If you were asked to list the easiest, or most exciting parts of running your business, it’s unlikely insurance would make either list. Already a confusing topic, the long list of technical jargon that usually comes along with insurance only makes it trickier to navigate. Yet protecting your business with the most appropriate cover is one of the most important parts of safeguarding your financial livelihood. To make life easier for small business owners, we’ve compiled a list of commonly used insurance terms and explained what they mean in plain English –no jargon guaranteed!
| A | |
|---|---|
| Accidental Damage | Any damage that is unintentional and is caused by you or someone visiting your premises. |
| Adjuster | This is someone who is appointed by the insurance company to investigate and determine how much damage has occurred from an event, and how much the insurance company will pay for the claim. An adjuster is usually appointed as part of a property claim, as well as liability claims involving personal injury or damage to a third party’s property. |
| Agreed Value | This where you and your insurer agree to insure an asset (for example, a car) for a set amount. This amount gets locked in for the policy period (usually 12 months). |
| Asset | Any item or resource which belongs to your business and is a part of your business. |
| Australian Financial Complaints Authority (AFCA) | The external dispute resolution body for all financial services organisations. |
| B | |
| Benefit | A payment made by an insurer to an eligible person. |
| Broadform Liability | This type of insurance provides you and your business with cover for legal liability to pay compensation if your negligence, or products your business sells cause any of the following
|
| Broker | Someone who acts as an intermediary between you and your insurer. They can help you to identify your insurance risks, assist you in choosing insurance products and provide claims management expertise if you need to make a claim. |
| Building | A physical dwelling,includes roof and walls, and some fittings. |
| Business Description | A description of the activities of your business, in respect of which a Policy will provide cover. |
| Business Interruption | Loss of income and/or extra expenses incurred as a result of an event. |
| C | |
| Contents | Items which are held on a business premises, but do not form part of the building structure -imagine tipping a building upside down -everything that would fall out is classified as 'contents'. |
| Contract | A written or verbal agreement between two or more parties which is legally enforceable. |
| Cooling Off Period | A period of time after a policy is taken out during which you’re entitled to a full refund if you cancel. |
| Certificate of Currency | A document that proves you have an insurance policy in place. This includes the type of cover, the insurer, the amounts insured for, and any interested parties |
| Cash Settlement | A cash settlement occurs when an insurer pays you a cash lump sum instead of repairing an item. |
| D | |
| Deductible | The amount of money which the Insurer will deduct from benefits paid as part of a claim. |
| Duty of Disclosure | Your legal duty to be honest, transparent and fair when applying for, or renewing, insurance. |
| Defined Events | Incidents covered under an insurance policy, as set out in a Policy Wording. |
| E | |
| Excess | An amount you're required to pay the insurer when lodging a claim. An excess is usually required to be paid before the Insurer will pay any benefits. |
| Exclusion | Conditions in a policy under which no cover will be provided. For example, most insurance policies exclude any damage deliberately caused by you. |
| Exposure | Your susceptibility to risk and loss. |
| Embargo | A period of time when no coverage is provided for certain events on new policies, for example when a bushfire breaks out. |
| F | |
| Financial Loss | Money you lose; forego as a result of an incident. |
| Fraud | Wrongful or criminal deception for personal or financial gain |
| G | |
| General Advice | Advice provided where your financial situation has not been considered or assessed |
| Geographical Limit | A clause in an insurance policy which defines the geographical area within which the policy would provide coverage, for example, your policy may only cover you while you work in your own state. Also known as Territorial Limit. |
| General Insurance | Any insurance which is not related to health or life insurance. |
| H | |
| Hazard | Something that has a likelihood or potential to cause harm or damage. |
| Hold harmless clause | An agreement not to claim against or take action against another party for loss which might be incurred in the future in relation to the contract. |
| I | |
| Indemnity | A promise by another party to provide compensation for loss. |
| Insured | The person, entity, or other party who is covered under a Policy. There may be more than one Insured under a single Policy. |
| L | |
| Legal Liability | Legal liability arises when there is a successful claim made against a party for failure to meet their responsibility. For example, if there is a breach of contract, or failure to take due care. |
| Limit of Liability | The maximum amount an Insurer will pay under a Policy. |
| Loss | Financial detriment which may be covered under insurance. |
| Levy | An Insurance levy is a fee imposed by Federal and State Governments to assist in meeting the costs of certain services. Depending on the nature of your insurance policy, as an example you could have a levy imposed for Fire and Emergency services, which will be included as part of your premium. |
| M | |
| Mitigation | Steps taken to prevent loss or damage (or further damage). Mitigation of loss or damage is a requirement under insurance policies for claims to be covered. For example, ensuring that buildings have installed automatic sprinklers to reduce the spread of fire. |
| N | |
| No Claim Bonus | A reduction in the premium given to customers who have a good claims history, common in motor vehicle insurance policies. |
| Negligence | A failure of duty of care which causes harm to a third party or damage to property belonging to others. |
| Non-Disclosure | Deliberately not making certain information known |
| New for old | Also known as 'Reinstatement' - covers property to repair or replace it to a condition similar to when it was new. |
| O | |
| Occurrence | The event which triggers cover under some policies, especially Public Liability. |
| P | |
| Peril | Immediate danger. Unforeseen event which causes loss and damage. |
| Period of Insurance | The period of time a Policy is operative for. Sometimes referred to as the Policy Period. |
| Policyholder | The person or entity whose name an insurance policy is in.This is not to be confused with an insured (above), which is the people covered under the insurance policy. For example, a policy may be in the name of a company or business, but the policy covers the owners and/or employees. In this case, the company is considered the ‘policyholder’, and the owners and/or employees are considered the insureds. |
| Premium | The cost of an insurance policy, plus GST, stamp duty and government levies (if required). |
| Product Disclosure Statement (PDS) | A document which comprehensively sets out all the terms and conditions of an insurance policy. Must be read in conjunction with the Schedule and other policy documents. |
| R | |
| Reinsurance | Insurance taken out by insurance companies to help cope with the cost of claims during major catastrophes, and significant incidents. |
| Replacement Cost | The amount it would take to replace an item with something exactly the same, or as close to as possible |
| Retention | Similar to an excess, this is the amount you must pay when you make a claim under a professional indemnity policy, either including or excluding legal defence costs. |
| Retroactive Cover | Cover that is provided before the policy start date |
| S | |
| Schedule | A document that sets out the features, covers and limits of a specific insurance policy. The schedule forms part of the Insurance contract between a particular policy holder and the insurer |
| Signatory | A party or person who has signed a document which is legally binding |
| Sublimit | A limitation in an insurance policy which is the maximum amount that will be covered for particular events. |
| Subrogation | A right of the insurer to seek compensation for claims paid under insurance policies from another party(ies). |
| Sum Insured | The value of an item insured on a policy |
| Self Insurance | Where a business owner chooses not to purchase insurance for a particular risk(s) or event. |
| T | |
| Total Loss | Where the cost to repair an item would be greater than the cost to replace it, an insurance company can deem the item a 'total loss' and pay you the sum insured. This means the property is either completely destroyed, or is deemed to be so due to the significant cost to replace it. |
| Territorial Limit | See geographical limit. |
| U | |
| Underwriting | The process of looking at the degree of risk, and determining whether to accept liability for the risk. Also referred to as an insurer. |
| Underinsurance | Where assets are insured under an insurance policy for less than their true value, or where it would take more than the total insured amount to replace everything. |
| Underwriter | A person trained and authorised to evaluate risk and determine insurance policy terms and premium. Also referred to as an Insurer. |