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A VERY Comprehensive Insurance Glossary

A

ABI
Acquired Brain Injury.

ABS
Australian Bureau of Statistics.

Absolute Assignment
Transfer of all policy ownership rights of a life insurance policy to another person (assignee).

Accident Benefit
Usually an additional benefit as a rider to a permanent plan policy providing extra sum insured in the event of death by accident, and sometimes including a proportion of the death benefit if a specified maim should occur.

Actuary
A number crunching expert in the business of insurance, annuities and financial instruments.

ADHD (Attention Deficit Hyperactivity Disorder)
A common childhood mental disorder showing markedly low attention and very high levels of activity. It is one of the most common forms of learning problems.

ADI
Activities of daily living, also activities of Daily Living (scale).

AFSL
Australian Financial Services Licence.

Agent
A person or entity that is authorised to act on the insured’s behalf.

Agreed Value
The amount that the insurer will pay the insured if their claim is successful, irrespective of the market value of the asset insured.

AIHW
Australian Institute of Health and Welfare.

AMD (Age-Related Maculopathy)
The most common causes of blindness in the elderly, involving changes to the macula, the part of the responsible for clear sharp vision.

ANB
Your Age at your Next Birthday.

Annual Premium
The amount required or expected to be paid in a year under a policy.

Anniversary
The date on which a policy is renewed.

Anxiety Disorder
A group of mental disorder marked by excessive feelings of apprehension, worry, nervousness and stress.

Any Occupation
A policy holder (insured) will be considered disabled only if he/she is unable to work in any occupation for which he/she is qualified by education, training, or experience.

Aphasia (Speech)
A language disorder that results from damage to one or more of the language areas of the brain, impairing the generation and understanding of language.

APIR Code
A unique product identifier used in the financial services industry.

Applicant
The person or organisation applying for the insurance policy.

Application
A form that must be completed by an individual or other party who requires insurance cover. This form provides the insurance company with all the information required to get the insurance cover requested.

APRA
Australian Prudential Regulation Authority.

Apraxia
Apraxia (also referred to as apraxia of speech, verbal apraxia or dyspraxia) is a speech disorder arising from damage to the relevant area of the brain’s cortex involved in skilled movement. It may de developmental, or acquired for stroke, head injury, brain tumor and infections.

ARBI
Alcohol Related Brain Injury.

ARSN
Australian Registered Scheme Number.

ASIC
Australian Securities & Investment Commission.

Asset
An investment normally referring to financial assets, such as shares, bonds, property, cash or units in a managed fund.

Assets Test
A calculation used by Centrelink and the Department of Veterans’ Affairs to determine the value of a person’s assets and thus their eligibility for a pension.

Asset Value
The value of the assets underpinning a security. These may not be fully reflected in the price of a security. (see also Net Asset Value).

Assignment
Process involving endorsement by which ownership of a policy is transferred.

Assurance
British and French term for insurance.

Asthma
A chronic, inflammatory disease of the lung’s air passages that causes widespread narrowing of the passages, obstruction to airflow, episodes of shortness of breath and chest tightness.

Authorised Representative
A person who acts on behalf of a licensee. Note an authorised representative is not necessarily an employee of a licensee.

Autism
A pervasive development disorder involving disturbance in cognition, interpersonal communication, social interactions and behaviours (in particular obsessional, ritualistic, stereotyped and rigid behaviours).

Aviation Exclusion
A life insurance definition that specifies that a death benefit will not be payable if the person insured dies because of certain aviation activities.

AWOTE
Average Weekly Ordinary Time Earnings – A ratio used to index the highest average salary (HAS) if retiring early.

B

Back-end Load or Charge
Also known as the Redemption Fee. A fee charged from the savings portion of an unbundled policy, if surrendered before a certain period.

Basic Death Benefit
A simple death policy that has no additional options or features. It’s also known as a No Frills Life Policy.

BDQ
Brief Disability Questionnaire.

Bed Confinement
When a person spends most of their time in bed due to the inability to perform the normal day to day functions (most probably due to an injury, sickness or disability).

Beneficiary
The Person or party the owner of an insurance policy nominates to receive the insurance benefit.

Benefit
The money that the insurance company pays out once your claim is approved.

Benefit Period
This is the time you are eligible to receive income benefits from your income protection policy or Salary Continuance Policy.

Betterment
The process whereby an object is enhanced from its original state. Adding a pergola to a house is an example of betterment.

Bipolar Disorder
A mental disorder where the person may experience depression at one time and mania at another. Formerly known as manic depression.

Blanket Policy
Provides coverage for accidental injuries or deaths for special groups of lives.

Bonus
A share of the life office’s surplus that is added to the face value of the participating policy and is payable under the same terms as the sum insured.

Bracket Creep
The movement of a person’s wages into higher tax brackets as a result of wage increases.

Broker
A person who acts on behalf of the client and has their primary responsibility to the client. The term “broker” does not exist under the Financial Services Reform Act.

Bundled
Bundled means the incorporation of a number of services or features into a single product. For example, a bundled insurance contract may combine the risk element of insurance together with the investment element.

Business Day
A day other than Saturday, Sunday or bank or public holiday.

Business Insurance
Simply insurance that is intended to serve the insurance needs of a business rather than an individual.

Business Continuation Insurance
An insurance policy that allows the business to continue operation if the owner or a key person dies.

Business Expense Insurance
A Insurance policy which covers the business’s expenses if the person who keeps the business afloat becomes sick and cannot work.

Business Overheads Insurance
Usually part of a disability income protection policy, it indicates the amount the insured will receive to cover the running costs of a business as distinct from the insured’s income.

Buy Back Option
This benefit is often available on a trauma or critical illness policy. The benefit offers the policy owner the ability to repurchase or “buy back” a level of term life insurance cover on the life insured after a claim has been made for a “critical illness”. This is available at a set time after the claim, for example, one year or a third of the sum insured over three years. For example, a person has a trauma policy for $200,000 which covers several trauma and death. They suffer a heart attack as defined under the terms of the policy and are paid $200,000. By exercising the “buy-back” option, they can repurchase up to $200,000 of term life cover without any medical evidence. Usually any exclusions or special conditions contained in the original policy will continue and premiums will be charged at the then published term rates for a person of that age and sex.

C

Cancellable Policy
A policy that the insurer can cancel for a number of specified reasons.

Capital Purpose
If the premium of a policy is used to build up capital, it is not tax deductible as a business expense.

Cash Value
Also known as surrender value or cash surrender value. The value of a life insurance policy should the policy holder terminate it. It is the amount the owner of the policy would get, representing premiums paid and bonuses or interest earned on those premiums, minus administrative, sales and other costs incurred by the insurance company. If the policy holder dies, the life office may keep the cash value.

Cataract
A cloudiness or opacity of the lens of the eye which may cause vision problems. Cataracts are typically associated with ageing but occur birth.

Certificate of Currency
A certificate issued by an insurer outlining the insurance policy details.

Cerebral Palsy
A non-progressive movement disorder, resulting from an injury to the immature brain in a foetus or infant.

Child Policy
A policy owned by a parent, relation or guardian, which is vested in a child at an age nominated by the policy holder. Vesting age may be between 10 and 21 years. The child then becomes the owner and can continue the policy.

Claim
A request for payment under the terms of an insurance policy.

Claim Investigation
This is the process of obtaining necessary information in order to process the claim. It’s really important to disclose everything up front to insurers.

Claimant
The person that formally requests payment of benefits under the terms of an insurance policy.

Co-Insurance
A co-insurance clause, or an averaging clause, penalizes the insured if they have not taken cover for the full value of their belongings. Co-insurance is only of concern where there is a partial loss. Most insurers now include an 80 per cent co-insurance clause which offers a compromise.

Coke
If you drink too much of the stuff it could cause a few problems.

Conduct Disorder
A repetitive and persistent pattern of aggressive or otherwise antisocial behaviour, usually recognised in childhood or adolescence.

Concurrent Disability
Injuries or sicknesses that have resulted in disablement at the same time.

Consideration
One of the elements for a binding contract. Consideration is acceptance by the insurance company of the payment of the premium and the statement made by the prospective policyholder in the application.

Consumer Price Index
An index measuring the prices at various times of a selected group of goods and services that typify those bought by ordinary Australian households. It allows comparisons of the relative cost of living over time, and is used as a measure of inflation.

Contribution
An investment, either single premium or regular premium made by an investor into a fund, usually superannuation.

Conversion Option
An insurance company may offer the policy-owner the opportunity to convert one insurance policy into permanent life insurance without the requirement of additional medical evidence. The conversion would be at the rates and applicable terms and conditions at the time the option is exercised.

Cooling off period
A period allowed when a person who has entered into a contract e.g. Insurance Policy may cancel it without incurring any penalty from the insurance company.

Cover Note
A temporary form of insurance, usually only given for a short period of time until the actual policy is processed and in place.

CSDA
Commonwealth/State – Territory Disability Agreement.

CTP Insurance
Refers to compulsory third party (CTP) insurance. CTP insurance provides compensation for people who are killed or injured in a car accident through driver negligence.

D

Days of Grace
After the payment of the first premium, the policy owner is given 30 days grace to pay subsequent premiums. The policy cannot be cancelled during this period. Should a claim arise during the 30 day grace period, the benefit will usually be paid and outstanding premiums deducted from the benefits.

Death Benefit
The amount of money paid under a life insurance policy if the insured person dies.

Death Benefit Advancement
A benefit that allows a policy owner (insured) to receive a specified portion of the policy’s death benefit before the individual insured has died.

Death Claim
A request for payment of benefits under the terms of a life insurance policy.

Decreasing Term Life Insurance
A type of life insurance policy that has a decreasing death benefit during the period of cover.

Deferred Premiums
Premiums that are due after an insurer’s Annual Statement date but before the next policy anniversary.

Defined Event
Events for which the policy will protect the insured for.

Delusion
A fixed false, irrationally held belief that cannot be altered by rational argument. Often found in serious mental disorders such as schizophrenia. Common delusions in mental illness include beliefs that one is being persecuted or controlled by others, is very powerful or is a victim of a physical disease.

Dementia
A general and worsening loss of brain power such as memory, understanding and reasoning. Main types of dementia include Alzheimer’s disease, Pick’s disease, Huntington’s disease and Parkinson’s disease.

Diabetic Retinopathy
A complication of diabetes, caused by changes in the blood vessels of retina and leading to partial or complete blindness.

Disability Benefits
Benefits that are payable periodically while an insured person continues to be disabled.

Disability Income Benefit
Monthly Benefit provided by an Income Protection policy or a Salary Continuance Policy.

Disability Income Insurance
Also known as income insurance or income replacement insurance. A policy that pays an income if the insured is totally disabled for a temporary or permanent period.

Disclaimer
A statement which may allow a person or corporation to avoid liability, if before or at the time of giving advice, that person or corporation makes it clear that he or she accepts no responsibility for his or her statement. Disclaimers are often found in disclosure documents (e.g. Prospectuses for collective investment products), to the effect that the manager of the product does not guarantee the level of performance of the fund or the return of capital to investors.

DSM
The Diagnostic and Statistical manual of mental disorder.

DSP
Disability Support Pension.

Duty of Disclosure
Before entering into a life or income protection contract, a person has a duty to disclose to the insurance company anything that that person knows or could be expected to know which could affect the decision of the insurance company to accept the risk of insurance. This same duty applies when a person extends, varies or reinstates a policy.
The duty of disclosure does not apply to information that would diminish the risk to the insurance company that is common knowledge, that the insurance company knows or ought to know or where the requirement is waived by the insurance company.

Dysarthria
A speech disorder due to a weakness or in coordination of the speech muscles (but not language problem). Dysarthria may be developmental, acquired, or a symptom of conditions such as cerebral palsy and muscular dystrophy.

E

Endorsement
Sometimes called a rider. An annexure to the policy forming part of the policy, often modifying the printed conditions, or adding extra benefits. Also the acknowledgement of an assignment.

Endowment Insurance
An insurance policy that provides a benefit if death occurs during the term of coverage and if at the end of the cover the person insured is alive.

Epilepsy
A tendency to have recurrent seizures (fits) indicating a disorder that arises in the brain or affect is secondarily, through a wide range of causes.

Estate Plan
A plan that addresses how best to distributean individual’s assets after the individual dies. Life Insurance is an important part of an estate plan.

Excess
An amount of money that the insured has to pay should they make a claim on their policy.

Exclusions
Conditions & Situation that are not covered by an insurance policy and specifically stated so in the policy contract e.g. bungy jumping.

Ex-nuptial Child
A child born to an unmarried couple.

Expected Mortality
The predicted number of deaths within a group of people at a given age.

Expiry Age
The age when a disability income insurance policy ceases to provide cover.

F

Fee-for-Service
A payment for a consultation with a Financial Adviser.

Fiduciary Duty
A duty of trust and confidence, to act in good faith and in the best interests of another.

FPA
The professional association for those providing financial planning advice.

Fraudulent Claim
Occurs when the insured person making a claim uses false information in an attempt to get the insurance benefit.

Fraudulent Misrepresentation
When a person knows something is false or untrue and states that it is true.

Funeral Advancement
Some insurance companies have a built in funeral advancement option for Death or Life Insurance Policies. This allows the widow or partner of the policy holder who is deceased to get a portion of the benefit upfront for the funeral expenses until the full benefit is processed.

G

Glaucoma
An eye condition in which vision is impaired by raised pressure within the eye, resulting in damage to the optic nerve.

Grace Period
The period following the date that a life insurance premium is due, during which overdue premiums may be paid. No penalty is applied and the policy remains in force during the grace period.

Gross
The total, before deductions have been taken away.

Group Insurance
An insurance policy that provides cover for a number of people under one primary policy or contract.

Group Life Bonus
A bonus or share of profit arrangement under certain types of group life insurance.

GST
Goods and Services Tax. An indirect tax applied on the consumption of a range of goods and services.

Guaranteed Insurability
An option often attached to policies that give the policy holder the right to purchase additional units of cover at certain specified future dates at standard rates in effect at the time the right is exercised. No evidence of insurability is required.

Guaranteed Renewable Policy
A insurance policy that the insurance company is required to renew, as long as premiums are paid and the insured reaches age limits.

Grief Support
A service offered by some insurers at claim time when partners of policy holders need support e.g. counselling and someone to talk to.

H

Health Insurance
Coverage for hospital, physician, and other medical expenses resulting from illness or injury.

Hazard
A situation that increases the risk of loss e.g. working from high level.

Hazardous Activity
Any activity that will substantially increase the insured’s risk. e.g. scuba diving, bungy jumping, skiing, football to name a few.

Hypertension
Long-term high blood pressure, which may damage the heart, brain or kidneys.

I

IADL
Instrumental Activities of Daily Living (Scale).

ICD
International Classification of Diseases and Related Health Problems.

ICF
International Classification of Functioning, Disability and Health.

ICIDH
International Classification of Impairments, Disabilities and Handicaps.

ICO
International Council of Opthalmologists.

Income
Generally any money received including mages or salary, Centrelink payments or income returns.

Income Protection
Also known as a partial disability insurance (or Salary Continuance), pays the policyholder a monthly benefit if they are temporarily disabled and can’t work. Premiums are tax deductible.

Income Test
A calculation used by Centrelink and the Department of Veterans’ Affairs to determine a person’s level of income and hence their eligibility for a person. Income includes earnings, interest, dividends, and deemed income from financial investments.

Indemnity
Insurance against possible loss or damage.

Indexed
Premium or benefit increased each year in line with Consumer Price Index or other formula.

Indexation
Is the process of adjusting income by way of a price index e.g. consumer price index.

Inflation
An increase in the level of prices of goods and services in the economy. It is typically measured by examining a basket of goods and services (eg. by the Consumer Price Index).

In Force
Insurance contract is current.

IQ
Intellectual quotient (tests).

Initial Premium
The first premium payable for an insurance contract.

Insurable Interest
Until the release of the new Life Act in July 1995, a person could not effect a policy on the life of another person unless he or she had an insurable interest in the life of that other person. This section of the Life Act has now been replaced with the following:“Insurable interest not required. This section applies to: (a) A contract of life insurance, or (b) A contract that provides for the payment of money on the death of a person by sickness or accident. A contract to which this section applies is not void by reason only that the insured did not have, at the time when the contract was entered into, an interest in the subject-matter of the contract.”

Insurability
The degree to which an individual is or is not acceptable as an insurance risk to the underwriting company.

Insurance
Is the protection against a specific loss over a period of time that is secured by the payment of regular scheduled premium(s).

Insurance Age
The age for which life insurance premiums apply. Most companies use age next birthday (NB).

Insurance Bond
Single or annual premium insurance or superannuation policy.

Insurance Trust
A common form of trust, created during the lifetime of the person who creates the trust, that is funded by insurance policies on the life of the trust’s creator or by the proceeds of such policies.

Insured
The person covered by an insurance policy.

Insured Person
A member who is currently insured under the insurance policy provided by the insurer, and for whom the insurer has accepted cover, the premium has been paid in respect to (or agreed to be paid) and whose cover has not been terminated.

Insurer
The Insurance Company.

J

Joint Whole of Life Insurance
One insurance policy that covers two lives and that provides payment of the benefit at the time of the insureds death.

K

Key Features Statement
KFS – A statement which describes the main features of a superannuation or life insurance product and to which an application form is attached.

Key Person Insurance
Protects a business in the event of the loss of a person who is very important to the business and towards the profitability or stability of the business.

L

Lapse
Termination of a policy because of failure to pay the premium.

Lapsed Policy
Termination of a life insurance policy with non-payment of premiums.

Level Premium
Premiums which do not change due to the life insured’s age.

Licensee
A holder of an AFSL.

Life Insurance
Pays a lump sum benefit when the insured person dies.

Life Expectancy
The expected average number of years a group of people of the same age will live.

Life Office
Also known as a life insurance company.

Loading
An extra premium charged for a perceived extra risk above standard rates.

Lump Sum
The Payment of the entire proceeds of a life insurance policy in one sum.

M

Mania
A mental disorder where the person is overexcited, overactive, and excessively and unrealistically happy and expansive, that is, the opposite of depression.

Marginal Tax Rates
Also referred to as “Tax Brackets”. The graduated rates of tax payable on income derived by a person.

Material Misrepresentation
A false statement made by a person applying for insurance.

Means Test
An evaluation undertaken by the Government to assess if a person is eligible for social security payments, such as the age pension. The test assesses income and assets with the lower being the basis for determining the social security payment.

Medical Application
A medical examination maybe required before is approval is grated (this depends on your individual personal health). The results of the medical examination are then reported to the insurance company.

Meniere’s Disease
A disorder of the inner ear, involving episodes of vertigo, hearing loss and tinnitus, often with nausea and vomiting.

Migrane
A recurrent throbbing headache that typically affects one side of the head, often accompanied by nausea, vomiting and other symptoms. It is condition resulting from spasm and subsequent over dilatation of certain arteries in the brain.

Mood Disorders
Disorders in which the fundamental disturbance is a change in affect or mood to depression(with or without associated anxiety) or to elation. The mood change is usually accompanied by a change in the overall level activity. Also known as ‘affective disorders’.

Monthly Benefit
This is the benefit amount the policyholder will receive from an approved claim. This relates to Income Protection Policies and Salary Continuance Policies.

Mortality Rate
The number of deaths in a specific group of people.

Mortality Table
Actuarial model of expected number of deaths each year from number living at each age.

Mortgage Insurance
A policy that allows mortgage lenders to recover part of their financial losses if a borrower fails to full re-pay a loan. Mortgage insurance makes it possible to buy a home with as little as a 5% deposit.

N

Needs Analysis
The process of developing a detailed personal and financial picture of an individual’s insurance needs.

NES
Not elsewhere specified.

NFD
Not further defined.

NHPC
National Health Performance Committee.

Nominated Beneficiary
A person nominated by an investor to receive the proceeds of their investment in the event of the investor’s death.

Non Smoker Risk Class
An insurance risk class for people who are standard risks and who have not smoked cigarettes for a specified period of time, usually 12 months before applying for insurance. People in this class pay lower premiums.

Non Assignment
When a buyer can’t transfer its rights and duties under an agreement without the seller’s prior written consent.

Non-Cancellable Policy
A policy that cannot be cancelled if the insured’s health deteriorates, a claim is made or the policy holder changes occupation.

Non-Forfeiture
The compulsory condition under any permanent plan policy, whereby unpaid premiums are automatically advanced to the policy-owner as a loan to retain the insurance in force. The policy will cease when the advances and interest exceed the surrender value.

Non-Smoking Condition
Premium rates can be divided into rates for smokers and non-smokers. A non-smoker is usually defined as a person who has not smoked for at least 12 months. If the life insured commences smoking after taking out a policy at non-smoker rates, they may have an obligation to inform the insurance company who will then apply the applicable smoker rates. If the life insured does commence smoking, fails to inform the insurance company and subsequently claims a benefit, that benefit may be reduced to the benefit that would have been applicable to a smoker.

O

Occupation Class
A category that an insurance company uses to determine an individual’s work duties.

OECD
Organisation for Economic Co-operation and Development.

Osteoporosis
Reduction in bone tissue caused by loss of calcium from the bones, making them thinner and weaker, and thus more phone to fractures.

Otitis Media
An inflammation of the middle ear usually from infection and resulting in temporary hearing loss, particularly in children.

Otosclerosis
A cause of deafness in adults affecting certain bones in the ear so they cannot conduct sounds normally.

Own Occupation
Disability policy term stating that the insurance benefits are paid when the policyholder is unable to perform the usual duties of their own occupation.

P

Paid-up-life-Insurance
A policy on which no further premiums are due. Will remain in force until surrendered or terminated by death.

Parkinson’s Disease
A brain disease characterized by hand tremors, rigid limbs, difficulty in starting and stopping movements, and often mental effects.

Partial Disability
Partial disability means that a person is not totally disabled but is able to work part of the time or perhaps in another occupation. Definitions differ between insurers. However, it is imperative to understand that for a claim to be paid under the vast majority of definitions in the market place, the insured person must be totally disabled for at least the minimum waiting period before receiving a partial disability payment. The insured continues to be under the advice of a medical practitioner at this time. Full benefits would no longer be paid and all policies contain a formula for working out the partial disability benefit. The formula used in the market place is expressed as A-B/A x Monthly Benefit where A is pre-disability income and B is current income.

Partial Disability Benefit
The benefit amount that the insured receives when you become partially disabled and cannot perform your regular work duties.

PAYE
The benefit amount that the insured receives when you become partially disabled and cannot perform your regular work duties.

PDS
A document containing information about a financial product, including the features of the product, costs that apply, the benefits and risks and other information to enable you to make an informed investment decision. The PDS may contain an application form allowing you to invest in this product.

Permanent Plan Policy
Any policy under which the insured builds up equity in the form of a surrender value. Does not include temporary life insurance or disability policies.

Personal Accident and Sickness
Life insurance policy that pays an income or lump sum in the event of accident or illness. Superseded by income protection insurance.

Permanent and Total Disablement
Disability in which the insured wage earner is forever prevented from working because of injury or illness suffered.

Personal Disorders
Long term abnormal patterns of behavior indicating personality problems, usually apparent by adolescence. They are not usually considered to represent major mental disorders but can be very maladaptive, causing problems or suffering person or those around them.

Personal Insurance
Broadly describes insurance policies that cover personal property and/or health.

Personal Statement
Part of the details required to be given with utmost good faith to the prospective insurer by a proposed person to be insured.

Premium Freeze
A option which allows the insured individual to put his or her premiums on hold for a short period of time.

Policy
The written document that serves as evidence of an insurance contract, including all details of the insurance coverage, policyholder, the insured, and the insurer.

Policy Anniversary
The same date an insurance policy is issued a year later.

Policy Fee
An fee added to the basic premium for the cost of issuing the insurance policy.

Policy Holder
The owner of the policy. Not always the life insured.

Policyowner
Is the person who actually owns the insurance policy. This is usually the insured person, but can also a partnership or a corporation.

Premium
The payment that a policyholder or insured makes to own an insurance policy.

Premium Rate
Premium rates are determined by many variables (eg. Age, sex, smoker, options chosen, benefit period, waiting period etc) which depend on type of contract (ie. Term life, income protection etc). Premiums are set by the insurance company and cannot be changed for an individual alone. Discounts may apply, however, for large sums insured or a no-claims bonus could apply.

Probate
A certified legal document that proves a will is valid thus allowing an executor/s to administer the estate. An estate may not be administered until probate has been granted.

Proposal
An offer to take out an insurance policy.

Pure Endowment Policy
A now rarely used form of endowment assurance where the death benefit is limited to the return of premiums paid, sometimes with interest.

Q

Qualifying Period
Another term for waiting period.

Quartile
A statistical measure dividing a sample into four numerically equal groups. This, ‘top quartile’ means the top 25% of a given sample.

R

Rated Policy
Also called an “extra-risk” policy is issued at a higher-than-standard premium to cover extra risk e.g. heart condition.

Recession
A significant slowdown in the economy, but not of the same severity or duration as a depression.

Recovery Benefit
A benefit paid under a disability insurance policy while recovering from sickness or accident, prior to returning to full-time work.

Recurrent Disability
When a disability keeps surfacing or cropping up.

Refractive error
Inability of images of focus properly on the retina of the eye due to problems in how the eye bends light rays as they enter it.

Rehabilitation benefits
Part of an income protection policy that pays the insured benefits while undergoing rehabilitation that is acceptable to the insurers.

Reinstatement
After the 30 day grace period has lapsed and premium payments have not been made, an insurance policy may be reinstated subject to the terms and conditions of the policy document. This usually means that all conditions will have to be satisfied again and that benefits will only be payable for conditions arising after the reinstatement.

Reinsurance
A contract transferring all or part of a risk or liability already covered under an existing insurance policy. This allows an insurer to protect itself against part or all of the losses incurred when approving all the claims of its members. Think of it as Insurance for insurers.

Reinsurer
An insurance company that accepts the risk transferred from another insurance company.

Renewal Notice
A statement you will receive from your insurer regarding the renewal of your insurance policy.

Renewal Premium
Premiums that are payable after the initial premium.

Renewable Term Insurance
Also known as yearly renewable policy or step-rate term life. Cover remains the same but renewed each year. In this case premium depends on age. Right to renew without evidence of health.

Reversionary Bonus
An addition to the sum insured payable on the same terms and conditions as the sum insured. Can usually be cashed for an amount below face value.

Rider
An addition or proposed addition to a policy.

Risk
The possibility of something unpleasant occurring including the likelihood of a loss or failing to meet a goal.

Risk Aversion
The tendency to require a relatively high return in order to compensate for risk, or uncertainty, in the result. Risk averse investors will tend to settle for a relatively low-risk portfolio, where the return is more predictable.

RSE
The possibility of something unpleasant occurring including the likelihood of a loss or failing to meet a goal.

S

Salary Continuance
Much like an income protection policy, salary continuance is income protection within a superannuation fund. Benefit periods is usually a maximum of 2 years.

Schedule
Contains the details of the insured. It contains the name of the insured, the sum insured, premiums payable and any exclusions or variations that apply to the policy.

Schizophrenia
A serve disorder typically beginning in late adolescence or early adulthood. It is characterized by profound disruptions in thinking, affecting language, perception, mood, behavior, motivation and sense of self. It often includes psychotic experiences such as hearing voices or delusions.

SMHWB
Survey of Mental Health and Wellbeing.

Stepped-Rate Term Life Insurance
Also known as yearly renewable, the opposite of level term insurance. The premium for this type of contract is geared to age.

Statement of Advice (SoA)
As part of the Financial Services Reform Act, the Corporations Act 2001 states that a SoA must be given when providing advice to retail clients (s947). A SoA sets out who is providing the advice as well as information about their remuneration. The SoA must be stated in a clear and concise manner.

Stroke
When an artery supplying blood to the brain suddenly becomes blocked or bleeds, often causes paralysis of parts of the body or speech problems.

Suicide
A life company can only void a life policy on the grounds that the person whose life is insured by the policy committed suicide if the policy expressly excludes liability in the case of suicide.
Most insurance policies will not pay a benefit for self inflicted injury or suicide if the event occurs within 13 months of the commencement or reinstatement of the policy.

Subrogation
The principle of subrogation was established to avoid people taking legal action against another party. When an insurer makes a payment under a policy in compensation for a loss, the insured subrogate all rights and remedies that they would otherwise be entitled to in relation to that loss. Effectively the insurer ‘takes over’ and acts on the insured person’s behalf.

Sum Insured
The maximum amount payable in the event of an insurance claim. This is also the maximum amount of cover you have under your insurance policy.

Surrender Value
The surrender value of a policy is the amount of money the policy owner would receive if the policy were cancelled.
This can be different to the cash value of a policy. It is not usual for risk insurance policies such as term life insurance, disability income or trauma or long-term care policies to have a surrender value. Policies such as whole of life, endowment, universal life and savings plans would have a surrender value.
Surrender values are often less than the premiums paid before the policy has been in force for several years, due to the uneven nature of expenses occurred.

T

TBI
Traumatic Brain Injury

Term Life Insurance
An insurance policy that pays a benefit when the insured passes on. This type of insurance has a set term of coverage.

Tinnitus
A continual noise in the ears or head, such as ringing, buzzing or clicking.

TFN
Tax File Number.

Total Disability
An illness or injury that prevents the insured of ever performing his or her occupational & life duties.

Total & Permanent Disablement Cover (TPD)
Insurance against an event that results in a person becoming totally and permanently disabled.

Trauma
A term derived from the Greek word for “wound”. It refers to any physical or mental bodily injury.

Trauma Insurance
This insurance provides a lump sum payment in the event a policy holder is diagnosed with a prescribed medical condition. Premiums are not tax deductible. Also known as Recovery Insurance.

U

Unbundled
A contract that separately identifies life cover and savings or investment element, usually allowing the policy holder to select the ration of cover to investment. It may be either investment-account or investment linked.

Unbundled Policy
The structure of an insurance product where the individual components are separate and readily identifiable is said to be unbundled. For example, an insurance bond, which has no risk insurance element, only investment, is said to be an unbundled insurance product. Generally, policies are separated into three parts: expenses, insurance and savings. Saving element can be investment account or investment linked.

Underwriter
A person who reviews and evaluates an application for a loan or insurance policy.

Underwriting
The process of evaluating an insurance application to determine the risk involved for the insurer.

Universal Life
An unbundled contract where the policy owner chooses the amount of the premium and selects the level of life cover and the term and the balance is directed to the investment component. The death benefit payable at any time is the amount equal to the sum insured or the balance of the investment account, whichever is the greater. Additional cash deposits can be made to this style of policy which are added directly to the investment element (usually without fees or charges).

Utmost Good Faith
A contract of insurance is a contract of utmost good faith. This means that there is an obligation on each party entering the contract to act towards one another with the best intentions.

V

Voluntary Group Insurance
Same as group insurance, but not the same as group life policy.

W

Waiting Period
The length of time a policy holder must wait after submitting a claim before the insurance company starts paying the income benefits.

Waiver of Premium
In some policies, a provision which relieves the insured of having to make premium payments after he or she has been disabled for 90 days, or the elimination period, if shorter. In addition, premiums paid during those 90 days are refunded and premiums due during the 90 days after recovery are waived.

Whole of Life Insurance
A Life insurance policy that remains active during the insured’s entire lifetime, provided premiums are paid as specified in the policy. Whole life insurance also builds a savings element as a result of the level premium approach which funds the death benefit.

WHO
World Health Organisation

X

Y

Z

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