Insurance jargon-buster

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Any one claim

Sometimes called each and every claim. The level of cover you choose applies to each claim you make during one policy period. Defence costs are paid in addition to any damages and to the same level of cover. The opposite of aggregate cover.

Aggregate

The level of cover you choose applies to the sum of all accumulated claims you make during one policy period. Defence costs are included in this level of cover.

Applicable courts

Also known as jurisdiction. For you to be covered by the policy, a claim against you must be brought in the courts of – or be subject to the laws of – a specific country or region. This is normally the UK, the UK and EU, worldwide excluding USA and Canada, or simply worldwide. Whichever applies to you is noted on your schedule.

Broker

An independent person or organisation whose business it is to find the most appropriate cover for any given customer's risk profile. Brokers usually have access to a selected range of specialist insurers and policy types.

Claims made cover

Applies to most types of business insurance, including professional indemnity insurance. To respond to a claim under a ‘claims made’ cover, your policy must be in force at two points: at the time a claim is made, and when the work was done or the incident occurred. Claims made after you've cancelled your policy aren't covered. As such, a business may choose to keep part of their insurance active for a period after they stop trading, or buy run-off cover. More restrictive than claims occurring cover.

Claims occurring cover

Usually applies to public liability insurance and employers’ liability insurance. The ‘claims occurring’ cover basis means claims under these sections are covered if the policy was in force at the time of the incident. That includes claims for loss or damage that haven't come to light until much later - even after the policy has ended. Less restrictive than claims made cover.

Clause

Defines the kind and degree of cover of your policy.

Continuous cover

A policy that doesn't expire or need renewal, and which remains in place for as long as payment is maintained. Aside from any mid-term changes, the premium stays the same throughout the life of the policy. The opposite of an annual policy which usually expires after 12 months.

Defence costs

The legal costs of defending your claim in court. These are included in the overall level of cover or paid in addition to it, depending on whether you have an any one claim or an aggregate policy.

Duty of disclosure

A document included with every professional insurance policy on continuous cover. It's sent at the start of the policy and resent at each anniversary. It states the essential information you provided about your business and explains what you need to do if and when any of this information changes.

Endorsement

A mid-term amendment that changes the original policy (and also the name of the document sent to you noting this change).

Excess

The amount you pay towards each claim. If you have a professional indemnity claim and the only costs to your insurer are their own legal costs, you don’t pay a thing. The excess usually only applies if you’re found liable and your insurer has to pay damages/compensation to your client.

Exclusion

A clause in your policy that states a specific business activity, operation or circumstance isn't covered by your insurance.

Geographical limits

For a claim to be covered by your policy, your business can operate only within certain countries. These are usually defined as UK, EU or worldwide and whichever applies to you is noted on your schedule.

Inception date

The start date of your policy. Claims can only be made after this date.

Indemnity to principal

This is a clause added to your policy. It means that your cover extends to your client or other third party (the 'principal') if they're sued as a result of your negligence. The insurer is bound to pay them directly (the 'indemnity').

Insurer

The organisation assessing and accepting the merits of each risk. It's the insurer that pays out in the event of a claim.

Insurance premium tax (IPT)

A 12% tax charged on all insurance premiums. You can't claim it back, unfortunately.

Jurisdiction

See applicable courts.

Level of cover

Sometimes called 'limit of indemnity'. The maximum amount your insurer pays in the event of any one claim, or the maximum sum paid for all accumulated claims.

Limit of indemnity

See level of cover.

Payroll/ wage roll/ wage bill

The total amount of money your business pays out in salaries, wages, and bonuses, including your own. Your calculation should include all overtime, paid holiday, and commission. As well as any National Insurance and pension contributions you make on behalf of your employees.

Policy

Your insurance. Your policy is the legally binding document detailing and confirming your cover and it consists of the schedule (the bit about you) and the policy wording (the bit about your cover). You should check both carefully when you get your documents.

Policy period

The length of time you're covered. Can be for 12 months or continuously, depending on your policy, your insurer and what your business does.

Premium

How much your insurance costs.

Proposal form

Some insurers like you to fill in a multi-paged paper form before they give you a quote. Whether you have to or not depends on what you do and, to some extent, how progressive the insurer is.

Retroactive date

The date from which your work is covered, regardless of the start date of your policy. Cover is extended backwards to a specified date. It means you're covered for work you did before you bought your insurance.

Run-off cover

Insurance for a business that's stopped trading but still wants cover for its past work. Run-off cover usually lasts for six years but other periods of time can be specified.

Schedule

This document outlines the details of your business, the cover you've bought, any applicable exclusions, the policy period and the premium you're paying.

Statement of fact

Forms the basis of the contract between you and the insurer. Statements of fact are compiled from information provided by you. You'll be asked a series of 'yes and no answer' questions as you get your insurance – cover is based on your answers to these questions. A statement of fact does away with the need for a lengthy proposal form.

Underwriter

A person employed by the insurer to evaluate individual risks, calculate an applicable premium, apply clauses or exclusions and confirm the overall terms and conditions of cover.

Wording

The definitive statement of exactly what you are and are not covered for.