What are the common terms used in a Home Insurance Policy?


Note, You should read your insurance policy document in full, different insurance companies may have different definitions then the ones listed below.

An understanding of the terms used by insurance companies is a great starting point for unravelling your insurance policy. This insurance terms glossary contains some of the most common terms.

An unplanned event, unexpected and undesigned, which occurs suddenly and may be insured against.


If you are found to be under-insured, the insurer’s liability will be limited to that proportion where the amount of cover is compared to the value at risk. This ratio is then applied to your loss. In simple terms, if you have bought only half the cover you should have, your insurers will only pay you half your assessed loss.

Beyond Economic Repair
Goods are deemed to be beyond economic repair where the cost of repairing the insured property exceeds the value of that property. In such cases the insurance company may pay the claimant the market value of the insured property at the date of loss, subject to the terms of the policy.

Bodily Injury

Injury resulting directly from an accident caused suddenly by violent and visible means.


Your home and its fixtures and fittings, interior decorations, swimming pools (but not outdoor spas and hot tubs), fuels, septic and service tanks, terraces, patios, decks, paths, driveways, tennis courts, walls, fences, and gates for which you are legally responsible all within the boundary of the home

Business Interruption
This insurance covers a business in the event of the loss rendering the business inoperable or hindered by an event such as a fire or a breakdown of machinery. The policy will define the gross profit and uninsured working expenses within the policy wording, which will be subject to increased costs of working and savings.


Your caravan or mobile home including fixtures, fittings, furnishings and utensils in or attached to it and used for social, domestic and pleasure purposes only.

Certificate of Insurance
A document explaining the insurance cover purchased by the insured. A Certificate of Insurance does not always detail all its terms, which are contained in a separate insurance policy.

An insured party who has undergone a loss, which they believe to entitle them for compensation under the terms of their insurance policy.


Household goods, personal belongings and valuables (including personal money up to certain limits) within your home which you or any member of your household own or for whick you are responsible.

Credit and debit cards

Credit, charge, cheque, debit, bankers or cash-dispenser cards.

Degree of Under-insurance
The amount of compensation you are entitled to depends on the circumstances and on your particular contract of insurance. Business insurance policies may differ from residential policies where instead of applying average, different degrees of compensation may be awarded depending on how under-insured you are.

Economic Limit
Insurers will pay up to – but not beyond – the minimum necessary to place you back in the same position as previous to the loss.

Employers’ Liability Insurance
A compulsory for all employers. Employers liability insurance is required in case any employees pursue their employer for compensation in case of (for example) unfair dismissal, sexual discrimination, or injury in the workplace.


Changes to the terms of your policy that are shown in your schedule

The agreed amount of some or all losses arising under an insurance contract that must be borne by the insured.

A term in an insurance contract, which excludes the insurer from liability for specified types of loss. An exclusion may apply throughout a policy or it may be limited to specific sections of it.

Gross Profit
Defined within an insurance policy. In simple terms: sales, less purchases, adjusted for opening and closing stock.


Your private house and its outbuildings at the address shown in the schedule


You and anyone else who lives permanently with you at your home

Increased Cost of Working
Insurers are happy to spend a “pound” to save a “pound and a penny” – subject to the economic limit.

The principle under which a claimant is restored (so far as possible) to the same financial position that they were in immediately prior to the insured loss. As account is taken for age, wear, tear, and depreciation, this differs from “New for Old”.

A contract whereby an insurer promises to pay the insured after uncertain events in exchange for the payment of a premium payment by the insured.

Insurance Company
The company who has undertaken to cover the risk of the policyholder, so that, in the event of any loss as stated in the contract, the insured party is recompensed for their loss. The insurance company effectively bets the insured party that the risk will not happen.

Insurance Policy
A legal contract, which states the terms of the agreement between the insured party and the insurance company. This document will contain exclusions of warranties and other clauses, which may require to be interpreted by professionals.

A person who is insured under a contract of insurance. This person is also referred to as the policyholder.

Liability Insurance
An insurance which covers the insured against third party claims or, in the case of employer’s liability insurance, claims by employees.

Injury, harm, damage or financial detriment that a person sustains. Losses may be insured or uninsured. Whether a loss is covered by a policy or certificate of insurance depends on the terms of that document and local law.

Loss Adjuster
Usually employed by the insurance company, the loss adjuster investigates the claim and gives his confidential opinion of the amount of compensation the insurance company should offer to the claimant under the terms of the policy. The Loss Adjuster is paid by, and reports to the Insurance Company.

Loss Assessor
Employed by the claimant to ensure that they receive their full entitlement of compensation for their loss. The loss assessor does the same research as the loss adjuster, but with the claimants’ interests in mind. The Loss Assessor will negotiate with the Loss Adjuster until he or she is satisfied that sufficient compensation is being offered in settlement of the claim.

New for Old
This is where insurers will pay the replacement cost, as new, in the event of a total loss. Nowadays, insurers prefer to replace through their pre-selected suppliers.

Period of Insurance

The period shown on the schedule

Personal belongings

Luggage, clothing, sports, musical and photographic equipment and other items that you normally wear or carry with you

Personal money

Cash, currency notes, banknotes, current postage stamps, cheques, postal and money orders, national insurance stamps, saving stamps and certificates, other trading stamps, travel tickets and travellers cheques, gifts or book tokens and credit notes.

The person who is insured under a contract of insurance.

The price charged by an insurer in order to grant insurance cover.

To acquire, install and commission such that the insured is returned to pre-loss situation.

Where an insurer agrees to replace irreparably damaged or stolen goods with goods of a similar type and quality instead of paying a cash sum to the insured.

Return to Normality
There is no formula for dealing with a disaster. Each case is unique, but there are common denominators. If you are interested in the speed of reinstatement to normality, and maximising the recompense from the insurance company, then you should contact Truman Associates.

If your business is closed or hindered by an insured event, you will almost certainly achieve savings. Reductions in consumption of utilities or reductions in staffing costs are obvious examples.


A document that gives details of the cover required

storm (from Proto-Germanic *sturmaz “noise, tumult”) is any disturbed state of an astronomical body’s atmosphere, especially affecting its surface, and strongly implying severe weather. It may be marked by strong wind, thunder and lightning (a thunderstorm), heavy precipitation, such as ice (ice storm), or wind transporting some substance through the atmosphere (as in a dust storm, snowstorm).

Sum Insured
The maximum amount that an insurer will pay under a contract of insurance. You must be careful to adequately insure otherwise you may find yourself subject to average.

Third Party
Someone other than the insured or his insurer.

Total Loss
Total loss is said to have occurred when the subject matter of an insurance is lost, destroyed or damaged beyond repair.

You should ensure what you have, and not what you think you are likely to lose. If you are under-insured you will be paying less premium than your risk deserves. It is therefore not surprising that your compensation for losses will be adversely affected.

The acceptance of the obligation to pay or indemnify the insured under a contract of insurance.

Void Policy
A contract that has no legal effect and is therefore unenforceable in a court of law.

Wear and Tear
The amount deducted from a claims payment to cover the depreciation of the property insured through usage over time. Where cover is provided on a “new for old basis” (where the insurer agrees to replace an old item with a similar new one) no such deduction is made.