Glossary
of Insurance
Terms
There are
many phrases and terms used in insurance, most of which have
a specific meaning that are used in insurance contracts and
do not constitute provision of advice or indicate that a particular
product is appropriate for you. This is a quick guide to what
they mean and how they affect you. These are our interpretation
of definitions and they may differ from one insurer to the next.
The definitions are not extensive and more information can be
found on our individual guide pages. You should always check
the full policy wording of your particular insurance policy.
If you have any questions please talk to your insurance broker.
Accidental
Loss or Damage: Destruction or damage caused by violent
external means. With household policies you can add accidental
damage cover to your buildings and contents. This would cover
you then in the event of an accident, for example someone putting
his or her foot through the ceiling, or dropping some paint
on the carpet.
Act
of God: An event, which is not the fault of any individual,
for example floods and storms. Acts of God can be insurable.
Age:
Many insurers provide a discount for clients aged 50 or over.
Some insurers will load premiums for those aged 30 or less,
or may even not quote.
Alarm:
Many insurers provide a discount for properties that have an
alarm fitted. This will normally only apply though if the alarm
is fitted and regularly maintained by a 'NACOSS' member. Most
insurers will not give their usual discounts unless proof can
be given.
All
Risks: Wider cover than given under a normal property
insurance policy. Covers any loss or damage apart from exclusions
stated in the policy. Commonly the term now used is Personal
Possessions cover and this avoids confusion.
Bedrooms:
Some insurers base the premium upon the number of bedrooms in
your property. You must count all rooms if they were designed
as bedrooms (even if you no longer use them as such).
Building
Accidental Damage: Covers you in the event of damage
being caused to your buildings accidentally. For example putting
your foot through the ceiling whilst you are in the loft.
Building
Sum Insured: The Building Sum Insured is usually
the re-building cost i.e. the amount it would cost to rebuild
your home in the event of it being totally destroyed (say by
fire).
Buildings:
When an insurer talks about buildings they usually mean the
house (or flat) and its domestic outbuildings, garages, greenhouses,
tennis courts, swimming pools, terraces, patios, drives, footpaths,
walls, gates, fences, hedges and including landlord's fixtures
and interior decorations forming part of the property on the
same site.
Buildings
Insurance: A policy covering the structure of a house
or other building against a number of different risks.
Caravan:
Some household policies allow you to cover a caravan and its
contents for an additional premium, thus avoiding the need for
a separate caravan policy.
Certificate:
Document issued by insurers as evidence that insurance is in
force to meet the requirements of the law (notably for motor
and employers' liability insurance).
Claim:
When a policyholder or beneficiary seeks payment or settlement
under the terms of a policy.
Combined
Policy: Normally a policy that combines cover for
buildings and for contents into a single contract.
Commission:
Money paid by an insurance company to a broker/ independent
intermediary/agent for selling policies.
Condition:
Part of a policy stating that certain rules must be followed,
for example, the duty to take reasonable care to protect property,
or to report claims to the insurance company promptly.
Consequential
Loss: Insurance covering the loss of profits of a
business and certain other costs resulting from fire or other
insured event (also known as Business Interruption).
Contents:
Household goods, furniture, furnishings, appliances, clothing,
valuables, personal effects and money owned by the client or
his/her family and in private use, fixtures, fittings and interior
decorations for which your client or his/her family are legally
responsible as occupier, visitors personal possessions provided
they are not otherwise insured.
Contents
Accidental Damage: Covers you in the event of damage
being caused to your contents accidentally. For example dropping
a tin of paint on a carpet whilst decorating.
Contents
Insurance: A policy covering the contents of home
against a number of different risks.
Contents
Sum Insured: The Contents Sum Insured is the total
amount of cover required to replace all your belongings, in
the event of everything being destroyed. Don't forget carpets,
curtains, linen, as well as all other possessions, furniture
and electrical goods.
Cover
Note: A document giving temporary evidence of cover
while the policy and certificate are being prepared. Most commonly
a cover note for motor insurance.
Critical
Illness Insurance: Pays out a lump sum on the diagnosis
of certain life-threatening illnesses specified in the policy.
Employers'
Liability: A compulsory class of insurance that most
employers must have to cover them against claims by employees
who are injured at work.
Excess:
An amount of money that the policyholder has to pay towards
the cost of each and every claim, for example, the first £50.
Exclusion:
Specified property, person or event that the policy does not
cover.
General
Insurance: Insurance
of (non-life) risks where the policy offers cover for a limited
period, usually one year.
Green
Card: A document issued to policyholders motoring
abroad as evidence that they have the minimum insurance cover
required by the law of the country visited. Not essential for
European travel, because minimum legal cover is automatically
included in UK policies.
Holiday
Insurance: A policy covering certain risks connected
with holidays. Usually includes cover for the costs of unavoidable
cancellation, personal accident, medical treatment abroad and
lost or stolen luggage. More usually described as Travel
Insurance
Indemnity:
The principle by which policyholders are put in the same financial
position after a loss as they were immediately before it.
Index
linked: Where the sum insured automatically increases
either in line with inflation or some other relevant index (for
example the house rebuilding cost index).
Index-linked:
Insurance where the amount of cover changes automatically in
line with an index. Examples are the cost of rebuilding a house
or replacing its contents.
Individual
Permanent Health Insurance: Policies arranged by
an individual providing for the payment of income during a period
of incapacity due to ill health or accident. The benefit is
paid to the policyholder until he/she is able to return to work,
or until retirement.
Insurance:
A service that offers financial compensation for something that
may or may not happen. Originally the term assurance was generally
used for life insurance, but now the two words are interchangeable.
Insurance
Company: A company that takes on risks under the
policies it sells in return for the payment of premiums. Companies
may be "mutual" (owned by the policyholders) or "proprietary"
(owned by the shareholders).
Insurance
Premium: The amount paid by the policyholder for
insurance.
Insurance
Premium Tax: A government tax imposed on most insurance
premiums. Currently 5% on most contracts and 17.5% on travel
insurance.
Liability:
Legal responsibility for causing loss to someone else by injuring
them or damaging their property. Householders - like everyone
else - have a duty to exercise reasonable care in everything
they do. If you are careless or negligent, and injury or damage
results to someone else or his or her property - then you could
be held "legally liable" - perhaps for a great deal
of money. Contents and buildings policies cover you against
this risk. The buildings policy covers you as owner of your
home while the contents policy covers you as its occupier.
Listed:
Some insurers will not cover listed properties; others will
require an up to date RICS valuation.
Lloyd's
of London: An insurance market organised into syndicates,
which underwrites most types of policy.
Loss
Adjuster: A person, independent of an insurance company
but engaged and paid by it, who checks that a claim is covered
and negotiates with the policyholder the amount payable for
a claim. Loss adjusters are independent experts with a good
knowledge of the area in which they operate. They are skilled
in assessing claims and in advising on the best repair and reinstatement
methods. They will recommend to the insurance company the way
in which your claim should be settled.
Loss
Assessor: A person who negotiates claims on behalf
of policyholders.
Mechanical
Breakdown Insurance: Covers against the cost of breakdowns
of household appliances or motor vehicles.
Minimum
Securities: Some insurers require the installation
of approved alarm and/or minimum security fittings. Check whether
this applies. You may qualify for a discount from the premium
if you already have good security. Outside doors should have
deadlocks that at least conform to BS3621. These locks can only
be opened by key. A burglar cannot just use a plastic card to
push back the tongue of the lock or break a glass panel and
reach in to open it. Doors that you usually lock from the inside
- for example the back door - should also be fitted with bolts.
Double doors should have bolts (preferably security bolts with
removable keys) at the top and bottom of both doors as well
as a lock. On patio doors, additional security locks should
be fitted to stop the slicing frame being lifted off the tracks.
The sliding leaf of patio doors should be fitted on the inside.
Windows Most burglaries are through windows. Key operated locks
should be fitted to all accessible windows - those on the ground
floor and those near drainpipes and flat roofs. These locks
are inexpensive to buy and easy to fit. In all cases security
devices must be in operation whenever members of the insured's
household have gone to bed for the night or when no one is at
home. The keys to doors and windows should be removed from the
locks and be kept in a concealed location, but be ready for
use in the event of an emergency, (the definition may vary from
insurer to insurer and the exact wording should be checked in
the policy booklet)
Mortgage
Payment Protection Policy: Cover for monthly mortgage
repayments in the event of accident, sickness or unemployment.
Often referred to as ASU.
Mortgage
Protection Policy: A life insurance policy that covers
the outstanding amount of mortgage if the policyholder dies
before the loan is repaid.
Motor
Insurance: Covers legal liabilities arising from
the use of a motor vehicle. Comprehensive policies also cover
damage to the vehicle.
Neighbourhood
Watch: A police approved Neighbourhood Watch Scheme
of which the policyholder is a member.
New-For-Old:
Cover for property where an item lost or destroyed would be
replaced with a brand new one, with no deduction for wear and
tear. Also called "replacement as new".
No
Claim Discount (or Bonus): A reduction in a renewal
premium to reflect a claim-free record; used most often in motor
insurance but increasingly common with household policies.
No
Claims Discount: This discount is only available,
based upon the number of claim free years insurance has been
held.
Occupancy:
Some insurers will provide a discount depending on whether or
not the property is occupied on a regular basis during weekdays.
Properties that are unoccupied for more than 30 days will not
normally be accepted; you will need to obtain an Unoccupied
property insurance.
Occupier's
Liability: Accidents often occur around the home,
for example a visitor to the house trips over a loose carpet
tile and injures himself or herself. Personal injury cases in
particular can cause substantial claims. Occupier's Liability
cover is part of the Contents
Insurance.
Outbuildings:
Buildings outside the house, for example a shed, greenhouse,
stables.
Owners
Liability: Sometimes a claim can arise because of
the negligence of the policyholder (or a member of the household).
Someone could be injured or suffer property damage and the policyholder
would be liable. Imagine, for example, that a loose tile falls
off the roof and injures a member of the public, the claim could
be substantial. Cover for owner's liability is part of the Buildings
Insurance.
Personal
Accident Insurance: A policy that pays specified
amounts of money if the policyholder is injured in an accident.
Depending on the type of disability, the payments may be made
weekly, for a set period, or as a lump sum.
Personal
Belongings: Most insurers will provide cover for
items that don't have a high individual value. This would cover
clothing and personal effects, jewellery, watches, furs, photographic
equipment, binoculars, cellular phones, musical instruments,
sports equipment, luggage, toys, portable radios and televisions
up to a pre-defined limit. For example £3,000 of cover
as long as no single article is worth more than £1,000.
Personal
Possessions: These are articles normally worn, used
or carried about in every day life. We define them as clothing
and personal effects, jewellery, watches, furs, photographic
equipment, binoculars, cellular phones, musical instruments,
sports equipment, luggage, toys, portable radios, televisions
and pedal cycles. Please note some of the above items have to
be specified on the quote system, as there are different ratings
for different companies. i.e. pedal cycles, video cameras, musical
instruments.
Policy
Limit: A limit on the amount of cover that an Insurer
is prepared to offer. For example the valuables limit may be
one third of the contents sum insured. The insurer is not prepared
to insure the contents where there are valuables exceeding this
amount.
Policy
Wording: The policy wording explains exactly what
cover is provided by a policy. You should always refer to the
policy wording if you need to check if a particular cover is
available. In most cases the policy wording is contained within
a booklet (the policy booklet) that is sent to the customer
with a schedule.
Policyholder:
Person or organisation to whom the insurer issues the policy.
Normally the person to whom benefits are payable.
Post
Code: When choosing insurance online, enter the full
Post Code: OX7 5SR - Don't forget the space in the middle and
remember to use the letter O or zero correctly. This is the
main rating factor for insurers and you cannot obtain a quotation
without entering a valid Post Code.
Premium:
The amount paid by the policyholder for insurance.
Previous
Insurance: The number of years that insurance has
previously been held. Most insurers will give a No Claims Discount
and this is based on the number of claim free years for which
the client has been insured. In order to qualify for the discount
you will need to know the previous insurance details when completing
the proposal.
Private
Medical Insurance: A policy that covers the cost
of private medical treatment.
Professional
Indemnity Insurance: Protects professionals against
liability claims resulting from negligent work.
Proposal
Information: It is important that you answer questions
in full as they will form the basis of an Insurance contract.
It is often possible to omit a start date and the insurer may
still process the proposal and will hold the case pending confirmation
of the start date. If you are unsure of any point, or wish to
disclose some other material fact, use a Notes page if present.
Proposal
Notes: It is important that you disclose all material
facts to the Insurer, failure to do so may mean that the policy
will not operate in the event that a claim is made. If you are
unsure of whether something is a material fact or not, you should
disclose it.
Proposal
Questions: These questions form the basis of the
declaration to the insurance company. It is important that these
are read and changed if necessary.
Proposer:
Person or company who applies to take out insurance.
Public
Liability Policy: Covers legal liability for injury
or damage caused to others.
Refer:
When a quotation system cannot produce a quotation for a particular
product, usually because the risk is outside the scope of the
standard underwriting terms, then the insurer will ask for the
risk to be referred to the underwriters. The underwriters may
then decide to accept or decline the risk. If accepted they
will notify you of the premium and any special terms or conditions
that might apply.
Reinsurance:
Reinsurance is the cover insurance companies can purchase to
protect themselves against large losses.
Renewal
Notice: Notice sent to the policyholder inviting
him/her to renew a policy for a further period and stating the
premium payable.
RPI:
Retail Price Index - an index taking into account the amount
prices of retail goods are rising or falling.
Security:
Some insurers require the installation of approved alarm and/or
minimum-security fittings. Check whether this applies. You may
qualify for a discount from the premium if you already have
good security. Outside doors should have deadlocks that at least
conform to BS3621. These locks can only be opened by key. A
burglar cannot just use a plastic card to push back the tongue
of the lock or break a glass panel and reach in to open it.
Doors that you usually lock from the inside - for example the
back door - should also be fitted with bolts. Double doors should
have bolts (preferably security bolts with removable keys) at
the top and bottom of both doors as well as a lock. On patio
doors, additional security locks should be fitted to stop the
slicing frame being lifted off the tracks. The sliding leaf
of patio doors should be fitted on the inside. Most burglaries
are through windows. Key operated locks should be fitted to
all accessible windows - those on the ground floor and those
near drainpipes and flat roofs. These locks are inexpensive
to buy and easy to fit. In all cases security devices must be
in operation whenever members of the insured's household have
gone to bed for the night or when no one is at home. The keys
to doors and windows should be removed from the locks and be
kept in a concealed location, but be ready for use in the event
of an emergency, (the definition may vary from insurer to insurer
and the exact wording should be checked in the policy booklet)
Single
Article Limit: Within particular sections of a policy
(for example valuables, personal possessions, specified items)
the insurer will limit the amount of cover they will provide
for any single article. If any item exceeds this limit then
the policy will need to be referred to the insurer to see if
they are prepared to accept the risk and if so on what terms.
Solvency
Margin: The solvency margin is the excess of the
reserves the insurance company holds over its liabilities.
Specified
Item: Description A brief description of the item
being covered. Many insurers will ask for valuations of specified
items over a certain value, usually around £1,500
Specified
Item Value: The value of the individual item.
Sports
Equipment: Some insurance companies prefer you to
identify sports equipment separately from other Personal Possessions.
Sub
Let: If the property is being sub-let to the occupier,
or on loan. Only certain insurers will accept Sub-Let properties
and there will be additional limits and exclusions that will
apply, Landlord's contents only and no accidental damage options
for example. DSS, Student and Holiday homes may have to be referred
before you can obtain a quote.
Sum
Insured: The amount for which property is insured,
and the maximum amount that the insurance company will pay for
any claim.
Third
Party: Someone involved in a claim who is neither
the policyholder nor the insurer.
Underinsurance
When the sum insured is not enough to cover the maximum possible
loss or damage.
Underinsured:
Where the amount of cover is insufficient to pay a claim in
full. For example if the buildings were underinsured then in
the event of a fire the insurance company may either refuse
to pay the claim at all, or only pay part of the claim. Underinsurance
is not fair on the rest of the population because effectively
the insurer is grouping together all the premiums and setting
that against the total claims, to work out the rate. If someone
is underinsuring it means they are paying a smaller amount but
could still make claims. Consider the case where there are two
homes with £30,000 of contents. One is insured for the
full value and one for only £20,000 and is therefore underinsured.
If they both make a claim for a £1,000 theft, the underinsured
home could still be paid the £1000 claim, but their premiums
would have been lower. This is clearly not fair on the others.
Underwriter:
Person who decides whether to accept a risk and calculates the
premium to be charged.
Uninsurable
Risk: A risk where loss is either inevitable (e.g.
a house already on fire or a person suffering from a terminal
illness). Also applies where damage is gradual e.g. rust and
corrosion.
Valuables:
Items of gold, silver and other precious metal, precious stones,
jewellery, furs, pictures, curios, other works of art, telescopes,
microscopes, collections of coins, stamps or medals, remaining
within the home.
Warranty
Insurance: This type of insurance provides cover
against the cost of repairs to broken down household appliances.
Write-Off:
A damaged vehicle which is not repairable, or one that would
cost more to repair than the car was worth before the damage
occurred. Also known as a "total loss".
Year
Built: The approximate year that the property was
originally built. Most insurers give discounts for properties
that have been built recently.
