GLOSSARY OF TERMS
Accidental Cover
Interim cover from when an application form is submitted which provides payment upon accidental death while your application is being formally underwritten usually valid for 90 days.
Accidental Death BenefitThis is an additional benefit to a risk policy providing an extra sum insured in the event of death by accident.
ActuaryA professional person qualified to make calculations and valuations in relation to insurance and investment funds.
AFSLAustralian Financial Services Licence.
Agreed ValueThis is a type of income protection policy where income is proved at the commencement of the policy and this will be the amount payable at the time of claim.
ASICAustralian Securities and Investments Commission.
Authorised RepresentativeA person acting for a Financial Services licensee.
Benefit PeriodIncome protection policies use this term to define the maximum period during which the monthly income benefit is payable (such as for 2 or 5 years or to age 60 or 65).
BeneficiaryA receiver of benefits from an insurance policy.
Body Mass Index (BMI)A ratio between height and weight often used by insurers in assessing a personal insurance application.
Buy Back OptionA benefit usually offered with a trauma or critical illness policy. This option creates the ability to repurchase or “buy back” a level of cover after a claim has been paid for a “critical illness”.
ClaimantAn insured person who makes a claim.
CommissionA payment made to an intermediary in consideration of placement of a policy.
Continuation OptionSome forms of group life insurance cover allow an employee on exiting the employer plan to convert (via a continuation option) into a personally held policy (without health evidence). Continuation options must be exercised within a specific time frame of leaving the employer (e.g. 30 or 60 days).
Cooling Off PeriodConsumer protection/insurance legislation requires an insurer to provide a ‘cooling off’ period for the consumer to determine if the policy meets their needs.
Corporate Authorised RepresentativeA Company employing Sub-Authorised Representatives acting for a Financial Services licensee.
Deductible ExpensesRefers to expenses that can be offset against taxable income, e.g. income protection insurance premiums.
Duty of DisclosureA person has a duty to disclose to the insurer. Anything that the 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. This duty does not apply to information that would diminish the risk to the insurer that is common knowledge, that the insurance company knows or ought to know or where the requirement is waived by the insurance company.
Endowment InsuranceA policy which provides a benefit at a stated date or on prior death of the insured.
ExclusionA modification to a standard insurance contract where an underwriter has accepted part of a risk only, and excluded certain activities or types of risk.
Financial Services Guide (FSG)This is a public document which provides details about a Licensee, an adviser, the services and products they provide and how they are remunerated. Any potential conflicts of interest and a complaints process are also outlined within the document.
Frequency LoadingInsurance premiums are expressed as annual but when a client pays either monthly, quarterly or half-yearly premiums, they may incur an additional loading for paying more frequently.
Group Life PolicyA scheme providing death and/or disablement cover to a group of people, usually the employees of a company. The premiums are usually offered at wholesale rates.
Guaranteed Renewable PolicyA policy which the insurer is obliged to renew if requested by the insured. Premiums may however be varied by the insurer.
Income Protection Policy (or Disability Insurance)A policy which provides income benefits in the event of a loss arising from an illness or accident. Also referred to as income replacement, salary continuance or disability insurance.
IndemnityThis is a type of income protection policy where income is proven at the time of claim.
Industry Superannuation FundsA superannuation fund established to cover more than one unrelated employer usually operating in a particular industry, e.g. hospitality.
Insurance PackagingMost insurers allow you to package multiple insurance products to cover different events.
InsuredThe person whose life is insured.
InsurerThe insurance company that accepts the insured’s application.
Keyperson InsuranceThis is where a business takes out an insurance policy (death or disablement) which it owns on a key employee in the business.
Level PremiumLevel premiums generally remain fixed throughout the duration of a policy. They have a predefined end date which is established at the commencement of the policy. Level premiums are therefore not only determined by the amount of cover required and entry age, but also the duration of the policy. Your premiums are effectively averaged out over the life of the policy. A premium structure which is most suited to long term cover needs.
LicenseeA holder of an Australian Financial Services Licence (AFSL).
Life Insurance CompanyA financial institution with the main business of providing personal insurance against death and disability.
Life Insurance (or Term Insurance)Life insurance or death cover is a legal contract with an insurer to provide a predetermined payment upon death.
Life Insurance QuoteAn estimated premium based on basic standard personal information, eg age, gender etc.
LifewiseLifewise is a long term public awareness initiative of the Australian life insurance industry aimed at educating Australians about the personal risks they face in life, and how they can better manage those risks.
LoadingAn additional premium charged for additional risk.
Lump SumA benefit payable in cash rather than as an ongoing income benefit/stream.
Monthly BenefitThe amount payable monthly to the insured under an income protection policy.
Mortality TableAn Actuarial calculation of expected number of deaths each year from the number of persons living at each age and each gender.
Multi Life DiscountsMost insurers provide premium discounts associated with multiple life applications such as joint spouse applications and business associates etc.
Non-SmokerA non-smoker is a person who has not smoked in the 12 months prior to applying for insurance. Premium rates are normally lower than for a smoker.
Paid-up PolicyA policy where no further premiums are due and payable.
Personal StatementAn insurance applicants personal health, financial details etc given to an insurer which helps form the basis of an underwriter’s decision.
Personal Medical Attendants Report (PMAR)A confidential medical report from your doctor regarding your personal health history.
Policy OwnerA person who owns an insurance policy, commonly the insured person, but it may be another party such as a spouse or business partner or even a company.
Policy ScheduleThis is the document issued by the insurer which outlines the specific benefits, terms and conditions as well as the premium under the policy contract.
PremiumAn amount payable to an insurer for the insurance cover provided.
Product Disclosure Statement (PDS)A legal document lodged and registered with the appropriate regulatory authority that sets out policy terms, conditions etc. Also usually includes the Policy Application.
ProposerThe person who takes out insurance on a life insured (i.e. the policy owner).
Qualifying PeriodThis is also known as the waiting period under an income protection policy.
ReinsuranceAn insurer transferring part of the risk to another insurer.
RiskThe chance of a loss.
Risk InsuranceA generic term referring to personal insurances such as life insurance and income protection.
Risk ManagementA strategy to deal with risk – such as risk transfer, risk avoidance and risk retention.
Salary ContinuationProvides income payments in the event of an illness or accident. Usually provided on a group basis under a superannuation plan (i.e. to an employee of a company).
Self InsuranceRefers to the practice of an entity/individual paying funds into a fund they directly control rather than using an insurance company to write a policy. The individual is effectively retaining the risk rather than transferring the risk.
Statement of Advice (SOA)An SOA sets out the advice you’ve been given, the basis of the advice, adviser remuneration and any interests, associations or relationships that could influence them.
Stepped PremiumStepped premiums are linked to age so the premium rate increases, or ‘steps up’, each year in line with risk.
Sum InsuredThe amount of insurance cover that is payable by the insurer upon certain conditions or events being met.
Surrender Value (or Cash Value)The accumulated net worth of a whole of life/endowment insurance policy if it were to be cashed-in prior to maturity.
Terminal IllnessThe diagnosis of the life insured of an illness which in the opinion of an appropriate specialist physician is likely to result in the death within 12 months of the diagnosis regardless of any treatment.
Total and Permanent Disablement (TPD)Pays a lump sum benefit in the event that you are totally and permanently disabled as defined by your insurer.
Trauma Insurance (Crisis Cover / Critical Illness Cover)Pays a lump sum benefit in the event that you suffer a trauma event such as a heart attack, or cancer as defined by your insurer.
UnderwriterAn insurance professional who determines the level of risk associated with a proposal and determines whether that risk will be accepted or not by the insurer.
UnderwritingThe process whereby an underwriter determines and evaluates risk.
Utmost Good FaithAn necessary element of an insurance contract where the insured and the insurer enter into a contract where each party has an obligation to act with the best intentions towards the other.
Waiting PeriodThe first part of a period of disability, for which no benefit is payable (commonly 14, 30, 60 or 90 days but can be up to 2 years).
Whole of Life PolicyA policy which provides a benefit at 95 or death of the insured whichever is prior.