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Commercial insurance glossary
The terms that come up on schedules, wordings and quotes, explained in everyday words. Useful for brokers explaining cover to clients.
A–Z of commercial insurance terms
- Average
- A claim is reduced in proportion to how far the client is underinsured.
- Business interruption
- Cover for lost gross profit and extra costs after damage stops the business trading.
- Claims made
- A policy that covers claims made during the policy period, whenever the event happened.
- Condition
- Something the insured must do (or not do) for cover to apply.
- Condition precedent
- A condition that must be met before the insurer has to pay. Breaking it can remove cover for a claim.
- Day-one reinstatement
- Buildings cover that allows for inflation during the policy year and the rebuild, without average on the uplift.
- Declaration
- Information the client gives the insurer, such as turnover or wage roll.
- Demands and needs
- The record of what the client needs from their insurance, required under the IDD.
- Employers' liability
- Compulsory cover for injury or illness to employees caused at work. Minimum £5 million.
- Endorsement
- A change or addition to the standard policy wording, often shown with a code.
- Excess
- The amount the client pays towards each claim.
- Exclusion
- Something the policy does not cover.
- Fair presentation
- The duty to give the insurer all material facts, under the Insurance Act 2015.
- Gross profit
- For insurance, usually turnover minus variable costs.
- Indemnity
- Putting the insured back in the position they were in before the loss — no better, no worse.
- Indemnity period
- The maximum time a business interruption claim covers after the damage.
- Insurance Premium Tax (IPT)
- Tax on general insurance premiums, 12% at the standard rate.
- Limit of indemnity
- The most the insurer will pay for a claim or in total.
- Material fact
- Information that would affect an insurer's decision to cover or the price.
- Material damage
- Physical damage to property, such as buildings, contents and stock.
- Non-disclosure
- Failing to tell the insurer something material.
- Policy schedule
- The document showing the insured, covers, sums insured, premiums and dates.
- Policy wording
- The full terms, conditions and exclusions of the policy.
- Products liability
- Cover for injury or damage caused by products the business supplies.
- Proposal form
- The questions the client answers when applying for cover.
- Public liability
- Cover for injury to the public or damage to their property caused by the business.
- Reinstatement
- Rebuilding or replacing property as new.
- Rebuild cost
- What it would cost to rebuild a building, including fees and site clearance. Not the market value.
- Retroactive date
- On a claims-made policy, events before this date are not covered.
- Statement of fact
- A summary of the information the insurer has relied on, which the client must check.
- Subjectivity
- A requirement that must be met for the terms to stand, such as a survey.
- Subrogation
- The insurer's right to recover what it paid from whoever caused the loss.
- Sum insured
- The amount the property or item is insured for.
- Underinsurance
- When the sum insured is lower than the true value at risk.
- Utmost good faith
- Both sides must be honest and open with each other.
- Warranty
- A promise by the insured, such as having an alarm set when closed.
- Wage roll
- The total paid to employees, often used to rate employers' liability.
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