the pure protection element in a life assurance contract; the insurer may fund it by appropriating part of the premiums or, in the case of investment-linked business, by cancellation of part of the policy value.

The amount shared out among long-living annuitants that is derived from the insurer’s profit derived from those who die shortly after taking out the annuity. Annuities are a way of ‘insuring’ against outliving one’s capital. The crosssubsidy is cumulative over time and exposes those who defer their annuities, as with income drawdown, to mortality drag.

The additional rate of return that investments left in a fund, such as income drawdown, have to generate above the yield on an annuity in order for income drawdown to provide a higher overall retirement pension. Over time it becomes very difficult for the return on the fund to beat that from an annuity.

The additional surplus in a life fund due to the actual mortality rate being more favourable than that assumed at an earlier valuation.

An instrument by which the probabilities of life and probabilities of death can be measured. The basis is the ratio of the number of persons dying at any age to the number of persons alive at the beginning of the year of that age. Mortality and interest rate factors enable actuaries to produce life insurance ‘net premium’ calculations.

Indemnifies mortgage lenders against loss due to ‘portfolio’ properties sustaining uninsured or under-insured damage. The policy is triggered when damage is due to perils against which the mortgagor was required to insure. The policy also responds if the insured mortgagor is unable to recover under his policy for reasons such as insolvency of the insurer concerned. The insured is also protected against its own negligence in failing to maintain a valid insurance as required by any mortgage deed.

Financial guarantee insurance covering a mortgage lender for any loss incurred when the mortgagor has defaulted and the property is sold for less than the amount of the loan. A Lloyd’s syndicate wishing to underwrite mortgage indemnity on ships or aircraft must first obtain approval from the War, Civil War and Financial Guarantee Committee.

Meets mortgage payments when the borrower suffers accidental injury, sickness or unemployment. No benefit is payable for the first two months. The policy may provide lump sum benefits for accidental death or critical illnesses.

a decreasing term assurance designed to pay off the anticipated outstanding balance of a repayment mortgage.

Additional items on or in the vehicle. The own damage’ section of a comprehensive car policy covers accessories while in or on the car or in the insured’s private garage. In the case of goods-carrying vehicles the accessories have to be on the vehicle.