| Insurance Glossary |
A basic description of common insurance terms
Act of God An accident or event that happens in extraordinary circumstances that could not have been foreseen. For example any damage caused by a storm would fall under the Act of God umbrella. Actual Total Loss There is an actual total loss where:
So actual total loss is where the insured risk no longer exists due to damage, theft, loss etc. All Risks The term used to describe a policy covering fortuities generally, though not inevitabilities such as wear and tear or depreciation. Sometimes loosely used to describe a policy that covers a number of specified risks, though not all. All risks insurance is commonly used in property insurance and commercial combined policies. It details a list of risks that are covered under a policy. All risks insurance is an extension of the fire & special perils policy. Unfortunately, even though it is called 'all risks' it does not cover the insured against everything, there will still be a number of exclusions and conditions, but it sets a broader scope of cover. Backdating Backdating is where a policy will begin before the date the cover is issued. For example, you buy a car and want to insure it from yesterday, that is backdating. Backdating insurance cover is illegal. Backdating insurance is often associated with motor insurance. Motorists who have been driving uninsured and want cover as they have had an accident are usually the main culprits to try and convince their insurance company to backdate insurance, and for this reason it is illegal to backdate insurance cover. It is also illegal if an insurance company issue a covernote before the time of issue. So if you were writing a covernote now and issued it from yesterday that would be illegal. Cancellation and Curtailment If your trip has to be cancelled due to unforeseen circumstances, then your travel insurance policy will provide the necessary compensation. By choosing a policy which provides protection against cancellation or curtailment your policy provider will be able to protect you against the following:
As always check your policy to ensure that in the event of cancellation or curtailment of your holiday you will receive full compensation. Claim Term used to recognise the process of a policyholder seeking compensation in line with the terms and conditions of the insurance policy. Compulsory insurance Insurance that a person is obliged to effect. For example, a motorist is required by the Road Traffic Act to have in force an insurance in respect of liability for bodily injury to or damage to the property of third parties arising out of the use of a motor vehicle on a road. Compulsory insurance is where the law stipulates that a person, company or organisation must hold a minimum amount of insurance. The reason for compulsory insurance is so that in the event that a third party is injured as a result of your negligence then they will be adequately insured. Contents Insurance Type of home insurance used to cover the contents of the house, i.e. items which can be physically removed from the building. Employers Liability An Act that made it obligatory for businesses to insure in respect of their liability to employees for bodily injury or disease arising out of and in the course of their employment. Employers liability insurance is a compulsive policy that all companies must have if they employ anyone. The cover is compulsory so that if any of the employees decide to pursue their employer for compensation they will definatley be able to get the compensation. An employee could sue their employer for a number of reasons, here are just a few examples:
Excess An amount being the first part of the cost of a claim, which the insured has to bear in accordance with the terms of the insurance. / The balance of a risk that cannot be placed in an insurance market, so that additional cover is needed. An excess is simply the first amount payable by the insured of every claim. For example, if you have a car and the excess is £250, if you have an accident and the claim amount to be paid out is £2000 then the amount you will receive will be minus the excess so, in this case, you would get £1750 as the excess will have been deducted. Sometimes the excess is to be paid before a vehicle is taken out of the mechanics garage. Exclusion This is something which is not covered by your insurance policy. It may be a person, an item or an incident. Index Linking A system whereby your policy is updated automatically in line with the rate of inflation so that you do not have to re-apply to purchase your policy. Insurable Interest Insurance requires for its validity that the insured shall be so related to the subject-matter of the insurance that he will benefit from its survival or will suffer from loss or damage to it or may incur liability in respect of it. In the absence of such an interest, known as an insurable interest, the insurance will be invalid. Everyone has an insurable interest in his own life and spouses are deemed to have such an interest in the lives of each other. In order for a risk to be insurable the proposer must have an insurable interest in the risk. An example of insurable interest would be; in order to insure a car it would need to be yours or a member of your families. You couldn’t insure your neighbours car because if it gets stolen then you pose no financial loss. Insurance Premium Tax A special type of tax imposed by the government to be paid on all insurance polices sold within the United Kingdom. This tax will usually be automatically incorporated into the price of your policy. Indemnify The making good of a loss by means of a monetary payment. / An agreement by one party to make good a loss sustained by the other party. Indemnify means, basically, to be covered against insured risks. For example: if you insure your car you will be indemnified against certain risks. Liability Insurance Insurance in respect of liability to third parties, most commonly for accidents resulting in bodily injury and damage to property. Liability insurance is designed to cover your business so that if you are sued for compensation you will insured. For example: a mechanic might fix a vehicle's brakes but not connect them properly, if the client has an accident as a result of the mechanics negligence then they could sue the mechanic. Liability insurance is designed so that if the above example happens and a third party suffers a loss or is injured as a result of you or your business's negligence and decides to sue you then you will be covered. Loss An event giving rise to a claim under an insurance. A loss is where a risk has been damaged, stolen or lost. For example: if you insure a mobile phone and drop it down the loo and it's damaged beyond repair then that is a 'loss'. It's the same if the mobile phone is stolen, it then becomes a loss. Loss Assessor/Adjuster One who, acting predominantly on the instructions of insurers, is habitually employed in a professional capacity in the negotiation and settlement of loss by fire or other contingencies. A loss assessor is nearly the same thing as a loss adjuster, the main difference is that a loss assessor works on the behalf of a client whereas a loss adjuster works on behalf of an insurer. A loss assessor/adjuster basically works on behalf of their clients' and asses how much damage a risks has sustained to enable them to see how much compensation the insured should receive. For example: if you’re a manufacturer and your warehouse burns down a loss assessor will come to your property and asses the damage and see what isn't damaged and what can be saved etc. then they will give you an indication of the compensation that you should receive. Material Facts A fact that would influence the mind of a prudent insurer in deciding whether to accept a proposed insurance and, if so, on what terms. A material fact is any fact or circumstance which would affect the judgement of an insurer in considering:
Facts that lessen the risk do not need to be disclosed, only risks that would make the chance of a claim higher. For example: if you have professional indemnity insurance and you forget to disclose a degree in IT, that could lessen the risk so an insurance company would not need to know. Some material facts do not need to be disclosed:
Medical and Health Cover It is essential that your travel policy provides ample cover for medical and health cover. It is recommended that protection is for at least £1 million. This will provide protection for all emergency treatment, hospitalisation and repatriation in the event that you are injured. Negligence The omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do. It consists in a failure to exercise due care in a case in which a duty to take good care exists. It is a tort giving rise to civil liability. Negligence is where an act that someone does, or forgets to do, gives rise to an accident. No Claims Bonus (NCB) A discount allowed from a renewal premium in consideration of there having been no claim paid or payable in the previous year of insurance. The use of no-claim discounts is widespread in U.K. motor insurance. Most are granted on a scale that rises with the number of consecutive claim-free years. A no claims bonus is a discount that is applied at renewal of a policy to lessen the premium. A no claims bonus is awarded if there have been no claims made in a full year. For example: if you are a motorist and you have not had any accidents for 3 years then you will receive a no claims bonus of 3 years. Old for New A common term used to indicate that an item lost or stolen will be replaced with a new item or its present day equivalent, rather than replacing it with the same old model. Peril A possible cause of loss, such as fire. A peril is a possible cause for a loss in insurance. For example: if you insure a car, the car is the subject (risk). A peril would be fire, theft, malicious damage etc. So if you insure a house and it is damaged by fire then you could say it was damaged by a peril. If a risk is insured against fire and theft then fire and theft are the perils. Personal Belongings Protection for the loss or damage of any luggage or articles worn whilst travelling. It is the norm for there to be a limit of around £500 for money and a similar upper maximum for protection of a single item, though these limits can usually be extended. The total cover for personal belongings tends not to exceed £1,500 for a full claim. Personal Liability Personal Liability within a holiday insurance policy will provide protection against any injury or damage which may occur to others or their property. It is always a good idea to check that your policy provides personal liability cover, otherwise you will be responsible for any accidental damage you may cause. This is particularly important if you are travelling throughout North America where there is a greater culture of following up personal liability claims. Policy The document outlining the terms and conditions of the insurance agreement you have between the insured and the insurer. Policyholder This is the person who is insured and to whom the insurance policy refers. Premium The consideration payable by the insured for an insurance. / The excess over the original value of a thing or over its par value. A premium is a cash sum made payable in exchange for cover. So if your insurance cost is £500 then that is the insurance premium. Proximate Cause A proximate cause is the first event in a chain of events that gives rise to a claim. For example: if a car is driving along and swerves to prevent itself hitting a dog and that then causes damage to a lamp post and 5 other cars then the car that swerved is the proximate cause. So a proximate cause is the initial event in a chain of events. Public Liability The insurance of liability for accidental bodily injury or damage to the property of third parties. Public liability insurance is designed to cover businesses so that if a member of the public sues them as they feel they have suffered a loss then they will be insured. For example: if a manufacturer is showing customers round the factory and a client slips over on some oil on the floor then they will be able to sue the manufacturer. Public liability insurance will pay out the compensation of whatever damages are awarded. Public liability insurance typically has a limit of cover, usually it comes in various levels from £1 million – £100 million. Sum Insured Signifies the total amount which the property or item is insured for. The sum insured is the highest amount that an insurer will pay out in the event of a claim. Underinsurance Occurs when a property or item has been underinsured and the policy would not cover the insured property or items sufficiently to be reimbursed. |
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