Glossary

B

Basis of Settlement

Insurers normally agree to settle claims on either a Reinstatement or Indemnity basis. Reinstatement is basically ‘New for Old’, but not better than when the item was new. Indemnity basis of settlement attempts to put you back in the same financial position as you enjoyed immediately before the loss and makes an allowance for Wear & Tear. See also Indemnity, Reinstatement and Wear & Tear.

C

Claims Notification

It is a Condition Precedent of all insurance policies that and claims, or incidents that may give rise to a claim, are notified to insurers promptly, and certainly within 7 days of the occurrence. This is particularly important for Liability and Injury claims as delaying notifying insurers can prevent them the chance to fully investigate the matter, potentially prejudicing the insurer’s position, and they may refuse to deal with the claim on your behalf in such circumstances.

Conditions

Conditions are slightly different to warranties but breaching them will have the same effect as breaching a warranty. The policy may be treated as void from inception and no claims will be paid. Conditions will require you to do something or create a responsibility, but only apply to one section or area of a policy so breaching an unrelated condition will not result in the whole policy becoming void. See also Conditions Precedent, Exclusion and Warranty.

Conditions Precedent

A very strict condition in a policy imposed by an insurer. A breach entitles the insurer to deny liability. See also Conditions, Exclusion and Warranty.

Contract Certainty

You should not enter into a contract of insurance until or unless you are fully certain of the terms of the contract, the cover you will receive, and the relevant Conditions, Warranties and Exclusions applicable. We will always send you a full written Quotation, a copy of the provider’s Key Facts summary of cover document, details of any Conditions, Warranties and Exclusions applicable, the option of seeing a copy of the provider’s full Policy Wording to read before proceeding with cover, and a copy of our own latest Terms of Business before incepting cover for you, to ensure that you are certain of and satisfied with the cover we have recommended. See also Cooling Off Period.

Cooling Off Period

Some, but not all, general insurance contracts contain a Cooling Off Period, during which time you can cancel the contract without penalty. Please either consult with us or check your policy wording for details as to whether your policy contains a Cooling Off Period. See also Contract Certainty.

D

Day One Average

Where a Material Damage cover is insured under “Day One” you decide on the “Declared Value” which, to avoid underinsurance, should be adequate at the beginning (Day One) of each period of insurance. The policy then provides cover up to a specific sum insured, typically 115% or 130% of the “Declared Value”, to make allowance for changes in value during the period of insurance. Such changes might be brought about by inflation, changes in rates of currency or other factors out of your control. You still need to notify us of the acquisition of extra Stock or other insured assets

E

Excess

This is the first part of a loss than insurer will not pay. You may have a compulsory excess or you may choose one to reduce the premium

Exclusion

A provision in a policy that excludes the insurer's liability in certain circumstances or for specified types of loss. See also Conditions, Conditions Precedent and Warranty.

F

Fair Presentation of Risk

You have a duty to make a fair presentation of the risk you wish to insure. This applies prior to the start of your policy, if any variation is required during the period of insurance and prior to each renewal. A fair presentation requires clear and accessible disclosure of every material fact/circumstance which the person(s) responsible for arranging your insurance should know, or ought to know, following a Reasonable Search or, failing that, sufficient information to put a prudent underwriter on notice that it needs to make further enquiries to reveal those material circumstances. See also Non-Disclosure, Reasonable Search and Utmost Good Faith.

G

General Condition of Average

If you do not insure for the full amount then your claim may well be reduced. If you deliberately under insure then the insurer may have a right to avoid the policy from inception unless you tell them that the sums insured do not represent the full value of something at inception. If that is the case let us know and we may be able to arrange insurance on a special basis. See also Average and Underinsurance.

Gross Profit

Now more commonly referred to as “insurable gross profit”, it is not the gross profit figure from your accounts. As a rough guide your gross profit sum insured should be in the region of turnover less purchases. Remember also to consider the level of turnover you might be experiencing one year from inception plus your chosen indemnity period. It could be much higher than your current turnover of the historical turnover from your accounts. See also Gross Revenue.

Gross Revenue

The corollary of Gross Profit for a business that does not rely on the purchase and processing or sale of stock and raw materials. This cover is typically used in reference to office type risks. See also Gross Profit.

H

I

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). Where an item is insured on an “Indemnity” basis a deduction for wear and tear will be made when settling any claim for damage or loss. “Wear and Tear” is the amount deducted from claims payments to allow for any depreciation in the property insured which is caused by its age or usage. See also Basis of Settlement and Wear & Tear.

Indemnity Period

This is the period after an insured event which it takes to get back to the position an insured would have been if the loss had not occurred. IT IS NOT the period to get back up and going again. In the event of a total loss it is rare indeed that a business other than a professional or office based business could get back to the position it would have been in just 12 months.

Insurable Interest

In simple terms, if anyone likely to lose money, property or rights in the event of a loss wants to be paid out under the policy, then they must have their names mentioned on the policy. It is no good insuring a property owned by John in a policy owned by Sam unless there is a note in the policy making the ownership clear. If nothing is mentioned then the insurer will assume that everything is owned by the policy holder.

Insurance Act 2015

The Act is effective from 12 August 2016 and applies to all new commercial insurance contracts incepted on or after that date and all amendments to an existing commercial insurance contract in existence on that date.

Insured Perils

These are essentially the things you are covered for under the Material Damage section of a policy and can include Fire, Lightning, Explosion, Aircraft, Earthquake, Riot, Theft, Storm, Flood, Impact, Escape of Water, Accidental Damage and Subsidence; please refer to your policy wording for full details.

J

K

L

Limit of Indemnity

The maximum amount payable. For Employers’ Liability and Public Liability policies this is a limit for all claims arising out of a single cause, whereas this is normally stated as an aggregate amount payable in any one period of insurance in the case of Products Liability or Financial Loss insurances. In the case of Professional Indemnity insurances the Limit of Indemnity may be expressed as one or the other.

M

Material Fact

A fact that would influence an underwriter in either accepting or declining a risk and, if accepting, at what premium. Basically, if you think that by giving an underwriter some information it may increase the premium or prevent them providing insurance then it is probably material and you must advise us of the information.

Minimum & Deposit Premium

Where a premium is stated to be a “Minimum & Deposit” no refund will be allowed for cancellation. Nor will any refund be allowed when the annual declaration is submitted, though an additional premium may be charged.

N

Non-Disclosure

Failing to advise an insurance company or underwriter of a Material Fact. This could result in your insurance becoming void and an insurer not paying out a claim. See also Duty of Disclosure.

O

P

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. See also Statement of Fact.

Q

R

Reasonable Search

It is your responsibility to perform a reasonable search of information available to you about your business. This can include a range of information about you and your management team (if applicable), as well as information about your business, what it does and how it does it. The search will help draw out anything unique about you and your business that the insurer needs to know. See also Fair Presentation of Risk, Non-Disclosure and Utmost Good Faith.

Reinstatement

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. See also Basis of Settlement and Day One Average.

S

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. See also Proposal Form.

Sum Insured

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

T

U

Underinsurance

You might be considered to be underinsured if the level of cover you have selected falls short of the actual amount necessary to provide full insurance after taking into account the Basis of Claims Settlement provision contained in your policy. See also Average and General Condition of Average.

Unoccupied

All property based insurance policies contain an Unoccupied or Empty Buildings warranty or clause that must be strictly observed. If you or a tenant vacates the insured property, either wholly or in part, then you must tell us as it is a Condition Precedent to the policy that insurers be notified. Full perils only apply for a short time from the date of unoccupancy, then become restricted to Fire, Lightning, Explosion & Aircraft Only, and insurers apply the Unoccupied or Empty Buildings warranty or clause accordingly and may choose to charge an additional premium to reflect the increased risk to them until the property becomes occupied once again.

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 or reduce their liability. See also Fair Presentation of Risk, Reasonable Search and Non-Disclosure.

V

W

Warranty

A very strict condition in a policy imposed by an insurer. A breach entitles the insurer to deny liability. See also Condition Precedent.

Implied Warranty

Some warranties are implied. For instance disclosure of all material facts is in effect a warranty. There is an implied warranty in that you must keep a building in a good state of repair and not leave it unoccupied or neglected.

Written Warranty

Most warranties are written and detailed in the policy schedule and the wording will usually start with “it is warranted that.....”

Wear & Tear

“Wear and Tear” is the amount deducted from claims payments to allow for any depreciation in the property insured which is caused by its age or usage. See also Basis of Settlement and Indemnity.

X

Y

Z