We know that for many business owners the terminology used in the insurance world isn’t always clear. This is where your insurance broker comes in! We are here to help you and answer all your questions about your policy and level of cover and explain terms that you may not understand.
We have prepared a quick list below of some of the most common terms used across the insurance industry and within policy documents.
Average clause
A clause in insurance policies where, in the event of under-insurance, 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 total value of the insured item.
Commercial combined insurance
A number of different commercial insurances put together as a single package.
Consequential loss
Insurance of loss following direct damage e.g. loss of profits; loss of use insurance.
Cyber Insurance
Insurance specifically to protect your business from digital threats like cyber attacks, data breaches, security breaches, phishing scams, and malicious software attacks to your IT systems. Such insurance also covers the cost of digital theft or fraud by an employee.
Day One basis
Day One basis is a clause applied to property damage insurance to deal with the effects of inflation during the period of the policy and the period of reinstatement. This simply means that the building reinstatement value (known as the declared value), should exclude any provision for inflation. Inflation is automatically catered for by the policy.
Declared value
The Insured’s assessment of the cost of rebuilding the property insured at the time of inception of a policy or its renewal. This value, otherwise known as the Reinstatement Cost, should also include costs of professional fees, debris removal and compliance with European regulations.
Deductible
The specified amount a loss must exceed before a claim is payable. Only the amount which is in excess of the deductible is recoverable.
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. With some exemptions this insurance is compulsory in the UK and can only be provided by an authorised insurer.
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.
Exclusion
A provision in a policy that excludes the insurer’s liability in certain circumstances or for specified types of loss.
Increase cost of working
Under a business interruption policy some cover is provided for additional expenditure incurred by the insured solely for the purpose of reducing the shortage in production following an insured event.
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).
Indemnity period
Under a business interruption insurance the period during which cover is proved for disruption to the business following the occurrence of an insured peril.
Index linking
A system that automatically adjusts your insurance policy upon renewal to account for changes to the cost of rebuilding or repairing your business.
Insurance broker
An insurance broker is an intermediary who advises clients and arranges their insurance. An insurance broker is a full-time specialist with professional skills in handling insurance business. Since January 2005 intermediaries and brokers must be registered with and regulated by the Financial Conduct Authority.
Insurable interest
The interest that a person has in something such as a particular property or another individual, which means that the person would suffer a loss should that property or individual be harmed. In insurance law, you can only buy insurance for something or someone in which you have an insurable interest.
Insurable value
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.
Limit
The insurer’s maximum liability under an insurance, which may be expressed ‘per accident’, ‘per event’, ‘per occurrence’, ‘per annum’, etc
Rebuild Cost Assessment
An appraisal of the overall cost of rebuilding a business, including buildings, equipment and loss of revenue.
Sum insured
The sum insured is made up of two elements which are “Declared Value” and an “Inflation Provision”.
There are many more terms associated with the commercial insurance industry than are listed here, but are no less important. Even for experienced business owners, vital details on an insurance policy, the claims making process or your liability can be lost in translation or misunderstood when jargon is used.
If you have found yourself confused by the wording of an insurance policy in the past, or are concerned about the issue when purchasing new policies in the future, get in contact with Harborough Portas. We offer a comprehensive, personalised service to demystify the process from insurance purchase to claims. Call us on 0116 260 0506 or email us at mail@harboroughportas.com.
