Understanding exactly what you're reading when dealing with insurance is absolutely vital in getting the most out of your policy. We began our glossary of important insurance terms by covering letters A – E.
Here are some more of the most important terms you may come across when looking for car, life, building or household content insurance.
Fire – The ignition of something which should not be on fire. For instance; your car, your home or yourself.
Fraud – In simple terms, insurance fraud can be defined as any event where an insured person claims from their insurance company for something that the insurer is not liable for; in terms of the insurance policy. Fraud has many faces, and can involve anything from claiming for additional items stolen which you never truly possessed to much greater, more intricate scams. Sooner or later, however, all fraudsters are caught.
Fund – This is a common pool into which all premiums, for each class of insurance, are paid. All losses are also met from this pool.
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.
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.
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.
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.
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.
Liability – This can broadly be defined as any legally enforceable obligation. The term is most commonly used in the financial sense, such as; you were too busy staring at Table Mountain, skipped a red light and smashed into my car. Now, you're 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.