Insurance jargon buster
In a world gone mad for acronyms, abbreviations, txt spk, urban dictionary slang and the ubiquitous celeb super-couple name-fusion (Brangelina, Kimye, etc), it’s refreshing to know that certain guides exist to help direct us through this veritable maze of vernacular indifference and ostensibly, preposterous gibberish.
The insurance business is itself no stranger to its fair share of elaborate, nonsensical or just seemingly daft sounding phraseology, irksome idiom and technical gobbledygook, and as a path to enlightenment often requires treading with due caution.
That, and being in the close proximity of a definitive glossary of terms to help the unwitting circumnavigate the treacherous wordy waters. Which is precisely where Bobatoo steps up to the insurance jargon-busting table and proffers its peerless guide to insure-speak direct from the horse’s mouth; to coin a popular phrase which doesn’t actually demand an explanation.
What follows is a bite-size literal translation of a compendium of key words and phrases populated by the insurance industry and routinely discovered in a plethora of insurance documents which most of us will be subject to at various points in our lives.
Presented in layman’s terms, our insurance jargon-busting guide tackles all the otherwise unintelligible descriptive words and linguistically-challenging phrases and seeks to clarify exactly what each example of insurance industry-spec word and applied sentence actually means and/or refers to. And once we help you see through the haze of what at first glance appears to be babble, you’ll have a far better understanding of the fabled parlance which is commonplace in the wonderful world of insurance.
Having said that there are of course a few self-explanatory phrases juxtaposed, to make some matters a little less taxing.
Accidental Damage Cover – This refers to insurance cover arranged to protect against accidental damage to goods. A good example of this would be the hypothetical scenario whereby you accidentally put your foot through the ceiling while in your loft, which would be typically covered in the accidental damage section of your buildings insurance policy. Likewise, if you accidentally dropped a tin of paint on a carpet while decorating a room, this would normally be covered under the equivalent section of your contents insurance policy.
Act of God (Also known as Vis Major) – Although – and unfortunately - not safeguarding you or your property against a Doomsday scenario which even Hollywood would be proud of, the ‘Acts of God’ traditionally flagged up in your insurance policy are specifically tailored towards both unpredictable and unpreventable events occurring which could ultimately lead to loss or damage to buildings, land, vehicles, etc, resultant from natural disasters such as flooding, tornados and earthquakes as opposed to plagues of locusts and any other Armageddon-ish happening.
Adjuster – A professional who’s responsibility it is to investigate and assess insurance claims on behalf of the insurance provider. Often referred to as either a Loss Adjuster or a Claims Adjuster.
Aggregate Limit of Indemnity – Effectively the maximum fiscal amount an insurance provider will compensate a claimant for under a pre-agreed policy in respect of all accumulated claims which have subsequently arisen within a specific period of insurance.
Alarm – An alarm in this instance refers to what’s often believed to represent the first line of defence when it comes to protecting what’s yours. Therein a device installed to a vehicle or your bricks and mortar-derived property which essentially deters would-be thieves from gaining access and/or possessions belonging to you. Emitting a loud noise from the outset, many modern day alarms also send a signal to the owner’s mobile devices warning them of an unwanted intrusion.
All Risks or Personal Possessions Cover – An increasing number of insurance policies agreed to with your provider offer an extra-curricular cover which manifests additional protection for your personal items of value if and when you take them and use them outside of your home. Such items habitually include laptops and tablets from a gadget perspective, along with jewellery. If All Risks and/or Personal Possessions Cover isn’t standardised in your existing policy, most providers offer the provision as an optional extra to add-on.
Amendment – (Also known as an Addendum) Put simply, an amendment when mentioned in the context of an insurance policy is anything which is deemed to be a change in your hitherto agreed circumstances. A point in question being an increase in the amount of mileage you’ll be doing throughout a year in relation to an existing motor insurance policy.
Ancillaries (optional extras) – In a nut shell ancillaries tend to refer to additional levels of cover which can be negotiated and bolted-on to your existing policy at a further price. Often an extension to previously agreed policy cover, in some instances they are a spate entity. By and large they could manifest as adding legal or breakdown cover to your motor insurance or home emergency or legal cover in the realms of buildings and contents insurance.
Annual Mileage and Annual Business Mileage – Pretty straight forward this one, as the former relates to the total mileage you complete in a year for a multitude of purposes including social, domestic and pleasure, while the latter is geared up towards the mileage you accumulate over a 12 month period solely for business or employment purposes.
Annual Premium – The actual price quoted to you by an insurance provider in direct relation to a proposed policy.
Arbitration Clause – Should neither you nor your insurer be in agreement with regards to an ‘appropriate claims settlement’ then an arbitrator is called in to settle the dispute who has been mutually agreed to by both parties and remains neutral to both camps. In this instance a majority decision will ascertain the amount of the outstanding claim to be awarded.
Assurance – Historically used in conjunction with life insurance policies, assurance implies the certainty of an event and insurance set against the probability of said event taking place.
Bedrooms – Your insurance provider will seek to determine how many bedrooms your property has so as to assist them calculating the size of your home. Although historically characterised as a room dedicated to sleeping in, bedrooms nowadays serve a number of alternative purposes included amongst which is a home office space. Conversely a space undefined after being subject to a loft conversion, might later become a designated bedroom and hence require being listed as such to your insurers.
Broker – Offering a selection of policies derived and pooled from a number of dedicated insurance providers, a broker is in essence an independent intermediary who compiles a broad range of alternative policies on behalf of their insurance-seeking clients.
Buildings Cover – Be it baths, toilets or fitted kitchens, permanent fixtures and fittings which the homeowner is legally responsible for within the confines of a property fall under the insurance remit of buildings cover. Normally an unavoidable stipulation if you require a mortgage, a growing percentage of buildings cover policies now extend to encapsulate outbuildings such as garages, sheds and even greenhouses, while accidental damage accrued to under-surface pipes and cables and the glass found in doors and windows are also important extra-curricular add-ons to such agreed documentation.
Business Insurance (Also known as commercial insurance) – In exchange for regular payment of a premium - and with the aim being to protect against losses experienced as a result of unforeseen circumstances – business insurance is normally taken out by companies, non-profit organisations and governmental units to safeguard themselves.
Cancellation – With direct regard to the cessation of a policy prior to its agreed termination date, cancellation in this instance chiefly acknowledges dedicated cancellation clauses signed up to by many insurers and clients. To this end the insurer is perfectly within their legal rights to charge you if you wish to cancel your existing policy before it is due to expire, while normally there’s an additional cancellation fee and percentage of your premium chargeable for auctioning this. Typical periods of notice are between 48 hours and 3 months.
Certificate of Insurance – As universally recognised and demanded by the law, a certificate of insurance is the legally binding documentation issued by your insurer as evidence that insurance is in place, so as to meet with the requirements of the law-makers.
Claim – In agreeance with the policy it has underwritten on you, the insured party’s behalf, a claim is in its most rudimentary term an injury or loss sustained by the insured which consequently subjects the insurance provider to liability as per the criteria of the aforementioned policy. Divided into two categories, a ‘Fault Claim’ and a ‘Non-Fault Claim’. The former refers to an event which you are deemed responsible for in the eyes of your insurer, simply for the underlying reason that they cannot recover their costs from the third party. Eg, if your car has been broken into and had possessions stolen from within, although you are not culpable there is nobody to recover costs from. Hence the situation becoming a fault claim. Alternatively, the latter gives rise to your insurer being able to recover all their costs from an acknowledged third party.
Commercial Combined Insurance – Presented as a single package, a commercial combined insurance policy typically envelopes a selection of individual commercial insurances.
Claims History – Helping to ascertain the risk you pose to a potential insurance provider, a claims history is a compendium of facts highlighting any insurance claims that you have submitted in the past, which subsequently allows the insurer to decide on what premiums to levy you with in terms of an insurance or renewal premium from the outset. Some insurers won’t even entertain those who have made claims previously as they are deemed too much of a risk.
Common Law – Recognising and upholding ancient customs and land usages, the common law has long been acknowledged by the courts and is demonstrably a complex system of both civil and criminal law; although greatly modulated by statute law and equity over the years. Despite being unwritten, common law has been interpreted and regularly enforced by sitting judges as and when required to preside over.
Contents Cover – Think furniture, kitchen equipment, TV and gadgets, personal items and all valuable for which you’re legally responsible and this pretty much sums up the gist of content cover. In as much as it sets out to safeguard all your household possessions which aren’t nailed down.
Cover Note – The certificate or document which acts as proof of cover should it be requested whilst the insured awaits the arrival of the official example being prepared by your insurance provider. This is more normally in relation to most types of motor insurance policies.
Cover Type – Third Party Only, Third Party Fire and Theft, Comprehensive. TPO, TPFT and Comp are three very well-known acronyms in insurance terms and cover the three main bases when discussing the specific subject of motor insurance. TPO historically covers any claims by third party involvement, and does not cover any damage to the driver’s vehicle. TPFT ensures insurance coverage regarding the event of fire and/or theft which the policyholder’s vehicle may be subjected to, alongside the third party protection. Comprehensive cover acts as a defence against damage to the driver’s vehicle in addition to third party fire and theft eventuality.
Concealment – The failure of an applicant to reveal, before the insurance contract is made, a fact that is material to the risk.
Consequential Loss – More of an in-direct loss in as much as consequential loss typically runs in tandem with an insured loss. For example a loss of earnings resultant from a burnt down business which was previously insured against fire damage. Consequential losses are rarely covered under the umbrella of ordinary insurance policies, unless they are specifically incorporated into additional premium payments from the outset.
Damage – In relation to the loss or harm suffered by a person and/or property belonging to the insured.
Deferred Premium – In common insurance practice, deferred premiums are the premiums on a life insurance policy that have yet to be paid/not yet due.
Deductible – (Also called Excess) This is a fixed amount (or percentage) of an insurance claim that is the responsibility of the insured, and which the insurance company will deduct from the claim payment. Sometimes deductibles are voluntary (to qualify for a lower premium rate) but usually they are imposed by the insurer to avoid paying a large number of small claims.
Endorsement – Any amendment made to your existing insurance policy will henceforth become part of the policy and constitutes the new policy from then on. Anything from broadening the scope of coverage, limiting or restricting the remit of the coverage, clarifying the application of coverage to some unique loss exposure, adding other parties as insureds or altering locations to the policy are considered endorsements as such. As a direct result, policy definitions, exclusions or conditions in the coverage form will be flagged up in the new policy documentation which usurps the previous.
Excess – Split into the two camps, compulsory and voluntary, the excess in insurance parlance is essentially the amount you, the insured are liable to pay towards any future claim. Compulsory excesses are chiefly predetermined by your insurance provider and worked out based on the personal details you outline before the contract is ratified (with higher excesses afforded what the insurance industry cite as high risk groups including the young drivers of high performance cars). With reference to voluntary excesses this allows the insured to negotiate a larger amount so as to effectively reduce the overall premium; although the voluntary is paid in addition to the compulsory for the most part.
Exclusions – Insurers could refuse to pay-out for what they might consider to be avoidable loss or damage. Known as exclusion policies, these are flagged up within the terms and conditions of documentation and typically refer to such instances as theft if you’ve sub-let your house (unless there is evidence of forced entry) as well as loss or damage consistent with leaving your property unoccupied for a lengthy passage of time, usually in excess of 30 days consecutively.
Employer’s Liability – An insurance policy that protects employers from liabilities arising from disease, fatality, or injury to employees resulting from workplace conditions or practices. Some jurisdictions make it compulsory for employers to buy such insurance
Ex-Gratia Payment –Ex gratia is Latin for ‘Out of goodwill’ and in insurance parlance it may take the form of payment for which the insurer did not appear to be liable.
Financial Ombudsman Service – An independent industry regulatory body established by insurance providers to oversee the interests of policyholders in the event of their claims being upheld through accepted channels of communication. Readily available by all policyholders holding personal cover, the Ombudsman’s ultimate rulings is binding for the insurance company involved in protracted and hitherto unresolved communications, although the insured party may appeal to the courts in furtherance to disputed outcomes.
First Loss Insurance – Generally accepted as a sum no more than the value of the property, first loss insurance sees the policy provider pay-out claims to the sum insured, without application of average.
Freezer Cover – In the event of a power cut or your freezer breaking down, many insurers offer freezer cover which means the value of the freezer’s contents if and when this situation arises are compensated for. Although an upper limit may well be activated in such a clause.
Garden Cover – A popular insurance policy add-on (or ancillary) for home and contents categories, garden cover can specify an amount which covers the value of items found in the average outside receptacle of people’s properties these days. Like for example children’s toys and expensive garden furniture. In the event of damage or loss incurred by fire, lightning, theft, malicious acts, etc the garden policy could extend to cover re-landscaping of said area.
Green Card – Classed as tantamount to imperative cover for those people looking to drive whilst abroad, some countries impose severe penalties if a green card isn’t frequented, including in some cases confiscating your vehicle. Acknowledged in over 40 countries the green card provides basic Road Traffic Act cover, and can be further personalised to give you the similar cover to the level you enjoy through your domestic driving policy.
High Risk Items – A check list of key items which are statistically proven to be more attractive to burglars in the event of your home being broken into and ransacked. These include the usual suspects of antiques, jewellery, art and watches along with more contemporary in-demand possessions such as laptops, tablets, cameras and expensive TVs.
Home Emergency Cover – An additional peace of mind cover which you can opt-in for on your home and content policy and which usually encapsulates central heating and electrical failure, plumbing and associated drainage issues, security problems and lost keys to name but a few core elements.
Home/Property – By its very definition in an insurance context this routinely refers to the private dwelling in which you reside for solely domestic intentions and purposes, including any garages or outbuildings.
Import/Imported Vehicle – Any vehicles manufactured outside of the UK and since imported to this country for use on British roads by the owner/insured.
Inception Date – Completely unconnected to the release date of the movie of the same name, the inception date is in reality the agreed date from which point hence the insured party is deemed to be at risk as per the terms of their policy.
Insured – You and us. The person and/or property/possessions covered by a specific insurance policy.
Insurer – The company who provides us with the aforementioned insurance policy who is responsible by law to make good in a manner laid down in the bespoke policy for any loss or damage suffered by the party paying the insurance premium.
Indemnity – The protection or security calculated and set against damage or loss by agreed compensatory measures, or something by way of compensation. In its basic form indemnity in an insurance guise relates specifically to something being returned to its former condition or pre-circumstantial state of affairs. For example, if you are involved in an accident and your vehicle is damaged, your insurer will pay for the repairs to it, and you will be able to use it again.
Insurable Interest – With regards to insurance law, insurable interest addresses the notion that the insured must have an active interest in the subject matter in relation to their policy, or such a pre-defined policy will be void and unenforceable since it will be regarded as a form of gambling. An individual ordinarily has an insurable interest when they obtain some type of financial benefit from the preservation of the subject matter, or will sustain pecuniary loss from its destruction or impairment when the risk insured against occurs.
Insurable Value – The value of the insured interest/property/possession in which the policyholder agreed to at the time of contract to compensate for loss or damage in an unforeseen event occurrence. The sum total liable by the insurer, assuming full insurance, in said circumstances coming to bear.
Joint Proposer – The coming together and acquiescence of the two parties wishing to share the insurance of a single entity; more normally a property and typically husband and wife and/or business partners.
Kit Car – NOT Michael Knight’s iconic talking Trans-Am of the 1980s, but rather a motor vehicle the insurer can assemble themselves from kit form and therein not classed as a mainstream production model.
Knock-for-Knock – An agreement where each motor insurer pays for damage to its policyholder’s insured vehicle, irrespective of which driver shoulders the perceived blame, on the proviso that the policy in place extends to damage cover for the policyholder's own car (comprehensive cover).
Lapse – The non-renewal of a particular insurance policy for whatever reasoning.
Legal Expense/Legal Protection – Protection for certain aspects of motor insurance which would not normally fall within the remit of a conventional policy. Typically these run to the payment of legal costs which arise from accidents which occur while the insured is behind the wheel, the arrangement of compensation claim pursuing by solicitors in the event of injuries sustained and general assistance with the recovery of the policy excess and accumulated medical or earning losses.
License Type – For the purposes of motor insurance, the provision of a permit which enables the user to drive a car after successfully passing a driving test and moreover highlights the types of vehicle you are entitled to drive and where you lived when you passed your test. The predominant UK driving license types are; UK full, UK provisional, UK automatic, EEC full, EEC provisional, International and Other European.
Lloyd’s of London – The insurer’s insurer, Lloyd’s have been in the business of underwriting a wealth of insurance policies since the year dot (although as a society, since the Act of Parliament of 1871), and they continue to proffer an extensive array of insurance-pertaining services, administrative employees and other facilities to perpetuate the smooth and seamless running of insurance services in the UK, per se.
Main Driver – The individual who drives the insured vehicle the majority of the time. If this evidence is falsified in any way and it transpires that the main driver turns out to be someone other than you, the insured, then it could seriously compromise your insurance policy and any future claims.
Modifications (Mods) – Any modifications to a car considered above and beyond manufacturer specification and which were found to be on the vehicle when it rolled off the factory production line. By refusing to inform your insurer of any modifications to your vehicle at the point of policy agreement then your insurer is within their rights to refuse to settle any insurance/compensation disputes at a later date.
Negligence - A failure to use a degree of care considered reasonable under a given set of circumstances. Acts of either omission or commission, or both, may constitute negligence. The four elements of negligence are a duty owed to a plaintiff, a breach of that duty by the defendant, proximate cause, and an injury or damage suffered by the plaintiff.
New for Old – Otherwise referred to as replacement-as-new-cover in certain insurance quarters, the new for old policy essentially meets the full cost of replacing items which are stolen or destroyed in light of the claim being deemed valid. If the items are damaged, then the cost of the repair will be met. There are sometimes exclusions which apply, like for instance bikes and clothing.
No Claims Bonus (NCB) – In its simplest form an NCB (here we go with the acronyms again) is a reward for policyholders who don’t make a claim on their insurance, which in real terms typically manifests itself as a discounted premium year on year. One aspect you need to be made aware of is that most insurers adhere to a maximum no claims discount of four or five years of claim-free motoring, although you can protect this bonus once you reach and maintain this level. Also every fault claim you make, you compromise the equivalent of 2 year’s bonus and if you should make a claim whilst your bonus is protected you’ll still receive the discount earned yet will see your insurance premium increased once it comes up for renewal.
Non-Disclosure – On the part of either the insured or their insurance provider the failure to reveal a material fact or known circumstance to the underwriter prior to acceptance of the risk.
Owner/Registered Keeper – The person agreeing to the insurance policy.
Permanent Health Insurance – This terminology explains the contract of insurance designed specifically to proffer continuing benefits in the event of what’s deemed to be prolonged illness, incapacity or disability from the policyholder’s perspective.
Personal Accident and Sickness Insurance – Often divided into the two categories, personal accident and sickness come together to offer fixed benefit insurance in the event of loss of limbs or sight by accident and the possible event of death and/or subsequent disablement as a by-product of accident or illness.
Points – Accrued to your driver’s license if convicted of a motoring offence, with speeding being the main culprit. Reflected in increased premiums when insurance policy is renewed.
Policy Holder/Proposer – Ordinarily the individual (or organisation) to which the insurer issues the policy. Normally clarified as the person who the insurance company will pay the benefits of the insurance policy cover to, in the event of a claim arising.
Premises – In relation to home insurance this will almost always be the risk address or household which arranges the policy and is cited as the premises during the quote procedure. The premises or risk address will be shown in the policy schedule once cover has been issued to the policyholder.
Premium – The sum of money paid by the policyholder to the insurance provider in exchange for cover.
Products Liability Insurance – Offering peace of mind cover to the insured with regard to legal liability, products liability insurance notably protects against bodily injury to persons or loss of or damage to property found to be resultant of defects in goods sold, supplied, erected, installed, repaired, treated, manufactured and/or tested by the insured party.
Quote – The price an insurer offers for insurance cover based on the personal and circumstantial information procured from the individual requesting the quote.
Rating – Insurance companies base the price of their policies on a number of factors such as the driver's age, postcode and driving history amongst other common denominators. This is commonly known as 'rating' in the insurance industry.
Rebuilding Cost – The rebuilding cost is the total cost of rebuilding your home/property if it was comprehensively destroyed accidentally or as the result of an act of God. It incorporates the cost of all professional fees, materials and labour, as well as the cost of demolishing and clearing the original building.
Renewal – The continued cycle of an insurance policy once its initial term is concluded. Eg, if you take out a 12-month policy and then stay with the same insurer after the year has terminated, your policy is then subsequently renewed.
Risk – Evaluation of proposed risk is a must and starting point for any insurance providing company. In real terms this equates to addressing the customer's quote details and assessing them by their claims history, the cost or type of the vehicle they drive, and perhaps the location in which they reside prior to offering a quote.
Risk Management – Preserving the interests of businesses or enterprises of various descriptions, risk management protocol is charged with the identification, measurement and economic control of potential risks which could threaten the assets and earnings of the aforementioned professional concerns.
Road Traffic Act (RTA) – Introduced in 1930, the Road Traffic Act came into force to guarantee that cover would compensate the innocent victims of accidents.
Schedule – This gives policy details of how much cover you have, the discount you qualify for, the period of insurance, the premium you have to pay and the sections that apply. With some policies you may get a new schedule when you renew the policy or whenever you change any previously negotiated policy details.
Single Article Limit – This is the maximum amount that a single item can be covered for in regards to your home insurance policy. The single article limit value is set by your insurance company from the outset of your policy being ratified.
Sum Insured – The fiscal amount paid-out by the insurer when a claim is made on a specific and contractually-obliging policy.
Telematics Insurance – Telematics car insurance policies (also known as 'pay-as-you-drive' and 'pay-how-you-drive' policies) are priced according to how a car is driven. Data is collected through a 'black box' that is fitted to the car and monitors information such as the time of day the car is driven, distance travelled and speed. This information is then used to calculate insurance premiums, and is at the forefront of reducing otherwise astronomical premiums to young and recently qualified drivers.
Third Party – Identifies an individual (or group) claiming against the insured party. According to insurance terminology the insurer is considered the first party, while the insured person is colloquially referred to as the second party.
Third Party Liability – A person (or group) who are the responsibility of the insured party whose person/possessions or property have been compromised by the actions of the insured (unforeseen, accidental or otherwise) who themselves are in no way privy to the contract of insurance or employees of the insured and therefore deemed to be a separate entity for the purpose of claims.
Tracker – Electronic devices installed and pre-programmed into vehicles so as to empower owners or third parties to track the perpetual location of a vehicle. Many systems also combine a communications component such as cellular or satellite transmitters to communicate the vehicle's location to a remote user, with a host of insurers offering a discount if a vehicle has a tracker fitted.
Underwriter – An underwriter is in the employ of an insurance company to decide whether to accept a risk and calculate the premium to be thus charged to the policyholder.
Use (Class of use) – Social, Domestic, Pleasure (SDP), Social, Domestic, Pleasure and Commuting (SDPL), Business Use and Commercial Travelling are the four predominant categories here, with the first affording the user coverage for day-to-day driving (Such as visiting family, friends or going shopping), but not driving to work. SDPL means the policyholder is covered for everything in the social domestic and pleasure category, plus driving or riding to and from one fixed place of work. Business use specifies facilitating your vehicle in connection with your job, such as driving to more than one place of work, while commercial travelling is dedicated to utilising your vehicle for things akin to door-to-door sales.
Valuables – Not exactly the Crown Jewels, yet the next best thing as far as you’re concerned, these are items which may fall into the high-risk items section but have a higher value than the high-risk items limit.
Warranty Insurance – Warranty insurance, if and where applicable to the policy, provides cover against the cost of repairs to broken-down household appliances.
Without Prejudice – A term which appears in discussions or correspondence between all insured parties on many occasions where a dispute or negotiations for a settlement and terms offered are noted as being offered ‘without prejudice’. Thus ensuring that subsequent communications cannot be admitted in evidence without the consent of both parties concerned. Elsewhere a term facilitated by an underwriter when paying a claimant which they believe may be extracted from a governed policy. Routinely termed ‘This payment must not be treated as a precedent for future similar claims’ for example.
Write-Off - A damaged vehicle which is not repairable, or costs more to repair than the value of the vehicle in its pre-damaged state.