Insurance Jargon: A Glossary for Beginners

Insurance documents are full of terms designed to be precise — but that can be baffling if you've never encountered them. Here's a plain-English glossary of the most important ones.

Core terms

• •Premium: The amount you pay for your insurance policy — monthly or annually.
• •Excess (or deductible): The amount you pay out of pocket when you make a claim. The insurer pays the rest.
• •Sum insured: The maximum amount your insurer will pay out on a claim.
• •Policy period: The duration your cover is active — usually 12 months.
• •Claim: A formal request to your insurer to pay for a loss or damage.
• •Premium loading: An additional amount added to your premium because you're considered higher risk.
• •Indemnity: Being restored to the financial position you were in before the loss — not better off.

Policy documents

• •PDS (Product Disclosure Statement): The main policy document. It contains all the terms, conditions, exclusions, and limits. You must read this before buying.
• •FSG (Financial Services Guide): Explains who the insurer is, their services, and any conflicts of interest.
• •Schedule: The personalised part of your policy — your name, covered items, agreed value, premium, and excess.
• •Certificate of insurance: Proof that you have cover — useful for lenders or landlords.

Coverage terms

• •Exclusion: Something your policy does NOT cover. Always read exclusions carefully — they define the real limits of your cover.
• •Sub-limit: A lower limit that applies to a specific category within your policy (e.g., $2,000 sub-limit for portable electronics).
• •Market value: What your insured item is worth in today's market — depreciation applies.
• •Agreed value: A fixed payout amount agreed upfront. Provides certainty, especially for cars.
• •New for old: Your insurer replaces damaged items with new equivalents, not depreciated ones.
• •Defined events: Specific events your policy covers (e.g., fire, theft, storm). If it's not listed, it's not covered.

Health insurance terms

• •MBS (Medicare Benefits Schedule): The government schedule of fees for medical services. Medicare pays 75% for private hospital; your health fund covers the rest.
• •Gap payment: The difference between what a doctor charges and what Medicare + your fund pays.
• •Waiting period: The time after taking out cover before you can claim for certain benefits. Up to 12 months for pre-existing conditions; 24 months for obstetrics.
• •LHC loading (Lifetime Health Cover): A 2% premium surcharge for each year you wait past age 31 to take out hospital cover. Maxes at 70%.
• •Extras cover: Optional cover for services outside hospital — dental, optical, physio, and more.