BROWSE BY CATEGORIES :

Glossary of Insurance Terms

The following is an A - Z glossary of some commonly used insurance terms.

The Easytoinsure.co.uk website is not regulated by the Financial Services Authority (FSA). Everything in this list below does not constitute financial advice and should not be taken as such. It is merely a guide to financial related terminology provided by Easytoinsure.co.uk for information only and is neither complete nor exhaustive. You should always take proper advice before making any sort of investment decision.

A

Accident, Sickness & Unemployment Insurance (ASU) [also known as Mortgage Payment Protection Insurance] With many plans it is possible to add sickness accident & redundancy protection, or income protection cover to replace your income in the event of long term sickness caused by accident or illness.
Accident & Health Class of insurance including two main types of business - personal accident and medical expenses.
Act of God An event, which is not the fault of any individual. Acts of God may or may not be insurable.
Actuary A professional qualified to apply principles to solving financial problems, normally in connection with pensions, life insurance and investment.
Additional Voluntary Contributions (AVCs) Additional contributions made by pension scheme members to top up their eventual retirement income.
Agent Someone who acts for one or a number of companies, particularly in selling insurance.
All Risks Wider cover than given under a normal property insurance policy. Covers any loss or damage apart from exclusions stated in the policy. This usually applies to items being insured outside of the home.
Average A policy condition requiring the amount of a claim payment to be reduced proportionately if the policyholder has not insured their property for the full amount of its value or replacement cost.

B

Betterment The principle by which the insured makes a payment towards the cost of the claim because his or her property will be in better condition after repair than before the loss or damage occurred. For example if your car is in better condition after the insurer has repaired it, they may ask for a contribution to the claim.
Broker A company registered with the Insurance Brokers Registration Council (IBRC) under the Insurance Brokers (Registration) Act 1977.
Buildngs Insurance This is a policy covering the structure of a building against a number of different risks including fire flood damage etc.

C

Capacity Every insurer has a limit on the amount on new business it can write. The FSA looks at a company to ensure it has adequate reserves.
Certificate This is the document issued by insurers as evidence that insurance is in force.
Claim When a policyholder seeks payment or settlement for a loss they have suffered under the terms of a policy.
Co-Insurance This is an arrangement whereby a number of insurance companies share in the cover of one particular risk.
Commercial Business An insurance policy taken out by a company, partnership or organisation to cover their business. Would include fleet policies for motor business. Often these policies are heavily weighted towards liability.
Commission Monies paid by an insurance company to a broker/ independent intermediary/agent for selling policies. In most companies a consumer has the right to find out what commission an agent is earning on an insurance deal.
Comprehensive Insurance A policy which covers a number of types of loss or damage mainly in motor insurance. This is the highest level of cover.
Condition This is part of an insurance policy stating that certain rules must be followed, for example, the duty to take reasonable care to protect property.
Consequential Loss This is insurance covering the loss of profits of a business resulting from an insured event (also known as Business Interruption).
Contents Policy This is an insurance policy covering the contents of a home or building against a number of different risks.
Contribution The principle of contribution applies where a risk is insured twice or more, for example on a travel and household policy, and the two insurers concerned may share the cost of any claim.
Cover Note This is an insurance document giving temporary evidence of cover while the policy and certificate are being prepared. Normally, cover notes are issued at the start of a policy while the insurance company are awaiting proof of no claims or other documents before the policy can be issued. Cover notes can be used as proof of cover when getting road tax.
Critical Illness Insurance Critical Illness Cover is designed to help protect you financially by paying a lump sum if you suffer from one of a number of specified illnesses - usually including heart attacks, cancer, strokes, major organ transplants, permanent and total disability and other life threatening diseases. The benefits can be used for any purpose, for example paying off debts, such as the mortgage; being able to change to a less stressful job without worrying about the drop in income; adapting the house or car to accommodate a wheelchair, or having a good holiday to recuperate.

D

Decline If an insurer rates that they are unable to offer cover for a vehicle or a client, then they will normally issue a 'decline'. This can be decided upon many factors.
Decreasing Term Life Insurance or mortgage life insurance With Mortgage Protection Insurance, also known as Decreasing Term Assurance, you pay a fixed monthly premium but, instead of the life cover remaining level, it gradually reduces over the term of the policy. It is most commonly used together with a repayment mortgage and the sum assured reduces broadly in line with the amount outstanding on the mortgage over the term. The reducing life cover means that the cost of this type of policy is lower than that of Level Term Assurance.
Direct Sources of Insurance Business Insurance transacted where no intermediary is involved, including marketing sources (e.g. newspaper advertisements), telephone sales, the internet and business through branch offices.

E

Endorsement This is a written amendment to an insurance policy that becomes a legal part of the insurance documentation.
Excess This is an amount of money that the policyholder has to pay towards the cost of a claim. There is normally a combination of compulsory and voluntary excesses.
Excess of Loss Policy This is a special excess policy which covers claims costs exceeding an amount specified in the policy.
Exclusion This is a specified property, person or event that the insurance policy does not cover. Market Exclusions are exclusions that the insurance market finds uninsurable.
Exposure Whether, and the extent to which, an insurer is subject to losses arising from a particular risk.

F

Family Income Benefit Rather than paying out a lump sum should you die during the selected term, a Family Income Benefit policy pays out a regular tax free income for your dependants for the remainder of the plan term. The amount of income benefit usually remains level over the plan term selected, although you can request that benefits increase in line with inflation as an optional extra.
Financial Services Authority (FSA) The Financial Services Authority (FSA) is an independent non-governmental body, given statutory powers by the Financial Services and Markets Act 2000. They are a company limited by guarantee and financed by the financial services industry. They help build public confidence within the financial market.

G

General Insurance This refers to the insurance of risks where the policy offers cover for a limited period, usually one year.
General Liability This cover protects the policyholder's legal liability for injury, property damage or financial loss caused to others.
Green Card This is a document issued to policyholders motoring abroad as evidence that they have the minimum insurance cover required by the law of the country visited. Not essential for EU driving, because minimum legal cover is automatically included in UK policies. It is always wise to inform your insurance company that you are going overseas.

H

Hazard insurance The homeowner's insurance policy.
Health Insurance Coverage that provides benefits as a result of sickness or injury. Policies include insurance for losses from accident, medical expense, disability, or accidental death.
Heir In title insurance, one who might inherit or succeed to an interest in lands under the rules of law applicable where an individual dies without leaving a will.

I

Indemnity The insurance principle by which policyholders are put in the same financial position after a loss as they were immediately before it.
Insurable Interest A principle of insurance which states that someone may only take out cover if they stands to suffer a financial loss from an event covered by the insurance policy.
Insurance A financial service offering financial compensation for something that may or may not happen.
Insurance Company A company that takes on risk within the insurance policies it sells in return for the premiums.
Insurance Premium Tax A UK government tax imposed on most non-life insurance premiums.
Insured The individual covered by an insurance policy.
Intermediary This is the person or organisation that offers advice and arranges policies for clients

J

Judgment A decree of a court.

K

Knock-for-Knock An agreement whereby each motor insurer agrees to pay for damage to its policyholder's car, regardless of blame, providing the policy covered damage to the policyholder's own car.

L

Legal Expenses Insurance Often referred to as uninsured loss recovery services for car insurance. Covers the cost of legal proceedings in circumstances defined in the policy.
Level term Life Insurance Level Term Life Insurance is the most basic type of life insurance. For fixed monthly payments, the amount of life cover - also known as the sum assured - is guaranteed for a fixed term. The lump sum is paid out if death occurs before the policy ends.
Liability This is the legal responsibility for causing loss to someone else by injuring him or her or damaging their property.
Lloyd's Members Individuals on whose behalf Lloyd's policies are issued. They pledge all their personal wealth to pay losses. Corporate members were also introduced in 1994.
Lloyd's of London An insurance market organised into syndicates, which underwrites most types of policy.
Loading This describes the extent to which an individual is charged more than the "average" for their insurance. This is common in personal insurance.
Loss Adjuster An individual who is independent of an insurance company but engaged and paid by it, who checks that a claim is covered and negotiates with the policyholder the amount payable for a claim.
Loss Assessor This is an individual acting on behalf of policyholders in assessing claims.

M

Material Fact Material fact is information at is integral to rating an insurance policy. This can be about age, accidents/convictions, or the car that is to be insured.
Mechanical Breakdown Insurance This cover protects against the cost of breakdowns of household appliances or motor vehicles.
Mortgage Payment Protection Insurance [also known as Accident, Sickness & Unemployment Insurance (ASU)] With many plans it is possible to add sickness accident & redundancy protection, or income protection cover to replace your income in the event of long term sickness caused by accident or illness.
Motor Insurance This insurance covers legal liabilities arising from the use of a motor vehicle. Comprehensive policies also cover damage to the vehicle. The minimum legal cover in the UK is third party insurance.
Mutual An insurance company that is owned by its policy holders.

N

New-For-Old Cover for property where an item lost or destroyed would be replaced with a brand new one, with no deduction for wear and tear. Also called "replacement as new".
No Claim Discount (or Bonus) also known as NCD and NCB A reduction in a renewal premium to reflect a claim-free record; used most often in motor insurance. Policyholders can typically build up to a 65% no claims bonus.

O

Occupational Hazard A condition in the workplace that increases the chances of the an accident, sickness, or death. It usually will mean higher premiums.
Original Age The age you were when you bought an insurance policy.
Other Insured Driver The temporary addition to an insurance policy, usually a member of the direct family.
Ownership All rights, benefits and privileges under life insurance policies are controlled by their owners. Policy owners may or may not be the insured. Ownership may be assigned or transferred by written request of current owner.

P

Personal Lines of Business This refers to any insurance policy taken out by an individual in his/her private capacity, normally car home and travel insurance.
Policy The insurance document providing full details of the contract between the insurer and the policyholder.
Policyholder This is the person to which the insurer issues the policy. It normally also means the person to whom benefits are payable.
Premium The amount paid by the policyholder for insurance.
Proposal Form This is an application for insurance cover.
Proposer This is the person or company who applies to take out insurance.

Q

Quota Share In reinsurance, this is the basic form of participating treaty whereby the reinsurer accepts a stated percentage of each and every risk within a defined category of business on a pro rata basis. Participation in each risk is fixed and certain.

R

Rate The price of insurance, usually expressed as the cost per unit of cover, e.g. ?x per ?100
Renewal Notice An insurance notice sent to the policyholder inviting him/her to renew a policy for a further period and stating the premium payable.

S

Subrogation The right of an insurer who has indemnified a policyholder to take over any legal rights the policyholder may have had in respect of that particular claim.
Sum Insured The amount for which property is insured, and the maximum amount which the insurance company will pay for any claim.
Syndicate This refers to a group of underwriters at Lloyd's.

T

Third Party A party involved in a claim who is neither the policyholder nor the insurer.
Third Party (cover) This type of cover only covers the damage done to a third parties vehicle.
Third Party Fire & Theft (cover) As well as covering the damage done to a third parties vehicle, additional cover is given in case the policy holder's vehicle catches fire or is stolen.

U

Underinsurance When the sum insured is not enough to cover the maximum possible loss or damage. Under the condition of average an insurance firm may under pay a claim by the same percentage that the insured under-insured.
Underwriter This is the person who decides whether to accept a risk and calculates a premium to be charged to the insured.
Utmost Good Faith This refers to the principle of insurance that requires a proposer to give all relevant information to the insurer.

V

Valuable Papers Coverage An "all risk" insurance coverage that covers the cost of research to reconstruct damaged records, as well as the cost of new paper and transcription. The term "valuable papers" refers to written, printed, or otherwise inscribed documents and records, including books, maps, films, drawings, abstracts, deeds, mortgages, and manuscripts.

W

Waiver of premium When an individual becomes eligible for benefits (such as disability or long term care), no further disability premium payments are required as long as benefits are being paid out.
Write-Off A damaged car or vehicle which is not repairable, or one that would cost more to repair than the car was worth before the damage occurred. Also known as a "total loss". Often an insurance company will declare a car a total loss once damage reaches a certain percentage of the total car value.
Whole life insurance A plan of insurance for life, with premiums payable for a person's entire life
Written premiums The entire amount in premiums due in a year for all policies issued by an insurance company.

X

X Table A designation sometimes used to refer to an experimental table or a draft of a table that has not developed to a point of satisfaction or for actual use in rating.
X, C, and U exclusions Explosion ("X") Hazard; Collapse ("C") Hazard; Underground ("U") Damage

Y

Yield on invested assets Ratio of net investment income to mean invested assets.
Yearly Renewable Term (YRT) Reinsurance A form of life reinsurance under which the risks, but not the permanent plan reserves, are transferred to the reinsurer for a premium that varies each year with the amount at risk and the ages of the insured.

Z

Zero First Year YRT A Yearly Renewable Term (YRT) scale with no premium in the first year.

Easy to Insure is your one stop shop for comparing insurance policies for home insurance, life insurance, travel insurance, pet insurance and motor insurance. We break down the information that is important to you into simple to read comparison tables so you can make an informed choice on the policy that is best for you - and at the best price!