Understanding insurance terminology is essential when reviewing any property insurance policy. Whether you own a rental property, strata unit, commercial building, or short-term accommodation, the wording used in your insurance contract directly affects the insurance coverage provided and how insurance claims are assessed.
Insurance policies are built around definitions. Each key insurance term in an insurance policy has a specific meaning, and these meanings can vary between insurance companies. A misunderstanding of a single term can lead to gaps in insurance coverage, unexpected out-of-pocket costs, or disputes during the claims process.
This glossary is designed to simplify common insurance terms used across landlord insurance, building insurance, strata insurance, commercial property insurance, NDIS property insurance, and short-term rental insurance. It provides clear, practical explanations to help you read your insurance policy with confidence and make more informed decisions about your insurance business involving coverage, risk management, insurance premiums, and insurance contracts.
Why Understanding Insurance Terms Matters
Insurance policies form part of the legal contract between you and the Insurer. Every definition within the policy wording plays a role in determining how your insurance cover responds when an insured event occurs. If a term is misunderstood, the outcome of an insurance claim can change significantly.
For property owners, this is especially important. Terms such as damage, insured event, exclusions, and sum insured are not just general descriptions. They are defined in a specific way within each insurance policy. These definitions decide whether an event is covered, how much is paid, and what conditions apply.
The same applies to tenant damage, accidental damage, or storm-related claims. Without a clear understanding of these definitions, it becomes difficult to accurately compare insurance policies or assess your level of protection.
Understanding insurance terminology also helps you:
- Identify gaps in insurance coverage before a claim arises
- Compare insurance policies on a like-for-like basis
- Avoid relying on assumptions about what is included
- Make informed decisions when selecting or renewing insurance cover.
This applies across landlord insurance, building insurance, strata insurance, commercial property insurance, NDIS accommodation, and short-term rental properties.
In simple terms, the clearer your understanding of insurance terms, the stronger your position when it comes to protecting your property and managing insurance risk.
How to Use This Insurance Glossary
This glossary is designed to be a practical reference tool that you can return to whenever you review your insurance policy, compare insurance cover, or navigate an insurance claim.
The terms are grouped alphabetically to make it easy to find specific definitions quickly. Each definition is written in plain English and focuses on how the term applies to property-related insurance within the general insurance industry.
To get the most value from this glossary:
- Use it while reading your Product Disclosure Statement or policy schedule
- Look up unfamiliar terms before making assumptions about your insurance cover
- Compare how different insurance companies define the same term
- Refer back to it during the claims process to understand how decisions are made
It is important to remember that insurance companies may define the same term differently. Always check how the term is defined in your specific insurance policy.
Common Property Insurance Terms Explained (A–C)
Note: the below is intended as a broad explanatory guide only, these terms as defined with your policy wording, will always supersede anything contained within this article.
Accidental Damage
Accidental damage refers to sudden and unintended physical damage to a property or its contents. This can include events like breaking a window or damaging a fixture.
Assessor
An assessor is a professional appointed by the insurance company to inspect property damage and determine the cause, extent, and repair requirements.
Asset
An asset is any tangible item of value that is insured under an insurance policy, including the building and attached fixtures.
Building Insurance
Building insurance covers the physical structure of a property, including walls, roof, floors, and permanent fixtures.
Burglary
Burglary refers to unauthorised entry into a property with intent to steal, often requiring evidence of forced entry.
Business Insurance
Business insurance provides coverage for commercial general liability, property damage, business interruption, and casualty insurance risks faced by businesses, professionals, and commercial establishments.
Contents (Property-Related)
Contents refers to items within a property that are not permanently fixed, such as furniture and appliances provided by the owner.
Cover / Coverage
Cover describes the protection provided under an insurance policy, including insured events, limits, and conditions.
Common Property Insurance Terms Explained (D–F)
Damage (Insured Damage)
Damage refers to physical loss or destruction caused by an insured event as defined in the insurance policy.
Depreciation
Depreciation is the reduction in value over time due to age and use.
Deductible
A deductible is the amount of loss borne by the insured before being able to claim under a property insurance policy.
Excess
Excess is the amount you pay when making an insurance claim before the insurer pays.
Exclusions
Exclusions are events or circumstances that are not covered under the insurance policy.
Fire Damage
Fire damage includes loss caused by flames, heat, or smoke.
Flood (Policy Definition)
Australian regulations include a standard definition of flood, which was introduced in June 2012.
It applies to home and contents, small business and domestic strata-title policies.
The standard definition (regardless of the insurer) of flood in Australia is:
“The covering of normally dry land by water that has escaped or been released from the normal confines of:
- any lake, or any river, creek or other natural watercourse, whether or not altered or modified; or
- any reservoir, canal, or dam.”
The key takeaway is that water damage due to water running off the property surrounding the insured property, overflowing from gutters, or failed drainage would not fall within the standardised definition of flood.
Insurers can not rely on any applicable flood exclusion nor apply a higher flood excess for water damage resulting from events that fall outside of the standard definition of flood.
Common Property Insurance Terms Explained (G–L)
Glass Cover
Glass cover relates to damage to fixed glass, such as windows and doors.
Indemnity Value
Indemnity value reflects the current value of an item after depreciation.
Insurance Contracts Act
The Insurance Act regulates the obligations and duties of insurers and insureds, including the duty of disclosure and insurance contract terms, including how policies are issued, claims handled and the circumstances under which an Insurer may cancel a policy.
Insured Event
An insured event is a specific occurrence listed in the insurance policy that triggers cover.
Liability Cover (Property-Related)
Liability insurance provides cover For your legal liability that results in third-party injury or property damage. Many products on the market will also provide cover for your reasonable defence costs against claims of negligence against you.
Liability Insurance Policy
A liability insurance policy that provides coverage for the insured’s legal liability as a result of third-party personal injury or property damage.
Loss of Rent / Income
Covers lost rental income when a property cannot be occupied due to an accepted property damage claim.
Landlord Insurance
Landlord insurance is designed for rental properties and includes protection for property damage, rent loss, whether due to damage to the building or your tenant defaulting on their rent and liability insurance
Common Property Insurance Terms Explained (M–R)
Malicious Damage (Tenant-Related)
Intentional damage caused by a tenant or occupant.
Mitigation Expenses
Steps taken to prevent further damage after an incident.
Outstanding Claims
Outstanding claims are claims that have been reported but not yet settled or paid by the insurer.
Claims Reserve
A claims reserve is the insurer’s estimated obligation to pay for claims incurred but not yet paid. It represents the funds an insurer sets aside to pay your claim, initially based purely on an arbitrary estimate and is then adjusted as further information, such as assessor’s reports and repair quotes are made available.
Policy Schedule
A document outlining your specific insurance cover, limits, and conditions. This document, coupled with the corresponding policy wording form the basis of the contract of insurance between you and the insurer.
Premium
The premium paid is the cost of your insurance policy.
Product Disclosure Statement (PDS)
A document explaining how the insurance policy works, including definitions, exclusions, policy covers, and acquisition costs.
Property Covered
Property covered refers to the real or personal property insured under the policy.
Replacement Cost
The cost to rebuild or repair the property using current prices, without deducting for depreciation, otherwise known as “new for old”
Rent Default
Loss of income when a tenant fails to pay rent.
Common Property Insurance Terms Explained (S–Z)
Strata Insurance
Covers buildings and shared property in a strata scheme.
Sum Insured
The maximum amount payable under a particular section of an insurance policy.
Storm Damage
Damage caused by weather events such as wind or hail. The policy wording will provide your insurers definition of storm, which can include cyclones in some policy wordings or specifically exclude cyclones in others.
Tenant Damage
Damage caused by tenants during occupancy.
Underinsurance
When the sum insured is less than the rebuild cost.
Vacancy Conditions
When a property is unoccupied.
Wear and Tear
Gradual deterioration that is not covered by insurance.
Common Mistakes When Interpreting Insurance Terms
- Assuming all damage is covered
- Overlooking exclusions
- Confusing replacement cost with market value
- Misunderstanding definitions of events like flood or storm
- Ignoring vacancy or usage conditions
- Relying on assumptions instead of policy wording
How Insurance Definitions Affect Your Claim
Insurance claims are assessed based on how your insurance policy covers events and damage. The insurance carrier compares the incident against policy wording, exclusions, and conditions.
This process includes:
- Reviewing insurance policy definitions
- Assessing damage through an insurance assessor or claims adjuster
- Considering claims incurred and claims paid
- Applying limits, excess, and conditions
- Determining the final outcome
Two similar insurance claims can have different outcomes depending on how the insurance policy defines the event.
When to Speak to an Insurance Broker
You should speak to an insurance broker when:
- Insurance policy wording is unclear
- Comparing insurance options
- Purchasing or renewing insurance cover
- Making an insurance claim
- Your property circumstances change
An insurance broker helps you understand definitions and ensures your insurance cover aligns with your risks.
Final Notes for Property Owners
Insurance terminology plays a central role in how your insurance policy performs. Every definition shapes what is covered and how insurance claims are assessed.
Understanding these key insurance terms helps you avoid underinsurance, gaps in cover, and unexpected claim outcomes. It also allows you to compare insurance policies with confidence.
Property insurance varies across landlord, strata, commercial, and short-term rental use. Always review your insurance policy wording to ensure it reflects how your property is used.
Use this glossary as a reference whenever you review your insurance cover or prepare for an insurance claim.
Contact the friendly Duo Insurance team for a quote or expert guidance on choosing the right policy for your property.
Key Takeaways
- Insurance terms can affect what is covered, how claims are assessed, and how much an insurer may pay.
- Each insurance policy may define key terms differently, so property owners should always check their own policy wording.
- Understanding terms such as insured event, exclusions, excess, sum insured, damage and underinsurance can help reduce claim surprises.
- Property owners should review their Product Disclosure Statement and policy schedule before choosing or renewing cover.
- Definitions are especially important across landlord insurance, building insurance, strata insurance, commercial property insurance and short-term rental insurance.
- Flood, storm, tenant damage and accidental damage may have specific policy definitions that affect whether a claim is accepted.
- Replacement cost, indemnity value and market value are not the same, and confusing them can lead to underinsurance.
- An insurance broker can help explain unclear policy wording and match cover to the property’s risks.
