The life insurance industry is full of jargon and terminology that can be hard to understand for the average Australian. While life insurance can seem like a very complex product, we’ll do our best to make it as simple as possible in the glossary below.
Keep in mind that this is only a general overview of these terms, and we may not cover everything you need to know before taking out a policy. For more information, you can speak to an expert by calling 1800 880 569.
These terms apply to multiple different life insurance products. To learn more about the different types of life insurance, read our handy guides here:
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
Accidental death cover is a form of life insurance that pays a benefit if the insured person dies as a result of an accident (e.g. drowning, car accident). The definition of a death by accident could differ between insurers, so it’s important you consider the policy terms and what is defined as an ‘accident’ or ‘accidental’ prior to taking out cover.
An any occupation definition means you can claim when you can’t work due to sickness or injury in any occupation you’re suited to, within the transferrable skills you attained through your education, training or experience.
See own occupation for more information.
A beneficiary is the recipient of your life insurance benefit in the event of your death. This could be:
You may be able to nominate more than one beneficiary.
Typically used for income protection, the benefit period is the length of time you receive your benefits if your claim is successful. So, for example, you claim on your income protection policy and your benefit period is two years. If your claim is approved, you will then receive your monthly income protection payments from your insurer for those two years following your waiting period.
A claim is when you apply for payment from your insurer due to an event you’ve experienced that may qualify you to receive a benefit payment based on the terms of your policy. This could be a claim made by your family or another beneficiary for a death benefit, or a claim made by yourself under a critical illness, income protection or TPD policy.
When an insurer assesses an application for insurance, they’re trying to determine whether or not they’re able to offer you insurance. Insurers determine this based on the information you provide generally relating to your health and lifestyle.
Some factors that may be considered include:
Your obligation to let your insurer know this information is called your ‘duty to take reasonable care not to make a misrepresentation’. If you don’t let them know, this may affect your ability to receive a benefit if you make a claim.
The amount paid to your beneficiary following your death.
Some policies won’t include cover for certain conditions, sometimes depending on your health and lifestyle factors; these are called exclusions. You’ll be notified of any exclusions when you apply for cover so they won’t take you by surprise.
The time when your insurance policy expires, as set out in the policy’s schedule. After this period, the policy can no longer be claimed on. Depending on your policy, this could be a set amount of time or when you reach a certain age.
On many life insurance policies, your benefit amount and premiums can increase relative to inflation. This is referred to as indexation and can ensure that your policy will still be sufficient if the cost of living increases.
If you don’t pay your premiums within a set period as outlined in your policy, it may lapse or be cancelled. Once it lapses, you’re no longer covered.
The life insured (or ‘the insured’) is the individual named on the insurance policy as the person covered by the insurance. This is not always the same as the policy owner, as you may be able to take out a policy with another person as a policy owner.
When you make a successful claim on a term life, TPD or trauma insurance policy, you may be paid a one-off benefit payment based on your total sum insured. This is referred to as a lump sum payment.
An own occupation definition means, you can claim if you can’t continue to work in your usual occupation (that you were working in at the time of disability) because of your injury or illness.
See any occupation for more information.
This is the contract between you and the insurance company. In it, you agree to pay for insurance and the insurer will provide a benefit if you make a successful claim, as outlined in your policy schedule.
The anniversary date that a policy was issued. This generally becomes relevant at the time of renewal (e.g. one year after you first took out your insurance).
Loading is an increase to your premium due to a higher likelihood of death, injury or disablement or other relevant factor(s).
The actual date at which an insurance policy for the life insured becomes active.
The sum insured is the amount the life insured by the policy is covered for. This amount may change subject to the terms and conditions of your policy.
The term of your life insurance is a predefined amount of time when your policy is in effect. Most life insurance policies continue to provide cover until this term ceases, provided the policy is renewed each year.
A terminal illness (in the context of life insurance) is an incurable condition resulting in a life expectancy of less than 12 or 24 months (depending on the policy wording). The diagnosis and prognosis must be confirmed by a medical professional. Any payment made due to a life insurance claim is subject to the terms and conditions of the Product Disclosure Statement (PDS).
In Australia, term life insurance is commonly referred to as just life insurance or death cover. It’s a policy that provides cover for a defined term that pays a benefit upon death or diagnosis of a terminal illness.
Trauma is a severe medical event (e.g. cancer, stroke or heart attack) that you can insure against with a trauma insurance policy (also known as critical illness insurance). The exact medical events considered ‘trauma’ differ between insurers and policies.
Because of this, be sure to refer to the PDS to establish what’s covered in your situation.
A waiting period is a defined period of time that you’re required to wait before a benefit can be paid out. Waiting periods are common on income protection policies.
Now that you know the language that’s used, it’s time for you to learn the basics of life insurance.
