Simplifying insurance jargon

Lost in your policy? Let’s translate it

If you’re someone that finds insurance language puzzling – you’re definitely not alone. Insurance terms can often seem complex and unclear at first glance. If you don’t have an insurance background, understanding your policy can feel like an intimidating task. It can be difficult to get to grips with the nuances and specificities of each policy. 

We want to help make that process easy and accessible to everyone and anyone.

Cracking the code: why insurance terms can be confusing 

There are several reasons why insurance language can sometimes be hard to digest:

• Technical terminology – specialised terms are used in insurance to cater to the specificity of policies.
• Complex legal language – policies are legal documents, so they are made up of precise legal language to ensure clarity and accuracy. This can often appear dense and wordy.
• Detailed and lengthy documents – by nature, policies are long and detailed to cover a range of scenarios and conditions.
• Ambiguity and vagueness – some terms may be intentionally vague to cover a wide range of situations, and this can lead to misinterpretation.
• Absence of standardisation – different insurance companies both nationally and internationally may use varying terms or definitions of similar concepts. For example, excess and deductible are often used interchangeably.
• Cultural and language barriers – for clients whose first language isn’t the one used in the policy, confusion on the nuances of insurance language can be particularly heightened.

No more guesswork: your go-to glossary for insurance jargon

• Aggregate limit – the maximum amount an insurer will pay for all covered losses during a specific policy period, typically one year.
• CofC (certificate of currency) - proof that you have an active insurance policy, and this includes the coverage provided.
• Claims made policy - a type of insurance policy that provides coverage only if the claim is made during the policy period, regardless of when the incident (or occurrence) actually took place – as long as it occurred after the retroactive date of the policy.
• Deductible - the amount of loss that is to be borne by the insured before being able to make a claim under a policy. This is sometimes referred to as ‘excess’.
• Endorsement – a document that modifies the terms, coverage, or conditions of the original insurance contract.
• Excess - the initial amount that must be contributed by the insured towards each claim. When one or more excesses are applicable to a policy, they will be detailed on the insurance schedule.
• Indemnity period - refers to the specific duration during which an insured individual or business can receive benefits following a covered loss. This is often used in policies such as business interruption and disability insurance.
• Interested party – a person or entity that has a financial or legal interest in the insured item or policy but is not the primary policyholder.
• Jurisdictional limits – this refers to the specific legal jurisdictions (i.e. the countries or regions) where claims can be made, and disputes can be resolved under the given policy.
• Lapse - when the policy is about to expire due to the lack of payment of premiums.
• Limit of liability / Limit of indemnity – refers to the maximum amount an insurer will pay for a covered claim or series of claims under a policy.
• Named insured – the individual or legal entity specifically listed on the insurance policy, also known as the primary policyholder.
• Occurrence policy – this type of insurance policy provides coverage for incidents that occur during a policy period, regardless of the time the claim is filed, even if the claim is made years later. 
• PDS (Product Disclosure Statement) – the document detailing the terms and conditions of an insurance product, so consumers can make informed decisions about purchasing.
• Premium – the price of insurance cover for a specified risk for a specified amount of time.
• Policy schedule – a key part of your insurance contract specifying the exact details of the policy.
• Retroactive date – the earliest date an incident can occur and still be covered under a claims-made policy.
• Sub-limit – a specific cap within the overall policy limit that applies to a particular type of loss, item, or coverage.
• Subrogation – a legal principle that allows an insurance company to step into the shoes of the insured after a loss and seek recovery from a third party that caused the damage.
• Sum insured – the upper limit of what the insurance company will cover for a specific event. 
• Territorial limits - defines the geographical area where your insurance policy provides coverage.

These definitions are guided by the NIBA glossary of insurance terms – for further terms and their explanations refer to the NIBA website¹.

Don’t forget to:

• Ask questions – always ask your insurance broker for clarification 
• Don’t cut corners – it’s important that you read the whole policy carefully
• Having the policy schedule and wording together will make life a lot easier and provides:
  • Comprehensive understanding 
  • Clarity and transparency 
  • Legal and compliance 
  • Efficient claims processing 
• Use your resources! Such as the NIBA glossary of insurance terms referenced above.

Why speaking insurance pays off

Learning the lingo provides peace of mind – there’s no more confusion about what your policy includes and what exactly that means. It allows you to make informed decision-making to protect your financial assets. It also increases your contractual awareness and ensures regulatory compliance. Above all, it equips you with the ability to communicate better and fully navigate your policy class. 
 

¹National Insurance Brokers Association of Australia, Glossary of Insurance Terms: The A–Z for Insurance Practitioners (April 2021) https://www.niba.com.au/sites/default/files/content-files/Glossary_of_Insurance_Terms-A-Z-4_21-1.pdf [accessed 14 May 2025]