Glossary of Insurance Terms
A | B | C | D | E | F | G | H | I | J | K | L | M | N |
O | P | Q | R | S | T | U | V | W | X | Y | Z |
A
Accident Insurance:
Insurance which pays benefits in the event of an accident. Items typically covered are medical expenses and loss of earnings. If, for example, the insured sustains the loss of a limb or an eye, a specified lump sum is payable.
Accidental Death Insurance:
Insurance which pays a lump sum in the event of death of the insured being caused by an accident.
Act of God:
An unpreventable and unpredictable event which could cause loss or damage to buildings, land, vehicles etc.
Accidental Damage:
Unexpected or unintended physical damage caused by sudden or external means.
Account Executive:
The person responsible for contact with the customers and the handling of their insurance arrangements.
Account Handler:
The person who is responsible for the placing and administration of a customers insurance arrangements
B
Blanket Policy:
A policy with a single sum insured covering a number of separate items without being divided up amongst them, i.e. fire insurance for several buildings.
Broker:
A regulated independent intermediary who acts as an agent for various insurers on behalf of the policyholder.
Business Interruption Insurance:
Insurance covering the loss of profits of a business and certain other costs resulting from fire or other insured events. Also known as consequential loss insurance.
C
Certificate of Insurance:
A document that provides evidence that insurance is in force - certificates are particularly used for compulsory insurances (such as motor and employers liability) or where individuals are covered under group policies.
Claims Condition:
Policy condition that sets out the policyholder's duties and responsibilities when making a claim.
Claims Experience:
How many claims a policyholder or group of policyholders has made, and for what monetary value.
Clause:
A section of the insurance policy (or other legal document)
Commercial Lines:
Types of insurance written for businesses instead of individuals, e.g. fire, business interruption and liability insurance.
Comprehensive Insurance:
Cover for a wide range of risks - e.g. accidental damage, fire, theft, third party injury and third party property under motor insurance.
Compulsory Insurance:
Insurance cover that is required by law, e.g. employers' liability, motor insurance.
Consequential Loss Insurance:
Insurance covering the loss of profits of a business and certain other costs resulting from fire or other insured events. Also known as Business Interruption Insurance.
Contract Works Insurance:
Insurance for construction works covering damage to property on the site and third party liability. Also known as Contractors All Risks.
Cooling Off:
The right of a customer to cancel a policy within a set time.
Cover Note:
A document issued by the insurer (or its agent) to the proposer or policyholder to confirm the main details of the cover that has been arranged, e.g. motor insurance. This is usually because the policy and/or certificate of insurance have yet to be prepared.
Credit Insurance:
Insurance cover against the financial default of the policyholders' customers.
Critical Illness Insurance:
A policy that pays a lump sum benefit to the policyholder upon the diagnosis of a critical or terminal illness. Also known as dread disease insurance.
D
Declaration:
A signed statement by the proposer or policyholder, usually at the foot of a proposal form or claim form, certifying that the information provided is accurate.
Directors and Officers (D&O) Insurance:
Insurance covering the personal interests of directors and officers of a company against lawsuits claiming they committed wrongful acts.
E
Effective Date:
The date from which cover begins under a policy and from which the insurer is on risk. Also known as the inception date.
Employers Liability:
A compulsory form of insurance that protects companies from claims made by employees who are injured or become ill as a result of their work.
Endorsement:
An amendment or alteration to a policy, which then becomes an integral part of that policy.
Engineering Insurance:
Insurance of plant and machinery against losses caused by perils such as explosion, collapse, breakdown etc as well as liability towards third parties.
Errors and Omissions (E&O) Insurance:
A form of professional indemnity insurance that protects the policyholder against any loss sustained due to an error or oversight on their part. E.g. an insurance agency would purchase this type of cover to protect itself against losses from errors such as failing to issue a policy.
Excess:
The first part of each and every claim that the policyholder must pay - excess may be voluntary (usually allowing the policyholder a premium discount) or compulsory (applied by the insurer due to the nature of the risk). Also known as a deductible.
F
Fidelity Guarantee Insurance:
A policy covering the risk of dishonesty by an employee who holds a position of trust, e.g. a stock controller
Fire Insurance:
Insurance cover for property caused by fire as well as additional perils such as explosion and weather losses.
Fleet Insurance:
A single motor insurance policy covering a number of vehicles - premiums are usually charged at a rate per vehicle based on the overall claims experience for that fleet. The pricing for some fleets some smaller fleets (also known as mini fleets) may be based on the normal Premium for the vehicles, to which a percentage fleet discount is applied.
G
General Insurance:
Non-life insurance mainly concerned with protecting the policyholder from loss or damage caused by specific risks. Examples include motor insurance, household insurance and business or commercial lines insurance. Normally renewable annually. Also known as non life insurance. Known in some markets as property and casualty insurance.
Goods in Transit Insurance:
Insurance for property being transported other than purely by sea. The goods themselves can be covered as well as the carrier's liability for them.
H
I
Increased Cost of Working (ICOW):
Under a business interruption insurance policy some cover is provided for additional expenditure incurred by the insured solely for the purpose of reducing the shortfall in profit following an insured event.
Independent Financial Advisor (IFA):
A broker or other independent intermediary authorised to transact life, pensions and other financial services business, for example, unit trusts. IFA's are regulated by the financial services authority (FSA) and must not be tied agents of any particular insurer or financial services product provider.
Insurance:
A contract whereby a sum of money or some other benefit is payable upon the happening of an insured event which involves a degree of uncertainty, either as to the happening of the event or as to the date on which the event will occur.
J
K
Keyman Insurance:
Cover to protect a business against financial loss caused by the death/disablement of a person whose work has a material and significant effect on the firm's profitability.
L
Liability Insurance:
Insurance to cover the liability of the policyholder, subject to any limitations expressed in the policy.
Limit of Indemnity (LOI):
The maximum sum an insurer will pay under a policy or section of a policy. This can be expressed in different ways, e.g. per annum, per claim, per occurrence ect.
Limit of Liability (LOL):
The maximum sum an insurer will pay under a policy or section of a policy. This can be expressed in different ways, e.g. per annum, per claim, per occurrence ect.
Lloyd's of London:
The world's main market in marine aviation and unique risks. Lloyds is organised into underwriting syndicates comprising names (private investors) and corporate members. Can trace its origins to Edward Lloyds coffee house in late-17th century London, where the owner attracted merchants, ship-owners by posting the latest shipping information.
Loss:
An alternative term for a claim.
Loss of Licence Insurance:
Cover against the financial consequences of losing a licence, e.g. the selling of alcohol.
Loss of Profits:
Insurance against the loss of profits following an insured event such as fire. Also known as business interruption insurance.
M
Material Damage:
Physical damage to property as opposed to consequential loss, liability ect.
Material Fact:
Any piece of information that may influence an underwriter in their acceptance of a risk, or in deciding what premium to charge or what terms and conditions to apply.
Maximum Possible Loss:
The largest loss thought possible under an insurance or reinsurance contract.
Maximum Probable Loss (MPL):
An insurer's best estimate of the maximum loss it is likely to face should a single insured event occur. Consideration is only given to probable events, rather than those that are extremely remote. Also known as estimated maximum loss.
Mechanical Breakdown Insurance:
Insurance cover against the cost of breakdowns of household appliances or motor vehicles.
Minimum Premium:
The lowest price that an insurer will charge for a particular insurance policy - a minimum is usually set to recognise a level of overheads involved in administrating the policy, even where the insurance risk is minimal.
Money Insurance:
All risks cover for banknotes, coins, cheques etc. In transit, on the policyholders premises or in the homes of employees. Cover is usually subject to specific limitations for the overnight premises risk. Extensions include personal accident benefits for assaults on staff and damage to their clothing.
Motor Insurance:
Generic term for insurance of vehicles, including private cars, motorcycles and commercial vehicles. Cover to meet the requirements laid down by the road traffic acts is compulsory, but the main covers offered are comprehensive, third party, fire and theft and third party only.
N
Non Standard Construction:
A term used in fire insurance to denote that a property does not meet the rules for the minimum grade of construction.
O
Open Driving:
A motor insurance policy that has no restrictions on who may drive the car, provided they are not disqualified.
Operative Clause:
The part of a policy wording that outlines the cover being provided by the policy.
P
Peril:
The cause of a possible Loss, e.g. fire, theft, flood.
Period of Insurance:
The duration of the Policy (usually 12 months) - usually shown in the Policy Schedule
Permanent Health Insurance (PHI):
An Insurance Policy that pays a replacement income where the Insured is unable to work. Also known as Income Protection Insurance or Income Replacement Insurance.
Permanent Partial Disablement (PPD):
A Lump Sum Benefit payable under a Personal Accident Insurance Policy, where an Insured permanently suffers an accident that prevents them from following parts of their normal occupation.
Permanent Total Disablement (PTD):
A Lump Sum Benefit payable under a Personal Accident Insurance Policy, where an Insured suffers an accident or sickness that permanently prevents them from following their normal occupation.
Personal Accident Insurance:
A Policy that pays specified benefits 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 Benefit. Cover is sometimes extended to include sickness.
Personal Liability Insurance:
Cover for an individual's Liability to others when causing injury or damage by Negligence, other than through the use of a motor vehicle - such cover is usually provided under Household Insurance Policy.
Physical Hazard:
Any Hazard arising from the material, structural, or operational features of the Risk itself apart from the persons owning or managing it.
Pluvius Insurance:
A Policy providing covers against Losses arising as a result of bad weather, e.g. the cancellation of a village fete.
Policy Conditions:
Stipulations that form part of an Insurance Policy, with which the Policyholder must comply. Failure to comply may lead to the Insurers refusing to pay a Claim.
Policy Exclusions:
Events not covered by an Insurance Policy. Some exclusions are generic whilst others are specific to the class of Insurance and/or the individual Policyholder.
Policyholder:
The person or company to whom a Policy is issued and who has the protection of the cover provided by that Policy.
Private Medical Insurance (PMI):
Provides cover against Loss from illness or bodily injury. Can pay for medicine, visits to the doctor, hospital stays, other medical expenses and loss of earnings, depending on the conditions covered and the benefits and choices of treatment available on the Policy.
Products Liability Insurance:
A Policy that protects businesses against Liability Claims resulting from defects in the products they sell.
Professional Indemnity Insurance:
Insurance to protect a firm employing people in professional roles against Liability resulting from them carrying out negligent work or giving wrong advice.
Property Insurance:
Cover for physical property, such as buildings structure, contents, stock, equipment etc.
Public Liability Insurance:
Cover for Liability for accidental bodily injury or damage to the property of others.
Q
R
Rebuilding Cost:
The recommended amount (assessed by a person's property valuation) that a Policyholder should effect Home Buildings Insurance for.
Renewal:
Continuation of a Policy for a further term, on payment of a Renewal Premium.
Renewal Date:
The date on which an Insurance Policy expires and on which the Insurer may offer to extend the cover for a further period (usually 12 months) provided the Policyholder pays the Renewal Premium.
Renewal Notice:
A document sent to the Policyholder inviting them to renew a Policy for a further period and stating the Premium payable and any changes to the Policy.
Risk Management:
The identification, evaluation and control of Risks faced by an Organisation. Insurance is one method of controlling those Risks - other techniques include risk improvements, Risk Transfer and Self Insurance.
Road Risks Insurance:
Cover for a motor trader for vehicles on the road or in the course of a journey, rather than when on their own premises.
S
Schedule:
Part of the Policy document that sets out the main details of the Policyholder, Period of Insurance, special terms and restrictions on the cover etc.
Sprinkler Leakage Insurance:
Cover against damage to property caused by the accidental leakage of sprinklers.
Strict Liability:
Usually used when referring to Products Liability Insurance coverage. The liability that manufacturers and merchandisers may be subject to for defective products sold by them, regardless of fault or negligence. A claimant must prove that the product is defective and therefore unreasonably dangerous.
Sum Insured:
The amount ed by the Policyholder for all items for which cover is to be provided. This should be the full replacement value and will represent the Insurer's maximum liability where the Contract is one of Indemnity. It is the Policyholder's responsibility to main their Sums Insured at adequate and up to date levels.
T
Temporary Partial Disablement (TPD):
weekly benefit payable under a Personal Accident Insurance Policy, where an Insured suffers an accident that prevents them from following parts of their normal occupation.
Territorial Limits:
The geographical limits in which cover provided under a Policy applies - these are defined in the Policy wording.
Theft:
On a commercial Insurance Policy theft cover is normally restricted to events following entry to the premises by forcible and violent means.
U
Underwriter:
A person responsible for evaluating a Risk that has been proposed for Insurance and deciding whether to accept the Risk and what terms and conditions to apply.
Underwriting:
The process used to evaluate the likelihood that an Insured Event will occur and whether the Insurer should accept the Risk, what should be charged and what special terms should be applied.
Uninsurable Risk
A risk where Loss is inevitable (e.g. a house already on fire or a person suffering from a terminal illness) or gradual (e.g. rust and corrosion).
Utmost Good Faith:
The principle of Insurance that requires a Proposer to give all relevant information (Material Facts) about a Risk to the Insurer. Also requires the Insurer to act reasonably and communicate clearly. Also known as Uberrima Fides.
V
Vicarious Liability:
The liability of one person for the acts or omissions of another. It usually arises from the 'servant' relationship (e.g. employer and employee).
W
Warranty:
A condition attached to a Policy that must be strictly adhered to by the Policyholder for a Claim to be paid under the Policy, e.g. that a burglar alarm must be activated when the premises are closed.
Wear and Tear:
The amount deducted from a Claim payment to allow for any depreciation in the property insured caused by its normal usage.
Without Prejudice:
A term used in the handling of Claims - where there is a dispute or ongoing settlement negotiations terms can be offered 'without prejudice'. This means that any offers etc. cannot be subsequently admitted in evidence unless both parties agree.
X
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