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Accident & Health
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Class of insurance under the insurance Companies Act including two main types of
business - personal accident and medical expenses. Personal accident policies will
pay a lump sum or weekly benefits in the event of accidental death or injury. Medical
expenses insurance
will pay the costs of treatment for acute conditions.
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Act of God
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An event, which is not the fault of any individual. Acts of God can be insurable.
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Actuary
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A professional person qualified to apply mathematical principles to solving long-term
financial problems, primarily in connection with pensions, life insurance and investment.
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Additional Voluntary Contributions
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Additional contributions made voluntarily by pension scheme members to boost their
eventual retirement income.
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Agent
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A person who acts for one or a small number of companies, particularly in selling
insurance.
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All Risks
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Wider cover than given under a normal property insurance policy. Covers any loss or damage apart
from exclusions stated in the policy.
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Annual Premium
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See "Yearly Premium".
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Annuity
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An arrangement by which an
insurance company pays someone a regular income, usually for life, in return
for a lump sum premium.
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Assistance
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The provision by an insurer or a service company of immediate practical help to
resolve an insured problem (e.g. arranging medical treatment abroad/organising a
roadside repair).
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Assurance
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See "insurance".
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AVCs
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See "Additional Voluntary Contributions".
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Average
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A policy condition that requires the amount of a claim payment to be reduced proportionately
if the policyholder has not insured his property for the full amount of its value
or replacement cost.
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Benefit
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The money paid by the life
insurance company when a claim is made.
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Betterment
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The principle by which a claimant has to make a payment towards the cost of the
claim because his or her property will be in better condition after repair than
before the loss or damage occurred.
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Bonus
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Amount of money added to the sum insured of a "with-profits" policy. It may be added
during the term of the policy (reversionary) or when the policy matures (terminal),
or both.
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Broker
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An intermediary registered with the Insurance Brokers Registration Council (IBRC)
under the Insurance Brokers (Registration) Act 1977.
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Buildings insurance
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A policy covering the structure of a house or other building against a number of
different risks.
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Business Interruption
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See "Consequential Loss".
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Capacity
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Capacity is the measure of an insurer's ability to write new business. It depends
on the maintenance of adequate reserves.
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Captive Insurer
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An insurance company
set up by an industrial or commercial company, for example an oil company, to provide
insurance to that
company only.
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Certificate
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Document issued by insurers as evidence that insurance is in force to meet the requirements of
the law (notably for motor and employers' liability insurance ).
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Claim
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When a policyholder or beneficiary seeks payment or settlement under the terms of
a policy.
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An arrangement whereby a number of separate insurance companies share in the cover of one particular
risk.
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Collective Life Policies
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Group life policies, which do not relate to schemes established by an employer for
the benefit of employees. Commonly used by credit companies to cover loans made.
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Commercial Business
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Any policy taken out by a company, partnership or organisation to cover their business.
Would include fleet policies for motor business.
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Commission
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Money paid by an insurance
company to a broker/independent intermediary/agent for selling policies.
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Company Representative
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An agent appointed by a life
insurance company who is authorised to sell only that company's products.
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Composite Insurer
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A company which transacts in both life and non-life insurance.
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A policy covering a number of types of loss or damage. The name is used mainly in
motor insurance
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Condition
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Part of a policy stating that certain rules must be followed, for example, the duty
to take reasonable care to protect property or to report claims to the insurance company promptly.
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Consequential Loss
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Insurance covering
the loss of profits of a business and certain other costs resulting from fire or
other insured event (also known as Business Interruption).
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Contents Policy
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A policy covering the contents of a home or other building against a number of different
risks.
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Contingent Annuities
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Annuities paid if a certain event (events) happens.
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Contribution
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The principle of contribution applies where a risk is insured on more than one insurance policy
(for example on a travel and household policy), and the two insurers concerned may
share the cost of any claim.
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Convertible Term
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A term insurance
policy which gives the policyholder an option to convert the policy to a whole life
or endowment insurance
without giving further evidence of health.
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Cover Note
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A document giving temporary evidence of cover while the policy and certificate are
being prepared.
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Pays out a lump sum on the diagnosis of certain life-threatening illnesses specified
in the policy.
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Decreasing Term
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A term insurance
policy in which the sum insured is reduced by a fixed amount each year, decreasing
to nil at the end of the term.
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Deferred Annuities
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Annuities that commence after a specified number of years or at a specified age
(usually on retirement), usually continuing through the policyholder's life.
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Direct Sources of Business
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Insurance business
where no intermediary is involved, including marketing sources e.g. newspaper advertisements,
telephone sales and business through branch offices.
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Disability Benefit
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Certain life policies will pay out if the policyholder becomes permanently disabled.
No further benefit is paid on the policyholder's subsequent death. (See also "Critical
Illness insurance
".)
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Employers' Liability
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A compulsory class of
insurance, which most employers must have to cover themselves against claims
by employees who are injured at work.
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Endorsement
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A written amendment to an
insurance policy that becomes part of it.
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Endowment Policy
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A life insurance
policy that pays a sum of money after an agreed period of time, or on the death
of the policyholder, whichever happens first.
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Excess
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An amount of money that the policyholder has to pay towards the cost of a claim,
for example, the first £50.
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Excess of Loss Policy
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Covers claims costs exceeding an amount specified in the policy.
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Exclusion
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Specified property, person or event that the policy does not cover.
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Ex Gratia Payment
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Any payment made by an
insurance company that is not strictly necessary under the terms of the
policy.
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Provides cover for exporters' losses arising from non-payment.
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Exposure
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Whether, and the extent to which, an insurer is subject to losses arising from a
particular risk.
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Family Income Policy
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A type of insurance
policy that, on the death of the life insured, pays benefits by instalments until
the end of a specified period.
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Fatal Accident Benefit
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Certain life policies will make an additional payment - over and above the sum insured
- if the policyholder dies as a result of an accident.
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Fidelity Guarantee Policy
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A policy covering the risk of dishonesty on the part of an employee who holds a
position of trust, for example, a wages clerk.
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Freestanding AVCs
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Additional contributions paid voluntarily into personal pension policies by employees
in occupational schemes who wish to top up their pensions, but keep the money separate
from the occupational scheme.
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Friendly Society
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Similar to a mutual insurance
company. A friendly society is owned by and established for the benefit of its members,
mainly through the provision of life
insurance and sickness benefit.
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Fully Contracted-out
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Pension policy where the only premium received is the DSS rebate.
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Insurance of (non-life)
risks where the policy offers cover for a limited period, usually one year.
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General Liability
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Covers the policyholder's legal liability for injury, property damage or financial
loss caused to others.
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Green Card
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A document issued to policyholders motoring abroad as evidence that they have the
minimum insurance
cover required by the law of the country visited. A Green Card is not essential
for European travel as minimum legal cover is automatically included in UK policies.
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Group Life
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A term that relates to the provision of lump sum death in service benefits for groups
of employees.
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Group Permanent Health
insurance
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Policies arranged by employers for their employees, providing for the payment of
income during a period of incapacity due to ill health or accident. The benefit
is usually payable until retirement.
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Group Personal Pensions
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An arrangement made for the employees of a particular employer to participate in
a personal pension scheme on a group basis. This is not a separate, or occupational,
pension scheme, but merely a collecting arrangement.
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Group Sponsored Schemes
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Scheme set up by employers for the benefit of their employees to provide life cover
or a pension on retiring, or both.
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A policy covering certain risks connected with holidays. Usually includes cover
for the costs of unavoidable cancellation, personal accident, medical treatment
abroad and lost or stolen luggage.
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Home-foreign
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Home foreign policies are issued to provide insurance where the business is written in one country,
although the risk is actually situated abroad.
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Home Service
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The provision and servicing of life and non-life insurance by company agents calling regularly at policyholders'
homes. (See also Industrial Branch)
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Household Business
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Includes insurance of both structure and contents, along with
any "add-ons" included within the policy such as legal expenses.
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Immediate Annuities
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Annuities that commence immediately, or shortly after, purchase.
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Impaired Lives Register
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Lists individuals who have been refused, or charged more for, life insurance , for medical reasons.
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Increasing Term
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A term insurance
policy in which the sum insured increases each year by a fixed percentage of the
original sum insured. Designed to increase policyholders' life cover as their earnings
increase.
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Indemnity
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The principle by which policyholders are put in the same financial position after
a loss as they were immediately before it.
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Independent Financial Adviser
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A broker or other intermediary authorised to sell or advise on the policies of any
life insurance
company, as well as other financial products (e.g. unit trusts).
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Index-linked
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Insurance where
the amount of cover changes automatically in line with an index. Examples are the
cost of rebuilding a house or replacing its contents.
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Individual Permanent Health
insurance
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Policies arranged by an individual providing for the payment of income during a
period of incapacity due to ill health or accident. The benefit is paid to the policyholder
until he/she is able to return to work, or until retirement.
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Individual Policy
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Insurance taken
out by an individual on his or her own life or by an individual or legal person
on the life of another.
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Industrial Branch
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Life insurance
where premiums are collected by an
insurance company agent at the policyholder's home, at intervals of less
than two months, often for a relatively small amount. Whole life and endowment contracts
are the only types of business written in the industrial branch.
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Insurable Interest
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A principle of insurance
which states that someone may only take out insurance if he/she stands to suffer a financial loss
from an event covered by a policy. Individuals have an unlimited insurable interest
in their own life and that of their spouse.
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A service that offers financial compensation for something that may or may not happen.
Originally the term assurance was generally used for life insurance , but now the two words are interchangeable.
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A company that takes on risks under the policies it sells in return for the payment
of premiums. Companies may be "mutual" (owned by the policyholders) or "proprietary"
(owned by the shareholders).
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A tax imposed on most non-life
insurance premiums.
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Insured
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A person covered by an
insurance policy.
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Intermediary
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Person or organisation that offers advice and arranges policies for clients. Intermediaries
may be either "tied" - representing one company in the case of life business or
a limited number of companies for general business, or "independent" - with no limit
on the number of companies with which they can deal.
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Investment
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The act of allowing someone else to have use of your money in return for payment
of interest and/or a share in profits that may be made.
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Investment Income
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Income earned on the money held by insurers on behalf of policyholders, having been
received in premiums but not yet paid out on claims.
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In the event of the death of a key employee on whom the business depends for its
continued profitability, or even existence, this type of cover provides a sum of
money which can be used to pay for the cost of finding and training a successor,
and to compensate for reduced profitability.
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Knock-for-Knock
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An agreement whereby each motor insurer paid for damage to its policyholder's car,
regardless of which driver was to blame, providing the policy covered damage to
the policyholder's own car. Currently rarely applies.
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Covers the cost of legal proceedings in circumstances defined in the policy.
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Level Premium
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The same premium paid throughout the term of a policy.
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Liability
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Legal responsibility for causing loss to someone else by injuring him or her or
damaging their property.
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Life Assurance Premium Relief
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Tax relief on life insurance
premiums. Applies only to policies taken out before 14 March 1984.
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Life Expectancy
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The average length of time people are likely to live, taking into account such factors
as their present age, health and occupation.
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Life Fund
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The pool of money, maintained by an
insurance company, into which all its life insurance policyholders' premiums are paid and
out of which all claims are paid.
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Linked
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Describes any savings product where the saver's money buys, or is deemed to buy,
units in an investment fund and the value of the saver's fund is thus linked to
the value of the units.
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Lloyd's Members
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Individuals on whose behalf Lloyd's policies are issued. They pledge all their personal
wealth to pay losses. Corporate members were also introduced in 1994.
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Lloyd's of London
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An insurance market
organised into syndicates, which underwrites most types of policy.
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Loading
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The extent to which an individual is charged more than the "average" for his/her
insurance.
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Provides for the cost of long-term care. Intended mainly to cover the costs of elderly
people being looked after either at home or in residential care.
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insurance of risks
where cover extends over a period of more than a year and where predetermined premiums
are often paid on a regular basis over a long period. Frequently, these insurance contracts are intended to provide an investment
vehicle as well as risk
insurance , e.g. endowment policies.
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Loss Adjuster
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A person, independent of an
insurance company but engaged and paid by it, who checks that a claim is
covered and negotiates with the policyholder the amount payable for a claim.
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Loss Assessor
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A person who negotiates claims on behalf of policyholders.
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Managed Funds
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Schemes by which the pension funds for a group of employees buy units in various
funds managed by an insurance
company.
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Marine Aviation and Transport
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The class of insurance
which embraces damage to the hull and cargo of ships and aeroplanes and liability
for property damage, injury and death to passengers and others.
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Maturity
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An agreed date when an endowment policy comes to an end and the sum insured plus
any bonuses earned is payable.
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Mechanical Breakdown insurance
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Covers against the cost of breakdowns of household appliances or motor vehicles.
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Mortgage Indemnity insurance
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Provides cover for a mortgage lender for any loss they might suffer as a result
of a property on which they provided a loan being sold for less than the amount
of the loan.
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Mortgage Payment Protection Policy
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Cover for monthly mortgage repayments in the event of accident, sickness or unemployment
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Mortgage Protection Policy
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A life insurance
policy that covers the outstanding amount of mortgage if the policyholder dies before
the loan is repaid.
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Mortgage-Related Policies
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Policies used both to provide protection for a mortgage loan and as a savings vehicle
to repay the loan at maturity.
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Covers legal liabilities arising from the use of a motor vehicle. Comprehensive
policies also cover damage to the vehicle.
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Mutual
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An insurance company
that is owned by its policyholders.
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New-For-Old
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Cover for property where an item lost or destroyed would be replaced with a brand
new one, with no deduction for wear and tear. Also called "replacement as new".
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No Claim Discount (or Bonus)
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A reduction in a renewal premium to reflect a claim-free record; used most often
in motor insurance
.
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Non-Motor
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Non-motor includes all business written under the accident and health, general liability,
pecuniary loss and property damage classes. Also known as Fire and Accident.
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Not Contracted-out
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Someone who is not contracted out of the State Earnings-Related Pension Scheme (SERPS).
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Occupational Pensions
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Pension scheme provided by an employer for its employees. Contributions will be
paid by the employer and often by employees also.
Schemes may be either "defined benefit" where the pension entitlement of an employee
is determined by, for example, number of years' service and salary; or "defined
contribution" whereby an employee's pension entitlement depends only on how much
has been paid into the scheme in the form of contributions on his/her account and
the value at retirement of the sum thus accumulated.
Employers may delegate responsibility for the running of their pension scheme to
an insurance company.
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Ordinary Branch
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Life insurance
and pensions business where the premiums are usually paid through the banking system
by cheque, standing order or direct debit.
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Outgo
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The total expenditure of an insurer in relation to any class of insurance business, comprising the cost of claims
and the insurer's business expenses, including any commission paid to sales staff,
brokers or intermediaries.
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Partially Contracted-out
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Pension policy that receives both a premium from the policyholder and a DSS rebate.
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Pecuniary Loss
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Covers any financial loss that may have been incurred, e.g. business interruption
and mortgage indemnity policies.
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Pension
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A regular income paid to a person when he/she retires from work. A life company
pays an insured pension from funds built up from contributions paid while working.
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Pension Annuities
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Annuities which become payable on the vesting of pension policies.
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A policy that pays an income for as long as the policyholder is unable to work as
a result of accident or illness. The benefit is usually payable until retirement
date.
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Persistency
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The rate at which policyholders keep their policies with a life insurer.
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A policy that pays specified amounts of money if the policyholder is injured in
an accident. Depending on the type of disability, the payments may be made weekly,
for a set period, or as a lump sum.
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Personal Lines of Business
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Any policy taken out by an individual in his/her private capacity.
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Personal Pensions
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Contracts under which payments are made to an insurance company by an individual policyholder during
his/her working life, in return for a regular income, to be paid after retirement.
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Covers against losses arising as a result of bad weather.
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Policy
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The document providing full details of the contract between the insurer and the
policyholder.
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Policyholder
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Person or organisation to which the insurer issues the policy. Normally the person
to whom benefits are payable.
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Pool Re
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A Government-backed re
insurance scheme that meets the cost of claims over £100,000 occurring as
a result of terrorist attacks in Great Britain.
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Premium
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The amount paid by the policyholder for
insurance.
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A policy that covers the cost of private medical treatment.
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Product Liability Policy
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Protects businesses against liability claims resulting from defects in the products
they sell.
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Professional Indemnity
insurance
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Protects professionals against liability claims resulting from negligent work.
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Property Damage
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Property policies cover specified property that may be damaged or destroyed by events
or perils, such as fire, storm or theft.
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Proposal Form
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An application for insurance
cover.
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Proposer
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Person or company who applies to take out insurance.
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Public Liability Policy
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Covers legal liability for injury or damage caused to others.
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