Jargon Buster

Insurance by its very nature is a complicated subject and it is full of Jargon - but what does it all mean? Use this page to find some help to understand those commonly used insurance terms. Its not an exhaustive list ad so if you would like to talk to a qualified insurance advisor please give us a call on 08450616553 and we will try to help.




Insurance Terms

 Accidental Damage


This is a broad term which is the widest insurance cover that you can purchase. It’s probably not what you would normally think of as an ‘accident’ as it is really referring to incidents beyond your control, fortuitous or just not deliberate. You some times see this on ‘Motor Insurance’ policies where the cover is not as wide as ‘Comprehensive’.


 Accidental Damage Excess


This is an ‘Excess’ that applies just to the ‘Accidental Damage’ section of the policy. It is usually a ‘Motor Insurance’ term referring to damage to your own vehicle claims.


 Act Of God


Nugent v Smith (1876) "Natural causes directly and exclusively without human intervention and that could not have been prevented by any amount of foresight and pains and care reasonably to have been expected"


 AD Cover


An abbreviation of ‘Accidental Damage’




A document setting out agreed alterations to an insurance contract. (See also endorsement).


 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.




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


 Advance Profits Insurance


Business interruption insurance of the expected profits of a new enterprise or an extension to an existing business.


 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.


 All Risks


Term used to describe insurance against loss of or damage to property arising from any fortuitous cause except those that are specifically excluded.


 All Sections Excess


This is an ‘Excess’ that usually relates to ‘Motor Insurance’. Although you don’t see it much these days it can be imposed following poor claims experience. This excess applies to claims made against you by other persons as well as your own claims.




A term interchangeable with insurance but generally used in connection with life cover as assurance implies the certainty of an event and insurance the probability.




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.




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.




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


 Claims Experience


This is a calculation that related the number and cost of your claims to the premium that the insurer has received. Insurers are in business to make money and so they would prefer that your incidence of claims is low. Should this exceed a certain limit then your insurers will take steps to help reduce this by increasing your premium and/or your policy excess.


 Collision Damage Waiver


This is additional cover that you can purchase to pay your ‘Excess’ for you should you have a claim. Originally an American term you will find this mostly involved in the insurance of ‘Self Driver Hire’ vehicles. The excesses on self drive hire vehicles are usually quite high.


 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.




This term is usually used in relation to ‘Motor Insurance’ and is designed to refer to the widest cover available. Comprehensive suggests all embracing but as no two polices are the same you will need to consider what cover is actually provided in order to make an informed decision.


 Compulsory Excess


This is an ‘Excess’ that is imposed by an insurer and can not be removed. This normally relates to ‘Motor Insurance’ and in this case it is usually deducted in addition to any other excess – like a ‘Voluntary Excess'




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


 Consequential Loss


Insurance of loss following direct damage e.g. loss of profits; loss of use insurance.


 Cover Note


A document issued to the insured confirming details of the insurance cover placed. Some cover notes are a legal requirement, e.g. motor.




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


 Deferred Premium


The part of a premium which, following agreement with underwriters, is payable by instalments, usually quarterly or half yearly.


 Employers Liability Insurance


Insurance by employers in respect of their liability to employees for injury or disease arising out of and in the course of their employment. With some exemptions this insurance is compulsory in Great Britain, and can only be provided by an authorised insurer.




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).




An excess is way that an insurer restricts their liability to pay claims. It helps to keep premiums lower in that it deters small claims being made. In addition it reduces the overall claims cost to an insurer. This is usually stated as ‘you will have to pay the first £ ‘value’ of any claim’. Additional excesses and be imposed to help try and correct a poor claims experience.




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


 Ex-Gratia Payment


A payment made by an insurer to a policyholder where there is no legal liability so to pay. 


 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.


 First Loss Insurance


Insurance where the sum insured is accepted to be less than the value of the property but the insurer undertakes to pay claims up to the sum insured, without application of average.


 Gross Premium


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


 Guaranteed Bonus


An upgrade to ‘no claims bonus protection’ where the ‘no claims discount’ is never reduced regardless of the number of claims submitted. It is worth noting here that if your ‘claims experience’ is worse than average you insurer has the right to load you premium or decline to renew a policy.




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


 Home Buildings


This represents all of the permanent structures comprising your home including garages, outbuildings, drives, patios and the like. This also includes fitted furniture – like a kitchen – and wooden flooring.


 Home Contents


In simple terms this is everything and anything that you could put in a removal van should you move home. You would expect this to include light fittings but not fitted furniture or wooden flooring.


 Inception Date


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


 Increase In Cost Of Working


Under a business interruption policy some cover is provided for additional expenditure incurred by the insured solely for the purpose of reducing the shortage in production following an insured event.




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).


 Indemnity Period


Under a business interruption insurance the period during which cover is proved for disruption to the business following the occurrence of an insured peril.


 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


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. 




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




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.


 Knock For Knock


A forbearance agreement between two insurance companies designed to avoid legal action. This arrangement applies to motor vehicle policies and under it each company agrees to pay up to the limits of their respective interests for the damage to the vehicle of their own insured without regard as to who was to blame for the accident.




The non-[renewal] of a policy for any reason.


 Latent Disease


An illness which lies dormant for some years before manifesting itself.




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


 Lloyd's (Of London)


A Society, incorporated under Act of Parliament of 1871 and known as the Corporation of Lloyd's, which provides the premises a wide variety of services, administrative staff and other facilities to enable the Lloyds market to carry on insurance business efficiently.


 Lloyd's Broker


A broker approved by the Council of Lloyd's and thereby entitled to enter the underwriting room at Lloyd's and place business direct with underwriters. Lloyd's brokers must meet the Council of Lloyd's stringent requirements as to integrity and financial stability. They have to file annually with the Council of Lloyd's a special accountant's report concerning their financial position. 




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.


 Loss Assessor:


In motor insurance, an engineer. In other classes a person who, in return for a fee (usually a percentage of the amount claimed), acts for the claimant in negotiating the claim.


 Material Damage


This refers to physical damage to material property that actually exists. It means damage to and not loss of property; and as the property must exist it does not include financial or monetary loss relating to the damage. 


 Material Damage Warranty


A warranty in a business interruption insurance policy stipulating that for the interruption insurance to become effective there must be a policy in force in respect of the material damage and a claim paid or admitted thereunder for such damage caused by an insured peril.


 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.


 Motor Insurance


This is a generic term for insurance polices that cover motor vehicles and this is ‘Compulsory’ throughout the EU. In the UK the responsibility to insure comes from the Road Traffic Act. The Motor Vehicles (Compulsory Insurance) Regulations 2000 amended the requirement to insure and added ‘other public place’ after the term ‘road. This means that if you have any self propelled vehicle, machine or plant it is our advice to ensure that you have at least ‘Third Party Only’ insurance cover on these vehicles.  




Another term for an underwriting member of Lloyd's.




An abbreviation of ‘No Claims Bonus’




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.


 New For Old


Where insurers agree to pay the cost of property lost or destroyed without deduction for depreciation.


 No Claim Bonus Protection


Usually related to ‘motor insurance’ and refers to a clause that enables you to make a claim without affecting the amount of ‘no claims discount’ you currently enjoy. Yes, you pay extra for this cover but it can be a valuable addition if your car is damaged by an unknown ‘third party’. Cover varies but it is usually protection for 2 claims in a three year period.  Relatively few Commercial Vehicle policies have this option.


 No Claims Bonus


This is usually a percentage reduction in the cost of an insurance policy which varies with the number of claims that you have made. Although this can apply to any policy it is normally related to ‘Motor Insurance’. Basically it is what it says. Don’t make a claim and your ‘Bonus’ will stay the same or increase. In practical terms you should consider the premium cost to you in making a claim in addition to any ‘Excess’ that you will have to pay when making a decision whether to make a claim or not. Some bonuses can be ‘Protected’


 No Claims Discount


This is another term for ‘No Claims Bonus’




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


 Package Insurance Or Insurance Package


This is a generic term for a collection of covers that are available only as a standard group. They are usually designed to meet most of the insurance requirements of specific trades or groups of people. Due to their structure they have a simple a quick rating method allowing for a fast turnaround of documents. Packages tend to be ‘property lead’ in that the presumed exposure to Liability claims is low thus they are not generally suitable for high risk occupations.   


 Passenger Liability


The liability of a carrier to passengers.




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.


 Permanent Health Insurance


Term used to describe contracts of insurance providing continuing benefits in the event of prolonged illness of disability.


 Personal Accident And Sickness  Insurance


Insurance for fixed benefits in the event of death or loss of limbs or sight by accident and/or disablement by accident or sickness. Accident and sickness may be insured together or separately.




An abbreviation of ‘No Claims Bonus Protection’




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 Excess


This is an ‘Excess’ that applies to the whole policy for each and every claim.


 Policy Holder


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


 Pre - Existing Medical Conditions


You should tell your broker or insurer about any illness you are currently suffering from, or have already had, even in the past. . These are known as pre existing medical conditions. For Private Medical Insurance, you will not normally be covered for these conditions, but for Travel Insurance, the Insurer may be able to offer cover, sometimes for a higher premium.




The consideration paid for a contract of insurance.


 Products Liability Insurance


These policies cover the insured's legal liability for bodily injury to persons, or loss of or damage to property caused by defects in goods (including containers) sold, supplied, erected, installed, repaired, treated, manufactured, and/or tested by the insured.


 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.


 Protected Bonus


This is another term for ‘No Claims Discount Protection’


 Protected No Claims Bonus


This is another term for ‘No Claims Discount Protection’




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




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.




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




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. 




A recovery of all or part of the value of an insured item on which a claim has been paid. The insurer will normally dispose of the item and apply the proceeds to reduce the cost of the claim. 




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.


 Standard Cover


In simple terms this is like a shopping list of individual insurance covers, called perils, that are either available or apply to a specific policy. The list states exactly under what circumstances the insurance cover applies. Effectively these perils are the standard cover provided by the insurer and will differ between each insurer. In some circumstances these may be extended to include Accidental Damage.


 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.


 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. 


 Underlying Insurance


The primary insurance as distinct from excess insurance.




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.


 Vis Major


Nugent v Smith (1876) "Natural causes directly and exclusively without human intervention and that could not have been prevented by any amount of foresight and pains and care reasonably to have been expected"


 Voluntary Excess


This is an ‘Excess’ that is chosen by you in addition to any other policy excess. This means that you are ‘Self Insuring’ for that part of any claim. Normally you would obtain a reduction in your premium for taking a voluntary excess. This usually relates to ‘Motor Insurance’ but is common on all insurance covers. 




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


 Wear And Tear


This is the amount deducted from claims payments to allow for any depreciation in the property insured which is caused by its usage.


 Windscreen Excess


This is an ‘Excess’ that apples to the replacement of broken glass in a vehicle. Usually if the glass is repaired, like a stone chip on a windscreen, the excess does not apply. A claim under this section does not normally affect your ‘No Claims Bonus’ but even if your policy did not have a separate ‘Windscreen’ section ‘Accidental Damage’ to the glass would be covered on a ‘Comprehensive’ policy. Some polices don’t automatically cover a ‘Sun Roof’.


 Without Prejudice


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. 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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