Insurance Glossary

A type of income protection insurance policy where the monthly benefit amount is agreed between the insurer and the life insured at the outset of the policy. This amount may be up to 75% of the life insured’s taxable income, and the applicant’s income is usually verified by the insurer at the time of application (by the life insured supplying financial records such as income tax returns, balance sheets and/or profit & loss statements). In the event of a claim, further financial evidence is usually not required.

An agreement under which one party-the assignor-transfers some or all of his ownership rights in a particular property to another party-the assignees. An example might be where a person assigns ownership of their Life Insurance policy to their bank to cover outstanding loans.

The person or the party owner of an insurance policy names to receive the policy benefit if the insured event occurs.

The amount of money paid when an insurance claim is approved.

The time during which periodic income benefits will be paid to a claimant under an income protection insurance policy.

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

Similar to Income Protection Insurance, but is designed to cover fixed business overhead costs such as premises rent, equipment leasing, electricity, the cost of a locum, the salaries of non-income producing staff, accounting and bank fees.

Insurance that is intended to serve the insurance needs of business owners. Usually used in conjunction with a buy/sell agreement which defines the transfer of the shares of a business from one owner to the remaining owner(s) in the event of death or total & permanent disability.

Provides for a lump sum payment in the event that the insured child is diagnosed as having suffered one of the specified conditions listed in the policy document. Most policies cover around 20 specified events, such as cancer, serious accidental injury, intensive care, meningitis and severe burns.

An option under an income protection policy whereby the monthly benefit amount is indexed to the rate of inflation. It is particularly valuable to people suffering with long term disabilities; as it ensures that the value of their monthly income protection benefit payment isn’t eroded by the effects of inflation over time.

The amount of money paid or due to be paid when a person insured under a life insurance policy dies.

Benefits that are payable periodically while an insured continues to be disabled. “Being disabled” is generally defined in terms of inability to work.

A type of health insurance designed to compensate the insured person for a portion of the income they lose because of an injury or illness that prevents them from working. Generally, benefits for income protection insurance are provided for in the form of monthly payments.

Yes. If at any time during the application process you change your mind for any reason whatsoever, you will receive a full refund, no questions asked. This guarantee also continues during the insurers cooling off period.

Yes, you can increase or decrease your cover if your circumstances change. However, you may need to provide further information. Remember it’s always a good idea to regularly review your insurance.

A type of life insurance that provides a benefit if death occurs during the term of coverage or if, at the end of the term of coverage, the insured is alive.

A plan that addresses how best to preserve an individual’s assets after the individual dies. Life insurance is often an important part of an estate plan.

An attachment to an insurance policy that excludes or limits coverage for specific health impairment (such as a pre-existing condition), sporting activity (such as hang gliding), or a specific act (such as suicide or an act of war).

The period of time after delivery of an insurance policy during which the policy owner may review the policy and return it to the company for a full refund of the initial premium.

A benefit that gives the policy owner the right to purchase additional insurance of the same type as the basic policy without supplying evidence of the insured person’s insurability.

An insurance policy that the insurer is obliged to renew as long as premiums are paid at least until the insured attains the age limit specified in the policy, regardless of changes in the insured person’s health.

Insurance that is generally designed to cover medical expenses resulting from injury or sickness. Benefits may include hospital and surgical expenses, dental, optical, physiotherapy and chiropractic expense insurance.

A type of income protection insurance policy where the monthly benefit amount is defined at the outset of the policy but not substantiated by the life insured. This amount may be up to 75% of the life insured’s taxable income. In the event of a claim, financial evidence is required by the insurer (by the life insured supplying financial records such as income tax returns, balance sheets and/or profit & loss statements) and the benefit payment is limited to 75% of the life insured’s taxable income in the 12 months immediately prior to the date of disability.

A system of protection against loss in which a number of individuals agree to transfer risk by paying certain sums of money, called premiums. These premiums create a pool of money which guarantees that the individuals will be compensated for losses caused by events such as fire, accident, illness, or death.

The party in an insurance contract that promises to pay a benefit if a specified loss occurs. Usually an insurance company.

Life insurance purchased by a business on the life of a person (usually an employee) whose continued participation in the business is necessary to the firm’s success and whose death or disability would cause financial loss to the company.

The termination of an insurance policy because a renewal premium is not paid before the end of the grace period.

Premiums that remain the same each year that the insurance policy is in force, and do not increase as the life insured gets older. The Level premium rate may either be guaranteed (never to increase) by the insurance company, or not guaranteed.

Premiums that are based on the attained age of the insured person each year. As the life insured’s age increases over time, so do the premiums.

A report on a proposed insured’s health that is completed by a doctor and is based on a physical examination and questioning of the person to be insured. Such a medical report serves as part of a medical application.

An underwriting risk class that includes people who have not smoked cigarettes (or other substances) for a specified period of time, usually 12 months, before applying for insurance. People in the nonsmoker risk class pay lower premiums than people who smoke.

Part of the fact-finding stage in the personal advice process; the process of developing a detailed personal and financial picture of a prospective client in order to evaluate his or her insurance needs.

A disability that prevents the life insured from engaging in some of the duties of his or her usual occupation or from engaging in the occupation on a full-time basis.

An amount specified in an income protection insurance policy that is payable when the insured suffers a partial disability. Usually the partial disability benefit is a proportion of the full disability benefit, and is based on the life insured’s capacity to earn an income, or the loss of income experienced from working part-time.

A condition that results in an insured person being unlikely ever to return to work. Several definitions of TPD exist complete with definitions considered totally disabled only if their disabilities prevent them from working at any occupation for which they are reasonably fitted by education, training, or experience.

The yearly anniversary of the date on which a policy was issued.

The person or party who owns an insurance policy. The policy owner is not necessarily the person whose life is insured.

The payment or one of a series of payments, required by an insurance company to put an insurance policy in force and keep it in force.

A type of insurance that one insurance company, known as the ceding company, purchases from another insurance company, the reinsurer, in order to transfer risks on insurance policies that the ceding company issued. Retail insurers generally use reinsurance to reduce their level of exposure to large volumes of claims that would adversely impact on profitability.

A type of term insurance which includes a renewal provision that gives the policy owner the right to renew their insurance policy at the end of the specified term (usually 12 months) without submitting evidence of insurability (see also Guaranteed Renewable Policy)

The premium rate charged for insurance on a member of the standard risk class.

The premium rate charged for an insured person that is classified as having a greater than average likelihood of loss, due to factors such as their health history, or height/weight ratio. This premium rate is higher than a standard premium rate, and is often referred to as a premium loading.

Life insurance policy wording which specifies that the proceeds of the policy will not be paid if the insured takes his or her own life within a specified period of time (usually 13 months) after the policy’s date of issue.

A disability that meets the definition in an income protection policy and that entitles the insured to receive full income protection benefits. When a disability begins, it is typically considered a “total disability” if it prevents an insured person from performing the important duties of his or her regular occupation, they are under the care of a doctor, and not working in their own or any other occupation.

Provides for a lump sum payment in the event that the life insured is diagnosed as having suffered (and survives) one of the specified conditions listed in the policy document. Most policies cover around 35 specified events, with up to 80% of claims payments made for heart attack, stroke, cancer, and heart disease.

(1) The person who assesses and classifies the degree of risk that a proposed insured represents. (2) The person or organization that guarantees that money will be available to pay for losses that are insured against. In this sense, the insurance company is the underwriter.

The process of assessing and classifying the degree of risk that a proposed life insured represents.

The department in a life insurance company that selects the risks that the company will insure. The underwriting department tries to ensure that the actual mortality or morbidity rates of the company’s clients do not exceed the rates assumed when premium rates were calculated. The underwriter considers an applicant’s age, weight, physical condition, personal and family medical history, occupation, financial resources, and other selection factors to determine the degree of risk represented by the proposed insured.

The evidence required by an underwriter to successfully assess the eligibility of a proposed life insured for insurance cover. This may include medical records and the results of physical examinations, blood tests, and/or financial records. Underwriting requirements are graduated based on the proposed insured’s age and the amount of coverage requested.

In income protection insurance, a specified amount of time, beginning with the onset of the disability, during which benefits are not payable. Such waiting periods may last from 14 days to 2 years, and are chosen by the insured person when initially applying for the cover.

Life insurance that remains in force during the insured’s entire lifetime, provided premiums are paid as specified in the policy. Whole life insurance also builds a savings element (called the cash value).

Term life insurance that gives the policy owner the right to renew the coverage at the end of each year. This renewal right continues for a specified number of years or until the insured reaches the age specified in the contract.