Glossary

This glossary is intended as a general aid to help you understand some of the commonly occurring phrases and jargon used in the insurance world. If you have any questions about the use or meaning of a term or expression in any particular product or literature, you should raise them with the provider concerned.

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Cash in value: The amount of money you get if you cash in an investment.
Caveat: A warning or an exception.
Claim: What the customer asks the insurance company to pay to sort out problems caused by an event, such as a flood or a car accident.
Claim frequency: The number of claims made on a policy.
Claims and underwriting exchange: A computerised register of information from insurance proposal, claims and renewal forms, shared by insurers as part of their efforts to combat fraud.
Co-insurance: An arrangement where an insurance policy is shared by more than one insurer.
Collective investment scheme: The name given to schemes where investors’ money is pooled together including unit trusts,investments trusts and open-ended investment companies (OEICS).
Commercial business: Any insurance policy taken out by an organisation to cover their trade, business or profession.
Commission: Money paid to a third party for matching customers with insurance providers.
Commutation: If the total of all your pension savings (excluding State Pensions) at retirement is below the government’s set limit, you may be able to withdraw your entire savings from your pension fund as a cash lump sum, part of which will be taxable. (Also known as trivial commutation or trivial payment).
Composite insurer: A company that provides both life insurance (such as term insurance or group life cover) and non-life insurance (such as property, motor or travel insurance).
Compulsory: Required by law or an insurance policy.
Compulsory excess: Part of any claim that a customer has to pay.
Contents policy: A policy that covers the contents of your home or other building against a number of risks.
Contestable period: A period of time the policy may be challenged by the insurance company if they think that the customer has not followed the policy.
Contract: An agreement between two or more people to do (or not to do) something. The agreement can be enforced by law.
Contracted out: Contracting out means opting out of the State Second Pension (S2P) which, before 2002, was known as the state earnings-related pension scheme (SERPS). It means that you pay less National Insurance. Once the single-tier State Pension starts in 2016 contracting out will no longer exist. Any time spent contracted out will be deducted from your State Pension entitlement, but it is possible to rebuild this entitlement.
Contribution: If something is covered under more than one policy, the cost of any claim may be shared over all policies. For example, losing possessions on holiday may be covered by both home contents and travel insurance.
Convertible term assurance: This means that the policyholder can change or transfer to whole life or endowment insurance without giving further evidence of health.
Cooling off period: A certain amount of time a customer has to cancel a policy without penalty.
Coverage: What your insurance will and won’t protect if you need to make a claim.
Credit: Money received from selling goods or services.
Creditor: Someone who is owed money.
Current assets: A balance sheet account that represents the value of all assets that are reasonably expected to be converted into cash within one year in the normal course of business. Current assets include cash, accounts receivable, inventory, marketable securities, prepaid expenses and other liquid assets that can be readily converted to cash.
Current liabilities: Short-term liabilities that are due to be paid in less than a year such as bank overdrafts, money owed to suppliers and employees’ PAYE (pay as you earn).