Insurance Terms Part 2

Cut through the insurance jargon

Find out the meaning of some technical insurance terms here.

General insurance

General insurance includes insurance policies that protect your property and your financial risk, including motor vehicle, home building and contents and travel insurance. It excludes life insurance and health insurance products.

Grace period

If you haven’t paid your premium on time, your insurance company will usually allow a period of up to 28 days during which it will continue the policy. If you pay the premium during the grace period, your insurance company treats it as though it was paid on time. If you do not pay you premium in this period, the policy may lapse soon after and leave you without any cover.

General Insurance Code of Practice

The General Insurance Code of Practice sets out the standards that general insurers must meet when interacting with customers at different stages of the customer experience journey. These different stages of the customer experience journey include when buying or renewing insurance, when making a claim or complaint, when supporting customers experiencing vulnerability. The performance of the industry and each general insurer who subscribes to the General Insurance Code of Practice is monitored and enforced by the General Insurance Code Governance Committee.

Hazard

A hazard is something that makes your situation more risky. For example, if you store explosives in your house, that’s a hazard that increases the risk of an explosion.

Hydrology

Hydrology is the field of study and expertise that can determine how a home or property was inundated. Insurers will arrange a hydrology report in cases where they need to determine the primary cause of water inundation to make a claim decision.

Indemnity

Indemnity under an insurance policy is the security or coverage that is provided to you to protect against loss, damage or injury. Legal indemnity means someone promises they won’t sue you if a certain event happens, or they promise to protect you by paying your damages if an event occurs.

Insurance

Insurance helps you to manage a risk if something happens to you or your property and helps you recover from the difficulties and financial hardship caused by unexpected events that cause injury and/or a financial loss. The person who buys the policy is known as the policyholder or the insured. In return, the insurance company who issues the policy to you promises it will compensate you under certain loss or damage circumstances as set out in the policy.

Insurer

This is the insurance company that issues a policy to you to help protect against certain risks. See also ‘Underwriting’.

Insurance Council of Australia

The Insurance Council of Australia is the representative body of the general insurance industry in Australia. Read more about us.

Liability

When a person or organisation is responsible for something, especially in law, that’s liability. Liability insurance can cover you for legal costs and compensation costs that you might have to pay if you are proved to be the cause of harm to another person or business.

Loss

You can make a claim only if you have incurred a loss that meets the terms and conditions of your policy. This means looking at the impact on your assets, for example when your property is lost or damaged. It’s much more serious than your footy team losing a game.

Liability

When a person or organisation is responsible for something, especially in law, that’s liability. Liability insurance can cover you for legal costs and compensation costs that you might have to pay if you are proved to be the cause of harm to another person or business.

Mitigation

This is things you might be able to do to lessen the impact of something happening to you or your property, for example taking action in terms of upgrading your building before the next natural disaster to reduce the consequences of damage.  On a larger scale, federal and state government can help protect entire communities by investing in mitigation  that can improve the resilience of the nation’s homes and businesses to cyclone, flood and bushfire, as well as projects that protect the community, like levees, floodways, and fuel reduction.

Market value

Market value means the amount of money that your property is worth, or would be worth if you sold it in its current state. For motor insurance, it’s the amount the insurer will pay out if your car is written off, based on the state of the car immediately before the collision or accident. This will be different to the agreed value.

No claim bonus

If you don’t make any claims on your insurance for a few years, your insurer may decide you are a lower risk and may decrease your premium by giving you a no-claim bonus. See also discount.

Non-insurance

Non-insurance is having no insurance to cover your exposure to a risk.

Negligent

Negligent or negligence is when you don’t use reasonable care in a situation where you have an obligation to another person. It is usually referred to when something goes wrong, such as an injury to another person, and this may lead to a liability claim. For example, if driving a car, you have a duty to take reasonable care of your passengers and other road users and to avoid causing accidents and acting carelessly. If you do not act with such care, you may well be found to be negligent and therefore responsible for the damages you have caused.

Non-disclosure

Non-disclosure means that a person has not told their insurer all of the information that should have been given, if the person had complied with their duty of disclosure when they applied for an insurance policy. This may result in your insurer not being obliged to pay all or a portion of a claim being entitled to avoid your policy so that it was never effective in the first place. With insurance, honesty is the best policy.

New for old

New for old is a term used in an insurance policy that allows older items to be replaced with new items, without any discount for the depreciation in value of the old items.

Occurrence

An occurrence is something that happens that results in a loss. It might be an accident, a burglary, a natural disaster or a recurring event that results in liability.

Insurance Terms and their meanings from https://insurancecouncil.com.au/resource/abcs-of-general-insurance-2/

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