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Home Owner Insurance Glossary Insurance is littered with jargon, we hope the following is useful to you.... Accident & Sickness Insurance. Accident Insurance covers you in the event of an injury or death., either on a weekly benefit basis up to a specified time limit or it will provide you with a capital sum if you loose a limb etc. To Accident Insurance, you can usually add Sickness cover. The cost of the covers depends on your occupation Act of God – An act of god is an event that is not the fault of any individual. such as a Storm or a Tempest or Lightning. Acts of God can be insurable and you used refer to your policy document to see if a particular peril is covered or not Actuary - An Actuary is a professional person qualified to apply mathematical principles to solving long-term financial problems, they are employed by insurance companies in particular life insurance companies to help calculate life expectancy tables and to calculate premiums. Additional Premium - A extra premium payable by the insured as a result of a change to an existing policy. Additional premiums are usually charged if the insurer calculates that the risk has increased. Frequently disclosing convictions to a motor insurer can result in extra premium being required Additional Voluntary Contribution (AVC) - An additional contribution made By a pension scheme member to his pension plan to help boost the final payout. Agent - This is a person or a company who acts for one or a number of insures when selling insurance products. Agents tend to deal with only a small number of insurers. Larger concerns tend to refer to themselves as Brokers or Intermediaries Aggregate Limit of Indemnity – This is the maximum amount an insurer will pay under an insurance policy in respect of all accumulated claims arising within a specified period of insurance. So if the aggregate limit of Indemnity is £5,000,000 that is the maximum the insurer will pay out for claims arising within the policy period. All Risks Insurance. This usually refers to an extension under a Home Contents Insurance policy and provides wider cover for such things as jeweler & Cameras ( Items taken out of the Home) The terms is also used in other policies to indicate cover that is wider than the normal. Whilst the term All Risks would indicate that everything is covered, this is not the case and a list of exclusions should also be studied.-. Annuity - This is a term used by a life assurance company for a product where they will someone a regular income, usually for life, in return for a lump sum payment. There are many different types of annunity and expert advice should always be sought to help you decide between products. Appointed Representative - A firm or an individual who acts as agent for a ‘principal’ (usually a larger broker or insurer) that is itself authorized by the FSA and that accepts responsibility for the representative’s activities. From 15th January 2005 anyone wishing to transact insurance business in the United Kingdom has to be authorized and regulated by The Financial Services Authority. Assistance - The provision by an insurer or an appointed service company of immediate help to resolve an insured problem , Assistance covers tend to deal with emergency situations which may happen as a result of a motor accident or perhaps an injury or illness on holiday. Authorized Insurer - An insurance company that is authorized under the Insurance Companies Act 1982 to carry on one or more classes of insurance business in the UK, and supervised by the Financial Services Authority. If you are wooried about dealing with a particular insurance company, you may check their details on the Financial Services Authority Web Site Average Clause Insurers use Average clauses to deal with incidents of under insurance. If you have a claim and the insurers calculates that you are underinsured, your claim may be reduced in direct proportion to the amount of under insurance. Beneficiary – Someone who may be named in a particular legal document or insurance policy that will receive a benefit from the policy if a claim is made Benefit - The money paid by an Insurance company when a claim is made. This is usually made by a life insurance company but benefits would also be paid by a Personal Accident & Sickness Insurer for example. Betterment - The principle by which an insured person has to make a contribution to his or her own claim because there property was in a better condition after the event than it was before. Sometimes an insurer will ask for a betterment contribution towards damaged tyres in a motor accident or if his property was in a poor state of repair prior to the accident or loss Bid price – This is the price you will obtain when you sell units in an investment fund. Bid prices are usually obtained in most daily newspapers although of course they will be for the previous days trading. Bid / Offer - people buying units in an investment fund will pay the ‘offer’ price. Customers selling units get the lower ‘bid’ price. Depending on the type and volatility of the fund, the "spread" can be sometimes quite large Bonus - Amount of money to be added to the guaranteed part of the sum insured of a With Profit Insurance policy. Bonus’s can be added at different times throughout the lifetime of a contract either during the policy term or at the end of it Broker (Insurance) A broker will act as an Intermediary for his clients in placing insurance contracts with Insurers or other Brokers. He will usually receive a commission for his work and may also charge a fee. If any fees are charged these will have to be disclosed before the contract is concluded. Buildings Insurance Policy-This terms usually relates to insurance for a domestic dwelling house but the term can equally apply to insurances of Commercial premises etc. Most domestic policies cover a range of perils to satisfy lenders conditions and can be extended to suit individual requirements. Business Interruption –This is a section of a Business Insurance policy that will cover the loss of profits of a business following an insured peril occurring at any insured premises. Cancellation – This is the process whereby units are cancelled to pay for certain expenses of unit-linked funds. The term also applies to any other type of insurance contract where the contract is cancelled in its entirety and ceases to have any effect. If the policy is cancelled and there have been no claims during the current period of insurance, it is usually to allow some form of return of premium. Capacity – This term relates to an insurers ability to write insurance business. The larger the capacity the larger the book of business the insurer will be able to accept. To increase it’s capacity, an insurer will have to demonstrate that it has adequate reserves to meet any potential losses. Captive Insurer - An insurance company set up by another insurance company with a specific purpose, usually to write a particular insurance risk or to insurer a specific company. Cash-in value - The amount you may possibly receive if you decide to cancel an insurance investment and request a cash payout. CAT Standards – The term CAT stands for for Charges, Access and Terms. These standards were introduced by the Government with regard to ISAs. CAT standards are designed to help you choose between products Certificate – There are various certificates of insurance and insurers to provide documentary evidence of insurance produce them. Some, like Certificates of Motor Insurance are required to tax a vehicle and to show to the police as evidence of insurance. Employers Liability certificates have to be displayed where employees can see them, you may be fined for not displaying an employers liability certificate. Claim – An insured event under a policy may lead to a claim. The policyholder will contact his or her insurance company , inform them of the incident that has occurred and seek to receive compensation in line with the policy terms and conditions. Claim Frequency - The number of claims made per policy year. Insurers pay special attention to claims frequency and if they believe you are claiming too often, they may refuse to insure you. Claims and Underwriting Exchange – This is a computerised register of information shared by most insurance companies and the police. Insurers may search the database if they believe someone is submitting a fraudulent claim or to check underwriting information. By accepting a policy with an insurer you will almost certainly be agreeing to allow your details to be placed on the exchange. This system helps to reduce fraudulent claims, which is turn, should help to keep everyone’s premiums down. Co-Insurance – This is an arrangement whereby a number of insurers will share a particular risk- this usually happens in the case of large risks where insurers will each share a part of the risk. Commercial Business – this term usually relates to insurance taken out by a business. The covers are quite various and can be tailored made to suit almost any business be it a shop, restaurant, office etc.. Commissions – these terms relates to monies paid to an agent or broker or intermediary for selling a particular insurers products. Commissions vary greatly from product to product and in some cases, you may be entitled to know what is being earned from your policies. Often the person arranging your insurance wilkl charge fees as well as receiving a commission, this should be disclosed to you Company Agents – This is a term given to persons selling insurance on behalf of one or a small number of companies. These Agents tend not to be employed by the companies and act as self-employed agents. Composite Insurer – The name given to an insurer that transacts both life and non life insurance policies. Comprehensive Insurance –This term is usually applied to private Car Insurance and represents the widest cover you can buy. It does not however mean that everything is covered and you should study your policy document carefully. Conditions- These are inserted in to insurance policy wordings by insurers and the policyholder must follow these conditions if a claim is to be considered valid. An example of a policy condition would be the requirement to fit special locks to windows and doors under a home insurance policy. Contents Policy – This term usually relates to items in a private dwelling house although of course Contents Insurance is available for any type of business. Contracted-out - Someone who is contracted out of the State Second Pension (S2P), formerly known as the State Earnings-Related Pension Scheme (SERPS). Contribution - The principle of contribution will apply where a risk is insured on more than one insurance policy. An examplw would be a watch lost on holiday, The watch may be covered by both a Travel & a Home Insurance Policy. In this case both insurers will pay towards the loss. Convertible Term - This relates to a Life Insurance contract where the policyholder is able to alter the term of the policy Cover Note - A document giving temporary evidence of cover while the policy and certificate are being prepared. Cover notes are usual in motor insurance where evidence may be required by the police and to obtain road tax. Credit Insurance - A form of insurance to protect a business against financial losses caused by the insolvency or default of their customers to whom credit has been granted . Creditor Insurance - An Insurance policy which will provide protection against the inability to repay a loan, a credit card balance or a mortgage. Critical Illness Insurance - An insurance policy where the insurer will pay the sum insured in the form of a lump sum to the policyholder in the event of diagnosis of a life threatening disease. The insurers have a standard set of diseases that they will provide cover for they include; cancer, heart attack, stroke, coronary artery disease, kidney failure, paralysis, a major organ transplant, heart valve surgery, multiple sclerosis, blindness in both eyes, total and permanent disability, loss of hearing, stage one Hodgkin’s disease, terminal illness, AIDS but only via infected blood transfusion.  Death in Service Benefit - A policy taken out by an employer to pay a benefit to the estate of an employee if they were to die during their employment. The payout is usually calculated as a multiple of the persons salary Decreasing Term - A term insurance policy in which the sum insured payable reduces steadily every year, decreasing to nothing at the end of the term. This type of policy is usually taken out to cover a debt. Deductible - The specified amount a loss must exceed before a claim is payable. Amounts above the deductible up to the policy limit are payable. Deductibles are usually called a policy excess. A typical excess on a motor insurance policy would be £50.00 Deferred Annuity – This is an annuity which starts after a specified number of years or at a specified age (usually on retirement), usually continuing through the policyholder's life time. Direct - Direct Insurance is sold without the intervention of an Insurance Intermediary such as a broker. A large proportion of insurance is sold on a direct basis nowadays, claiming to offer cheaper premiums by cutting out the middleman Disability Benefit - Certain life insurance policies will pay out if the policyholder becomes permanently disabled. . Employers’ Liability - Employers Liability is a compulsory type of insurance designed to protect employees. All employers are obliged to take out this form of insurance and the definition of an employee is very wide. Endorsement - An Insurance policy endorsement alters the scope of cover under an insurance policy. It is usually used to restrict cover but can also be used to increase cover if required. Always study policy endorsements most carefully. Endowment Policy - A life insurance policy which will pay a sum of money after an agreed period of time. This type of policy used to be a popular method of repaying a mortgage. The policy will also pay out if death occurs before the end of the agreed policy term .  Equities - These are shares s in a company that entitle the owner of the shares to a portion of the companies profits. Any losses are usually restricted to the face value of the share itself Ex Gratia Payment -Ex- Gratia payments are some times made by insurance companies following a loss when the event was not covered by the policy or perhaps some of the terms and conditions were not complied with. This type of payment is made solely at the insurers discretion. Excess - The first portion of an insurance loss that the policyholder has to pay out of his own pocket. Frequently in the case of motor claims, excess payments can be recovered from the Third Party if it can be proved that they were at fault for an incident. Excess of Loss Policy - This type of policy normally relates to Liability covers where a higher indemnity limit is required. If your Public Liability Insurance has a maximum indemnity limit of £5,000,000 and you require a higher limit but your existing insurer cannot provide it, it is usually possible to by the extra layer from another insurance provider.. Exclusion - All Insurance polices have exclusions and these will be listed in the policy document. Most policies will have a standard set of exclusions and you may find that because of your individual circumstances, extra exclusions are applied to your own policy arrangement is made for a particular employee and to the level of contribution or target  Export Credit Insurance - An Insurance policy providing cover for exporters losses arising from non-payment of monies owed. Exposure - Insurers use this term to express how likely they are to suffer a loss. Extended Warranty - An Insurance policy that allows the manufacturer’s warranty on a product to be extended for an additional period of time.  Family Income Policy - A type of term insurance policy which will , on the death of the named person insured, pays out a regular amount until the end of a specified period. Fidelity Guarantee – Insurance which provides cover for a business in against Theft by an employee. Financial Ombudsman Service - An organisation established by major insurance companies to settle disagreements between customers and insurance companies. The FSO oversees the interests of policyholders whose complaints remain unsolved through the normal company channels of communication. The service is available to all those holding personal insurance cover. The decision of the Ombudsman is binding on the insurer, although the insured may appeal to the court if he so wishes. When you take out an insurance policy, you should be given a terms of Business agreement which will outline how you can make a complaint if you are unhappy. Financial Services Authority - The Financial Services Authority (FSA) is an independent non-governmental body, given legal powers by the Financial Services and Markets Act 2000 to regulate the financial services industry in the UK. Financial Services Compensation Scheme - The Financial Services Compensation Scheme (FSCS) is a safety net for customers of financial services firms. It pays compensation if an authorised firm is unable to pay claims against it, usually perhaps Because it has gone out of business. The Scheme is funded by the insurance industry and covers deposits, insurance and investments. Details of the scheme will be provided in terms of business agreements. First Loss Insurance - An Insurance policy where the sum insured is accepted to be less than the value of the property but the insurer undertakes to pay claims up to the sum insured, without the usual application of an average clause. Free-standing AVCs (FSAVCs) - A life assurance term where additional contributions paid voluntarily into policies similar to personal pensions by employees in occupational schemes, who wish to top up their pensions, but keep the money separate from the occupational scheme. Friendly Society - A friendly society is set up for the benefit of and is owned by it’s members. General Insurance - This is a term that relates to non life insurance contracts such as Home Insurance or Office Insurance. The policy period on offer is 12 months and renewal is usually offered at the end of this period. Green Card - A document issued to policyholders to extend their United Kingdom motor insurance policy as evidence that they have the minimum insurance cover required by the law of the country visited. No longer required for European travel, because minimum legal cover is now automatically included in UK policies.  Group Life - A life insurance term that relates to the provision of a lump sum Death in Service Benefit for groups of employees. Group Personal Pension - This is an arrangement made for the employees of a particular company to participate in a personal pension scheme on a group basis. This is merely a collecting arrangement and is not a separate, or occupational, pension scheme . Holiday Insurance - This type of Insurance ( also known as Travel Insurance can be arranged on either a short term or an annual basis. The policy will cover certain perils connected with holidays. Usually this includes cover for the costs of cancellation, personal accident, medical treatment abroad and lost or stolen luggage. Home Service Business This is a term which relates to insurance transacted by insurers whose practice it is to call at the home of the policyholder. Household Insurance Business -  This terms relates to the insuring of domestic dwelling houses and policies can be extended to included contents and all risks covers. Most policies require that the home is not used for any business purposes although some insurer will now include business use for certain occupations Insurance Illustration - A printed example of how much a particular investment may be worth at a date in the future. Impaired Lives Register - This is a list of individuals who have been refused, or charged more for, life insurance, for various medical reasons. Inception Date - This is the date that an insurance contract started. Income draw down - This is a wayof taking regular income directly from a pension fund instead of buying an annuity . An annuity can be purchased at a later date. Income Protection Insurance - A policy which pays will provide an income for as long as the policyholder is unable to work as a result of accident or illness. The cover will usually last until retirement. Sometimes this type of insurance policy is called Permanent Health Insurance. Increase in Cost of Working - This is a form of Business Interruption Insurance, the policy will provide an indemnity in respect of additional costs incurred following an insured event under an insurance policy. The amount is designed to help pay for additional costs such as renting premises etc. Increasing Term - A term insurance contract in which the sum insured increases each year by a fixed percentage of the original sum insured. Indemnity - This is an Insurance principle by which policyholders are put in the same financial position after a loss as they were immediately before it. Independent Financial Adviser - Also referred to as an IFA, this is an Adviser authorised to recommend or sell the products of any insurance or investment firm. Index-linked - This term usually relates to Home Insurance products. The sums insured in respect of Buildings & Contents change automatically in line with an index. Individual Policy - Insurance taken out by an individual on his or her own life or by an individual or legal person on the life of another person.. Individual Savings Account (ISA) - This is a savings vehicle that allows customers to invest in equities, life assurance policies or save in cash without having to pay tax on the returns gained from them. Insurable Interest - A principle of insurance which states that you may only take out insurance if you would suffer a financial loss if the event covered by the policy happens. Individuals have an unlimited insurable interest in their own life and that of their husband or wife. Insurable Interest also relates to the insurance of property. Insurance - in simple terms, insurance is a risk transfer mechanism; someone (The policyholder) pays someone else (The Insurer or Underwriter) a sum of money (The premium or consideration) in return for a policy, which will provide a payment if an event (usually something unfortunate and unforeseen) happens to the item, which is the subject of the insurance. Perhaps you worry about your home being broken in to or being damaged in a flood or your car being involved in an accident. What would you do if you were suddenly faced with a large bill to replace or repair your belongings? Insurance can provide you with peace of mind as well as help remain financially secure.The terms Insurance & Assurance are interchangeable.. Insurance Company - A company that takes on insurance risks by offering policies in return for the payment of premiums. Insurance Companies may be ‘mutual’ (owned by the policyholders) or ‘proprietary’ (owned by shareholders). Insurance Premium Tax (IPT) - A tax imposed on most non-life insurance premiums. At the present moment the standard rate of insurance premium tax is 5%. An exception is Travel Insurance which attracts an Insurance tax of 17.5% Insured - A person afforded covered by an insurance policy. Intermediary - A Person or organisation that advises and sells insurance products on behalf of an insurance company or Lloyds of London. The Intermediary will usually receive a commission from the insurer whose products are sold. Commissions vary from product to product and you may be entitled to know how much an Intermediary is making by selling a particular product. Investment - The act of allowing someone else to have use of your money in return for payment of interest and/or a share in profits that may be made. Investment funds - The general name for life funds used for savings and investment plans. Invisibles - Income received by a nation from trading in services rather than goods. Joint Life - Where a plan covers two or more people. Payment of the benefits may depend on what happens to just one of them, or to all of them. Joint Life Annuity - An annuity that will pay out to a partner after the policyholder’s death. Key Features - A document that insurance and investment firms must produce, by law, that sets out the main features of the plan. Key Person Insurance - In the event of the death of a key employee on whom the business depends for its continued profitability, or even existence, this type of cover provides a sum of money which can be used to pay for the cost of finding and training a successor, and to compensate for reduced profitability. Knock-for-Knock - An agreement whereby each motor insurer paid for damage to its policyholder’s car, regardless of which driver was to blame, providing the policy covered damage to the policyholder’s own car. No longer in operation. Lapse - The non-renewal of a policy for any reason. Latent Disease - An illness that lies dormant for some years before manifesting itself. Legal Expenses Insurance - Covers the cost of legal proceedings in circumstances defined in the policy. Level Premium - Premium that stays at the same amount throughout the term of a policy. Liability - Legal responsibility for causing loss to someone else by injuring them or damaging their property. Life Assurance Premium Relief - Tax relief on life insurance premiums. Applies only to policies taken out before 14 March 1984. Life Expectancy - The length of time a person is likely to live, taking into account such factors as their present age, gender, health and occupation. Life Fund - The pool of money, maintained by an insurance company, into which all its life insurance policyholders' premiums are paid and out of which all claims are paid. Life Insurance - Long-term policies which pay out on death or, in some cases, on earlier maturity of the policy, eg Endowment, Term, or Whole Life policies. Linked - Describes any plan where the value of you insurance, savings or investment goes up or down in line with the price of units in a fund. Lloyd’s Members - Individuals on whose behalf Lloyd’s of London policies are issued. They pledge all their personal wealth to pay losses. Corporate members were also introduced in 1994. Lloyd’s of London - An insurance market organised into syndicates, which underwrites most types of policy. Loading - An extra premium you are charged because of a higher risk such as poor health or dangerous job.  London Market - A distinct, separate part of the UK insurance and reinsurance industry centred on the City of London. It comprises insurance and reinsurance companies, Lloyd’s syndicates, protection and indemnity clubs (originally created to serve the marine industry), and brokers who handle most of the business. There is general agreement that the core of its activity is the conduct of internationally traded insurance and reinsurance business. Long Term Care Insurance - Pays for some or all of the agreed costs of long-term care. Intended mainly to cover the costs of elderly people being looked after either at home or in residential care. Long-term Insurance - Life insurances and pension plans, that can last for many years. Loss - Another term for a Claim. Loss Adjuster - A person, independent of an insurance company but engaged and paid by it, who checks that a claim is covered and negotiates with the policyholder the amount payable for a claim. Loss Assessor - A person who negotiates claims on behalf of policyholders. Managed Funds - Investment funds, that can also be used for life insurance and pension plans, where the managers spread the investments across a range of assets including company shares, government stocks and property. Marine, Aviation & Transport (MAT) - The class of insurance which covers damage to both the hull and cargo of ships or aeroplanes, along with the liability for property damage, injury and death to passengers and others. Indemnities are also provided for the goods that may be lost or damaged whilst in transit. Market Value Excess of Investments - This is the difference between the market value and the book value of a companies’ investments. Market Value Reduction- A reduction in the value of a claim on a Unitised With-Profits Policy in order to reflect fairly the movement of assets underlying the policy. Material Fact - A fact that would influence an insurer's decision on whether to issue a policy, and on what terms and conditions. You must state any material facts when you apply for cover. Maturity - An agreed date when a life or pension policy comes to an end, and the value is paid out.  Mechanical Breakdown Insurance - Covers against the cost of breakdowns of household appliances or motor vehicles. Minimum Income Guarantee (MIG)  - This was a means-tested benefit that helped individuals on low incomes at retirement. It has now been replaced by the Pension Credit. Mortgage Indemnity Insurance - Provides cover for a mortgage lender for any loss they might suffer as a result of a property on which they provided a loan being sold for less than the amount of the loan. Mortgage Payment Protection Policy - A type of Creditor insurance that covers the policyholder against the inability to make repayments due to accident, sickness and/or unemployment Mortgage Protection Policy - Life insurance designed to pay off the outstanding mortgage if you die before the end of the mortgage term. Mortgage-Related Policy - A policy used both to provide protection for a mortgage loan and as a savings vehicle to repay the loan at maturity. Motor - Motor policies cover the legal liabilities arising from the use of a motor vehicle. Private car, motorcycle, commercial vehicles and fleets are all included within this category. Comprehensive policies also cover damage to the vehicle. Motor Insurance Anti-Fraud and Theft Register - Computerised record of claims for stolen or written-off vehicles. Used by insurers to detect multiple, and therefore fraudulent, claims. Mutual - An insurance company which is owned by its policyholders.   National Brokers - Intermediaries with a national presence, whose clients are often corporate bodies and have departments specialising in different sectors of the market. Negligence - Perhaps the most common form of tort. In Blyth v Birmingham Waterworks Co. (1856) it was defined as 'the omission to do something which a reasonable man guided by those considerations which ordinarily regulate the conduct of human affairs would do, or doing something which a prudent and reasonable man would not do'. Gives rise to civil liability. Net Assets - The excess of an insurer’s assets over its liabilities. Net Premium - A premium net of reinsurance ceded but gross of commission, and excluding premium tax. Net Relevant Earnings - Are used to determine the maximum contributions to a Retirement Annuity or Personal Pension. New-For-Old - Cover for property where an item lost or destroyed would be replaced with a brand new one, with no deduction for wear and tear. Also called Replacement-as-New. No Claim Discount (or Bonus) - A reduction in a renewal premium to reflect a claim-free record; used most often in motor insurance. Non-comprehensive Cover - A policy covering a limited number of types of loss or damage. The term is mainly used in motor insurance, where a vehicle may have RTA cover – the minimum cover provided by the Road Traffic Act; third party cover, which indemnifies the policyholder for damage caused to other people’s property and injury that may be caused to others; or third party, fire and/or theft cover which additionally provides compensation to the policyholder if the insured vehicle is destroyed or damaged by fire and/or theft. Non-Disclosure - Where you or anyone acting for you, fails to state a material fact when applying for insurance. Non-Linked - Life insurance policies that are non-linked receive their investment income in the form of "bonuses", paid out of the total income earned by the insurance company on its pooled fund, and are also known as "with-profits". The value of the saver’s fund thus depends on the amount he/she has bought and the amount of bonuses added. Once added, bonuses cannot be taken away, making these policies generally less volatile than linked policies. Non-proportional Treaty Reinsurance - This relates to the whole of a certain class of business and is a way of limiting the loss made by the ceding office. Not Contracted-out - Someone who is not contracted out of the State Earnings-Related Pension Occupational Pension Scheme - A scheme set up by employers for the benefit of their employees. Contributions will be paid by the employer, and often by employees, and employers may delegate responsibility for the running of their pension scheme to an insurance company. See also Defined Benefit Schemes and Defined Contribution Schemes. One/Three Year Account - Insurance cover is provided for a period of time agreed in the policy, in the case of general insurance, usually one year. Where all claims arising from a policy are quickly identified and dealt with, the insurer can close the books on that policy soon after the period of cover has ended and calculate the underwriting profit or loss made. This business can then be accounted for on a one-year basis. Where claims are not identified and dealt with so quickly, as is typical for marine, aviation and transport (MAT) and reinsurance, the business may be accounted for on a two or three year basis. Open-Ended Investment Company (OEIC) - A type of Collective Investment, similar to a Unit Trust. Open Market Option - An option to move the value of your pension fund at retirement to another company or pension provider - usually to purchase a higher amount of pension income known as an Annuity. Operating Ratios - Figures showing ratios of claims, expenses and underwriting in relation to premium income. Ordinary Branch - Life insurance and pensions business where the premiums are usually paid through the banking system by cheque, standing order or direct debit. 'Other' Company Agents - Company agents, other than company staff, as defined in the ABI code for general insurance, whether they sell the products of one company, or up to six companies. 'Other' Independent Agents - For the purpose of data in this report, any ‘non-IBRC registered’ independent intermediary as defined in the ABI Code for General Insurance. Other Intermediaries & Brokers - Intermediaries selling insurance products of seven or more insurers for a particular class of business. Outgo - The total expenditure of an insurer in relation to any class of insurance business, comprising the cost of claims and the insurer’s business expenses, including any commission paid to sales staff, Brokers or Intermediaries, together with amounts set aside for Reserves. Partially Contracted-out - Pension policy that receives both a premium from the policyholder and a DSS rebate. Pecuniary Loss - This class of business loss relates to financial losses that may have occurred, eg Consequential Loss and Mortgage Indemnity policies. Pension - The regular income you get after you retire. Pension Annuity - An annuity which become payable on the maturity of a pension policy. A pension annuity converts a pension fund into pension income ie the income to be paid until death. You buy an annuity with your pension fund from an insurance company. Permanent Health Insurance - See Income Protection. Persistency - The rate at which policyholders keep their policies with a life insurer. Personal Accident Insurance - A policy that pays specified amounts of money if the policyholder is injured in an accident. Depending on the type of disability, the payments may be made weekly, for a set period, or as a lump sum. Personal Equity Plan (PEP) - An arrangement that allows a policyholder to pay money into a plan managed by a fund manager who then invests the money in equities on behalf of the policyholder. Personal Lines - Any policy taken out by an individual in his/her private capacity. Personal Pension - Savings plan, with tax advantages, that builds up a fund to give you a regular income when you retire. You can pay in regular amounts, one-off occasional amounts, or both. Pluvius Insurance - Covers against losses arising as a result of bad weather. Policy - The document giving full details of the contract between the insurer and the policyholder. Policyholder - Person or organisation to whom the insurer issues the policy. Normally the person to whom benefits are payable. Premium - The amount paid by the policyholder for insurance. Private Medical Insurance - A policy that covers the cost of private medical treatment. Product Liability Policy - Protects businesses against liability claims resulting from defects in the products they sell. Professional Indemnity - Provides protection to businesses against errors cause in their professional capacity eg solicitors who incorrectly advise clients. Profit & Loss Account - The financial statement bringing together the Revenue Account profit and loss for each class of business, together with investment income and taxation, and shows the company profits to be distributed. Property Damage - Property policies cover specified property that may be damaged or destroyed by events or perils such as fire, storm or theft. Proportional Treaty Reinsurance - Agreements in which the reinsured and the reinsurer participate in premiums and losses in a fixed proportion. It can apply to both facultative and treaty reinsurance. Proposal Form - An application for insurance cover. Proposer - Person or company who applies to take out insurance. Proprietary Companies - Those that are owned by shareholders. Provision of Services - See Freedom of Services. Public Liability - The insurance of liability for accidental bodily injury or damage to the property of third parties. Purchased Life Annuity - A life annuity which commences immediately on, or shortly after, purchase. Also know as an Immediate Annuity. Quote - A statement by an insurer of the premium he will require for a particular insurance Rate - The price of insurance, usually expressed as the cost of a unit of cover, eg £x per £1,000. Rebate Only - Personal pension policy where the only premium received is the Inland Revenue rebate paid for contracting out of additional State pension. Also called Fully Contracted Out. Regular Premium - A recurring premium paid over the term of the policy, at intervals specified in the policy, usually monthly. 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. Reinsurance - Reinsurance is the cover insurance companies can purchase to protect themselves against large losses or an unexpected aggregation of losses. Renewable Single Premium Policy - Policies under which additional premiums can be paid later to provide increased benefits; these are at the policyholder’s discretion and are non-contractual. Renewable Term - A term insurance policy which gives the policyholder the option to take out a further term policy without the need for any further evidence of health. Renewal Notice - Notice sent to the policyholder inviting him/her to renew a policy for a further period and stating the premium payable. Replacement-as-New - See New-for-Old. Reserves - Money put aside by insurers to meet known or possible future liabilities. They can broadly be divided into Technical Reserves and Free Reserves. Revenue Account - The financial statement containing the underwriting results. It usually shows premiums, claims incurred, commission, expenses and the transfer to/from the Profit & Loss Account. Reversionary (or Regular) Bonus - Bonus for with-profits policies, usually added at yearly intervals, during the term of the policy. Risk Management - The identification, measurement and economic control of risks that threaten the assets and earnings of a business or other enterprise. Salvage - A recovery of all or part of the value of an insured item on which a claim has been paid. The insurer will normally dispose of the item and apply the proceeds to reduce the cost of the claim. Savings Policy - Plan where you make regular payments to build up a lump sum. Schedule - The part of a policy containing information peculiar to that particular risk. The greater part of a policy is likely to be identical for all risks within a class of business covered by the same insurer.  Section 226 Policy - An ‘old style’ personal pension that was available only to the self-employed prior to the introduction of Personal Pensions in 1988. Segregated Funds - Assets which do not belong to the insurer and which are excluded from the investment funds. The assets are managed on behalf of the client and normally belong to the trustees of a pension fund. SERPS - Part of an employee's National Insurance contributions goes into SERPS (State Earnings-Related Pension Scheme), which is paid on top of the Basic State Pension on retirement. The SERPS pension, payable when you reach State pension age, depends on you earnings while you were in employment and the National Insurance contributions paid. SERPS is paid in addition to the Basic State Pension. This was replaced by the State Second Pension in April 2002. Services Business - Business written under Freedom of Services. Single Life Annuity - Annuity based on the life of just one person. Single Premium Policy - A Long-term Insurance policy where the premium is paid in a single lump sum. Solvency Margin - The excess determined in accordance with the insurance supervisory rules of the insurer’s assets over its liabilities. Under those rules, this is required to be not less than a prescribed minimum. Solvency Ratio - The ratio of the net assets of a non-life insurer to its annual net written premiums. Sponsored Individual Scheme - One where each premium paid is identifiable to an individual employee and where, in addition, the rules allow the employer discretion both as to whether the pension arrangement was made for that employee and to the level of contribution or target benefit under the policy. Stakeholder pension - A type of personal pension introduced by the Government in 2001 in order to make it easier for people to save for their retirement. Stakeholder pensions are designed to be simple, cheap and flexible. Stand-alone Critical Illness - See Critical Illness. These are policies where critical illness cover is the primary element of the policy as opposed to being a Rider Benefit. State Second Pension (S2P) - Extra state pension that replaced SERPS in 2002. It is linked to your earnings while you were employed, but only up to a limit that can change from time to time. Statute Law - Presently the most important source of law is statute law, otherwise known as Acts of Parliament, which may create entirely new law, over-rule, modify, or extend existing principles of common law and equity, and repeal or modify existing Statute law. Subject to Survey - Phrase used by an insurer to signify provisional acceptance of an insurance pending inspection by a surveyor whose report is necessary to determine the rate and conditions applicable. Subrogation - The right of an insurer who has indemnified a policyholder to take over any legal rights the policyholder may have had in respect of that particular claim. Subscriber - A person enrolled in a scheme where a subscription is paid for himself/herself alone or including dependants. For personal business it should relate to the policyholder, and for corporate business, the subscriber is the member, ie the employee within a group scheme. Subsidence Claim - A claim arising from subsidence, heave and landslip. Sum Insured - The amount for which property is insured, and the maximum amount that the insurance company will pay for any claim. In life insurance, the amount that is guaranteed to be paid and to which bonuses may be added. Surety Bond - A guarantee to pay the direct loss and damage suffered as a result of a breach of contractual obligations. Surrender Value - What you get back if you cash in a life policy before it matures. Not all life policies have a surrender value. Syndicate - Group of underwriters at Lloyd’s. Technical Reserves - Money put aside to meet specific items, usually for events that have already happened. The four main types of technical reserves are for unearned premiums, unexpired risks, unreported claims and outstanding claims. Temporary Insurance - See Term Insurance. Term Insurance - Life cover provided for a specified number of years. The insurer only pays out if the policyholder dies within this time. Terminal (or Final) Bonus - Extra bonus that may be paid for with-profits policies at maturity or if a claim is made. Term Assurance - Life cover provided for a specified number of years. The insurer only pays out if the policyholder dies within this time. Theft Claim - One arising from burglary, robbery and theft under the Theft Act 1968 in England and Wales, and burglary, robbery, housebreaking and larceny in Scotland and Northern Ireland. Third Party - Someone involved in a claim who is neither the policyholder nor the insurer. Third Party Administrator - An organisation to which an insurance company contracts out administration.  Tied agent - A sales person who sells the policies of only one insurance company. Some sales people are tied to several companies - this is known as a multi-tie. Total Loss - See Write-Off. Trading Result - An insurer’s overall profit/loss calculated as the Underwriting Result plus Investment Income. Transfer Value - The amount of the transfer payment which the trustees of a pension scheme allow members to take with them to another scheme or personal pension. Travel - A policy that covers a combination of loss of baggage, medical expenses, legal fees, and change in travel arrangements. Treaty Reinsurance - An agreement between offices whereby the ceding company is bound to cede and the reinsurer bound to accept a share of all risks defined in the treaty. Trust - An arrangement whereby control over an Asset is transferred to a person or organization (known as the "trustee") for the benefit of someone else (known as "the beneficiary"). Trustee- A person appointed to manage and safeguard the assets of a trust. Underinsurance - When the sum insured is not enough to cover the maximum possible loss or damage. Underwriter - Person who decides whether to accept a risk and calculates the premium to be charged. Underwriting Ratio - See Operating Ratios. Underwriting Result - The profit or loss achieved by an insurer on insurance underwriting activity, calculated as premium income less the cost of claims and the insurer’s expenses in connection with that business (ie "outgo"). It has been common for insurers to make underwriting losses since they also receive investment income which generally offsets the underwriting loss. Uninsurable Risk - A risk where loss is either inevitable (eg a house already on fire or a person suffering from a terminal illness) or gradual (eg rust and corrosion). Unit Trust - A trust into which a small investor may buy by acquiring units. The capital collected is invested in various securities in a wide range of markets. Unitised With-Profit - Contracts where premiums are invested in units, either in the with-profits fund or in linked funds or in a mix of both. Unit-Linked - See Linked. Unit trust - Investment fund that pools the payments of many individual investors. The fund is split into units of equal value. The unit prices move up and down in line with the value of the fund's investments. Utilities / Retailers / Affinity Groups - Institutions which sell insurance policies to their customers but it is not their primary product or service. These policies are underwritten by established insurers. Utmost Good Faith - The principle of insurance which requires proposers to give all relevant information to the insurer and requires insurers to deal openly and honestly with policyholders.  Waiver of Premium - An optional extra on a life, protection or pension policy which means that the insurance company will pay the premiums if the policyholder is unable to because of illness or injury. Warranty Insurance - This type of insurance provides cover against the cost of repairs to broken down household appliances. Wear and Tear - This is the amount deducted from claims payments to allow for any depreciation in the property insured that is caused by its usage. Weather Claim - One arising from burst pipes, storm and weather damage. Whole Life Policy - A policy where premiums are paid for the rest of an individual's life, or up to a specified advanced age, and benefit is paid on the death of the person insured, whenever that occurs. With Profit Insurance - Life insurance policies that receive their investment income in the form of "bonuses", paid out of the total income earned by the insurance company on its pooled fund. The value of the saver’s fund thus depends on the amount he/she has bought and the amount of bonuses added. Once added, bonuses cannot be taken away, making these policies generally less volatile than linked policies. With-Profit Bonds - A fund made up of investments like company shares, fixed interest securities, commercial property and money. Policies can be single premium (with-profits bonds) or bought with regular premiums to save for pensions or general savings. With-profits policies usually have regular bonuses added and the eventual payout is usually smoothed to reduce the peaks and troughs of investment performance. With-Profits - See Non-Linked. WriteOff - A damaged vehicle which is not repairable, or one which would cost more to repair than the car was worth before the damage occurred. Also known as a Total Loss. Written Premium - Premium income due to the insurer on the risks accepted during the year.