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

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. For example if you have insured a £100,000 home for £50,000 and suffer a total loss, an insurer can apply the law of average and pay you just £25,000.

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.

Buildings Insurance

This is a policy covering the structure of a building against a number of different risks including fire flood damage etc.

Business Interruption

You can find the interpretation of this under consequential loss.

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.

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. This means that an individual cannot claim twice on two policies for the same loss which would contravene a key principle of insurance which is that the insured cannot be better off following a loss and 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.

Critical Illness Insurance

These policies pays out a lump sum on the diagnosis of certain life-threatening illnesses specified in the policy.

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.

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. More information is available on young driver excess in our FAQs .

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.

Ex Gratia Payment

Any payment made by an insurance company that is not strictly necessary, under the terms of the policy. Often these payments are good will gestures to rectify poor service.

Exposure

Whether, and the extent to which, an insurer is subject to losses arising from a particular risk.

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.

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 governement 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.

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.

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.

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

A 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.

Mechanical Breakdown Insurance

This cover protects against the cost of breakdowns of household appliances or motor vehicles.

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.

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)

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. Find more in our No Claims Bonus frequently asked questions.

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.

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.

Replacement-as-New

See 'New-for-Old'.

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.

Third Party

A party involved in a claim who is neither the policyholder nor the insurer.

Trading Result

An insurer's overall profit/loss calculated as the underwriting result plus investment income.

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.

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.