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Glossary of Insurance terms

Premium. A premium payable by the insured as a result of a change in policy cover or declaration adjustment to reflecting increased exposure or sums insured.

Adjuster. A person who investigates claims on behalf of insurers (see claims adjuster or 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.

APR. The Annual Percentage Rate (APR) is the total cost of credit to the consumer, expressed as an annual percentage of the amount of credit granted. APR is intended to make it easier to compare lenders and loan options.

Broker. An intermediary who acts as an agent for insurers and on behalf of the insured who is regulated by a professional body and codes of practice.

Cancellation. Termination of a policy before it is due to expire.

Claim. Injury or loss to a claimant against the insured arising so as to cause liability under a policy it has arranged.

Claims adjuster. Claims adjusters investigate insurance claims by interviewing the claimant and witnesses, consulting police and hospital records, and inspecting property damage to determine the extent of the company’s liability.

Common Law. The common law consists of the 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, 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.

Days of Grace. Number of days for which insurance cover continues beyond the actual expiry date of the policy, which you intend to renew. If you fail to pay the renewal premium within this period, your policy will lapse.

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. If the premium has been calculated based on estimates provided by the insured, they are required to maintain records to enable a declaration of actual wage roll or turnover during the period to be made. The insurer may then adjust the premium charged for that period by making an additional or return premium.

Deferred Premium. The part of a premium which, following agreement with the insurer, is payable by installments, monthly, quarterly or half yearly.

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 Great Britain, 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.

Excess (or deductible). Specified initial amount of a claim that the insured has to contribute. If a claim fails to exceed this amount stated in the policy, no payment is made by the insurers.

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 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 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 any 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.

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 ‘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 Lloyd’s market to carry on insurance business efficiently.

Loss Adjuster. 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.

Minimum Deposit. This is a payment payable for the first year regardless of whether the intention is for the policy to run for a full 12 months. If the policy is no longer required there is no refund of premium for the period of insurance remaining.

Negligence. A form of tort or civil wrong that can give rise to civil liability.

Net Premiums. 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.
OMBUDSMAN: Official body, financed by participating insurers, to whom unresolved complaints can be referred.

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 and assured).

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 evidenced by the renewal receipt.

Premium. The consideration paid for a contract of insurance.

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 what premium terms and conditions. Once agreed by both parties, it forms the basis of the insurance contract.

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. (This is subject to the under writers discretion)

Risk Management. The identification, measurement and economic control of risks that may 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 plus other details specific to the particular insurance and premium.

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 Liabilty. Liability of the insured to persons who are not employees of the insured.

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 all facts material to the risk while insurers have to act reasonably and communicate clearly.

Warranty. A condition which forms part of 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.

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