As with many professions the insurance industry has a bewildering, often intimidating language all of its own and whilst it may seem that this language is used to confuse the layman, it is in fact used for the removal of doubt.

This brief glossary is far from exhaustive but we hope that it is of interest, of course it should not be used as a legal reference but here at h2i we are always pleased to offer clear, straightforward advice and explanations.

If there are any terms that you would like to discuss in more detail, or should you have a specific, specialist question, please call us on 0203 328 9999 or email your enquiry to

A ~ B ~ C | D ~ E ~ F | G ~ I | L ~ M ~ N ~ O | P ~ R ~ S | T ~ U ~ V ~ W

A ~ B ~ C

An addition to a document setting out agreed alterations to a contract


Additional Premium
Payable by the insured party as a result of a policy amendment, this may reflect changes to risk, the sum insured or a change in terms and conditions


Advance Profits Insurance
Business interruption insurance based on expected profits of a new venture or project usually before earnings have commenced


Aggregate Limit of Indemnity
The maximum amount that an insurer will pay out in claims to a client in a given period


All Risks
This is something of a misnomer but is effectively an inclusive term that ‘you are covered unless otherwise excluded’ and then the exclusions are listed. It is similar to, though not the same as, fire, full perils and accidental damage


A term generally used in respect of life cover


In the event of under-insurance, this clause entitles the insurer to pay any claim in direct proportion to the amount of under-insurance represents to the full value



Business Insurance
Protection against losses due to unforeseen circumstances by transferring the risk to insurers in exchange for payment of premium


Business Interruption
Insurance cover for loss of turnover/revenue following an insured event that interrupts the normal operations of a business


The early termination of a contract or policy. The specific terms in respect of cancellation of the policy should always be checked as insurers are not necessarily obliged to give pro-rata or even any return of premium and can depend on the cause of cancellation. There could also be a required notice periods and cancellation fees may be payable


A request for payment from and insurer due to an insured event occurring causing loss, damage, accident or illness etc


Claims Made Basis
This refers to a policy providing cover for claims made against an Insured during the Policy period and subject to notification during the period. If the claim relates to an occurrence or loss date prior to the current policy period, then the current policy must have ‘retroactive’ cover, in other words cover for past activities prior to inception of the current policy.


Commercial Combined Insurance
A Policy that combines a range of optional covers under one single insurance contract (that were historically purchased separately)


Common Law
Part of English law that evolved from custom and judgements handed out by judiciary, sometimes called judicial precedent (as distinct from statute and criminal law)


Deliberate withholding of information relating to risk in an effort to mitigate effect on premiums, gain coverage when it might otherwise be withheld or profit from a claim that might otherwise be reduced or refused. Such an act would give insurers the right to void the Policy


Consequential Loss
Indirect losses arising from an event of direct damage, can also be known as loss of income, loss of profits etc


Cover Note
A document issued by or on behalf of the insurer confirming details of the cover. Some circumstances such as motor insurance dictate a cover note as a legal requirement


D ~ E ~ F

The uninsured amount of a claim, only the amount in excess of this is payable by the insurer (also known as excess)


Economic Limit
A limit within Business Interruption cover that limits the insurer’s liability in respect of additional cost of working to being no greater than the amount the insurer would have to pay out in respect of loss of Gross Profit


Employers Liability Insurance
Cover for an employer’s liability at law for injuries to employees (including temporary employees, volunteers, labour only sub-contractors and work experience) for bodily injury arising out of the course of their employment. This is compulsory within the UK (with very few minor exceptions)


Documentary evidence of a change in the wording of or cover provided by an insurance policy


The uninsured first amount of any claim/amount that must be borne by the Insured. This excess may be compulsory as part of the policy or (an additional) voluntarily entered into in order to reduce premiums


Excess Layer / Excess of Loss
Coverage that is purchased in addition to a primary policy to increase the total amount of coverage (often because the primary insurer does not wish to provide the higher amount of cover sought or it is more cost effective to arrange to spread the risk). The insurer providing the excess layer refers to the primary policy as underlying insurance


A specific elimination of a cover for a certain type of loss


Ex Gratia Payment
A payment made without acceptance of (legal) liability


Financial Ombudsman
Established to oversee the interests of policyholders, dealing with complaints which remain unresolved via the companies own processes. The decision of the Ombudsman is binding to the insurer but the insured may appeal


G ~ I

Gross Premium
The premium including brokerage/commissions before the addition of Insurance Premium Tax


Gross Profit
Turnover less purchases (plus any change in stock) and any other savings that would be made were the business not operating. This is not the same as the accountants’ calculation of Gross Profit which usually deducts wages and other potentially unavoidable costs


Inception Date
The date from which the Policy cover commences


Increased Cost of Working
In respect of an interruption to the business following an insured event this is the additional expenditure incurred by the insured for the purpose of reducing or avoiding a reduction in turnover/revenue. Additional Increased Cost of Working is paid in addition to loss of revenue to avoid the economic limit when it is essential for business to continue


The principle where the insurer seeks to place the insured in the same position occupied immediately before an event


Indemnity Period
The period of cover in respect of Business Interruption provided for disruption to the business as a result of an insured event which normally starts at the time of occurrence


Insurable Interest
For a contract of insurance to be valid the policy holder must have an interest in the insured item that is recognised by law


Insurable Value
The value to be paid out by the insurer in case of loss


Insurance Broker
An intermediary who advises clients and arranges insurance cover, Insurance Brokers must be regulated by the Financial Conduct Authority


Insurance Premium Tax
Introduced as part of the Finance Act of 1994 this tax is levied on most general insurance risks in the UK. This is not the same as VAT and is not recoverable


The person or company who is insured


A company or individual who underwrites an insurance risk, undertaking to pay in the event of a claim covered under the Policy


L ~ M ~ N ~ O

The expiry and non-renewal of a policy


The insurers maximum liability as agreed in the contract, this may be expressed as per event, per annum or per occurrence


Often defined as either the loss of an item or damage to the item which is the subject of the insurance coverage


Loss Adjuster
Loss Adjusters are appointed by insurers to carry out detailed investigations of claims on behalf of the insurer. The Loss Adjuster is intended to be an independent expert tasked to negotiate a settlement which is agreeable to all parties in a claim, though they are paid by the insurer


Loss Assessor
Acts on behalf of the claimant (if appointed by them) in return for a fee or percentage of the amount of the claim paid by the insurer


Material Damage Proviso
Within business interruption insurance there is a requirement for there to be loss or damage to property by an insured peril under a material damage policy and the insurer of said property must have admitted liability under their policy for such for there to be a claim under the business interruption cover. There are some specific extensions that do not require such


Material Fact
Any information which would influence the insurer’s acceptance of a risk and the terms that they would apply including level of premium


Failure to take proper care over something (failure to do that which a prudent and reasonable man would do)


Net Premiums
Gross premiums net of commission, brokerage fees, taxes, reinsurance fees or any combination of these



New for Old
Insurers agreement to pay the cost of replacement without deduction for depreciation, wear and tear



No Claims Bonus
A premium rebate or discount given by the insurer to the insured if no claim has been made during a previous period or periods



The failure by the insured to disclose a material fact before acceptance of the risk by the insurer or a change to a material fact during the period of insurance


an event or specific happening as defined within a policy


Occurrence Basis
Coverage is provided for a period and a cause of a claim must have occurred during the Policy period. See also claims made basis

P ~ R ~ S

Package Policy
This provides various covers automatically included as part of the ‘standard’ package under one single insurance contract (that were historically purchased separately) and may also offer optional covers


A specific risk, event or cause of loss that may be included or excluded from an insurance policy



A document detailing the terms and conditions applicable to every part of an insurance agreement. The Policy document/wording should be read in conjunction with the Insurance Schedule and any Statement of Fact issued


The monies to be paid by the insured in exchange for insurance coverage


Products Liability Insurance
Covers the insured’s legal liability for damage to property or injury to persons caused by defects in goods sold, supplied, erected, installed, repaired, treated tested and/or manufactured by the insured


Professional Indemnity Insurance
Covers the insured legal liability for their breach of professional duty (such as defective design, wrongful advice, error, omission or the failure of a system to perform it’s intended function) resulting in financial loss to their principal


Proposal Form
A form providing material facts and information from the proposer (who is to become the insured) in order to obtain insurance from an insurer. The proposal form is said to form the basis of the contract between the parties. It is the proposal form which is used by the insurer to decide whether or not to accept the risk and what conditions and warranties to apply if the risk is accepted


The individual or company seeking cover (then becoming the Insured once cover is accepted)


Public Liability Insurance
Covers the insured’s legal liability for damage to property or injury to persons arising from business activities of the insured


Making Good on goods or property in lieu of a financial settlement of a policy


Retroactive Cover
Cover for past activities prior to inception of the current policy


Retroactive Date
The date from which retroactive cover applies


Return Premium
Monies due back to the Insured as a result of reduction of risk or cancellation of cover


The peril or exposure insured against


The recovery of all or part of an item on which a claim has been paid


The details of the cover provided to the Insured which is specific to them and will list the covers and may include any specific endorsements, terms, conditions and warranties that the insurer has decided to apply


Statement of Fact
A document which sets out the material facts disclosed by the proposer or assumptions they have made about the proposer in offering terms (this typically is issued by the insurer to replace the need for a proposal form in an effort to reduce the burden of administration on smaller policies)


Statute Law
Law passed by Act of Parliament which may overrule, modify, bring together or create entirely new laws


Subject to Survey
Used by an insurer to signify provisional acceptance pending an investigation by a risk surveyor. The insurer may then reject the risk, accept the risk as it is or insist that any risk improvement requirements stipulated by the surveyor are complied with in full by an agreed deadline


T ~ U ~ V ~ W

Third Party
A claimant against the Insured


Underlying Insurance
The insurer offering/providing the first amount/level of insurance (see also excess of loss/excess layer)


A person who accepts risk in exchange for premium either on their own account or on behalf of an insurer


Utmost Good Faith
The Insured has a duty act honestly and sought to disclose reasonably and accurately all material facts and that any claim is presented honestly and fairly. The Insurer has to assume that the Insured has done so unless there is evidence to the contrary. In other words they have to assume the Insured has acted with utmost good faith in his dealings with the insurer. Any failure to do so is likely to result in the Policy being void


The term used when an insurance contract is capable of being


A strict condition applied to a policy which, if breached, entitles an insurer to void the Policy


Wear and Tear
The amount deducted from claims payments allowing for depreciation caused by usage


Without Prejudice
Any offer marked as such cannot be admitted in evidence without the agreement of both parties. Also, any claim paid without prejudice cannot be used as precedent in future cases



Call us on 0203 328 9999 or fill in the below form to get in touch
Unit C1b (5), Fairoaks Airport, Chobham, Surrey, GU24 8HU


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