Act Of God

Nugent v Smith (1876) “Natural causes directly and exclusively without human intervention and that could not have been prevented by any amount of foresight and pains and care reasonably to have been expected”.


A document setting out agreed alterations to an insurance contract. (See also endorsement).

Additional Premium

A further premium payable by the insured as a result of policy amendment that may have increased the risk or changed the policy conditions or sum insured.


One who investigates and assesses claims on behalf of insurers (claims adjuster or loss adjuster).

Advance Profits Insurance

Business interruption insurance of the expected profits of a new enterprise or an extension to an existing business.

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

Term used to describe insurance against loss of or damage to property arising from any fortuitous cause except those that are specifically excluded.


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 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. If a property is insured for less than what it is worth (known as underinsurance) the policyholder will not be reimbursed for the full amount of any loss. In the event your property is underinsured, the net amount you will receive from a valid claim will be in direct proportion to the amount of underinsurance. For example, if you have a sum Insured that is only half of what it should be, you will receive only half of any valid claim. The following serves to illustrate this principle: Sum Insured: $100,000 Replacement Cost: $200,000 Amount of Loss: $ 50,000 Calculation Formula: Sum Insured/Replacement Cost x Loss $100,000/$200,000 x $50,000 = $25,000.00 Claim Payment: $25,000.00 (before deductible). Any deductible will be subtracted from the final claim payment. In the event of a total loss the policy will pay the lower of the amount of the loss or the sum insured. This means that in the event of you being underinsured and having a total loss you will receive only the sum insured. The basic concept of insurance is that insured persons contribute to a pool based on the risk (the value of their property) they bring to the pool. If the insured does not pay premium based on his full exposure (i.e. if he only insures 50% of his risk) then he has contributed less to the pool than he should, and cannot take out of the pool the full amount of his loss. The basis for calculating the sum insured is set out in the policy document. To avoid underinsurance, a professional valuation should be undertaken at regular intervals.


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 from 48 hours to 3 months. In most cases this will result in a return premium being paid by the insurer to the insured.


Injury or loss to the insured arising so as to cause liability to the insurer under a policy it has issued.

Common Law

The common law consists of the ancient customs and usages of the land, which have been recognised 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 law and equity. It is unwritten, and has come down in the recorded judgements of judges who for hundreds of years have interpreted it.


Deliberate suppression by a proposer for insurance of a material fact relating to the risk, usually making the contract null and void.

Consequential Loss

Insurance of loss following direct damage e.g. loss of profits; loss of use insurance.

Cover Note

A document issued to the insured confirming details of the insurance cover placed. Some cover notes are a legal requirement, e.g. motor.

Deductible (or Excess)

The specified amount a loss must exceed before a claim is payable. Only the amount which is in excess of the deductible is recoverable. You should read your policy carefully to familiarise yourself with the relevant deductibles.

Duty of Disclosure

The specified amount a loss must exceed before a claim is payable. Only the amount which is in excess of the deductible is recoverable. You should read your policy carefully to familiarise yourself with the relevant deductibles.

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.


Documentary evidence of a change in the wording of or cover offered by an existing policy or qualification of wording if the policy is written on restricted terms. (See also Addendum).


A provision in a policy that excludes the insurer’s liability in certain circumstances or for specified types of loss.

Ex-gratia payment

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

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.


A physical or moral feature that introduces or increases the risk.

Health Insurance

Protection against the costs of hospital and medical care or lost income arising from an illness or injury (sometimes called Accident & Sickness Insurance).

Inception Date

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

Increase In 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.


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.

Insurable Interest

For a contract of insurance to be valid the policyholder must have an interest in the insured item that is recognised at law whereby he benefits from its safety, well-being or freedom from liability and would be prejudiced by its damage or the existence of liability. This is called the insurable interest and must exist at the time the policy is taken out and at the time of the loss.

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.

Insurance Broke/intermediary

An insurance intermediary who advises his clients and arranges their insurances. Although he acts as the agent of his client, he is normally remunerated by a commission (brokerage) from the insurer. An insurance broker is a full-time specialist with professional skills in handling insurance business.


The person whose property is insured or in whose favour the policy is issued.


An insurance company or Lloyd’s underwriter who, in return for a consideration (a premium) agrees to make good in a manner laid down in the policy any loss or damage suffered by the person paying the premium as a result of some accident or occurrence.


The non-renewal of a policy for any reason.


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


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 investigations of complex and large losses. It is his task to negotiate a settlement which is within the terms of the policy and equitable to both insured and insurer. Should he himself not be an expert in a particular discipline which is necessary or desirable to pursue his negotiations, he will consult or employ such an expert.

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 fixing the premium or terms and conditions of the contract is material and must be disclosed by a proposer, or by the insurer to the insured.


Perhaps 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”. Gives rise to civil liability.

New For Old

Where insurers agree to pay the cost of property lost or destroyed without deduction for depreciation.

No Claims Bonus (or Discount)

A rebate of premium given to an insured person by an insurer where no claims have been made by that insured. Very common in motor insurance.


The failure by the insured or his broker to disclose a material fact or circumstance to the underwriter before acceptance of the risk.

Passenger Liability

The liability of a carrier to passengers.


A contingency, of fortuitous happening, which may be covered or excluded by a policy of insurance.

Period Of Risk

The period during which the insurer can incur liability under the terms of the policy.

Permanent Health Insurance

Term used to describe contracts of insurance providing continuing benefits in the event of prolonged illness of disability.

Personal Accident And Sickness Insurance

Insurance for fixed benefits in the event of death or loss of limbs or sight by accident and/or disablement by accident or sickness. Accident and sickness may be insured together or separately.


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.

Policy Holder

The person in whose name the policy is issued. (See also insured and assured).


The consideration paid for a contract of insurance.

Products Liability Insurance

These policies cover 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

This policy protects a professional against legal liability towards third parties for injury, loss, or damage, arising from his/her own professional negligence or that of his/her employees.

Proposal Form

A form sent by an insurer to a person requiring insurance so as to obtain sufficient information to allow the insurer to decide whether or not to accept a risk and what conditions to apply if it is accepted. This forms the basis of the contract of insurance.


A statement by an insurer of the premium he will require for a particular insurance.


Making good. Where insured property is damaged, it is usual for settlement to be effected through the payment of a sum of money, but a policy may give either the insured or insurer the option to restore or rebuild instead.


The process of continuing an insurance from one period of risk to a succeeding one.


The peril insured against or an individual exposure.

Risk Management

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


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.


The part of a policy containing information peculiar to that particular risk. The greater part of a policy is likely to be identical for all risks within a class of business covered by the same insurer.

Statement Of Fact

An alternative to a completed proposal form. A statement provided by the insurer clarifying the basis on which insurance is accepted and what conditions apply.

Statute Law

Presently the most important source of law is statute law, otherwise known as Acts of Parliament; which may create entirely new law, over-rule, modify, or extend existing principles of common law and equity, and repeal or modify existing Statute law.

Subject To Survey

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.

Sum Insured

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

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

Liability of the insured to persons who are not parties to the contract of insurance and are not employees of the insured.


A person who reviews and sets guidelines for accepting business on behalf of an insurer.

Utmost Good Faith

Insurance contracts are contracts of utmost good faith (uberrima fides), 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 very strict condition in a policy imposed by an insurer. A breach entitles the insurer to deny liability.

Wear And Tear

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