Glossary


Accident benefit

Usually an optional benefit under Income Protection insurance plans, this will reduce the waiting period (generally to 4 or 5 days) if disability is as a result of an accident.


Accidental death cover

This is an optional benefit often added to a Term Life insurance policy and pays out only in the event of death by accident.


Adviser

Us. Or someone like us being an Authorised Representative of a holder of an Australian Financial Services Licence which specifically covers the provision of advice and sale of life insurance products.


Agreed value

If you have an agreed value Income Protection policy your monthly benefit at the time the policy was issued cannot exceed 75% of your income for the 12 months prior to application. You could be asked to prove this either at the time of application or at the time of a claim.


Automatic indexation

Most policies offer automatic indexation as a free optional benefit. This means that each year the sum insured or benefit will increase by CPI or other nominated percentage and no medical or financial evidence is required from you. You may decline to accept this increase but generally if you decline two consecutive increases it will not be offered again.


Benefit amount

The amount for which you are insured.


Benefit period

The maximum length of time for which Income Protection benefits will be paid.


Business expenses insurance

This is an Income Protection policy that will pay your monthly business overheads in the event of loss following your disability. For further information click here.


Buy back benefit

This optional benefit is offered with Trauma and some TPD policies and means that the death benefit or the Trauma benefit can be reinstated at some future stage (normally 12 months) after a claim has been paid. There are conditions attached and you should read your Product Disclosure Statement carefully.


Child cover

Under a Trauma insurance policy you can take out additional cover on the life of your child. Usually this cover would be limited to a maximum of $200 000, have fewer conditions covered and only be available to children between the ages of 2 and 16.


Cooling off period

This is the period after the insurance company sends you the policy document, during which you can cancel the policy and receive a full refund of premiums with no further obligation on your part. It is usually 28 days.


Disability

This is the insurance company’s definition of disability. This definition varies between companies.


Duty of disclosure

You must disclose all material facts and answer all questions truthfully at the time of application. Failure to do so, could cause the insurer to repudiate a claim or cancel your policy from inception.


Exclusions

These are events, circumstances or conditions against which you have no insurance. These include medical conditions and hazardous pastimes.


Expiry age

Most policies have an expiry age. Typically Term Life insurance would expire at age 99 but Income Protection policies would expire at age 65 or 70.


Financial planning benefit

Most good lump sum insurance policies offer a financial planning benefit which is an additional amount (usually up to $5000) which will be paid to a licenced Financial Planner to provide you with advice following the payment of a lump sum claim.


Funeral Expense

This is often called an Advanced Payment Benefit and is a benefit under a Term Life policy which allows for a small immediate payment to meet funeral or similar expenses.


Guaranteed insurability

This is a benefit which allows you to increase your sum insured or benefit either at certain future ages or following defined events (such as the birth of  a child) with no further evidence of health required. There are limits applicable to the amount of increase available.


Guaranteed renewable

All good quality policies are guaranteed renewable. This means that as long as you pay your premium and comply with the policy conditions the insurance company will guarantee to renew your policy no matter what other of your circumstances have changed. Even if you have had a claim they will renew your policy and cannot increase your premium in isolation.


Guaranteed upgrade

As new features, benefits and definitions are continually evolving, a good policy will have a Guaranteed Upgrade feature which means that as these new features are introduced they will automatically be included in your policy.


Income protection

Insurance that will pay you a monthly benefit in the event of you being unable to work as a result of sickness or accident. For further explanation, click here.


Increasing claim benefit

This is an optional benefit available with Income Protection insurance policies and means that your benefit will increase each year whilst you are on claim by CPI.


Indemnity policy

If you have an Indemnity Income Protection policy the monthly benefit will be the lesser of the insured benefit or 75% of your pre-disability earnings. For pre-disability earnings, some insurance companies will use the 12 months prior to disability and some will use the highest 12 month period in the 3 years prior to disability.


Interim cover

Most Term Life, TPD and Trauma policies will offer interim accident only cover for the period following lodgement of the application. This cover is very limited and only for a specific period.


Level premium

This means that your premium remains the same each year if your sum insured or benefit does not increase. Usually level premiums convert to stepped premiums at age 65.


Life insured

This is the person whose life is insured under the policy.


Product disclosure statement (PDS)

This is a document required by law that describes the policy in detail and outlines all terms and conditions. It should always be read prior to making an application for insurance particularly if you are not receiving advice from a qualified adviser.


Policy owner

This is the person or entity that owns the policy and who will direct where the proceeds are to be paid.


Premium waiver

This benefit is included in most policies and means that while benefits are being paid no premiums are payable by you.


Stepped premiums

This means that each year your premium will increase based on your age at the time.


Superannuation benefit

This optional benefit under an Income Protection policy will pay the equivalent of your employer’s superannuation contribution into your nominated superannuation fund. It is usually limited to a maximum of 10% of your salary.


Terminal illness benefit

This is a benefit included in most modern Term Life policies and it means that if you are diagnosed as having less than 12 months to live the sum insured will be payable.


Total & permanent disability

The definition of total and permanent disability is generally able to be selected by you when applying for the policy. It could mean that you are unable to ever perform your own occupation again or that you are unable to ever again perform an occupation for which you are suited by training, education or experience or it could mean that you are unable to ever again perform some of the activities of daily living like dressing or washing. For further explanation, click here.


TPD insurance

This is an abbreviation of Total & Permanent Disability insurance.


Trauma insurance

This insurance pays a lump sum in the event of the diagnosis of a traumatic condition such as a heart attack, cancer or stroke. For further explanation, click here.


Waiting period

This is the period following disability for which no income protection benefits will be paid.


NOTE: This glossary is intended to provide generic information and a basic understanding of common terminology used in insurance policies. It is not to be relied on as being the definition of a word or phrase used in your policy. For this purpose, you should refer to your policy document or Product Disclosure Statement.


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