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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Public liability
Public liability insurance covers the cost of claims made by members of the public for incidents that occur in connection with your business activities. Public liability insurance covers the cost of compensation for personal injuries, loss of or damage to property, and death.
Purchased life annuity
An annuity that provides a regular income in exchange for a lump sum, but which is not bought directly with money from a pension.
The price (or premium) of insurance.
Rebuild value
How much it would cost to rebuild your property if it was destroyed beyond repair. Most building insurance is based on this figure rather than a property’s sale price or market value.
Regular premium
premium that comes out at an agreed time, such as once a month or once a year.
Regulatory capital requirement

The amount of financial resources held by insurance companies to withstand the risks they are exposed to, such as falling asset prices or increased liabilities.

The minimum amount of capital that insurers need to hold in order to do business is determined by rules such as the European Union’s Solvency II Directive. These rules are enforced by financial regulators.

Repayment of money to a consumer for a cost that is actually covered by the insurance policy.
If an insured property is damaged, rather than paying the policyholder a sum of money the insurer arranges for the property to be restored to its previous condition.
Insurers can buy cover from other insurers to protect themselves against large (or unexpected) losses.
Renewal notice
A notice sent to a customer inviting them to renew a policy.
Amount set aside by organisations to cover unexpected expenses or all regular expenses for a certain time frame (often three to six months).
Responsible party
This term is often used to describe someone who has caused a loss or damage.
This is additional cover added to an existing policy.
An event or outcome that you can insure yourself against such as fire, theft, flooding.
Recovery of all or part of the value of an insured item on which a claim has been paid.
A document describing the details of the cover you have from the information you have supplied to your insurer.
Selected pension age
When you start a pension plan you can choose the age at which you expect to start taking a retirement income. Speak to your pension provider if you want to change this.
Self-invested personal pension
A type of personal pension that allows you more flexibility with your investments. For example, it allows you to hold individual stocks and shares, investment trusts and commercial property. Charges for a SIPP may work differently to a personal pension. Using different types of investment involves different risks to other personal pensions and you should consider seeking advice.
Single-life annuity
Annuity based on the lifetime of just one person.
Solvency II

The European Union Directive that governs insurance companies. The text sets out:

  • valuation rules and capital requirements
  • risk management and corporate governance standards
  • reporting and disclosure obligations
Solvency ratio
The ratio of an insurance company’s eligible capital to its regulatory capital requirement. This ratio is used as an indication of an insurance company’s financial strength and its ability to withstand the risks they are exposed to such as falling asset prices or increased liabilities. It is usually expressed as a percentage and is calculated as follows: Solvency ratio = (eligible capital/regulatory capital requirement) x 100
Stakeholder pension

A type of defined contribution scheme that has to meet minimum standards set by the government. These include:

  • a charging structure that is capped at a maximum of 1.5% a year for the first 10 years and 1% a year after that
  • there can be no penalties for altering or stopping contributions or on transferring the benefits to another scheme
Stakeholder pension providers may only refuse to accept contributions if they are less than £20.
State earnings-related pension scheme
An additional State Pension which people who worked for an employer before 2002 could earn. Any SERPS entitlement will be affected by the changes to the State Pension. For more information on state pensions, see the Gov.UK website.
State pension
The government pays a basic State Pension to everyone who has paid the minimum National Insurance contributions. For further information, see the Gov.UK website
State pension age
The age at which you are entitled to draw a State Pension. The government has proposed changes to the State Pension Age. For more information see the Gov.UK website.
State second pension
An additional State Pension, linked to earnings, that replaced SERPS in 2002. It is due to be replaced by the single tier State Pension in 2016. For more information about the state second pension, please see the Gov.UK website.
Statement of fact
A form outlining all the information given to an insurer that is signed by the customer.
Statutory money purchase illustration
A yearly illustration of the estimated pension a member might get when they retire, in today’s prices.  It is adjusted to allow for the effect inflation can have on the cost of living over the period before the member retires, and how far their money will go in the future. (Also known as SMPI).
Subject to survey
Insurers use this term to provisionally accept a policy but this may change on what survey results, such as a survey on a property, show.
This is where someone takes over the claim made by another person. For example, if an individual has a problem with broken drains that are the responsibility of the local authority, the insurance company may pay to fix the drains and will then look to recover the costs from the local authority.
Subsidence claim
A claim for damage to a building caused by subsidence, that is when the ground beneath a building sinks, pulling the property’s foundations down with it. The downward movement of the site on which the building stands is unconnected with the weight of the building. Subsidence usually occurs when the ground loses moisture and shrinks, for example following prolonged dry spells.
Sum insured
The value of an insured item (or event) which will form the basis of a claim.
This is someone who takes responsibility for another person's debts or promises, and guarantees that they will be paid or undertaken.
Surety bond
A guarantee or promise taken out with the payer to pay you (the first party) a certain amount of money if the payer (the second party) fails to meet their agreed (or contractual) obligations. This will then be paid by a third party who has agreed to act as surety.
Tangible asset
This is a physical belonging or piece of property, for example including buildings, land or machinery.
Tax-free lump sum
You can take up to 25% of your pension fund as a tax-free lump sum when you retire. The maximum tax-free amount is set by the government. (Also known as pension commencement lump sum (PCLS) or tax-free cash).
Tax relief
Tax relief on pension contributions means you do not pay any Income Tax on the contributions you and / or your employer make into your pension scheme. Funds held in the scheme also receive favourable tax treatment. Income Tax is payable on any income taken from the scheme.
Telematics-based Motor Insurance

Insurance policies that use GPS technology to measure how a vehicle is being driven, which insurers then use to make judgements about driving performance. This information is then considered together with other traditional risk factors, such as the drivers’ age and occupation, to set premiums. ‘Safe’ drivers will usually benefit from lower premiums than ‘less safe’ drivers (also known as 'Pay how you drive' motor insurance).

Temporary claim
Your buildings insurance policy may cover the cost of alternative accommodation if your home is uninhabitable while repairs are being carried out.
Terminal bonus
A type of bonus paid out when a with-profits insurance policy (usually an endowment) comes to an end. The insurer can decide to pay either when the policy matures or when the policyholder dies, whichever comes first. It is paid out of the profits from the insurance company’s investments.
Third party
Usually for a motor insurance claim, this is the person who is involved in a claim but is neither the insurer nor the policyholder.
Third party administrator
An organisation to which an insurance company pays another company to do the administration or management of certain aspects of their business.
Tied agent
A person who sells policies for only one insurance company. Some sales people can be tied to several companies – they are known as multi-tied agents
Total permanent disability
Some life policies will pay out if the policyholder becomes permanently disabled – the policy then stops.
Trading result
An insurer’s overall profit and loss, calculated as the underwriting result plus investment income.
Underinsurance is when your insurance cover, or sum insured, is less than the value at risk.
When a building’s foundations are strengthened or deepened to manage the risk of subsidence occurring. 
Uninsurable risk
risk that an insurer will not take on. For example, this may be where an event is inevitable (such as a terminally-ill person’s death), gradual (such as rust or corrosion) or against the law.
Unit trust
An trust or organisation that takes money from individual investors and invests it in stocks and shares for them under a trust deed. The investment is in the form of units in the trust.
Unitised with-profit
A form of with-profits fund where the investor buys units which increase in value in line with any declared regular bonuses and to which a final bonus may be added when the units are cashed in.
Unit-linked annuity
A type of investment-linked annuity where the retirement income paid to you is linked to the performance of units in investment funds. Your retirement income may vary depending on how the investments rise and fall.
Utmost good faith
A term where both the policyholder and the insurer agree not to withhold information or provide false information that could affect the policy.
These are items that you own such as jewellery or paintings.
Another term for cancelled.
Voluntary excess

By agreeing to pay an excess your insurer may offer you a reduced premium. You can decide how much voluntary excess you wish to pay when you are taking out your policy.

A certificate which gives the person holding it the right to buy shares at a given price.
Wear and tear
This is the fall in the value of the item or property due to damage that occurs over time.
Weather claim
A claim arising from a weather event such as freeze, storm or flood.
With-profits annuity
A type of investment-linked annuity where the retirement income paid to you is linked to the performance of the annuity provider’s with-profits fund. The retirement income you will receive each year may go up or down.
With-profits policy
A fund made up of a variety of assets which usually carries a medium level risk. The products that use with-profits funds are typically regular and single premium savings plans and pensions. With-profits funds pool policyholders' investments, and customers share in the company's investment returns and other profits. These returns are smoothed to help reduce the volatility associated with direct equity investments.
Write-off or written loss
A damaged vehicle which is either not repairable, or one which would cost more to repair than the vehicle was worth before the damage occurred. (Also known as total loss).