Below you will find definitions of some more common insurance terms. we've developed this list over the years to help our clients understand the terms and phrases that are used by Brokers and Insurers. We'd be happy to field any further queries you have!
What is Average?
In the event of a claim, where under insurance is identified, an insurance company will look to reduce the amount paid, in proportion to the difference in value (see under insurance).
What is Business Interruption?
This will often be a period of time, following an insured loss, where you can no longer conduct business normally. Cover is available for the resulting loss of revenue, until such time as the business has fully recovered.
What is a Certificate of Insurance?
A certificate of insurance is a document issued by an insurance company/broker that is used to validate the existence of insurance coverage under specific policies.
What is a claim?
A formal request to an insurance company asking for payment based on terms of an insurance policy.
What is Claims Occurring Basis?
A policy issued on a ‘Claims Occurring’ basis covers claims that occur during the policy period regardless of when the claim is made. Although you may have changed insurer they will still accept a claim even though the policy may no longer be in force.
What is Claims Made basis?
A policy issued on a ‘Claims Made’ basis meets claims that are made and reported during the policy period shown in the policy
What is Precedent to Liability'?
This is potentially more serious than a policy condition because an insurance company stipulates that it will only have a liability to pay a claim if a policyholder complies with the specific policy condition.
What is a Data Breach
This is when information about someone is held in confidence by another and is lost or stolen.
What is Employers Liability Insurance?
This covers employers for the costs of compensation claims resulting from their legal liability to employees for injury, illness or disease sustained at work. With some exceptions this is a legal requirement within Great Britain.
What is an Endorsement?
A document that amends, alters or changes the cover provided by the standard policy wording or the details contained in the policy schedule.
What is Excess?
The amount you must bear yourself, before the insurers pay your claim.
What is an Exclusion?
Within a policy this is the provision which excludes an insurer’s liability in certain circumstances or for particular types of loss.
What are Extensions?
Where a policy is specifically extended to provide wider cover than the standard policy wording.
What is a Fair Presentation of Risk?
A fair presentation of your risk must be made to insurers. It must disclose, in a manner that is reasonably clear and accessible, every material circumstance which is known or ought to be known by those responsible for arranging insurance, following a reasonable search. This is required by an insurer to help them understand the risks they are taking on. Normally a Broker would work with their clients to deliver this information to the insurance company.
What is Indemnity?
An insurer makes a payment to replace what is lost or damaged, putting you back to where you were, financially, prior to the loss occurring.
What is The Insurance Act 2015?
This is an Act of Parliament (within the UK) which has made significant reforms to insurance law and replaces legislation which dated back to the early 1900’s. The Act introduced new obligations, which are coupled with strict remedies for insurers.
What is an Insurance Intermediary / Broker
An insurance intermediary who advises their clients and arranges their insurances. A full-time specialist with expert skills in insurance business.
What does Lapse Mean?
The process when a policy is terminated after the policyholder fails to pay for renewal within the correct time-frame. Or the process when the insured decides to change insurers, causing the previous policy to end (become lapsed).
What is liability?
The process of being legally responsible for something.
What is a Long Term Agreement?
By signing a Long Term Agreement (LTA), a local council agrees to renew its policy for a 3 year period with the insurer offering the undertaking, in exchange for a premium discount. The insurer usually agrees to maintain their rate of premium during that period too, so long as there is no adverse claims experience.
What is a Loss Adjuster?
An insurance specialist appointed by an insurer to review the circumstances of a claim made by a policyholder and advise the insurer what amount should be paid under the terms of the policy.
What is Negligence?
Failure to act reasonably in any given situation where any rational person would succeed.
What does Period Of Insurance mean?
The period in which the policy is valid. Typically policies are issued for a period of 12 months.
What is an Insurance Policy?
A contract agreed between the insurer and insured, which identifies all claims which the insurer is legally required to pay.
What does Premium mean?
This is the amount of money that you must pay for an insurance policy.
What is Professional Indemnity Insurance?
A policy which protects a professional person against legal liability for third parties for injury, damage and loss due to the person’s own (or of the person’s employees) professional negligence.
What is Products Liability?
This covers you in the event of products (including food and drink) which you have supplied causing damage to third party property or injury to third parties.
What is a Proposal Form?
A form filled out by a responsible person who is applying for insurance on behalf of themselves or their employers. The purpose is for the insurer to receive a fair presentation of the risk by way of the answers provided, in order that they may provide the appropriate policy, apply terms and calculate premiums as necessary.
What does Proportional Remedy mean?
An insurer may choose to reduce a claim payment in proportion to the premium paid, if, for example, they felt the presentation of the risk was not fair or correct, and whilst they would still have accepted the risk, would have charged an additional or increased premium.
What is Public Liability?
Public Liability insurance covers you against any accidental injury or damage caused to third parties or third party property.
Define Reasonable Care
The policyholder is (under duty of care) lawfully required to act reasonably, responsibly and not to expose their insurers to unnecessary risks and hence claims. This is a general condition in all contracts of insurance.
What does Renewal mean?
The process where the period of insurance is coming to an end, and an invitation is issued to renew or continue the policy for a further period.
What is a Retroactive Date?
A retroactive date is generally the date from which you have held uninterrupted insurance cover. It is typically applied to professional indemnity and directors & officers insurance policies and its purpose is to exclude claims arising from any work undertaken prior to the date shown.
What is a Risk Assessment?
The process of identifying, evaluating and measuring all potential risks which may be found within a particular situation.
What is 'Risk Management'?
The process of identifying, measuring and mitigating risks (including financial) that threaten control over assets or earnings of an organisation.
What are Standard Exclusions?
Whilst these may vary from one insurance policy to another, generally these are the exclusions applied in all insurance policies and describe in what circumstances a claim may not be paid.
What does Subrogation mean?
This is when an insurance company has made a claim settlement but feel that the cause of the claim was the fault of someone else and in these circumstances they may then seek to recover all or some of what they have paid.
What is Under Insurance?
If you insure an asset for less than its full replacement value any claim you make will be reduced in direct proportion. In simple terms if you insure an asset for £100,000 and its full replacement value is £200,000 you are 50% under insured, so any claim you make will be reduced by 50%.
What is an Underwriter?
A person employed by an insurer who is responsible to assess a risk on the basis of the information provided and calculate the premium required.
What is a Valuation?
This is usually a professional assessment of an asset’s worth, for example, a building or an item of regalia.