Understanding insurance terms can be incredibly confusing at first. All the assessors, premiums, liability—it’s enough to make anyone feel lost. However, having a solid grasp of key insurance terminology is key to making smart coverage choices.
In this guide, we’ll break down the most common insurance words and phrases in simple, plain English. No more feeling overwhelmed by stuffy industry jargon.
Whether you’re a homeowner or renter, you’ll learn what these key terms really mean and how they impact the coverage you need.
A – Assessor
An insurance assessor, also known as a loss adjuster, plays an integral role in the claims process. They review insurance claims to assess the circumstances and determine the extent of the loss. Assessors may specialise in specific areas such as medical, property, or motor vehicles, bringing their expertise to evaluate the value of the claim accurately.
Accidental Damage
Accidental damage is a common term used in property insurance. It refers to the coverage that protects against unexpected and unintended mishaps that cause damage to your belongings or property.
This can include incidents like dropping your TV while moving it or damage caused by a power surge. Accidental damage coverage may be included in your policy or offered as an optional add-on for an extra premium.
B – Broker
An insurance broker is a professional advisor who helps customers understand their insurance needs and find suitable coverage options. Brokers work on behalf of customers to assess risks and recommend appropriate insurance products. They can assist with complex insurance needs, such as those faced by small businesses, and also manage the claims process on behalf of their clients.
C – Catastrophe
A catastrophe refers to an event that leads to a large number of insurance claims and involves multiple insurers. Examples of catastrophes include bushfires, floods, earthquakes, cyclones, severe storms, and hail. The Insurance Council of Australia officially declares an event a catastrophe based on its magnitude and impact.
Certificate of Insurance
A certificate of insurance is a formal document that serves as proof of your coverage. It’s a key part of the insurance contract between you and the insurer.
The certificate includes information about you, the insured, and the property or item being insured. It also outlines the terms and conditions of the policy, including coverage limits and effective dates.
Claim
A claim is a request for compensation submitted to an insurance company after experiencing a loss covered under your insurance policy.
For example, if your home is damaged in a fire, you could file a claim with your homeowner’s insurance policy. If approved, the insurer pays you reimbursement for repairs or rebuilding costs.
Contents Insurance
Contents insurance covers your personal belongings in the event of destruction or damage caused by covered events such as fire, flood, storm, or theft.
Whether you own a home or rent a real or personal property, contents insurance can be tailored to your specific needs. Insurance providers generally offer various policy options for homeowners, renters, and strata owner-occupiers, ensuring your belongings are protected.
Cooling off Period
Most general insurance products include a cooling-off period of at least 21 days, allowing you to change your mind after purchasing a policy. During this period, you can cancel your policy and receive a refund of any premiums paid, provided you haven’t made a claim.
Coverage
Coverage refers to what is included in your insurance policy. It outlines the risks and losses you’re insured against, the items or properties covered, and the coverage amounts provided. Understanding your coverage is essential to ensuring you have adequate protection for your assets and liabilities.
D – Depreciation
Depreciation refers to the reduction in value of an item or property over time due to factors such as wear and tear, age, or obsolescence. When filing a claim for damaged or destroyed property, the insurance company takes depreciation into account when determining the amount of compensation they’ll provide.
E – Excess
An excess, or a deductible, is the amount you must contribute towards a claim before your insurance coverage kicks in. Choosing a higher excess may help lower your premiums, but you should understand the different types of excess and how they apply to your policy.
Exclusions
Exclusions are specific scenarios or events not covered by your insurance policy. These may include damage caused by illegal activities, intentional acts, or reckless behaviour. You must review your policy documents to understand the exclusions and limitations of your coverage.
Embargo
An embargo is a temporary restriction imposed by insurers on purchasing or increasing insurance coverage in specific areas with a known likelihood of an event occurring or an ongoing event. For example, during an active bushfire season, insurers may impose an embargo on certain types of insurance in affected areas.
H – Home Insurance
Home insurance, also known as property insurance, covers your home and its contents. It protects against various risks, including fire, storm damage, theft, etc. Most insurers offer home insurance policies designed for owner-occupiers, providing comprehensive protection for your building, contents, or both.
I – Incident
An incident refers to an event or a series of related events resulting in a claim on your insurance policy. It could be a single event, such as a car accident, or a series of events leading to property damage, like a burst pipe causing water damage to your home.
L – Landlord Insurance
Landlord insurance is designed specifically for landlords, providing coverage for rental properties and their contents. It offers protection against a range of risks, including storm damage, fire, theft, vandalism, and loss of rent due to property damage caused by an insured event.
Levy
A levy is an additional sum added to the insurance premium to raise funds for a specific government purpose. For example, in New South Wales (NSW), home insurance policies include an Emergency Services Levy to support the funding of emergency services in the state.
Liability
Liability insurance refers to being legally responsible for an action or event that leads to a claim. In insurance terms, liability coverage protects you against claims made by third parties for bodily injury or property damage caused by you or your property.
M – Mitigation
Mitigation refers to the actions you can take to reduce the potential occurrence or impact of an insurance event. For example, regular property maintenance can help mitigate the risk of water damage or other hazards.
P – Premium
A premium is the amount of money you pay to the insurance company for your insurance coverage. It can be paid monthly or annually, and the cost is determined based on factors such as the type of coverage, the value of the property insured, and the level of risk involved.
Policy
A policy is a legal contract between you and the insurer outlining the terms and conditions of your insurance coverage. It includes the product disclosure statement (PDS), any supplementary PDS, and the certificate of insurance. The policy also governs the rights and responsibilities of both parties and serves as a guide for the claims process.
R – Renewal
An insurance policy typically provides coverage for a specified period, often 12 months. Before the policy expires, the insurer will notify you and offer the option to renew your coverage for another term. It’s essential to review your policy details and assess your needs before renewing to ensure you have adequate coverage.
S – Settlement
In some cases, instead of repairing damaged property, the insurance company may offer a cash settlement for the claim. This allows you to use the funds to replace or repair the property.
T – Total Loss
If your property is damaged beyond repair, it is considered a total loss. In these cases, the insurance company may provide a settlement based on the sum insured, the maximum amount specified in your policy.
Third Party
A third party refers to someone not party to the insurance contract or policy. For example, if a visitor gets injured in a slip and fall accident at your home, they would be considered a third party, and you could file a liability claim with your homeowner’s insurance to cover their medical bills.
U – Underinsurance
Underinsurance occurs when the amount you have insured is less than the value required to replace or rebuild the property. You should regularly review your insurance policy and ensure it adequately covers the value of your assets, especially when there are changes in your life or property values.
Underwriting
Underwriting is how an insurance company assesses the risks involved in providing insurance coverage to an individual or entity. It involves evaluating factors such as the applicant’s risk profile, claims history, and the potential for future losses. Based on the assessment, the insurer determines the premiums and terms of coverage.
Key Takeaways
- Know key terms like assessor, liability, and premium to understand your policy coverage and options.
- Review exclusions and limitations carefully to ensure important risks are covered.
- Adjust coverage as life and property values change to avoid underinsurance.
- Compare policies using standard terms to find the best rate and coverage.
- Ask about add-ons like accidental damage to expand protection as needed.
- File claims properly by documenting incidents and losses from covered events.
- Work with brokers if you need help navigating complex insurance needs.
- Use the glossary as a quick reference guide to demystify confusing terminology.
If you need assistance finding the right building and landlord insurance for your property, contact the team at Duo Insure today.
FAQs
What Is the Difference Between a Deductible and an Excess?
A deductible and an excess both refer to the amount you need to pay towards a claim before your insurance coverage kicks in.
The main difference is that a deductible is a fixed dollar amount, while an excess can be a percentage or fixed amount. With a $500 deductible, you would pay the first $500 of any claim. A 20% excess means you pay 20% of the total claim amount.
If I Increase my Insurance Excess, Will My Premiums Be Lower?
Yes, choosing a higher excess amount generally leads to lower premiums. This is because you take on more financial responsibility with a higher excess, so the insurer can decrease your premiums. Just be sure you can afford to pay the excess if you do need to claim.
What Should I Do If I Discover My Home or Contents Are Underinsured?
Being underinsured means your insured amount is less than the full value of your home or belongings. If you discover this, contact your insurer immediately to increase the insured amount. You may need to complete a revaluation of your property. Underinsurance can lead to large out-of-pocket costs in the event of a major loss.
Is Flood Covered Under A Standard Property Insurance Policy?
Unfortunately, flood damage is usually excluded under a standard home insurance policy. This is considered a separate risk that requires add-on flood insurance. Be sure to evaluate your flood risk and consider adding this coverage if needed.
What Is the Difference Between Market Value and Replacement Value for Contents?
Market value is what your content would sell for second-hand. The replacement value is the actual cash value cost to replace them. Most content policies cover replacement value, which provides more comprehensive coverage.
What Factors Determine the Insurance Coverage I Need?
The amount and type of insurance coverage you need depends on your unique situation. Important factors to consider are the value of your home and possessions, income, health conditions, and liabilities. Reviewing your finances and lifestyle with an insurance company or broker can help determine adequate coverage.
How Do I know if my Insurance Company will Pay a Claim?
When reviewing insurance companies, check their financial strength ratings and customer satisfaction scores. A reputable company with a track record of fairly assessing claims and providing timely payouts is key. Reading the policy documents closely and understanding exclusions is also important. If unsure, ask an agent to explain the claims process before purchasing a policy.
Does Home Insurance Cover Medical Payments?
Standard home insurance policies generally do not cover medical payments for injuries in your home. This is considered liability coverage, which is usually an add-on. If you’re looking for insurance protection that covers medical payments and health care services, you should consider taking out health insurance.