Specialist Holiday Home Insurance
For European Holiday Homes

Further Holiday Home Insurance Jargon Explained

Financial Ombudsman Service - A bureau established to oversee the interests of policyholders whose complaints remain unsolved through normal company channels of communication. The service is available to all those holding personal cover with the insurers who have joined the scheme. The decision of the Ombudsman is binding on the insurer, although the insured may appeal to the court if they so wish.

Financial Services Authority (FSA) – The regulatory body that is responsible for insurance since the 2000 Financial Services and Markets Act.

Hazard – This could be a physical or moral hazard that increases the risk that the insurer carries.  A physical hazard could be a thatched roof for a property or a postcode in a flood risk area and this will increase the risk to the underwriter.  It is of a physical nature and to some extent cannot be changed.  A moral hazard is more influenced by the way people act.  A person who has previous convictions for example may be considered a poor moral hazard and this could influence the risk that the insurer carries.  An underwriter may target specific groups of lower moral risk - such as giving an age related discount in the attempt to target those of more mature years – in insurance those of mature years will be deemed less of a risk than those who are younger.

Indemnity – This is the concept that all insurances are developed from.  The theory of indemnity is the returning of the policyholder to the same position after a claim that they enjoyed beforehand.  So in basic terms it is repairing some damage to a property that may have happened and returning the client to the position they were in before any damage occurred.  Sometimes this can be through payment of money to enable a policyholder to replace a broken item or part, sometimes its repairing the property – such as a locksmith repairing locks after an attempted break in or replacement of glass.  It could also be a reinstatement of the property – this is in respect of a total loss situation where a property can be burnt to the ground or destroyed through earthquake or flooding.  The reinstatement comes from the fact that the underwriter will take over the property to work on it and reinstate rather than just repair.  In all examples the theory is that the client is returned to the same position after a claim than they were beforehand.

Insurable Interest – A policyholder must have an interest in the property they wish to insure.  Usually this is their financial interest from the property they are legally liable for.  They must benefit from the continued existence of the property in question.  If someone does not have a financial interest in a property, or benefit from its existence and they are not legally liable for the property, they do not have insurable interest.  This insurable interest must be in place at the inception of the period of insurance as well as when a claim is made and if this is not the case, the policy could be void from inception or the client had no insurable interest when a claim arises.  

Insurance Broker/Intermediary - An insurance company who advise, administer and arrange insurance.  The broker/intermediary will act as the agent of the client, and will usually receive commission (brokerage) from the insurer. Since January 2005 intermediaries and brokers must be registered with, and regulated by The Financial Conduct Authority - FCA.

Insurance Company – The provider of the insurance cover.  The insurance company is essentially a company that sells insurance to the public whether underwritten by themselves or through another agent. As stated previously, the Financial Service Authority will regulate the insurance company.

Insurance Premium Tax - This is a tax on insurance policies where the risk is located in the UK. 

Insured - The person whose property is insured or who is listed on the policy.

Insurer - The insurance company or underwriter who, in return for a premium, agrees to cover a certain risk for a list of insurable events or perils. 

Lapse – The decision not to renew a policy at renewal - usually a renewal will be offered each year but the policyholder may not choose to renew for whatever reason and the policy will lapse from the date of that renewal.

Limit - The insurer's maximum liability under a policy, which may be written into the policy as a monetary limit per claim or per event as well as taking the policyholders sums insured as the possible maximum for indemnity.

Lloyd’s Broker - A broker approved by the Council of Lloyd's and entitled to place business direct with underwriters at Lloyd's. Lloyd's brokers must meet the Council of Lloyd's strict requirements as to integrity and financial stability. They are annually assessed concerning their financial position.

Lloyd’s of London - A Society, incorporated under Act of Parliament of 1871 and known as the Corporation of Lloyd's, where members of Lloyds join together as syndicates to insure risks.

Loss – The actual or financial loss that forms the basis of claim.

Loss Adjuster – A loss adjuster is an insurance professional who will be appointed by an insurance company to investigate and facilitate the smooth operation of dealing with a claim.  This could be by investigating the loss as the “eyes of the insurance company” as much as helping to arrange the repairs with tradesman and to minimise losses.  The fees for the loss adjuster will be paid by the insurer, whether a claim is valid or not, and based upon economies of scale will depend on whether an insurance company will appoint a loss adjuster for a claim.  If a property on risk has an item of furniture that has sustained accidental damage and will cost a negligible amount to repair or replace, an insurer will not appoint a loss adjuster as its not financially viable for them to do so.  However if a property has sustained serious water damage, storm damage, or fire then a loss adjuster is more likely to be appointed as the cost of the loss adjuster will be more than outweighed by the savings they may make from the loss adjuster helping to minimise losses and helping to protect the underwriter from potential liabilities whilst the property is not in a good state of repair.

Material Fact - Any fact, which would influence the insurer in accepting or declining a risk or in fixing the premium or terms and conditions of the contract, is material.  These must be disclosed by a proposer, or by the insurer to the insured.

New For Old - Where the insurer will replace items with new items rather than take into account depreciation or wear & tear.

No claim discount – A discount on premiums that can be offered by an underwriter, and rewards those who may not have had a claim on a previously relevant or similar insurance.  It may be that the client was with another company and the new company may wish to reward those without claims (subject to the client being honest with all material facts regards their claim’s history) or it could be a renewal of an existing policy and the insurer is offering a new price subject to the previous year without a claim.  Most insurers will have a limit to the no claims discount and it is not a discount that will reduce the premium after that limit has been reached.

Non-Disclosure - The failure by the insured or their insurer to disclose a material fact to the underwriter before acceptance of the risk.

Peril - An exposure of risk, or unfortunate event, which may be covered or excluded by a policy of insurance.

Period of risk - The timescale during which the insurer can incur liability under the terms of the policy.  An insurance policy is likely to be offered on a 12-month period of insurance.

Policy - A document detailing the terms and conditions applicable to an insurance contract and providing evidence of the underwriter’s acceptance of the risk on cover.  It may contain the statement of fact, certificate and policy wording all together, because the insurance has been formed under the principle of utmost good faith and all facts that form the basis of the insurance from the policyholder’s declaration to the full policy wording will form the policy.

Premium - The monetary amount paid for a contract of insurance that covers the transfer of risk of certain events/perils from the insured to an insurer and usually to cover a period of 12 months.

Quotation – A statement of the monetary cost to an individual that an insurance company will require to offer insurance cover for a particular risk being offered to them.

Reinstatement – The rebuilding of a property by the insurer to indemnify the insured.  The insurance company will be in control the property as the property is rebuilt or reinstated and this is over a longer period of time than a conventional repair.  The reinstatement cost is often the sums insured of the insurance, as an insurance company will assess their underwriting risk and calculate the premium for the insurance, based on the value of the reinstatement of the property, this being the worst case scenario.

Renewal - The acceptance of the premium and policy terms by an existing client to continue cover for a further period of insurance.

Renewal notice – The offer of a premium and policy terms for the next period of insurance by the insurer.  This renewal notice will usually be sent to the policyholder “in good time” before the period of insurance ends, and if the client wishes to renew the policy they will have to arrange payment of the premium to continue the insurance cover.  If the client does not wish to renew, the contract of insurance will end on the renewal date and will be known as lapsed.

Risk - The subject matter of the insurance or the named risk.  It could also refer to the actual perils of the policy.

Schedule - The part of a policy containing information specific to that particular risk. The policy wording which accompanies the schedule will be more homogenous so the schedule is the specific details of the risk.

Settlement – The process where the insurer agrees to meet the claim for the amount stated.  The claim amount is known as the quantum.

Statement of Fact - A statement of facts and details of an insurance risk given by the proposer, which is provided to an insurer enabling the insurer to offer a premium and terms.

Subrogation – This is the underwriter acting as the insured to recover rights for the insured in terms of a claim from a third party.  In common law we have responsibilities towards each other such as a duty of care towards others and to act in a responsible manner, and not to act without due care or consideration for others.  If an insured has to make a claim on their policy due to the negligence or liability arising from others, then in common law they have the right to reclaim the loss from the negligent party.  The result being that the responsible person should pay for the damage they caused.  How this works in insurance is that the underwriters will indemnify their client for loss or damage caused, putting their client in the same position they enjoyed before the claim was made.  Then, under subrogation rights the insurer will claim their costs from the third party or the third party’s insurance as under common law the third party was liable for the damage caused.

Sum Insured - The maximum amount payable in the event of a claim under contract of insurance.

Third Party Liability - Liability of the insured to cover any bodily injury or property damage that may occur to persons who are not party to the contract of insurance and are not employees of the insured.

Underwriter - A person, company or syndicate who accepts business on behalf of an insurer and will agree to the transfer of risk for an agreed premium.

Utmost good faith - Insurance contracts are contracts of utmost good faith, which means that both parties to the contract have a duty to disclose, clearly and accurately, all material facts relating to the proposed insurance. The insurer may be able to deny liability if the proposer does not disclose all material facts relevant to the risk.

Warranty - A very strict condition within a policy imposed by an insurer onto the insured. A breach entitles the insurer to deny liability, as they would be accepting the policy on the basis that the warranty will be strictly adhered to.

Wear & Tear - This is the amount deducted from claims payments to allow for any depreciation in the property insured. Most insurers will deduct wear & tear when insuring clothing, bedding and linen.

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