Glossary

Not quite sure what a term that you've come across on this site means? Insurance can be a difficult subject at times. Therefore for your benefit, we've assembled a list of terms and definitions to help keep you informed.

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Additional Premium

A further premium payable by the insured as a result of policy amendment, that may have increased the risk or changed the policy conditions or sum insured.

Adjuster

One who investigates and assesses claims on behalf of insurers (claims adjuster or loss adjuster).

Aggregate Limit Of Indemnity

The maximum amount an insurer will pay under a policy in respect of all accumulated claims arising within a specified period of insurance.Alarm Warranty - Circumstances under which the alarm should be set (usually this is when the premises are unattended) and how it should be maintained. Failure to comply can lead to a claim not being covered.

Average

A clause in insurance policies whereby, in the event of under-insurance, the claim paid out by the insurer is restricted to the same proportion of the loss as the sum insured under the policy bears to the total value of the insured item.

Cancellation

Termination of a policy before it is due to expire. There may be a cancellation clause in a policy setting out the condition under which the policy may be cancelled by notice. The period of notice could be anything from 48 hours to 3 months. In most cases this will result in a return premium being paid by the insurer to the insured.

Claims

Injury or loss to the insured arising so as to cause liability to the insurer under a policy it has issued.

Common Law

The common law consists of the ancient customs and usages of the land, which have been recognised by the courts and given the force of law. It is in itself a complex system of law, both civil and criminal, although it is greatly modified and extended by statute law and equity. It is unwritten, and has come down in the recorded judgements of judges who for hundreds of years have interpreted it.

Community Company

An insurance company whose head office is in a member State of the European Economic Community.

Concealment

Deliberate suppression by a proposer for insurance of a material fact relating to the risk, usually making the contract null and void.

Deductible

The specified amount a loss must exceed before a claim is payable. Only the amount which is in excess of the deductible is recoverable.

Dual Insurance

Dual insurance occurs when, in the case of insurance against loss or damage, the same items are insured against a certain risk under more than one insurance policy. In the event of loss or damage the benefits paid by the insurer will be reduced by the amount of the dual insurance.

Duty To Minimise Loss

In the event of a claim you must do everything possible to restrict the damage as far as possible, and in particular to avoid any consequential damage.

Endorsement

Documentary evidence of a change in the wording of or cover offered by an existing policy or qualification of wording if the policy is written on restricted terms. (See also Addendum).

Excess

The first portion of a loss or claim which is borne by the insured. An excess can be either voluntary to obtain premium benefit or imposed for underwriting reasons

Exclusion

A provision in a policy that excludes the insurer's liability in certain circumstances or for specified types of loss.

Financial Ombudsman Service

A bureau established by major insurance companies to oversee the interests of policyholders whose complaints remain unsolved through normal company channels of communication. The service is available to all those holding personal cover with the insurers who have joined the scheme. The decision of the Ombudsman is binding on the insurer, although the insured may appeal to the court if he so wishes.

Gross Premium

A term normally applied to gross written premiums before deduction of brokerage and discounts.

Hazard

A physical or moral feature that introduces or increases the risk.

Inception Date

The date from which, under the terms of a policy, an insurer is deemed to be at risk.

Indemnity

A principle whereby the insurer seeks to place the insured in the same position after a loss as he occupied immediately before the loss (as far as possible).

Insurable Interest

For a contract of insurance to be valid the policyholder must have an interest in the insured item that is recognised at law whereby he benefits from its safety, well being or freedom from liability and would be prejudiced by its damage or the existence of liability. This is called the insurable interest and must exist at the time the policy is taken out and at the time of the loss.

Insurable Value

The value of the insurable interest which the insured has in the insured occurrence or event. It is the amount to be paid out by the insurer (assuming full insurance) in the event of total loss or destruction of the item insured.

Insurance Broker/Intermediary

An insurance intermediary who advises his clients and arranges their insurances. Although he acts as the agent of his client, he is normally remunerated by a commission (brokerage) from the insurer. An insurance broker is a full-time specialist with professional skills in handling insurance business. Since January 2005 intermediaries and brokers must be registered with,and regulated by the Financial Services Authority.

Insurance Premium Tax

The Finance Act 1994 introduced this new tax on most general insurance risks located in the UK.

Insured

The person whose property is insured or in whose favour the policy is issued.

Insurer

An insurance company or Lloyd's underwriter who, in return for a consideration (a premium). agrees to make good in a manner laid down in the policy any loss or damage suffered by the person paying the premium as a result of some accident or occurrence.

Limit

The insurer's maximum liability under an insurance, which may be expressed 'per accident', 'per event', 'per occurrence', 'per annum', etc

Loss

Another term for a claim.

Loss Adjuster

Independent qualified loss adjusters are used by Insurers for their experience and expertise necessary to carry out detailed and in some instances prolonged investigations of complex and large losses. Although the adjuster's fees are invariably paid by the insurers he is an impartial professional person and makes his judgement on the amount to be paid in settlement solely on the basis of established market practice. It is his task to negotiate a settlement which is within the terms of the policy and equitable to both insured and insurer. Should he himself not be an expert in a particular discipline which is necessary or desirable to pursue his negotiations, he will consult or employ such an expert.

Material Fact

Any fact which would influence the insurer in accepting or declining a risk or in fixing the premium or terms and conditions of the contract is material and must be disclosed by a proposer, or by the insurer to the insured.

Negligence

Perhaps the most common formof tort. In Blyth v Birmingham Waterworks Co. (1856) it was defined as 'the omission to do something which a reasonable man guided by those considerations which ordinarily regulate the conduct of human affairs would do, or doing something which a prudent and reasonable man would not do'. Gives rise to civil liability.

Net Premiums

Term variously used to mean gross premiums net of reinsurance premiums payable, or commission, brokerage, taxes, or any combination of these.

Non-Disclosure

The failure by the insured or his broker to disclose a material fact or circumstance to the underwriter before acceptance of the risk.

Peril

A contingency, of fortuitous happening, which may be covered or excluded by a policy of insurance.

Period Of Risk

The period during which the insurer can incur liability under the terms of the policy.

Policy

A document detailing the terms and conditions applicable to an insurance contract and constituting legal evidence of the agreement to insure. It is issued by an insurer or his representative for the first period of risk. On renewal a new policy may well not be issued although the same conditions would apply, and the current wording would be evidence by the renewal receipt.

Policy Holder

The person in whose name the policy is issued. ( See also insured and assured).

Premium

The consideration paid for a contract of insurance.

Professional Indemnity Insurance

This policy protects a professional man against his legal liability towards third parties for injury, loss, or damage, arising from his own professional negligence or that of his employees.

Proposal Form

A form sent by an insurer to a person requiring insurance so as to obtain sufficient information to allow the insurer to decide whether or not to accept a risk and what conditions to apply if it is accepted.

Quote

A statement by an insurer of the premium he will require for a particular insurance.

Reinstatement

Making good. Where insured property is damaged, it is usual for settlement to be effected through the payment of a sum of money, but a policy may give either the insured or insurer the option to restore or rebuild instead.

Renewal

The process of continuing an insurance from one period of risk to a succeeding one.

Risk

The peril insured against or an individual exposure.

Risk Management

The identification, measurement and economic control of risks that threaten the assets and earnings of a business or other enterprise.

Schedule

The part of a policy containing information peculiar to that particular risk. The greater part of a policy is likely to be identical for all risks within a class of business covered by the same insurer.

Statement Of Fact

An alternative to a completed proposal form. A statement provided by the insurer clarifying the basis on which insurance is accepted and what conditions apply.

Statute Law

Presently the most important source of law is statute law, otherwise known as Acts of Parliament; which may create entirely new law, over-rule, modify, or extend existing principles of common law and equity, and repeal or modify existing Statute law.

Subject To Survey

Phrase used by an insurer to signify provisional acceptance of an insurance pending inspection by a surveyor whose report is necessary to determine the rate and conditions applicable.

Subrogation

The insurance company that makes the initial payments (e.g. in the case of Motor Liability insurance) has recourse to the person responsible for the loss, or to the policyholder if the loss was due to a tortuous act (such as gross negligence) or if the insurance cover does not suffice.

Sum Insured

The maximum amount payable in the event of a claim under contract of insurance.

Third Party

A person claiming against an insured. In insurance terminology the first party is the insurer and the second party is the insured.

Third Party Liability

Liability of the insured to persons who are not parties to the contract of insurance and are not employees of the insured.

Underwriter

A person who accepts business on behalf of an insurer. (See also Lloyd's underwriter).

Utmost Good Faith

Insurance contracts are contracts of utmost good faith (uberrima fides), which means that both parties to the contract have a duty to disclose, clearly and accurately, all material facts relating to the proposed insurance. Any breach of this duty by the proposer may entitle the insurer to repudiate liability.

Warranty

A very strict condition in a policy imposed by an insurer. A breach entitles the insurer to deny liability.

Without Prejudice

  1. Term used in discussion and correspondence. Where there is a dispute or negotiations for a settlement and terms are offered 'without prejudice' an offer so made or a letter so marked and subsequent correspondence cannot be admitted in evidence without the consent of both parties concerned.
  2. Term also used by an underwriter when paying a claim which he feels may not attach to the policy.This payment must not be treated as a precedent for future similar claims.
 
 
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