Insurance jargon: Your ultimate guide to understanding important terms!

Forget endless insurance gibberish and hailing a financial translator! This blog is your cheat sheet for understanding the most important insurance jargon. We'll ditch the stuffy terms and swap them for real talk so that you can confidently navigate the world of insurance. This blog is here to be your friendly guide, translating all that mumbo jumbo into clear, understandable terms. Let’s begin!

Why do you need to know about car insurance terms?

Knowing car insurance terms is like having a key to understand your insurance policy. It helps you know what your insurance covers and how to ask for help if something goes wrong. It's also important to compare different insurance options and make sure you're getting the best one for you. Understanding these terms helps you talk clearly with your insurance company and protects you legally. It's also important for planning your money and protecting your things. So, learning car insurance terms is like learning a secret code that helps you make smart choices about your insurance.

Some important car insurance terms!

Understanding car insurance terms can be challenging. To help, here are explanations of some common insurance words and phrases used in specialised insurance classes:

1.Accessories:

These are additional items that are either added to the car before it was first delivered to its owner or at any time afterwards.

2. Accident:

An unforeseen, unintended, and unexpected event that occurs suddenly at a specific place and time.

3. Adjustment Premium:

The final premium is determined after the policy expires based on declared details like wages, stock values, or the loss experience under the policy. The initial premium is often called the deposit premium.

4. Agreed Value:

The amount agreed upon to insure the car at the time of loss, as shown on your policy schedule. It includes any accessories and modifications unless they are disability or campervan/motorhome modifications.

5. Aggregate Limit:

The total amount an insurance company will pay under a liability policy for all claims during the insurance period.

6. Annual Premium:

The premium is paid annually to keep the policy fully in force.

7. Anti-theft device:

A device or tool installed to reduce theft or vandalism, or increase the chance of recovering a stolen vehicle. Examples include steering wheel locks, Global Positioning Systems (GPS), and starter disablers.

8. At-fault claim:

A claim where the driver of the insured vehicle is found to be partially or fully at fault for the incident.

9. Baby seat:

A child restraint that complies with the Australian/New Zealand Standard for Child Restraint Systems for Use in Motor Vehicles.

10. Bonds:

A surety bond is a contract of guarantee involving three parties: the surety (insurance company), the person performing the obligation (contractor), and the person in whose favour the bond is issued (owner or obligee). The surety guarantees the contractor's obligation up to the specified amount.

11. Breakdown:

A mechanical or electrical fault that has caused the vehicle to become immobilised and/or unsafe to drive, including flat tyres, faulty batteries, running out of fuel, or lost or locked keys.

12. Business items:

The equipment, instruments, and tools used in your trade or profession that either belong to you or you are responsible for.

13. Business use:

A car is used as an essential part of any work or business, or to generate income or reward.

14. Call Out:

When a service provider is dispatched to assist at the breakdown location.

15. Car:

The motorised vehicle shown on your policy schedule includes factory-fitted accessories and any after-market accessories or modifications.

16. Car hire cover:

Cover providing access to a hire car if the insured vehicle is unavailable due to repairs from a related claim.

17. Claim:

A formal notification to your insurance company that you have experienced loss or damage in an incident covered by your insurance policy.

18. Claimant:

The party making a claim under an insurance policy, which can be the insured or a third party under liability policies.

19. Claim repairs:

Works completed by an authorised repair partner to rectify damage to an insured vehicle caused by a covered incident or accident.

20. Comprehensive cover:

Covering the car for events listed under Insured Events, including additional cover listed under Extra Cover if specified for Comprehensive cover.

21. Compulsory Third Party Insurance (CTP):

Mandatory insurance covers compensation costs for parties who experience injury or death as a result of an accident involving your vehicle.

22. Contract:

A formal and legally binding agreement outlining the mutual obligations of two or more parties.

23. Contract period:

The period, including the time and date, from the start or renewal of your policy to its expiry, as noted on your policy schedule.

24. Cooling off period:

A predetermined amount of time a party can withdraw from a contract or agreement without incurring penalties.

25. Cover:

An agreed maximum amount of risk or liability which the insurance company will issue if an insured event occurs.

26. Damage:

Loss or harm to an individual or property, including damage caused by fire, theft, or collision.

27. Depreciation:

A reduction in the monetary value of a vehicle over time, caused by wear and tear, neglect, or market conditions.

28. Discount:

A reduction of the advertised or agreed price of a product or service.

29. Driver:

The person using or operating a car, or the person legally responsible for its use.

30. Driving record:

A history of offences attributed to a license number. A claims history reflects any insurance claims and enquiries made by an individual.

31. Duty to take reasonable care not to make a misrepresentation:

A duty to take reasonable care not to make a misrepresentation when answering an insurer's questions that may affect the cover provided.

32. Earthquake:

An earthquake, volcanic eruption, hydrothermal activity, or tsunami.

33. Effective date:

The date an agreement or contract becomes legally binding and enforceable.

34. Excess: The first amount you must pay for each claim made under your policy.

35. Exclusion:

Circumstances, items, or actions your insurance policy does not cover, are outlined in your product disclosure statement (PDS).

36. Expiry date:

The date on which an insurance policy contract ends.

37. Flood:

The covering of normally dry land by water that has escaped or been released from its normal confines.

38. Gross trailer mass:

The mass transmitted to the ground by the axle or axles of the trailer when coupled to a drawing vehicle and carrying its maximum load.

39. Hire car following an accident:

Entitlement to a hire car following an accident, depending on the level of cover you have.

40. Household member:

Any person who lives at the overnight address where the car is kept.

41. Incident:

An unforeseen, unintended, and unexpected event that occurs suddenly at a specific place and time.

42. Insurance broker:

An intermediary who arranges insurance contracts between insurers and insureds.

43. Insurance policy:

A written contract between an insurer and an insured that outlines the terms and conditions of the insurance coverage.

44. Insurance premium:

The amount paid by the insured to the insurer for the insurance coverage.

45. Insured Value:

Either the market value or the agreed value as shown on your policy schedule.

46. Immobile:

Not capable of moving using the car's power.

47. Insured event:

An event described in the Insured Events section of your PDS.

48. Insured property:

The car and any other property insured by this policy.

49. Insurer:

An individual or entity providing financial coverage to another individual or entity.

50. Leaves the scene of an accident without lawful excuse:

Not remaining at an accident scene as required by law until duties are complete or there is a valid reason for leaving.

51. Legal liability:

The responsibility of an individual or entity according to law, including the responsibility to pay for harm or damage caused by their actions.

52. Listed driver:

Any driver listed on your policy schedule and legally allowed to drive the car.

53. Market value:

The cost of replacing the car with a similar make, model, mileage, and condition, immediately before an incident is covered by your policy.

54. Metropolitan:

The capital city of each state or territory and surrounding towns and cities.

55. Mobile:

Moving or capable of moving using the car's power.

56. Modifications:

Changes from the manufacturer's specifications were made to the car after it left the factory.

57. Motor vehicle insurance:

Insurance for cars, trucks, motorcycles, or other road-registered vehicles, providing financial protection for damage or loss.

58. New car replacement:

Coverage for a new car of the same make and model if the insured vehicle is a total loss within 24 months of purchase.

59. Nominated listed drivers:

Individuals known to the insurance company as listed drivers of the insured vehicle.

60. Not-at-fault accident:

An accident where the insured driver did not cause or contribute to the collision.

61. Optional extras:

Events or circumstances not covered by your original policy, are available for an additional fee.

62. Period of insurance:

The period a vehicle is insured against events outlined in the insurance policy.

63. Policy:

The product disclosure statement (PDS), your most recent policy schedule, and your insurance application.

64. Policy schedule:

The document confirming insurance cover and including details of that cover.

65. Premium:

The amount paid to an insurer to keep the insurance policy active.

66. Private use:

Use of a car solely for social, domestic, and pleasure purposes, including driving to or from work or study.

67. Product Disclosure Statement (PDS):

A legal document providing key features, fee structures, benefits, exclusions, and risks of an insurance product.

68. Reckless manner:

Any intentional and dangerous act by the driver of a car.

69. Regional:

All incidents occurring outside metropolitan areas.

70. Registered:

A car or trailer registered or licensed for use on a public road.

71. Regular driver:

The person who drives the car most often.

72. Repairable write-off:

A vehicle damaged to the extent that repairing it would exceed its market value.

73. Restricted access area:

An area protected by security to prevent unauthorised access.

74. Risk:

The likelihood of making a claim resulting in a payout from the insurer.

75. Roadworthy:

Compliance with roadworthy requirements for the state or territory where the vehicle is used.

76. Safety features:

Features in a vehicle reduce the likelihood of an accident.

77. Service area:

An area accessible by a two-wheel drive recovery vehicle or an island accessible by a two-wheel drive.

78. Storm:

A violent atmospheric event, including thunderstorms, cyclones, or strong wind.

79. Substitute car:

A loan car is provided free of charge while the insured car is serviced or repaired.

80. Third Party:

Any person involved in an accident with the insured car, excluding the driver or passengers.

81. Third-Party Property Only Cover:

Cover for damage caused to other vehicles and property, excluding damage to the insured car.

82. Third-Party Fire And Theft Cover:

Third Party Property Only cover plus cover for Fire and Theft.

83. Total loss:

When the car is either stolen and not recovered, or damaged beyond repair.

84. Unbraked trailer:

A trailer up to and including 750kg Gross Trailer Mass.

85. Unregistered:

A car or trailer not registered or licensed for use on a public road.

86. Use:

Private use or business use of a car.

87. Valuables:

Items of value stored or contained within your vehicle.

88. Vehicle identification number (VIN):

A unique number assigned to each vehicle for identification purposes.

89. Windscreen damage:

Loss or damage to the windscreen of a vehicle.

90. Write off:

A vehicle is considered a total loss if it has been damaged to the extent that repairing it would not be possible or advisable.

Other important insurance terms:

1.Accounts receivable / Book debts:

Uncollected debts due to physical loss or damage to accounting records.

2. Advance business interruption:

Loss resulting from damage to property during construction, installation, etc. It includes the loss from deferred trading revenue, continuing overheads, extended interest charges, etc.

3. Airport operator’s liability:

Covers third-party liability arising from owning, maintaining, or operating registered aircraft landing areas.

4. Assurance:

A term used to distinguish life "assurance" from general (non-life) insurance.

5. Average or co-insurance clause:

A clause in a policy requiring the insured to bear a proportion of any loss if the property is insured for less than its full insurable value. The proportion is based on the degree of underinsurance.

6. Aviation hull and liability:

Covers loss of or damage to the insured aircraft and liability to third parties arising from the operation of the aircraft.

7. Bankers’ blanket bond:

A package product for the banking and finance industries, incorporating various relevant insurances.

8. Bloodstock or livestock:

Insurance of animals for risks of death by accident, sickness, or disease.

9. Boiler and pressure vessel explosion:

Covers loss or damage due to the explosion or collapse of boilers and pressure vessels, including liability for resultant third-party property damage or bodily injury.

10. Burglary and/or theft:

Burglary coverage is for theft following a break-in or committed by concealed persons on the premises. Theft cover is not dependent on these characteristics and is typically more expensive.

11. Business interruption (loss of profits, consequential loss):

Covers loss of gross profit or revenue, continuing or fixed costs, and increased working costs following loss or damage to property.

12. Cancellation and abandonment:

Protects against losses arising from the cancellation or abandonment of an event due to specified perils.

13. Capacity:

The amount of insurance or reinsurance available from one insurer or the entire insurance market in a particular location or country.

14. Caravan and/or trailers:

Coverage for caravans, car trailers, or boat trailers.

15. Charterer’s legal liability:

Covers the insured's legal liability to the owner of a chartered vessel and/or to third parties arising from a charter party agreement.

16. Claims incurred but not reported (“Ibnr”):

Claims resulting from accidents or occurrences that have taken place but have not been reported to the insurer.

17. Commercial package business:

Insurance package for small business enterprises covering both assets and liabilities within one policy.

18. Completed operations:

Covers the contractor's responsibilities after completing a project and leaving the site.

19. Construction risks/liability:

Covers loss or damage to contract works and materials during construction, including legal liabilities for injury or damage to third parties.

20. Container liability:

Covers contractual liability for loss of or damage to hired or leased containers and additional costs incurred.

21. Contract bonding / Contract guarantee:

Covers financial loss arising from parties' failure to fulfil contractual obligations.

22. Contract penalties / Liquidated damages:

Covers penalties for delay in completing a contract on schedule.

23. Contributory negligence:

Lack of care on the part of the injured party contributing to the accident or aggravating the injury or damage.

24. Control of well (operator’s extra expense):

Covers expenses in bringing under control an oil or gas well, including cleanup costs and re-drilling expenses.

25. Corporate travel:

Covers various contingencies for insured persons while travelling on business, including baggage, medical expenses, and personal accidents.

26. Cost, Insurance & Freight (C.I.F.):

The cost of goods, including freight, insurance, and other charges for delivery to the port or final destination.

27. Cover:

The protection is provided by an insurance contract.

28. Cover note:

A temporary contract to protect the insured while the insurance policy is being processed.

29. Crops (growing):

Covers loss, destruction, or damage to crops from an insured peril.

30. Customs and payments bonds:

Covers liability under customs and/or excise laws.

31. Deductible:

A portion of the loss that the insured must pay before the insurer covers the rest, as stipulated in the policy.

32. Deposit premium:

The initial premium is paid at the inception of cover for policies whereas the final premium is determined after the policy expires.

33. Directors’ and officers’ liability / Company reimbursement:

Covers directors or officers for their legal liability for wrongful acts committed while acting in their capacity as director or officer. Company reimbursement covers payments the company is legally obliged to make in indemnifying directors or officers for claims made against them.

34. Disability:

Covers insured persons for permanent or temporary disablement as a result of an accident or sickness, preventing them from performing their normal occupation.

35. Disclosure:

Providing the insurer with information that may affect their decision to insure and the terms of insurance.

36. Dual basis payroll:

Insurance for payroll during two successive periods of business interruption.

38. Economic loss:

Liability for purely financial loss to third parties not arising from injury to persons or property damage.

39. Electronic computer crime:

Covers loss due to fraud perpetrated through the insured's computer or electronic communications systems by someone other than the insured's employees.

40. Electronic equipment / Breakdown / Business interruption:

Covers physical loss or damage, including breakdown, to computing equipment and loss due to interruption to the business as a result of such damage.

41. Employee benefits:

Arrangements for superannuation, life assurance, disability, or salary continuance insurance for employees.

42. Employers liability:

Insurance covers the legal liability of employers for injuries or diseases sustained by employees arising out of and in the course of their employment.

43. Employment practices liability:

Covers a range of liabilities arising from employment practices, such as wrongful termination, discrimination, or harassment.

44. Endorsement:

Documentary evidence of a change to an existing insurance policy, which may result in an additional premium, a return premium, or no premium adjustment.

45.Environmental impairment liability:

Covers legal liability for personal injury or property damage caused by pollution, including costs of cleanup and removal.

46. Export credit:

Covers losses caused by contract repudiation, export license cancellation, or currency inconvertibility preventing payment transfer under a contract.

47. Extended warranty:

Protection for breakdowns and defects that arise after the expiry of a manufacturer’s warranty period.

48. Extra cost of reinstatement:

Covers additional costs necessary to comply with government regulations following a loss.

49. Extra-territorial workers’ compensation:

Covers liability to pay compensation to employees domiciled in Australia who sustain injury or disease outside their state or territory of domicile.

50. Fidelity guarantee:

Covers loss sustained through fraudulent or dishonest acts committed by employees.

51. Film/ Film producers:

Coverage for film production and/or negatives, including third-party property damage and bodily injury.

52. Fire:

Covers loss or damage to insured property caused by fire, lightning, and explosion.

53. Fire brigade charges:

Covers charges incurred from calling the fire brigade to protect insured property.

54. Fleet policy:

Covers several motor vehicles under one policy.

55. Freight forwarders liability:

Covers legal liability to third parties for loss or damage to property entrusted to the insured for forwarding.

56. Full replacement cost:

Covers the cost to repair or replace property without depreciation deduction.

57. Fungi or bacteria:

Covers loss or damage caused by fungi or bacteria, such as mold, mildew, or wet or dry rot.

58. Goods in transit:

Covers loss or damage to goods while in transit by road, rail, air, or sea.

59.  Group personal accident:

Covers members of a group against accidental bodily injury resulting in disablement or death.

60. Guarantee:

A promise to answer for the debt, default, or miscarriage of another person.

61. Hailstorm:

Covers damage to property caused by hail.

62. Hull and machinery (Marine):

Covers loss of or damage to the vessel and its machinery and equipment.

63. Income protection:

A form of disability insurance that provides a regular income if the insured is unable to work due to illness or injury.

64. Increased cost of working:

Covers additional costs incurred to maintain normal business operations following loss or damage to property.

65. Indemnity:

A principle of insurance that aims to restore the insured to the same financial position as before the loss, without allowing a profit.

66. Industrial special risks:

Covers loss or damage to property from specified perils, such as fire, lightning, explosion, etc., on an all-risk basis.

67. Inland transit:

Covers goods while being transported within a specified area.

68. Insolvency:

Covers loss resulting from the insolvency or bankruptcy of a debtor.

69. Installation floater:

Covers materials and equipment during transit, on-site storage, and installation.

70. Insurable interest:

A legal right or financial interest in property that would be affected by its loss or damage.

71. Insurance act:

A law that governs the business of insurance in a specific jurisdiction.

72. Insured peril:

A specific risk or cause of loss is covered by an insurance policy.

73. Interest rate swap:

A financial product where two parties exchange interest rate payments to reduce or manage exposure to interest rate fluctuations.

74. Joint life policy:

A life insurance policy that covers two or more individuals, with the proceeds payable upon the first death.

75. Journey insurance:

Covers risks associated with travel, such as trip cancellation, medical emergencies, or lost luggage.

76. Key person insurance:

Life insurance is taken out by a business on the life of a key employee, with the business as the beneficiary.

77. Kidnap and ransom:

Covers ransom payments and related expenses incurred as a result of kidnapping, hijacking, or extortion.

78. Landlord’s liability:

Covers legal liability arising from owning or leasing premises to tenants.

79. Legal expenses:

Covers legal costs and expenses incurred in defending or pursuing a legal claim.

80. Liability insurance:

Insurance that protects against claims arising from injuries or damages to other people or property.

81. Life insurance:

Insurance that pays out a sum of money upon the insured's death or after a set period.

82. Livestock:

Insurance of animals for risks of death by accident, sickness, or disease.

83. Loss of gross profit:

This covers the reduction in the gross profit of a business following a loss covered by the material damage policy.

84. Loss of licence (Pilot):

Covers pilots for loss of license due to injury or illness.

85. Loss of use:

Covers additional expenses incurred as a result of loss or damage to property.

86. Loss prevention:

Measures taken to reduce the frequency or severity of losses.

87. Loss ratio:

The ratio of losses incurred to premiums earned.

88. Loss reserving:

The process of estimating the amount of money that an insurer will need to pay for future claims.

89. Malpractice:

Covers liability arising from professional services rendered negligently.

90. Marine cargo:

Covers loss or damage to goods while in transit by sea, air, rail, or road.

91. Material damage:

Covers loss or damage to insured property caused by specified perils, such as fire, lightning, explosion, etc.

92. Medical malpractice:

Covers liability arising from medical services rendered negligently.

93. Money:

Covers loss of money due to theft, robbery, or dishonesty of employees.

94. Mortgage indemnity:

Covers the lender against loss in the event of default by the borrower on a mortgage loan.

95. Motor insurance:

Insurance covering loss or damage to motor vehicles and liability to third parties arising from their use.

96. Nuclear risks:

Covers liability for nuclear damage as defined in the relevant legislation.

97. Occupational health and safety:

Aims to ensure the health, safety, and welfare of people at work.

98. Occurrence basis:

Insurance that covers claims arising from events that occur during the policy period, regardless of when the claim is made.

99. Offshore risk:

Covers risks related to offshore operations, such as oil and gas exploration and production.

100. Package policy:

A policy that combines various types of coverage into a single contract.

101. Pecuniary loss:

Financial loss, such as loss of earnings or profits.

102. Peril:

A specific risk or cause of loss is covered by an insurance policy.

103. Personal accident:

Covers accidental bodily injury resulting in disablement or death.

104. Personal effects:

Covers loss or damage to personal belongings while travelling.

105. Policyholder:

The person or entity that owns an insurance policy.

106. Pollution liability:

Covers liability arising from pollution, including cleanup costs and legal expenses.

107. Portable property:

Covers loss or property damage that is frequently moved, such as laptops and mobile phones.

108. Pre-existing condition:

A medical condition that existed before the start of an insurance policy.

109. Premium:

The amount paid by the insured to the insurer for the insurance coverage.

110. Product liability:

Covers liability for injury or damage caused by a defective product.

111. Professional indemnity:

Covers liability arising from professional services rendered negligently.

112. Property damage:

Physical damage to or destruction of tangible property.

113. Public liability:

Covers legal liability to third parties for injury or damage to their property.

114. Reinstatement value policy:

Covers the cost of reinstating the property to its original condition following a loss.

115. Renewal:

The process of extending an insurance policy for another term.

116. Rider:

An additional provision or endorsement is added to an insurance policy to modify its terms.

117. Riot, Strike, And Civil Commotion:

Covers loss or damage caused by riots, strikes, or civil disturbances.

118. Risk:

The chance of loss or the person or entity exposed to the chance of loss.

119. Risk management:

The process of identifying, assessing, and managing risks to reduce the likelihood and impact of loss.

120. Salvage:

The value of property that has been saved from a loss.

121. Self-insured retention:

An amount that the insured must pay before the insurance coverage applies.

122. Subrogation:

The right of an insurer to recover the amount of a claim paid to the insured from a third party that caused the loss.

123. Subsidence:

Covers loss or damage caused by subsidence, landslip, or heave of the site.

124. Suretyship:

A promise by one party to be responsible for the debt or obligation of another party.

125. Sustainability:

Meeting the needs of the present without compromising the ability of future generations to meet their own needs.

126. Terrorism:

Covers loss or damage caused by acts of terrorism.

127. Theft:

Covers loss of or damage to insured property caused by theft.

128. Third-Party administrator (TPA):

An organisation that processes insurance claims or provides other services on behalf of an insurer.

129. Total loss:

A loss that results in the destruction or loss of insured property.

130. Towing and labor:

Covers the cost of towing and labour when a vehicle breaks down.

131. Travel insurance:

Insurance that covers risks associated with traveling, such as trip cancellation, medical emergencies, or lost luggage.

132. Underwriter:

An individual or organisation that evaluates and assumes the risk of insuring a person or entity.

133. Underwriting:

The process of evaluating, selecting, and classifying risks for insurance.

134. Valuable papers:

Covers the cost of reproducing or restoring valuable papers that are lost or damaged.

135. War risks:

Covers loss or damage caused by war, civil war, revolution, rebellion, or insurrection.

136. Warranty:

A statement or provision in an insurance policy that must be strictly complied with.

137. Workers' compensation:

Insurance that provides benefits to employees for work-related injuries and illnesses.

138. Yacht:

Insurance of boats and ships used for pleasure or sports.

Conclusion

In conclusion, understanding car insurance terms is crucial for navigating the complex world of insurance. This blog serves as a cheat sheet, translating complicated jargon into clear, understandable terms. By knowing these terms, you gain insight into your insurance policy, allowing you to make informed decisions, communicate effectively with your insurer, and protect yourself legally. Whether you're comparing insurance options, planning your finances, or simply trying to understand your policy better, knowledge of these terms is like having a key to unlocking the mysteries of insurance.