Glossary of Insurance Terms Explained

Ab Initio

Latin for from the beginning.

Accidential Damage

Damage is caused by accidental means as opposed to fire, theft or reckless conduct on your part. Accidental damage is usually subject to a policy excess for each claim.

Additional Premium

A further premium payable by the insured as a result of policy amendment, that may have increased the risk or changed the policy conditions or sum insured.

Aggregate Limit

The maximum amount an insurer will pay under a policy in respect of all accumulated claims arising within a specified period of insurance.

Agreed Value

The value of the insured items is agreed by you and the insurers at the start of the period of insurance. The agreed value then applies at the time of a claim.

Bona-fide Subcontractors

Bona-fide subcontractors are contractors who work without direction from yourself, hold their own insurance, and will usually provide their own materials and tools. It's worth noting the higher % paid to bona-fide subcontractors means a higher exposure to claims under your public liability insurance.

Buildings Insurance

Building insurance protects you against the cost of repairing or rebuilding the property the business owns if it is damage or destroyed. It covers the structure (e.g. the roof, walls and windows) and any permanent fixtures and fittings, such as fitted kitchen units and bathroom suites.

Business Interruption Insurance

Business interruption insurance will protect against the loss of income from being unable to trade as a result of an insured event. The insurance will cover the consequential loss of the interruption to trade by indemnifying the policyholder.

Business Travel Insurance

Business travel insurance provide protection medical and other emergency travel expenses, such as repatriation expenses, personal liability, personal property, business equipment, cancellation, kidnap and ransom.

Certificate of insurance

A certificate of insurance is legal evidence of your insurance. You may need to produce to prove you have insurance in place.

Claims Made

An insurance policy which provides cover to claims notified to the insurer during the policy period, irrespective of the date of loss.

Clerical Activities

Clerical activities means work predominantly undertaken from an office environment, that does not not include manual work.

Commercial Combined Insurance

Commercial combined insurance is a package policy that provides a variety of covers that can be tailored to the requirements of a wide range of business activities. Cover will typically include as a minimum: employers liability, public liability, product liability, and property damage.

Consequential Loss

Consequential or indirect losses include any loss which does not arises naturally from a breach of contract and is not forseeable by both parties.

Contents Insurance

Contents insurance can cover your company against the risks that accidents, theft, fire and water damage can pose to the contents in your workplace.

Contract Works Insurance

Contract works insurance provides cover for damage or loss for the work in progress on a construction site. The cover will reinstate or repair the building works resulting from any type of loss or property damage (i.e. theft, flood, fire, storm, ect).

Contractors All Risk Insurance

Contractors all risk insurance is a package policy that provides a range of covers to meet the requirements of companies which operate in the construction industry. Cover can typically include: contract works, liability insurance, plant and equipment insurance.

Crime insurance

Crime insurance provides protection from a criminal or fraudulent taking, obtaining or appropriation of money, securities or property. Cover can typically include: client fraud, employee fraud, extortion, third-party fraud and social engineering fraud.

Cyber Insurance

Cyber insurance provides protection against first and third-party losses arising from security and privacy breaches. Cover will typically include: business interruption, cyber extortion, cyber liability, incident response and notification.

Deductible

The specified amount a loss must exceed before a claim is payable, otherwise known as an 'excess'. Only the amount which is in excess of the deductible is recoverable.

Deterioration of Stock Insurance

Deterioration of stock insurance provides protection for damage to property, being stock in any cold chamber, by deterioration or putrefaction in consequence of an insured event. The insurance will cover the insured value of such property.

Directors and Officers Insurance

Directors and officers insurance provides protection for individuals against civil, criminal and regulatory proceedings, while acting in a managerial capacity on behalf of the company. Offering cover for legal costs, damages, insurable fines, and settlements.

Duty to Defend

A duty to defend provision provides the right to select legal counsel and control the defence of a claim.

Effective Date

The date on which an insurance contract comes into force, can also be called the inception date.

Electronic Equipment Insurance

Electronic equipment insurance can cover your company against the risks that accidents, theft, fire and water damage can pose to electrical equipment in your workplace.

Employee Tools Insurance

Employee tools insurance will protect against damage to personal tools and effects belonging to an employee, whilst on the construction sites.

Employers Liability Insurance

Employers liability insurance provides protection against claims arising from injury or illness of your employees. Offering cover for legal costs incurred in defending allegations and compensatory damages arising from any judgment, award or settlement.

Employment Practices Liability Insurance

Employment practices liability insurance provides protection for the company and their directors, officers, employees, against claims arising from a range wide range of employment disputes. Offering cover for legal costs, damages, awards or settlement.

Endorsement

An endorsement refers to any variation or addition to the standard terms of the policy.

Engineering Inspection Insurance

Engineering inspection insurance will provide a periodic inspection of machinery, appliances and equipment stated in the policy schedule. In addition to offering a written report to meet the legal statutory regulations, if required.

Equipment Breakdown Insurance

Equipment breakdown insurance provides protection in the event of machinery and plant, owned or leased by the Policyholder, suffers damage during the course of business. The insurance will provide financial support as defined in the policy schedule.

Ex Gratia Payment

An ex gratia payment is a payment made by an insurer from a sense of moral obligation rather than because of any legal liability.

Excess

The excess is the first portion of a loss or claim which is borne by the insured.

Exclusion

A clause in a policy that describes specific areas that are specifically excluded from the insurance cover.

Expiration Date

Expiration date is the date on which the policy ends.

Extended Reporting Period

An extended reporting period, also known run-off cover, allows claims to be reported to the insurer after the policy has expired, to ensure you are protected from services already provided. Cover should be considered for the statute of limitations in tort which is six years.

Fair Presentation of Risk

The requirement of "Fair Presentation of Risk" under the Insurance Act 2015 clarifies the obligations of both parties entering into an insurance contract.

FCA

The Financial Conduct Authority regulates the financial services industry in the UK. Its role includes protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers.

FOS

The Financial Ombudsman Service is an independent and impartial organisation in the UK dedicated to resolving disputes between consumers and financial service providers.

Force Majeure

Force majeure is a force beyond the control of an individual.

GDPR

The Data Protection Act 2018 is the UK's implementation of the General Data Protection Regulation (GDPR). Everyone responsible for using personal data has to follow strict rules called 'data protection principles'.

Hard Market

When the availability of insurance is relatively low compared with demand. A lack of competition amongst insurers leads to upwards pressure on premiums and restriction in the availability of cover.

Hired-in Plant Insurance

Hired-in plant and equipment insurance will protect your legal liability under the terms of your hiring agreement to pay compensation for damage to hired-in plant whilst in your custody or control.

Hold Harmless

A hold-harmless agreement (also known as an indemnity agreement) allows one party to protect another party against any future losses or claims.

Inception Date

The date on which an insurance contract comes into force, can also be called the effective date.

Indemnification

Indemnification is the principle the insured should be returned to the same financial position before the loss or damage occurred. The insured cannot profiteer and recover more their actual loss.

Indemnity Insurance

The concept of indemnity is fundamental to insurance; it's about restoring the insured to the financial position they were in before the loss. Indemnity insurance doesn't aim to profit the insured, but to ensure that they are not left worse off after a loss.

Insurance Act 2015

The Insurance Act 2015 provides the principles governing insurance contracts. The Act introduces a new regime of proportionate remedies for non-disclosure and misrepresentation, moving away from the previous "all or nothing" approach that often led to insureds being unfairly penalised for honest mistakes.

PRA

The Prudential Regulatory Authority safeguards the financial stability and the soundness of financial institutions in the UK. Prior to the establishment of the PRA, the Financial Services Authority (FSA) held the combined responsibilities of both prudential and conduct regulation.

Premium

The amount charged by an insurer as the price of granting cover, including or not including brokerage and additional fees.

Pro Rata

Pro rata means at a proportionate rate, for example a pro rata premium is calculated as a proportion of the annual premium.

Proposal Form

A insurance proposal form is a detailed questionnaire used by insurance companies to gather necessary information from individuals or businesses applying for insurance cover.

Product Liability Insurance

Product liability insurance provides protection against claims arising from injury or property damage as a result of a fault with a product you have provided. Offering cover for legal costs incurred in defending allegations and damages arising from any judgment, award or settlement.

Professional Indemnity Insurance

Professional indemnity insurance provides protection against the failure to exercise reasonable skill and care in the provision of professional or advisory services. Offering cover for legal costs incurred in defending allegations and damages arising from any judgment, award or settlement.

Property Damage Insurance

Property damage insurance provides protection for your companys buildings and/or contents (including options for stock and computer equipment) against loss or damage from a range of insured perils.

Property Owners Insurance

Property owners insurance is a package product designed for companies that hold a portfolio of properties owned but not currently occupied by the owner. Cover can typically include: buildings insurance, landlords contents, loss of rent, public liability, employers liability and legal expenses.

Public Liability Insurance

Public liability insurance provides protection against claims arising from injury or property damage of persons other than your employees in the course of your business. Offering cover for legal costs incurred in defending allegations and compensatory damages arising from any judgment, award or settlement.

Remuneration

Remuneration is the payment or compensation received for services undertaken.

Repudiate

Repudiate is to reject the validity (i.e. a claim).

Retroactive Date

Retroactive date is typically be determined when you first purchase professional indemnity insurance. You will typically be required to maintain continous cover since you first purchased professional indemnity insurance to carry over your current retroactive date. The retroactive date is  used by insurers to exclude cover for past liabilities.

Risk Acceptance

Risk acceptance is the decision to accept both the probability and the likely consequences of a particular risk.

Risk Avoidance

Risk advoidance is the decision and the activity to ensure the organisation is not likely, at any time, to face the risk incident.

Risk Evaluation

Risk evaluation measures the probability and the consequences of a risk against pre-established criteria.

Risk Identification

Risk identification is the systematic research to understand what risks may be inherent in an organisation's decisions, assets and activities.

Risk Management

Risk management is the process that identifies and analyses risks, makes decisions about acceptability and takes action to bring the probability or consequences to within acceptable limits.

Run-off Cover

Run-off cover, also known as an Extended Reporting Period, allows claims to be reported to the insurer after the policy has expired, to ensure you are protected from services already provided. Cover should be considered for a period a claim can potentially be brought (statute of limitations for civil wrongdoing in tort is six years).

Schedule

The schedule is the part of a insurance policy containing information specific to that particular risk.

SME

SMEs are defined as small to medium sized enterprises, typically defined as any business with fewer than 250 employees.

Social Engineering Fraud

Social engineering fraud is the act of influencing a person to divulge sensitive information or to perform a task, which results in a voluntary payment to the fraudster. The scams will typically leverage the qualities of trust, helpfulness or fear to manipulate their targets.

Soft Market

When the availability of insurance is relatively high compared with demand. Competition amongst insurers leads to downward pressure on premiums and increase in the availability of cover.

Specified All Risks Insurance

Specified all risks insurance provides protection for specific company items against defined perils (i.e. accidental damage and theft). These items will be specified on the schedule of the policy and will be covered up to a sum insured value.

Statement of Fact

A statement of fact is a document that outlines information upon which the insurance contract is based. It serves as a critical component of the underwriting process, serving as a record of the risk information that the insurer uses to assess the policy terms, coverage, and premium. 

Stock in Transit Insurance

Stock in transit insurance provides protection for damage to property (i.e. merchandise, goods and tools) in transit by vehicles owned by or operated by you, or the custody or control of a third-party carrier. The insurance will cover the insured value of such property.

Subrogation

The right of an insurer which has paid a claim under a policy to avail themselves of the rights of the insured to recover the loss which was the subject of the claim paid.

Subsidiary

Subsidiary typically means a company in which the applicant directly and/or indirectly: (a) holds a majority of the voting rights; (b) has the right to appoint or remove a majority of the board of directors; or (c) controls alone, pursuant to a written agreement with shareholders, a majority of the voting rights.

Sum Insured

Sum insured is the maximum amount payable in the event of a claim under contract of insurance.

Terrorism Insurance

Terrorism insurance provides protection against loss from damage to property and potentially consequential loss resulting from acts of persons carying out activities directed towards the overthrowing or influencing, by force or violence, of any government.

Trustee Indemnity Insurance

Trustee indemnity insurance offers protection to individuals against civil, criminal and regulatory proceedings, which may arise while acting in their capacity on behalf of the organisation. Offering cover for legal costs incurred in defending allegations and damages arising from any judgment, award or settlement.

Underinsurance

Underinsurance is when the sum insured or limit of liability is not sufficnet to cover the maximum possible loss or damage.

Underwriter

Underwriter is a person or entity who accepts business on behalf of an insurer.

Underwriting

Underwriting is the process that insurers go through when assessing the risk of providing insurance.

Void

Not legally binding, cannot be legally enforced.

Wageroll

Projected wageroll is deemed to be the total gross remuneration paid to all employees and exclusively employed contractors over the next 12 month period.