The jargon used within the insurance industry can sometimes be difficult to understand. This insurance terminology can make it difficult to make informed decisions about the right insurance cover. In this guide, we will break down some of the most common insurance terms and explain them in a way that everyone can understand.
By understanding these terms, you will hopefully be able to make more informed choices about your insurance cover, feel more confident when communicating with your insurance company and find the insurance policy that is right for you.
Insurance Terms
Addendum
An addendum is an amendment or supplement to an insurance policy. It is used to make changes to the terms, conditions, or coverage of the policy. Addendums can be used to add new coverage, remove coverage, change the premiums, or make other changes to the policy. They are typically issued after the policy has been issued, and they must be signed by both the insured and the insurer in order to be valid.
All risk cover
All risk cover is insurance that covers a wide range of risks. Unlike other types of insurance, all risk insurance policies do not exclude any particular type of risk, providing comprehensive cover. All risk policies can be customised to meet the specific needs of the policy holder, and premiums are typically based on the amount of coverage required. While all risk policies provide broad coverage, they may not cover every possible contingency. As such, it is important to carefully review an all risk policy before purchase to ensure that it meets your needs.
Broker
A broker is an individual or firm that acts as an insurance intermediary between insurers and the insured. Brokers typically work with multiple insurance companies to help their clients find the best coverage at the most competitive prices. In addition to acting as a middleman, brokers can also provide advice and guidance to their clients.
Claim
A claim is a demand made by an insured person or beneficiary on an insurance company for payment of the benefits as provided in the insurance policy. It is also a request for compensation for a loss due to an insured peril. Claims can be made by policy holders for themselves or on behalf of others who have suffered a loss that is covered by the policy.
Cover
Cover refers to the insurance protection that an insurance policy provides. This protection can take many forms, but it typically includes financial compensation that the insurer pays in the event of a covered loss. Insurance coverages can be quite broad or very specific, depending on the type of policy.
Endorsement
In the insurance business, an endorsement is an amendment or rider added to an insurance policy that makes changes to the coverage or details of the policy, and can also either extend or restrict it.
Excess
In insurance terms, the excess refers to the amount of money that the policy holder is responsible for in the event of a claim. The excess is typically a fixed amount, and it is usually stated in the policy contract. In some cases, the policy holder may have the option to choose their excess or not to pay a voluntary excess, which will in turn affect the premium they pay.
Indemnity
In the insurance business, the term indemnity refers to a financial arrangement in which one party agrees to reimburse another party for losses incurred. In essence, it is a way of transferring risk from one party to another. The concept of indemnity is often used in the context of liability insurance, where an insurance company agrees to reimburse a policy holder for any damages that they may be held liable for. Indemnity can also apply to other types of insurance, such as health insurance and workers’ compensation. In these cases, the insurance company agrees to reimburse the policy holder for certain expenses related to injury or illness.
Insurance Policy
An insurance policy is a contract between an insurance company and the policy holder in which the insurance company agrees to provide coverage for certain losses or events in exchange for a premium from the policy holder. The terms of the policy, including what is covered and how much the premium will be, are typically determined by the insurance company. In order for a policy to be valid, both parties must agree to its terms and conditions.
Liability
Liability refers to the legal responsibility of an individual or organisation to pay damages to another party. This can include compensation for physical injury, property damage, or financial loss. Legal liability insurance is designed to protect the policy holder from the financial burden of paying these damages and associated legal costs. Legal liability coverage can be purchased as part of a larger insurance policy or it can also be purchased as stand-alone coverage.
Loss
In the insurance industry, the term loss refers to an event that results in financial damage or loss. This can include events such as natural disasters, accidents, fires, or theft.
Negligence
In insurance terms, negligence is defined as the failure to take reasonable care to prevent foreseeable harm. This can include anything from failure to properly maintain equipment to failing to follow safety procedures.
Non-disclosure
A non-disclosure is an agreement between two parties in which information is exchanged but not to be shared with other people or used for any other purpose outside of the agreement. It’s typically used in business deals or insurance contracts as a way to protect intellectual property or other sensitive information. By signing an NDA, the policy holder agrees not to discuss the details of their policy with anyone outside of the insurance company. In exchange, the insurance company agrees to keep the policy holder’s information confidential.
Policy holder
The policy holder is the person or entity who owns an insurance policy and who pays insurance premiums to the insurance company in exchange for coverage. In most cases, the policy holder is also the insured, meaning that they are the one who will be covered by the policy in the event of a loss. However, there are some insurance policies where the insured and policy holder are different. For example, a business owner may purchase an employer’s liability insurance policy to protect their employees, but the employees would be the ones who are actually covered by the policy.
Premium
A premium is the price of insurance coverage for a specified period. Insurance premiums are paid by policy holders to insurance companies in exchange for financial protection against covered losses. Insurance premiums can be paid on a monthly, quarterly, or annual basis. Typically, the higher the premium, the more insurance cover the policy holder will receive.
Quotation
A quotation in insurance terms is simply a price that has been offered for an insurance policy. It is usually given in writing, and will outline the details of the policy as well as the premium that must be paid. Quotations are typically valid for a set period of time, after which they may be revised or withdrawn. Insurance companies will often provide quotations upon request, and comparisons between different providers can help to ensure that you get the best deal on your policy. When you have decided upon a suitable quotation, you can then proceed to purchase the policy.
Rate
The term rate is often used in insurance, but it can be confusing to consumers who are not familiar with the industry. In general, a rate is the price charged for a unit of insurance coverage, such as a premium. Rates can be expressed as a monetary amount, such as £100 per year, or as a percentage, such as 10%. Insurance companies use rates to determine the cost of insurance cover for their customers. Rates are based on factors that affect the risk of loss, such as the type of coverage, the amount of coverage, and the location where the coverage is needed. The goal of insurance companies is to charge rates that are high enough to cover their costs, but not so high that they deter potential customers.
Reinstatement
Reinstatement refers to the rebuild value of a property, that is how much it would cost to restore the insured property to the same state it was in prior to the loss.
Risk
Insurance risk is a term that insurance companies use to describe the likelihood that an insured event will occur. In other words, it is a measure of the probability that a policy holder will make a claim under their policy. Insurance companies use risk to determine premiums, as well as to decide which insurance policies to offer and which to decline.
Statement of fact
In insurance terminology, a statement of fact is a written or oral declaration by an insured individual that is used to provide information about themselves or their property to an insurance company. This information is used by the insurance company to determine the individual’s risk profile and to calculate premiums. Statements of fact must be accurate and complete, as any misrepresentation or omission of material information could result in the policy being declared void or affect the insurance company’s willingness to pay out.
Third party
When you hear the term third party in relation to insurance, it is referring to the person or entity who is not directly involved in the insurance contract between the insured and insurer. In other words, they are not financially responsible for any compensation that may be due under the terms of the policy. The most common example of a third party in relation to insurance is when someone files a claim against another person’s policy. If the insurance company decides that the claim is covered under the policy, then the insurer pays out the compensation to the third party. In this instance, the third party would be the person who filed the claim (the claimant).
Underwriter
An underwriter is a person who assesses the risk of insuring a client and who will calculate insurance premiums for insurance policies. Underwriters may work for insurance companies or they may be independent agents. Underwriters assess insurance risk to determine the likelihood that the client will file a claim and how much that claim is likely to cost. Based on their assessment, they will set a premium that they believe will cover the cost of any claims that may be filed.
Warranty
A warranty is a type of insurance that reimburses the policy holder for covered repairs or replacement costs. Warranties are often included with new products, but an example within the construction industry is a New Build Warranty, which protects the homeowner against any defects that might arise in the 8-12 years following completion of the build. Most warranties have a limited time frame and insurance cover limits.
Hopefully this guide has provided some clarity on common insurance jargon. Of course, if you have any further questions, please don’t hesitate to contact us. We are an insurance company with many years specialising in the construction insurance business and fully understand the insurance needs of the property developers and contractors we deal with.