Most people view insurance as a necessary evil at best or just plain evil at worst. These views may be an indication of the negative experiences people have had with their insurance providers, but are more likely a result of the shadow of unfamiliarity most have regarding the area of insurance.
To be smart about insurance, you must know the jargon. The following are 10 terms that will get you well on the way of understanding the world of insurance.
1. Aggregate Limit of Indemnity
This is the upper-limit payable by an insurer under a given policy with respect to all the claims arising within a specific period of insurance. This is common with Products Liability Insurance, where the number of claims arising from a faulty product may be difficult to predict. An Aggregate Limit for a given policy period will ensure that the insurer restricts their maximum loss. Insurance required by the law cannot be restricted in this manner.
2. Consequential Loss
This is the insurance of an indirect loss which may accompany an insured loss, such as a loss of profit or the loss of use of the damaged property. It can also cover situations where revenue is lost because of a breach of contract by a supplier. Consequential losses are not included in a normal policy and attract an additional premium.
3. Employers Liability Insurance
This covers the liability of employers to their employees for injuries or diseases arising out of and in the course of their employment. This type of insurance, bar some exemptions, is compulsory in Great Britain. These exemptions include most public organisations, family businesses where all employees are closely related to the owner and companies where the only employee is the owner.
4. Ni Number
A National Insurance number is used in the administration of National Insurance to adult residents of the UK. It is used to keep track of the National Insurance contribution of a person. It is only given to adult citizens and individuals who have the right to work or study in the UK.
An exclusion policy gives a condition for which a given policy does not cover. The policy thus excludes the insurer’s liability in these cases.
6. Increase in Cost of Working
This provides for any additional expenditure incurred by the insured as a result of trying to keep up the level of production, following the occurrence of an insured peril.
7. Professional Indemnity Insurance
This is a policy that protects a professional from any legal liability arising from third party injury, loss or damage caused by his own professional negligence or that of his employees. It covers the insured against unintentional breach of confidentiality and loss of goods, money or data for which the he or she is responsible.
This is where an insurer restores or rebuilds the lost property, instead of providing a monetary payment for the settlement.
9. Utmost Good Faith
Utmost Good Faith (uberrima fides) means that both parties to the contract fully disclose all material facts relating to the proposed insurance. A breach of this by the insured entitles the insurer to repudiate liability.
10. Wear and Tear
This term carries a double meaning. It is the amount deducted from any claim payment to allow for the depreciation of the property insured, but can also be a provision by the insurer that states that normal depreciation of the insured property will not be covered by the policy.