Motts Godwin Insurance Services

All Classes of Insurance Transacted - Authorised and Regulated by the Financial Conduct Authority

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Glossary of Terms

Specific Definitions


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  1. A
    Accidental damage
    Unintended and unexpected damage caused by sudden and external means
    Accidental damage cover
    Cover under a household policy to provide insurance for standard named events such as fire, storm, flood and theft plus accidental damage cover - e.g. spilling paint.
    Additional Premium (AP)
    An extra charge made for increasing or making amendments to insurance cover e.g. following inclusion of additional items or an additional property or adding an additional motor vehicle
    Age limits
    The limits set by insurers as to the maximum and minimum ages at which cover will be offered
    Aggregate limit of indemnity
    The maximum amount that the insurer will pay in respect of all insured losses occurring during any period of insurance - sometimes there is a limit per claim or occurrence
    All risks cover
    Cover for any unforeseen loss or damage that is not specifically excluded under a policy. The typical exclusions found are depreciation and wear and tear, and other losses due to gradually operating causes.
    Annual Percentage Rate (APR)
    The formula for calculating the true interest rate - The APR is the total cost for credit expressed as an annual percentage rate of charge.
    Approved alarm systems
    An intruder alarm installed and maintained by an approved NSI - the National Security Inspectorate (formally known as NACOSS) or SSAIB - Security Systems and Alarm Inspection Board alarm installation company. Some policies include an intruder alarm warranty which requires the installation and maintenance of an approved alarm as a pre-requisite to providing theft insurance cover.
    Art Loss Register
    A computerised art index set up to log stolen works of art and compare their description against auction catalogues world-wide.
    A policy condition that requires the amount of a claim payment to be reduced proportionately when a policyholder has not insured their property for the full amount of its value or replacement cost.
  2. B
    when insurance cover begins before the date the cover is issued
    Breach of contract
    Failure to perform an obligation arising out of a contract - a breach may give the aggrieved party the right to damages.
    Breakdown recovery
    Insurance which arranges for recovery of vehicles from the scene of a breakdown
    British Insurance Brokers Association (BIBA)
    A general insurance intermediary organisation which represents the needs of brokers, intermediaries and their customers - it aims to enhance the status and recognition of members through the maintenance of high standards, public relations, government and parliamentary contacts.
    Buildings Insurance
    A policy covering the structure of a house or other building against a number of different risks.
    Burst Pipes
    Cover under household policies for damage caused by an escape of water from any tank, apparatus or pipe. Cover restrictions may apply when a building is unoccupied
  3. C
    Cancellation clause
    A clause that permits the insurer to terminate insurance cover during the policy term - the clause sets out the notice procedure the insurer must follow, and the basis for refunding the unexpired premium. The clause also sets out an insured's cancellation rights and gives details about how any refund in premium that might be due back to the insured is calculated.
    A claim is made when a policyholder seeks payment or settlement under the terms of a policy.
    Claims experience
    The cost and frequency of previous insurance claims - it is important for all claims or circumstances that might have resulted in a claim under a policy of insurance to be declared when applying for insurance.
    Claims-made policy
    A policy covering all claims notified during the policy year regardless of when the injury or loss occurred.
    The remuneration paid to a broker/independent intermediary/agent for selling policies.
    Comprehensive Insurance
    A policy covering a number of types of loss or damage
    The 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. A claims condition sets out what the insured has to do in the event of a claim. It covers notice of loss, assistance to the insurer and proofs of loss. A condition may sometimes also be referred to as a warranty.
    Consumer Credit Act 1974
    The legislation controlling all forms of credit supplied to individuals (sole traders and partners). Premium finance facilities fall within the Consumer Credit Act.
    Contents Insurance
    A policy covering the contents of a home or other buildings against a number of different risks - e.g. furniture, furnishings, household goods, personal effects
    Contribution is an insurance principle that applies where a risk is insured on more than one insurance policy (for example personal belongings on a travel and household policy) - the two insurers concerned may share the cost of any claim.
    Cooling off period
    The period allowed to a customer to reflect upon whether or not they which to continue with the insurance arranged for the entire period of insurance - for household insurances it is a 14 day period.
    Cover Note
    A document giving temporary evidence of cover while the policy documentation and certificate are being prepared e.g. often provided for motor insurance
    The insurance provided by the insurer
    Credit Checks
    Both financial and personal checks on individuals to ensure their suitability to rent a property
  4. D
    Dangerous Dogs Act 1991
    Legislation that requires owners of specified breeds that are considered to be dangerous such as pit bull terrier and pit bull terrier types etc. to obtain and carry a certificate of exemption in order to keep their dogs. Breaches of the Act may lead to criminal and, where injury has occurred, civil action against the owner. The Act also makes it an offence to allow any dog to be dangerously out of control in public or a private place where it is not permitted to be.
    Data Protection Act 1998
    Prevents unauthorised or inappropriate use of ‘personal data’ held electronically or manually. Individuals (‘data subjects’) are allowed access to information held about them and given redress if the Act is contravened. Organisations (‘data controllers’) must notify the Information Commissioner about the type of data held by it and how it is used. They must follow eight data protection principles.
    A specific amount that is deducted from a claims settlement by the insurer - claims below the deductible are eliminated. A deductible works in the same way as an excess.
    Defective Premises Act 1972
    Legislation that places an obligation on builders and developers to build dwellings ‘fit for human habitation’. The duty is owed to all persons who acquire an interest in the dwelling for six years from when the work is completed or remedied. It also makes vendors and lessors liable for negligent work on the property carried out before the sale of a property and ‘repairing’ landlords liable for defects of which they know or ought to have known about.
    Direct Sources of Business
    Insurance business where no intermediary is involved
    Domestic employees
    Employees are employed in a household rather than a business where compulsory employers' liability insurance does not apply.
    Driving of Other Cars (DOC)
    A clause in a motor insurance policy that permits the insured to drive vehicles not belonging to him and not hired to him under a hire purchase agreement.
    Dual Insurance
    Dual insurance arises when there are two policies in force that are covering the same risks. A policyholder is often unaware that there are two polices running. Upon discovery each insurer will usually refund 50% of the premium paid.
  5. E
    Emergency Helpline
    Contact telephone line available 24 hours a day 365 days a year to provide guidance and assistance
    Employers' Liability
    A compulsory class of insurance which most employers must have to cover them against claims by employees who are injured whilst at work
    A written amendment to an insurance policy that becomes part of it
    The amount that the policyholder has to pay towards the cost of a claim e.g. - the first £100 or £250.
    The excess may be compulsory or voluntary in which instance the insured's premium is discounted. The term deductible is an alternative term for excess.
    An event that a policy does not cover
    Ex Gratia Payment
    A payment made by an insurance company that is not strictly necessary, under the terms of the policy.
    whether, and the extent to which, an insurer is subject to losses arising from a particular risk
  6. F
    Financial Ombudsman Service (FOS)
    The independent body set up by the government to settle complaints between consumers and businesses providing financial services.
    Financial Services Authority (FSA)
    The UK's statutory financial regulator - with four main objectives: maintaining market confidence; promoting public understanding of the financial system; protecting consumers; fighting financial crime -
    Financial Services Compensation Scheme (FSCS)
    A compensation scheme for customers of authorised financial services firms that have gone out of business or who have ceased trading. Compulsory third party motor insurance and employers' liability is compensated in full; non-compulsory insurance (e.g. household) is compensated at 90 per cent of the claim, with no upper limit applying
  7. G
    Green Card
    A document issued to policyholders motoring abroad as evidence that they have the minimum insurance cover required by the law of the country visited. Not essential for European travel, because minimum legal cover is automatically included in UK policies.
    One who gives a guarantee
  8. H
    Upward movement of land that can result from the expansion of the clay sub-soil after the removal of trees or other vegetation or from the natural movement of earth and rock
    High Net Worth Household Insurance
    Household insurance for individuals with high value buildings and contents who have more complex needs e.g. the need to cover listed buildings, contents on a worldwide basis, fine art, antiques, gold, silver, expensive items of jewellery and possibly a second home
    High Net Worth Insurance
    Insurance for individuals with high value homes, property and cars who require specialist insurance
    High Net Worth Motor Insurance
    Specialist comprehensive motor insurance for individuals with high value vehicles and/or who wish to insure all the household's vehicles on one policy
    High risk property
    Typically ‘jewellery, precious stones or articles made of gold, silver or other precious metals, clocks, watches, photographic equipment (not for commercial use), binoculars, telescopes and the like, musical instruments, antiques, curios and works of art, stamps and coin collections’. They are items that are attractive to thieves.
    Home Emergency Assistance cover
    Cover for home emergencies involving the roof, drains, plumbing, heating, electrics, vermin etc. - features 24 hour call out and an amount for call out charges, parts, materials and VAT - a separate benefit for overnight accommodation if needed is often included as part of the cover.
    House Rebuilding Cost Index
    A recognised index of changes in the cost of rebuilding houses produced by Building Cost & Information Service Ltd of the Royal Institute of Chartered Surveyors. It is used by insurers of buildings under household insurances as the basis of automatic increases in the sum insured on renewal where the policy concerned is subject to indexation.
    Means all persons with whom the policyholder normally resides at home.
    Household Insurance
    Insurance for the structure of a home and its contents, along with any optional covers included with the cover, such as personal possessions insurance or "add-ons" such as legal expenses cover or travel insurance.
  9. I
    Identity Fraud
    Fraud that involves someone pretending to be someone else in order to steal money or obtain the other persons property or goods
    Inception date
    The date on which the insurance becomes operative
    The insurance principle by which policyholders are put in the same financial position after a loss as they were immediately before it
    Insurance where the amount of cover changes automatically in line with an index - e.g. the cost of rebuilding a house or replacing its contents Household building sums insured are linked to a rebuilding cost index and contents cover increases annually in line with an index reflecting replacement costs.
    Insurable Interest
    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 that is covered by a policy
    A service that offers compensation for something that may or may not happen.
    Insurance broker
    An intermediary offering a service on the basis of professional expertise and competence - a broker offers advice and arranges insurance usually as agent for the insured, remunerated by a commission from the insurer.
    Insurance Company /Insurer
    A firm that takes on the risks under the policies it sells in return for the payment of premiums
    Insurance intermediary
    A ‘middleman’ through whom the insurance is arranged
    Insurance premium tax (IPT)
    A tax levied by HM government on insurance premiums. The current rate is 5 per cent of gross premium (17.5 per cent for travel insurance). Risks located outside the UK are exempt e.g. Isle of Man and Channel Islands
    A person or business covered by an insurance policy - also known as the policyholder
    Investment Income
    Income earned on the money held by insurers on behalf of policyholders, having been received in premiums but not yet paid out on claims.
  10. J
  11. K
  12. L
    Landlord Household Insurance
    Household insurance that includes in addition to the usual standard household events, the option to insure against theft or accidental damage by tenants as well as offering cover for other specific risks which a landlord might be exposed to when letting.
    Landlord Legal Expenses Insurance
    Legal expenses insurance that is designed for landlords to help meet the legal costs that might arise in the event of disputes with tenants
    Landlord Rent and Legal Protection Insurance
    Insurance for landlords which in addition to providing landlord specific legal expenses cover also includes rental protection cover to help ensure continuity of rental payments in the event of tenant default.
    Legal expenses insurance
    Insurance for individuals, families and businesses to enable them to meet the cost of defending or pursuing certain civil actions - cover is also available for defending prosecutions and an allowance is made for attendance expenses in connection with court hearings or similar proceedings.
    Legal liability for injury, property damage or financial loss caused to others
    Liability insurance
    Insurance against the legal obligation to pay compensation and costs to third parties and employees for loss, injury or damage - liability may arise through negligence; strict liability; breach of statutory duty; breach of contract.
    Limit of indemnity/liability
    The maximum sum an insured may collect, or for which an insured is protected, under the policy. The liability limit may be: per policy, per event, per occurrence, per year, per ‘originating cause’ or, by way of sub-limit, per specified type of loss.
    An increased charge made as an underwriting measure in respect of a higher normal risk.
    Loss adjuster
    An independent claims expert engaged by an insurer to investigate claims and assess the true extent and value of any loss - Loss adjusters are not usually engaged for smaller, routine losses.
    Loss assessor
    A person with specialist knowledge, appointed by the insured to assess his claim and negotiate a settlement with the insurer or insurer's representative, e.g. loss adjuster
  13. M
    Material (relevant) fact
    Facts or information that would influence the judgement of an underwriter in deciding whether to accept a risk for insurance and on what terms - a prospective insured/insured has a duty to disclose relevant facts at inception, at renewal and in respect of mid-term alterations where there has been a change in risk.
    Managing Agent
    A firm appointed by a landlord to manage their property on their behalf
    Moral hazard
    Character, habits and actions of an insured/ proposed insured and others that influence the possibility and extent of a loss - e.g. carelessness, poor lifestyle, dishonesty
    The creditor of a mortgage
    The debtor of a mortgage
    Motor Insurance
    Covers legal liabilities arising from the use of a motor vehicle. Comprehensive policies also cover damage to the vehicle.
    Motor insurance certificate
    A document issued by insurers to evidence proof of insurance in accordance with the Road Traffic Act 1988 in the form required by law. When cover is cancelled the certificate must be returned within seven days or a lost certificate declaration completed.
    Motor Insurance Database (MID)
    A database set up to combat uninsured driving. It contains information about registered vehicles, policyholder and insurance details. It links with the Police National Computer and helps to aid identification of uninsured drivers and assists fraud enquiries to be dealt with quickly.
    Motor Insurers' Bureau (MIB)
    A bureau established to enter into Agreements with the government to compensate the victims of negligent uninsured and untraced motorists. Every insurer underwriting compulsory motor insurance is obliged to become a member and contribute to the funding. The UK Guarantee Fund compensates victims of the motorists concerned when there is no other source of compensation.
    Motor Legal Expenses
    Insurance which helps an insured to pursue uninsured loss claims, including personal injury, against third parties; and to defend motoring prosecutions
  14. N
    Named drivers
    The persons named in a motor insurance policy as being the only drivers permitted to drive under the policy.
    National Security Inspectorate (NSI)
    The leading approvals and certification body that inspects companies providing home security, business security and fire safety services (formally known as NACOSS).
    No Claim Discount (or Bonus)
    A reduction in a renewal premium to reflect a claim-free record
    Non-standard construction
    Buildings of unusual construction or incorporating materials more combustible than those used in standard construction. The insurer is likely to increase the premium, and may restrict the cover and impose conditions.
  15. O
    Generally an event that results in an insured loss
    Own damage
    In motor insurance, damage to the insured's own vehicle
  16. P
    Policy summary
    A document provided by intermediaries to detail the significant exclusions and limitations of a policy and other information.
    Policy wording
    The document that provides full details of the contract between the insurer and the policyholder
    The amount paid by the policyholder for insurance before adding any insurance premium tax that applies
    Proof of loss
    Documentation presented to an insurer to help the insurer to determine its liability under the policy
    The person or business who applies to take out insurance
  17. Q
  18. R
    Rebuilding cost
    The cost of rebuilding a property following its destruction by an insured event
    The continuance of a policy beyond its initial period
    Renewal Notice
    A notice sent to the policyholder inviting him/her to renew a policy for a further period and stating the premium payable.
    Risk Management Survey
    A survey which is conducted, often on behalf of an insurer, to provide advice and guidance on the security and to put forward risk improvements for high value homeowners
  19. S
    A form of protection to safeguard and protect assets
    Security Systems and Alarm Inspection Board (SSAIB)
    SSAIB is a leading Certification Body offering a wide range of schemes for providers of electronic security, fire systems and guarding security services in the UK and Republic of Ireland.
    Subject to survey
    A phrase to indicate that the insurer's acceptance of a risk is provisional pending completion of a survey and possible implementation of risk improvements
    Sum insured
    The amount specified as the maximum amount that the insurer will pay under the policy. The limit is normally set by the insured and should be the full value of replacement. The sum insured is normally used as the basis for calculating the premium.
    Standard construction
    A property insurance term referring to buildings constructed of brick, stone or concrete and roofed with slates, tiles, metal, asbestos, concrete or sheets or slabs of incombustible mineral.
    Standard excess
    An excess that is written into the standard or basic policy e.g. the young and inexperienced drivers excess in motor policies
  20. T
    Tenant's liability
    The liability of a tenant for loss or damage to the landlord's property - the tenant's liability section of a household contents policy covers liability for buildings damage when caused by insured peril
    Territorial limits
    The geographical limits within which the insured event or loss must occur
    Third Party
    Someone involved in a claim who is neither the policyholder nor the insurer.
    Total loss
    when the subject-matter of insurance is lost, destroyed or damaged beyond economic repair.
    Travel Insurance
    Insurance 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. Cover can often be extended to include winter sporting / sporting activities
  21. U
    When the sum insured is not enough to cover the maximum possible loss or damage
    A skilled person who decides whether to accept a risk and calculates the premium to be charged
    Utmost Good Faith
    The principle of insurance that requires proposers to give all relevant information to the insurer
  22. V
    A statement or certificate confirming the value of items of insured property, usually prepared by an independent professional
    Voluntary excess
    An excess for which an insured volunteers to take in order to get the benefit of a reduced premium
  23. W
    A condition that must be complied with to obtain or maintain insurance coverage against certain risks. e.g. - for theft cover, there may be a requirement to install and maintain an approved intruder alarm system or to install an approved safe
    A damaged vehicle which is not repairable or one that would cost more to repair than the car was worth before the damage occurred - also known as a "total loss".
  24. X
  25. Y
  26. Z
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