Between all the different insurance options on the market (pet insurance, anyone?), knowing what type of cover and which policy is right for you and your family can be hard to navigate.
With phrases such as ‘fortuitous’ and ‘Uberrima fidei’ floating around, the process can feel overwhelming. [FYI: ‘Uberrima fidei’ literally translates as “utmost good faith”.]
But don’t leave it in the too-hard basket: insurance can prove invaluable, especially when it comes to protecting your loved ones during a difficult time.
To help with your pursuit of the perfect insurance policy, here’s a list of tricky insurance terms and their meanings.
Actuary
A business professional who helps insurance companies design their insurance cover. They use maths and statistics to help determine the risk of something happening to someone, and how much it will cost to finance that risk. From there, they’ll work out how much a person’s premium should cost.
Accidental damage cover
This type of insurance is aimed at protecting an asset from damage in the case of a one-off, unforeseeable event. It doesn’t cover general wear and tear, but rather a single accident.
Accidental only cover
In terms of life insurance, this cover only insures you in the case of death and sometimes injury as the result of an accident such as a car accident. It doesn’t cover you for illnesses such as cancer. To be covered for both injury and sickness, you would need to have a comprehensive life insurance policy that covered both accident and sickness.
Agreed value
An asset’s agreed value is set by you and your insurer at the beginning of each period of cover, and is often associated with car insurance. Once the agreed value of a car is set, it will remain at that value until the policy renewal date.
Aggrieved party
A party who has been wronged by another party – victims are said to be ‘aggrieved’.
Asset
Something with monetary value that is usually covered by the insurance policy, for example a house or a car.
Benefit
What you receive from your insurer for a personal insurance product such as life or funeral insurance, after your claim is agreed and processed.
Benefit period
In terms of life insurance, it refers to the maximum period of time your income protection policy will pay you for.
Broker
An insurance broker is a business professional who acts on behalf of a person applying for insurance. They act on your behalf, not the insurer, to ensure you are covered by the risks you or your business face. A broker will receive commission from insurance companies, however, they have a responsibility to find the most appropriate insurance products to suit the insured’s needs.
Claim
A request made by the insured for insurer compensation, after suffering a loss that is covered under the policy agreement.
Clause
A section of an insurance policy that outlines conditions that terminate the coverage, as well as exclusions, locations covered by the policy and the duties of the insured.
Coverage
The insurance afforded under a contract of insurance.
Cooling-off period
A time period (usually no less than 14 days) where you are able to change your mind about a policy purchase and receive a refund on any money you have paid.
Declaration
Issued for a new insurance policy and for each renewal term. It identifies who is covered, the policy period and limit of insurance.
Direct Loss
Refers to damage or loss immediately caused by a ‘covered perils’ such as a fire, disaster or theft. The perils covered by your insurer will be outlined in your policy.
Duty of disclosure
The insured has a duty to disclose everything about their situation that could be relevant to the insurer. The duty applies up until a policy is entered in to, or when it is renewed or varied.
It’s always best to be honest about your situation, which includes your health history, physical state and income for life policies.
Excess
Also known as ‘deductible’, excess is the amount of any loss or damage that you must pay before your insurance policy starts to kick in. In other words, it’s the amount of money the insured must pay on a loss.
Exposure
The amount of loss the ensured may experience.
Family life cover
This cover combines whole life with term life insurance, and is designed to cover family members in a single policy.
For example, Real Insurance Family Life Cover is a life insurance policy that is flexible enough to include you, your partner and your dependant children aged two to 17 under the same policy.
General insurance
Insurance that protects your property and your financial risk, for example motor, home or travel insurance. It excludes life insurance and health insurance products.
Homeowners policy
Insurance for property and liability perils to which a homeowner or renter is exposed.
Indemnity
A type of insurance that restores the insured as close as possible to the financial position that they enjoyed before the loss.
Income protection
Cover designed to replace a percentage of your income in the case where you can no longer work due to an accident or sickness.
Insured
A person, party or company covered by an insurance policy.
Insurer
The party who pays for losses in an insurance arrangement.
Liability
When a person or organisation is legally responsible for something. Liability insurance aims to protect a policyholder, in form of compensation, if the policyholder is proved to be the cause of harm for a person or business.
Loss
Unplanned or undesired loss of financial value (such as property) or use (such as a body part). You can only make a claim if you have incurred a loss due to an insured peril.
Loss control
Identifying and acting upon situations which may lead to losses, in order to reduce the risk of that loss.
Loss reserve
Money put aside by the insurer to pay losses.
Moral hazard
The risks regarding to the honesty and integrity of a person seeking insurance, and that may increase probability of losses. For example, a person who has previously been convicted of theft may be more likely to lodge a fraudulent claim.
Morale hazard
Carelessness or disregard about his or her belongings, on the part of the insured which could lead to probable loss.
Negligence
When a person fails to use a degree of care resulting in loss or damage to oneself or others.
No-claim bonus
If a policyholder doesn’t make any claims on their insurance over a few years, an insurer may deem them eligible for a reduced premium. A no-claim bonus is the amount by which a renewal or new business premium is reduced. This is most commonly used for comprehensive motor vehicle policies and some home insurance policies.
Non disclosure
When a person fails to divulge relevant facts to an insurer when applying for an insurance policy. In other words, they have forgone their duty of disclosure.
Occupation category
Grouping together occupations with similar duties and risk levels. It is commonly used for risk ratings on life insurance, TPD and income protection insurance policies.
Payout
Sometimes your insurance company will give you money as part or full settlement for your insurance claim.
For example: in the unfortunate event of a life insurance claim, Real Insurance may give your family a $10,000 advance funeral payout while assessing your claim.
Peril
A cause of possible loss.
Permanent life insurance
An insurance policy that remains active for the life of the insured, rather than for a specified period of time. In other words, it is insurance that does not expire.
Policy
The legally binding contract between an insurer and an insured, that determines the claims the insurer will pay and that documents the agreed terms of your insurance policy.
Premium
The amount of money a person pays an insurance company for their insurance policy, in return for the insurance company’s agreement to cover you.
Premium loading
Additional cost built into the insurance policy to cover losses which are greater than expected for the company, arising from insuring a person who is susceptible to a form of risk.
Product Disclosure Statement (PDS)
A document which describes in clear terms the terms and conditions of your policy and forms part of the contract of insurance. By law, insurance companies must provide you with a PDS.
Replacement cost
The amount of money you need to replace damaged, stolen or lost property by buying new items.
Renewal premium
The amount of premium due upon renewal of an insurance policy and/or paid at renewal.
Risk
The uncertainty concerning the possibility of loss caused by a peril. In other words, it’s the likelihood of something happening that may result in financial loss or injury. Insurance policies help to manage the insured’s risks.
Risk management
The way you manage losses you may experience. For example, to help manage your chances of being burgled, you may install a security camera.
Self-insured
Deciding not to insure an asset with an insurer, and instead putting money aside or a strategy in place to cover unexpected losses.
Severity of loss
The size or financial amount of loss to the insurance organisation.
Term Life Insurance or Death Cover
Insurance that is designed to cover you in the event of death or being diagnosed with a terminal illness and are not expected to live for more than 12 (and sometimes 24) months.
Terminal illness cover
Generally available as part of a standard life insurance policy, terminal illness cover provides a once-off lump sum pay out to you or your nominated beneficiaries while you are still alive but have been medically diagnosed with a terminal illness in which you are not expected to live for more than 12 (and sometimes 24) months after diagnosis. This cover is included in some life insurance policies and may help you get the best medical treatment available, put your personal affairs in order or fulfil other family needs.
For example, designed to ease stress, Real Insurance’s Terminal Illness Cover lets you claim your full life insurance benefit in advance if you are diagnosed as being terminally ill (with 12 months or less to live).
Umbrella policy
Insurance policy over and above a basic liability policy. An umbrella policy only pays once your basic liability limits have been exhausted or if the claim is excluded from the basic liability coverage.
Underwriting
The process where an insurance company determines how much risk exposure it has and how much it will need to charge in order to insure that risk. When a company’s underwriter assess your application they will look at your health, occupation, physical activity and income. The underwriter will then deem you eligible for cover, under specialised terms, or reject your application.
**Optional covers Serious Illness and Total and Permanent Disability cover will expire at age 65.*
Brought to you by Real Insurance.
With Real Life Insurance you can help ensure that your loved ones will be protected financially if life throws a curveball your way. Choose a cover amount from $100,000 up to $1 million (depending on your age), and get covered quickly and easily over the phone in a single call, with no medicals or blood tests required to apply.
This is general information only. Terms and conditions apply. Please consider the Product Disclosure Statement (PDS) available at realinsurance.com.au. This information is provided by Real Insurance, a trading name of Greenstone Financial Services Pty Ltd ABN 53 128 692 884, AFSL 343079. Real Family Life Cover is issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484.
