Insurance terms in everyday use
Home Insurance Glossary of Terms– there are many terms in every day use with regard to the insurance building and contents. Whether you wish to insure your own property or obtain cover for a holiday home, the terms tend to have the same meaning.
All Risks – This term is used to describe a wider form of cover usually attached to valuables or personal possessions. It can be used to cover items such as watches & jewellery against accidental breakage or loss away from the home- Be careful though, it does not actually mean that every eventuality will be covered.
Average – In the event of under insurance and if your policy contains this clause, your insurers may reduce the amount of your settlement following a claim in proportion with the amount of the loss.
Betterment – A term that is not so widely used today as many policies are written on a new for old or reinstatement basis. In the past polices that were written on the old style indemnity basis (The principle of indemnity is to leave you in the same position after a loss as you were in before it) may have involved an amount of betterment following a claim, In these cases, you were often requested to make a contribution towards costs.
Ex Gratia Payment – Sometimes, when an event is not covered by a policy or if it is not clear if it is covered or not an insurer may agree to pay a claim without an admission of public liability.
Excess – This is the portion of the loss that the policyholder has to pay. It is always the first portion of the loss so a £500.00 claim under a policy with a £50.00 excess will result in £450.00 being paid. Excess can be either compulsory or voluntary, in return for a discount. Under a building insurance policy, £50.00 is a typical excess.
Indemnity – As stated above, the principle of indemnity is to leave a person in the same position after a loss as they were in before. If an insurance company grants indemnity, it means they are going to pay a claim.
Insurers Interest – The contract rights act states that for anyone to receive the benefit of a policy, they must have their interest noted on the schedule of cover. Lenders require their interest to be noted on a policy so as they can be notified in the event of a claim.
Index Linking – This is a method under building insurance that helps to guard against under insurance. Each year, the insurers will increase the policy sum insured in line with an index that is usually linked to the rate of inflation. Whilst index linking helps to keep your sums insured up to date, no amount of index linking will help if the sums insured are inadequate to start with.
Loss Adjuster – Usually independent or they can be attached to insurance companies, they are appointed after a claim to help quantify the amount of the loss. You can of course appoint your own loss adjuster who can help formulate a claim on your behalf.
Material Fact – Information that you must disclose to your insurance company or broker that is likely to effect their assessment of your insurance proposal. An example would be telling them that your building is located on a flood plain or had previous subsidence problems. Failure to notify a material fact may result in a claim not being paid.
Mortgagee – This is the name given to a lender that provides finance to buy property, it can be a bank or building society or other organization
Mortgagor – This is the name given to a person that borrows money from an organization to the finance the purchase of property.
New for Old – A cover that is very popular under contents insurance, in the event of a claim, no deduction is made for wear and tear. To receive the benefit of this cover, you have to have insured all your contents for their replacement as new cost.
No Claims Bonus – As with car insurance, many building & contents polices now provide a discount each year if no claims have been made in the previous twelve months
Non Standard Construction – A building is said to be of standard construction if it is built of brick, stone or concrete and roofed with slate or tiles. Anything out side of this is often classed as non standard construction.
Occupiers Liability – Covers Legal liability to pay claims for which you are liable arising out of the occupation of a building.
Owners Liability – Also called Property Owners Liability – Covers legal liability to pay compensation for accidents arising out of ownership of a building.
Personal Liability – A cover that is normally provided as part of a Contents policy, it will provide cover for accidents happening in the course of ones private life.
Proposal Form – This document forms the basis of an insurance contract. Often these are no longer used and are gradually being replaced by statements of fact
Reinstatement – this term is applied to the insurance of buildings to mean that no deduction will be made for wear and tear; to obtain this cover you will have to insured the property for it’s full reinstatement or rebuilding cost.
Sum Insured – This is the maximum amount that the insurer will pay in respect of claims under a building and/or contents policy
Tenants Liability – A cover that is provided under a contents insurance to Tenants for damage to rented buildings
Under Insurance – This relates to instances where sums insured are not adequate to meet the full costs of reinstating the buildings or contents
Underwriting – The process by which insurers calculate insurance premiums, usually a set of questions are asked and at the end a premium or quotation is provided
Warranty – A stipulation placed under a policy wording that the policyholder must comply with. If a warranty is not complied with, a claim may not be paid.