Understanding exactly what you're reading when dealing with insurance is absolutely vital in getting the most out of your policy. So, we set out to compile a glossary of the most important insurance terms you might come across.
Here are some more of the most important terms you may come across when looking for car, life, building or household content insurance.
Regular Driver – Related to car insurance. The regular driver is a person listed with the insurer to be the driver who regularly operates the vehicle. This person is not insured themselves, but the vehicle is.
Reinsurance – This is a common term which tends to confuse a lot of people. In essence, reinsurance is the insurance that an insurance company buys for its own protection. It’s insurance for the insurer. The risk of a large loss is hereby spread so that a massive loss under a single policy doesn’t fall on one company. Reinsurance allows the insurance company to stabilize underwriting results, finance expansion and secure protection against catastrophic losses.
Renewal – This is the process of continuing insurance cover for a further period, after the first or current period of cover has ended. Short-term insurers will issue the insured with a renewal notice to remind them that their contract will be terminating soon.
Repudiation – In insurance terms, repudiation refers to the decision by the insurer to refuse payment of a claim for some or other reason.
Residual Benefit – Related to disability insurance, this is a benefit paid out to the insured upon developing a disability, resulting in a loss of income due to the inability to work.
Risk – A risk is commonly defined as a situation which cannot be entirely foreseen or controlled, such as being hijacked, the development of a critical illness or being involved in a car accident. Risk can then be seen as the very subject matter of an insurance contract.
Risk Class – In insurance underwriting, risk class refers to the grouping of insured persons into similar levels of risk. Typically, you’ll have people grouped by factors such as smoking or non-smoking, male or female, age and married or single.
Salvage – In insurance terms, salvage refers to the insurance company becoming the owner of the insured’s damaged property after replacing it. This applies to movable property, such as vehicles or appliances, etc.
SASRIA – Stands for South African Special Risk Insurance Association. It is generally known as unrest, riot, strike or public disorder insurance.
Short-Term Insurance – This kind of insurance operates on a year to year basis. It may be terminated by the insurer or insured at any time, and includes cover for your vehicle, household contents and much more.
Subrogation – This is an old term. Subrogation is the right of one party – such as the insurer – to stand in the place of another – such as the policyholder – and take up the latter’s legal rights against a third party in respect of a claim.
Sum Insured – The amount for which the insured’s property is insured. It is the maximum amount that an insurance company will pay for any claim.
Third Party Insurance – When involved in a car accident, this type of car insurance provides compensation for the injury or damages inflicted upon the other driver’s vehicle. You will then have to cover the damages to your own vehicle out of your own pocket. One step up from this insurance plan is the Third Party, Fire and Theft insurance – which adds additional cover for your own vehicle in the event of fire damage or theft.
Underinsured – In the event of the insured sum not being enough to fully replace or reinstate the value of the property at risk, we may say that the property is underinsured. As with over-insurance, the average will be applied.
Underwriter – An individual trained to evaluate risks and determine rates and coverage for those risks – or alternatively, reject them. Underwriting is the process of classifying these risks according to their degrees of insurability, so that appropriate rates may be assigned.
Write Off – Sometimes, an accident can damage a car so badly that it isn’t repairable – or the cost of repairs will actually exceed the value of the car. A vehicle is classified as a write off when the damage is so extensive that it just isn’t worth repairing it. Also known as a total loss.
Without Prejudice – In written communication, this term refers to the reservation of rights by the party who writes the communication. Without prejudice therefore protects the writer, in the sense that the written communication cannot be used against the writer in court or any communications that may follow.
The A-Z of CompareGuru’s most important insurance terms is constantly updated. Is there a tricky insurance term which you would like us to clarify or explain? Let us know!