Glossary of Insurance Terms
Information on terms used in the car insurance industry
ABI: Acronym for the Association of British Insurers,
a regulatory body for the UK insurance industry.
Accidental Damage Cover: A policy that protects against damage to goods, not loss or theft. Not always included as part of motor cover, but sometimes applies to vehicle contents that are stolen or damaged.
Act of God: Accident or event which happens without human intervention, usually due to natural causes, i.e. storm or earthquake. Suggesting that an event was an "act of God" may be a defence in English law against a claim for liability since it could not have been foreseen or safeguarded against.
Actuary: Professional person trained in the technical aspects of insurance and related fields who specialises in the mathematics and the calculation of premiums and reserves.
Addendum: Any change or addition made to a contract.
Advance Payment: Payment made 'up front'.
Agent: Someone acting on behalf of another. Insurance company salesmen have been known as agents.
Any Driver: A policy that allows anyone to drive a vehicle with permission of the owner.
Approved Repairer: A team of insurer approved repairers who operate across the UK.
Arbitration: A method of arriving at an acceptable agreement between two disputing parties. An independent person or body, often a member of the Institute of Arbitrators, listens to the arguments of both parties and then makes a decision which is binding on all concerned.
Association of British Insurers: An association which represents over 450 insurance companies which account for over 95% of the business transacted by UK companies.
Breakdown Cover: A policy that provides recovery and repair services should your vehicle break down.
Broker: An agent who brings together two parties, i.e. the customer and the insurer, and enables them to enter into a contract to which he is not a principal.
Cancellation Clause: A provision in an insurance contract that permits the insurer or the insured to cancel a policy at any time before a specified expiration date.
Carport: A roof that covers a driveway or other parking area. It does not have a door in the manner of a garage and is therefore considered less secure.
Cash Surrender Value: An amount of money received if a policyholder surrenders an insurance policy. In the case of car policies this is usually zero, though some insurers refund some of the premium if a policy is cancelled early.
Claim: The term used to describe the process of getting an insurance company to pay out on your policy.
Claims Reserve: The amount of money set aside by an insurer to meet the cost of claims incurred but not yet settled.
Code of Practice: An agreement that certain professions sign up to in which they agree to act in a certain way in order to best protect the consumer.
Collision Damage Waiver: An extra insurance premium you may have the option to take. This removes your liability to pay any excess on a vehicle such as a hire car.
Commission: The percentage of the premium the insurer gives to an introducer should a policy be sold from the lead.
Comprehensive Cover: Covers all related risks of that product’s insurance policy. It is also the most expensive form of policy. It covers damage to other peoples' cars, your own car, any liability, as well as losses incurred by fire and theft.
Consumer Credit Act: Legislation to define the rules which relate to lending money and is designed to protect the consumer.
Contract: A legally enforceable agreement made between two parties.
Contractual Liability: If you sign a contract you are bound by the contract terms and conditions. If you fail to abide by the agreed conditions it may result in financial loss or criminal charges.
Cooling Off Period: A period during which a customer, who has entered into a contract, may cancel it without incurring a penalty.
Cover: Cover describes the specific risk a given policy will protect you against.
Cover note: A temporary certificate stating that an insurance policy is in force.
Default: If an agreed payment or a series of premiums payments are missed.
Deposit: An agreed amount paid when an application is made for an insurance policy.
Effective date: The date on which the insurance under a policy begins.
Excess: Applies to an insurance claim. It is the first part of any claim that must be paid for by the customer.
Exclusions: Items or events not covered by an insurance policy. Exclusions include running a taxi service (for motor insurance), overloading your car, or allowing drivers other than those specified in the policy to drive the vehicle.
Fault Claim: A fault claim is one where your insurance company is not able to recover all of the costs from another party.
Financial Adviser: There are two types of financial adviser; both recommend products and services that will help individuals plan their finances. An Independent Financial Adviser, or IFA, works on behalf of the client who can choose from any product or service. A Tied Agent works on behalf of a company and will only recommend their products.
Fully Comprehensive: See Comprehensive Cover.
Green Card: A document issued to those driving abroad as evidence that they have the legal minimum insurance cover required. Not usually essential for European travel as minimum legal cover is usually automatically included in UK policies. Spain does require a Green Card if you wish to drive in Spain.
High-Risk Occupation: A job that makes a person more likely to have an accident.
IFA: Independent Financial Advisor who works on behalf of the customer. An IFA is authorised to sell or advise on the policies offered by any insurance company, as well as other financial service providers. They sometimes still have access to special deals not on offer elsewhere.
Insurance: An agreement under which individuals, businesses, and other organisations, in exchange for payment of a sum of money (a premium), are guaranteed indemnity for losses resulting from certain events or conditions specified in a contract (policy).
Insurance Premium Tax (IPT): A government tax that is charged as a percentage of insurance premiums.
Insured: The person or organisation covered by a policy.
Insured Car: The insured car is as specified by its registration mark on your current certificate of motor insurance.
Insurer: The provider of the insurance contract and who is bound by the contract to pay for losses or benefits.
Intermediary: A person or organisation that offers advice and also arranges policies for clients.
Introducer: Individuals, companies or websites that provide information to borrowers about certain products or services and ‘introduce’ them to the lender.
Knock for Knock: An arrangement between companies to reduce administration and the costs of legal action.
Lapsed Policy: A policy which is terminated for non-payment of the premium.
Legal Expenses Insurance: Some policies include a provision to cover the costs of private legal action.
Lloyd's Insurance Market: London based insurance market comprised of syndicates who underwrite most types of policy.
Loading: The extent to which an individual is charged more than the 'standard' or 'average' rate for their insurance. This can be due to a bad claims history, age, occupation, and sometimes even gender.
Loss: Insurance people's term for being robbed, burgled, injured or in a car accident. A loss gives rise to a claim.
Main Driver: The person who uses the vehicle the most.
Market Value: The value of the vehicle that the ‘market’ is willing to pay based on the valuation of the car at a specific period.
Material Fact: Information that would affect a company accepting a policy, or the premium it would charge. Failure to disclose a material fact could invalidate a policy.
Mechanical Breakdown Insurance: MBI policies are usually known as extended warranties for cars. They are policies that pay out if certain faults occur with a car.
Motor Insurer’s Bureau (MIB): A body funded by motor insurance companies who deal with claims for injury compensation when the driver at fault is not insured or cannot be traced.
Motor Schedule: A document giving details of your policy, excesses, endorsements and premium that is specific to your insurance and should be read in conjunction with your insurer's policy wording.
Mutual: An company that is owned by its policyholders.
Named Driver: A driver who has been named on a policy but who does not own the vehicle.
No Claims Bonus: A no claims bonus (or NCB) is the discount that you have earned on a previous insurance policy.
Non Fault Claim: The company recovers all the costs from another party.
Optional Extras: Other products available in addition to your car insurance, i.e. breakdown cover or windscreen cover.
Ordinarily Resident: If you are resident in the UK, you are 'ordinarily resident'.
Overseas: A country other than England, Northern Ireland, Scotland and Wales.
Owner: The legal owner of a vehicle. The legal owner may not be the person to maintain or drive it. It may well be driven by a named driver.
Period of Insurance: Period of time covered by a policy as shown on your certificate of motor insurance.
Personal Investment Authority (PIA): The PIA regulates the way in which some financial products are marketed, promoted and sold.
Policy: A legally binding document issued by the company to the policyholder which states the terms and conditions of the insurance.
Policy Booklet: This document holds the full list of the terms, conditions, exceptions, and exclusions as set out in your policy.
Policy Excess: The amount to be paid by the customer in the event of a claim being made.
Policy Exclusions: Events or instances not covered by your insurance policy.
Policy Schedule: Document detailing the level of cover under a policy, the sum insured, the discount that you qualify for (if any), and the premium to pay.
Policy Term: The length of time an insurance policy provides coverage for.
Policyholder: The person to whom the insurer issues the policy.
Premium: The single or regular payment made to an insurance company in respect of a policy.
Public Liability Policy: Covers legal liability for injury or damage caused to others while driving.
Quotation: See Below.
Quote: An amount an insurer estimates to be the cost of providing a service based on the available information.
Rate: The pricing criteria upon which a premium is based; it is the cost of a given unit of insurance.
Registered Keeper: A person who looks after a vehicle but does not own it.
Reinsurance: A practice whereby one insurer transfers part or all of the risk it has accepted to another insurer.
Renewal: An agreement to continue cover beyond any original term.
Replacement Car: A vehicle provided by an approved repairer or other company, instructed by the insurer whilst repairs are made to your car.
Reserve: The sum set aside by an company as a liability to fulfil future obligations.
Roadside Rescue: An insurance policy providing recovery and repair services for motorists.
Settlement: Payment of a claim by the insurer.
Sum insured: Maximum amount a company will pay on a claim.
Term: The period of time for which a policy is valid.
Territorial Limits: The geographical limits inside which your policy is valid. Most UK insurance policies are valid in Great Britain, Northern Ireland, The Isle Of Man and the Channel Islands. Also included are the journeys between each location.
Third Party: Basic motor insurance cover. Third party covers damage to others' cars but not to your own. It is also the cheapest form of policy.
Third Party, Fire and Theft: Third party fire and theft provides additional insurance against fire or theft above what is provided by third party only.
Total Loss: If your insurance company decides it is uneconomical to repair your car following an accident, theft or damage, it will be 'written off' as a total loss.
Tracker: An electronic device which emits a signal enabling law enforcement agencies to locate the car if it is stolen anywhere in the UK.
Uninsured Loss Recovery (ULR): Is an additional insurance protection. If a motor accident was the fault of a third party, the insurers will attempt to recover your uninsured losses including repair costs, policy excess, loss of use, hire costs of alternative vehicle, transport costs, etc.
Under Insured: If you give incorrect details or do not give a full account of your circumstances, it can lead to a lower premium being offered. This is illegal and will result in the company refusing to pay out in the event of a claim. It is less common in motor insurance, but more prevalent in house contents insurance (although this is not a legal requirement). The customer is responsible for the correct evaluation of possessions. Should you be under insured the company will simply reduce the value of the claim they will pay.
Underwriter: A technician who is trained in evaluating risks and determining rates and coverage for them.
Underwriting: Where a company takes into account known facts like your age, sex and health, in order to assess the likelihood of you making a claim on the policy.
Underwriting Decision: A decision made by underwriters based on supplied evidence.
Voluntary Excess: This is the amount that you choose to pay in addition to the policy excess that has to be paid in the event of a claim.
Waiver of Premium: A provision that sets certain conditions under which an insurance policy will be kept in full force by the company without the payment of premiums.
Write Off: The term used when the company decides it is not economical to repair your vehicle following an accident, theft, or damage. (see' total loss').