Insurance Jargon Explained…

by Kyle Taylor on March 29, 2014

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They say “accidents happen”, and when they do it is important that those who have been affected are able to claim compensation for their troubles. Unfortunately, claiming on your insurance can be made more difficult by industry jargon. As well as keeping up with the latest news in the world of insurance, it pays to know what some of the more common terms you may come across mean.

 

  • Accident year: the year in which a loss occurs; can be measured as a calendar year or an accounting year
  • Agent: insurance agents are independent middle-men who sell policies from different firms and companies
  • Appreciation: a term specifically related to real estate which indicates an increase in property value
  • Cancellation clause: a section of the insurance document which allows the policy to be terminated before the expiration of the contract under certain circumstances
  • Claim: this is the demand for payment or compensation under your insurance policy but there are many different types, including: fault claims, where you are deemed responsible for causing the incident, and non-fault claims where you are deemed not responsible for causing the incident and the insurer can recover their costs from a third party
  • Depreciation: a reduction in value of property or possessions; can refer to real estate as well as personal possessions and automotives
  • Duty of disclosure: an obligation for those seeking insurance to inform their insurer of every fact which may influence the cover (known as “material fact”)
  • Excess: the amount of money you pay towards any claim for damages; there are two main types: a voluntary excess which is how much you choose to pay and a compulsory excess which is how much your insurer requires you to pay under the terms of your policy
  • Exclusions: events or incidences when your insurer will not pay out; these will be outlined in the terms and conditions of your insurance policy
  • Fidelity insurance: type of business insurance policy which seeks to protect the firm against losses caused by any dishonest acts committed by their employees
  • Grace period: a set amount of time when cover may be extended past the original insurance contract to allow payment for renewable to be processed by the policyholder
  • Gross line: the level of risk which an insurer carries before considering any reinsurance which may reduce this risk
  • Hazard: something which is perceived as dangerous and can cause injury, loss or damage; can also refer to dangerous pursuits such as extreme sports
  • Inception: beginning or start of cover
  • Indemnity: for insurance purposes, this means returning claimants to the same financial position or state they were in before losses occurred
  • Joint proposers: term used for two people who are looking to gain insurance together
  • Loss adjuster: someone who investigates the event surrounding a claim and advises on the amount which should be paid to the policyholder to settle the case
  • Misrepresentation: usually refers to misrepresentation of risk, where there is a wrongful or miswritten statement of fact
  • Policyholder: the individual who has taken our insurance
  • Renewal: the process of continuing with an insurance policy after it has reached the end of its initial contract; the process usually involves signing a new contract which applies to the relevant dates
  • Sum insured: amount paid to a policyholder when a claim is made
  • Warranty/guarantee: a promise that certain actions will or won’t occur during the period of cover or that particular circumstances/rules do or do not exist at the start of cover

 

This is just an overview of the types of terms you may come across when taking out an insurance policy (for a more thorough list click here) and demonstrates just how complex the industry can be. When investing in an insurance policy or attempting to process a claim, it is important you understand every term being used. If unsure, research the terms yourself or ask an advisor for an explanation.

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