stocks and shares, fixed interest, property and cash on behalf of individual and institutional customers. Also known as asset management or investment management.
Fund Management Charge A charge or fee that a person must pay each year to the manager of an insurance policy, investment or pension fund, based on the value of a person?s fund.
Fund Switch An option to sell some or all of the units in one fund to purchase units in another fund which has a different investment approach. The number of units purchased may be different, depending on the price of units in each fund.
Group Pension Scheme A pension scheme which an employer sets up for the benefit of his employees.
Guaranteed Insurability Some contracts allow for a specified increase in benefits such as life cover, on the occurrence of certain events (e.g. having a baby, moving house) regardless of the customer?s current health.
Hedging Protecting against the risk of losses in one investment by taking up other investment positions that will reduce the risk run by the first commitment. This can mean investing in opposite positions in the same or equivalent stocks or markets using complicated packages of futures and options. Though speculative, hedging is actually a cautious action which sets out to reduce the risk run by the investor.
High Yield Equities or bonds that offer a high rate of return on your investment are said to be high yield. There is likely to be more risk attached to such investments.
Illustrations/Quotations These are projections that give the customer an idea of what they might expect from a policy. They are based on a number of assumptions about the future and customer specific details. Most illustrations are not guaranteed.
Income Protection Policy A policy that pays out a benefit if you suffer a loss of income due to sickness or disability lasting longer than a specified period, usually 26 weeks. This type of policy is sometimes known as Permanent Health Insurance (PHI).
In Force An insurance policy is ?in force? from its start date until the date it is terminated.
Inheritance Tax A tax payable by a person who receives assets on the death of another person. The tax is dependent on the value of the assets received and the relationship between the person receiving the inheritance and the person who gave the inheritance.
Insurance A contract taken out with an insurer to protect against loss from a perceived risk. The person taking out the insurance is called the insured. Payments for the policy are called premiums.
Intermediary An individual or organisation who introduces business to an insurance company on behalf of a customer and represents them in dealings with the company.
Investment Buying and holding assets, such as shares, bonds, property and commodities, to earn income or to make capital gains.
Joint Life An insurance contract where two people are insured against death.
Joint Life First Death A joint life first death policy is a policy where the death benefit will be paid only in the event of the death of the first of the individuals insured under the policy. The policy usually ceases when the benefit has been paid on the first death. This is different from a dual life policy where the benefit is paid on the death of each of the insured individuals.
Joint Life Second Death A joint life second death policy is a policy where the benefit will be paid out in the event of the death of both parties to the policy on the occurrence of the second death of the insured individuals. No benefit is paid when the first person dies.
Key Features Document This is a document that people offering a life insurance policy or pension scheme must give to anyone thinking of buying a policy or joining a scheme. It gives general information about the policy or scheme.
Keyman Insurance A company can take out keyman insurance on the life of a director or employee whose particular knowledge, skill or contacts are vital to the company. Keyman insurance protects the company from loss in the event of this key individual dying or suffering serious illness.
Lapse A policy lapses when premiums are not paid and there is no value on the policy. When this happens, all benefits cease.
Life Cover Depending on the type of cover chosen, this amount will be paid on the death of the person(s) covered by the policy.
Life or Lives Assured The person or people covered by the policy.
Long Term Savings Collective term for life insurance, pensions, savings, investments and related business.
Lump Sum Contribution This is where a customer makes a single premium payment in a lump sum to their policy.
Managed Funds A pool of assets which is invested in a mix of investments (including company shares, government stocks and property) on behalf of policyholders. The purchase and sale of the assets is conducted by experienced fund managers and the performance of the fund is monitored regularly.
Market Value Adjustment A penalty that may be applied if a customer takes units out of a with profit fund other than on a pre-agreed date, to take account of investment market conditions at the time. The adjustment is used to protect the remaining policyholders in that fund.
Maturity Date This is the day the policy ends. On certain types of policy a cash benefit may be payable.
Money Laundering The illegal process of disguising the origins of money from criminal activities so that it appears legitimate. This can be attempted by transferring it through many bank accounts and taking ?clean? cash from the proceeds. For this reason, many countries require financial institutions to check the origins of large cash deposits.
Net Relevant Earnings The earnings which the Revenue Commissioners will allow to be taken into account when calculating pension benefits and contributions.
New Business Term used to describe the value of long term savings policies sold to new and existing customers. Includes premium increases on existing business.
Non Contributory This is a type of pension scheme where the members do not have to pay into the scheme themselves.
Non Pensionable Earnings These are earnings that are not used when working out contributions or benefits. They could include overtime or bonuses.
Non Pensionable Employment This is employment where either a worker chooses not to join an occupational pension scheme, or there is no occupational pension scheme that they can join. Earnings from non pensionable employment can be counted towards net relevant earnings.
Normal Retirement Age (NRA) The date the member of a pensions scheme is due to retire. For a personal pension, it is between 60 and 75 years of age. For group and company pensions, it is between 60 and 70. Normal pension age (NPA), normal pension date (NPD) and normal retirement date (NPD) mean the same as NRA.
Occupational Pension Scheme A pension scheme arranged by an employer for the benefit of one or more employees.
Offer Price The price that a life office uses to allocate units to a unit linked policy when premiums are paid.
Old Age Pension A pension a person gets from the State when they retire.
Open Market Option This option allows the policyholder to transfer their retirement fund to another life assurance company to purchase an annuity.
Paid Up Policy A paid up policy is one where regular premiums are no longer being paid but there is an existing value on the policy.
Pension Plan A plan approved by the Revenue, designed to provide an income in retirement. Tax relief may be available on contributions paid into the pension.
Permanent Health Insurance This is an insurance policy which pays an income to someone who falls ill with a long term illness or disability.
Policyholder(s) The person to whom the policy is issued, i.e. the owner of the policy.
Policy Anniversary The anniversary of the date the policy started.
Policy Fee A regular fee, payable on some life assurance savings policies. A policy fee is usually a fixed amount, for example ?4.50 per month.
Policy Schedule/Certificate A document which sets out details of the policy for the policyholder(s). It also sets out the benefits of the plan, important dates, and the amount of the premium or contribution payable.
Policy Start Date The date the contract, the premium and its benefits commence.
Policy Term The number of years between the start date and the maturity date of the policy.
Policy Value Monetary value of the policy at any point in time.
Portfolio A collection of financial assets ? investments in shares, fixed interest stocks, cash and property ? held by an investor.
Premium or Contribution The amount payable by the owner of the policy to the life assurance company at agreed regular intervals.
Private Medical Attendants Report (PMA) Before the life assurance company offers terms on life assurance or other protection benefits it may require a medical report from the person?s doctor.
Rate of Return The change in value of an investment over a period of time, taking into account income from it and any change in its market value.
Regulatory Body An organisation with statutory powers to lay down a framework within which member companies must operate.
Reinsurance A form of insurance bought by insurance companies to protect themselves from the risk of large losses. One insurer pays to place part of an insured risk or an entire book of business with one or more other specialist insurance companies, known as the reinsurers.
Return The difference between the original sum invested and the final value of income or capital growth, given as a percentage.
Savings Fund A fund that a person contributes to over time to build up a lump sum.
Scheme Refers to a group or company pension scheme which can have many members.
Set Up Charges The charges applied at the start of the policy by the life assurance company. These charges are used to cover the initial costs of setting up the contract.
Single Life Insurance A contract with only one person covered by the policy.
Socially Responsible Investment (SRI) A policy of investing in companies or funds that demonstrate best practice in social, environment and corporate governance. Examples include environmentally friendly or ?green? funds, and sectors such as hospitals and education.
Sort Code A six figure code that identifies a person?s bank branch.
Stockbroker Someone who buys and sells stocks and shares for clients.
Sum Assured The lump sum benefit payable under an insurance policy or contract in circumstances defined within the policy (usually it represents an amount payable on death).
Surrender or Encashment An option to cash in all or part of the policy, if there is a policy value.
Surrender Value Monetary value of a policy taking account of market value adjustments or early encashment penalties where these apply.
Term Assurance A simple form of life assurance that a person takes out for a set period of time (for example, 10, 20 or 25 years) and guarantees to pay out a specified sum if the person dies during that period of time.
Tied Agent A financial adviser who is only allowed to advise on and provide financial products from one of a small number of companies.
Tracker Fund An investment fund which aims to replicate the performance of a selected market index.
Transfer Payment This is an amount that a scheme may pay when a member leaves. This amount will either go into a new scheme that the member has joined, or will be used to purchase a buy out bond for the member.
Transfer Value When a member leaves a pension scheme they may have an option to transfer the value of the pension fund to a new similar pension arrangement.
Trust By placing a policy in trust, ownership of the policy is transferred to trustees appointed by the owner of the policy. The person or persons who are to benefit from the proceeds of the policy, (the beneficiaries), are nominated by the policy owner.
Trustee The person or persons appointed by the owner of a policy which is placed in trust. The duty of a trustee is to look after the interests of the beneficiaries and they must comply with the directions of the policy owner set out in the trust document.
Underwriting Requirements The information, medical, financial or otherwise, used to evaluate an application for life assurance or other benefits. Based on the information supplied, the life company will set out the basis on which it will offer cover. Alternatively, they may decline the application.
Unit A unit is a measure used to identify the policyholder?s individual share in a unit linked fund.
Unit Linked Funds Policyholder?s premiums are pooled together by an insurance company and invested by a fund manager to gain the benefit of being a single large investor. Unit funds invest in assets such as company shares (equities) and government and fixed interest securities (gilts and bonds). These funds are valued at regular intervals. The value of the fund may rise or fall, in line with the underlying investments. This usually means that the fund value is not guaranteed at any stage. The total value of the assets in the fund is divided amongst the policyholders by way of allocating individual units to each policyholder depending on their contribution to the fund and the growth earned on that contribution.
Unit Linked Policy Life assurance policy where the premiums paid are invested in unit linked funds.
Unit Price The unit price is calculated by dividing the overall value of the fund at a specific point in time by the number of units in the fund at that time.
Unitised Investment policy under which contributions are used to buy units in a chosen investment fund. See unit linked.
Unitised With Profit A unitised investment contract where the unit price increases daily in line with a declared bonus rate. The unit price is guaranteed not to fall (and may even be guaranteed to grow at a particular rate) and therefore the unit price is not directly related to the value of the assets in the fund.
Waiver of Premium (WOP) This is an additional optional benefit available on some policies. If this benefit applies and the person covered by the policy is unable to work due to sickness or injury for a specified period of time, the life assurance company will pay the premiums until the life insured recovers or until he/she reaches a certain age, whichever happens first.
Whole of Life This means that the policy is not limited to a specific time period.
With Profit A type of investment plan in which extra amounts may be added to the main benefit (known as the sum assured) to reflect profits earned during the course of the contract. Regular or reversionary bonuses may be added, usually each year, and once declared are guaranteed. A final or terminal bonus may be added when the policy becomes payable. With profit funds are typically invested in a mixture of equities, property and fixed income investments. Under poor stock market conditions a market value adjustment (MVA) may be applied to the value of the policy if it is surrendered before the maturity date.

Glossary/Jargon Buster is provided courtesy of Hibernian Aviva Life & Pensions Limited.
Heffernans, 35 Morgan Street, Waterford. Lo-Call: 1890 333 400 Email: financialservices@heffernan.ie
Heffernan Insurances & Investments Limited t/a Heffernan Insurances, Heffernan Mortgage Solutions & Life Time Loans is regulated by the Central Bank of Ireland. (Company No.: 134974)