Annual Premium Equivalent

An industry standard formula for calculating levels of life and pensions new business over a period of tme, to smooth out the effect of large, one off payments. It is the total of new annual premiums plus 10% of single premiums.

Annual (Regular) Premium

A policy where the policyholder makes annual/regular payments of premium to finance life assurance protection cover or to build up an investment or retirement fund. Premiums are invested by the life office as they are received and built up over time to provide a lump sum at maturity for payment to the policyholder or purchase of a retirement annuity

Cancellation Clause

A clause in an insurance contract which permits an insurer and/or the person insured to cancel the contract before it is due to expire. The clause may allow for the refund of part of the premium in respect of the unused portion of the policy.

Claimant

The person making a claim.

Duty of Disclosure

Your duty when seeking insurance to inform the insurer of every material fact. The duty arises when getting quotes for new insurance. It also applies if you look for a variation of cover and at renewal of your policy. Non disclosure of a material fact can invalidate a policy: an insurer can cancel a policy or refuse to pay a claim if you fail to reveal all material facts when applying or renewing insurance.

Indemnity

The principle whereby a person who has suffered a loss is restored, as far as possible, to the same financial position that he/she was in immediately prior to the loss, subject to any contractual limitation as to the amount payable (the loss may be greater than the policy limit). The application of this principle is called indemnification.

Loading

An extra charge to a standard premium reflecting the additional risk being taken on by the insurer. E.g. a motorist with a number of penalty points may find their motor premium is loaded.

Loss Adjuster

A professional who is appointed to investigate the circumstances of a claim under an insurance policy and to advise on the amount that is payable to the policyholder in order to settle that claim. Loss adjusters are generally appointed by underwriters.

Market Value

Most policies provide settlement for a total loss claim (the car is stolen or irredeemably damaged) on a “market value” basis. This means you are entitled to an amount representing the cost of a vehicle of similar make, model, age and condition. Or, if the vehicle is less than one year old, many insurers will replace it with a new vehicle of the same make and model you lost.

An Agreed Market Value cover is especially useful for classic or vintage cars – where the insurer agrees to pay a specified amount in the event of a total loss.

Material Fact

This refers to any fact that would influence the decision of an insurer in deciding whether to accept an insurance risk and the terms including the premium level at which the company would be willing to grant cover.

Maturity Value

This is the final value of a savings policy if it is allowed to run for the full term specified in the contract.

No Claims Bonus

This means you are rewarded on an ascending scale for each successive year without a claim and is most commonly associated with comprehensive motor insurance policies. If you do claim, your bonus is reduced, although if the accident is not your fault, certain insurers will leave your bonus intact. Some insurers allow you to “protect” your bonus by paying an extra premium, so you’re not penalised for just one claim.

Operating Result

A non-life insurer’s profit or loss after its investment income has been added to its underwritting result.

Premium

The amount charged by an insurer in return for providing insurance cover.

Proposal Form

This is a form which contains a number of questions that you are required to complete for an insurer when seeking insurance. This form is needed to assist the insurer to decide whether or not it is willing to provide insurance cover and, if so, the terms of such cover.

Personal Injuries Assessment Board

This is a statutory body, which provides independent assessment of personal injury compensation for victims of workplace, motor and public liability accidents. This assessment is provided without the need for the majority of litigation costs, such as solicitors and experts fees. Under the PIAB Act 2003, all claims for personal injury (excluding medical negligence) must be submitted to PIAB.

Pensions

For many people, the income they receive from the State of retirement will not be sufficient to support them. For this reason, many people chose to provide for their retirements by taking out pensions with a life assurance company. This is usually done by way of a contract where, in return for a lump sum or a series of regular payments to the life assurance company, the they will receive a lump sum at retirement.

Reinsurance

Insurance protection bought by an insurer to limit its own exposure. The availability of reinsurance protection allows an insurer to expand its own capacity to take on risk. Without a reisurance facility, each insurer would be able to accept less business.

Single Premium

A lump sum life investment or pension policy under which the policyholder makes a one-off payment to the life office. The life office uses it to provide life assurance protection, or invests it on the policyholder’s behalf for repayment with any gains at the end of the policy term(or in the case of a pension, for purchase of retirement benefits when the you retire).

Subrogation

This means that the insurer, which has paid a claim under a policy, has a right to step into the shoes of the insured in order to exercise in his name all rights he might have with regard to the recovery of the loss which was the subject of the relevant claim paid under the policy up to the amount of that paid claim.

Sum Insured

The maximum amount that an insurer will pay under a contract of insurance. The expression is usually used in the context of property and life insurance where (subject to the premium cost) the insured determines the amount of cover to be purchased.

Statement of Facts

On confirmation of cover, either by phone or online, the insurer will issue a statement of facts to the insured. It is essential that this document is read and any anomaly on same to be advised to the insurer

Technical Reserves

The amounts insurers hold against future payment of claims.There is government supervisory control of the proper estimation of outstanding claims and the nature and spread of assets which can be used to cover technical reserves.

Term Assurance

This is the simplest form of life assurance, and is pure protection product. A term assurance policy is taken out for a set period of time (e.g. 10, 20 or 25 years) and guarantees to pay out a specified sum if you die during that period of time. If you survive the term of the policy, no payment is made.

Third Party

Someone other than the insured or his insurer who has suffered injury or loss.

Under Insurance

Where the sum insured does not represent the true value of the property insured.

Underwrite

This is the process whereby an insurer assesses if insurance cover can be provided and what premium should be payable. It can also refer to the acceptance of the obligation to pay or indemnify the insured under a contract of insurance.

Unit Linked

The premiums under your savings policy are invested in units of the investment funds of your chosen life assurance company and the growth in the value of the units purchased determines how much your policy is worth at any point in time.

Wear and Tear

The amount deducted from a claims payment in recognition of the depreciation of the property insured through usage of it over time. Where cover is provided on a “new for old basis” i.e. where the insurer agrees to replace an old item with a similar new one, no such deduction is made.

Whole of Life Assurance

As with the term assurance policy, whole of life assurance is a protection product with promises to pay out an agreed sum on the death of the life assured. However in this case, there is no time limit on the term of the policy. Once the policy is taken out, the policy can continue uninterrupted for the rest of the policyholder’s life, as long as the premiums continue to be paid.