NZ Level 5 Life, Disability and Health Insurance key terms

A legal obligation on a person applying for insurance to tell the insurer, honestly and completely, every fact material to the insurer's decision before the contract begins. In New Zealand this is governed mainly by the Contract and Commercial Law Act and the Fair Insurance Code.

Information that a reasonable and prudent insurer would treat as relevant when deciding whether to accept a risk, what premium to charge, or what exclusions to impose. Failing to reveal it can let the insurer avoid or vary the policy.

When an applicant leaves out a material fact, whether deliberately or by oversight, when applying for cover. Depending on the circumstances and the law, the insurer may be able to avoid the policy, reduce a claim payment, or apply other remedies.

A false or misleading statement made by an applicant or adviser about a risk, product, or policy term. It differs from non-disclosure because something incorrect is actively stated rather than simply omitted.

An industry code of practice that New Zealand insurers who are members commit to. It sets standards for fair dealing, clear communication, complaint handling, privacy, and claim settlement timeframes, and sits alongside statutory duties.

The main New Zealand statute regulating how financial products, including many insurance products, are designed, marketed, sold, and disclosed. It underpins licensing, conduct standards, and fair-dealing obligations for advisers and providers.

An entity licensed under the financial advice regime to give regulated financial advice, either directly or through nominated advisers. It holds the licence and is accountable for the conduct of the advisers it engages.

The conduct standards that financial advisers must meet under the New Zealand advice regime, covering client interests, competence, disclosure of conflicts, and record-keeping. Advisers must follow it independently of their employer's own policies.

An independent New Zealand dispute resolution scheme that considers complaints about insurers and financial service providers who are members. It can make decisions binding on the provider up to a monetary limit, at no cost to the consumer.

An individual who gives regulated financial advice to clients about products such as life, disability, and health insurance. They must operate under a licensed financial advice provider and meet competence, conduct, and disclosure requirements.

A formal process inside an insurer for reviewing and responding to a client complaint before it goes to an external scheme. Good practice requires clear timeframes, a named contact, and a written outcome the client can escalate.

Cover that pays a lump sum if the insured dies or is diagnosed with a terminal illness during the policy term. It has no investment or savings component, so it is usually the cheapest way to buy a large death benefit.

Cover that lasts for the insured's whole life provided premiums are paid, so a claim is expected eventually. Premiums are typically higher than term cover and may be reviewed or structured with a cash value component.

The maximum amount the insurer will pay under a policy for a covered event, set when the policy starts or at review. It is the figure used to calculate the benefit, not the premium.

The person or entity nominated to receive the policy proceeds when a claim is paid. The nomination may be made in the policy or by will, and the insurer needs clear instructions on who is entitled.

The person who owns the insurance contract, pays the premium, and controls the policy, including who receives the benefit. The owner may be different from the life insured, which matters for insurable interest and tax.

The person whose life, health, or ability to work is covered by the policy. A claim is triggered by an event affecting this person, and their health and circumstances are what underwriting assesses.

A financial or legal reason why the policy owner would suffer loss if the life insured died or became disabled. It prevents people from insuring strangers and is a basic requirement for a valid life policy.

The amount the policy owner pays, usually monthly or annually, to keep the insurance in force. It reflects the insurer's assessment of risk, the sum insured, the policy term, and the product's structure.

The part of the policy documents that records the specific details of the contract: the insured, the owner, the cover type, the sum insured, the premium, and any special conditions or exclusions.

A stated circumstance or event for which the policy will not pay a benefit. Exclusions narrow the cover and must be clearly disclosed so the client understands what is not insured.

The amount an insurer will pay if the owner cancels certain whole-of-life or investment-linked policies early. It is usually less than the premiums paid and does not apply to pure term cover.

Cover that replaces part of a person's earned income when illness or injury stops them from working. Benefits are usually paid monthly as a percentage of pre-disability income and continue for an agreed period.

The proportion of a person's pre-disability income that the policy pays as a monthly benefit, often set between 50 and 75 percent. Insurers cap it to preserve the incentive to return to work.

The insured's earnings over a defined period before the disability began, used as the base for calculating the monthly benefit. The policy states how it is measured, for example the average of the last twelve months.

The time between the onset of a disability and the start of benefit payments, such as 30, 60, or 90 days. A longer waiting period lowers the premium but requires the client to have other funds available.

The maximum length of time a disability income or similar benefit will be paid for a single claim, such as two years, five years, or to age 65. It is a key driver of premium.

A lump-sum benefit paid when the insured becomes permanently unable to work or meets the policy's definition of severe disability. Insurers define TPD in different ways, so the wording must be compared carefully.

Basic self-care tasks such as bathing, dressing, eating, toileting, and moving about. Some disability and health policies trigger benefits when the insured cannot perform a set number of these without help.

A lump-sum benefit paid when the insured is diagnosed with one of a defined list of serious conditions, such as cancer, heart attack, or stroke. It pays on diagnosis rather than on death or disability.

Cover that pays for or reimburses medical treatment costs, such as specialist visits, surgery, or hospital stays. It can be structured with excesses, exclusions, and provider networks that affect both premium and access.

The amount the policyholder pays toward a claim before the insurer meets the remaining cost. A higher excess reduces the premium but increases the out-of-pocket cost when treatment is needed.

A health condition that existed, or that the person ought reasonably to have known about, before the policy started or before a cover increase. Insurers commonly exclude it or apply a stand-down period.

A structured process of gathering information about a client's circumstances, goals, and risks, then quantifying the cover they need. It forms the basis for a recommendation and must be documented and reviewed.

Collecting accurate information from a client about income, dependants, debts, assets, health, and existing cover. The quality of the fact-find directly determines whether the later recommendation is suitable.

Identifying and prioritising the specific risks a client faces, such as premature death, disability, illness, or medical costs, and judging how likely and how severe each would be for them.

A written document given to the client that sets out the recommendation, the reasons it fits their needs, the costs, and any conflicts of interest. It records the advice so the client can make an informed decision.

Whether a recommended product actually meets the client's identified needs, circumstances, and objectives. Suitability must be assessed on the documented facts, not on what is easiest to sell.

A systematic review of competing policies against the client's needs, looking at definitions, exclusions, premiums, and claim terms rather than headline price alone. The comparison should be documented to support the recommendation.

Cancelling or reducing an existing policy in favour of new cover. It requires care because the client may lose favourable terms, face new waiting periods or exclusions, and pay more, so the comparison must be documented.

The insurer's process of assessing an application to decide whether to accept the risk, at what premium, and on what terms. It may involve medical evidence, lifestyle questions, and financial checks.

An extra amount added to a standard premium to reflect a higher-than-average risk, such as a health condition or hazardous occupation. It is one way an insurer can accept a risk it would otherwise decline.

The standard that applies to answers given on an insurance application: the applicant must answer honestly and with reasonable care rather than disclosing every conceivable fact. It replaced harsher older rules in New Zealand.

The insurer's process for receiving, assessing, and settling a claim, including verifying cover, checking exclusions and disclosure, and paying the benefit. Fair and timely handling is a core conduct obligation.

The amount or service the insurer provides when a covered event occurs, such as a lump sum, a monthly income, or payment of treatment costs. The policy wording defines exactly when and how it is paid.

Arranging how a person's assets, including insurance proceeds, pass to others on death or incapacity. It links policy ownership and beneficiary nominations to wills and trusts so the money reaches the right people.