Life Insurance Glossary

Many special terms are encountered when you are reading documents that refer to Life Insurance, Employee Benefits and Superannuation.

The most commonly found of these “jargon” terms are:

Accumulation Plan

This is a superannuation scheme where the final benefit paid to a fund member is calculated from an accumulation of the contributions paid by and/or on a member’s behalf plus a share of an investment income earned by the fund.

Annuity

This is a series of regular payments usually monthly or quarterly received in exchange for a lump sum. Annuities are generally bought from life insurance companies although banks, building societies and other financial institutions may provide them if they wish.

Approved deposit fund

This is a rollover fund set up specifically to hold and invest Eligible Termination Payments. The fund is only available to those who retire or transfer jobs before age 65.

Benefit Promise Plan (defined benefit)

This is a plan where the retirement benefit is defined. A common scheme is based on a multiple of an employee’s salary, e.g. 10% of a salary each year of membership. A member with 40 years of membership would receive a retirement benefit of four times salary.

Bonus

Under participating (with profit) policies the life office adds to the sum assured a share of its fund surplus as a bonus.

Capital Guarantee

A form of investment under which the capital asset value plus any interest amounts as they are declared and added are guaranteed.

Commutation

The practice of converting part of a pension fund entitlement into a lump sum is called commutation.

Deferred Annuity

This is a type of rollover arrangement where the final payout is in the form of annuity.

Eligible Termination Payment

When a superannuation member leaves his employment an Eligible Termination Payment is made. If this is “rolled over” into an approved deposit fund an approved deferred annuity or another superannuation fund, taxation is deferred.

One more term that you should remember is GNG, which stands for the Greater National Group. Business Insurance advice is easily obtained from us at GNG.  As a broker we are independent and deal with a whole range of insurers.  We know what policies are available, what cover they provide and what special conditions or charges might be imposed.  We also know what optional extra covers are available. To know more about us, please visit us at http://www.gng.com.au.

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