Glossary of Insurance Terms

Policy Wording

Essentials Umbrella
Life Benefit
Critical Illness
TPD Benefit
Income Protection

We have outlined some common insurance terms and definitions of the Sovereign Essentials policies below as a guide to help you to better understand the insurance offered. For a fuller definition of the terms please refer to the policy wordings.

Appendices
The appendix or appendices that forms part of the policy document and contains the terms of any benefit you have chosen.

Benefit term
The term for which the life assured is insured for the stated benefits as stated in the schedule.

Benefit payment period
The maximum period for which an income protection benefit is payable for the same or related illness of a life assured, which is two years or until the life assured turns 65 whichever is the earlier.

Bereavement support benefit
Upon receiving written notification that the life assured has died, Sovereign will immediately pay a lump sum of $5,000 to the policy owner(s). This bereavement support benefit will be treated as an early payment of the life cover benefit. The life cover benefit will then be reduced by the amount paid.

Body Mass Index - BMI
This is a ratio of height to weight of a person. Insurance underwriters use this index to assess future medical risk. Persons with a higher than normal BMI may be offered a higher premium (loading), which must be accepted before a policy can be put in place.

Claim
The action taken to obtain the benefits of an insurance policy when a loss happens that's covered by the policy.

Condition(s)
A treatment, illness, surgical procedure or event which leads to a claim being paid under the specified definition. e.g Critical Illness conditions - see policy wordings.

Cover
The amount of protection provided by an insurance policy.

Excess
The amount a person making the claim contributes towards the cost of a claim (for example, the selected excess for an Absolute Health Medical Insurance cover may be $300 therefore the person pays the first $300 of any claim for Hospital costs). The Insurance company pays the rest.

Full-time care
Care for 16 hours per day or more, provided by a professional nursing service.

Income Protection Benefit
Sovereign will pay an income protection benefit, during the benefit term and in accordance with this policy if the life assured has become totally disabled while in New Zealand and remains so for a continuous period of at least the waiting period. Sovereign will only pay an income protection benefit for this policy while the life assured is living in New Zealand.

Sovereign pays you the income protection benefit in the form of a monthly income, in arrears from the end of the waiting period. Once Sovereign have accepted your claim, you will receive the income protection benefit until the life assured ceases to be totally disabled, or until the end of the benefit payment period whichever is the earlier.

The benefit payment period is the maximum period Sovereign will pay you an income protection benefit for the same or related illness of a life assured. For this policy it is two years for any single claim.

Note: This is an Agreed Value policy which requires evidence of income on application, compared with other Indemnity Value policies provided by others which require evidence of income on claim which can be difficult. NZLife experience is that the Agreed value is preferable as it provides certainty, and is not taxable.

Life Assured
The life to be covered. A separate application is required for each life to be assured.

Occupational Classes
We all work in different jobs, some involving more physical and other risks than others. Claims history has shown that certain occupations can lead to more claims. Occupations have therefore been graded into 5 main classes for Income Protection/TPD premium purposes. They are:

Professional
General clerical
Tradepersons
Labourer
Not employed

Policy Owner
The policy owner is responsible for paying all premiums under this policy and can be an individual, group or organisation other than the life to be covered. The policy owner receives any benefits due from the policy.

Notes:
1. The Life Assured can also be the Policy Owner. This is normal for applicants who are single.
2. Married couples or partners may wish to own each others policies so that the benefits are paid to the surviving partner. This arrangement is also used for business partnerships.

Premium
The money that must be paid for your insurance policy. Depending on the type of cover you have, your premium is made up of:

The selected Insurance premiums which go to Sovereign
A policy fee which goes to Sovereign
GST applied only to TPD and Income Protection Insurance

Registered Medical Practitioner(s)
A person, acceptable to Sovereign, who is registered and practising as a medical practitioner in New Zealand or Australia, other than:

You;
The life assured;
A member of the life assured's family or your immediate family;
The life assured's or your business partner or associate.

Risk commencement date
The commencement date of the policy, being the date on which the policy was issued.

Smokers/Nonsmokers
A smoker is defined as someone who has smoked cigarettes in the last 12 months. Persons who smoke cigars or pipes are classified as non-smokers for insurance purposes. Smokers can have their classification revised, if they have not smoked for over 12 months. On providing a written and signed note to this effect, your premiums will be adjusted to nonsmokers rates. Use the calculator to see that difference (potential savings).

Sum insured
The amount an insurance policy covers.

Terminal Illness benefit
You can apply for a terminal illness benefit of up to 100% of the applicable life cover benefit if the life assured has been diagnosed as having an illness, which will result in the death of the life assured within 12 months.

This terminal illness benefit will be treated as an early payment of the life cover benefit. The life cover benefit will then be reduced by the amount paid.

Totally disabled - income protection
Has the meaning given to it in depending on the occupational class of the person. For each class, the degree of incapacity required for a life assured to be totally disabled is as follows:

Occupation classes other than five
A life assured is totally disabled if, in Sovereign's opinion, after considering the advice of a Registered Medical Practitioner and other relevant information, the life assured is so seriously incapacitated by illness or injury that they are unable to follow the occupation or carry on the business they were involved in before becoming totally disabled for more than 20 hours per week.

Occupation class five
If a life assured has been on leave without pay for more than 12 months or was unemployed for three months immediately before becoming totally disabled, that life assured automatically becomes occupation class five.

A life assured is totally disabled if, in Sovereign's opinion, after considering the advice of a Registered Medical Practitioner and other relevant information, the life assured is so seriously incapacitated by illness or injury that they are continuously confined under full-time care to the life assured's home or a medical institution.

A total disability does not include the following conditions:

any disease or disorder of, or injury to the spine, invertebral discs, nerve roots or supporting musculature, including their treatment or complications thereof;
any mental disorder including, but not limited to, anxiety disorders, chronic fatigue syndrome, depression, stress, fatigue, exhaustion, psychiatric complications of physical disorders, behavioural or any other mental or functional nervous disorder, their treatment or complications thereof;
complications of pregnancy or childbirth of the life assured, unless the disability lasts for more than 90 days after the pregnancy, in which case the waiting period will start from the 91st day.

TPD - Total Permanent Disablement
Sovereign will pay a total permanent disablement insurance benefit, during the benefit term and in accordance with the policy if:

Either:

The life assured is totally and irreversibly disabled, with the effect that they are unable as a result of sickness or injury, to perform without assistance at least three of the following activities for themselves;
1. Bathing and showering
2. Dressing and undressing
3. Eating and drinking
4. Using a toilet
5. Moving from place to place by walking, in a wheelchair, or with a walking aid.

Or:

The life assured is unable to perform two of the above and his or her intellectual capacity has reduced or deteriorated to such an extent that the life assured requires permanent and constant supervision.

Waiting period
The minimum period, as stated in the schedule, that a life assured must be totally disabled before Sovereign will pay an income protection benefit. The options in this income protection insurance policy is either 4 or 13 weeks.

Waiver of Premium
If you are entitled to an income protection benefit you will also be entitled to a waiver of premium benefit. Sovereign will waive your regular premiums payable under this policy (for all benefits), for the duration of the claim payment period. Once Sovereign stops paying you an income protection benefit, you must recommence your premium payments.