A lot of the jargon and terminology surrounding insurance can be difficult for people not familiar with the industry to understand. Worse, many insurance companies or brokers use these terms expecting full knowledge. Here is the definition of some of the most important terms you might come across when dealing with insurance.
An insurance policy is a contract between yourself and the insurer. The policy provides conditions that once you fulfill, you will receive payment from the insurer in the amount agreed to when the policy is taken out. For example, a life insurance policy is an agreement between you and the insurer to pay a certain amount (called the sum assured) in the event of death. A Total Permanent Disablement Policy will provide payment once you fulfill the conditions of being unable to work due to illness or disablement for longer than a specified period of time. And so on and so forth. An insurance policy is what you pay premiums for as well as what you make a claim upon.
The price you pay to keep a policy in force. Most premiums are paid monthly, and the amount depends upon the type of insurance, the sum assured and other factors such as your age, your health or the amount of people covered by the policy.
A claim is the action you take when you have fulfilled the conditions of your policy and wish to be paid out the sum assured.
4. Pre-Existing Conditions
A pre-existing condition is a physical health or mental health condition which were already present at the time of taking out the policy. Pre-existing conditions can be excluded from your insurance coverage or can cause your premiums to be higher, as the insurance company is taking on a higher risk by insuring you.
Events or conditions that are not covered by your insurance policy. For example, in many life insurance policies there is a suicide exclusions whereby death by suicide will not result in the insurance paying out ie. it is 'excluded' from your cover.
6. Insurance Broker
An insurance broker is different from an insurance company in that a broker does not sell insurance to you directly. A broker searches the marketplace on your behalf, taking your needs and your individual circumstances into account to secure the best possible deals on the insurance policies you are looking to take out. A broker's job is to work for the client and work for their interests and not the interests of the insurance companies. Our company, Spratt Financial Services is a team of insurance brokers, operating under this definition.
7. Waiting Period
The waiting period is the amount of time (agreed upon at the time of taking out the policy) which must pass after an event before you can collect your insurance benefit. For example, in an income protection policy with a waiting period of 4 weeks would mean that you will receive your agreed upon benefit from the policy 4 weeks after being rendered unable to work by illness or disability.
8. Living Benefits
This is a feature that can be included in life insurance policies that allows you to receive payment on your life insurance before you die under certain circumstances. Usually, these involve diagnosis of terminal illness such as cancer or the need for specialised care.
9. Waiver of Premium
A feature that can be added to an insurance policy that will ensure that your insurance remains in place and active if you fail to make premium payments due to illness or disability. The waiver of premium will usually remain in effect for as long as you are disabled and unable to make premium payments. This feature will cost an additional premium.
10. Qualifying Event
An occurrence that triggers your insurance payout or claim. For instance, a death in the case of life insurance or a surgical procedure in medical insurance.