business insurance frequently asked questionsThe purpose of insurance is to transfer a risk that you can afford (i.e. the payment of a premium with no guarantee of its return) to cover a risk you cannot afford - ref: http://www.myownbusiness.org
DO I NEED TO TELL THE INSURERS EVERTHING ABOUT MY BUSINESS?
WILL MY PUBLIC LIABILITY POLICY COVER CLAIMS AGAINST ME FOR ERRORS AND OMISSIONS OR DEFECTIVE WORKMANSHIP?
ADDITIONAL PREMIUM
A further premium payable by the insured as a result of policy amendment, which may have increased the risk or changed the policy conditions or sum insured. ABANDONMENT OF EVENTS
A contingency insurance protecting promoters of events (e.g. exhibitions, fetes) against financial loss following cancellation, abandonment, interruption, rescheduling, postponement through circumstances (fires, storms) beyond their control. Judicial intervention that causes abandonment is sometimes included in the cover. Non-appearance cover is also available. ACCIDENTAL DAMAGE COVER
Cover under a household or a commercial policy that provides all the benefits of standard named peril policy plus accidental damage cover, e.g. spilling paint on a carpet or computer. Under a named peril policy a loss has to be matched to a named peril. ADJUSTER
One who investigates and assesses claims on behalf of insurers (claims adjuster or loss adjuster). ADVANCE PROFITS INSURANCE
Business interruption insurance of the expected profits of a new enterprise or an extension to an existing business. AGGREGATE LIMIT OF INDEMNITY
The maximum amount an insurer will pay under a policy in respect of all accumulated claims arising within a specified period of insurance. ALL RISKS
A term describing a property insurance covering any fortuitous loss or damage that is not specifically excluded. This contrasts with a policy covering physical loss or damage caused by a named peril, e.g. fire. The 'all risks' exclusions relate to inevitable forms of loss, such as depreciation and wear and tear, and other losses due to gradually operating causes. 'All risks' cover is available for personal possessions, cameras, jewellery, industrial equipment and goods in transit, and applies to Institute Cargo Clauses A. Under household and commercial policies on buildings and contents, and cover on motor vehicles, the term has given way to 'accidental loss or damage' as a means of going beyond named perils cover. AVERAGE
A clause in insurance policies whereby, in the event of under-insurance, the claim paid out by the insurer is restricted to the same proportion of the loss as the sum insured under the policy bears to the total value of the insured item. BOAT INSURANCE
Most policies cover physical damage to the hull, sails, machinery, furniture, and most other equipment that is normally used on board. Most perils are covered including vandalism, malicious mischief, and even damage those results from latent defects of workmanship. BUILDINGS INSURANCE
This covers your property against damage. This normally includes fire, flood and subsidence damage, temporary accommodation / housing, and the cost of replacing broken or lost keys. Outside buildings such as garages, greenhouses and sheds are often also covered.
Fixed items such as baths, toilets, sinks, pipes and drains are also covered by the majority of policies.
Some policies have options to include accidental damage cover, and to raise the excess (Initial amount you need to pay in the event of a claim) to reduce the policy cost. BUSINESS TRAVEL INSURANCE
This covers you against the loss or damage of business equipment such as laptops and product samples. This often also covers the costs of an emergency courier to deliver replacement items if needed (say, for an important meeting). Some policies also provide cover against the death or hospitalisation of an employee on a business trip, covering the costs for a colleague to take their place.
CANCELLATION
Termination of a policy before it is due to expire. There may be a cancellation clause in a policy setting out the condition under which the policy may be cancelled by notice. The period of notice could be anything from 48 hours to 3 months. In most cases this will result in a return premium being paid by the insurer to the insured. CARAVAN INSURANCE
Caravans represent a major financial investment, an investment that you need to protect against loss from, accident, fire and theft. You also need third party liability indemnity insurance to protect yourself against claims made by others. CARGO
Covers manufacturers and suppliers with domestic and/or international risk exposures arising from the movement of their goods. Worldwide cover is available for import, export, inland transit and stock throughput risks. CLAIMS
Injury or loss to the insured arising so as to cause liability to the insurer under a policy it has issued. COMBINED LIABILITY POLICY
Policy combining two or more types of liability insurance in one document, e.g. public liability, products liability and employers' liability. COMMERCIAL COMBINED
Covers accidental loss, destruction or damage to the property, except as excluded (e.g. faulty or defective design, inherent vice, latent defects, explosion of boilers, sonic bangs, collapse and others that may be applicable in real terms to certain categories of equipment). Many of the exclusions can be bought back. The property insured is industrial and commercial plant and equipment. Cover is often arranged on a first loss basis. COMMERCIAL HULL AND LIABILITY
Covers work boats, port craft, barges, pontoons, tugs, dredgers, passenger and/or goods carrying vehicles, marine property, inshore fishing vessels, ship builders, ship repairers and marina operators. Cover is tailored to individual risk requirements.
COMMERCIAL LEGAL EXPENSES
Provides businesses with legal advice and covers legal expenses to enforce or defend legal rights in a range of disputes. Cover is available under various sections: court attendance expenses; tax/VAT disputes; prosecution defence; data protection liability; contract disputes; personal injury or property claims; premises disputes; employment disputes and awards; licence disputes. COMMERCIAL VEHICLE INSURANCE
A general term referring to the insurance of goods-carrying vehicles, buses and coaches, agricultural and forestry vehicles, mobile plant and other special types. COMMON LAW
The common law consists of the ancient customs and usages of the land, which have been recognised by the courts and given the force of law. It is in itself a complex system of law, both civil and criminal, although it is greatly modified and extended by statute law and equity. It is unwritten, and has come down in the recorded judgements of judges who for hundreds of years have interpreted it. COMMUNITY COMPANY
An insurance company whose head office is in a member State of the European Economic Community. COMPREHENSIVE
A term describing a policy with a number of different types of cover in one document (e.g. a private car comprehensive policy has sections providing material damage cover, third party cover, personal accident cover, medical expenses, etc.). COMPUTER INSURANCE
Covers 'all risks', theft and breakdown included, on computer and ancillary equipment. Chips and standard software are included automatically. Other key features: 'new for old' settlements; cover in UK premises and in transit; negotiable excesses; loss of data; Data Protection Act liability; and consequential loss following an insured breakdown or loss. Liability insurance may be included. Exclusions are minimal but special precautions have to be taken when computer equipment is left in an unattended vehicle. Policies may apply to personal computers, laptops and main-frame systems. CONCEALMENT
Deliberate suppression by a proposer for insurance of a material fact relating to the risk, usually making the contract null and void. CONSEQUENTIAL LOSS
The term, unless defined in a contract, follows the rule for contractual damages and embraces losses flowing directly from the breach, e.g. late delivery that increases costs. Consequential losses are generally regarded as the more remote consequences that were not reasonably foreseeable by the parties. Contracts that define consequential are more likely to limit a person's rights than a clause that simply excludes liability for consequential loss without definition. In insurance the term is used to refer to expenses such as the cost of temporary relocation, while fire damaged property is being repaired. The term 'consequential loss insurance' has been replaced by 'business interruption insurance'. Consequential loss is not covered under material damage insurances. CONTENTS INSURANCE
This covers the contents of your home against damage or loss due to fire, lightning, flooding, theft or break-in. Accidental damage is sometimes included, although it is usually an optional extra.
Contents Insurance is often sold together with Buildings Insurance, or as a single Home Insurance policy.
Remember that if you have a home office, it is not covered by your standard buildings/contents insurance, and a special policy will need to be bought. CONTINGENCY INSURANCES
A term describing those policies that do not fall naturally into one of the principal classes of insurance business. The term embraces insurances such as abandonment of events, pluvius insurance and others often of an unusual nature. CONTRACTORS' PLANT POLICY
Renewable cover for contractors who own, hire-in or hire-out plant (mobile plant, machinery and equipment) against unforeseen and accidental physical loss due to external causes; internal causes such as breakdown and wear and tear are excluded. The policy operates whilst at work or at rest or during dismantling or erection, loading, unloading or transit. For hired-in plant the cover includes legal liability for negligent breakdown and continuing hire charges. For hired-out plant the cover can be extended to indemnify the hirer. Cover can be arranged as a part of a contract works policy or, in some cases, motor insurance as special types. CONTRACT WORKS/CONTRACTORS' ALL RISKS INSURANCE (Annual or single project)
Covers temporary and permanent works executed in the performance of contracts, and materials for incorporation therein, plus own and hired plant, and tools and equipment while on sites or in transit. Cover is arranged for house extensions through to multi-storey office blocks. Premiums are based on annual turnover with a maximum value of any one contract. Various extensions are available (e.g. continuing hire charges following plant damage). Key exclusions relate to existing structures and defective design. Cover may have to accord with standard term contracts (e.g. Joint Contract Tribunal). COVER NOTE
A document issued to the insured confirming details of the insurance cover placed. Some cover notes are a legal requirement, e.g. motor. CREDIT INSURANCE
This protects you against customers who fail to pay their invoices. Because the risk of bad debt can be high, you would probably find it hard to get cover for this unless your business has been successfully up and running for some time. DEDUCTIBLE
The specified amount a loss must exceed before a claim is payable. Only the amount which is in excess of the deductible is recoverable. DEFERRED PREMIUM
The part of a premium which, following agreement with underwriters, is payable by installments, usually quarterly or half yearly. DETERIORATION OF FREEZER CONTENTS (Household)
Insurance of stock stored in a freezer and/or refrigerator against the risk of loss through deterioration following: (a) breakdown of plant; (b) non-operation of thermostatic or automatic controlling devices; (c) action of escaping refrigerant fumes from any cause; or (d) failure of the public electricity supply. DETERIORATION OF STOCK
Engineering insurance covering damage to perishable stock in cold stores directly consequent upon an accident to cooling or climatising equipment insured under a machinery breakdown policy. The widest form of cover insures loss caused by any rise or fall in temperature. EMPLOYERS LIABILITY INSURANCE
Insurance by employers in respect of their liability to employees for injury or disease arising out of and in the course of their employment. With some exemptions this insurance is compulsory in Great Britain, and can only be provided by an authorised insurer. ENDORSEMENT
Documentary evidence of a change in the wording of or cover offered by an existing policy or qualification of wording if the policy is written on restricted terms. (See also Addendum). ENGINEERING INTERRUPTION
A business interruption insurance providing an indemnity at a fixed rate per day in respect of interruptions following breakdown or unforeseen damage to installed plant and machinery or failure of the power or water supply. There are time excesses/deductibles or franchises applied to the indemnity period to avoid small losses, particularly temporary losses of services. EXCESS
The first portion of a loss or claim, which is borne by the insured. An excess can be either voluntary to obtain premium benefit or imposed for underwriting reasons. EXCESS LAYER
A layer of insurance cover provided by an insurer that sits above the primary layer. The liability of the insurer providing the additional layer is only triggered when the existing primary layer (plus any other layers already in place) has been exhausted. The 'layer' insurer provides a band of cover, commonly in liability insurance, by setting an upper limit of liability. EXCLUSION
A provision in a policy that excludes the insurer's liability in certain circumstances or for specified types of loss. EX-GRATIA PAYMENT
A payment made by an insurer to a policyholder where there is no legal liability so to pay. FAMILY LEGAL PROTECTION
This covers you against legal costs in the event of you being involved in a court case. This usually includes (amongst other areas) cover against contract disputes, personal injury claims, employment disputes, and jury service.
When you join a Family Legal Protection policy, many insurers will also then allow you access to free legal help and advice. FIDELITY INSURANCE
This covers you for fraud or dishonesty by employees, it can be taken out for any amount of employees or the whole staff.
FIRE AND THEFT COVER
Named peril 'own damage' cover added to a third party motor vehicle. The property damage cover is against damage caused by fire and theft risks only. The cover could stand alone if the vehicle is out of use. FIRE INSURANCE POLICY
A material damage insurance that in its 'standard' form covers destruction or damage to the insured property by (1) fire (resulting from explosion or otherwise) not occasioned by or happening through (a) its own spontaneous fermentation or heating or its undergoing any process involving the application of heat, (b) earthquake, subterranean fire, riot, civil commotion etc.; (2) lightning; and (3) explosion, not occasioned by or happening through any of the perils specified in (1) above, (i) of boilers used for domestic purposes only, (ii) in a building not being part of any gas works, of gas used for domestic purposes or used for lighting or heating of the building. FIRST LOSS INSURANCE
Insurance 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 application of average. FLEET INSURANCE
Policy on a number of vehicles operated by the same insured and rated on an experience basis, i.e. fleet rating. Usually five or more vehicles constitute a fleet. The fleet itself can comprise vehicles of different classes, e.g. private cars, goods-carrying vehicles, etc. Aircraft and ships can also be insured as fleets. FLOOD INSURANCE
Insurance against damage caused by the escape of water from the normal confines of any natural or artificial water course (other than water tanks, apparatus or pipes) or lake, reservoir, canal or dam in addition to inundation from the sea. Losses are normally subject to a minimum excess of £250. The risk is normally insured as an additional peril together with storm damage. FREIGHT LIABILITY
Products are aimed at transport contractors, road hauliers, freight forwarders, warehouse keepers, packers and consolidators. Cover is available to meet the firm's chosen trading conditions and other legal liabilities. GOODS IN TRANSIT INSURANCE
Covers goods in transit by land (or by land and sea). Cover is either on (a) the goods protecting the owner's interest; or (b) the liability when a road haulier carries customers' goods. The goods owner insures 'all risks' cover up to an amount per specified vehicle or per consignment when using other transport modes. The haulier can insure on a specified vehicle basis or, on a declaration basis, by estimating annual haulage charges with a selected limit of indemnity. Cover, within the territorial limits, applies during loading, carriage, unloading or temporary garaging of vehicles or trailers. Insurance may include loss/damage to sheets, ropes, clearing up, repackaging and re-sorting following an accident. GLASS INSURANCE
Breakage of all types of glass (e.g. wired and embossed plate, figured glass, etc.). The insurers will make good or pay full replacement value, including shop fronts with lettering. Any breakage insurable under a fire policy or caused by explosion is excluded. Fixed glass in dwellings is insured under household comprehensive policies. GROSS PREMIUM
A term normally applied to gross written premiums before deduction of brokerage and discounts. HAZARD
A physical or moral feature that introduces or increases the risk. HEALTH INSURANCE
This covers you for private treatment in the event of an illness or the need for an operation. Optional areas of cover include home nursing, some specialist consultations, and 'out-patient' treatment such as physiotherapy. INCEPTION DATE
The date from which, under the terms of a policy, an insurer is deemed to be at risk. INCREASE IN COST OF WORKING
Under a business interruption policy some cover is provided for additional expenditure incurred by the insured solely for the purpose of reducing the shortage in production following an insured event. 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). INDEMNITY PERIOD
Under a business interruption insurance the period during which cover is proved for disruption to the business following the occurrence of an insured peril. INSURABLE INTEREST
For a contract of insurance to be valid the policyholder must have an interest in the insured item that is recognised at law whereby he benefits from its safety, well being or freedom from liability and would be prejudiced by its damage or the existence of liability. This is called the insurable interest and must exist at the time the policy is taken out and at the time of the loss. INSURABLE VALUE
The value of the insurable interest which the insured has in the insured occurrence or event. It is the amount to be paid out by the insurer (assuming full insurance) in the event of total loss or destruction of the item insured. INSURANCE BROKER/INTERMEDIARY
An insurance intermediary who advises his clients and arranges their insurances. Although he acts as the agent of his client, he is normally remunerated by a commission (brokerage) from the insurer. An insurance broker is a full-time specialist with professional skills in handling insurance business. Since January 2005 intermediaries and brokers must be registered with, and regulated by the Financial Services Authority.
FINANCIAL OMBUDSMAN SERVICE
A bureau established by major insurance companies to oversee the interests of policyholders whose complaints remain unsolved through normal company channels of communication. The service is available to all those holding personal cover with the insurers who have joined the scheme. The decision of the Ombudsman is binding on the insurer, although the insured may appeal to the court if he so wishes. INSURANCE PREMIUM TAX
The Finance Act 1994 introduced this new tax on most general insurance risks located in the UK. INSURED
The person whose property is insured or in whose favour the policy is issued. INSURER
An insurance company or Lloyd's underwriter who, in return for a consideration (a premium). Agrees to make good in a manner laid down in the policy any loss or damage suffered by the person paying the premium as a result of some accident or occurrence. KEY PERSON (Key Man) INSURANCE
This insures your business against the loss of a key employee through disability or death. The money can be used in any way by a business deems appropriate, not just to train/hire a direct replacement. Key person cover can also be used to cover partners in a partnership, or shareholders in a privately owned company. Key person insurance can be particularly important in small businesses, where there may only be one person trained for a particular job. KNOCK FOR KNOCK
A forbearance agreement between two insurance companies designed to avoid legal action. This arrangement applies to motor vehicle policies and under it each company agrees to pay up to the limits of their respective interests for the damage to the vehicle of their own insured without regard as to who was to blame for the accident.
It is essential to talk to a specialist or advisor before taking out key person cover; as it requires a detailed knowledge and understanding of the business and employee roles. LAPSE
The non-renewal of a policy for any reason. LATENT DISEASE
An illness which lies dormant for some years before manifesting itself. LEGAL EXPENSES INSURANCE
This helps cover the majority of your costs in the event of a legal dispute. This usually covers legal costs for employment tribunals, prosecutions under acts such as The Health and Safety at Work (etc) Act 1974, contract disputes, and costs caused by an in-depth Internal Revenue or Custom and Excise investigation. Some legal expenses policies also provide free legal advice, as well as cover for employee time lost during jury service or as a witness in a case. LIMIT
The insurer's maximum liability under an insurance, which may be expressed 'per accident', 'per event', 'per occurrence', 'per annum', etc LLOYD'S (OF LONDON)
A Society, incorporated under Act of Parliament of 1871 and known as the Corporation of Lloyd's, which provides the premises a wide variety of services, administrative staff and other facilities to enable the Lloyds market to carry on insurance business efficiently. LOSS
Another term for a claim. LOSS ADJUSTER
Independent qualified loss adjusters are used by Insurers for their experience and expertise necessary to carry out detailed and in some instances prolonged investigations of complex and large losses. Although the adjuster's fees are invariably paid by the insurers he is an impartial professional person and makes his judgement on the amount to be paid in settlement solely on the basis of established market practice. It is his task to negotiate a settlement which is within the terms of the policy and equitable to both insured and insurer. Should he himself not be an expert in a particular discipline which is necessary or desirable to pursue his negotiations, he will consult or employ such an expert. LOSS ASSESSOR
1. In motor insurance, an engineer.
2. 2. In other classes a person who, in return for a fee (usually a percentage of the amount claimed), acts for the claimant in negotiating the claim. MATERIAL DAMAGE WARRANTY
A warranty in a business interruption insurance policy stipulating that for the interruption insurance to become effective there must be a policy in force in respect of the material damage and a claim paid or admitted thereunder for such damage caused by an insured peril. MATERIAL FACT
Any fact which would influence the insurer in accepting or declining a risk or in fixing the premium or terms and conditions of the contract is material and must be disclosed by a proposer, or by the insurer to the insured. MONEY INSURANCE
An insurer's definition of money includes cash, bank notes, cheques, postal orders, postage stamps, national savings certificates and holidays with pay stamps, luncheon vouchers and VAT purchase invoices. Cover is 'all risks' subject to specific limits depending on the circumstances of the loss, e.g. from a locked safe or a directors home. Insurers normally cover personal assault and theft by employees, primarily a fidelity guarantee risk, is covered only if discovered within 14 days. NAME
Another term for an underwriting member of Lloyd's. NEGLIGENCE
Perhaps the most common formof 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 PREMIUMS
Term variously used to mean gross premiums net of reinsurance premiums payable, or commission, brokerage, taxes, or any combination of these. |