Many industries have their own language and terminology that is specific to their sector – and the insurance industry is no exception. Below we’ve provided a simple explanation of some commonly used phrases – we hope you find them useful. For a full glossary of terms, visit the BIBA website at www.biba.org.uk/JargonBuster.aspx

ADDENDUM: A document setting out agreed alterations to an insurance contract.

ADJUSTER: A person who investigates and assesses claims on behalf of insurers.

ALL RISKS: Term used to describe insurance against loss of or damage to property arising from any fortuitous cause except those that are specifically excluded.

ASSURANCE: A term interchangeable with insurance but generally used in connection with life cover as assurance implies the certainty of an event and insurance the probability.

CLAIMS: Injury or loss to the insured arising so as to cause liability to the insurer under a policy it has issued.

COMMON LAW: The common law consists of the ancient customs and usages of the land, which have been recognised by the courts and given the force of law.

COVER NOTE: A document issued to the insured confirming details of the insurance cover placed. Some cover notes are a legal requirement, e.g. motor.

DEFERRED PREMIUM: The part of a premium which, following agreement with underwriters, is payable by installments, usually quarterly or half yearly.

EMPLOYERS\’ LIABILITY INSURANCE: Insurance by employers in respect of their liability to employees for injury or disease arising out of and in the course of their employment.

ENDORSEMENT: Documentary evidence of a change in the wording of or cover offered by an existing policy or qualification of wording if the policy is written on restricted terms (see also Addendum).

EXCESS: The first portion of a loss or claim which is borne by the insured. An excess can be either voluntary to obtain premium benefit or imposed for underwriting reasons.

EX-GRATIA PAYMENT: A payment made by an insurer to a policyholder where there is no legal liability to pay.

GROSS PREMIUM: A term normally applied to gross written premiums before deduction of brokerage and discounts.

HAZARD: A physical or moral feature that introduces or increases the risk.

INDEMNITY: A principle whereby the insurer seeks to place the insured in the same position after a loss as he occupied immediately before the loss (as far as possible).

INSURANCE BROKER/INTERMEDIARY: An insurance intermediary who advises his clients and arranges their insurances. Although he acts as the agent of his client, he is normally remunerated by a commission (brokerage) from the insurer. An insurance broker is a full-time specialist with professional skills in handling insurance business.

FINANCIAL OMBUDSMAN SERVICE: A bureau established by major insurance companies to oversee the interests of policyholders whose complaints remain unsolved through normal company channels of communication.

LAPSE: The non-renewal of a policy for any reason.

LOSS: Another term for a claim.

MATERIAL FACT: Any fact which would influence the insurer in accepting or declining a risk or in fixing the premium or terms and conditions of the contract is material and must be disclosed by a proposer, or by the insurer to the insured.

NEGLIGENCE: Perhaps the most common form of tort. In Blyth v Birmingham Waterworks Co (1856) it was defined as \’the omission to do something which a reasonable man guided by those considerations which ordinarily regulate the conduct of human affairs would do, or doing something which a prudent and reasonable man would not do\’. Gives rise to civil liability.

NEW FOR OLD: Where insurers agree to pay the cost of property lost or destroyed without deduction for depreciation .

NO CLAIMS BONUS (OR DISCOUNT): A rebate of premium given to an insured person by an insurer where no claims have been made by that insured. Very common in motor insurance.

NON-DISCLOSURE: The failure by the insured or his broker to disclose a material fact or circumstance to the underwriter before acceptance of the risk.

POLICY: A document detailing the terms and conditions applicable to an insurance contract and constituting legal evidence of the agreement to insure.

PREMIUM: The consideration paid for a contract of insurance.

PRODUCTS LIABILITY INSURANCE: These policies cover the insured\’s legal liability for bodily injury to persons, or loss of or damage to property caused by defects in goods sold, supplied, erected, installed, repaired, treated, manufactured, and/or tested by the insured.

PROFESSIONAL INDEMNITY INSURANCE: This policy protects a professional man against his legal liability towards third parties for injury, loss, or damage, arising from his own professional negligence or that of his employees.

QUOTE: A statement by an insurer of the premium he will require for a particular insurance.

REINSTATEMENT: Making good. Where insured property is damaged, it is usual for settlement to be effected through the payment of a sum of money, but a policy may give either the insured or insurer the option to restore or rebuild instead.

RENEWAL: The process of continuing insurance from one period of risk to a succeeding one.

RISK MANAGEMENT: The identification, measurement and economic control of risks that threaten the assets and earnings of a business or other enterprise.

SALVAGE: A recovery of all or part of the value of an insured item on which a claim has been paid. The insurer will normally dispose of the item and apply the proceeds to reduce the cost of the claim.

SCHEDULE: The part of a policy containing information peculiar to that particular risk. The greater part of a policy is likely to be identical for all risks within a class of business covered by the same insurer.

STATEMENT OF FACT: An alternative to a completed proposal form. A statement provided by the insurer clarifying the basis on which insurance is accepted and what conditions apply.

SUM INSURED: The maximum amount payable in the event of a claim under contract of insurance.

UNDERWRITER: A person who accepts business on behalf of an insurer.

WARRANTY: A very strict condition in a policy imposed by an insurer. A breach entitles the insurer to deny liability.

WEAR AND TEAR: This is the amount deducted from claims payments to allow for any depreciation in the property insured which is caused by its usage.