Do you need help threading through the maze of financial jargon?

Use our Jargon Buster to gain a better understanding of just what those financial terms really mean and what financial products can offer
you.

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Income Protection

Income replacement insurance provides an income should you be prevented from working due to sickness or injury. It is commonly known as permanent health insurance or sometimes PHI schemes. The word "permanent" in the name, refers to fact that the policyholder is the only person who can stop the cover during the term of the policy (this would be through the none- payment of premiums or cancelling the policy directly.) The insurance company cannot withdraw cover, under any other circumstance, once the contract has been accepted and premiums have commenced. These plans work by paying you an income, usually equivalent to 50 - 65% of your usual salary, if you are unable to work for a long period. The income is generally paid until you reach your usual retirement age but will automatically ceases if you return to work prior to this point.

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ISAs

ISA stands for Individual Savings Account. The annual ISA limit for the current tax year is £7,200 and up to £3,600 of that can be saved in a Cash ISA with one provider. The reminder of the £7,200 can be invested in Stocks and Shares ISA with a different provider. Alternatively using the Stocks & Shares ISA route, £7,200 may be invested solely in Stocks and Shares. Investments within ISAs are free from income tax and capital gains tax although some tax may be payable of the dividends.

Over 50's can invest up to £10,200. This was announced in the 2009 Budget and took effect on October 6th 2009. This higher limit will apply to all savers from April 6th 2010. The tax year runs from April 6th to April 5th and it is important touse as much of your annual allowance as you can within that time as it cannot be carried over into the next financial year.

 ISA_Appendices_2009_to_2010.pdf 



 

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Life Assurance

Most of us have heard of Life Assurance and appreciate that it is a policy provided by a Life Assurance company, that pays out either a lump sum or a series of payments if or when you die. These payments are normally paid without the deduction of any tax, and in most instances are actually tax-free. The proceeds of a Life Assurance policy can used: to pay off a debt such as a mortgage to provide an income for your dependents as a savings scheme. You pay monthly premiums or an annual sum to the Life Assurance company for either a given time span or in the case of Whole of Life Assurance normally through to until death (some Whole of Life policies have a maximum age limit on premiums). Life insurance policies can be combined with other forms of insurance, such as Critical Illness insurance so that you receive the lump sum if you are diagnosed with a serious illness.

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Medical Insurance

Private Medical Insurance (PMI) cover provides you with the option of private medical care in addition to the care provided by the National Health Service. You (or your employers) pay monthly or annual premiums, the cost of which is determined by your personal circumstances (e.g. sex, age, previous medical history) and the type of cover you choose. Premiums are reviewed each year.

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Mortgages

A mortgage is the name given to a loan secured on your home. It is usually used to buy the home although it is becoming more popular to consider a new mortgage, where the propety is already owned, to access a more competitive mortgage product or to raise capital for other purposes, such as school fees or business investment. A mortgage is a long-term loan and traditionally have run for a fixed period, typically 25 years. However, most mortgages are flexible enough to allow for early repayment or, if your circumstances dictate, the term can be extended beyond the original loan period.

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Personal Loans

All manner of people and organisations borrow money from time to time. The reasons for borrowing are numerous as are the means by which money is borrowed. It is likely that any individual who wishes to borrow money will do so by way of an overdraft, a credit or charge card or a personal loan.

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Pet Insurance

Pet insurance covers the payment of veterinary bills and medicine for animals, and a range of other costs associated with owning an animal.

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