If you have to make a claim on your home insurance, or are simply going through the terms and conditions when taking out a policy, some of the industry jargon you’ll come across can be a little confusing.
Here are some of the key terms explained to help you understand your policy better, especially when dealing with insurers over a claim, and also when you’re comparing quotes:
Accidental damage – Accidental damage cover is usually available as an extra with most standarpolicies. It’s offered to protect both buildings and contents against damage which you or others named on your policy cause accidentally. This might include hammering a nail into a water pipe, or ruining an expensive rug by spilling paint on it.
Act of God – There is a common misconception that insurers reject claims for ‘acts of God’. ‘Acts of God’ is an American term that refers to natural disasters, such as floods, lightening strikes and earthquakes, which are certainly covered by most home insurance policies. But in one or two extremely rare, almost unforeseeable circumstances, such as damage caused by ‘war’ (war is also seen as an ‘act of god’), you won’t be covered.
Broker – An insurance broker can prove extremely useful in getting you a good deal, guiding you to the correct cover for your needs, accessing exclusive deals and even helping you in the event you have to make a claim.
Cancellation – This usually refers to ending a policy before the period of cover agreed at the outset has finished. Some insurers may charge you for cancelling a policy before it’s officially due to end.
Certificate of insurance – A certificate of insurance is a legal document which proves insurance is in force. It’s required by law in the case of banks offering mortgages and requiring proof a home is covered.
Claims history – Insurers often take into account how many claims you have made in the recent past (usually as far back as 6 years) when working out how much to charge you for cover.
Compulsory excess – The first part of any claim is nearly always met by the insured (i.e. you). The compulsory excess is the amount of excess stipulated by the insurer in the terms of a policy, but is usually adjustable when you take cover out. It’s usually around £50, but can be up to £500 or more depending on the claim type.
Cover limits – Nearly all policies set maximum limits both for claim totals, no matter how many different elements are involved, and any individual items within the claim.
Due diligence – Insurers naturally expect the insured to take reasonable care with their possessions and property, this is known as ‘due diligence’. For example, if you left all your windows open one summer, went out and came back to find you’d been burgled, in all likelihood it would be deemed you hadn’t shown ‘due diligence’ in protecting your property.
Excess – As touched on above, the ‘excess’ is the amount you must pay for a claim, before your insurer covers the rest. You’re usually also given the option to set a voluntary excess, which is then added to the compulsory excess, and can have the effect of lowering the premiums you pay. The excess can change depending on the claim. Notoriously, claims for subsidence may have an automatic excess of £1,000 or more.
Financial Ombudsman Service – The Financial Ombudsman Service is a Government funded service which deals with complaints and disputes you may have with an insurer, assuming you can’t come to an agreement with the insurer directly. Its services are free to consumers, and the website is www.financial-ombudsman.org.uk.
Home emergency cover – Some policies now include a certain level of emergency cover for home emergencies such as boiler breakdown and blocked drains as standard. But most home emergency cover is generally bought as an optional extra.
Individual and specified items – Individual items that you own which are of higher value, or which are particularly high risk (i.e. attractive to thieves, or particularly old and/or delicate) may need to be brought to the insurer’s attention so they can adjust your premiums accordingly, or make allowances for such items when providing you with cover quotes. The amount you can claim for specified items is often limited, typically to 25% of the total insured sum.
Legal expenses – Legal expenses cover is offered by some insurers, usually as an optional extra. It covers legal costs in the event of disputes with commercial organisations or individuals, but not any pay outs you might be required to make if you lose a case.
Loss adjustor – Loss adjustors (or loss assessors as they’re also known) are appointed experts who will look at a claim and assess what needs to be done and any settlement required.
New for old – Most providers these days offer insurance on a ‘new for old’ basis. In other words, you will get the brand new equivalent of the item you’ve experience loss or damage to, no matter how old it is (exclusions, of course, apply to some items, such as antiques and other high value items).
No claims discount – Insurers often provide discounts on premium costs to those who haven’t previously made any claims (or no claims in the recent past that is). Discounts can be as much as 60% to 70% for those with 5 or 6 years no claims.
Obligation to notify – You are obliged to notify your insurer of any change in your circumstances and to your property which may affect your insurance, such as taking in a lodger or having major building work completed. ‘Obliged to notify’ also refers to giving accurate and honest information when you first take out cover.
Period of cover – Basically, this is how long a policy is due to run for. It’s usually 12 months, but is often also 18 or 24 months.
Policyholder – The policyholder is you!
Rebuilding costs – When you’re working out how much to insure your property’s structure for, as part of the buildings element of cover, you must remember that it’s the total cost of rebuilding everything from scratch you’re considering, not your home’s market value. This should include all outbuildings and garden structures, as well as the main building itself.
Quote – This is a financial, no obligation sum an insurer comes up with after working out how much they want to charge you for the type and level cover you require. It’s always best practice to hunt around at renewal time and compare quotes on like-for-like cover. If you’re happy with your current insurer and would prefer not to switch providers, but find the same level of cover elsewhere at a lower price, see if your current insurer will match it.
We help our customers to compare insurance products and find a policy that’s right for them. Customer care is at the heart of everything we do and we have a dedicated customer service team on hand by phone, email, twitter and instant chat. For more information speak to one of our experts on 0203 014 9300 or email firstname.lastname@example.org