Home Insurance terminology

Home insurance terminology

Entering the world of insurance brings with it a whole new language. Property Advice Blog helps you simplify the terminology.

• Policyholder - the person who has bought home insurance.


• Insurer - provider of insurance.


• Policy - the contractual document provided by the insurer which outlines the details of the home insurance cover.


• Cover - the potential risks that the policyholder is protected against in their home insurance policy.


• Premium - the price calculated for the policyholder to pay the insurance provider. This is recalculated and issued annually but can be paid in monthly instalments.


• Excess - the amount charged by the insurer and payable by the policyholder, whenever a claim is made.


• Claim - a formal appeal for compensation by the policyholder to the insurer when theft or damage has occurred.


• No claims - a policy that you haven’t claimed on. If you have not had to make a claim for compensation regarding burglary or damage to your property, you can build your ‘no claims bonus or discount’ to reduce your premium for following years.


• Conditions - contractual rules listed in your policy that the policyholder and insurer must abide by.


• Contents – possessions within the walls of your property that are not fixed items – the belongings you would take with you if you moved house.

• Act of God - a clause in a policy that encompasses natural events like earthquakes, landslides, flooding, snowfall, storms and lightning strikes that are outside of human control. These can often be excluded from an insurance policy, meaning that you cannot claim in their event.


• Exclusions - items, circumstances or events that are not included as a part of a policy’s cover.


• Risk - looks at potential circumstances that will affect each individual policyholder and their likelihood to claim. The risk associated with each policyholder helps the insurer determine the amount of the premium.


• Loss Adjuster - an insurance specialist who investigates claims made on behalf of the insurance company and assesses the compensation required to cover the claim.


• Due diligence - is the care that a policyholder must take to avoid damaging their property. Proof against due diligence may result in compensation withheld by the insurer.


• Duty to minimise loss - the policyholder has a responsibility to put in place every precaution to prevent further damage or theft of their property.


• Obligation to notify - the potential policyholder must disclose to the insurer all the information they can, so that the insurer can adequately assess the risk of insuring them. Any information not revealed can result in compensation withheld by the insurer.


• Overinsured - when an item is insured at a price greater than its actual value. The replacement worth is normally only considered in the event of a claim.


• Underinsured - when an item is insured at a price less than its actual value. In the event of a claim, policyholders may not receive the full value of items lost or damaged.


• Dual insurance - occurs when the same item is listed in more than one insurance policy.


• Insurance Premium Tax (IPT) - a levy that is a percentage of your premium applied by the government. It is shown as a separate charge on your documentation (Isle of Man and the Channel Islands are exempt from this tax).