Glossary - Car insurance terms explained

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Car Insurance Glossary

Car insurance glossary of car insurance terms.

Accident

An unexpected event, usually referring to an injury or fatality. Although some accidents are easier to prevent than others, the financial damage can be limited by taking out accident and sickness insurance.

ABI

Association of British Insurers

Access To Medical Records Act 1988

Terms that insurance companies must follow before approaching a medical practitioner for medical information.

Accident insurance

Insurance that covers you if you suffer certain injuries, such as loss of a limb or vision.

Accident, sickness and unemployment insurance

Insurance cover arranged by the borrower to protect against inability to meet mortgage payments. Unemployment cover is restricted to cover certain events only. Exclusions to this insurance include dismissal due to professional misconduct or taking voluntary redundancy. The accident and sickness cover does not cover any act of self-injury or any injury related to the use of alcohol or drugs.

Act of God

An accident or event that happens in extraordinary circumstances that could not have been foreseen. For example any damage caused by a storm would fall under the Act of God umbrella.

ADD

Accidental Death and Dismemberment

Agent

An agent is someone who acts on behalf of another person. For example and Insurance salesman could be called an Agent as he is acting on behalf of the Insurance Company.

Amortisation

The depreciations in the value of assets, which a company owns. For example, if the company has a fleet of cars worth £1 million, they may set aside £300,000 per year to allow for depreciation in their value.

AMRA

Access To Medical Records Act 1988.

Applicant

Someone who applies for a credit, or other financial product.

Applied or nominal Interest rate

Rate used to calculate interest due. 

Arbitration

A process by which two disputing parties come to a suitable conclusion.

Arrears

A late payment, or a payment after the event, for example most salaries are paid "monthly in arrears" - I.e. the first payment is one month after commencement of work.

Arrears fee

Charges for any late payments. See late payment fee.

Association of British Insurers

Association made up of 95% of UK insurance companies. Method by which the insurance companies liase with Government Departments.

Beneficiary

The main recipient of a benefit.

Benefits

The money paid out to a claimant by the Insurance company.

Broker

An agent who brings together two parties enabling them to enter a contract for which he receives a set fee.

Broker's Fee

The fee paid to the Broker for their services.

Cancellation Clause

A condition of the contract whereby the Insurer or the Insured can cancel a policy before the expiration date.

Caveats

Conditions of an insurance quote.

CII

Chartered Insurance Institute. Governing body for the Insurance Industry.

Claim

Notification to an insurance company that a payment is due.

Co-insurance

When a group of insurers cover a risk together.

Conditional Insurance

An insurance policy that has to be taken out as a condition of obtaining a loan, it must usually be taken out via the lender's agency.

Conditions

Details of rights and duties of insurer and insured. 

Contract

A legal agreement between to parties.

Cooling Off Period

The time period in which a personal may cancel the agreement without incurring any penalty.

Cover

Describes the risk that your insurance policy protects you against.

Direct debits

A payment method that once sets up to pay bills automatically.

Drugs

In financial terms, this usually refers to exclusions from insurance policies caused by abuse of illegal substances. However, many prescription or over-the-counter drugs can also have numerous harmful side effects, so it is always worth being well informed before taking any substance you have not taken previously.

Excess

Applies to an insurance claim. Simply the first part of any claim that must be covered by yourself.

Exclusions

Instances and possessions that are not covered by your insurance policy.

Financial adviser

A person who helps individuals with their financial situation.

Income protection insurance

Provides protection if you are unable to make payments on an outstanding agreement.

Insurance excess

Applies to an insurance claim. Simply the first part of any claim that must be covered by yourself.

Insurance Group

Insurance groups are a method used by Insurers to assess the risk of a particular vehicle. This numbers from 1-20 with the higher risk vehicles such as a Ferrari belonging to Group 20.

No Claims Group

As with car insurance your household insurers do now give you a discount if you have not made a claim in the previous insurance periods

Other income

This is income in addition to basic annual salary or, in the case of self-employed, annual net profits.

Payment protection insurance

See ASU accident, sickness and unemployment insurance. And unemployment insurance.

Period

The length of time for which, or end date until, the initial interest rate applies.

Policy exclusions

This is when you are not covered by your normal insurance policy.

Postcode

An alphanumeric code defined by the post office, which can identify properties to a location of within a handful of dwellings. Since their introduction they have been used for many purposes including assessing premiums for household insurance.

Postcode area

The first one or two letters of the first part of the postcode. E.g. B for Birmingham.

Premium

This is the payment you make to keep your policy in place. See: term assurance.

Professional

A person who is a member of a recognised profession, such as a doctor or solicitor. The definition of a professional can vary substantially from lender to lender with occupations such as banker being accepted as a profession by some but rejected by others. Many professions are disqualified from practising if they become bankrupt. 

Redundancy Insurance

An income protection that covers you in case you are made redundant, it gives you a tax-free income.

Repayment plan

If you fall behind on your payments a lender may try to renegotiate your repayment plan.

Quotation

A detailed document itemising costs, fees etc. Which will be incurred in taking out the specified loan.