Insurance jargon buster

The insurance industry is full of legal terms, which while essential for legal process, are not necessarily easy to understand.


Here at Homelyfe we want to demystify insurance to make it as straight-forward and easy to understand as possible. So with that in mind, we’ve put together a glossary of insurance terms to help you when taking out your policy.


From Addendum to Vis Major, we’ve covered the basic legal jargon you need to know, as well as general terminology and terms specific to home and contents insurance (listed in alphabetical order.)



Part of the legal insurance contract, the addendum is a document that sets out any agreed alterations to the original policy. It’s also known as an endorsement and is attached to the final contract.


If you want to cancel or end your policy before it is due to expire, you are usually given a cancellation period during which you have to give notice. If you cancel your policy, it will terminate your insurance and you will not be able to make a claim.


An insurance claim is when you make a formal request to your insurer for them to make payment on a term of the policy. E.g. with contents insurance, you can make a claim if your house is burgled and an item listed on your insurance policy is stolen.


This is the amount that you pay the insurer before they pay you for losses. i.e. the insurer will pay you the amount, less the deductible if you make a claim.


The excess is the amount of money you are expected to pay towards a claim. Therefore if your excess is £500 and your television, worth £400 breaks, you could not claim on it. However, if your £1,000 laptop is stolen, you could claim and you would just have to pay £500 to replace it, the rest would be covered by your insurance. Your excess amount is voluntary – the higher your excess, the lower your premium (see below) will be. The bedroom rated policy has a ‘compulsory excess’ – so if the customer takes a voluntary excess then this would be added to the compulsory payment.

Inception Date

The date from which the policy comes into effect.


The person who buys (and is named in) the insurance policy and whose property is insured.


An insurance company or Lloyd’s underwriter (see definition below) who, in return for a premium agrees to compensate losses, liability or damages incurred as laid out in the contractual agreement when the insured person pays the premium as a result of some accident or occurrence.


Offers advice to clients and arranges their insurance, but is not an insurance company themselves., Insurance brokers (full-time specialist with professional skills in handling insurance business) and financial advisers are examples of intermediaries. Since January 2005 intermediaries and brokers must be registered with, and regulated by the Financial Conduct Authority.


The limit is the maximum amount that an insurer will pay out. It is usually specified ‘per accident’, ‘per event’, ‘per occurrence’ or ‘per annum’.

Lloyd’s underwriter

Someone working for Lloyd’s of London  whose job is to decide whether they can offer insurance against a particular risk and how much to charge for that insurance

No claims discount

If you have not made a claim on your policy before, upon renewal you may be given a discount as you will be seen as a ‘safe investment’ for the insurer.


This is the document detailing the terms and conditions of your insurance agreement. The document is legal evidence of your contract and agreement to insure. It is issued by the insurer when the term starts (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 insurance premium is the amount that you pay for the insurance policy, i.e. the cost of taking out insurance.


When your insurance policy has expired, you can renew the period and continue your insurance cover. You may be able to reduce your premium or alter your excess at this time.


The policy schedule outlines the cover provided, including details of the policy holder, the cover given, limit, sum insured and excess.


In insurance, the warranty is the promise from the customer to say that the facts they have provided are true. Breach of warranty can void the contract.


(Loss) Adjuster

A person who investigates claims and recommends settlement options on behalf of the insurer.

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.

Cooling off period

This is the time you have to cancel the policy after purchase. This will be specified in your contract.

Gross premium

This is the total premium cost before any discounts are deducted, or broker fees and commissions are added to the bill of payment.

Insurable interest

For an item to be insured, it must be deemed to have ‘insurable interest’, which means that you would experience a financial or other kind of loss if the item were lost, stolen or damaged. You must also prove that you own the item for it to have insurable interest.


The non-renewal of a policy for any reason, i.e. If a policy is not renewed, either by the insurer or the customer, it will have ‘lapsed.’


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

Material fact

Any fact which would influence the insurer and that must be disclosed by the proposer. This includes any fact that could influence acceptance, decline or the terms and conditions of the contract.


A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft.

Statement of fact

An alternative to a completed proposal form. It is provided by the insurer to clarify terms and conditions.

Sum insured

The maximum amount payable by the insurer if you make a claim under your 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

Protects you (the insured) from legal liability from another, i.e. a third party.


A person who accepts business on behalf of an insurer. (See also Lloyd’s underwriter).

Utmost Good Faith

This is a legal obligation that requires insurance contracts to be made in utmost good faith (uberrima fides), which means that both parties have a duty to disclose all material facts relating to the proposed insurance.

Vis major (Act of God)

Defined by the case Nugent v Smith (1876) as “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”.

Without Prejudice

If a document, letter, or discussion is made “without prejudice”, it cannot be used as evidence in a court case and cannot be taken as the last word on the matter, nor can it be used as a precedent in legal matters should there be a dispute or negotiations for a settlement.


Accidental damage cover for Buildings

This is usually sold as an optional add-on to your policy to protect you from any sudden and unintentional physical damage to your home (the structure of the building).

Accidental damage cover for Contents

Again, this is usually sold as an optional add-on to your policy to protect you from accidental damage to your possessions, e.g. if a television fixed to the wall falls off its mount and smashes.

Actual cash value

This is how much will be awarded for repayment for items. It is worked out as the replacement cost minus the depreciation of the item.

Escape of water

This is damage caused by water that has leaked or escaped from a fixed installation, e.g. bath, shower or radiator.

Mortice lock

A mortice is a lock that is usually fixed to front and back doors for security. It is a lock that is set within the body of the door or a mortice, rather than simply being attached to the surface of the door, which makes it more secure. As part of the British Minimum Protections’ Clause, all external doors must be fitted with a five-lever mortice lock.


This stands for Insurance Premium Tax – it is simply an indirect tax payable on all general insurance premiums in the UK.

Insurable value

This is the maximum amount the insurer will pay if the asset is deemed a total loss. E.g. the insurable value of a building is the replacement cost or cash value of a building which standard insurance policies provide indemnity cover for. This value is less than market value of the property as it does not include the land the building stands on.

Mechanical failure

When an appliance or car stops working for no clear or apparent reason. You should check whether your policy covers this or not.

Personal possessions

Items that belong to you, including but not limited to: Mobile phones, glasses, sunglasses, laptops, tablets, e-readers, video games, wallets, purses, clothes, cameras, jewellery, watches, luggage, clothing, sports equipment, bicycles.

Rebuild cost

This is the total amount it would cost to completely rebuild your home if it was destroyed or damaged beyond repair in a flood or fire – this is not the same as the market price of your property as it includes the cost to clear the site and legal fees. If you have a mortgage, the rebuild cost can be found in your lender’s valuation report.

Sanitary fittings

Any bathroom fittings or sinks, e.g. bathroom and kitchen sinks, bidets, toilets, showers and baths. Swimming pools are not included.

Trace and access

This is the process of finding out where leaks in your home are coming from and repairing the issue. The point of a leak is not always obvious but may be indicated by signs such as damp or wet walls or ceilings.

Wear and Tear

This is the amount deducted from claims payments to allow for any depreciation in the property insured – wear and tear is considered inevitable with the use of property. Insurance is designed for people to claim against unforeseen losses, not damage as a result of day-to-day use.



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