It’s important to note that the definitions listed here are intended purely as a guide and are not binding. It’s always good to bear in mind that each insurance policy issued will be subject to its own terms, conditions, limitations, exclusions and definitions. For this reason we always suggest that you contact us should you have any questions or require any clarifications so that we may explain to you in more detail

Accidental Damage

Any kind of fortuitous damage not excluded from the cover intended by an insurance policy.


An expert employed by an insurance company who calculates future risk by using statistical data from the past.


A document setting out agreed alterations to an insurance contract. See also Endorsement.

Additional Premium

A cost that is payable by the insured as a result of policy amendment, such as increase in the Sum Insured and/or change in the policy conditions and/or change in risk.

Advanced Loss of Profits Insurance

Insurance covers financial losses that one incurs as a result of a delay caused by an insured event, typically used for industrial construction projects.

Aggregate Limit of Indemnity

The maximum amount an insurer will pay under a policy in respect of all accumulated claims arising within a specified period of insurance.

All Risks

A term used to describe insurance against loss of or damage to property arising from any fortuitous cause and including accidental loss or damage except for those circumstances that are specifically excluded.


Differences may be referred to an arbitrator, usually appointed by the insurer and the insured as an alternative to litigation for the settlement of disputes relating to policy liability. Arbitration is also used to determine responsibility between two insured parties, for example in road traffic accidents.


Transfer of a policy to a third party as security for a loan or mortgage, often used in property and life insurance.


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.


A clause in insurance policies whereby, in the event of underinsurance, the claim paid out by the insurer is restricted to the same proportion of the loss as the sum insured under the policy bears to the actual value of the insured item.


Improvement which results from damage being repaired and leaving property in a better condition or specification than it was in before the damage.


The commission received by a full-time independent intermediary known as an insurance broker for placing risks on behalf of the insured. See also Commission.


Termination of a policy before it is due to expire. There may be a cancellation clause in a policy setting out the condition under which the policy may be cancelled by notice. The period of notice could be anything between 48 hours to 3 months. In most cases this will result in a return premium being paid by the insurer to the insured, unless a claim has occurred during the period of insurance.

Certificate of Insurance

Statutory evidence, in the form of a certificate, that an insurance contract exists.


The insured asks for payment subject to the terms of the insurance policy. The insurer will then verify whether it is covered or not under the specific policy and will pay either the insured or the third party accordingly.


When an insurance company feels that the risk being presented by the insured is high and therefore approaches other insurance companies to share the risk.


The remuneration paid to an intermediary for the introduction of business, usually in the form of a percentage of the premium. See also Brokerage.

Common Law

The common law consists of the ancient customs and usages of the land, which have been recognized by the courts and given the force of law. It is in itself a complex system of law, both civil and criminal, although it is greatly modified and extended by statute and equity. It is unwritten, and has come down in the recorded judgments of judges who for hundreds of years have interpreted it.

Compulsory Insurance

A statutory requirement to effect insurance; it is compulsory for a user of a motor vehicle on the road to insure the liability for loss and/or damage and/or injury to third parties.


It is a deliberate suppression by a proposer for insurance of a material fact relating to the risk, usually making the contract null and void; also known as ‘non-disclosure’.


A condition is a part of a contract that must be complied with by one party or the other and which governs the validity of the contract.

Consequential Loss

This refers to an indirect loss from an insured loss, such as loss of profits, loss of use, loss of rent etc.

Contract of Insurance

An agreement between the insurer and the insured, whereby the insurer undertakes to compensate the insured for an expected event unless specifically excluded.

Contractual Liability

Contractual liability is defined as liability that does not arise by way of negligence but by assumption under a contract or agreement.


Contribution is the division of a loss between insurers where two or more policies of insurance cover the same insured and the same risk. It arises from the principle of indemnity and ensures equitable distribution of losses between insurers.

Cover Note

A document issued as evidence that insurance has been granted, pending the issue of a policy.


A statement signed by the insured, confirming that the information provided to the insurer is to the best of his knowledge and belief correct.

Declaration Basis

This is an arrangement whereby a provisional premium is paid and subsequently adjusted by an additional or return premium on receipt of a declaration from the insured giving details of values at risk.


This is a refusal of an insurer to accept or renew a proposal for insurance.

Decreasing Term Assurance

Life cover decreases during the insurance term reducing the cash payout the longer the term runs. Decreasing Term Assurance can be useful for individuals wishing to secure the payment of a reducing debt if they die during the term.


The specified amounts of a loss must exceed before a claim is payable. Only the amount which is in excess of the deductible is recoverable. See also Excess.

Deferred Premium

This is the part of a premium which following agreement with underwriters is payable by instalments, usually quarterly of half yearly.

Direct Insurer

This is an insurance company that does not deal via an intermediary.

Employer’s Liability Insurance

Insurance covers the liability of employers to employees for injury or disease arising out of and in the course of their employment.


Documentary evidence of change in the policy wording or cover offered by an existing policy. See also Addendum.


A type of assurance policy under which the benefit is payable on a predetermined date or at death whichever occurs first. Such policies may also be with or without profits.

Ex-Gratia Payment

A payment made by an insurer to a policyholder where there is no policy liability to pay.


This is 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.


A peril or contingency specifically excluded from the terms of the policy.

First Loss Insurance

Insurance 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 application of average. See also Average. Such cover is typically requested for Theft / Burglary Insurance where the theft of the entire stock is unlikely and the insurer would agree to insure up to an agreed value. The insured would be considered to be his own insurer for the values exceeding the first loss sum insured.

Gross Premium

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

Gross Profit

In the context of Business Interruption Insurance, the gross profit refers to the figure calculated by adding turnover to closing stock and work in progress and subtracting from this amount the opening stock and work in progress and the variables selected by the insured, usually defined as specified working expenses.


This is a physical or moral feature that introduces or increases the risk.

Inception Date

This is the date from which, under the terms of the policy, an insurer is deemed to be at risk.


A principle whereby the insurer seeks to place the insured in the same position after a loss as the insured occupied immediately before the loss, as far as possible.

Indemnity Period

The period for which benefits are payable under an insurance policy.


This is insurance where the amount of cover automatically increases in line with inflation.

Insurable Interest

For a contract of insurance to be valid the policyholder must have an interest in the insured item that is recognized at law whereby the policyholder benefits from its safety, well-being or freedom from liability and would be prejudiced by its damage or the existence of liability.

Insurable Value

This is the value of the insurable interest which the insured has in the insured occurrence or event. It is the amount to be paid out by the insurer (assuming full insurance) in the event of total loss or destruction of the item insured.


This is the person, company or organisation on who the insurance policy is issued.


The organization providing insurance also referred to as the Insurance Company.


This refers to the non-renewal of a policy for any reason.

Latent Disease / Defect

This is an illness or defect which lies dormant or unnoticed for some years before manifesting itself.

Legal Liability

This is liability enforceable in the courts. In the context of Liability Insurance, this is liability to pay damages to third parties.

Liability Insurance

Insurance covers the legal liabilities of the insured against accidental losses resulting from injury or damages to third parties.

Life Assured

The person on whose death or survival benefit under a life assurance policy becomes payable.


This is the insurer’s maximum liability under an insurance, which may be expressed ‘per accident’, ‘per event’, ‘per occurrence’, ‘per annum’, etc.

Liquidated Damages

These are pre-known damages specified in amount.

Local Authorities Clause

This refers to an extension to the standard policy to cover the cost of rebuilding or repairing a building in a fashion dictated by local authority requirements.


This is another term for a claim.

Loss Adjuster

Independent, qualified loss adjusters are used by insurers for their experience and expertise necessary to carry out detailed and in some instances prolonged investigations of complex and large losses.

Margin of Solvency

This is the total assets of an insurance company that must exceed its liabilities (other than share capital) by a relevant amount.

Material Damage Warranty

A warranty in a business interruption insurance policy stipulating that for the interruption insurance to become effective there must be a policy in force in respect of the material damage and a claim paid or admitted thereunder for such damage caused by an insured peril.

Material Fact

Any fact which would influence the insurer in accepting or declining a risk or in determining the premium or terms and conditions of the insurance contract is material. This must be disclosed by the proposer, or by the insurer to the insured. Non-disclosure of a material fact would normally lead to potential claims being declined by the insurer.


This is the end of the term of an endowment assurance policy.

Moral Hazard

This refers to the risk arising from the character and circumstances of the policyholder or the policyholder’s employees.


This is 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”. Negligence gives rise to civil liability.

Net Premiums

A term variously used to mean gross premiums net of reinsurance premiums payable, or commission, brokerage, taxes or any combination of these.

New for Old

This refers to covers where insurers agree to pay the cost of property lost or destroyed without deduction for depreciation.

No Claims Bonus (or Discount)

A discount in premium is given to an insured by an insurer where no claims have been made by that insured; very common in motor insurance.


This refers to the failure by the insured or his broker to disclose a material fact or circumstance to the underwriter before acceptance of the risk. This can lead to a claim being refused by insurer. See also Concealment.

Occupier’s Liability

This refers to the legal liability to pay compensation for accidents arising out of occupying buildings.

Operative Clause

This clause defines the class and nature of business covered by a specific insurance policy.

Owner’s Liability

This refers to the legal liability to pay compensation for accidents arising out of the ownership of buildings.

Package Policy

A policy that includes various different types of insurance covers under one policy, example travel insurance.

Passenger Liability

This refers to the liability of a carrier to passengers.

Personal Accident Insurance

Insurance covers fixed benefits in the event of death or loss of limbs or sight by accident and / or disablement by accident.


A document detailing the terms and conditions applicable to an insurance contract and constituting legal evidence of the agreement to insure. It is issued by an insurer or his representative for the first period of risk. On renewal a new policy may well not be issued although the same conditions would apply, and the current wording would be evidence by the renewal receipt or endorsement.


Also known as the insured referring to the person being insured and who can claim an insured benefit under the policy.


The sum paid to the insurer to insure a predetermined possible occurrence against an agreed contingency.

Products Liability Insurance

The policy covers the insured’s legal liability for bodily injury to persons, or loss of or damage to property caused by defects in goods, including containers, sold, supplied, erected, installed, repaired, treated, manufactured, and / or tested by the insured.

Professional Indemnity Insurance

The policy protects the professional legal liability for costs and expenses should the insured become liable for injury, loss or damages to the client arising out of negligence, errors or omissions while performing professional duties. – to keep it the same as found under the PI section.

Proposal Form

A form provided by an insurer to an individual / company requiring insurance so as to obtain sufficient information on the risk proposed. This will allow the insurer to asses the risk in detail and can decide whether or not to accept the risk. The insurer may also opt to accept the risk subject to terms and conditions.The proposal form is the basis of the contract between the insurer and the insured.


A document noting the premium amount to be paid according to the insurance coverage selected and information given together with the corresponding terms and conditions.


When the Insurer puts the Insured in the same position before the loss or damage, the repair costs may either be paid in cash or directly to your chosen repairer.


This refers to the continuation of a policy beyond its original term.

Renewal Notice

A notice sent to the policyholder as a reminder that an insurance is due for renewal.

Renewal Receipt

The written evidence that a renewal premium has been paid.


The possibility of a claim such as loss, damage and injury for which insurance is provided.

Risk Management

This refers to the identification, measurement and economic control of risks that threaten the assets and earnings of a business or other enterprise.


This refers to 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.

Special Perils

This refers to the collective term for risks which are commonly added to a fire policy.

Subject to Survey

This is a phrase used by an insurer to signify provisional acceptance of an insurance pending inspection by a surveyor whose report is necessary to determine the rate and conditions applicable.


This refers to the right which one person has of standing in the place of another and availing oneself of the rights and remedies of that other, whether already enforced or not. This is the right acquired by an insurer to make a recovery from the negligent party who has cause injuries / damages to the insured.

Sum Assured

This refers to the cash benefit guaranteed by a life assurance policy.

Sum Insured

This is the maximum amount payable in the event of a claim under a contract of insurance.

Surrender Value

This refers to the cash value of a whole life or endowment assurance policy. Surrender values are small in the early years of the policy.


An insurance company official who inspects property proposed and makes recommendations as to rating, acceptability and loss reduction.

Third Party

A person claiming against an insured; in insurance terminology the first party is the insurer and the second party is the insured.

Third Party Liability

This refers to liability of the insured to persons who are not parties to the contract of insurance and are not employees of the insured.


This refers to a civil breach of a personal duty owed to one’s fellow citizens in general.

Total Loss

The complete loss or destruction of the property insured under a particular policy. It could also be referred to when the property is beyond economical repair.


The situation arises where the sums insured represent less than the total value of property at risk. See also Average.


This refers to the official of an insurer / insurance company who decides whether or not to accept a proposal for insurance, and if so, upon what rate, terms and conditions.

Utmost Good Faith

Insurance contracts are contracts of good faith, which means that both parties to the contract have a duty to disclose, clearly and accurately, all material facts relating to the proposed insurance. Any breach of this duty by the proposer may entitle the insurer to repudiate liability.


A warranty is a very strict condition in a policy imposed by the insurer. A breach entitles the insurer to deny liability.

Wear and Tear

This is the amount deducted from claim payments to allow for depreciation in the property insured which is caused by its usage.

Whole Life Assurance

This is a type of assurance under which benefit is payable in death whenever it occurs. Premiums can continue throughout life or can be limited. The policy can be with or without profits.

Without Prejudice

This is a term used in discussion and correspondence. Where there is a dispute or negotiations for a settlement and terms are offered ‘without prejudice’ an offer so made or a letter so marked and subsequent correspondence cannot be admitted in evidence without the consent of both parties concerned. The term is also used by an underwriter when paying a claim which the underwriter feels may not be attached to the policy. This payment must not be treated as a precedent for future similar claims.