Life Insurance Glossary
Life insurance can be a tricky ballpark to navigate, especially if you’re unfamiliar with all its legal terms and jargon. So, we’ve put together this life insurance glossary to help you cut through the ‘legalese’ and find out exactly what you’re getting into.
Please note that these are general definitions in relation to life insurance and that you should always refer back to your policy’s terms and conditions.
Accelerated Death Benefit/Terminal Illness Benefit
A benefit that can be attached to a life insurance policy which enables the policyholder to receive payment if the holder becomes terminally ill. To receive the benefit, you must be diagnosed with a terminal illness with a limited life expectancy (for example, of a year or less).
This is known as the Death & Terminal Illness Benefit as part of our Loan Protection Plan product.
Accidental Death Benefit (also known as Accidental Death Cover)
A benefit paid to the beneficiary of an accidental death insurance policy or a life insurance policy.
Accidental Injury
An injury that resulted from an accidental cause rather than a disease process or long-term medical condition.
Actuary
A professional who assesses and manages the risk of events and helps to create policies for clients and businesses to minimise such risk.
Assessor
Also known as a “loss adjustor,” an assessor is a professional who acts for an insurance company by investigating claims to ensure validity.
Beneficiary
The person or persons or other entity that receives the benefits payable under a life insurance policy. In some cases, the policy holder may nominate who is to receive the proceeds of the insurance benefit. This could be:
- Dependants (spouse or children)
- Trustee of the estate
- Anyone named in the policy/joint policy holder (non-dependant person)
Benefit
An entitlement or payment made to an insurance holder after the occurrence of an insured event (for example, such as death or disablement) in either a lump sum or ongoing payments.
Benefit Period
If your claim is approved, the benefit period is the duration of time you receive benefits from your insurer.
Capital
Capital refers to the financial assets an insurance company must have in order to pay claims.
Claim
A request made to the insurer for financial compensation (a benefit) that a policyholder or their beneficiaries make when the policyholder suffers an insured loss.
Consumer Credit Insurance (CCI)
This type of insurance provides you with cover if you’re unable to meet your credit payments. It usually covers situations of unemployment, accident, illness, and death. Unlike our Loan Protection Plan (where benefits are paid directly to you or your beneficiary), CCI benefits are paid to your lender.
Cooling-off Period
The period of time in which a policyholder can cancel their policy and receive a refund of premiums that were paid. The duration is usually 30 days from the date the policy commenced.
Duty of Disclosure
The obligation to provide accurate and truthful information to an insurer during the application process for a policy. Such information may include your occupation, health, income, and sport activities. Failure to provide full disclosure may result in claim denial.
Death Benefit
The amount paid to your beneficiary following your death.
Disability
In terms of insurance, disability is generally defined as the inability to work due to an injury or illness.
Exclusion
An exclusion is an event for which you won’t be eligible for a benefit. Exclusions are usually put in place by the insurer due to health and lifestyle choices or pre-existing medical conditions of the insured person.
Expiry (or expiry date)
The time when an insurance policy expires and claims can no longer be made.
Guaranteed Future Insurability
An option that allows the policyholder to increase their insurance cover amount without having to undergo a health check or further underwriting in certain cases (such as marriage, mortgage increases, or birth of children).
Grace Period
If you have not paid your premium on time, the grace period is the time frame in which an insurance company will maintain your cover (typically 28 days). After this period, the insurer will no longer provide cover unless you arrange an alternative payment method.
Income Protection Insurance
A type of insurance policy that replaces a percentage of your income if you are not able to work due to an illness or injury.
Income Protection Offsets
A clause in your income protection policy that allows the insurance provider to ‘offset’ i.e. deduct your regular income protection benefit from other sources of income.
Interim Cover
Some life insurance companies provide interim cover whilst an insurance policy application is being considered. Particularly in cases where an applicant has pre-existing medical conditions, the policy underwriting process may be considerably longer, and interim cover may mean you are not left without any cover.
Joint Life Insurance Policy
Typically associated with couples, a joint life insurance policy covers two individuals and only pays out on the first death.
ALI Group Loan Protection Plan differs in that both individuals can be covered (as long as the eligibility requirements are met) and each of you will have separate insurance, even though you're covered by the same policy.
Key Person Insurance
A type of life insurance that insures a business from the financial loss of the death or injury of key workers.
Lapse
The situation where a person’s cover is terminated due to non-payment of premiums within a specified timeframe.
Life Insured
The individual named on the insurance policy.
Level Premium
A fixed premium that is calculated based on your age at the beginning of the policy. The other type of premiums are “Stepped Premiums”.
Memorandum of Transfer
A document to transfer ownership of a life insurance policy to another person, where all existing policy owners must give their consent for the transfer by completing and signing the memorandum of transfer form.
Morbidity Tables
A statistical table that shows data of the proportion of people that are expected to get injured or sick at each age. These tables and the data they contain are used by insurers when setting policy premiums and during the underwriting process.
Multi-Policy Discount
If you have multiple policies with the same insurer, you may be eligible for a multi-policy discount.
No Claim Period
After the commencement of your life insurance policy, there is typically a 90 day no claim period in which a claim cannot be made or paid.
No Claim Bonus
A discount offered with some policies on the premium you pay for not making a claim over several years.
Non-Disclosure
Failure to disclose pertinent information that has been requested by an insurer. This can result in having your claim denied and policy terminated.
Occupation Category
Grouping occupations that have similar duties and levels of risk.
Overinsurance
Having more insurance protection than what is needed.
Policy
The contract between you and the insurance company.
Policy Date
The date in which an insurance policy for the life insured starts.
Policy Anniversary
The anniversary date that a policy commenced. For example, a year after an initial policy date.
Power of Attorney
A power of attorney is a legal document in which one person gives another the authority to act in the interests of the first party and make personal or financial decisions on their behalf.
Pre-existing Condition
A medical condition that was present before or at the time an application is made for insurance.
Premium Waiver
A clause in an insurance policy that provides financial protection to the policyholder, and waives the policyholder's obligation to pay any further premiums if in any event, the policyholder becomes ill, disabled or unable to work.
Product Disclosure Statement (PDS)
A document or group of documents which includes information about the product’s key features, benefits, risks, fees, commissions and how you can make a complaint if you are not happy. The PDS must be provided to you before or at the time you complete an application.
Qualifying Event (Insured Event)
An accidental, unforeseen, or unexpected event that the insurance policy covers.
Redundancy Insurance
A cover that provides financial assistance if you involuntarily lose your job. This is not to be confused with income protection. It may be an optionyou can dd onto your policy.
Involuntary Unemployment Benefit is automatically included as part of our Loan Protection Plan product.
Renewal
The process of renewing an insurance policy for an extended amount of time.
Risk
The probability of injury, loss, damage or liability that an insurer accepts when they agree to provide a person with cover.
Stepped Premium
A premium that will be recalculated and most likely, increased based on the policyholder’s age on each policy anniversary.
Sum Insured
The maximum financial amount a policyholder will benefit in the event of a claim.
Smoker
Someone who has smoked any tobacco or other products in the past 12 months.
Terminal Illness
A medical condition in which a person is likely to die within a specified period of time (usually 12 months) of being diagnosed by a medical professional.
Term Life Insurance
Another name for life insurance which provides cover for a specified period of time (the “term”). Less common nowadays are “whole of life” policies which provide access to benefits for a person’s full lifetime.
Third Party Authority
Consent to allow your financial adviser, financial professional or other person to access information regarding your life insurance policy or policies.
Total and Permanent Disability (TPD) Insurance
Insurance that provides a lump sum payment if the policyholder is totally and permanently disabled and can no longer work ever again.
Trauma
A severe medical event which you are most likely able to insure against. What can be insured for trauma is different from policy to policy, so be sure to check.
This is known as the Living Benefit as part of our Loan Protection Plan product.
Underwriting
The process of assessing an insurance application to determine the most appropriate policy to offer, and the premiums which will be applied. Insurers look at risk factors such as health, medical history and lifestyle factors to help determine what to offer and at what premium.
Underinsurance
The opposite of overinsurance, underinsurance is when an individual does not have enough insurance to cover their potential losses in the event of a claim.
Void
When a policy is no longer valid and cannot be used to make a claim.
Waiting Period
The timeframe in which an individual must wait before they can make a claim and be paid a benefit.
You and Your
The person(s) named on the policy.
ALI Group provides comprehensive life insurance solutions designed to protect your ability to make repayments on your loan. We pay you – and not your lender – and we’ll even cover you if you refinance and change providers. Request your quote today.
Loan Protection Plan is jointly issued by Hannover Life Re of Australasia Ltd ABN 37 062 395 484 (Death, Terminal Illness, Living and Accidental Injury Benefits) and QBE Insurance (Australia) Limited ABN 78 003 191 035 AFSL 239545 (Involuntary Unemployment Benefit). It is distributed by Australian Life Insurance Distribution Pty Ltd ABN 31 103 157 811 AFSG 226403 (ALI). ALI receives commission for each policy sold. Any advice provided is of a general nature only and does not take into consideration your personal objectives, financial situation or needs. You should consider the Product Disclosure Statement when deciding if this product is appropriate for you.