Insurance Glossary: Plain-English Definitions A to Z

Policy basics

Policyholder: The person or business that owns the policy.
Premium: What you pay for the policy, usually yearly or monthly.
Sum insured: The maximum the insurer will pay for a section of cover, such as buildings or contents.
Limit of indemnity: The maximum a liability policy will pay for a claim or in a period.
Policy wording: The full contract: definitions, cover, exclusions and conditions.
Schedule: The page personal to you: who and what is insured, sums insured, excesses and dates.
IPID: Insurance Product Information Document: a short standardised summary of a general insurance product (UK and EU).
Endorsement: A change or addition to the standard policy wording, sometimes called a rider in the US.
Peril: An event that causes loss, such as fire, storm or theft. “Named perils” policies list them; “open perils” policies cover everything not excluded.

Excess (deductible): The part of a claim you pay. UK policies have compulsory and voluntary excesses; US policies call it a deductible.
Average clause: A condition that reduces a claim in proportion if you were under-insured.
New for old: Replacing items with new equivalents rather than paying their second-hand value.
Indemnity: Putting you back in the same financial position as before the loss, no better and no worse.
Insurance Premium Tax (IPT): UK tax on most general insurance premiums: 12% standard rate, 20% higher rate for some products such as travel insurance.
Premium finance: Credit used to spread premium payments monthly, which can add interest.
No claims discount: A discount for claim-free years, also called no claims bonus or bonus-malus.

Loss adjuster: An expert appointed by the insurer to investigate and value a larger claim.
Loss assessor: An expert you can appoint (and pay) to prepare and negotiate your claim.
Subrogation: The insurer’s right, after paying you, to recover the cost from whoever caused the loss.
Contribution: Sharing a claim between two insurers when more than one policy covers the same loss.
Settlement: The final agreed payment or repair for a claim.
Final response: An insurer’s last word on a complaint, after which UK customers can go to the Financial Ombudsman Service.

Claims-made: A policy that responds to claims made while it’s in force (typical for PI and D&O).
Occurrence basis: A policy that responds to incidents that happened while it was in force, whenever the claim is made (typical for public liability).
Retroactive date: Work done before this date isn’t covered by a claims-made policy.
Run-off cover: Protection for claims about past work after a business stops trading.
Indemnity period: In business interruption cover, the maximum time the policy pays lost income while you recover.
Gross profit (insurance): Turnover minus specified variable costs; the usual basis for business interruption cover.
Fair presentation: A business’s legal duty under the UK Insurance Act 2015 to disclose material facts clearly.
Additional insured: Another party (such as a client) given protection under your liability policy.

HO-3 / HO-5: Standard US homeowners policy forms; HO-5 is broader for belongings.
HO-4 / HO-6: Renters and condo owner policy forms.
BOP: Business owner’s policy: property, general liability and business income bundled.
CGL: Commercial general liability.
PIP: Personal injury protection, required in no-fault auto insurance states.
Experience mod: A multiplier in workers’ comp pricing based on your claims history.
NFIP: National Flood Insurance Program, run by FEMA.

Last updated: 15 October 2026