A guide to insurance speak ? All the terms every contractor needs to know
Contractor insurance comes with a lot of related jargon and we understand that it’s easy to become bogged down in…
Insurance jargon can be like trying to understand another language sometimes. There’s probably plenty of common insurance terms you’ve come across and not fully understood – maybe you’ve even googled it! So we’re here with a business insurance glossary of common terms to get you started.
Whether you’re trying to understand insurance policies you already have or are shopping for new cover, it’s crucial to have an understanding of business insurance industry terms. This will give you a clearer picture of what you are/will be covered for (and what you might not be covered for!).
*Disclaimer – the following is a general guide to insurance cover types and definitions. Exact coverage, conditions and exclusions may differ per policy and insurance provider. Please always check your policy wording, schedule, and insurer Ts&Cs.
What do insurance acronyms mean?
It’s one thing to understand what you’re reading when it’s plain English. But when insurance terminology gets shortened to mere letters, it doesn’t make it any easier. Here’s a quick look at some common insurance acronyms you might come across…
Acronyms for types of insurance
What is PI?
PI refers to professional indemnity insurance. It covers policy holders against civil liability claims arising from negligence, errors, or omissions in your professional services. It does this on a claims made basis (see below for definition).
What is PL?
PL is an abbreviation for public liability insurance. PL insures against compensation claims if a third party suffers accidental injury or property damage due to your business activities. It does this on a claims occurring basis (see below for definition).
What is EL?
EL refers to employers’ liability, which is the only legally required insurance for any business with employees. It helps pay compensation if an employee is injured or becomes ill while working for you. It does this on a claims occurring basis (see below for definition).
What is PA?
Personal accident cover (PA) can also be referred to as occupational accident insurance. It’s essentially a policy that can pay a weekly sum if you become injured while doing your job or travelling to and from work.
What is D&O?
Often known as directors’ and officers’ liability insurance, this covers directors and officers of a company for defense costs and damages from wrongful act allegations. It does this on a claims made basis (see below for definition).
Other insurance acronyms
What is MTA?
MTA refers to a mid-term adjustment. This is where a change is applied to a policy during its active coverage period and could include adding/removing coverage, changing business details, adding employees or modifying business assets.
What is PSC?
Often referenced in articles relating to IR35, a PSC is a personal service company. This is a specific type of limited company setup primarily to provide the services of a single contractor, consultant or freelancer.
What is FCA?
The FCA is the Financial Conduct Authority. It regulates financial services firms and markets in the UK.
What is IR35?
IR35 is normally used to refer to the off-payroll working rules (or intermediaries legislation). It’s a UK tax legislation designed to combat contractors working as “disguised employees” and paying less tax.
Business insurance terms you should know
On top of acronyms and abbreviations, there are plenty of other terms you normally come across when reading about insurance. From insurer websites to your policy documents, a few common phrases include:
Any one claim
With an ‘any one claim’ policy, the level of cover applies to each and every claim made during the policy period – each claim is individual.
In the aggregate
‘In the aggregate’ means your level of cover is a total sum for the policy year that each claim will count towards. Essentially you have a pot of cover that’ll decrease with each claim made.
Claims made basis
A policy written on a claims made basis will pay out for any claim notified to insurers during the period of insurance, regardless of when the incident being claimed for occurred.
Claims occurring basis
The other type of payment basis, ‘claims occurring’ will pay out for claims involving incidents that occur during the insurance period, even if you make the claim after the policy cover ends.
Limit of indemnity
Indemnity refers to protection against loss, or a sum paid as compensation – so the limit of indemnity is the maximum amount your insurer will cover you for. For example, if your public liability had a £5million limit, that’s the maximum amount your insurer would be liable to pay out.
This can also be referred to as “cover limit” or “limit of cover” or just “limit”.
Premium
An insurance premium is essentially what you pay your insurer to cover you for the insured period. This could be paid annually, or you could opt for a monthly premium.
Excess
The excess is what you, as the policy holder, agreed to pay towards a claim before your insurer covers the rest. For example, a £2000 claim with a £200 excess would require you to pay £200 before your insurer pays out the remaining £1,800.
Retroactive cover
Retroactive cover refers to a type of cover that operates on a claims made basis, like professional indemnity insurance. It means that even if your policy starts after you finish a client project, it can cover you if they take action against you.
As long as you make the claim while your policy is active, it can cover the incident retroactively (from the retroactive date stated in your policy schedule).
Policy schedule
A policy schedule is a summary document that goes alongside your policy wording. It details information about you (the policy holder) and your coverage (start and end dates, key exclusions, limits, premium etc.). Think of it as the ‘order summary’ whereas the policy wording is the ‘terms and conditions’.
How to understand terms in my business insurance policy
Now you know some of the more common insurance related terms you should be able to better understand your policy wording.
Let’s put it into practice and decipher an example in our own standard wording…
Standard Combined Policy key facts document
Professional Indemnity cover
“Limit of indemnity any one claim Costs and Expenses inclusive… up to £5,000,000.
Please refer to your Schedule which will show the specific limit of indemnity that you have chosen.”
What it means
- Limit of indemnity up to £5,000,000 – this is the maximum limit you can choose for your policy.
- “Refer to your schedule” for your specific chosen limit – this is a generic facts document for our standard cover only outlining what it can cover and won’t detail the specifics of your own policy.
- Any one claim – your limit will apply per claim, not in the aggregate for the policy period.
- Costs and Expenses inclusive – the limit includes reasonable legal costs and fees incurred in relation to the claim. This will be subject to the terms in your policy wording.
Tips for navigating policy documents
This guide to business insurance terms is a good starting point, but we have a few more tips on reading insurance documents.
- Read the key facts or schedule document – the key facts document simplifies the policy wording making it a good way to understand the fundamentals of the insurance cover.
- Use a glossary – have a glossary or guide to insurance jargon to hand while you read through your policy wording. Most policy documents (like ours) will include definitions at the start that you can refer to, or you can use articles like this one.
- Ask lots of questions – your insurer also wants to make sure you have the right insurance for your business. If you’re unsure of anything, feel free to ask them for clarification.
Getting support with your insurance
Hopefully this breakdown highlights that understanding insurance policies doesn’t have to be a mysterious puzzle. Though we know there might still be things you’re unsure about or don’t understand.
With Kingsbridge insurance, we provide access to dedicated in-house experts who can take the time to talk you through your policy and assist with any questions you have.
Need help understanding your policy? Get in touch today on 01242 808740 or email our support team.
