Familiarise yourself with the insurance terms you may come across as you explore your options.
If you're considering insurance, or have received quotes from different providers, you might come across some unfamiliar words. Understanding insurance terms will help you compare different types of policies, what they cover, and what they don’t.
Here are the most common insurance terms and phrases you're likely to encounter:
An insurance policy is a contract of insurance, which refers to the level of cover you've chosen, summarises its terms, and details any particular policy conditions you should be aware of.
Insurance cover refers to the specific risks or events that your insurance policy is covering you for.
A certificate of insurance is an official document, also known as a certificate of currency, that provides legal proof of your insurance coverage.
Exclusions are specific risks or events that you're not covered for.
In most countries or regions, a Key Facts document sets out the main features of an insurance plan or policy in clear, jargon-free language. This makes it easier for you to make like-for-like comparisons between products from different providers, and select the product that best suits your needs.
Insurance excess is the amount you must pay towards any claim you make. It’s also known as deductibles. With some policies, you can pay a higher excess to reduce the cost of your premium. Keep in mind that you'd need to cover the cost of any damages or losses below the excess amount.
A premium is the total amount you pay for an insurance policy. It's usually calculated annually, but can often be paid in monthly instalments.
The sum insured is the agreed value of an insured item or risk, which forms the basis of a claim.
The policy holder is the person who is taking out the insurance policy.
The insured is the person who the insurance covers – usually also the policy holder.
A cooling-off period refers to the period during which you can cancel an insurance policy after purchase.
A grace period is the length of time after a premium is due in which a policy holder can make a premium payment without their insurance coverage lapsing.
An insurance claim is when you ask your insurance provider to cover some or all of your financial losses in response to an insured event – such as a theft or a car accident. If an excess applies to your policy, this will be your contribution towards the costs of those losses.
A rider is any additional cover that you add to an existing policy, like cover for specific items of value, or adding an extra driver to a motor insurance policy.
An insurance broker is a person or third party that places insurance with an insurer on behalf of a customer. They can advise customers on appropriate insurance products depending on their needs. They can also provide other services such as handling claims.
Maturity is when certain types of policy (such as life insurance or a pension) reach their agreed time limit. At this point, the policy ends, and its value is paid out.
Indemnity insurance is where an insurer guarantees compensation for unexpected losses or damages caused by the policyholder. It typically protects people and businesses from misjudgements or malpractice.
