Insurance Law glossary
Australian insurance law is governed principally by the Insurance Contracts Act 1984 (Cth), supplemented by general common law principles. This glossary covers 40 commonly used terms across first-party, liability, and life insurance.
This is a glossary of 40 key terms used in Australian insurance law practice. Each entry has a plain-English definition and, where relevant, a citation to the Insurance Contracts Act 1984 (Cth).
Definitions
AFCA
The Australian Financial Complaints Authority — the external dispute resolution body handling complaints against financial firms, including insurers.
Aggregate limit
The maximum amount an insurer will pay for all claims during the policy period, regardless of the number of claims.
Average
A principle applied where the sum insured is less than the value of the property, reducing the insurer's liability in the same proportion as the underinsurance.
Broker
An intermediary who arranges insurance on behalf of an insured, owing duties to both the insured and the insurer depending on the circumstances.
Claims made policy
A policy that responds to claims first made against the insured during the policy period, regardless of when the underlying events occurred.
Co-insurance
A provision requiring the insured to bear a proportion of each loss, particularly where the property is insured for less than its full value.
Condition precedent
A condition that must be complied with before the insurer's liability to indemnify arises under the policy.
Contribution
The right of one insurer to recover from another insurer covering the same loss where both policies respond to the same risk.
Declinature
A refusal by the insurer to pay a claim, typically on the basis of non-disclosure, misrepresentation, or an exclusion.
Deductible
The amount of a loss the insured must bear before the insurer is obliged to pay. Also called an excess.
Double insurance
The situation where the same risk is insured by two or more policies, giving rise to a right of contribution between insurers.
Duty of disclosure
The insured's statutory duty under the Insurance Contracts Act to disclose to the insurer every matter known to them that is relevant to the decision to accept the risk.
Duty of utmost good faith
The reciprocal obligation of insurer and insured under section 13 of the ICA to act towards each other with the utmost good faith in all matters relating to the contract.
Excess
The amount the insured must pay towards a claim before the insurer's liability to indemnify arises.
Exclusion
A policy term that removes specified risks or losses from the scope of cover.
Express warranty
A term of the policy describing or defining the risk insured, breach of which may give the insurer defences in accordance with sections 54 and 55 of the ICA.
Financial Services Council (FSC)
The peak industry body for many financial services firms, including life insurers and superannuation trustees, setting standards and codes of practice.
General Insurance Code of Practice
A voluntary industry code setting service standards and claims handling obligations for general insurers, administered by the Insurance Council of Australia.
ICA
The Insurance Contracts Act 1984 (Cth) — the principal statute governing general and life insurance contracts in Australia.
Indemnity
The principle that an insured should be placed in the same financial position after a loss as they were before the loss, so far as money can achieve this.
Insurable interest
A legal or equitable interest in the subject matter of the insurance such that the insured stands to suffer economic loss from its damage or destruction.
Insurer
A body that is authorised under the Insurance Act 1973 or Life Insurance Act 1995 to issue insurance policies in Australia.
Liability cap
A contractual or policy limit on the amount an insurer will pay under the policy, whether per claim, per occurrence, or in aggregate.
Life Insurance Act
The Commonwealth Act regulating the business of life insurance and the licensing of life insurers.
Material fact
A matter that a reasonable insurer would consider relevant to the decision to accept the risk or to the terms on which it would do so.
Misrepresentation
A false statement made by the insured to the insurer that induces the insurer to enter into the contract on particular terms.
Non-disclosure
A failure by the insured to disclose a matter they were required to disclose under the duty of disclosure.
Occurrence policy
A policy that responds to claims arising from events that occurred during the policy period, regardless of when the claim is made.
Policy schedule
The document attached to the policy setting out the specific details of the risk insured, including the insured, period of insurance, sum insured, and excess.
Policy wording
The standard terms and conditions of the policy, typically produced by the insurer and applied to all policies of that type.
Product Disclosure Statement (PDS)
A document required under the Corporations Act to be given to retail clients before issue of a financial product, including retail insurance.
Reinstatement
A policy term providing that the sum insured is reinstated after a claim, often automatically and subject to additional premium.
Replacement cost
A basis of indemnity under which the insurer pays the cost of replacing or repairing damaged property without deduction for depreciation.
Run-off cover
Insurance cover that responds to claims made after a claims-made policy has ended, typically for past acts committed during the policy period.
Section 54
The provision of the Insurance Contracts Act preventing an insurer from refusing to pay a claim because of an act or omission that could not reasonably be regarded as having caused or contributed to the loss.
Subrogation
The insurer's right, after indemnifying the insured, to step into the insured's shoes and pursue recovery from a third party responsible for the loss.
Sum insured
The maximum amount the insurer will pay under the policy for a particular risk or category of loss.
Third-party claim
A claim against the insured by a third party for loss the insured has caused, triggering indemnity under a liability policy.
Utmost good faith
The reciprocal duty imposed on both insurer and insured to act with the utmost good faith in their dealings under the policy. See also duty of utmost good faith.
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This glossary is a general reference for practitioners — not legal advice. Always verify against the current Insurance Contracts Act and relevant case law.
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