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Accumulated Value

The amount accumulated in a life policy which has cash value.

All Risks

This is a slightly misleading name for the types of insurance which provide wide cover but nevertheless contain a number of exclusions depending on the risks. In other words, the term "all risks" should not be taken literally, but policy wordings should be read thoroughly.


  • A series of periodic payments
  • A policy under which an insurance company promises to make a series of periodic payments to a named individual or joint individuals in exchange for a single premium or a series of premiums.


Maintenance of a full sum insured and therefore adequate contribution or premium to the insurer is of vital importance. The system of average penalises under insurance and makes the insured his own insurer for the under-insured portion of a risk. Most property and pecuniary policies are now subject to Average.

Average condition

A condition in a non-marine property policy whereby, if the property value insured at the time of the claim is less than the refurbishment value, then the insured person's claim will be reduced proportionately.



The person or party, the owner of an insurance policy names, to receive the policy benefit if the event insured against occurs.


Used to describe an improvement in the insured property under a contract of indemnity resulting from its refurbishment or repair.


Usually refers to theft involving forcible or violent entry to or exit from the premises, and is more restrictive than Full Theft cover. If you have a Burglary policy you should check the extent of cover actually provided to make sure it meets your needs.


Cash value

The amount of money, before adjustments for factors such as loans that the policy owner will receive if a permanent life insurance policy is cancelled before the insured's death. Also known as cash surrender value.

Certificate of insurance

A document that describes the coverage provided by a group insurance policy and that is distributed by the group policyholder to the insured member.


Payments made subject to terms and conditions indicated in the policy.

Contract of indemnity

Property insurance that restores the insured to his original financial condition after suffering the loss. The idea is that the insured cannot profit from his misfortune. Personal Accident Insurance, where a pre-agreed lump sum payment is made, is not a Contract of Indemnity.

Consequential loss

Financial loss that results from, and in addition to, material damage.


The principle whereby if two or more insurers indemnify the insured for the same subject matter against the same risk on behalf of the same interest, they share the loss of liability proportionately. An insured cannot make a profit from a loss by recovering more than one property or pecuniary insurance policy. Contribution only arises when policies cover:

1. the same loss or damage by the same insured peril;
2. the same subject matter;
3. the same interest of the same insured.

Contributory negligence

A principle of law recognising that injured persons may have contributed to their own injury. For example, by agreeing to be a passenger in a car being driven by someone that you know to be drunk. If you are subsequently injured you may be said to have been contributory negligent.

Contributory plan

A group insurance plan under which insured group members must contribute some or all of the premium for their coverage.

A retirement plan that requires plan participants to make contributions to fund the plan.

Convertible term insurance

A term life insurance policy that gives the policy owner the right to convert the policy to a permanent plan of insurance.

Cooling-off period

The period during which the policyholder has the right to terminate the policy. It gives the purchasers of new life insurance policies a chance to re-think their decisions to purchase a life insurance plan which is a long-term commitment.


Terms and conditions provided by your policy.

Cover note (conditional receipt)

An interim document that serves as proof of the granting of insurance cover.

Customer protection declaration form

A form must be completed when he agrees to purchase a new policy in replacing the existing one. The declaration form reminds the buyer that he is fully aware of any real or potential replacement disadvantages and losses or has been given an explanation as to why no disadvantage or loss exists.


Decreasing term insurance

A term life insurance policy that provides death benefit decreasing over the term of coverage.


Sometimes called an "Excess", it refers to the amount of your claim that you yourself must pay before your insurance cover will operate. Sometimes this deductible is imposed by insurers because of the nature of the risk and in other cases it is voluntary and premium reduction can be allowed.

Defined benefit plan

A pension plan that defines the amount of the benefit that a participant will receive at retirement.

Defined contribution plan

A pension plan that describes the annual contribution the employer will deposit into the plan on behalf of each plan participant.

Double indemnity

A provision in a life or personal accident policy whereby benefits will be doubled if a claim arises from a particular cause.



Any writing on a policy in addition to its normal wording.

Endowment insurance

A type of life insurance that provides a specified benefit amount whether the insured lives to the end of the term of coverage or dies during that term.


Sometimes known as Exclusion, these are designed to limit the insurer's risk and can be found in the small print of policies. Notable examples would be the exclusion of war risks and nuclear damage, property covered by other insurance, etc.


The amount of your claim you have to pay before your insurance cover kicks in. See Deductible.


See Exceptions.



If a policy features a franchise figure; the agreed claim is then paid in full. Time franchises may also be used particularly for machinery breakdown covers.


Incontestability provision

A life and health insurance policy wording that provides a time limit on the insurer's right to dispute a policy's validity based on material misstatements in the application.

Insurable interest

In order to recover from an insurance policy the insured must stand in some legally recognised relationship to the subject matter of the policy, whereby he benefits from its safekeeping or is prejudiced by its loss. In property and pecuniary insurance, insurable interest can arise through option or obligation to insure.


A person who arranges insurance, whether an insurance agent, broker or consultant.


Juvenile insurance policy

An insurance policy that is issued on the life of a child but is owned and paid for by an adult.


Level term insurance

A term life insurance policy that provides a death benefit that remains the same over the term of coverage.


For compensation and motor insurance, each policy holder is required to pay a levy in addition to the premium.

Limits of liability

Liability policies normally contain a Limit of Liability stating the maximum amount insurers will pay for a particular event. This limit usually applies to the total of all claims arising out of a single event. Some policies will also have a limit set for each policy period.

Loss adjuster

A person employed in professional capacity in the negotiation and settlement of claims.


Malicious damage

This is an optional Additional Peril you can insure against under a Fire policy and it is taken together with cover against damage caused by riot and strike. Cover against malicious damage insures you against damage caused by "malicious persons". However, such damage excludes malicious break-ins, which are covered under a Burglary / Theft policy. An arson fire would be covered under the standard Fire policy unless it was started by the insured, of course.

Material changes

Changes in circumstances that affect the risk.

Material fact

Anyone seeking insurance must disclose all the material facts about the risk involved that he or she knows, or that they ought to know. In other words, the insured should not hide anything. The trouble is certain facts that the underwriter may deem "material" may not always be known to the insured person. The best principle to follow is: "If in doubt, mention it anyway." If you are not sure whether some other piece of information may or may not be relevant, tell your insurers anyway.


The end of the term of an endowment policy.

Maturity date

1. The date on which an endowment insurance policy's face amount will be paid to the policy owner if the insured is still living.

2. The date on which an insurer begins to pay periodic benefits under an annuity. Also known as annuity date.


Named peril policy

Such a policy specifies what perils are covered, whereas an All Risks policy would automatically cover anything not specifically excluded.


This is the most common form of breach of duty towards third parties under Common Law (also known as Tort). It is the failure to do something that a reasonable person would have done under the same circumstances, or alternatively an action which a "reasonable" person would not have done. No-claim discount - with some policies, such as motor insurance and accident insurance, you will get a discount on your premiums if you make no claims within a given period. The discounts will be higher as the period becomes longer.


Paid-up policy

An insurance policy that requires no further premium payments.


Under a Fire or Consequential Loss policy, the inclusion of Additional Perils cover protects the insured person against damage caused by, among other things, explosions, riots and strikes, malicious damage, aircraft, impact by road vehicles, burst pipes or "acts of nature" such as storms, floods and earthquakes.

Permanent life insurance

A type of life insurance that provides coverage throughout the insured's lifetime and also provides a savings element that builds a cash value.

Personal liability

Hopefully, this will not happen to many of us, but in the course of our lives, there are many things we may be liable for, although quite unintended on our part. For instance, we may, by some silly accident, poke someone's eye out with an umbrella. Such an incident must, of course, result in some tangle with the law. Personal Liability coverage helps us pay for the compensation due after such accidents. Most good quality Personal Lines package policies would cover this sort of event.


A document setting out the terms of a contract to insure.

Policy rider

An attachment to an insurance policy that expands the benefits payable under the policy.

Policy withdrawal provision

A policy provision that permits the owner of universal life insurance policy or a deferred annuity policy to withdraw funds from the policy's cash (accumulated) value. Also known as partial surrender provision.


A specified amount of money that the insurer receives in exchange for its promise to provide protection against the insured event(s).

Primary beneficiary

The party designated to receive the proceeds of a life insurance policy following the death of the insured. Also known as first beneficiary.

Public liability

You can use this type of policy to insure your business against legal liability for body injury to third parties or loss of, or damage to, the third party property.



An amendment to an insurance policy that becomes a part of the insurance contract and expands or limits the benefits payable. Also called an endorsement.


Standard risks

The risk category that is composed of proposed insured who has a likelihood of loss not significantly greater that average.

Substandard risks

The risk category that is composed of proposed insured who has a significantly great-than-average likelihood of loss. Also known as special class risks.

Suicide exclusion provision

A life insurance policy provision that governs the payment of policy proceeds if the insured dies as a result of suicide.

Sum insured

The sum expressed in a policy as the maximum of the insurer's liability under an insurance that gives indemnity or the amount payable by way of benefit in other insurance such as life.

Surrender charge

1. Expense charges sometimes imposed when a policyowner surrenders a universal life policy.

2. A charge imposed if the contractholder surrenders a deferred annuity policy within a stated number of years after it was purchased.


Term life insurance

A type of life insurance that provides a death benefit if the insured dies during a specified period.

Third party

Any person who is not a party in a contract of insurance.

Third party liability / Public liability

Exactly the same as Public Liability Insurance, involving three parties - the insured as first party, the insurer as second party, and the other person involved as third party.

Total and permanent disability

A disability that is defined in a disability income policy and that entitles the insured to receive disability income benefits. Usually the insured is unable to engage in any gainful occupation.



Insurance that is not adequate in terms of the sum inured to provide for full payment of a loss.


Insurance company employees who are responsible for identifying and classifying the degree of risk represented by a proposed insured.


The process of identifying and classifying the degree of risk represented by a proposed insured. Also known as selection of risks.

Utmost good faith

As one party to a proposed insurance contract (the insurer) relies upon the other party (the insured) for information about the risk, the rule of utmost good faith applies. This is a duty upon the proposed risk. A material fact is one which would influence the mind of a prudent underwriter in deciding whether to accept a risk and what terms to apply.


Variable life insurance

A form of permanent insurance under which the death benefit and the cash value of the policy fluctuate based on the investment performance of a separate account fund. It is also known as unit-linked insurance.


Without legal effect.


Waiver of premium for disability benefit

It provides that the insurer will waive payment of the policy's premiums if the insured becomes unable to work because of an accident or injury.

Waiver of premium for payer benefit

It provides that the insurer will waive payment of the policy's premiums if the adult policyowner dies or becomes disabled.

Whole life insurance

A form of permanent life insurance that provides life time insurance coverage at a level premium rate and builds a cash value.


Yearly renewable term

Term life insurance that gives the policyowner the right to renew the coverage each year, over a specified period of time.