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This section offers general guidelines by which to identify long term insurance.

Perhaps the most obvious way of spotting a long-term policy is that only a company authorised to write long-term business may underwrite it. After this, the distinctions between long term and general business are not always clear.

However, there is a distinction in case law between indemnity insurance and contingency insurance.

Indemnity insurance relates to a loss of some description and the insured is indemnified by a reference to the amount of their loss, for example home contents insurance usually contains an element of insurance against theft or burglary.

Under a contract relating to contingency insurance, a loss is not required in order that the insured might benefit under the policy. Instead, the contract is an agreement to pay a specified sum of money when a particular event occurs, whether or not that event actually constitutes a loss to the insured.

A “long term� policy is generally not a contract of indemnity; in that it pays out a sum of money on an event that, although may be inevitable, is uncertain in time. For example:

• death (or a given date if death has not first occurred)
• marriage
• birth.

Such policies do not attempt to provide a full indemnity and all that is necessary is for the insured event to occur. However, while general insurance policies are usually indemnity- based, and long-term policies are usually contingency-based, there are some exceptions. For example, a policy which pays out on accidental death is likely to be treated as a contingency contract, even though accidental death-only insurance usually falls under general insurance and is therefore liable to IPT (Permanent Health policies, are excluded from the definition of accidental death policies).

»Ê¹ÚÌåÓýapprefore, it is not always correct to compare the distinction between contingency contracts and indemnity contracts to that between Schedule 1 part I business or part II business (see IPT04100).

Although some policies are described as classes of “long termâ€� business, time limits are only specifically mentioned in two of the seven classes. »Ê¹ÚÌåÓýappse are class II, Marriage and Birth (written for a period of more than one year) and class IV, Permanent Health (written for a period of not less than five years, until normal retirement age or without time limit). However, any contract that is covered by Schedule 1 part II of the RAO 2001 may be treated as exempt even if they are cancelled or paid off early. For example, a life insurance contract written to cover a policyholder for one month, or a Permanent Health contract originally written without limit of time but which is terminated after 3 months.