Glossary
Cut through all the unintelligible insurance jargon with our Business insurance glossary. All the gobbledegook explained . . .
A
Accident Insurance - insurance to cover loss or damage which arises mainly from an accident e.g. personal accident; liability to other people for causing damage or injury; accidental damage to business equipment. In this braod sense it is largely a historic term and more precise terminology such as Public Liability are now more general
Accidental Damage - damage arising as a result of an accident, e.g. paint spilled on a carpet or damage to a car in a collision
Actuary - a professional person qualified to apply mathematical principles to solving long-term financial problems, primarily in connection with pensions, life assurance and investment and increasingly in other types of insurance
Additional Premium - a further premium payable as a result of a policy alteration, that may have increased the risk or amended the policy conditions or the sum insured
Adjuster - a person who investigates and assesses claims on behalf of insurers (known also as claims adjuster or loss adjuster)
Agent - a person or firm who acts for one company or a number of companies, particularly in selling insurance
AIRMIC - Association of Insurance and Risk Managers in Industry and Commerce, an association to bring together people in industry, commerce or the public sector who are responsible for buying or arranging insurance for their organisations
All Risks - the widest cover given under a property insurance policy. Covers any loss or damage apart from specific exclusions stated in the policy
Annual Premium - the premium that is paid each year to renew the insurance - whether as a single sum once a year or in instalments during the course of the year
Annuity - an arrangement by which an insurance company pays the annuitant a regular income, usually for life, in return for payment of a single lump sum. Also called a pension
Association of British Insurers - the trade association for UK insurers. All companies authorised to transact insurance business in the UK are eligible to join
Assurance - a term originally used in connection with life insurance, as assurance implies the certainty of an event whereas insurance implies only the probability. More recently the two words assurance and insurance have become more or less interchangeable
Assured - the person whose life is assured or in whose favour an life assurance policy is issued
Average - a policy condition in property insurance. It requires the amount of a claim payment to be reduced proportionately if the policyholder has not insured his/her property for the full value or replacement cost. Suppose for example a building is insured for £1m, but the true cost of rebuilding it is £2m. The building is partially damaged, and the policyholder claims for the cost of repairs, i.e. £300,000. Under the average condition, the amount of the claim is reduced in the proportion £1m / £2m. The policyholder thus receives £150,000. Also known as the "underinsurance" condition
B
Benefit - the amount paid by the insurance company when a claim is made, especially used in connection with life assurance and personal accident insurance
Betterment - the term used when property is repaired or reinstated in a better condition than before the loss or damage occurred. WShen this happens the insurer may require the claimant to make a payment towards the cost of the claim
Beyond Economical Repair - a term usually used in respect of motor vehicles when the damage suffered is such that it costs more to repair than the value of the vehicle
Blanket Policy - a policy in which a single sum insured covers a number of separate items without the amount being divided among them (e.g. stock under a property policy)
Block - a type of policy which provides cover for a series of items with similar characteristics e.g. several buildings belonging to one owner or jewellery sold through one jeweller
Bonds and Guarantees - financial guarantee insurances that indemnify the policyholder in respect of loss suffered as a consequence of the failure of a person to perform or not perform a stated task
Book Debts - a form of consequential loss occurs when records are destroyed and losses are incurred because debtors cannot be traced
British Insurance and Investment Brokers Association - the trade association for organisations placing insurance and/or investment business
Broker - an “intermediary” or "agent" registered with the Financial Services Authority (FSA). A broker is independent ad not tied to any particular insurance company on what they offer
Brokerage - commission received by the broker for placing insurance business with the insurer - normally calculated as a percentage of the premium paid. The expression can also refer to the business of the broker and the obtaining of that business
Buildings Insurance - a policy (or an item within a policy) covering the structure of a building against a number of different risks, e.g. fire, explosion, storm, "all risks"
Business Description - most business insurance policies contain a description of your business. The relevance of this is that the insurer will only cover you so long as your business fits within this description. It is therefore essential to make sure the description is broad enough to include all aspects of your business, and you must inform your broker or insurer if the description ever needs to change
Business Insurance - insurance for businesses of all sizes - from the self employed to large corporations. It includes insurances for people who own buildings used for business purposes
Business Interruption - insurance covering the loss of profits of a business and some other costs arising from fire or other insured event. Also known as consequential loss, loss of profits and loss of income. The insurance is intended to help put your business back in the same trading position as just before the fire or other insured event occurred
C
Cancellation - termination of a policy before it is due to expire, i.e. some time during the course of the insurance year. If you ask for a policy to be cancelled, the insurer will generally refund some of the premium only where the reason for cancellation is that insurance is no longer required - e.g. because you have sold the property, or the business has been wound up
Cargo Insurance - insurance of goods carried in a ship or aircraft
Carrier - a person who carries goods or passengers by land, sea or air
Casualty Insurance - term used for commercial liability and motor insurance
Certificate - document issued by insurers as evidence that insurance is in force to meet the requirements of the law (notably for Motor and Employers’ Liability insurance). By law you must display an Employers' Liability certificate at your place of work and retain it for 40 years after the year of insurance has ended
Claim - when a policyholder or beneficiary seeks payment or settlement under the terms of a policy
Claim Form - a form completed by the claimant to report the full details of a claim. It is not always necessary to complete a claim form
CMR - abbreviation of the French expression, Convention Merchandises Routes, which relates to the European convention conditions used to regulate the carriage of goods by road between EU countries
Combined Policy - a policy that groups several covers together in a composite document although each cover is separately priced
Commercial Insurance - insurance for businesses of all sizes - from the self employed to large corporations. It includes insurances for people who own buildings used for business purposes
Commercial Motor Insurance - insurance effected by a company or organisation to obtain cover for their motor vehicles. Vehicles that can be covered include vans and lorries, agricultural vehicles, passenger carrying vehicles such as buses, and fleets od either private cars or commercial vehicles
Commercial Property Insurance - generic term for all insurances for commercially-owned property
Commission - money paid by an insurance company to a broker, intermediary or agent for selling insurance policies
Composite Insurer - a company which transacts both life and
non-life insurance
Comprehensive Insurance - a policy covering a number of types of loss or damage. The name is used mainly in motor insurance
Compulsory Excess - an excess imposed by the insurer (see Excess)
Concealment - deliberate suppression by a proposer of a material fact relating to the risk, which can make the contract worthless
Condition - part of a policy stating that certain rules must be followed, for example, the duty to take reasonable care to protect property, or to report claims to the insurance company promptly
Consequential Loss - insurance covering the loss of profits of a business and certain other costs resulting from fire or other insured event. Also known as business interruption, loss of profits and loss of income. The insurance is intended to help put your business back in the same trading position as just before the fire or other insured event occurred
Contents insurance - a policy or item within a policy covering the contents of a building against a number of different risks, e.g. fire, explosion, theft, "all risks"
Contingency - a peril, or happening, which may be covered or excluded under an insurance policy
Contractors’ All Risks - a form of insurance providing all risks cover, subject to certain exceptions, in respect of building works while in the course of construction, and cover for materials, equipment, plant and temporary buildings. Also known as Construction Insurance
Cover - the protection granted by insurance
Cover Note - a document issued to the insured confirming details of the insurance cover placed before the policy is produced. Some cover notes are a legal requirement, e.g. for motor insurance
D
Damages - the monetary sum awarded for loss or damage suffered by a successful plaintiff in a court case
Data Protection Act 1984 - the Act which safeguards the interests of individuals in respect of information held on computer and similar electronic files
Day One Reinstatement - a basis of insuring buildings and contents (but not stock). The purpose is to allow for inflation during the year of insurance and, if you make a claim, during any period after that while the property is being rebuilt, repaired or replaced. The way it works is that at the beginning of each insurance year you let the insurer know the full cost of rebuilding or replacing the property as at Day One of the year of insurance. This figure is referred to as the "declared value". The maximum amount that will be paid to you as a claim is then that declared value plus an inflation provision of up to an agreed percentage of the declared value, e.g. 35%. Most insurers don't automatically provide cover on a Day One basis - so you need to make sure any building you are responsible for is covered on this basis
Days of Grace - a period after the renewal date of a policy during which cover continues provided that (a) you pay the premium before the end of the days of grace, and (b) you have not indicated that you don't intend to renew
Declinature - refusal by an insurer to accept or renew an insurance for reasons that are very specific to the person or company applying for insurance. It's important to make a distinction here. Sometimes an insurer will not be able to insure you because it's not their general policy to insure companies in your line of business, or to provide the type of cover you need. This may be inconvenient, but it simply means you need to try another insurer - and this is not what is meant by a "declinature" in insurance jargon. However, if an insurer declines to insure you for reasons that apply specifically to you or your company, this is much more serious because, whenever you apply to any other insurer, you will need to tell them that you have been declined. (Not to inform another insurer would amount to holding back a material fact.) If an insurer does attempt to decline you, it's best to seek advice from a broker if you haven't already done so
Deductible - another term for Excess
Direct Insurance - insurance where there is no broker or other agent or intermediary
Direct Insurer - an insurer with whom you deal direct by phone, online or by post without going through an agent, broker or other intermediary
Directors and Officers Insurance - insurance effected by a company to obtain protection from any acts of negligence, omission, mis-statement or misleading statement made by its directors or officers
Discharge - a form of receipt given by a claimant, acknowledging that he or she has no further claim in respect of the event that gave rise to the claim
Disclosure - the duty that you (and, where appropriate, your broker) have to tell an insurer every material fact
E
Effective Date - the date on and from which an insurance comes into force
Employers’ Liability Insurance - insurance covering employers against claims from employees who are injured at work. It is a statutory requirement of all employers to take out this insurance. Your insurer will provide an Employers’ Liability certificate of insurance which you’re required by law to display at your place of work. (At the end of each insurance year, hold on to your old certificate: Employers' Liability certificates must be retained for a minimum of 40 years.)
Endorsement - documentary evidence of a change in the cover provided by an existing policy
Engineering Inspection - an inspection service, provided by some insurance companies. Regular inspections are required by law for certain items of engineering plant such as boilers and lifts. This is not a form of insurance - and so is not regulated by the FSA - but the contract to provide inspections is often included in an Engineering Insurance policy - see below
Engineering Insurance - insurance of various perils arising from the use of plant and machinery, such as explosion of boilers, breakdown of electrical or mechanical plant, lifts and cranes, and the resultant damage to the insured’s property. It can also include cover for liability to third parties.
Errors and Omissions Excepted - an expression used to indicate that while care has been taken in preparing a document any errors or omissions will have to be taken into account if identified later
Errors and Omissions Insurance - insurance for professionals (e.g. accountants, auditors, brokers, etc) to cover acts of negligence or omission resulting in loss to a client
Estimate - an initial calculation of the amount of a claim. An estimate is calculated before the full facts are known
Excess - the first part of any claim which is paid by the policyholder. The insurer pays amounts “in excess” of this first amount. Suppose for example you have a policy with an excess of £250. If you suffer a loss amounting to £750, then (assuming the loss is covered) the insurer will pay £500 (i.e. £750 minus £250). If the loss is only £150, the insurer won't pay anything. An excess may be imposed by the insurer ("compulsory"), or it may be voluntary (i.e. you agree to it in return for a premium reduction)
Exclusion - a clause in an insurance policy which limits the scope of cover, e.g. by excluding claims arising from war
Ex Gratia Payment - a payment made by an insurer to a policyholder following a claim, although there is no legal liability to pay. This might happen, for example, where strictly speaking a claim is not covered by the policy, but paying the claim is felt to be within the spirit of what was intended
Export Credit Insurance - provides cover for exporters’ losses arising from non-payment of bills from overseas
Extended Warranty - insurance available to extend the cover provided by a warranty or guarantee on consumable goods, e.g. household goods and motor vehicles
F
Fidelity Guarantee Insurance - an insurance for employers that covers losses arising from the dishonesty of employees
Financial Loss - an extension of cover under a liability policy to include accidental financial loss which is not occasioned by physical loss or damage to material property
Financial Ombudsman - oversees the interest of policyholders whose complaints remain unsolved through the normal channels of communication with the insurer. The decision of the Financial Ombudsman Service is binding on the insurer, although the policyholder may appeal to the Court if he or she wishes. The Financial Ombudsman Service is available to the following types of policyholder if they have taken out policies with those insurers that have joined the scheme:
(a) private individuals who have taken out personal insurance cover, e.g. insurance on a home or private car
(b) small businesses (or groups of companies) with an annual turnover of less than £1 million
(c) charities with an annual income of less than £1 million
(d) trusts with a net asset value of less than £1 million.
In the case of (b), (c) and (d), the Financial Ombudsman Service will need to ask you more questions and request the relevant paperwork before confirming that they are able to help
Financial Services Authority (FSA) - major regulatory authority established in 1997 to regulate all aspects of the financial services industry and to bring together the activities of many previous regulatory authorities
Fire Insurance - cover under Property and Business Interruption policies against both fire and lightning. "Fire" includes smoke damage and also damage caused by the fire brigade when putting out a fire
First Loss Insurance - form of property insurance where the sum insured is deliberately less than the value of the property, but the insurer undertakes to pay claims in full up to the sum insured. As a general rule, if a sum insured is inadequate, an insurer will scale down any claim (however small) in the same proportion that the sum inured bears to the actual value of the property. But when cover has been agreed on a First Loss basis, this does not happen - and the insurer does not reduce the amount of any claim that is below the sum insured simply because the sum insured is inadequate
Franchise - exclusion of all losses falling below a set limit, while losses that exceed the limit are paid in full. Suppose for example you have a policy with a franchise of £250. If you suffer a loss amounting to £750, then (assuming the loss is covered) the insurer will pay the full £750. If the loss is only £150 (or any amount below £250), the insurer won't pay anything
Freight - is the sum paid to a carrier for transporting goods. In insurance it also includes the profit derivable by a shipowner from carrying his own goods. The payment for the hire of a vessel is known as Chartered Freight
G
Garage Risks - term used in Motor Trade policies to refer to damage to vehicles and their contents while they are on the premises of the garage. See also Road Risks
Goods In Transit - insurance to cover loss of or damage to goods in transit in a road vehicle
Gross Premium - the total premium paid by the policyholder for the insurance contract
H
Hazard - a physical or moral circumstance which introduces or increases the possibility or extent of an insurance claim
Hazardous Trades - those trades which, because of the nature of the business, pose a greater then average risk of a particular type of insurance claim. For example, in property insurance a sawmill is a more hazardous trade than an optician because the stock is combustible and a fire is more likely to break out
Hold Covered - a risk is said to be held covered when an insurer agrees to insure it temporarily pending the completion of all the insurance arrangements
Hull Insurance - insurance of a vessel or aircraft, as distinct from the goods or cargo carried
I
Inception Date - the date on which the insurance comes into force
Increase in Cost of Working - under a business interruption policy some cover is provided for additional expenditure incurred by the policyholder for the purpose of reducing the shortage in production following an insured event. For example, the cost of hiring of additional machinery or premises to keep production going during repairs
Indemnity - the total cover available to the policyholder under an insurance policy. The principle of indemnity is to try to place the policyholder in the same position after an insured loss as applied immediately prior to the event
Indemnity Period - under a business interruption insurance, the period - beginning at the time of a fire or other insured damage - during which cover is provided for disruption to the business. The indemnity period ends (and the business interruption claim ceases) when the business returns to where it would have been if the fire etc. hadn't occurred. There is a limit to the indemnity period and this is shown in the policy; it is sometimes called the "maximum indemnity period". For small businesses, the standard limit is 12 months, but longer periods (e.g. 18 months, 24 months) are usually available if you feel that it could take longer than a year for the damage to be repaired and for the business to return to normal
Index-linked - policies where the sum insured is automatically adjusted in line with general rises in costs
Industrial Disease - generic term for a group of diseases that can be caused by industrial working conditions. These diseases lead to a large proportion of claims under Employers’ Liability policies
Insurance Broker - an “intermediary” or "agent" registered with the Financial Services Authority (FSA). A broker is independent ad not tied to any particular insurance company on what they offer. A broker is generally remunerated by the insurer
Insurance Company - a trading concern which provides insurance and issues insurance policies
Insurance Ombudsman - see Financial Services Ombudsman
Insurance Premium Tax (IPT) - a tax payable on general insurance premiums. The insurance company pays the tax and adds it to the policyholder's premium. It currently stands at 5% of the premium
Insured - the person whose risks are insured or in whose favour an insurance policy is issued (i.e. the customer or policyholder)
Insurer - a generasl term covering an insurance company or Lloyd’s underwriter
Intermediary - person or organisation that offers advice and arranges policies for clients. Intermediaries may be either “tied” -representing one company in the case of life business or a limited number of companies for general business - or “independent” - with no limit on the number of companies with which they can deal. See also Broker
IPT (Insurance Premium Tax) - - a tax payable on general insurance premiums. The insurance company pays the tax and adds it to the policyholder's premium. It currently stands at 5% of the premium
J
Jettison - a marine term relating to throwing cargo overboard to ensure that the vessel is saved
Jurisdiction Clause - a policy clause that either (a) specifies what country’s courts shall have jurisdiction in the event of a dispute under the policy or (b) in liability insurance, excludes liability for third party claims brought in any courts other than domestic courts
K
Key Person Insurance - in the event of the death of a key employee on whom the business depends for its continued profitability, or even existence, this type of cover provides a sum of money which can be used to pay for the cost of finding and training a successor, and to compensate for reduced profitability
L
Lapse - cancellation of a policy at the end of the insurance year when it falls due for renewal
Latent Defects - a defect in a building or other item that is gradually developing or that develops a number of years after its completion
Latent Disease - an illness which lies dormant for some years before manifesting itself
Legal Expenses Insurance - covers solicitors’ fees and expenses, the cost of barristers and witnesses, court costs, and opponents’ costs if awarded against the policyholder
Legal Liability - legal responsibility for causing loss to someone else by injuring them or damaging their property
Liability - a term used in two separate senses to describe: (a) the state of being liable, as for example when an insurer is due to pay a claim; and (b) liability insurances - see below
Liability Insurance - insurance that covers the policyholder's legal liability to pay for claims made against them by third parties. In general, claims are therefore not paid to the policyholer, but to someone suffering loss who is not a party to the insurance contract. Examples of liability insurance are (a) Employers' Liability, (b) Public Liability, (c) Products Liability and (d) the Third Party Liability cover provided in Motor insurance
Limit - the insurer’s maximum liability under an insurance. It most usually applies to any one event. This measn it applies to any one claim, or - if several claims all relate to the same event - to all those claims that follow on from the single event. In a few cases (e.g. in the case of Products Liability), it applies to the grand total of all the claims that are paid in the course of any one year of insurance
Livestock Insurance - type of insurance relating mainly to cattle and horses which provides protection against loss of animals by death resulting from accident or disease. It also includes vets' fees
Lloyd’s - common name for Lloyd’s of London
Lloyd’s of London - the major insurance market operating alongside the insurance companies. Lloyd’s took its name from Lloyd’s coffee house where the initial meetings were held
Lloyd’s Name - an underwriting member of Lloyd's who is required to meet the Lloyd's means test and is responsible for meeting his or her share of any losses made by their syndicate. Also referred to simply as a ‘Name’
Lloyd’s Underwriter - an underwriting member of Lloyd's subscribing to Lloyd's policies
Long-term Agreement or Undertaking - an agreement whereby, in return for a discount on the premium, the policyholder makes a binding commitment to keep the insurance with that insurer for an agreed number of years (e.g. 3 years)
Loss - another term for a claim
Loss Adjuster - an independent claims expert, who acts as a consultant to insurers in assessing the extent and value of a claim. Although paid by the insurer, a member of the Chartered Institute of Loss Adjusters (CILA) is required to act with the claimant's legitimate interests in mind
Loss Assessor - a person who acts for the claimant in negotiating settlement of a claim, in return for a fee (usually a percentage of the amount claimed)
Loss of Licence - a policy which protects a policyholder against depreciation in the value of the licenced premises (public house, restaurant, hotel, off licence etc) if the licence is forfeited, revoked, suspended or refused renewal
Loss of Profits - an insurance covering the loss of earnings of a business following fire or other specified damage. Also known as consequential loss or business interruption
M
Managing Agent - an agent who manages a property or a property portfolio
Marine Insurance - insurance of the hull, cargo, freight and liabilities of ships and oil rigs
Material Damage insurance - another term for property insurance
Material Fact - a fact that:
(a) means you’re more likely to make an insurance claim
(b) might influence either whether an insurer decides to insure you or not, or what premium the insurer will charge
(c) could allow an insurer to avoid paying a claim if you hadn’t previously told the insurer about it.
Unfortunately there’s no more precise a definition. So, to make sure your insurer does not have any opportunity to reject a future claim, it’s best to reveal any information that you think could be material.
Examples of material facts are:
(1) history of flooding or subsidence in the immediate area
(2) presence of other tenants within the same building (if you occupy part of a multi-tenure building) – especially of those other tenants have more hazardous trades than you do
(3) premises built mainly of combustible materials, e.g. timber
(4) if any insurer had declined to insure you in the past or had only insured you subject to special terms
Medical Expenses Insurance - insurance usually taken out when travelling abroad, covering the cost of treatment, extra travel, accommodation costs and air ambulance home. Often purchased as part of a travel package
Minimum Premium - the minimum premium that an insurer charges for a year’s insurance. Insurers impose minimum premiums mainly to cover their administrative expenses. If you are a very small business, it can pay to shop around for the insurer with the lowest minimum premium
Mortgage Indemnity Insurance - insurance taken out by mortgage lenders to secure their re-payments in specific circumstances where the borrower is unable to make those payments
Motor Insurance - covers as a minimum legal liabilities arising from the use of a motor vehicle. Most policies (i.e. Comprehensive policies and those covering Third Party, Fire and Theft) also cover damage to the vehicle itself
Motor Trade - collective term for all businesses trading and working with motor vehicles, including main dealers, other car sellers, vehicle repairers and bodywork repairers. Many insurers provide a special policy for this trade
N
Negligence - this is a common cause of friction between people and can give rise to civil liability and to court cases. In the case of Blyth v Birmingham Waterworks Co. in 1856, it was defined as “the omission to do something which a reasonable man guided by those considerations which ordinarily regulate the conduct of human affairs would do, or doing something which a prudent and reasonable man would not do”. Subject to certain exclusions, liability insurance covers claims made against you following an act of negligence
New for Old - a form of cover where insurers agree to pay for the cost of property lost or destroyed without making any deduction for depreciation. This means that a claim is settled on the basis of replacing the property as new, even though the old preperty that had been destroyed was probably not new and its value had therefore reduced. The sum insured must however reflect the full value of the property insured as new
No Claims Discount (or Bonus) - a rebate of premium given to an insured by an insurer when no claims have been made. Very common in motor insurance
Non-disclosure - the failure by a policyholder (or broker) to disclose to an insurer a material fact
Nuisance - the use of land or property in such an unreasonable, excessive or unnecessary way as to cause tangible inconvenience or discomfort to a neighbour. Not normally insurable
Null and Void - not in force or not legally binding
O
Open Cover - insurance where the insurer enters into an obligation in advance to provide cover that falls within agreed parameters
P
Package Policy - a policy which includes various different types of insurance. Package policies offer advantages in having a number of polices in one, one insurer to deal with, a common renewal date and one premium to pay. That doesn’t mean that they are necessarily cheaper than buying several policies instead of one
Passenger Liability - the liability of a carrier (e.g. a taxi firm or bus company) to passengers and the insurance to cover that liability
Pecuniary Loss - Expression which includes any financial loss which may have been incurred, e.g. business interruption and mortgage indemnity policies
Pensions - the area of insurance which provides benefits for retirement. It consists primarily of occupational pensions organised by employers and personal pensions organised by individuals
Peril - a contingency, or happening, which may be covered or excluded by a policy of insurance. Usually used to describe the types of damage covered by property insurance, e.g. fire, storm, flood, etc
Permanent Health Insurance - insurance providing continuing benefits in the event of prolonged illness or disability
Permanent Total Disability - permanent disability preventing an insured person from following gainful employment or occupation
Personal Accident Insurance - insurance for fixed benefits in the event of death, or loss of limbs, or sight, or disablement as a result of an accident. It may be combined with Sickness Insurance
Personal Pensions - retirement benefits arranged by individuals through approved arrangements which attract favourable tax treatment
Physical Hazard - relates to the physical or tangible aspects of a risk which are likely to influence the occurrence and/or severity of a loss
Pluvius Insurance - insurance against losses resulting from adverse weather conditions
Policy - a document detailing the terms and conditions applicable to an insurance contract and constituting evidence of that contract
Policyholder - the person in whose name the policy is issued
Political Risks - those risks that arise from political or economic actions of a government that are beyond the control of the policyholder. Generall not insurable
Premium - the amount that is paid for buying insurance
Proposal form - an application form for insurance