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Your Easy-To-Use Insurance Handbook (Part 2)

Applying for insurance may seem a little daunting at first, with all these terms and clauses being thrown your way. In Part Two of our Insurance Handbook, we'll have a look at some more of the most important terms you may come across, from Hazards to Long-Term Insurance, Insurers to Liabilities,

When it comes to any form of insurance, it's important to understand exactly what you’re reading, and what it is that you're agreeing to. So, we've put together some of the most important terms you may come across when applying for, or managing, your insurance. 

We began Part One of this Insurance Handbook covering everything from All Risk Insurance to Funeral Insurance. Now, let's continue onward.  

And, as always, if you're still unsure about anthing at all, you've got a Guru standing by to guide you.  

In Case You Missed It: Your Easy-To-Use Insurance Handbook (Part 1)

G – Giving Grace

General Contents – These are contents that are not limited, and that are covered under your Building Insurance.

General Liability Insurance – This is an insurance product designed to protect business owners from a wide variety of liability exposures. These risks could include liabilities arising from accidents taking place on the insured's premises or base of operations – as well as those arising from products sold or operations completed by the insured.

Grace Period – Related to premium payments, this refers to the length of time after which the premium is due and remains unpaid, in which the policy still remains active. The Grace Period given by most insurers is 31 days – and if the premium is paid within that time, it is considered to be paid on time. 

H – Hazardous To Your Health

Hazard – In insurance terms, this is simply defined as any circumstance that increases the probability or severity of a loss. For instance, as far back as the 1600s, churches and castles would store massive amounts of gunpowder in the vaults. Before the lightning rod was invented, lightning would often strike these tall buildings and blow up all of the gunpowder, killing hundreds of people. Storing large amounts of gunpowder in your basement, then, is a hazard, and insurers frown upon this kind of behaviour. 

Hazardous Activity – Insurers often provide very specific cover for people who engage in adventurous activities. These activities could include sky-diving, scuba diving, bungee jumping and Black Friday shopping. It's very unlikely that any insurer would cover that person for liability or personal accident – since by engaging in them, you're knowingly putting your life at risk. This cover is usually provided by the company which is hosting the event.

Hospital Insurance - This insurance covers your costs, or a percentage of it, should you be admitted to hospital. This depends entirely on benefits included in your policy.

Household Contents Insurance – This policy covers the items you keep in your home, such as clothing, furniture, appliances, personal documents and even the food which spoils in your fridge due to a power failure. Household contents insurance commonly goes hand in hand with Building Insurance. Insure what's on the inside and the outside.

I – Insurance, Insurance, Insurance

Impaired Insurer – This is a common term for an insurance company which is facing dire financial difficulties. These difficulties may impede the insurer's ability to meet regulatory requirements or financial obligations – such as paying out your claim.

Indexing – This refers to the method of adjusting the insured sums in order to provide for inflationary increases in values.

Insurable Interest – Simply, this is the principle which requires a person effecting insurance to have a legally recognised relationship with the subject matter of the insurance. For instance, you own your house and you don't want your house to be blown away by a tornado. Therefore, you insure it.

Insurance Policy – This is a very important document which acts as evidence of a contract of insurance.

Insured – The person covered by an insurance policy.

Insured Sum – This is the sum that determines the amount of money for which you are protected by your insurer. 

Insurer – An insurer, or insurance company, is a financial institute whose business is to provide indemnification or compensation against defined loss. For instance, we get car insurance in case our car is stolen or damaged in an accident. We get life insurance to ensure that our loved ones are looked after, financially, in the event of our death. In order to be a legitimate insurance provider, the company has to be registered as such, and also be licensed by the Financial Services Board.

Intermediary – This is a person who arranges insurance on behalf of another, such as a broker.

L – From Liability To Loss

Lapse – This refers to the termination of an insurance contract due to the non-payment of premiums – usually exceeding three months – or by the insurer's decision not to invite renewal.

Legal Insurance - Insurance that covers the cost of any civil, labour or criminal cases in which you are involved.

Liability – This can broadly be defined as any legally enforceable obligation. The term is most commonly used in the financial sense, such as; the motorist skipped a red light, smashed into another car, and is therefore liable for the damages. 

Limits - Related to health insurance in particular. If medical treatment is on-going, limits define how much an insurer is willing to pay for a treatment that is numerously repeated, such as chemotherapy.

Living Benefits – Also known as Accelerated Death Benefits. This refers to life insurance, in which the insured receives the proceeds of their life insurance policy before they die. There are certain circumstances which need to be met, of course, including terminal illness or requiring long-term care or confinement to a nursing home. It's important to check if your insurer offers this feature. 

Lloyd's, or Lloyd's of London – You'll certainly hear the name of Lloyd's quite often when it comes to insurance. Lloyd's of London, based in England, is, essentially, a corporation of individual underwriters best known for insuring some of the strangest things in the industry. Celebrities insure their bodies. People who watch too much YouTube insure themselves from alien abduction. If you can think it, chances are, Lloyd's will insure it.

Long-Term Insurance – These are the types of insurance products that are governed by the Long-Term Insurance Act. Products include life insurance, disability cover or dread disease cover.

Loss Prevention – These are activities undertaken to prevent losses from occurring. 

Loss Ratio – This is in reference to the ratio of claims to premiums.

Need-To-Know: Vehicle Modifications May Impact Your Premiums

M – Motors and Markets

Mandate - This is permission to act on behalf of the policyholder.

Market Value – Sometimes, your insurance may only cover the market value of your car. The market value is basically the amount for which anything can be sold or bought at any specific time, on any given market.

Maturity Date - The date an investment or policy ends and funds are paid out to the policyholder.

Mortgage Insurance Policy – Related to life and health insurance. This is a policy which covers the insured with benefits, intended to pay off the balance due on a mortgage upon the insured's death. It could also be used to meet the payments due on a mortgage in the event of the insured becoming disabled or critically ill.

Motor Insurance – Also known as car insurance or vehicle insurance. These types of policies cover you and your vehicle in the event of an accident, hijacking or theft. Different types include the bare bones minimum – Third Party - and also Third Party, Fire and Theft. Top of the line is Comprehensive Cover, which covers your vehicle in almost any event. 

Mutual Insurance Company – This can broadly be defined as an insurance company owned by its policyholders. In other words, it has no shareholders.

N – No Claims Equals Rewards

Needless Exposure To Danger - An exclusion clause in an insurance policy, wherein the insurer has reason to believe that you may have put yourself in unnecessary danger, or acted recklessly. Examples include claims where alcohol, drugs, deliberate self-harm, or suicide was evident.

Negligence – This is the failure of a duty of care, which usually results in damages. When we operate a motor vehicle, for instance, we agree to do so in a careful, responsible and law-abiding way. We are trained to do so, and that is how we acquire a licence to operate that vehicle. Dereliction of this duty can result in massive repercussions, such as your insurer refusing to meet your claim.

New-For-Old – A term referring to an insured item becoming lost or damaged, and no matter how old it may have been, the insurer replaces it with a brand new substitute without any deductions for depreciation. Also known as Replacement As New.

No Claims Bonus – If you, as the insured, can make it through a specific period of time without claiming, your insurance company will reward you. These rewards could even include huge discounts on your monthly premiums.

O – The Ombudsman

Occurrence – Relatively self-explanatory, but with a very specific meaning when it comes to insurance. It can be defined as an event that results in an insured loss, but is commonly distinguishable from an accident. A loss by occurrence doesn't need to be sudden or unexpected or fortuitous the way an accident is commonly defined. Loss by occurrence could result from repeated or continuous exposure to risk which eventually results in injury or property damage, neither expected, nor intended. 

Ombudsman – Swedish for representative. The Ombudsman is an entirely independent, impartial office that resolves any disputes between policyholders and insurance companies. Their services are 100% free of charge to anybody who needs them. In South Africa, we have an Ombudsman for both short and long-term insurance, and they both release annual reports on the state of the industry.

Operative Clause – This is the clause in a policy which lists the circumstances in which the insurers will make claim payments.Over-Insured – This means that the sum insured is greater than the full replacement value of the property at risk. Therefore, Average will never be applied and the only risk that the insured carries will be the extra premium paid. 

CONTINUED: Your Easy-To-Use Insurance Handbook (Part 3)

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