Jargon buster: Personal insurance edition
Written and accurate as at: Mar 15, 2022 Current Stats & Facts
Many industries use jargon (technical words)—and the finance industry is no exception. In many instances, understanding this jargon can be helpful when making informed personal finance decisions.
With this in mind, we have put together another jargon buster article. However, the focus here is to help you understand some of the more commonly used jargon in relation to personal insurance.
Personal insurance jargon busters
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Agreed value benefit type. In the event of an income protection policy claim, the benefit payments payable to you is the sum insured agreed upon (and verified) at the time of the policy commencement date.
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Any occupation claim definition. In the event of a TPD policy claim, you must be assessed as being incapacitated solely due to sickness or injury, to such an extent, that you are unlikely ever to be able to work in any occupation for which you are reasonably suited by training, education, or experience.
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Benefit payment. In the event of a successful claim, the full (or partial) payment of the policy sum insured.
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Benefit payment period. The maximum duration you will receive the sum insured of an income protection policy if you were unable to work.
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Certificate of insurance. A document detailing the policy—for example, the type of cover, the sum insured, any specific exclusions, and the premium type and amount payable.
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Child trauma benefit. The provision of a lump-sum benefit payment to you if your child was to, for example, suffer a specified medical event or pass away.
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Claiming. The process of applying for a benefit payment due to an event occurring that meets the claim definition(s) set out under the policy.
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Commencement date. The date the policy started.
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Core cover provisions. Features and definitions that are primary considerations when determining the need for a particular type of cover.
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Duty to take reasonable care not to make a misrepresentation. In an application, you are required to disclose every matter to your knowledge about your health, occupation, pursuits and pastimes, and income.
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Exclusion. An event or circumstances leading to a claim which aren’t covered under the policy.
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Guaranteed future insurability. Upon meeting a specified life event, the option to increase the sum insured without having to provide health evidence or go through the underwriting process.
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Hybrid premium style. The premiums payable are, in essence, a blend of the features of both a stepped premium style and a level premium style.
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Indemnity value benefit type. In the event of an income protection policy claim, the benefit payments payable to you is the sum insured agreed upon at the time of the policy commencement date, but you'll have to verify what you are earning at claim—and if it’s less, you will be paid the lesser amount.
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Income protection insurance. A cover type that provides monthly benefit payments in the event you are unable to work for a period of time due to a sickness or injury.
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Level premium style. The premiums payable are calculated based on your age at the commencement of the personal insurance policy and remain (relatively) fixed over time.
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Life insured. The insured person under the policy.
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Life insurance. A cover type that provides a lump-sum benefit payment in the event you pass away or are diagnosed with a terminal medical condition.
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Needs analysis. The process of determining the appropriate insurance (eg cover types and sums insured) required by assessing your financial needs in the event of your passing or disablement, or a traumatic event.
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Nominated benefit recipient. The person(s) nominated by you to receive all or part of the benefit payment.
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Ownership structure. For example, super or non-super: your super fund trustee owns the policy on the member’s life (your life); or, you own the policy on your own life for personal protection purposes, and you pay the premiums.
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Own occupation claim definition. Assessed by the insurer as being incapacitated to such an extent, solely because of a sickness or injury, as to render you unlikely ever to be able to work in your own occupation.
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Policy owner. The person shown in the certificate of insurance as the person to whom the policy has been issued.
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Premiums. The regular payments made to the insurer for ownership of the policy.
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Product Disclosure Statement (PDS). The document prepared by the insurer detailing all of the terms and conditions of their cover types.
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Revised terms. During the application process, the underwriter may assess the need to take risk reduction or avoidance action in relation to your circumstances—this can entail the issuance of revised terms (ie a loading, an exclusion, or in some instances a restriction/modification or decline to offer the cover).
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Risk impact. The consequence severity (ie financial and/or health-related) associated with a risk occurring (eg trivial, minor, moderate, major, or extreme).
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Risk probability. The likelihood of a risk occurring (eg rare, unlikely, moderate, likely, or very likely).
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Risk reduction or avoidance. Based on an assessment of risk probability and impact, you choose to mitigate a specific risk.
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Risk retention. Based on an assessment of risk probability and impact, you choose to retain a specific risk.
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Risk transfer. Based on an assessment of risk probability and impact, you choose to share a specific risk with a third party, such as an insurer (upon which they conduct their own risk assessment).
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Stepped premium style. The insurance premiums payable are calculated based on your age and recalculated on the anniversary of the personal insurance policy each year.
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Supplementary cover provisions. Features and definitions that are secondary considerations when determining the need for a particular type of cover.
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Trauma insurance. A cover type that provides a lump-sum benefit payment in the event you were to suffer a specified traumatic event (eg heart attack, stroke, or cancer).
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Total and permanent disability (TPD) insurance. A cover type that provides a lump-sum benefit payment in the event you become totally and permanently disabled due to a sickness or injury and therefore unable to work again.
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Underinsurance. Inadequate insurance or no insurance coverage to meet your overall financial needs.
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Underwriting. The process where the insurer’s underwriter assesses your application.
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Waiting period. The length of time from when you stop work before the policy will start paying you the benefit payments.
If you have any queries about this article, please contact us.
