We all know that our insurance policy contains lots of confusing terms and that it is often almost impossible to understand and frustrating to read – that is exactly why we wrote this article about "Household Insurance Terms and Definitions". How else are you supposed to know what you are getting without understanding the policy? Anyway, now there is a solution. All you have to do is read the below glossary and you will have a much better understanding of what things mean. Don’t worry, it won’t be as boring as reading a dictionary!
If you are not sure what household insurance actually is, then perhaps first start by reading our general article about Household insurance.
Household Insurance Terms and Definitions
Act of God: An unexpected event which causes destruction and/or damage to your home and its contents. For example, if a volcano happens to pop up in your neighborhood and causes damage, this will probably not be covered. On the other hand, if it hails, and seeing that hail is something that occurs every so often, this would not be seen as an “act of God”.
All risks: An all risks policy covers loss or damage even if it comes from accidental damage to the property insured. Your neighbor’s soccer ball breaking your new widescreen TV, for example. This form of insurance usually has very few specified exclusions.
Amendment (also known as Endorsement): Any change made to your original insurance agreement, for example, if you get a home insurance policy and then you or the insurance company decides to change a specific part in it. For example, including flood coverage, or the fact that you added an alarm system (which usually gets you a discount).
Arbitration clause: If you and your insurance company should be unable to agree on if or how much you should get paid, you would hire a third party appraiser whom you both accept to settle the dispute.
Arson: The act of intentionally burning someone’s property.
Broker or Insurance Broker: The professional agent who acts on your behalf with the insurance company and attempts to get you the best insurance policy.
Cancellation: Ending an insurance policy before the expiration date. If your house’s contents get damaged after the cancellation, you will not be paid for the loss. In some cases, you may have to pay a cancellation fee for early cancelation although this should not be the case. Also, if you paid in advance, and not on a monthly basis, you should receive a return for the outstanding amount.
Claim: When you ask the insurance company to pay you for damage to or loss of your possessions. For example, if you experience a burglary, and you have household insurance, you then report this to your insurance company and ask for a return – this is a claim.
Claims history: The record of how many times you have made a claim (see above) in the past. Insurance companies will look at your claims history to assess how much of a risk you are as a customer. Someone with a large claims history will pay higher premiums compared to a person who has never claimed before.
Claims adjuster: The insurance representative who investigates and settles your claims and tries to see if you qualify to be paid. Also known as a Loss adjuster.
Commission: The fee paid to a broker for the broker’s services. The commission is usually calculated as a percentage of the insurance policy premium.
Commencement date: See Effective date here below.
Content insurance: See Household insurance.
Cover: What your insurance company will pay for in the event of loss or damage. Your policy might cover furniture, electronics and art, but not jewelry, for example.
- Comprehensive Cover: This is the more extensive type of coverage and covers the cost of replacing household items; the cost of repairing any accidental or fire damage and also usually covers damages due to break-ins, theft, vandalism, short circuits, lightning damage, power surges, earthquakes, explosions, water damage from causes such as storms, floods and broken/burst pipes.
- Limited Cover insurance will specifically exclude specific causes of damage such as flooding, etc., resulting in a less expensive policy but obviously involving more risk on your side.
Covered loss: Any loss that is covered by the terms of your insurance policy. It’s the cases that you get paid for.
Cover note: A temporary document with details of your insurance, while the permanent insurance document is being prepared.
Depreciation: When the value of your household possessions decrease due to regular wear and tear and age. This happens a lot with TVs, computers, and other electronics.
Endorsement: See Amendment.
Effective date: The date when your insurance policy becomes active and from which you are covered by it. You will only be paid for damage or loss between the Effective date and the termination or expiry date, but not before this date.
Excess: This is the fee that you pay when you make a claim. It is your 'participation fee' and based on what you agreed to pay when you took out the insurance policy. This is a fee that you pay regardless what the cause of your loss is and so long as you make a claim. Generally speaking, if you agree to a higher excess, you will pay less in your monthly premiums and the other way around – lower excess usually means higher premiums.
Exclusions: Particular conditions under which an insurance company won’t pay out. These are set out in your insurance policy document and you should check them carefully before you sign and ask about them.
Inception date: See definition of “Effective date”. (Hint, it has nothing to do with going to see a movie starring Leonardo DiCaprio!)
Independent Agent/Agency: An insurance agent or agency who is independent and does not work directly for any insurance company.
Indemnity: When the insurance company pays you for your financial loss due to an event covered by the insurance.
Insurable interest: The individual who owns the objects which are being insured.
Insured value: The amount which an insurance company will pay if something you own is stolen or damaged. The type of value you choose determines how big your home insurance quotes will be. Make sure that you read the terms and conditions carefully so that you know what you are paying for and how much you would receive should the need arise. There are a few different ways of estimating this:
- Retail value: the amount which you paid when you bought the item. This is the highest value, as in the event of total loss due to theft, fire, etc., you will receive the amount which the item costs to buy. The disadvantage to this is that every year the value of your stuff goes down, but unless you contact your insurance company each year to reassess the actual retail value of what you currently own, your premiums will stay the same.
- Market value: Is the current value of your used items, and since this is generally lower than the cost of buying a something new, you will not receive enough money to fully cover the purchase of a replacement.
- Specially agreed value: commonly used for jewelry and fine art, based on the valuation of an approved assessor.
Insurance premium: The amount that you pay every month or year for your house insurance.
Home insurance: See Household insurance
House insurance: See Household insurance
Household insurance: Household insurance is insurance coverage for the mobile contents of a house – things like clothes, furniture, electronics, etc. Household insurance is also known as "contents insurance" and "home insurance".
Material fact: Any important information that might affect whether or not an insurance company would accept an insurance policy or the size of the premiums it would charge. If you do not tell an insurance company about a material fact, your policy could be invalid. For example, you did not tell them that you no longer have that fancy security system you told them about in order to get the discount.
No-claims bonus: Most insurance companies will reduce your monthly/yearly premiums somewhat for every year that passes without your making a claim.
Ombudsman: also known as the "Short-term Insurance Ombudsman", is a regulatory body for the home insurance companies, which is there to help consumers settle disputes with insurance companies. Read more about this in our article on “How to file a complaint with the household insurance Ombudsman”
Peril: Risks for which insurance protection is arranged, for example, fire, floods, theft, collision, hail, bodily injury, property damage, etc.
Police report: See definition of "Report Form" here below.
Policy: The written contract which sets out what the insurance company will pay, under which conditions and with which limitations, for your insurance coverage.
Policyholder: The person who buys the insurance or "holds" it. That’s you if you buy a household insurance policy.
Policy lapse: Your insurance policy will be cancelled if you repeatedly do not make your payments on time.
Policy schedule: The part of a policy explaining the details of the policy such as who is the policyholder, what items are insured, what is the sum insured, what is period of cover, how much are the excesses and stuff like that.
Policy term: The length of time when your insurance policy is active. You only can get paid for losses that happen within the Policy term.
Premium: The monthly or yearly cost of your policy.
Rate: The price of insurance, usually figured as the cost per unit of cover, and listed as how many Rand per R1000 of cover. So R5 per R1000 would mean it costs R5 for every R1000 of possessions insured.
Renewal: Continuing your insurance with the same company and conditions, after the initial policy term has ended.
Report Form, or "Police Report": The official report that you receive from the police after you report the event and which your insurance company will need before it agrees to pay you.
Renters Insurance: Similar to Householders Insurance, but targeted towards renters.
Risk: The likelihood that you would submit an insurance claim. The insurance company will assess your risk before deciding the size of the insurance quote.
Salvage: If your property was replaced by the insurance company after you made a claim, what's left of it is the "salvage" and now belongs to them.
Schedule: See "Policy Schedule" here above.
Settlement or Sum Insured: The amount that your insurer actually pays when you make a claim.
Total loss: A loss of the full value of the insured item/contents.
Underwriter: Someone who examines your risk level and decides whether or not to accept your request for a householder’s insurance policy and calculates your premiums.
Underinsured: This is what happens when you do not have enough insurance to cover the maximum possible loss or damage. For example, you thought that the contents of your house were only worth R50,000 and therefore insured it for that amount but after the event you realized the damage is a lot higher. You will still only get paid the amount you were insured for and therefore you are "underinsured". You can also be over insured.
Uninsured losses: Any loss that you experience which your insurance policy will not pay for.
Waiver of excess: If you choose this option, you will not have to pay any excess when you make a claim. But you would usually have to pay a higher premium.
If you think we missed any definitions, comment here below and we will add them
Main Subject: household insurance terms and definitions