Glossary of Insurance terms
If your term or query is not described below, please contact us.
NOTE: The list of definitions below is meant for information purposes only and is not exhaustive. If you have a specific query about your policy you should contact us for further clarification.
ADDRESS
Your principal address for correspondence purposes.
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.
AVERAGE CONDITION
If you were to under-estimate the value of your insured property when arranging insurance this would result in under-insurance. The average condition clause could then be applied and would mean that the insurer would only be liable to pay the same proportion as the under-insurance represents. For example, if you valued your contents at £100,000 and during a claim the total value of contents was assessed as being worth £150,000 you would be underinsured by 33%. This means that if the average condition was applied the insurer would only be liable to pay up to 66% of any claim.
BUSINESS
The description of your Business. You need to check that this is accurate and complete.
CERTIFICATE OF INSURANCE
A document prepared by or signed by an insurer to provide evidence of insurance. The law requires insurers to provide Motor and Employers’ Liability certificates.
CLAIMS MADE
Professional indemnity insurance is a “Claim Made” liability insurance policy. It only provides cover if:
- A claim is made against you, by some other person, during the period when the policy is in force; and
- The claim arises out of circumstances committed, attempted or alleged to have been committed or attempted after the Retroactive Date stipulated in the schedule
CLAIMS OCCURRING
If a claim arises out of an occurrence during the period when a policy is in force, the insurance company is responsible for its payment, up to the limits of the policy, regardless of when a third party notifies the claim. There are time limits according to English law. For example, in English Law this usually allows claimants with personal injuries up to three years from the date of the incident to issue a claim in court. The time starts for the claimant from the date they are aware of the injury or damage. This leads to the problem of “long tail” claims such as Repetitive Strain Injury (RSI), when the time between RSI starting to affect the claimant and the prior period during which the RSI was developing, can take many years to appear.
CONDITIONS
Specific cover enhancements or exclusions from the standard Policy Wording.
CONDITION PRECEDENT TO LIABILITY
Failure to comply with these conditions, which are usually particular to a specific matter, may give the insurer more rights to avoid a claim, even if the claim does not directly relate to the condition that you have breached. Please advise your broker if you are unable to comply with conditions precedent to liability.
CYBER EXTORTION
Cyber extortion is the act of cyber-criminals demanding payment by using or threatening some form of malicious activity against a victim, such as data compromise or denial of service attack.
DATA BREACH
A data breach is a security incident in which sensitive, confidential or otherwise protected data is accessed and/or disclosed in an unauthorised fashion. Data breaches may involve personal health information (PHI), personally identifiable information (PII), trade secrets or intellectual property.
DUTY OF DISCLOSURE
Your quotation has been provided based upon the proposal information you have supplied to us, and which is detailed in the “INFORMATION” section of your quotation. To comply with your legal duty to disclose all material facts, whether favourable or not, which would influence the judgement of a prudent insurer in determining whether or not he will accept your proposal, and if so, at what terms, you need to satisfy yourself as to the accuracy and completeness of the information you have provided. This obligation to disclose material information will continue until the date that cover is bound by the insurer. You also have a continuing obligation to disclose material changes during the course of the insurance, after cover is bound.
If you fail to disclose material information, insurers have the right to avoid the contract of insurance from its commencement, which could then lead to a denial of cover for any claims notified during the period of the contract.
EXCESS
The amount of each claim that you have to bear financially. If the excess is “costs exclusive”, the excess will not apply to insurers’ costs and expenses.
EXCESS OF LOSS
A form of insurance where the insurer becomes involved where a claim exceeds the limit on an underlying policy. For example, a primary Public Liability insurance purchased for up to £1m on any one occurrence basis, is supplemented by an excess of loss/layer liability insurance through another insurer for say £4m in excess of £1m to result in two insurance policies providing a total insurance limit of £5m.
EXCLUSIONS
A term in an insurance policy that removes cover for specified types of loss. An exclusion may apply throughout a policy (General Exclusion) or it may be limited to specific sections (e.g. Property Damage) or to specific individual exclusions.
INDEMNITY
A principle whereby the insurer seeks to place you in the same position after a loss as you were immediately before the loss (as far as possible).
INDEMNITY PERIOD
This is the length of time that benefits are payable under an under an insurance policy e.g. Business Interruption insurance
INFORMATION
The information upon which our Quotation is based. Please also see DUTY OF DISCLOSURE.
INSURER(S)
The financial security behind the quotations. Please advise us if you are unhappy with any of the security proposed.
INSURED
The names of all Insured Parties to be specifically indemnified under the insurance. You need to check that the list is accurate and complete.
INSURED PERIL
Insurance responds to a number of triggers or ‘perils’ that result in the need to make a claim. Examples of perils include flood, fire, storm, theft and accidental damage.
JURISDICTION
The areas of the world where, if claims are brought against you, cover would apply. Again, you need to check that this satisfies your needs.
LAPSE
The non-renewal of a policy for any reason.
LOSS ADJUSTER
A Loss Adjuster is an independent qualified person appointed by insurers for their experience and expertise to support an insurer to investigate and assess larger or more complex claims.
LIMIT OF INDEMNITY
The maximum payable in the event of each claim (or in all during the policy period if the quotation is on an “aggregate” basis). The Limit may include insurers’ costs and expenses, or they may be payable in addition to the Limit.
MATERIAL DAMAGE WARRANTY
A warranty in a business interruption policy stipulating that for the interruption insurance to be triggered there must be a policy in force in respect of the damaged property and a claim paid or admitted under that insurance for that damage.
MATERIAL FACT OR CIRCUMSTANCE
This is something that would influence the judgement of an insurer in deciding whether to insure the risk and will include matters such as arrangements to satisfy creditors (IVA) County Court Judgments (CCJ’s), criminal convictions, involvement as a director or partner of insolvent companies etc. You should check with your broker if you have any doubt about the relevance of a matter to be disclosed.
NEGLIGENCE
Negligence is the breach of duty owed to other parties to exercise appropriate care that you expect to be exercised in particular circumstances, which results in harm or financial loss to that party.
OCCURRENCE WORDINGS
An occurrence wording insures losses within the year that they occur, as opposed to when a third party notified the claim to insurers. This type of wording normally applies to Employers’ Liability and Public Liability. This provides protection against long tail losses (e.g. disease claims following repetitive strain injuries developed over a number of years) without needing to be concerned with run-off cover as is the case under 'claims made' liability wordings.
PERIOD
The period of the insurance contract, if the quotation is accepted by you.
PERSONAL DATA
Personal data is information that relates to an identified or identifiable individual. For example this could be: full name, address and an email address such as name.surname@company.com.
POLICY WORDING
The Insurer or Scheme policy wording that would be issued to you on acceptance of the insurance.
PROXIMATE CAUSE
Insurers use proximate cause to assess all claims. It is determined by the event that originally caused a loss.
REINSTATEMENT OF LIMIT
This occurs where claims have eroded the Limit of cover provided. Some policies contain automatic reinstatement provisions whilst others require payment of an additional premium.
REINSTATEMENT VALUE
A basis of settlement on a property damage policy. It is important that you set the sum insured to reflect the cost of replacing the lost or destroyed item as new or you are at risk of under-insurance as described above.
RETROACTIVE DATE
If applicable, the date prior to which any work that you have carried out will not be covered against any future claims. This date is sometimes negotiable with insurers. If the word “None” is used, this means no retroactive restriction applies and all work undertaken in the past is covered.
RUN OFF COVER
When a 'claims made' based policy is terminated due to a legal change in status (e.g. merger, acquisition or liquidation) it is possible to continue to protect past liabilities through a run-off policy. The cost of the run-off policy will gradually reduce as the years go by as the likelihood of claims for past activities diminishes.
SITUATION
The areas of the world where your work will be covered. You need to check that this is adequate.
SUBJECTIVITIES
Conditions that must be satisfied before insurers can confirm that cover is fully operational. Please note that, even if insurers agree to bind cover on a provisional basis, the subjectivities will have to be satisfied before indemnity can be confirmed under the contract of insurance.
SUBROGATION
A legal right held by insurers to pursue a third party that caused an insurance loss to their policyholder.
SUM INSURED
The values shown in the policy, which are your calculation of the total value at risk. The insurer calculates the premium based on these values.
TERRITORIAL LIMITS
Some liability/casualty etc. policies will state that the policy cover is restricted to the insured’s country of domicile; others extend to worldwide and others may give worldwide excluding USA/Canada. It is important to ensure that, if a third party claim can be brought against an insured in a foreign court, that the territorial limits expressed in the policy are wide enough to protect the insured. See also Jurisdiction.
THIRD PARTY
A person or organisation that is not part of your organisation and claims against you.
THIRD PARTY LIABILITY
Your legal liability to persons who are not parties to the contract of insurance and are not employees of the insured. The exception is where employees may be in a vehicle but are not the driver.
TYPE
The class of insurance for which the quotation is being provided.
WARRANTY
A very strict condition in a policy imposed by an insurer to say that something must or must not be done. A breach entitles the insurer to deny liability for all claims affected by the warranty.