Insurance Terms Everyone Should Know

At a glance:

• Insurance terms are critical for understanding your coverage and making informed decisions.
• Familiarise yourself with key terms like Agreed Value, Beneficiary, and Benefit Period.
• Be aware of the importance of Grace Periods and the role of Brokers in obtaining the right insurance.

 

 

Understanding insurance terminology is essential to make informed decisions, especially when considering policies like Income Protection, Trauma, Total Permanent Disability (TPD), and Accidental Death insurance. Below is a curated list of common insurance terms, designed to help you navigate the complexities of insurance with ease.

 

Accidental Death

 

An injury resulting in the death of the insured person within 12 months from the date of the injury. Typically, this is covered under policies like Accidental Death insurance, providing financial protection for the beneficiaries.

 

Actively at Work

 

Refers to when an insured person is performing all duties of their regular occupation without restrictions. Being actively at work is often a condition for eligibility for certain types of coverage.

 

Agreed Value

 

The pre-determined amount agreed upon by the insurer and policyholder for the value of an insured asset or benefit. This ensures clarity in compensation amounts, especially relevant in Income Protection policies.

 

Base Salary

 

The amount of salary an insured person earns before additional compensations like bonuses, overtime, or benefits. This is a crucial figure used to determine the level of coverage in income-based insurance policies.

 

Beneficiary

 

The individual or entity named in the policy to receive the benefits upon the insured person’s death. It is important to regularly review and update your beneficiaries to ensure they reflect your current wishes.

 

Benefit Period

 

The maximum duration during which benefits are payable under the policy for a specific injury or illness. This is critical in Income Protection and TPD policies to understand how long you can receive benefits.

 

Blue Collar

 

A term used to describe individuals engaged in manual or physical labor, often used in insurance contexts to classify occupations and assess risk.

 

Broker

 

An insurance broker is a professional who acts on behalf of clients to find suitable insurance policies based on their needs. Brokers play an essential role in helping clients choose the right coverage, such as Income Protection or Trauma Insurance, while navigating the complexities of different insurers.

 

Capital Benefits

 

A lump-sum payment provided in the event of death, total permanent disablement (TPD), or other specified losses. This benefit is often included in TPD or Accidental Death insurance policies.

 

Cessation of Cover

 

The termination of an insured person’s coverage under a policy, which can occur due to retirement, policy cancellation, or other specified conditions.

 

Claim

 

A formal request made by the insured to the insurance company for payment based on the terms of the policy. For example, a claim can be made under a Trauma Insurance policy after being diagnosed with a serious medical condition.

 

Close Relative

 

Typically refers to a spouse, fiancé(e), parent, sibling, or child. This term is important in policies that restrict coverage or benefits to close family members.

 

Continuous Cover

 

A provision ensuring that coverage remains uninterrupted, as long as premiums are paid and no exclusions apply. This is especially relevant for long-term policies such as Income Protection.

 

Cooling-Off Period

 

A specified period during which a policyholder can cancel the insurance policy and receive a full refund, provided no claims have been made. This allows policyholders to reconsider their purchase without financial penalties.

 

Coverage

 

The specific protection provided by an insurance policy, which outlines the scope and extent of the benefits and risks covered. Coverage may vary significantly across different types of insurance policies.

 

Dispute Resolution

 

The process available to policyholders for resolving complaints or disputes with an insurance company. This can involve internal reviews or independent arbitration services.

 

Duty of Disclosure

 

The legal obligation of the insured to provide truthful and accurate information to the insurer before the policy is issued. Failing to disclose relevant facts could result in claim denial or policy cancellation.

 

Excess

 

The amount the insured must pay out-of-pocket before the insurance company covers the remaining cost of a claim. This is also known as a deductible in some policies.

 

Exclusions

 

Conditions or circumstances that are not covered by the policy. For instance, pre-existing medical conditions may be excluded from coverage in some policies.

 

Fraud

 

Any deliberate deception or misrepresentation made by the insured to benefit unjustly from the policy. Fraudulent claims can lead to severe legal and financial consequences.

 

General Exclusions

 

Standard exclusions listed in most insurance policies, outlining situations or conditions not covered by the insurance.

 

Grace Period

 

A specific period after the premium due date during which a policyholder can still pay without losing coverage. This is a crucial feature, especially for those with Income Protection or TPD insurance, where missing a payment could lead to unintended lapses in coverage.

 

Inclusions

 

Specific conditions or circumstances explicitly covered by the insurance policy, indicating the scope of the protection provided.

 

Income

 

The total earnings before taxes or deductions, often used to calculate the level of benefit in Income Protection policies. It is vital for determining how much replacement income the insured can expect.

 

Indemnity

 

The principle of indemnity ensures that the policyholder is restored to their financial position before a loss, without profiting from the insurance.

 

Indexation

 

A method used to adjust the value of benefits or premiums in line with inflation to ensure that the policy retains its purchasing power over time.

 

Insured Person

 

The individual covered under the insurance policy. This can be the policyholder or another person, depending on the policy terms.

 

Lump Sum

 

A one-time payment made under the policy, commonly associated with TPD, Trauma, or Accidental Death insurance policies.

 

Misrepresentation

 

A false or misleading statement made by the insured that can lead to the insurer voiding the policy or denying claims.

 

Permanent Disability

 

A condition that permanently prevents the insured person from working in their usual occupation or any occupation for which they are suited by experience or education.

 

Policyholder

 

The individual or entity that owns the insurance policy and is responsible for paying premiums.

 

Premium

 

The amount of money paid by the policyholder to the insurer for coverage, typically on a monthly or annual basis.

 

Renewal

 

The process of continuing an insurance policy beyond its initial term. Renewal may involve changes to premiums or terms based on risk reassessment.

 

Total Permanent Disablement (TPD)

 

A condition where the insured is permanently unable to work in their usual occupation or any similar role, with little to no prospect of recovery. This often results in a lump sum payout under TPD insurance.

 

Waiting Period

 

The time an insured person must wait before being eligible for benefits after an incident occurs. This is a common feature in Income Protection and Trauma insurance policies.

 

Understanding key insurance terms is essential for making well-informed decisions about your financial protection. Whether you are considering Income Protection, Trauma, TPD, or Accidental Death insurance, familiarising yourself with these terms will help you better assess your needs and select the right policy. Always review policy details carefully and consult with a broker if you have any questions about coverage or specific terms.