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Insurance, in plain words
Eleven terms that decide what a policy pays. Knowing them before you buy is the cheapest protection there is.
Why this matters
Most disputes about claims come from a misunderstanding at the point of purchase: an amount insured that was too low, an exclusion nobody read, a fact that was not disclosed. We would rather explain these once, early, than argue about them later.
If a term here is not in your policy wording, or is used differently, ask us. The policy wording always decides.
- Premium
- The price of the policy. It depends on the risk, the amount covered and the insurer’s view of your history.
- Sum insured
- The maximum the insurer will pay for an item or risk. Set it too low and you carry the gap yourself.
- Underinsurance
- Insuring for less than the true value. Many policies reduce a part-loss claim in proportion, so a claim can pay less than the damage.
- Excess
- The amount you pay towards each claim before the insurer pays. A higher excess usually lowers the premium.
- Indemnity
- Putting you back where you were before the loss, no better and no worse. It is why insurance does not pay a profit.
- Third party
- Anyone other than you and the insurer who is harmed by what you do. Third-party cover pays them, not you.
- Comprehensive
- For motor, cover that includes damage to your own vehicle as well as third-party liability.
- Exclusions
- Things the policy does not cover. Read these before the benefits, because they are where claims are disputed.
- Endorsement
- A written change to the policy, such as an added item or a changed address. Ask for it in writing.
- Utmost good faith
- You must tell the insurer every fact that could affect their decision to insure you. Leaving something out can put a claim at risk.
- No-claim discount
- A reduction in premium for each year without a claim, common in motor insurance.