A guide to insurance terminology

Let’s face it, insurance definitions can feel like a whole other language sometimes.

Between “excess,” “beneficiaries,” and “waiting periods,” it’s easy to feel like you need a translator just to read your policy.

But don’t stress. Whether you’re new to the insurance game or just need a little refresher, we’ve broken down key insurance terminology you’re likely to come across.

In this article, we’ll be breaking down the key terms from life insurance to income protection insurance, and everything in between. Ready to be fluent in insurance? Let’s dive in.

General insurance terms

Before we dive into the nitty-gritty of different types of insurance, let’s cover a few fundamental terms that pop up across most policies.

Key terms across most types of insurance include:

• Premium: The amount you pay to keep your policy active — think of it like a subscription fee, paid, fortnightly monthly or annually, depending on your policy.
• Excess: The amount you pay when making a claim before your insurer pays the rest.
• Policyholder: The person who owns the policy. If it’s your name on the paperwork, that’s likely you.
• Beneficiary: The person (or people) who receives a payout if you were to pass away.
• Cover: What your policy actually includes — from events to items and circumstances.
• Exclusion: The stuff your policy doesn’t cover — which is always important to double check in detail.
• Insurer: The company providing your cover — a.k.a. the company holding the safety net.
• Underwriting: The behind-the-scenes process insurers use to decide how risky (or not) you are, and how much your premium should be.
• Renewal: When your policy term ends and it’s time to renew your policy for another round.
• Lapse: When your policy ends because you missed a payment.

For more in-depth definitions, check out the Insurance Council of Australia’s ABC of General Insurance.

Life insurance terms

So, what is the meaning of life insurance? This type of cover is all about helping your loved ones financially if something happens to you. But before you take out a policy, it’s helpful to know what the jargon actually means.

Let’s unpack it:

• Life insured: The person whose life is being covered (remember it’s not always the same person who owns the policy).
• Sum insured or benefit amount: The total amount paid out if the life insured passes away.
• Term life insurance: Cover that lasts for a set period of time, for example 20 or 30 years.
• Whole life insurance: Cover that lasts your whole life, with a guaranteed payout after any waiting periods.
• Death benefit: The money paid to beneficiaries when the life insured passes away.
• Policy maturity: The end of your policy term — sometimes with a payout, depending on the type of policy held.
• Optional extras: Optional cover options you can add to your life insurance policy, like total and permanent disability (TPD) insurance or children's insurance. Also known as insurance riders.
• Non-disclosure: When you leave out important information (like a medical condition) when applying. This can affect your claim.
• Accidental death cover: A policy that only pays out if the death is due to an accident
• Increasing cover with inflation: Some policies increase your benefit amount (and premium) over time to keep up with inflation.
• Loading: An extra cost added to your premium if you have a risky job, enjoy extreme sports, or have certain pre-existing health conditions.

Now that you’ve got a handle on life insurance terminologies, dive deeper with a how-to guide on making a claim.

Health insurance terms

Now let’s talk health insurance. In Australia, Medicare has your back for many basic health services — but private health insurance may give you more choice, faster access to treatments, and cover for things like dental and physio.

Here are the terms to know:

• Hospital cover: Helps pay for treatment and services when you’re admitted to hospital.
• Extras cover: Covers out-of-hospital services like optical, chiro, dental and more.
• Waiting period: A set time you have to wait before you can claim on certain services.
• Gap payment: The “gap” between what your insurer covers and what your provider charges.
• Pre-existing condition: A medical condition you had before taking out your policy.
• Benefit limit: The max amount you can claim for a particular service over a set time.
• Lifetime Health Cover (LHC) loading: A penalty that bumps up your premium if you delay getting private hospital cover until after turning 31.
• Medicare: Australia’s government-funded health system that covers many essential medical services, such as bulk-billed GP visits.

Want to learn more about private health insurance? For more info, visit the Private Health Insurance Ombudsman.

Income protection insurance terms

So, what is income protection insurance? Think of it as your financial safety net. If sickness or injury takes you out of action and means you’re unable to work, this type of policy can help to cover your regular expenses by paying out a portion of your pre-tax income for a set period of time.

Let’s decode the key terms:

• Monthly benefit amount: The portion of your income you’ll receive during the benefit period, while you're unable to work. Usually paid monthly during your benefit period.
• Benefit period: How long your monthly benefit payments last if you remain unable to work due to illness or injury.
• Waiting period: The time you need to be off work due to sickness or injury before your benefit payments kick in.
• Total and permanent disability: You’re permanently unable to do your usual job due to sickness or injury.
• Partial disability: You can still perform some, but not all duties of your usual occupation.
• Offsets: Any other income you’re getting (like workers comp) that might reduce your benefit amount.

Want to understand more about income protection insurance? Check out these top myths debunked.

Common claim-related terms

Okay, so something has happened, and you need to make a claim.

Here are the buzzwords that might pop up along the way:

• Claim: A request you make to your insurer to pay out benefits based on your policy.
• Assessment: The process where your insurer checks all the claim details and decides if your claim will be approved.
• Claim form: The paperwork you need to complete to submit your claim.
• Supporting documents: Things like receipts, medical reports or death/birth certificates to back up your claim.
• Settlement: The final payout or resolution of your claim.
• Denied claim: When your insurer may refuse to pay out on a claim- either partially or fully.
• Dispute resolution: The process of sorting things out if you and your insurer don’t see eye to eye.
• Claim history: A record of your past claims, which can influence future premiums.

How to protect yourself in the process

Before you go, here are two more terms you’ll definitely want to keep in your back pocket:

• Product Disclosure Statement (PDS): This legally required document includes everything you need to know about your policy — the inclusions, exclusions, benefits, and more. It’s important to ensure you understand the ins and outs of your policy. Always give it a proper look before buying.
• Australian Financial Complaints Authority (AFCA): If things go pear-shaped and you can’t resolve a complaint with your insurer, AFCA is your go-to. It’s an independent, free service that helps everyday Aussies sort out disputes with financial service providers.

The easiest way to compare insurance policies

Insurance terminology might feel like a confusing hassle at first, but once you’re across the basics, you’ll feel much more confident when it comes time to compare, choose, or even claim.

If all the research, quotes, and policy details feel a bit overwhelming — that’s where Choosi can help. Choosi is a free comparison service that helps you cut through the clutter by comparing features, benefits, and premiums from products available on its Approved Product List.

Request a quote and compare available policies today.