Welcome to our Insurance Glossary, designed to help you understand common insurance terms and phrases. We’ve broken down industry jargon into clear, simple explanations so you can make more informed decisions about your cover.
This is a standard phrase used to explain unintentional damage caused to property or a person.
An additional amount on top of the agreed annual premium due to a policy amendment, which increases the amount of risk to an insurer. This can be an increase in sums insured, a change to the policy conditions or as a result of a non-disclosure of information which has now come to light. (A Return Premium, or Refund of Premium, is a change to the agreed premium which usually reduces the risk to the insurer)
Insurance policies can be made on the basis of either All Risks or Insured/Named Perils. All Risks coverage insures the policyholder for any peril, unless specifically excluded by the policy, whereas a policy on a named peril basis will only cover perils that are specifically listed in the policy
This is the amount you pay each year for your insurance policy.
Average is a clause present in the policy wording of an insurance policy. In the event of under-insurance, the insurer will reduce the amount they will pay to you following a claim by the same percentage you are under-insured by. For example, if you declare the rebuild cost of your building to be £100,000, but following a claim, a surveyor assesses the rebuild cost at £500,000, you will only be insuring (and therefore only paying for) 20% of the total risk. As a result, if you were to claim repair costs of £10,000, the insurer will only pay 20% of these (£2,000). In this example, you would be left to pay for the remaining £8,000 to repair the damage.
Insurance Brokers act on behalf of their clients to obtain suitable insurance policies from a panel of insurance companies. Some brokers are specialists in certain types of insurance. Lifestyle Insurance Brokers specialise in most types of commercial insurance.
Describes cover that pays you for losses incurred because of interruption to your business due to damage to buildings or property that are insured under the Material Damage section, and that has been caused by an insured peril. Payments may be based on your gross profit or revenue. This cover usually forms part of a larger package of insurance, such as a commercial combined policy.
A document provided by the insurance company to provide evidence of your insurance cover. Insurers are required by law to provide Motor Insurance Certificates and Employers’ Liability Insurance Certificates.
This is an official document provided by your existing fleet insurer that shows your claims history over a set number of years. The document will usually show each year you have been insured with that provider, the average number of vehicles insured throughout each year, the number and value of claims reported, the cover you had in place and the excess applicable. This information allows any prospective insurer to see the ratio and frequency of claims, which enables them to assess the risk and calculate their premium. A CCE is essential in order to obtain competitive fleet insurance quotes.
A cooling-off period allows you to cancel your policy within a certain timescale, usually 14 days. It is important to note that consumers have a legal right to a 14-day cooling-off period; commercial customers do not. In the event that a policy does contain a 14-day cooling-off period, you will still have to pay for the time on cover, plus administration fees. If a claim is recorded against the policy within the 14 days, you may have to pay the full annual premium.
Commercial insurance refers to policies that are taken out by businesses to protect against risks that may affect their ability to continue trading. Commercial Insurance can provide cover for physical items such as buildings and contents, loss of income (under the Business Interruption cover), liability protection (Employers Liability, Public Liability and Product or Sales/Service Liability) and legal expenses.
Conditions form an important part of every insurance policy. These are the rules, or requirements, that you (and the insurance company!) have to follow to ensure the policy is valid and that claims will be paid out. There are many conditions within an insurance policy, ranging from basics such as your obligation to pay the premium due and to provide accurate information, to more specific conditions like ensuring you lock your doors to maintain security. It is vitally important that you read, understand and comply with all conditions. Failure to do so can have consequences ranging from the insurer refusing to pay your claim to cancelling your policy. If you are ever unsure or need more information, always ask your broker.
A consumer is someone who takes out an insurance policy for their own personal or family use, outside of their business. An example of a consumer policy is Private Car Insurance or Home Insurance. These types of insurance are known as Personal Lines.
This cover is a legal requirement for anybody who employs others. This section will cover you for compensation claimed by your employees for injuries or illnesses suffered as a result of working for you.
A section of the policy wording that can change the standard cover provided by the policy. Endorsements that are applicable to your particular policy are noted on the policy schedule. The purpose of an endorsement may be to provide more cover, to restrict cover or to require your adherence to certain conditions.
This is the first part of a claim that is not covered by the insurer and is paid for by the insured. You may be able to lower your premium by choosing an additional voluntary excess, which would mean the initial amount the insured pays towards the claim is higher.
An exclusion is a specific event, item or risk that the insurer will not cover.
Under the UK Insurance Act 2015, the policyholder must disclose all material facts to the insurer in a clear manner and in good faith. This allows insurers to fully understand the risk presented to them. The insured has an obligation to disclose all material facts that are known, or that should be known to them, as the person arranging the insurance. Failure to adhere to this principle means the insurer may avoid the policy, repudiate a claim or change the terms of the policy, which may reduce the amount of any claims paid.
This is the date your insurance cover starts. You can find the inception date noted on the policy schedule.
Under UK insurance laws, you must have an insurable interest in an item or person in order to buy insurance for that particular item or person. Having an insurable interest means that you would suffer a loss if the item is damaged or if the person is harmed.
Insurance is a contract between an insurance company (or insurer) and an individual or other legal entity (the insured). In exchange for premiums paid to the insurer by the insured, the insurer will make a payment for any loss or damage that is covered under the contract.
The person or legal entity whose property or risk is insured, and who is named on the policy schedule. See also policyholder.
An insurer is a company that will make a payment in the event of a claim for an insured risk, in exchange for receiving the payment of premiums from the insured.
A legal entity refers to a business or organisation which is recognised as separate from its owners. Examples include business partnerships, limited companies, limited liability partnerships (LLPs), and charities
This covers Legal Expenses, Awards of Compensation, Jury Service Allowance and Witness Attendance Allowance incurred in pursuit or defence of any claim brought by or against you for events defined on your schedule – for example, Contract Disputes, Employment Tribunals, Taxation Proceedings, Criminal Prosecution Defence, Property Disputes, Personal Injury or Jury Service Allowance
Describes cover for the buildings and other property (such machinery plant, tools, stock & office equipment) at the premises.
A material fact is anything that would affect an insurer’s decision to provide cover, what premium they would charge, and what terms, endorsements or conditions they would impose. This can include details about your driving history, criminal convictions, previous claims history, and property construction, amongst others. Customers have a duty of fair presentation to inform the insurer of all material facts.
This is a document provided by your existing Private Car or Commercial Vehicle insurer confirming the number of years’ entitlement you have earned for driving without a fault accident. The more years you have been claim-free, the higher the potential discount that may be offered by future insurers.
A non-disclosure occurs when a customer fails to tell the insurer a material fact, or any information which may have influenced the insurer’s decision to offer cover. An insurer can take different actions when discovering a non-disclosure, depending on how the non-disclosure would have affected their decision to insure the risk and whether or not they deem the non-disclosure to be deliberate or reckless.
A peril is the specific event that causes a loss, such as a fire, flood, theft or storm. Insurance policies will cover the policyholder for either only the specified perils listed in the policy, or “All Risks“, which covers everything except perils that are specifically listed as exclusions.
Insurance taken out by consumers, such as home insurance or car insurance, as opposed to commercial insurance, which is taken out by businesses.
This is a document produced by the insurance company which shows details of the cover provided by the policy. It will usually show the name of the policyholder, the policy premium, policy number, the dates of cover and details of the type of cover provided, including sums insured and any applicable endorsements.
This is the person or legal entity whose name the policy is issued in and also referred to as the Insured.
This is the amount paid for the contract of insurance.
Provides cover for compensation claims brought against you by a third party who is injured as a result of a faulty product you have sold, supplied or manufactured.
Provides cover for compensation claimed by a third party (for example, your customers or members of the public) if you cause injury to them or damage to their property. It is not a legal requirement to have Public Liability insurance.
This is an assessment performed by a chartered surveyor to calculate how much it would cost to rebuild your property from scratch. For best practice, you should use a surveyor approved by the Royal Institute of Chartered Surveyors (RICS).
Insurance cover for buildings is based on the amount it would cost to rebuild your property from scratch, not the property’s market value. It is vital to get this accurate as under-insurance is a major issue for property owners. You can obtain a Rebuild Cost Assessment (RCA) to calculate this.
Refers to the potential for loss.
Insurers use statistics called risk factors to determine the amount of risk involved in issuing cover and, therefore, what rates they should charge for each type of risk.
Now widely used in place of a proposal form. A Statement of Fact is a document that outlines all the information provided to the insurer by the insured. A Statement of Fact should be checked thoroughly, and your broker or insurer should be made aware of any discrepancies immediately.
This refers to the value shown in your policy schedule. This figure is used to calculate your policy premium and how much your insurer will pay you in the event of a claim.
Refers to someone who is not the insurer or the policyholder. Usually used in connection with a claim, particularly motor insurance claims, where the first party is the insurer, the second party is the insured and anyone else is a third party.
This is when the declared value of an item, or sum insured, is below the actual replacement or rebuild cost. Being underinsured could lead to the insurer applying the Average condition in the event of a claim.
Refers to a person who considers the risk presented to the insurance company and can accept, decline or impose special terms on behalf of the insurer.
Insurance contracts are formed on the principle of utmost good faith. This means both the insurer and the insured have a duty to ensure all material facts are disclosed in a clear and accurate manner.