The world of protection can be a confusing place with a wide range of products providing different levels of cover for different times of your life.

If you are puzzled by the terms life and whole of life cover or income protection and unemployment benefit, this jargon buster, courtesy of Bright Grey, is a must-read.

Life cover

Life Cover is a product that would pay out on death or diagnosis of a terminal illness that meets the policy definition during the plan term.

Critical illness cover

Critical illness cover pays out on diagnosis of an illness or condition which meets one of the definitions specified in the policy terms and conditions.

This can be taken out as a standalone product or alongside Life assurance. If taken out with Life Cover this is usually on a first event basis so would pay out on death, diagnosis of a terminal illness or a defined critical illness within the term.

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Life Cover and Critical Illness Cover can usually be set up with a level, decreasing or increasing sum assured. A level cover will have the same sum assured for the term of the plan. Decreasing cover is usually taken out in conjunction with a repayment mortgage and the sum assured would decrease over time to match the mortgage liability. Increasing cover is designed to reduce the impact of inflation on the sum assured and will increase each year in line with RPI or a fixed percentage rate depending on the plan’s terms and conditions.

Income protection

Income Protection pays out when someone is unable to work through accident or illness and meets the definition of incapacity. There are several definitions of incapacity, for example being unable to perform your own occupation, or failing to do a number of defined work tasks. The cover is designed to replace a portion of income while the person covered is unable to work and their income has dropped. Some income protection products are payable for the term of the cover and others have a one or two year payment period.

Whole of Life Cover

Whole of Life Cover has no end date and would run until death. It is usually for Life Cover but a few providers have critical illness available on a whole of life basis. It can be used for inheritance tax planning or to leave money for family.

Family income benefit

Family Income Benefit is where a product is set up to pay out a monthly income after a claim rather than a lump sum benefit. This is often used to cover ongoing costs such as school fees or maintenance payments. This can be set up on a level income or increasing income basis to suit the protection need.

Unemployment benefit

Unemployment benefit is used to protect a proportion of income in the event of redundancy. This is often for a 1 or 2 year benefit payment period.

Waiver of premium

This is designed to cover plan payments during a claim. It is assessed on the same basis as income protection where the person covered would have to meet the definition of incapacitated for a claim to be met. This means that if the person covered is unable to work and meets the definition then their plan payments are kept up to date and their protection remains in place.