Insurance Glossary NZ: A-Z Insurance Terms Explained | QuoteHub

By QuoteHub Editorial Team · Updated 2025-12-18

Insurance Glossary NZ: Every Term You Need to Know, Explained

Insurance policies are full of terms that sound like plain English but carry very specific meanings. When you are comparing quotes, reading your policy wording, or talking to an adviser, understanding these terms matters. A single misunderstood definition can mean the difference between a smooth claim and a frustrating surprise.

This A-to-Z glossary covers 80+ insurance terms commonly used in New Zealand. Every definition is written in plain English with NZ-specific context where it applies. Bookmark this page and come back whenever you need a quick reference.

For a category-based breakdown of common insurance jargon, see our Insurance Jargon Buster.

A

Accelerated Trauma

A trauma (critical illness) benefit that is linked to your life insurance policy rather than held as a separate standalone policy. If you claim for a qualifying trauma event, the payout comes from your life cover sum insured, reducing it by the amount paid. For example, if you have $500,000 of life cover with $200,000 accelerated trauma and you claim for cancer, your remaining life cover drops to $300,000. It is typically cheaper than standalone trauma cover because the insurer is not providing additional capital.

Accidental Death Benefit

A benefit that pays a lump sum if the policyholder dies as the direct result of an accident. Some policies include this as a built-in feature, while others offer it as an optional add-on. It does not cover death from illness or natural causes.

Adviser

A financial adviser who holds a licence to provide personalised insurance advice. In New Zealand, advisers must operate under a Financial Advice Provider (FAP) that is authorised by the Financial Markets Authority (FMA). An adviser's job is to assess your situation, recommend appropriate cover, and help you through the claims process.

Agreed Value

A method of calculating your benefit where the insurer agrees on a fixed amount at the time the policy is taken out, regardless of your income at claim time. Common in income protection insurance. The alternative is indemnity value, where your benefit is based on your actual earnings at the time of the claim. Agreed value policies typically cost more but provide certainty. Read more in our agreed value vs indemnity guide.

Annual Renewable

A policy structure where the contract renews every 12 months. At each renewal, the insurer may adjust the premium (usually upwards as you age). Most NZ life, trauma, and income protection policies operate on an annual renewable basis with stepped premiums.

Any Occupation

A definition used in income protection and TPD policies. Under an "any occupation" definition, you can only claim if you are unable to work in any occupation suited to your education, training, or experience. This is a stricter test than "own occupation" and generally results in lower premiums.

Application

The form and process you complete when applying for insurance. It includes personal details, health history, occupation, lifestyle, and financial information. The insurer uses this to assess your risk and decide whether to offer cover, and on what terms.

B

Beneficiary

The person or entity nominated to receive the insurance payout when a claim is made. In life insurance, this is typically a spouse, partner, child, or family trust. You can usually nominate multiple beneficiaries and specify the percentage each receives. It is important to keep your beneficiary nominations up to date, especially after major life events like marriage, separation, or the birth of a child.

Benefit Period

The maximum length of time an insurer will pay a recurring benefit. In income protection, the benefit period might be two years, five years, or until age 65. A longer benefit period provides more protection but increases the premium. Choosing the right benefit period depends on your financial situation and how long you could manage without income.

Broker

In NZ insurance, "broker" and "adviser" are often used interchangeably. Technically, a broker acts as your agent (representing you) rather than the insurer's agent. Most personal insurance advisers in New Zealand operate under a FAP and can access products from multiple insurers.

Built-in Benefit

A benefit that is automatically included in a policy at no extra charge. For example, many NZ life insurance policies include a built-in funeral advance, terminal illness benefit, or financial planning benefit. These are sometimes called "standard benefits" or "included benefits."

Buyback

An option that allows you to restore your sum insured to its original level after making a partial claim. Common in trauma cover. If you claimed $100,000 of a $200,000 trauma policy and the policy includes a buyback option, you may be able to reinstate the full $200,000 (subject to underwriting and a stand-down period).

C

Claim

A formal request to your insurer for payment under your policy. You are asking the insurer to honour their end of the contract based on an event that your policy covers. Claims can be for lump sums (life, trauma, TPD) or ongoing payments (income protection).

Claims Acceptance Rate

The percentage of claims that an insurer pays out. NZ insurers typically publish these figures annually. A high claims acceptance rate (most NZ life insurers sit above 90%) indicates that the vast majority of claims are paid. However, the figure alone does not tell you why the remaining claims were declined, so it should be read alongside the insurer's claims philosophy and your own policy terms.

Commission

The payment an insurer makes to an adviser or broker for placing a policy. In NZ, commission structures are regulated. Upfront commission is paid when the policy is first placed, and trail (or renewal) commission is a smaller ongoing payment for as long as the policy remains in force. Advisers are required to disclose their commission arrangements to you.

Consumer Insurance Contract

Under the Contracts of Insurance Act 2024, a contract taken out wholly or mainly for personal, domestic, or household purposes. This includes home, contents, car, travel, and pet insurance. The Act imposes specific duties on both insurer and policyholder for these contracts.

Contestability Period

A period (usually the first three years of a policy) during which the insurer can investigate and potentially void the policy if they discover material non-disclosure or misrepresentation in your application.

Cooling-off Period

A window, typically 14 to 30 days from receiving your policy documents, during which you can cancel the policy and receive a full refund of premiums. This gives you time to read the policy wording and confirm the cover is what you expected.

CPI Indexation

An option that automatically increases your sum insured each year in line with the Consumer Price Index (inflation). This helps your cover keep pace with the rising cost of living. Most insurers offer CPI indexation as a built-in or optional feature. Your premium will also increase accordingly.

Cross-purchase Agreement

An arrangement between business partners where each partner owns a life insurance policy on the other. If one partner dies or suffers a serious illness, the surviving partner uses the insurance payout to buy the deceased partner's share of the business.

D

Deductible

See Excess. In NZ, "excess" is the more commonly used term for personal insurance, while "deductible" appears more often in commercial policies.

Disclosure Duty

Your legal obligation to tell the insurer everything that is relevant to the risk they are assessing. Under the Contracts of Insurance Act 2024, the duty for consumer contracts is to take "reasonable care not to make a misrepresentation." For non-consumer contracts, the traditional duty of disclosure still applies. Failing to disclose relevant information can result in a claim being declined or a policy being voided.

Dual Benefit Period

A feature in some income protection policies that provides two distinct benefit periods: a shorter period for partial disability and a longer period for total disability. This structure can reduce the premium compared to a single long benefit period for both.

E

Excess

The amount you pay out of your own pocket before the insurer pays the rest of a claim. For example, a $500 excess on a health insurance policy means you pay the first $500 of an eligible claim. A higher excess lowers your premium but increases your out-of-pocket cost at claim time.

Exclusion

A specific condition, event, or circumstance that your policy does not cover. Exclusions can be standard (applying to all policyholders, such as war or self-harm within a certain period) or specific (applying only to you, based on your health history or occupation). Exclusions are listed in your policy wording and schedule.

Experience Refund

Some insurers offer a partial refund of premiums if you have not made a claim over a specified period. This is not common across all product types in NZ but appears in some health insurance and income protection policies.

F

FAP (Financial Advice Provider)

A business entity that is authorised by the FMA to provide financial advice, including insurance advice. All financial advisers in NZ must operate under a FAP. When you check an adviser's credentials, look for their FAP's name, FSP number, and FMA authorisation status on the Financial Service Providers Register.

Financial Strength Rating

A rating assigned by an independent agency (such as AM Best, S&P, or Fitch) that indicates an insurer's ability to pay claims. In NZ, insurers are required to maintain a minimum financial strength rating. A higher rating (e.g., A or A+) suggests the insurer is in a strong position to meet its obligations.

FMA (Financial Markets Authority)

The government body that regulates financial markets in New Zealand, including the conduct of financial advice providers, insurers, and other financial service providers. The FMA authorises FAPs and monitors compliance with financial advice legislation.

FSP Number

A unique registration number on the Financial Service Providers Register (FSPR). Every entity providing financial services in NZ must be registered. You can look up any adviser's or provider's FSP number at the FSPR website to verify their registration.

Funeral Advance

A feature included in many NZ life insurance policies that allows a portion of the sum insured (often $15,000 to $25,000) to be paid quickly upon death, before the full claim is processed. This helps the family cover immediate funeral costs without waiting for the complete claims assessment.

G

Grace Period

A set number of days after a premium due date during which your policy remains active even though the premium has not been paid. In NZ, grace periods are typically 30 days. If you pay within this window, your cover continues uninterrupted.

Group Insurance

Insurance arranged by an employer or organisation for a group of people. Group life, income protection, and health insurance are common in NZ workplaces. Premiums are often lower than individual policies, and underwriting may be simplified or waived for smaller sums insured.

Guaranteed Acceptance

A policy that does not require medical underwriting. You are accepted regardless of your health history. These policies often come with limitations such as lower sum insured amounts, higher premiums, graded benefits (reduced payouts in the first few years), or more exclusions. They are typically marketed to people who have been declined cover elsewhere.

Guaranteed Insurability

An option that allows you to increase your sum insured at certain life events (such as marriage, birth of a child, or taking on a mortgage) without further medical underwriting. This protects your ability to get more cover even if your health changes.

H

Hospital Cash Benefit

A benefit that pays a fixed daily amount for each day you are admitted to hospital. This is designed to help cover incidental costs (such as parking, extra childcare, or loss of income) rather than the hospital bills themselves.

I

IFSO Scheme

The Insurance and Financial Services Ombudsman scheme. A free, independent dispute resolution service for consumers who have a complaint against an insurer or financial adviser in NZ. If you cannot resolve a dispute directly with your insurer, you can take it to IFSO. All authorised insurers and FAPs must belong to a dispute resolution scheme.

Indemnity Value

A method of calculating your benefit based on your actual financial position at the time of the claim, rather than a pre-agreed amount. In income protection, an indemnity policy pays a percentage of your actual earnings at the time you become unable to work. If your income has dropped since you took out the policy, your benefit will be lower. Compare with Agreed Value.

Inflation Protection

See CPI Indexation.

Insurable Interest

You must have a genuine financial interest in the thing or person you are insuring. You cannot insure something that would not cause you a financial loss if it were damaged, lost, or if the insured person died.

K

Key Person Insurance

A policy taken out by a business on the life (or health) of a person whose death or incapacity would cause significant financial loss to the business. The business owns the policy, pays the premiums, and receives the payout. Common for business owners, directors, and essential employees. See our key person insurance guide for more detail.

L

Lapse

When a policy ends because premiums have not been paid after the grace period expires. A lapsed policy provides no cover. If you want to reinstate a lapsed policy, most insurers will require a new application and potentially new underwriting, which could result in exclusions or higher premiums based on your current health.

Level Premium

A premium structure where the amount you pay is fixed for a set period or for the life of the policy. Level premiums start higher than stepped premiums at younger ages but do not increase each year as you age. Over the life of a policy, level premiums can be significantly cheaper overall. See our stepped vs level premium comparison.

Life Assured

The person whose life is insured under the policy. This is often the same as the policyholder, but not always. For example, a parent might be the policyholder on a policy where the life assured is their child.

Loading

An increase to the standard premium that reflects a higher-than-normal risk. If your health, occupation, or lifestyle presents additional risk, the insurer may apply a loading (e.g., +50% loading means you pay 50% more than the standard premium). Loadings are disclosed in your policy schedule.

M

Material Information

Information that would influence a reasonable insurer's decision to provide cover, or the terms on which they offer it. Failing to disclose material information can be grounds for declining a claim or voiding a policy.

Moratorium

A type of underwriting approach used mainly in health insurance. Under a moratorium, pre-existing conditions that you have experienced symptoms for or received treatment for within a set period (usually five years) before the policy start date are excluded. If you remain symptom-free for a further continuous period after the policy starts, the condition may then become covered.

Multi-life Discount

A premium discount offered when two or more people are insured under related policies, typically partners or spouses. Not all NZ insurers offer this, but it is worth asking about.

N

Nominated Beneficiary

See Beneficiary. The specific person or entity you have named to receive the insurance payout.

Non-disclosure

The failure to provide material information to the insurer during the application process. Non-disclosure can be innocent (you genuinely did not know about a health condition) or deliberate. Under the Contracts of Insurance Act 2024, the consequences of non-disclosure depend on whether it was deliberate or reckless versus an honest mistake. Deliberate non-disclosure can void the policy entirely.

O

Occupation Class

A classification system insurers use to assess the risk associated with your job. Occupations are typically grouped into classes from low risk (e.g., office-based professionals) to high risk (e.g., manual labourers, certain trades). Your occupation class directly affects your premium. Someone working at a desk will generally pay less than someone working on a construction site.

Own Occupation

A definition used in income protection and TPD policies. Under an "own occupation" definition, you can claim if you are unable to perform the duties of your specific occupation, even if you could theoretically do a different job. This is a broader, more generous definition than "any occupation" and typically comes with a higher premium.

Ownership Structure

Who owns the insurance policy. Common structures in NZ include personal ownership, trust ownership, superannuation fund ownership, and business ownership. The ownership structure affects who can make changes to the policy, who receives the payout, and the tax treatment of premiums and benefits.

P

Partial Disability Benefit

A benefit in income protection that pays a reduced amount when you can work in a limited capacity but cannot perform all of your normal duties. The benefit is usually calculated based on the difference between your pre-disability income and your current reduced earnings.

Policy Anniversary

The date each year when your policy renews. Premium adjustments (for stepped premiums), CPI increases, and other annual changes typically take effect on this date.

Policy Wording

The legal document that sets out the full terms and conditions of your insurance contract. It defines what is covered, what is excluded, how to make a claim, and the insurer's obligations. Always read the policy wording, not just the marketing material. If something is not in the wording, it is not part of your cover.

Pre-existing Condition

A health condition, injury, or illness that existed before you applied for insurance. Insurers assess pre-existing conditions during underwriting and may exclude them from cover, apply a loading, or decline the application altogether. What counts as "pre-existing" varies between insurers. Some look at conditions you have been diagnosed with, others include symptoms you have experienced.

Premium

The amount you pay for your insurance cover. Premiums can be paid monthly, fortnightly, or annually. Annual payment often comes with a small discount. Your premium is determined by factors including your age, health, occupation, lifestyle, sum insured, and policy structure.

Premium Holiday

A feature that allows you to temporarily stop paying premiums while keeping your policy active. Most NZ insurers allow premium holidays of up to three or six months, typically once per policy year. Your cover remains in force during the holiday. This can be useful during periods of financial stress, but check the specific terms as some benefits may be reduced.

Premium Waiver

A feature that pauses your premium payments while you are receiving a benefit under the policy. For example, if you are claiming on your income protection policy, a premium waiver means you do not have to keep paying premiums on that policy (and sometimes on linked policies) during the claim period.

Q

Qualifying Period

See Stand-down Period. The terms are often used interchangeably in NZ.

R

Reinstatement

The process of reactivating a policy that has lapsed due to non-payment of premiums. Reinstatement terms vary by insurer. Some allow reinstatement within a certain period (e.g., 12 months) subject to paying arrears and possibly providing updated health information. Others may require a completely new application.

Replacement Policy

A new insurance policy taken out to replace an existing one. In NZ, advisers have a duty to ensure that replacing a policy is in your best interest. The risk with replacement is that your new policy may have new exclusions based on changes in your health since the original policy was issued, or you may lose benefits that are no longer available in current products.

Rider

An add-on or optional extra attached to a base insurance policy. For example, a trauma rider added to a life insurance policy provides critical illness cover on top of the life cover. Riders allow you to customise your cover without taking out a completely separate policy.

S

Schedule

The personalised summary document attached to your policy. It lists your name, the type of cover, your sum insured, premium, excess, benefit period, any exclusions or loadings specific to you, and other key details. The schedule and the policy wording together form your complete insurance contract.

Special Conditions

Additional terms applied to your specific policy based on your individual risk profile. These might include exclusions for particular conditions, loadings on your premium, or modified benefit terms. Special conditions are listed in your policy schedule.

Stand-down Period

The length of time you must wait after becoming unable to work before your income protection benefit begins paying. Common stand-down periods in NZ are four weeks, eight weeks, and 13 weeks. A longer stand-down period reduces your premium but means you need to cover your own expenses for longer before the benefit kicks in. Also called a waiting period or qualifying period.

Stepped Premium

A premium structure where the amount you pay increases each year as you age. Stepped premiums start lower than level premiums at younger ages but can become significantly more expensive over time. Most NZ personal insurance defaults to stepped premiums unless you specifically choose level.

Subrogation

The right of an insurer, after paying your claim, to pursue a third party who caused the loss. For example, if another driver causes an accident and your insurer pays for repairs, the insurer may recover costs from the at-fault driver's insurer.

Sum Insured

The maximum amount your insurer will pay under your policy. For life insurance, this is the lump sum paid on death. For income protection, the sum insured is expressed as a monthly benefit amount. Choosing the right sum insured is one of the most important decisions when setting up your cover.

Surplus Recovery

A feature in some income protection policies where, if you return to work earning more than your pre-disability income, the insurer may reduce or stop the partial disability benefit to prevent over-insurance.

T

Terminal Illness Benefit

A feature in most NZ life insurance policies that pays the sum insured (or a portion of it) early if you are diagnosed with a terminal illness and your life expectancy is less than a specified period (usually 12 months). This allows you to access the funds while still alive.

Total and Permanent Disablement (TPD)

A lump sum benefit paid if you become totally and permanently disabled and are unlikely ever to return to work. The definition of TPD varies between policies. It may use an "own occupation" or "any occupation" test, and some policies include additional criteria such as loss of limbs, sight, or cognitive function.

Trauma Cover

Also called critical illness insurance. A lump sum benefit paid on diagnosis of a specified serious illness or medical event. Common covered conditions include cancer, heart attack, stroke, coronary artery bypass surgery, and major organ transplant. NZ policies typically cover between 40 and 60 defined conditions, varying by insurer.

Trust Ownership

When an insurance policy is owned by a trust rather than an individual. Trust ownership can offer benefits in terms of estate planning, relationship property protection, and creditor protection. The trust is the policyholder and receives the payout, then distributes it according to the trust deed.

U

Underwriting

The process an insurer uses to assess your application and determine the terms on which they will offer cover. During underwriting, the insurer evaluates your health, occupation, lifestyle, financial situation, and other risk factors. The outcome may be standard terms, an exclusion, a loading, a deferral, or a decline.

Utmost Good Faith

A legal principle that both the insurer and the policyholder must act honestly and fairly toward each other. The Contracts of Insurance Act 2024 has modernised this concept in NZ, replacing some aspects with specific statutory duties, but the underlying principle of good faith remains central to the insurance relationship.

V

Voluntary Excess

An additional excess amount you choose to pay on top of the standard excess, in exchange for a lower premium. Common in health insurance and general insurance. The higher your voluntary excess, the lower your premium, but the more you pay out of pocket at claim time.

W

Waiting Period

See Stand-down Period. In NZ personal insurance, these terms mean the same thing. In health insurance, "waiting period" may also refer to the period after policy commencement before certain benefits become available (e.g., a 12-month wait for pre-existing conditions under a moratorium).

Waiver of Premium

See Premium Waiver.

Not sure where to start?

If you have read through this glossary and realised your own cover could use a review, or you are looking at insurance for the first time, get a free insurance check with QuoteHub. We will match you with an authorised adviser who can walk you through the terms that actually matter for your situation.

Frequently Asked Questions

What is the difference between an excess and a deductible?

In New Zealand, they mean the same thing. "Excess" is the term used in most NZ consumer insurance policies, while "deductible" appears more often in commercial or international policies. Both refer to the amount you pay out of your own pocket before the insurer covers the rest.

Why do insurers use so much jargon?

Insurance is a legal contract, and many terms carry precise legal meanings that differ from everyday language. Insurers are required to be specific in their policy wording to avoid ambiguity about what is and is not covered. The Contracts of Insurance Act 2024 requires consumer policies to be written in plain English, which is gradually improving readability.

What should I do if I do not understand a term in my policy?

Ask your adviser. It is their job to explain your cover in language you understand. You can also contact the insurer directly, or refer back to this glossary. If you are not happy with the explanation, the IFSO scheme provides a free dispute resolution service.

Is there a difference between "own occupation" and "any occupation"?

Yes, and it matters significantly at claim time. "Own occupation" means you can claim if you cannot do your specific job. "Any occupation" means you can only claim if you cannot do any job suited to your skills and experience. Own occupation is the broader, more protective definition, and typically costs more.

How do I check if my adviser is properly authorised?

Search for their name or FSP number on the Financial Service Providers Register (FSPR) at fsp-register.companiesoffice.govt.nz. Confirm that their FAP holds a current FMA authorisation. QuoteHub's FSP number is 712931.

Need help making sense of your insurance?

Insurance terms are only useful if they help you make better decisions about your cover. If you want a straightforward conversation about what you actually need, talk to a QuoteHub adviser. No jargon, no pressure, just clear advice.

Disclaimer: QuoteHub is a registered Financial Advice Provider (FSP 712931). The information in this glossary is general in nature and does not constitute personalised financial advice. Insurance terms and definitions may vary between insurers and policy types. Always refer to your specific policy wording for the terms that apply to your cover. For advice tailored to your situation, speak with an authorised financial adviser.

References

• Financial Markets Authority (FMA) , Insurance guidance
• ACC New Zealand
• Sorted.org.nz , Insurance guides
• Insurance & Financial Services Ombudsman (IFSO)
• MoneyHub NZ , Insurance resources
• Cancer Society of New Zealand
• Heart Foundation NZ
• ACC New Zealand , What we cover

Explore related pages: Life Insurance, Income Protection, Health Insurance, Trauma Insurance.