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Jargon Explained
Insurance
Jargon & Terms Explained
Have you
come across a piece of insurance terminology you don't understand? Use
this facility to find the 'plain English' descriptions to many commonly
used and mis-understood terms.
A-Z MENU:
A B C D
E F G H
I J K L
M N O P
Q R S T
U V W X
Y Z
A
Accidental damage cover
Insurance against damage to goods rather than loss or theft. Home insurance
will replace possessions that are stolen or damaged by a fire or a flood,
but it doesn't protect against more minor and frankly, more common hazards
including errant pets, angry children or dangerous DIY-ers.
Act
of God
Less miraculous than it sounds. The clause Act of God covers natural events
that can't be foreseen or predicted. Insurance policies often exclude
acts of God or acts of war, although they will cover natural disasters
such as floods.
All risks
An insurance policy that covers all risks -- except those not listed under
its exclusions. An all risks section of a home policy, for example, covers
possessions such as cameras and watches when taken outside the house.
Customers can specify certain possessions, such as a camera, as all risk
on their policies.
Annual
policy
For travel, an insurance policy that applies all year round rather than
just for a single journey or holiday.
Any driver
Insurance that allows anyone to drive a vehicle, not just the owner. But,
any driver policies only cover drivers if they have permission to use
the car.
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B
Breakdown
cover
A policy that provides recovery and repair services for motorists. Traditionally,
breakdown services were provided by the RAC and the AA, but more recently
insurance companies have come in on the act, offering recovery alongside
car or bike insurance.
Broker
An independent intermediary who sells policies from several insurance
companies. Insurance brokers have to be registered by law to use the name.
Intermediaries using other names -- such as insurance consultant -- don't
need to register, leading to confusion. The Government plans to remove
the confusion by no longer policing insurance brokers.
Buildings
insurance
A policy that covers the fabric of a building against damage from hazards
such as flood, fire or subsidence. A policy will pay to rebuild or repair
the property. Buildings insurance is usually a requirement if you have
a mortgage.
Business
equipment
Anything used for a business is normally excluded from a standard home
insurance policy. This can cover valuable items such as faxes and computers.
If you work from home, it pays to check the exact conditions of a policy
to make sure you are covered. Computers that are not used for business
-- for example for games -- are usually covered as standard.
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C-D
Claim
The term used to describe the process of getting an insurance company
to pay out on the policy you bought from them.
Combined
policy
In home insurance, a policy that covers both buildings and contents. Insurers
usually offer a discount for combined policies making them look attractive.
But it can still be cheaper to buy separate policies on the open market.
Contents
insurance
Cover for household possessions. As a rule, contents cover insures anything
that can be moved while buildings cover insures anything that can't, such
as the windows or bathroom fittings. Contents cover doesn't always include
jewelery and cash as standard.
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E
Excess
The amount of a claim a policy holder agrees to pay if he or she suffers
a loss. An excess is often standard with some policies such as car insurance
or travel. A voluntary excess cuts the cost of most insurance premiums.
Exclusions
Events not covered by an insurance policy. Typical exclusions include
running a taxi service (for motor insurance), business equipment (for
home policies) and dangerous sports (for travel).
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F
Fully
comprehensive
For motor insurance, a policy that covers damage to the owner's vehicle
as well as to others'.
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G
Green
Card
A document issued to those motoring abroad as evidence that they have
the legal minimum insurance cover required. Not essential for European
travel, because minimum legal cover is automatically included in UK policies.
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H
High-risk
occupation
A job that makes a person more likely to have an accident. Travel and
motor insurance can exclude people with some jobs, or charge higher premiums.
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I-J
Indemnity
The principle by which insurance policyholders are put in the same financial
position after a loss as they were immediately before it.
Insurance
Premium Tax (IPT)
A Government tax charged as a percentage of insurance premiums.
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K
Knock
for knock
An agreement between insurance companies to cut down on paperwork and
legal action. Insurers pay for the costs of claims for their own customers,
rather than claiming the money from the other party.
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L
Legal
expenses insurance
Insurance that covers the costs of private legal action, for example disputes
with neighbours or trades people. Usually sold as an add-on to home insurance.
Lloyd's
of London
An insurance market organised into syndicates, which underwrites most
types of policy.
Loss
adjuster
An insurance specialist who deals with large or complicated insurance
claims. The loss adjuster works on behalf of the insurance company. His
or her job is to check that claims are all they seem.
Loss Assessor
A person who negotiates claims on behalf of policyholders. Not to be confused
with Loss Adjustor, whose aim is precisely the opposite -- ie to reduce
insurance company pay-outs.
Loss
Insurance people's term for being robbed, burgled, injured or in a car
accident. A loss gives rise to a claim.
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M
Material
fact
Information that would affect an insurance company's willingness to accept
a policy, or the premium it would charge. Failing to disclose a material
fact could invalidate a policy. Typical examples include previous driving
convictions or a history of subsidence in a house.
Mechanical
breakdown insurance
MBI policies are better-known as extended warranties for cars. They are
not really warranties at all, but insurance policies that pay out if certain
faults arise with a car.
Mutual
An insurance company that is owned by its policyholders.
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N-O
Named
driver
A driver specified on an insurance policy who is not the vehicle's owner.
Named additional drivers are a cheaper option than any driver insurance.
New-For-Old
Cover for property where anything lost or destroyed is replaced with a
brand new item, with no deduction for wear and tear. Also called "replacement
as new".
No
claims bonus
A discount that grows for every year without a claim. No claims bonuses
are most common with motor insurance, but they are also becoming available
on home insurance.
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P-Q
Personal
possessions cover
Insurance for personal items such as money, jewelery and luggage.
Pluvius
Insurance
Covers against losses arising as a result of bad weather, principally
rain. Also known as "event insurance". Typically taken out for
spectator events.
Policy
The document that details the contract between the insurer and the policyholder.
Policyholder
Person to whom the insurer issues the policy. Normally this is the person
benefits from an insurance policy.
Premium
The amount a customer has to pay in return for insurance cover.
Professional
Indemnity Insurance
Protects professionals, such as lawyers, against liability claims resulting
from negligent work.
Public
Liability Policy
Covers legal liability for injury or damage caused to others. Normally
part of motor insurance and some home insurance policies.
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R
Roadside
rescue
See breakdown cover.
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S
Settlement
When an insurer pays a claim.
Single
trip
Travel insurance that covers one holiday or business trip, for a specified
length of time.
Sum insured
The maximum an insurance company will pay for a claim. Some policies,
such as travel insurance, come with built-in sums insured. Others, such
as home insurance, leave it for the customer to choose the appropriate
level of cover, and work out the cost accordingly.
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T
Third
party
A cheap and basic form of motor insurance. Third party covers damage to
others' cars but not to your own. It's cheaper than comprehensive cover
but not as much as it was. If you can afford comprehensive insurance,
it is almost always a better option.
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U-V
Under-insurance
When a customer takes out too little insurance, paying smaller premiums
than they should. Insurance companies take a dim view on under-insurance,
and they will almost always scale down a claim as a result. So, if you
insure a car for £8,000 when it's worth £10,000, they will
only pay out £8,000 if it is written off. Even worse, if the car
sustains more minor damage, the insurer will only pay four fifths of a
claim.
Underwriter
Person employed by an insurance company who decides whether to accept
a risk and calculates the premium to be charged.
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W-Z
Warranty
Insurance
Provides cover against the cost of repairs to broken-down household appliances.
Write-Off
A damaged vehicle which is not repairable, or one which would cost more
to repair than the car was worth before the damage occurred. Also known
as a "total loss".
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