Insurance can be a very confusing and complex subject.
The “jargon” often used by companies will probably leave you with more questions than answers after reading your insurance documents… so we’ve compiled explanations of the top used insurance terms you’ll come across when examining your insurance.
Common insurance terms:
- Insurer – the company that issues and is responsible for your policy
- Insured – the party the company is issuing the policy to
- Claim – A claim is the request you make for compensation from your insurer if you suffer a loss that is covered by your insurance policy.
- Excess – Excess (also called deductible) is the amount of any loss or damage that you must pay before your insurance policy starts to kick in. In effect, you are accepting a small part of the financial risk yourself. Your excess is stated on your certificate of insurance.
- Premium – A premium is the amount of money you pay to your insurance company for your insurance policy, in return for the insurance company’s promise to cover you if something that is covered by your policy, goes wrong.
- Accidental Damage – This form of insurance cover is for an unintentional one-off incident that causes damage to your property or its contents. For example, accidentally spilling red wine over your new white carpet.
- Defined/Listed Events – Also known as insured events and refers to a policy that specifically lists the events that you are covered for. These sorts of events could include fire, storm and damage by burglars among other events. Anything not listed as a defined event will not be covered under this type of policy.
- Sums insured – The sum insured is the maximum amount that your insurer will pay for a claim in a particular policy.
- Liability – When a person or organisation is responsible for something (and responsibility carries risk), that’s referred to as ‘liability’.
- Policy – This is the binding legal contract that documents your insurance cover. You should read the details of your policy that is outlined in your Product Disclosure Statement and the policy schedule, and make sure it covers the risks you want to cover.
- Policyholder – A policyholder, also known as the insured, is a person or entity who has entered into a contract with an insurer and holds an insurance policy.
- Benefit – This is what you receive from your insurer when your claim is agreed and processed. You may have the damage to your property repaired, or the insurer may give you the money. It’s often called a settlement or payout.
- Indemnity – Indemnity under an insurance policy is the security or coverage that is provided to you to protect against loss, damage or injury. Legal indemnity means someone promises they won’t sue you if a certain event happens, or they promise to protect you by paying your damages if an event occurs.
- Agreed Value – The amount for which you and your insurer agree to insure your motor vehicle. You might choose this if your vehicle is fairly new, has modifications, is in better-than-normal condition or has extras not factored into its normal market value. Agreed value policies are usually more expensive than market value policies.
- Market Value – Market value means the amount of money that your property is worth, or would be worth if you sold it in its current state. For motor insurance, it’s the amount the insurer will pay out if your car is written off, based on the state of the car immediately before the collision or accident. This will be different to the agreed value.
More useful definitions:
- Insurance company – The actual provider of insurance and the party assuming liability
- Insurance broker – A consultant who understands insurance policy and process and can tailor advice and create policies customised specifically to your needs
- Insurance agent – A sales agent representing a single insurance company
- Online aggregators – An online service that compiles and allows you to compare policies across their partnered insurers (but cannot provide tailored advice or customise the policy beyond optional extras)