Glossary of car insurance terms

Accident – Refers to an unexpected event involving damage and/or injury to at least one party, causing financial damage.

ABI – Association of British Insurers. Financial service trade that represents the collective interests of the UK’s insurance industry.

Accident Insurance – Insurance that covers you if you suffer particular injuries due to an accident.

Act of God – Refers to damages caused by an unforeseeable/unusual event, such as a flood or storm.

ADD – Accidental Death and Dismemberment

Agent – Someone who is acting on the behalf of another person or company.

Amortisation – The reduction in the value of assets that is owed by a company. A company may set aside some money each year to allow for depreciation in the value of their assets.

AMRA – Access To Medical Records Act (1988). Legislation that governs access to the health records of deceased people.

Applicant – Someone who applies for a financial service or product.

Applied Interest Rate – The rate used to calculate how much insurance is due.

Arbitration – The process where two disagreeing parties come to an appropriate conclusion.

Arrears – Refers to a late payment, or to a payment that is made after the event.

Arrears fee – The fee you pay in the event of a late payment.

Beneficiary – The main recipient of funds or other benefits.

Benefits – The money paid out by the insurance company when you make a claim.

Broker – A person or organisation that will find you an appropriate policy for a set fee. Allowing you and the insurance company to enter into a contract.

Broker’s fee – The fee paid to a broker for the services provided.

Cancellation Clause – Details and conditions about cancelling your insurance policy before the given expiration date.

Caveats – The condition of what your contract would be when given a quote.

Certificate – Documentation provided by the insurer to prove that an insurance policy is now in operation.

CII – Chartered Insurance Institute. Governing body for the Insurance Industry.

Claim – The event of notifying your insurance company that you require payment for damages caused in the event of an accident or theft.

Coinsurance – When a number of insurance companies arrange to share the cover of a particular risk.

Commission – The money paid by the insurance company to an independent party that sells their insurance policies.

Comprehensive Insurance – A type of car insurance that covers all possible risks, with some exemptions. The exemptions will differ between policies.

Conditional Insurance – An insurance policy that has to be taken out as a condition of obtaining another service, such as a loan.

Conditions – The details of the duties and rights of the insurer and the insured, as given in the insurance policy.

Contract – A legal agreement between two or more parties.

Cooling off period – This is the time period in which the insured may cancel their contract without having to pay a penalty or cancellation fee.

Cover – Financial protection of particular risks offered by your insurance company.

Direct Debit – A payment method that allows you to pay for bills automatically out of your bank account.

Endorsement – A written adjustment to an insurance policy that becomes a legal part of the policy.

Excess – The amount of money that has to be paid by the insured towards the cost of a claim.

Exclusions – Exclusions are specific events or possessions that are not covered by an insurance policy, they will be specified in your insurance documentation.

Financial Adviser – Someone who advises others with their financial situation.

GAP Insurance – Insurance that covers any outstanding payments you may occur in the event of theft or a write-off.

Green Card – A document issued to motorists with an insurance policy, it is used abroad to prove that the motorist has the minimum insurance legally required by the country visited. It is not essential to have a green card in all European countries.

Insurance Group – Each policyholder is placed into an insurance group, it is a way for the insurer to assess the risk of each vehicle. Group numbers are from 1 to 20, with the higher risk cars belonging to group 20.

Liability – This is the legal responsibility for causing injury or damage to someone else’s vehicle.

No Claims Bonus – A reduction in the cost of renewing your premium as a result of making no previous claims. If you build up your no-claims bonus over time, you are eligible to receive a discount of up to 65%.

Period – The length of time that the initial interest rate applies.

Policy Exclusion – Exclusions are specific events or possessions that are not covered by an insurance policy, they will be specified in your insurance documentation.

Postcode – This is the alphanumeric code at the end your address used to identify the location of a property.

Premium – The payment made by the insured to keep an insurance policy in place.

Quotation – The predicted cost of taking out an insurance policy, the quotation takes into account your vehicle and circumstances.

Redundancy Insurance – Insurance that covers you for money-loss if you are made redundant.

Repayment Plan – A way of paying back outstanding money.

Third Party – One or more people who are involved in an insurance claim who aren’t the insurer or policyholder.

Write-off – Refers to a vehicle that is so badly damaged that it cannot be repaired.