| Accelerated Benefit |
| Income Protection - the insurer commences benefit payments before the qualifying (waiting) period has expired. Special conditions apply. Life Insurance - The insurer pays part or all of the death benefit early on a specified event, eg. serious illness or total and permanent disability |
| Accidental Death Cover |
| Life insurance paid if death arises by accident. Premiums are less expensive than normal life insurance and clients are guaranteed acceptance despite their medical condition. |
| Agreed Value Contract |
| Income Protection - Benefit amount is agreed at inception. It cannot be reduced if future income decreases. Evidence of present income is required at the time of application. Tax considerations vary between life companies. |
| Bed Confinement Benefit |
| Income Protection - Insurer pays the benefit before the qualifying period has elapsed if the policyholder is confined to bed and under supervision of a registered general practitioner. |
| Benefit Offset |
| Income Protection - Amount which can be deducted from the benefit payment. Earned income from other sources is a standard offset. However the extent and nature of other offsets vary between insurers. This should be checked at inception. |
| Benefit Payment Period |
| Income Protection - the maximum period for which a benefit will be paid. Normal periods are 2 years, 5 years, to age 60 and to age 65. |
| Bonus |
| Life Insurance - amount added annually to the sum assured on permanent life insurance products. Companies calculate bonuses differently. The amount of the bonus applied by the insurer is discretionary and formulas can change in the future. |
| Business Overheads Cover |
| Income Protection - additional payment to meet ongoing specified business expenses during a period of disability (eg wages, rent etc). Benefit periods are normally either 1 or 2 years. |
| Buy/Sell Agreement |
| Legal agreement between shareholders or partners setting out what is to happen to their business interest in the event of premature death. Normally supported by life insurance over each other to fund the purchase of shares for their fair value. |
| Cancellable Contract |
| Income Protection - policies offered by fire and general insurance companies and some life insurers whereby the policy can be cancelled at any time at the insurers option. Not regarded as providing the future security of non-cancellable contracts. |
| Claim period |
| (Also Benefit Payment Period) Income Protection - the maximum period for which a benefit will be paid. Normal periods are 2 years, 5 years, to age 60 and to age 65. |
| Code of Business Practices |
| Code of conduct established by the Investment Savings and Insurance Association in conjunction with the Securities Commission regulating the requirements for insurance companies and intermediaries in the marketing and completion of insurance contracts. |
| Conversion Option |
| (Also Convertibility Option) Life Insurance - option given to a risk/term insurance policyholder to automatically convert to a permanent insurance policy in the future. |
| Convertibility Option |
| (Also Conversion Option) Life Insurance - option given to a risk/term insurance policyholder to automatically convert to a permanent insurance policy in the future. |
| Co-Partner Insurance |
| Life Insurance - cover taken by a partner (or partners) over another partner’s life to ensure that funds are available to purchase that partners interest in the partnership in the event of premature death. |
| Co-Shareholder Insurance |
| Life Insurance - cover taken by a shareholder (or shareholders) over another shareholders life to ensure that funds are available to purchase that shareholder's shares in the company in the event of premature death. |
| Critical Illness Cover |
| Insurance policy which pays a lump sum in the event that the policyholder contracts a serious illness. The scope and definition of serious illnesses vary between companies. Should be checked at inception to ensure that clients know what cover is provided. |
| Death Cover |
| Life Insurance - the amount paid by the insurer on the death of the life assured. |
| Decreasing Death Cover |
| Life Insurance - Amount of death cover decreases throughout the term of the policy. This normally allows premiums to remain the same despite the increasing age of the life assured. Was a popular form of mortgage repayment insurance. |
| Earned Income |
| (Also Earnings) Income Protection - the amount received by the policyholder from his or her own endeavours. Does not include, for example, interest received on investments. |
| Earnings |
| (Also Earned Income) Income Protection - the amount received by the policyholder from his or her own endeavours. Does not include, for example, interest received on investments. |
| Endowment Policy |
| Life Insurance - Type of permanent life insurance policy. Premiums are more expensive than term insurance. The additional premium is paid towards the investment part of the policy. Returns vary widely and can be changed by the insurer at any time. |
| Exclusion |
| Situation in which the insurer is not obliged to pay. May be standard (eg death by suicide within the 1st 13 months of the policy) or specifically applied to a clients circumstances (eg disability arising from a pre-existing medical condition). |
| Financial Underwriting |
| Insurer's consideration of the client's financial position at the time of application. Normally only required where either large sums assured or income protection is sought. |
| Free Look Period |
| Time period (normally 15 days) after an insurer issues a policy. During this period the policyholder can elect to reject the insurance and receive a full refund of all premiums paid. |
| Frequency Loading |
| Additional charge added by some insurers to the premium if the client wishes to pay premiums more than once a year. |
| Guarantee Protection Insurance |
| Life Insurance - life cover owned by a business over the life of an individual who has guaranteed business borrowing. The policy is often assigned to the lender. The purpose is to ensure that funds are available to release the estate from the guarantee. |
| Guaranteed Future Insurability |
| Life Insurance - an additional benefit (rider) on a life insurance policy. For an increased initial premium the policyholder is guaranteed the right to increase the sum insured in future without any further medical evidence. |
| Guaranteed Renewability |
| Insurance contract in which the insurer does not have the right to terminate. |
| Increasing Claim Benefit |
| (Also Inflation Adjusted Benefit) Income Protection - Amount of the benefit payable during a period of claim will increase annually with inflation. This facility can make a significant difference to the maximum entitlement under the contract. |
| Indexed Death Cover |
| Life Insurance - Amount of death cover increases with inflation throughout the term of the contract. |
| Inflation Adjusted Benefit |
| Income Protection - Amount of the benefit payable during a period of claim will increase annually with inflation. This facility can make a significant difference to the maximum entitlement under the contract. |
| Initial Commission |
| Amount paid by the insurance company to an adviser at the time an insurance contract is entered into. |
| Initial term |
| The initial term for which a policy is automatically renewable by the policyholder. Some policies are renewable beyond this term and some are not. |
| Insurance & Savings Ombudsman |
| State appointed official who determines disputes between policyholders and insurers. This provides an inexpensive and expedient way to resolve disputes. The ombudsman's decisions are binding on the insurer but not binding on the policyholder. |
| Investment Savings & Insurance Association |
| (Formerly the Life Offices Association) An association of life insurance companies who regulate the insurance industry. The Institute oversees the operation of the Code of Business Practices and has education and disciplinary functions. |
| Issue Age |
| Policyholders age at the date a policy is issued. |
| Joint Life Contract |
| Single policy which covers the lives of 2 or more persons. Proceeds may be paid on the deaths of each life assured, on the death of the first to die or on some other basis. |
| Key Person Insurance |
| Life Insurance - cover taken by a business over the life of a key person within the business. This recognises that, without that person, the business will suffer and funds are required to meet additional expenses while a suitable replacement is found. |
| Lapse |
| The termination of a policy through the actions of the policyholder (normally by failure to pay premiums). Insurance companies have different rules regarding the date at which the termination is deemed to occur and whether the policy holder has a right to reinstatement. |
| Large Sum Insured Discount |
| Discount allowed by insurers on their standard rates where the sum assured is large. |
| Level Death Cover |
| Life Insurance - life policy in which the amount to be paid on the death of the life assured remains constant throughout the term of the contract. Premiums generally increase throughout the term reflecting the increasing age of the life assured. |
| Level Term |
| Life Insurance - life policy for a specified term (eg 20 years) where the premiums remain level throughout. This levelling of premiums normally means that premiums will be higher than normal in the early years. |
| Life Assured |
| The person on whose death the proceeds will be paid by the insurer |
| Living Insurance |
| (Also Trauma Cover) Lump sum payable on the life assured contracting a serious illness. Care must be taken with the different definitions of "serious illness" offered by different insurers. |
| Loading |
| Additional amount charged by the insurer due to the particular circumstances of the life assured. Standard loadings are applied for smokers but loadings may also be applied for medical conditions etc suffered by the life assured. |
| Loss of Profits Contract |
| Income Protection - policy which pays a benefit to offset the loss of protits arising through the disability of the policyholder. Premiums are deductible and the proceeds are assessable. |
| Loyalty Discount |
| Percentage discount applied by some insurers when a policy has been in force for a specified period. |
| Maximum Insured Benefit |
| The maximum amount an insured could receive under the policy. |
| Medical Underwriting |
| Process carried out by insurers before entering into a contract of insurance. Depends on the amount of insurance and the medical condition of the insured. Can involve medical examinations and blood tests. Costs are normally met by the insurer |
| Minimum Premium |
| The minimum premium which will be charged by the insurer despite the amount of the insurance. For low sums assured there is an argument for increasing the amount of cover so that the premium equals the minimum premium. |
| Minimum Sum Insured |
| The minimum amount of insurance cover permitted. This is normally set at a very low level and so does not affect most policies. The main reason for imposing this minimum is to avoid unjustifiable administrative costs to insurers. |
| Monthly Benefit |
| Income Protection - the maximum amount payable monthly to the insured in the event of disability. |
| Mortgage Repayment Insurance |
| Life Insurance - Traditionally death cover which decreases over the term of the policy in line with the amount owing under a mortgage. Most now prefer to use normal term insurance policies which offer more flexibility at no further cost. |
| Multiple Life Insurance |
| (Also Joint Life Contract) - single policy which covers the lives of 2 or more persons. Proceeds may be paid on the deaths of each life assured, on the death of the first to die or on some- other basis. |
| New Business Commission |
| (Also Initial Commission) - amount paid by the insurance company to an adviser at the time an insurance contract is entered into. |
| No Claims Discount |
| Percentage discount applied by some insurers when no claims have been made within a specified period. |
| Non-Cancellable Policy |
| Policy which cannot be cancelled by the insurer. |
| Occupation Class |
| Income Protection - Classification of occupations according to likelihood of a claim resulting from disability. Normal classifications are 1. Professional; 2. Semi-professional/Managerial; 3. Skilled Trades; 4. Manual. Classification affects premiums. |
| Permanent Disability Benefit |
| Lump sum payable upon the insured becoming totally and permanently disabled. Care should be taken to check the definitions of "totally and permanently disabled" offered by different insurers. |
| Permanent Insurance |
| Life Insurance - Type of permanent life insurance policy. Premiums are more expensive than term insurance. The additional premium is paid towards the investment part of the policy. Returns vary widely and can be changed by the insurer at any time. |
| Policy Fee |
| Fixed amount charged by the insurer and included in the premium. Normally between $40 and $70 per annum. |
| Policy Illustration |
| Document provided by the insurer prior to commencement of a Policy which sets out a number of important aspects of the policy. |
| Policy Owner |
| The person who is entitled to receive the proceeds in the event of a claim. The owner need not be the life assured and may be a number of individuals together or could be a company. |
| Policy Reinstatement |
| Reinstatement of a policy following a lapse. Terms of reinstatement are set out in individual policy documents and may vary between insurers. |
| Policy Review |
| Review (normally only of premium) carried out by the insurer at a pre-agreed date in terms of the policy. Often carried out annually. |
| Policy Revival |
| (Also Policy Reinstatement) - reinstatement of a policy following a lapse. Terms of reinstatement are set out in individual policy documents and may vary between insurers. |
| Pre-disablement Income |
| Income Protection - the income of the insured prior to incurring a disability. Under normal income protection policies a lower pre-disablement income will result in a reduction in the amount of the benefit payable. |
| Premium |
| Amount payable by the insured to provide the protection offered by the policy |
| Premium Review |
| Review (normally only of premium) carried out by the insurer at a pre-agreed date in terms of the policy. Often carried out annually. |
| Qualifying Period |
| (Also Waiting Period) Income Protection - period immediately following a disability for which no benefit is payable by the insurer. Clients can select their own qualifying period. Longer qualifying periods result in lower premiums. |
| Reinstatement |
| (Also Policy Reinstatement) Reinstatement of a policy following a lapse. Terms of reinstatement are set out in individual policy documents and may vary between insurers. |
| Replacement of Business Form |
| Form which must be completed whenever a proposed policy will replace another policy. The form provides advice to the client regarding the potential disadvantages of terminating an existing policy |
| Rider |
| An additional benefit payable under a policy in addition to the principal purpose of the policy (for example waiver of premium, guaranteed future insurability) |
| Risk Insurance |
| Insurance in which the total premium is allocated to the risk of an event occurring. No additional premiums are contributed to investment (as with permanent insurance) |
| Surrender Value |
| Amount payable by the insurer when a permanent insurance contract is terminated |
| Temporary Insurance |
| Insurance in which the total premium is allocated to the risk of an event occurring. No additional premiums are contributed to investment (as with permanent insurance) |
| Term Insurance |
| Insurance in which the total premium is allocated to the risk of an event occurring. No additional premiums are contributed to investment (as with permanent insurance) |
| Terminal Illness Benefit |
| Amount of life cover is paid to the life assured on diagnosis of a terminal illness. Terms vary between insurers |
| Total and Permanent Disability |
| Lump sum payable to the assured on suffering a total and permanent disability. Terms vary between insurers |
| Trauma Insurance |
| (Also Living Insurance) Lump sum payable on the life assured contracting a serious illness. Care must be taken with the different definitions of "serious illness" offered by different insurers. |
| Underwriting |
| Process by which insurers check medical and financial information before making an offer of insurance |
| Waiting Period |
| Income Protection - period immediately following a disability for which no benefit is payable by the insurer. Clients can select their own qualifying period. Longer qualifying periods result in lower premiums. |
| Waiver of Premium |
| Additional benefit offered by insurers whereby, for an increased initial premium, future premiums will be waived during periods of disability |
| Whole of Life Policy |
| Life Insurance - Type of permanent life insurance policy. Premiums are more expensive than term insurance. The additional premium is paid towards the investment part of the policy. Returns vary widely and can be changed by the insurer at any time. |
