Introduction - when you apply for your Home Insurance you may encounter some of the following terms. If you are unsure of any term relating to your Home Insurance policy it is better to ask your insurer or broker for help.

• All Risks- A wider form of cover than that provided by the standard Contents Section, items can be insured on a specified or unspecified basis and will include accidental loss or damage insurance away from your home.

• Average Clause - Insurers insert this clause on your policy as a means of dealing with under insurance. It has the effect of reducing a claim in proportion to the amount of underinsurance.

• Act of God – An act of god is an event that is not the fault of any individual. such as a Storm or a Tempest or Lightning.  Acts of God can be insurable and you should refer to your policy document to see if a particular peril is covered or not.
   

• Additional Premium - A extra premium payable by the insured as a result of  a change to an existing policy.  Aadditional premiums are usually charged if the insurer calculates that the risk has increased. Frequently disclosing convictions to a motor insurer can result in extra premium being required.

• All Risks Insurance - This usually refers to an extension under a Home Contents Insurance policy and provides wider cover for such things as jewellery & Cameras ( Items taken out of the Home).  The terms is also used in other policies to indicate cover that is wider than the normal. Whilst the term All Risks would indicate that everything is covered, this is not the case and a list of exclusions should also be studied.

• Average Clause Insurers use Average clauses to deal with incidents of under insurance. If you have a claim and the insurers calculates that you are underinsured, your claim may be reduced in direct proportion to the amount of under insurance.  Example- If you insure your Building for £100,000 but in reality you should have insured it for £200,000 then a valid claim for £5000 will be reduced to £2500. Most policies will contain an average clause thus it is vital to make sure that your sums insured are accurate.

• Buildings Insurance Policy-This terms usually relates to insurance for a domestic dwelling house but the term can equally apply to insurances of Commercial premises etc. Most domestic policies cover a range of perils to satisfy lenders conditions and can be extended to suit individual requirements.

• Claim - If you have insurance policy and are unlucky enough to suffer a loss, you will be entitled to make a claim for your financial loss from your insurers, providing that the policy wording covers the cause.

• Cancellation Period - The Financial Services Authority require insurers to give you a statutory cooling off period in which you can cancel your policy. It is usually 14 days and most insurers will make a full refund of any insurance premiums collected. After the 14 days period, you are still free to cancel you policy and any rebate will be calculated in accordance with the insurers standard scale, which is usually published in your policy document.

• Cancellation – This is the process whereby units are cancelled to pay for certain expenses of unit-linked funds. The term also applies to any other type of insurance contract where the contract is cancelled in its entirety and ceases to have any effect. If the policy is cancelled and there have been no claims during the current period of insurance, it is usually to allow some form of return of premium.

• Claim – An insured event under a policy may lead to a claim. The policyholder will contact his or her insurance company , inform them of the incident that has occurred and seek to receive compensation in line with the policy terms and conditions.

• Claim Frequency - The number of claims made per policy year. Insurers pay special attention to claims frequency and if they believe you are claiming too often, they may refuse to insure you. 

• Contents Policy – This term usually relates to items is a private dwelling house although of course Contents Insurance is available for any type of business.

• Commission - This is the amount of remuneration paid by the insurer to a broker or intermediary for placing business with them.

• Contract Of Insurance - This is agreement between an insurer and your self, in return for you paying a premium; the insurer will pay you compensation or a sum of money on the happening of an insured event.

• Days of Grace - These are additional days of cover provided after your policy has ended. The usual amount is 14 days.

• Direct Insurer - an insurance company or underwriter that will sell you insurance directly without going through a “middle man” such as a broker or Intermediary.

• Endorsement - a policy endorsement alters the scope of your policy wording. It can have two effects, it can extend your cover or it can restrict your cover. It is very important to read all of your policy endorsements so as to fully understand your covers.

• Excess  this is the amount of money that your will have to contribute towards a claim. Some excesses are compulsory such as subsidence excess; some are voluntary where you can elect to receive a discount in return for paying the first portion of any loss.

• Extended Accidental Damage - Most policies will include a certain amount of Accidental Damage cover free of charge. Under Contents Insurance Free Accidental Damage Insurance normally includes TV Videos and Sound reproducing equipment and fixed glass in furniture. Under Buildings Insurance Free Accidental Damage Insurance normally extends to breakage of baths and lavatory pans, bidets etc and fixed glass in windows and doors. Extended Accidental Damage will extend the cover to include all other items.

• Fee - Brokers & Intermediaries may place fees on your policy for arranging things for you, any fees charged should be mentioned in your documents.

• General Insurance - This is a term that relates to non life insurance contracts such as Home Insurance or Office Insurance. The policy period on offer is 12 months and renewal is usually offered at the end of this period.

• Home Service Business  This is a term which relates to insurance transacted by insurers whose practice it is to call at the home of the policyholder.

• Household Insurance Business -  This terms relates to the insuring of domestic dwelling houses and  policies can be extended to included contents and all risks covers. Most policies require that the home is not used for any business purposes although  some insurer will now include business use for certain occupations

• Indemnity - A very important Insurance principal, the insurer in granting indemnity to a client will seek to place them in the same financial position after the loss as they were in before.

• Mortgage Indemnity Insurance -   This type of policy although paid for by the policyholder actually covers the lender in the Event that they have to sell a property and the amount they realise on the sale is less than the value of the original, loan.

• Mortgage Payment Protection Policy - A type of Creditor insurance that covers the policyholder against the inability to make repayments due to accident, sickness and/or unemployment. A variety of different types of cover are available

• No Claims Bonus - In return for not making claims under your policy, the insurer may reward you with a discount from your premiums. For each year of no claim up to usually a maximum of three or four, the insurers will provide an additional discount.

• Peril - Something that happens that could lead to a claim under an insurance policy such as a Fire or Flood etc.

• Premium - This is the money that you will have to pay to your insurer in return for your insurance policy, it is sometimes known as consideration.

• Proximate Cause - This is the active cause of a loss that sets in motion a train of events that brings about a result without the intervention of any force started and working actively from the new and Independent source.  In simple terms this means that the most recent cause of a loss is not the cause that the insurers study to see if an event is covered. They look to see the active or first cause, check that the peril is covered by a policy, and then decide if a claim is valid.

• Quote or Quotation-  An offer by a broker or intermediary or Insurer for a particular insurance contract. The quotation should tell you the following information:-

• The price of the Insurance Contract

• Details of any fees or charges

• The time that the quotation is valid for

• Demand & Needs & Suitability statement

• The type of Insurance contract

• The Insurance company name and contact details

• Cancellation Rights

• How to Complain

• A Keyfacts Leaflet.

The Keyfacts leaflet to be supplied with Insurance quotations is designed to help you decide if a particular insurance contract is suitable for your needs.

• Renewal Notice - At the end of your insurance contract term the insurer will send you an invitation to renew your policy. The notice will quote the new contract price and period of insurance and advise you of any changes to the terms & conditions of your policy.

• Schedule - the schedule of Insurance outlines the sums insured under your policy, and tells you the policy sections you have covered and may make reference to any endorsements applicable to your policy contract.

• Subrogation - Legally this right of one person to stand in place of another and to avail himself of the rights and remedies of that other person. Usually it relates to the insurers being able to recover their losses.

• Wear and Tear - If you have an old fashioned Indemnity policy and you make a claim, the insurer will make deductions for wear and tear, depending on the age and condition of the item. Under Home Insurance policies where cover is on a New for Old Basis, wear and tear deductions are still made on most claims in respect of items of clothing.
   

Appointed Representative - A firm or an individual who acts as agent for a ‘principal’ (usually a larger broker or insurer) that is itself authorised by the FSA and that accepts responsibility for the representative’s activities. From 15th January 2005 anyone wishing to transact insurance business in the United Kingdom has to be authorised and regulated by The Financial Services Authority.

Assistance - The provision by an insurer or an appointed service company of immediate help to resolve an insured problem , Assistance covers tend to deal with emergency situations which may happen as a result of a motor accident or perhaps an injury or illness on holiday

Authorised Insurer - An insurance company that is authorised under the Insurance Companies Act 1982 to carry on one or more classes of insurance business in the UK, and supervised by the Financial Services Authority. If you are wooried about dealing with a particular insurance company, you may check their details on the Financial Services Authority Web Site

Betterment - The principle by which an insured person has to make a contribution to his or her own claim because there property was in a better condition after the event than it was before. Sometimes an insurer will ask for a betterment contribution towards damaged tyres in a motor accident or if his property was in a poor state of repair prior to the accident or loss

Bid price – This is the price you will obtain when you sell units in an investment fund. Bid prices are usually obtained in most daily newspapers although of course they will be for the previous days trading

Bid / Offer - people buying units in an investment fund will pay the ‘offer’ price. Customers selling units get the lower ‘bid’ price.
Depending on the type and volatility of the fund, the “spread” can be sometimes quite large

Broker (Insurance) A broker will act as an Intermediary for his clients in placing insurance contracts with Insurers or other Brokers. He will usually receive a commission for his work and may also charge a fee. If any fees are charged these will have to be disclosed before the contract is concluded

Excess - The first portion of an insurance loss that the policyholder has to pay out of his own pocket. Frequently in the case of motor claims, excess payments can be recovered from the Third Party if it can be proved that they were at fault for an incident.

Excess of Loss Policy - This type of policy normally relates to Liability covers where a higher indemnity limit is required. If your Public Liability Insurance has a maximum indemnity limit of £5,000,000 and you require a higher limit but your existing insurer cannot provide it, it is usually possible to by the extra layer from another insurance provider..

First Loss Insurance - An Insurance policy where the sum insured is accepted to be less than the value of the property but the insurer undertakes to pay claims up to the sum insured, without the usual application of an average clause.

Index-linked - This term usually relates to Home Insurance products. The sums insured in respect of Buildings & Contents change automatically in line with an index.

Insurance Premium Tax (IPT) - A tax imposed on most non-life insurance premiums.  t the present moment the standard rate of insurance premium tax is 5%. An exception is Travel Insurance which attracts an Insurance tax of 17.5%

Insured - A person afforded covered by an insurance policy. .

Intermediary - A Person or organisation that advises and sells insurance products on behalf of an insurance company or Lloyds of London. The Intermediary will usually receive a commission from the insurer whose products are sold. Commissions vary from product to product and you may be entitled to know how much an Intermediary is making by selling a particular product.

Material Fact - A fact or piece of information that is likely to affect the insurers assessment of your insurance proposal. Insurance policies contain a declaration stating that you have made the insurers aware of all material facts. If all facts are not disclosed to any insurer you may find that you will not receive a payout in the event of a claim, An example of non disclosure of a material fact would be not telling your car insurer that you had points on your licence or that you had made previous claims under a policy.

Negligence - In simple terms is used to describe the fact that someone is responsible for an accident or loss. Sometimes courts have to decided whether a person is negligent or not taking in to account various factors.

New-For-Old -A term most common in Home Insurance policies where an old damaged item is replaced with a new one. To receive the benefit of this cover it is usual that you will have to value all of your possessions as if they were brand new and insure for this amount. This type of contract saves a lit of arguing at the time of a claim as to the actual value of an old item You can still purchase Indemnity policies which will make a deduction for wear & tear. If you have accepted a New for Old policy and you have not insured for the full replacement value of your contents, you may well find that in the event of a claim, your insurers will apply an average clause.

Non-Disclosure - Insurance contracts involve a principle of “utmost good faith” where both parties to the agreement tell both sides all the relevant information to make any informed decision. The policyholder agrees to tell the insurer all the required information and the insurer in turn will provide a policy document outlining all the terms or conditions of the contract. The term non disclosure usually relates to a situation after a claim whereby the policyholder or someone acting for him has withheld certain underwriting information which would have altered the insurers assessment of the original proposal.

Personal Lines Insurance -Relates to non life insurance contracts taken out by an Individual. Some examples are Motor Insurance, Home Insurance, Holiday Insurance.

Schedule - A schedule is attached to a policy document to make it personal or unique. It will contain the policyholders name, the contract dates and a list of the sections of the policy covered. It will also make reference to any extra or special endorsements that apply to the policy . The policy should always be read in conjunction with the schedule

Survey - Some insurance companies accept risks and say they are subject to a satisfactory survey. The insurer will usually send around a representative to view a risk ( usually free of charge) and then report back their findings. The insurer then has the option to continue with the insurance at the premium and terms quoted, accept the insurance but subject to certain conditions being met by the policyholder usually within a set time period ( up grading an alarm for example) or they may decline a risk in it’s entirety in which case they will have to refund a portion of the premium paid.

Subrogation - Insurance companies hold subrogation rights over a policyholder, once a policyholder has received indemnity under a contract, they can seek to recover their outlay following a claim. In certain cases, particularly with property Insurance contracts,, the insurer may agree to waive their subrogation right if pursuing them may prove not in the interest of the policyholder.

Subsidence - This is a major insurance peril covered under a Buildings Insurance policy. Subsidence claims are infrequent but often large when they do arise. They are more likely to occur to properties built on clay soil or in close proximity to trees. Buildings that have suffered subsidence may have to be underpinned and insurance may be more difficult to obtain.

Sum Insured - This amount is listed on the schedule of insurance and will be the maximum amount that an insurance company will pay out in the event of a claim . With regard to a life insurance contract, this is the amount that the insurance company will pay out in the event of a death. The amount for which property is insured, and the maximum amount that the insurance company will pay for any claim. In life insurance, the amount that is guaranteed to be paid and to which bonuses may be added.