The Insurance Glossary You’ll Actually Understand.
The Insurance Glossary You’ll Actually Understand.
Let’s face it – Insurance isn’t exactly the most intuitive topic. Whether it’s your home policy, car insurance or business cover, the fine print can be filled with some confusing terminology. That’s where we come in.
As insurance brokers, we believe in making things simple and clear to keep you stress free and make the insurance procedure a lot more straightforward. So here’s a quick alphabetical guide to help you understand some of the terms in insurance.
A
- Accidental damage – Unexpected damage caused suddenly (not wear or tear).
- Act of God – A natural event outside human control (e.g. flood or storm). Often not covered unless stated.
- Annual premium – The total cost of your insurance if paid once a year.
- Additional premium – An extra charge due to changes in your cover, risk level or circumstances.
B
- Buildings insurance – Covers the structure of your property (walls, roof, etc).
- Broker – A regulated adviser who compares insurers on your behalf and helps you find the best policy.
C
- Cancellation fee – A charge for ending your policy early.
- Claim – A formal request for your insurer to pay for a loss or damage.
- Claim excess – The amount you pay towards a claim. You can choose a higher voluntary excess to lower your premium.
- Contents insurance – Covers personal possessions inside your home (e.g. tech, clothing, etc).
- Comprehensive cover (fully comp) – Motor insurance that covers damage to your own vehicle and others, regardless of who’s at fault.
D
- Defaqto rating – An independent star rating (out of 5) used to show the quality of financial products.
- Duty of disclosure – Your legal responsibility to give full and honest details when applying for insurance.
E
- Endorsement – A change or addition to the original policy (e.g. adding a new driver).
- Excess – The fixed amount you must pay when making a claim. Comes in two types:
- Compulsory excess – set by the insurer.
- Voluntary excess – chosen by you to adjust premium.
- Exclusion – Something your policy specifically does not cover.
F
- Financial Ombudsman Service (FOS) – An independent body that handles complaints between consumers and financial firms.
- Flood Re – A UK government-backed scheme that helps people in high-risk flood areas get affordable home insurance.
G
- Gap insurance – Covers the difference between what your car insurer pays if your vehicle is written off, and what you originally paid (or still owe on finance).
- General insurance – A broad term for non-life insurance policies like home car, travel, etc (basically anything that isn’t life insurance).
- Geographical limits – The area or regions where your insurance is valid. Some travel policies only cover Europe, not worldwide.
- Goods in transit insurance – Covers items being transported from one location to another – often used by delivery drivers, couriers, or tradespeople.
- Grace periods – A short time after a payment due date where your policy may still remain valid before it’s cancelled for non-payment. Mot all policies offer this.
- Gross premium – The total price you pay for insurance, including Insurance Premium Tax (IPT) and any admin fees.
H
- Hazard – A condition or situation that increases the change of a loss or damage (e.g. faulty wiring is a hazard for fire).
- High-risk items – Valuable items (like jewellery, watches or electronics) that need to be specifically declared on your contents due to their high value.
- Home emergency cover – Optional add-on to home insurance that covers urgent issues like boiler breakdowns, burst pipes, or pest infestations – 24/7 call-out included.
- Household insurance – A general term that combines buildings insurance and contents insurance.
- Hazardous activity (travel insurance) – Certain activities (e.g. skiing, scuba diving, skydiving) that are considered higher risk and may require extra cover in your travel insurance.
- Hire and reward – Insurance cover required if you use your vehicle to carry passengers or goods for payment – used by couriers, taxis and delivery drivers.
I
- Indemnity – A principle of insurance that returns you to your pre-loss financial position – no better, no worse.
- Insurance Premium Tax (IPT) – A government tax included in the price of your insurance policy.
- Insurer – The company that underwrites ad provides your insurance cover.
L
- Legal expenses cover – An optional add-on that covers legal costs (e.g. property disputes, employment issues, etc).
- Loss adjuster – Am independent professional sent by the insurer to assess the value and legitimacy of the claim.
- Loss assessor – Works for you, not the insurer, to help prepare and negotiate a claim.
M
- Market value – The price something would sell for on the open market – used in claims, especially for cars.
- Material fact – Any important information that might affect the insurer’s decision. This must be declared.
N
- Named driver – Someone specifically listed on your car insurance policy who’s allowed to drive the vehicle.
- No Claims Discount (NCD) – A reward for not making a claim – builds up each year and can significantly reduce premiums.
P
- Policyholder – The person or business named as the owner of the insurance policy.
- Policy schedule – A document outlining what’s covered, policy limits, and key personal details.
- Premium – The amount you pay for your insurance (monthly or annually).
- Public liability insurance – Covers you or your business if someone is injured or their property is damaged because of your actions.
R
- Renewal – When your policy comes to an end and you’re offered new terms to continue for another year.
- Risk – The likelihood of a claim being made – used by insurers to calculate premiums.
S
- Schedule of insurance – A key document detailing cover types, amounts insured, start and end dates.
- Sum insured – The maximum amount your insurer will pay for a claim.
T
- Third Party Only (TPO) – The minimum legal car insurance in the UK – covers damage to others but not your own vehicle.
- Third Party, Fire & Theft (TPFT) – Covers other people’s vehicles and property, plus your car if it’s often or damaged by fire.
- Total loss (write-off) – When the cost to repair your car is more than its value.
U
- Underinsurance – When the amount you’ve insured for is too low – this could reduce your payout in claim.
- Underwriter –The person or department that assesses the risk and decides your policy terms and price.
V
- Valuation – An expert assessment of how much an item is worth for insurance purposes (e.g. jewellery, art, or property).
- Void policy – A policy that is declared invalid – often because of non-disclosure or false information.
- Voluntary excess – The portion of a claim you choose to pay yourself, in addition to the compulsory excess.
- Vehicle category – Cars are grouped into insurance categories (1-50) based on their cost, performance and repair costs.
W
- Warranty (in insurance) – A condition you must follow under your policy – if you break it, cover might be invalid.
- Wear and tear – Gradual damage from regular use. Usually excluded from cover.
X
Y
- Year of manufacture – The year your car or item was build or produced – used to determine its current value or depreciation in a claim.
- Yield (in property insurance) – In commercial property insurance, “yield” can refer to rental income generated by the property, which may be relevant in loss of rent cover.
Z
- Zero depreciation over – A policy feature where the insurer pays the full replacement cost of a new vehicle part with no deduction for depreciation. Rare in the UK but can appear in prestige or niche cover.
Understanding insurance jargon doesn’t have to be confusing. Whether you’re a first-time policyholder or reviewing your cover, knowing what terms like excess, underwriter, or endorsement actually mean can help you make smarter, more confident choices.
If any of these terms still leave you scratching your head – or if you’d like help reviewing your current insurance – we’re here to help! As your local insurance broker, we’ll break it down in plain English and ensure that you get he right cover for your needs. Just give us a call!
Thank you for reading,
Lilly Morgan – T Link Work Placement Student