Life insurance is sometimes called life assurance. Some authorities draw a distinction between insurance where the peril insured against may or may not occur, and assurance where the event (death) is inevitable, though not necessarily within the assurance term. In practice, though, the terms may be used interchangeably. There must be some life contingency for a policy to be one of life assurance, or for a life annuity contract to be such. But for life policies the payment on death need be no more than the investment return.
This is pure protection, reflecting mortality risk only, and pays out only on death of the life assured before a predetermined date.
Whole of life insurance
Insurance under which benefit is payable on death whenever it occurs. It can be with or without profits, see IPTM1410, or unit-linked, see IPTM1400. Whole of life policies have some of the characteristics of both protection and investment policies.
Generally a unit-linked, single premium whole of life or endowment policy providing minimal guaranteed death benefits, and often capable of surrender without penalty, particularly later in the term. An investment rather than insurance in the general sense.
The meaning is considered at IPTM2040.
Term assurance policies
A term assurance policy is one where benefits are only paid if the death or disability covered occurs within a specified term. Under the qualifying policy rules, there may also be a surrender value but where the term of the policy is less than ten years, the surrender value must be limited to the value of premiums paid.
It is now rare for a term assurance policy to be written as a qualifying policy because life assurance premium relief is no longer available on the premiums and no chargeable event gains will arise unless the policy was acquired second hand. However, there might be unusual cases where a term assurance policy is presented for certification as qualifying, for instance if it contains an option to take out another policy that is not a term assurance policy. The minimum term for a term insurance qualifying policy is one year. Where the term is less than ten years, there is no minimum premium paying term, so even a policy with just a single premium payable could qualify. Where the term is ten years or more, regular premiums must be paid for a minimum of ten years, or three quarters of the term if that is shorter than ten years.
Pooled investment fund
A pooled investment fund is a policy in which you pay into the fund along with a number of other investors and your money, along with that of other members, is put together and invested in stocks, shares, equities, bonds and property over a set period of time.