Glossary of important insurance terms

To help you break down the meaning of some common insurance terms, here’s our useful glossary to explain what the fine print really means.

Annual premium

The amount that must be paid every year (annually) in order for the insurance company to provide the insurance cover. Some insurers allow the policyholder to pay the annual insurance premium in instalments - monthly or fortnightly - while others may require an upfront payment in full before any coverage starts.

Amount covered

The amount covered or sum insured is the maximum amount the insurer will pay for a claim that is covered under the insurance policy. This amount includes GST.


An intermediary who acts on behalf of a client seeking insurance. The broker may earn a commission from the insurer, but they are responsible for obtaining adequate cover for their client, regardless of the provider.

Certificate of insurance

Confirmation that an insurer has issued a policy to an individual and forms part of the contract outlining the terms of the cover. May be requested when making a claim.


If an event has occurred, an insured individual may give formal notice to their insurer by making a claim for benefits.

Cooling-off period

The period of time after purchasing a policy (usually 14 days) during which an individual may consider the cover and its suitability and may change their mind without financial consequence. If they return the policy during this time they will receive a full refund of the premium, unless a claim has already been made.


The protection provided by the insurer’s policy. ‘Coverage’ refers to the scope of protection that is provided under an insurance contract. Insurance coverage helps consumers recover financially from unexpected events, such as car accidents.

Defined events

The specific events you are covered for, such as in a home and contents policy things such as fire, storm damage and burglary. Anything not listed as a defined event will not be covered under this type of policy.


The decrease in value of an item that is covered under insurance. Typically this refers to vehicles (for car insurance) and items in a property (for home and contents insurance), which depreciate in value over time due to wear and tear.


A legal statement that an insurer may use that provides for limits on the responsibilities of an insurance agent or insurance company giving information about the policy. Generally used to qualify any risks, limitations or exclusions on a policy cover.


When applying for or renewing an insurance policy, you must provide full disclosure and let your insurer know all relevant information about you and your situation that could impact your insurer’s decision to insure you.

Due date

The date at which annual premiums must be paid.


The out of pocket amount an insured individual must pay when making a claim under their policy. Sometimes referred to as ‘deductible’.

Expiry date

The date at which the insurance policy ends. This will vary from policy to policy, and provider to provider.

Home and contents

An insurance policy that covers an individual’s property (home) as well as the valuables within it (contents).

Insured event

Events that cause loss or damage to the insured individual and which are covered under their policy.

Lapsed policy

A policy that has expired because the insured individual did not make their premium payments to keep the policy in force.

Market value

What is deemed the ‘fair price’ that something can be sold for in its current condition. Typically used for motor vehicle insurance, and is the value of the vehicle at the time of a claim.

New for old

Typically as part of a ‘replacement’ in the policy, this refers to replacing an existing item or equipment covered under the policy that has been damaged, lost or stolen with a new item, instead of a depreciated one based on the age of the claimed for item.

Policy schedule

A notice that shows the specific details of an insurance policy.

Product disclosure statement (PDS)

A document prepared by the insurer, or on behalf of the product issuer, that includes all the key information about the policy – i.e. name and address of the insurer, benefits, cost, terms, conditions, cooling-off period, claims process and more.


Most home insurance and contents insurance covers storms. This includes damage caused by lightening, cyclones, strong winds, rainwater, hail and snow.


The period of time the insurance policy is issued for.

Unearned premium

Unearned premium is that part of the overall premium which is collected by the insurance companies beforehand, but for which protection is not provided.


The estimated value of an item, property or equipment. This is usually calculated during an appraisal.

Waiting period

The amount of time that must pass before the policy’s coverage (all or some of it) comes into effect.

All the information at your fingertips

Understanding insurance isn’t difficult when you have a handy glossary at your fingertips. Use this information to help find the right policy for your needs.

Whether you are planning to take out a life insurance policy, home and contents insurance or anything in between, it’s important you understand the terms when signing up. Start comparing a range of policies with Choosi today.