Insurance
Glossary
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.
