Glossary of Terms
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• Additional premium
  a premium payable by the insured as a result of a change in policy cover or declaration adjustment to reflect increased exposure or sums insured.
• Adjuster
  a person who investigates claims on behalf of insurers (see loss adjuster).
• Agent
  one who introduces a business to an insurer for commission, but can continue to act as an intermediary between the insurers and the insured.
• Aggregate limit of indemnity
  the maximum amount an insurer will pay under a policy in respect of all accumulated claims arising within a specified period of insurance.
• Arbitration
  settlement of a dispute by an independent person, whose decision is to be accepted by both parties. It is an alternative to legal action.
• Assurance
  a term interchangeable with insurance but generally used in connection with life cover as assurance implies the certainty of an event and insurance the probability.
• Average
  a clause in insurance policies whereby, in the event of under-insurance, the claim paid out by the insurer is restricted to the same proportion of the loss as the sum insured under the policy bears to the total value of the insured item.
• Betterment
  the term used when property is repaired which results in it being in a better condition than before the incident or replaced with a better item (higher quality or specification). Consequentially insurers may ask the client to contribute to the cost of the repair which is referred to as betterment.
• Broker
  an intermediary who acts as an agent for insurers and on behalf of the insured, and who is regulated by a professional body and codes of practice.
• Cancellation
  termination of a policy before it is due to expire.
• Certificate of employers’ liability insurance
  document proving that you have a valid policy which must be displayed where employees can read it easily and kept for at least 40 years.
• Claim
  injury or loss to a claimant against the insured arising so as to cause liability under an arrangement policy.
• Common law
  ancient customs and precedents that have been recognised by the courts and given the force of law. It is in itself a complex system of both civil and criminal precedents, although it is greatly modified and extended by statute law and equity. It is unwritten and has come down over the centuries in the recorded judgments of courts.
• Concealment
  deliberate suppression by a proposer for insurance of a material fact relating to the risk, usually making the contract null and void.
• Conditions
  stipulations written in a policy, with which a policyholder must comply. Failure to do so may result in insurers refusing to pay a claim.
• Contribution
  when more than one policy covers the same risk, each insurer contributes by paying its rateable proportion of any loss.
• Cover note
  a document issued to the insurer or agent confirming details of the insurance cover placed. Some cover notes (eg for motor insurance) are a legal requirement.
• Days of grace
  number of days for which insurance cover continues beyond the actual expiry date of a renewable policy. If the renewal premium is not paid within this period, the policy lapses.
• Day one basis
  the sum insured is declared to Insurers at inception, without allowance for inflation during the rebuilding period (the "declared value"). Insurers then allow a provision for inflation during the rebuilding period not normally exceeding 50% of the declared value.
• Declaration
  a signed statement by the insured, usually at the foot of a proposal or claim form, certifying that the information given is accurate.
• Declaration adjustment
  sometimes the premium is calculated based on estimates of wageroll or turnover provided by the insured. In this case, the insured is required to maintain records to enable a declaration of actual wageroll or turnover to be made. The insurer may then adjust the premium for that period by making an additional or return premium.
• Deductible
  the specified amount which the insured will contribute to any claim, also called excess or Insured's Contribution. As the insurer is dealing with the claim on the insured's behalf, they may require payment of the deductible prior to settlement with the claimant.
• Deferred premium
  the part of a premium which, following agreement with the insurer, is payable by monthly, quarterly or half-yearly instalments.
• Directors’ and officers’ liability insurance
  insurance that indemnifies against any claims for compensation and legal fees for any actions on the part of the company directors or officers which is outside of their duties, responsibilities or powers.
• Duty of disclosure
  obligation placed on someone taking out insurance, to inform insurers of anything that could influence either their judgment on whether the risk is acceptable, or the terms to be offered.
• Employers' liability insurance
  insurance for employers in respect of their liability to employees for injury or disease arising out of and in the course of their employment. With some exemptions this insurance is compulsory in England, Scotland, Wales and Northern Ireland and can only be provided by an authorised insurer.
• Endorsement
  an amendment or alteration to a policy, which becomes an integral part of that policy.
• Ex gratia
  payment made "as a favour" by an insurer, when there is no obligation under the policy terms.
• Excess (or deductible)
  specified initial amount of a claim that the insured has to contribute. If a claim is less than the excess stated in the policy, no payment is made by the insurers. Excesses do not apply to Employers' Liability Compulsory Insurance, as the insurer is responsible for any payments due to the employee.
• Exclusion (or exception)
  an event or circumstances specifically excluded from the terms of a policy.
• Extension
  an addition to an existing policy to provide cover not previously considered or included, either temporarily or permanently.
• Gross premium
  a term normally applied to gross written premiums before deduction of brokerage fees or commission and expenses.
• Inception date
  the date from which, under the terms of a policy, an insurer is deemed to be at risk.
• Indemnity
  insurance principle by which a policyholder is placed in the same financial position after a loss, as they were immediately before it.
• Insurable interest
  the principle that the insured must have an interest, usually financial, in the risk for which the policy is to be issued.
• Insurance broker/agent
  an insurance intermediary who advises their clients and arranges their insurances. Although they act as an agent for their client, they will normally be remunerated by a commission (brokerage) from the insurer. An insurance broker is a full-time specialist in handling insurance business who belongs to a professional body and complies with their code of practice.
• Insurance Ombudsman
  official body, financed by participating insurers, to whom unresolved complaints can be referred.
• Insurance premium tax
  the Finance Act 1994 introduced this new tax on most general insurance risks located in the UK. All amounts stated on documentation should make clear the amount of tax payable.
• Insured
  the person, firm or company in whose name the policy is issued.
• Insurer
  an insurance company or Lloyd's underwriter who, in return for a premium, agrees to provide indemnity in the event of a specified loss suffered by the person paying the premium as a result of some accident or occurrence.
• Lapse
  the non-renewal of a policy for any reason.
• Latent (gradually developing) disease
  an illness that lies dormant for some years before manifesting itself.
• Liability
  legal responsibility for injury to other persons or damage to their property.
• Limit of indemnity
  maximum sum an insurer can be expected to pay under a policy or section of a policy. May be expressed as "per accident", "per event", "per occurrence", "per annum", etc.
• Lloyd's (of London)
  a society, incorporated under Act of Parliament of 1871 and known as the Corporation of Lloyd's, which provides the premises for a wide variety of services, administrative staff and other facilities to enable the Lloyds market to carry on insurance business efficiently.
• Loss adjuster
  an independent professional claims expert, who is engaged by insurers to impartially check and arrange settlement of claims in accordance with policy terms.
• Loss assessor
  person specialising in compiling and negotiating settlement of claims on behalf of the insured, by whom they are paid.
• Loss
  another term for a claim.
• Material fact
  any fact that could influence an underwriter in their acceptance of the risk, or calculating the premium.
• Name
  an underwriting member of Lloyd's.
• Negligence
  a form of tort or breach of a legal duty of care where the victim is entitled to some form of compensation, eg damages for harm suffered.
• Net premiums
  a term variously used to mean gross premiums net of expenses, commission taxes, or any combination of these.
• Non-disclosure
  the failure by the insured or their agent to disclose a material fact or circumstance to the insurer before acceptance or renewal of the risk.
• Period of risk/insurance
  the period during which the insurer can incur liability under the terms of the policy.
• Policyholder
  the person in whose name the policy is issued. See also insured.
• Policy
  a document detailing the terms and conditions applicable to an insurance contract and constituting legal evidence of the agreement to insure. It is issued by an insurer or their representatives for the first period of risk. On renewal a new policy may not be issued although the same conditions would apply, and the current wording would be evidence by the renewal receipt.
• Premium
  the consideration paid for a contract of insurance, often paid monthly, quarterly or annually.
• Premium tax
  see Insurance premium tax.
• Product liability insurance
  insurance that covers against any claims for compensation for injury or damage caused by your products.
• Professional indemnity insurance
  insurance that indemnifies a professional against their legal liability towards third parties for loss arising from their professional negligence or that of their employees.
• Proposal form
  document completed by a prospective insured, giving details required by insurers to enable them to decide whether to accept the risk and on what premium terms and conditions. Once agreed by both parties, it forms the basis of the insurance contract.
• Pro-rata premium
  charge for a number of days a risk is covered, calculated as a precise fraction of the annual premium.
• Public liability insurance
  insurance that indemnifies against any claims for injury or damage by members of the public to their property by you or your business.
• Quote
  a statement by an insurer of the premium terms and conditions they will require for a particular insurance.
• Renewal
  continuation of a policy for a further term, on payment of a fresh premium.
• Return premium
  a premium payable back to the insured as a result of a change in policy cover or declaration adjustment to reflect reduced exposure or sums insured.
• Risk management
  the identification, measurement and economic control of risks that threaten the assets of a business or other enterprise.
• Risk
  in insurance, this is the probability of an insured loss occurring.
• Schedule
  policy section setting out the main details of the insured, their business activities, the period of cover the application of any special terms or restrictions, together with other details specific to the particular insurance and premium.
• Statute law
  otherwise known as Acts of Parliament, which may create entirely new law, over-rule, modify, or extend existing principles of common law or repeal or modify existing statute law.
• Subject to survey
  phrase used by an insurer to signify provisional acceptance of a risk pending inspection by a surveyor whose report is then part of the assessment of that risk. The insurer reserves the right to vary or withdraw any offer as a result of the survey. The insurer may also impose specific requirements or make recommendations for risk improvement.
• Subrogation
  insurer's right to pursue action in the insured's name against the party considered legally liable for the loss or damage.
• Third party liability
  liability of the insured to a person or persons who are not directly involved in the insurance contract.
• Third party
  person who is injured or whose property is damaged by the policyholder (the first party). The second party is the insurer.
• Underwriter
  a person who accepts business on behalf of an insurer.
• Utmost good faith
  duty placed on both parties to an insurance contract. The insured has to disclose material facts while insurers have to act reasonably and communicate clearly.
• Warranty
  a condition which goes with a policy and must be strictly complied with for a claim to be paid under the policy for example, use of a hot work permit.