© Planet Financial Services Limited 2012

Insurance basics

How Insurance works


The fundamental basis is that a large number of people pool their money (premium) to pay out relatively large amounts to people who need to claim. Read more....

Explaining Jargon

Just click on the 'jargon' you want to find out about

Please note that these explanations intended as a guide only and are not guaranteed to be either legally or actuarially 100% accurate.

Older type policies

What is meant by:

          Whole of Life

          Endowment Assurance

          Reversionary Bonuses

          Terminal Bonuses

          Surrender Value

Today's policies

       Trauma, Living Insurance or Critical Illness

       YRT (Yearly Renewable Term)

       Stepped premiums

       Level Premiums

       Income Protection

       Waiting period

       Paid in Arrears or Pain in Advance


If the "jargon" you want to find out about isn't listed, please send an email telling us what you want explained. Send email

We will reply and post it on this site for others to see.

For further explanation of any of these terms we suggest you refer to an adviser. Find the one nearest you ​

When might an insurance company decline a claim?

There are only 2 grounds on which insurance companies can, by law, decline claims. They are;

1. Non-disclosure

- which is either making false statements (especially regarding health, occupation of leisure activities) or omitting information which would be relevant in assessing the acceptance of cover. This relates only to things the person knows about or could reasonably be expected to know about 

2. The claim doesn't fall within the terms of the policy.

An example of this would be a person claiming under their "trauma" cover (see Explaining Jargon) for severe burns when 10% of their body was effected when their policy says at least 20% must be affected.

While the relatively few declined claims often make it to the news or TV programmes (and in the majority of these cases the insurance companies are found to have acted correctly) the good news of payout goes unnoticed.

The fact is that life insurance companies paid out over a whopping $1,069M in claims in the year ending 30 June 2012, including more than $536M in death claims, $108M in “trauma”, more than $97M in replacement income and more than $78M in medical insurance (& that doesn’t include Southern Cross)