Insurance jargon and glossary

Set out below are some of the most common terms you find used in household insurance policies together with an explanation of what they mean:

Accidental damage

Damage caused to your property as a direct result of a single unexpected event

Act of God

An event not caused by a person that causes damage to your property (an example would be your house being hit by a meteor). It will depend on the circumstance whether an act of God is insurable or not

Agent

An intermediary through who insurance policies are bought and sold

Aggravated theft

The forcible and violent theft or attempted theft of items in your house while you are inside it

All risks

Insurance cover that is broader than normal and which covers any loss or damage apart from exclusions stated on the policy

Betterment

The payment by the insured party towards a claim in recognition of the fact that the property will be worth more following claim than it was before

Broker

A company authorised to sell insurance cover to the general public

Buildings

Your home, greenhouses and sheds all on the same site, and used for domestic purposes, including central heating oil tanks, septic tanks, tennis courts, swimming pools, patios, drives, paths, walls, fences, gates and landlord's fixtures and fittings

Business equipment

Furniture, computers (including keyboards), printers, modems, fax machines, photocopiers, typewriters and telephone equipment in the home (other than any equipment belonging to your employee)

Claim

An application by the insured party to recover payment from the insurance company under the terms of the policy

Commission

A fee paid to an intermediary or agent by an insurance company for promoting the sale by that third party of its insurance products. In most instances the intermediary is obliged to disclose how much commission it is receiving when you buy a policy. Many will try to avoid disclosing this information and it is often rolled into the insurance premium without being separately disclosed

Condition

Part of the insurance policy that states what condition the property must be in for the insurance cover to be valid (eg in relation to security for the property)

Contents policy

A policy covering the insurance of the contents of a house

Contribution

The principle by which two or more insurers with an interest in the same insurance risk share the cost of any claim

Credit cards

Credit, cheque and debit cards which belong to the insured party (ie not those belonging to visitors)

Direct source of business

Insurance cover obtained directly from the ultimate insurance supplier (ie not involving and intermediary or agent)

Endorsement

An amendment to an insurance policy which has the same legal effect as if it had been originally included in the policy. Not to be confused with an endorsement on a driving license

Excess

The amount the policy holder is obliged to pay before the insurance company makes any payment towards a claim

Exclusion

An event or circumstance carved out of the insurance policy (ie where the insurance company is not obliged to make any payment)

Ex gratia payment

The payment by an insurance company to the insured party which is not strictly required by the terms of the policy. Not a common occurrence!

Exposure

The risk to which the insurance company is exposed resulting from the policy

Family

The insured party, his/her domestic partner, their children (including adopted and foster children) and the parents and other relatives of the insured party and his/her spouse permanently living in the property

General liability

The legal liability of the policy holder for injury, property damage or loss caused to third parties

Home

The private living accommodation of the insured party including garages and outbuildings at the same address provided they are used for domestic purposes

Insurable interest

One of the most important concepts in insurance which states that you can only insure an object if you can demonstrate that you will incur financial loss if it is damaged, lost or stolen

Insurance company

A company authorised by the Financial Services Authority to take on insurance risk

Insurance premium tax

A tax levied by the government on nearly all non life insurance policies in the UK, payable as a percentage of the annual insurance premium

Intermediary

A person or company which acts as an agent between the consumer and the insurance company and charges a commission

Level premium

A premium that stays the same across the life of the policy

Loading

Where a policy holder is charged more for insurance cover than the 'average'

Loss adjustor

An individual or company - notionally independent of the insurance company - who assesses the amount of a claim and adjudicates between the interests of the policy holder and the insurance company. We say 'notionally independent' because the fees of a loss adjustor are typically paid by the insurance company

Loss assessor

Similar to a loss adjustor except that the policy holder pays for the policy assessor not the insurance company

Money

Cash, traveller's cheques, postal orders, postage stamps, premium bonds and National Savings certificates, gift vouchers or gift tokens, travel tickets, phonecards and luncheon vouchers

Mutual

An insurance company owned by its policy holders. Becoming less common

New for Old

The concept of replacement of a lost or stolen item with a new one without any deduction for wear and tear

Occupant

The insured party or a member of his/her family or a person authorised by the policy holder to stay at the insured property overnight

Period of insurance

The duration of the insurance cover

Personal belongings

Articles which the policy holder is using, wearing or carrying (subject to certain exceptions)

Policy

The legal contract between the insured party and the insurance company which sets out the rights and obligations of each party

Premium

The amount paid by the policy holder for his/her policy

Renewal notice
 
The notice sent to the policy holder by the insurance company inviting him/her to renew his/her insurance cover

Self contained

A home which has its own kitchen, bedroom and toilet and is not shared by others

Sum insured

The maximum amount the insurance company is obliged to pay out for a particular item under the terms of the policy

Third party

A party which is not either the insured party or the insurance company providing insurance cover

Underinsurance

An important concept in relation to household insurance. The amount by which the property or a particular item is underinsured. Typically an insurance company will discount the amount of any payment it makes proportionately if you are underinsured

Unfurnished

Where the property is not sufficiently well furnished for it to be deemed to be fit for normal habitation

Uninsurable risk

A risk that is not capable of being insured

Unoccupied

Where the property has been left unoccupied for a specified period of time (typically 45 days)

Utmost good faith

The principle that requires the policy holder to disclose all relevant information to the insurance company in good faith

Valuables

Articles of value such as gold, silver, other precious metals, jewellery, gemstones, furs, watches, portable television sets, audio-video and computer equipment, telescopes, binoculars, photographic equipment, musical instruments and guns