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Abandonment
The cession by the insured to the insurer of the remains of his or her property and rights relating to it, when a total loss is claimed.

Accident
An unlooked-for mishap, or an untoward event that is neither expected or designed.

Accumulation
Concentration of risk, as where insurers may find that they have many policies on properties or liabilities that could result in heavy losses occurring at the same time.

Act of God
An event that is the result of natural forces, arising without human intervention, which no human foresight could have provided against and of which human prudence was not bound to recognise the possibility.

Additional Perils
Perils added to a fire insurance policy, such as damage by storm, tempest or flood.

All Risks
Term used to describe an insurance covering fortuities generally though not inevitabilities such as wear and tear or depreciation. Other exceptions may be specified.

Arbitration
Settlement of a difference by a person or persons (other than a court) appointed for the purpose.

Assessor
A person appointed to assess and agree on the settlement of an insurance claim. In modern fire insurance, the person appointed by the insured to act on his or her behalf for that purpose.

Assignment
(a) Transfer of a right by an assignor to an assignee.
(b) The document making the transfer of the right.

Average condition
A condition in a non-marine property insurance that if the property value has been understated the insured's claim is reduced proportionately to the understatement.

Bail bond
A bond given to secure the release of an imprisoned person.

Blanket policy
A policy in which a single sum insured covers a number of separate items such as buildings in a fire policy or employees in a fidelity guarantee policy, without being divided up among them.

Bond
An undertaking by a surety to pay compensation or a penalty if the person guaranteed by the bond fails to fulfil some obligation.

Breakdown Engineering insurance
In traditional from covers the breakdown of mechanical or electrical plant defined as:

(a) actual breaking or burning out of any part of the plant whilst in use from either mechanical or electrical defect causing sudden stoppage and necessitating immediate repair or replacement
and
(b) fracturing of any part of the plant by frost which renders the plant inoperative.

Burning cost
The cost of claims under a group of insurances. The term is not confined to fire insurance.

Cancellation
The termination of an insurance by notice.

Capital benefits
Lump sums payable under a personal accident insurance for accidental death or loss of limb or sight.

Captive insurance company
An insurance company formed by a trading company, a trade association or the like, primarily for the insurance of the founder's own risks.

Catastrophe
A sudden and severe disaster causing very large loss.

Clause
A section of a policy or other form of contract.

Co-insurance
There is said to be co-insurance where:

(a) a number of insurers each issue part of an insurance, or
(b) the insured is required to bear a stated proportion of any claim

Collapse
A peril covered by a boiler policy, commonly defined as "a sudden and dangerous distortion (whether or not attended by rupture) of any part of the plant caused by crushing stresses by force of steam or any other fluid pressure (other than by pressure of ignited flue gases)".

Combined liability policy
A policy combining employers' liability and public liability cover.

Comprehensive policy
A policy covering a number of perils.

Concealment
Deliberate suppression by a proposer for insurance of a material fact relating to the risk.

Conditions
Provisions in an insurance policy which supplement the operative clause and the exclusions, by setting out procedures and qualifications or making stipulations as to some important matter. A condition may be either:

(a) a condition precedent of the policy which, if not observed, relieves the insurer of all liability under it
(b) a condition precedent to liability which, if not observed, relieves the insurer of liability for a particular claim, or
(c) a condition subsequent, the non-observance of which does not prejudice payment of the claim but entitles the insurers to counterclaim damages from the insured.

Consequential loss
Monetary loss resulting from an occurrence in addition to any material damage suffered.

Contingency insurance
Insurance against relatively remote possibilities, eg loss arising through the reappearance of a missing beneficiary under a will.

Contingent liability
A liability arising in some secondary way.

Contract guarantee
A bond whereby A, a guarantor, promises to pay B a sum of money if C does not perform a contract entered into between B and C.

Contractual liability
Liability that arises by virtue of a contract, as distinct from liability at common law.

Contribution
The principle whereby if two or more insurers indemnify the insured in respect of the same subject-matter against the same peril on behalf of the same interest, they share the loss or liability proportionately.

Cover note
An interim document evidencing the grant of insurance cover.

Cross-liabilities
Where two persons are indemnified by a liability policy, it is possible that one of them may become entitled to sue the other. A cross-liabilities clause can be inserted in the policy to make it clear that the liability of one to the other is covered.

Customs & Excise bonds
Bonds given to the Commissioners of Customs and Excise to secure the eventual payment of duty that has become or may become due.

Days of grace
A period after the renewal date of a policy during which cover continues provided that the premium is paid before the end of the period and the insured has not indicated an intention not to renew.

Declaration policy
A policy requiring the insured to declare periodically the value of fluctuating items insured, eg stocks or goods carried, as a basis for adjustment of the premium to correspond.

Deductible
An amount, being the first part of the cost of a claim, which the insured has to bear in accordance with the terms of an insurance.

Discovery period
The period within which a defalcation has to be discovered and notified to insurers under a fidelity guarantee policy.

Duty of disclosure
The duty of a proposer for insurance to disclose all material facts about the risk.

Earned premium
Premium is said to be earned by a particular date to the extent that the insurance has by then run its course.

Endorsement
Any writing on a policy in addition to its normal wording.

Ex gratia payment
A payment in settlement of a claim when legal liability to pay is denied.

Exception
A peril or contingency specifically excluded from the insurance cover.

Excess
An amount, being the first part of the cost of a claim, which the insured has to bear in accordance with the terms of an insurance.

Exclusion
A part of the insurance contract that limits its scope.

Experience
The comparison of claims, or claims and premiums, over a period, in respect of a particular insurance or group of insurances.

Fidelity guarantee
An insurance guarantee to A against the dishonesty of B or B's failure to perform an obligation.

First loss insurance
Property insurance where the sum insured is accepted to be less than the value of the property but the insurer undertakes to pay claims in full up to the sum insured.

Fleet policy
A single policy covering a number of hulls or motor vehicles in one ownership with a special rating of its own.

Force majeure
Irresistible compulsion or coercion.

Franchise
A minimum percentage or amount of loss which must be attained before insurers are liable to meet a claim. Once it is attained insurers pay the full amount of the loss.

Green card
A document evidencing the existence of third party motor insurance, issued to a motorist for use internationally.

Hazard
A physical or moral feature that introduces or increased the possibility of a loss arising from a peril or influences the extent of the loss.

Incurred but not reported
(IBNR) Term for a reserve by an insurer for losses that have occurred but have not been notified.

Indemnity
(a) An agreement by one party to make good a loss sustained by the other party.
(b) Making good a loss.

Inherent vice
A quality in goods that produces damage to them by its own action without the assistance of an outside agency.

Insurable interest
Insurance requires for its validity that the insured shall be so related to its subject-matter that he or she will benefit from its survival or will suffer from loss or damage to it or may incur liability in respect of it.

Insurance
A contract whereby one party, the insurer, for a consideration (the premium), undertakes to pay to the other party (the insured) a sum of money or its equivalent in kind, on the happening of a specified event that is contrary to the interest of the insured.

Long tail business
Insurances under which claims take a long time to arise or settle.

Long term agreement
An agreement in fire insurance whereby the insured undertakes, in consideration of a discounted premium, to renew the insurance for a given number of years.

Loss ratio
The proportion of claims paid or payable to earned premiums.

Maintenance bond
A bond providing indemnity if work completed under contract is not of the required standard or does not function properly.

Moral hazard
The hazard arising from the possible behaviour of an insured which may increase the possibility of loss by reason of carelessness or dishonesty.

Mutual insurance company
An insurance society without shareholders so that all the profits belong, in principle, to the policyholders.

New for old
Insurance where the replacement value of property lost or damaged is payable without deduction for depreciation.

No-claim discount
A discount granted on a renewal premium after a period without claims.

Operative clause
That part of an insurance policy that states the insurance to be granted.

Peril
A possible cause of loss, such as fire.

Physical hazard
A physical, feature that introduces or increased the possibility of loss arising from a peril or one that may influence the extent of a loss.

Policy
A document setting out the terms of a contract to insure.

Policyholder
The insured person.

Premium
The consideration payable for an insurance

Probably maximum loss
(PML) An insurer's estimate of the maximum loss likely to arise from the occurrence of a single event.

Proximate cause
The immediate or effective cause of an event, not necessarily that closest in time.

Reinstatement

(a) Making good damaged property.
(b) Paying an extra premium to restore the sum insured after it has been depleted by a claim.

Reinsurance treaty
A contract between two insurers whereby defined risks insured by one party are reinsured by the other to an extent specified by the contract.

Renewal
Continuance of an insurance after an initial period.
Risk Used in many senses, notably:

(a) uncertainty as to the outcome of an event
(b) the subject-matter of insurance
(c) probability of loss
(d) the peril insured against
(e) danger

Risk management
Protection from losses through untoward events which would jeopardise solvency, and minimising the cost of such protection by physical or financial means.

Schedule
That part of an insurance policy that groups together the variable details..

Selection
The actions of an insurer in choosing what risks to insure and on what terms.

Selection against the Insurer
The observed phenomenon that under-average risks will be proffered more readily for insurance than above- average ones and that when the insured has an option under a policy it is likely to be exercised in the direction least favourable to the insurer.

Self-insurance
Establishing a fund to meet losses without seeking outside insurance.

Short period rate
A rate of premium (higher than the annual rate) for insurance of less than a year.

Solvency margin
A statutory margin that insurers are required to preserve between their assets and their liabilities.

Specification
The description of a fire insurance policy of the property insured.

Subrogation
The right of an insurer after indemnifying the insured for a loss to stand in the insured's place with regard to any means of recouping the loss.

Sum Insured
The sum expressed in a policy as the maximum of the insurer's liability under an insurance that gives indemnity or the amount payable by way of benefit in other insurances such as life.

Third party

(a) A person who is not party to a contract of insurance.
(b) In a legal action a person not originally sued by the plaintiff but brought into the action by defendants.

Total loss
A loss of the subject matter of insurance such that it is totally lost, destroyed or damaged beyond economic repair.

Uberrima fides
Utmost good faith.

Underwriter

(a) An Insurer
(b) An individual who determines the acceptability of an insurance and specifies terms for it.

Unearned premium

(a) Premium in respect of an insurance where the risk has never attached.
(b) Where an insurance has attached, that part of the premium that relates to the period of insurance still to run.

Utmost good faith
Insurance contracts require that the parties exercise the utmost good faith towards each other. Specifically, the proposer of an insurance must disclose all material facts about the risk to be run.

Valuation
An appraisal of the value of property.

Void
Without legal effect.

Voidable
Term used of a contract that may be declared void at the instance of a party to it but if not challenged is effective.

Warranty
In insurance contract law:

(a) a promissory undertaking by the insured that some particular thing shall or shall not be done, or some condition shall be fulfilled, or that some fact is affirmed or negatived.
(b) a requirement by the insurer as to some limitation of cover; a breach of warranty entitles the insurer to avoid liability.