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Busting the insurance jargon

Why is it that 98% of homes and *95% of cars are insured, while only 57% of the population have life insurance and 20% income protection? Does this mean that we value material things more than ourselves and our family?

jargonProbably not, however it is likely that “jargon” is at times getting in the way of understanding the world of insurance. And jargon is definitely something best to be avoided.

The insurance industry is well known for its technical (and sometimes confusing) terminology and this is clear to me because during insurance meetings many new clients are unsure of the type of cover they currently have or, unaware that a type of insurance was available or, how it pays out. And who really can blame them with such words as: Term Life Insurance, Terminal Illness, Critical Illness, Dread Disease, Trauma, TPD, I.P. Disability Income Insurance and many more ……. Phew!

So let’s try to get to the bottom of some of regular terms used in the industry with language we can all understand:

Term Life Insurance

Term Life insurance pays a lump sum or regular amount of money if you pass away or become terminally ill. Term Life insurance is designed to help your family pay costs that you would have helped with if you were still alive.

Accidental Death Insurance

Will only pay a lump sum benefit if you pass away as a result of an accident.

Trauma or Critical Illness Insurance

Pays a lump sum of money to help you recover physically and financially from a serious illness, injury or medical procedure. The most common illnesses linked to trauma insurance in New Zealand are cancer, heart attack, and stroke.

Level or Stepped premium payments

You can choose a level premium payment option and lock your premium payments in so they don’t increase with age – like a fixed-rate mortgage. Alternatively stepped premiums start lower than level premiums but increase each year based on your age at that time.

CPI Adjustment

Each year the insurance company will offer to increase your sum insured by the rate of inflation, according to the consumer price index (CPI), without the need for further medical or financial underwriting.

Trauma Reinstatement / Buy Back

You can restore your Trauma insurance after you’ve claimed on it, so that you can claim it again in the future usually excluding the initial Trauma.

Life Cover Buy Back

You can increase your Term Life cover back to its original amount when your trauma claim comes out of your life insurance – when you have the accelerated version of Trauma insurance.

Standalone Cover

Your Trauma or Total and Permanent Disability insurance can be separate from your Term Life insurance. A Trauma or Total and Permanent Disability claim won’t reduce the amount of life cover you have.

Accelerated Cover

Your Trauma or Total and Permanent Disability insurance is linked to your Term Life insurance. The insurance company will pay your Trauma or Total and Permanent Disability claim out of your Term Life insurance.

Premium Cover

The insurance company will pay your premiums for you if you’re ill or injured and can’t work in your usual job for more than 10 hours a week.

TPD

Stands for ‘Total and Permanent Disablement’. TPD insurance pays you a lump sum of money if you’re totally and permanently disabled because of illness or injury.

TPD – Own Occupation

You can claim your TPD insurance if you’re unable to return to your specific occupation. For example, if you were injured and could no longer work as a plumber, you could claim your TPD insurance even if you were able to do another job, such as working in a plumbing company office.

TPD – Any Occupation

You can claim your TPD insurance if you are unable to work in any job that you are reasonably suited to by training, education or experience. For example, if you were injured and could no longer work as a plumber, you could claim your TPD insurance if you were also unable to do another job, such as working in a plumbing company office.

Mortgage Repayment / Protection Insurance

Pays you a regular monthly payment if you’re unable to work because you‘re sick, injured. Mortgage Repayment insurance is designed to pay for your mortgage and related expenses while you’re not receiving your salary or wages. It is paid until you can return to work, or until you reach the end of the payment period on your policy depending on the option you choose.

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Published on Monday, February 18th, 2013, under Latest News

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