Policy Terms
Comprehensive definitions of insurance policy terms and conditions in Australia
19 terms in this category
Premium
The amount you pay to an insurance company to maintain your insurance coverage. Premiums can be paid monthly, quarterly, or annually, and the amount depends on factors like age, health status, occupation, and the level of cover chosen.
Stepped Premium
A premium structure where your insurance cost starts low and increases each year as you age. The premium 'steps up' annually, reflecting the increased risk of claims as you get older, making it more affordable initially but more expensive over time.
Level Premium
A premium structure where your insurance cost remains relatively stable over time, rather than increasing with age. The premium is calculated based on your age when you start the policy and remains at that level, though it may still adjust for inflation through indexation.
Sum Insured
The maximum amount an insurance company will pay out if you make a valid claim. This is the total coverage amount you select when purchasing a policy, such as $500,000 for life insurance or $100,000 for trauma insurance.
Benefit Amount
The regular payment amount you receive from an insurance policy, particularly for income protection insurance. This is typically a monthly payment expressed as a dollar amount or percentage of your pre-disability income, such as $6,000 per month or 75% of earnings.
Waiting Period
The length of time you must wait after making a claim before benefit payments begin. For income protection, this is typically 30, 60, or 90 days. For trauma insurance, it's usually 14 days after diagnosis. Longer waiting periods result in lower premiums.
Elimination Period
Another term for waiting period, commonly used in Australian income protection insurance. It's the period of time that must elapse after you become disabled before insurance benefits commence, effectively 'eliminating' the initial period of disability from coverage.
Benefit Period
The maximum length of time an insurance company will continue paying benefits for a single claim. Common benefit periods in Australian income protection are 2 years, 5 years, or to age 65, with longer periods providing more comprehensive protection but costing higher premiums.
Policy Term
The duration for which an insurance policy remains in force, typically running for one year in Australia before requiring renewal. For life insurance, policies are usually annually renewable to age 65, 70, or 99, while some policies offer fixed terms like 10 or 20 years.
Renewal
The process of continuing your insurance coverage for another policy term, typically occurring annually in Australia. Most policies automatically renew if premiums are paid on time, though insurers send renewal notices outlining any changes to terms, conditions, or premiums.
Lapse
When an insurance policy terminates due to non-payment of premiums. In Australia, policies typically lapse after a 30-day grace period following missed payment. A lapsed policy means coverage ends, and you'll need to reapply with full underwriting to obtain new insurance.
Reinstatement
The process of restoring a lapsed insurance policy to active status. In Australia, reinstatement is typically available within 30-90 days of lapse, requiring payment of outstanding premiums and sometimes evidence of continued good health. After this period, full reapplication is usually necessary.
Cooling-off Period
A consumer protection period (typically 14-30 days in Australia) after purchasing insurance during which you can cancel the policy and receive a full refund of premiums paid. This allows time to review the policy details and ensure it meets your needs without financial penalty.
Indexation
An automatic annual increase in your insurance coverage (sum insured or benefit amount) and corresponding premium, typically linked to inflation measures like CPI. Indexation ensures your insurance keeps pace with rising costs and maintains its purchasing power over time without requiring new health assessments.
CPI Adjustment
An annual premium or benefit increase based on the Consumer Price Index (CPI), Australia's official measure of inflation. CPI adjustments ensure insurance coverage and premiums track with the general increase in prices and cost of living across the Australian economy.
Guaranteed Renewable
A policy feature that guarantees the insurer will renew your coverage each year regardless of health changes, claims made, or age, as long as premiums are paid. The insurer cannot cancel coverage, add exclusions, or refuse renewal, though premiums may still increase with age or indexation.
Non-cancellable
The strongest form of policy protection where the insurer guarantees both coverage continuation AND premium rates cannot increase beyond scheduled amounts (except for indexation). Unlike guaranteed renewable policies, premiums cannot be increased due to age or risk pool changes, providing complete certainty for long-term planning.
Policy Exclusions
Specific conditions, activities, or circumstances that are not covered by your insurance policy. Exclusions define what the insurer will not pay for, such as pre-existing conditions, self-inflicted injuries, dangerous activities, or war-related events. Understanding exclusions is critical to knowing when you're actually covered.
Pre-existing Condition
A health condition, illness, injury, or symptom that existed before you purchased insurance or before coverage began. Pre-existing conditions are typically subject to waiting periods or permanent exclusions, meaning claims related to these conditions may not be covered for a specified period or at all.