Thinking about taking out new insurance cover, or updating the policies you already have?

While your insurance adviser is there to guide you, having a good understanding of a few key terms could really help you get the most out of the process.

Excess

Your insurance excess forms a key part of some types of insurance policies.

Excess refers to the amount that you pay before your insurance cover steps in. You may be familiar with this from car insurance or your home and contents cover – if you make a claim for a broken window that costs $500 to repair and your excess is $200, you would pay $200 and the insurer would cover the remaining $300.

It can also apply to health insurance in much the same way. If you had health cover with an excess of $250 and went into hospital for a procedure that cost $20,000, you would pay $250 and the insurer would pick up the rest of the bill, within the policy limits.

Generally, the higher your excess, the lower your premiums may be able to be, because you are taking on more of the cost.

Other ways that insurers might share risk – and potentially lower premiums – are through shared cover policies, where you agree to pay a percentage of any healthcare cost rather than a set dollar amount, and with mechanisms such as longer waiting periods on income protection cover.

Exclusions and Loadings

When an insurer can see an additional level of risk associated with providing cover, they won’t necessarily decline to offer cover – but they may apply exclusions or loadings for specific conditions.

Exclusions refer to things that are not covered by a policy. For example, if you had a history of lung problems, you might find that an insurer would add an exclusion to your proposed insurance cover that meant you could not claim for any condition or event related to your lungs.

Loadings are when an insurer charges more to make up for the additional risk.

Not all insurers have the same approach to risk, so it may be that the exclusions or loadings that one provider would apply would not be in place for another. It is important to read your policy documents to fully understand how these work – we can help you through this, too.

Wait period

A wait period is the length of time that you have to wait before an insurance policy pays out a claim. This is usually used in reference to income and mortgage protection policies, but it can apply to other covers that provide an ongoing stream of payments.

When you take out insurance you can choose the wait period you think would be appropriate – generally based on how long you could afford to keep meeting your financial obligations and living costs without any income.

Generally, the longer your wait period the more affordable premiums may be.

Waiting periods, in contrast, refer to the period of time that you must wait before a claim can be made on a new insurance policy. These often apply to things like health and trauma insurances, but the period of time that is needed can vary a lot between insurers and for different types of claims. This helps insurers to avoid the risk associated with someone taking out cover when they know they are likely to need to make a claim in the near future.

Want to talk?

We’re the insurance advice experts and can help you find the answers you’re looking for when it comes to your next insurance policy. Drop us a line today to discuss your needs and individual circumstances and we can help you to determine the most appropriate cover for you.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.