Home insurance jargon explained

Posted on July 13, 2012 by Guest Writer
Couple looking at buying a holiday home

Everyone knows that home insurance is a vital part of owning a property, and a good policy must be secured. However, this can be something of a daunting prospect when there is so much home insurance jargon to wade through to make sure you end up with a policy that meets your needs.

The list below explains some of the most common terms you’ll come across in your search for insurance, hopefully making purchasing cover a much more straightforward experience.

Accidental Damage

Accidental damage can happen to either a building or its contents. Cover is often included as standard for things like window glass, sanitary ware, pipes above and below ground as well as electrical items. You can often tailor your policy with enhanced accidental damage options.

Act of God or Force Majeure

An Act of God in insurance terms is an unpreventable and unpredictable event that causes damage to property. Earthquakes, lightning and severe are often described as Acts of God.


If you need to make a change to your original policy this is an amendment. If you build an extension or add a garage, you policy will require an amendment.

Annual Premium

The annual premium (sometimes called yearly) is the amount you pay for your home insurance for a year.


Ancillaries is another phrase for extended or additional cover. Enhanced accidental damage would be considered and ancillary.

Buildings Insurance

While buildings insurance is not a legal requirement in the UK, it is very difficult to get along without as it is a compulsory stipulation for many mortgage lenders.

Buildings insurance covers the physical structure of the home, including fitted fixtures and outbuildings. This means that it protects the home in the event of the property being damaged or even destroyed. Buildings insurance is vital in the case of fire or flood or other such disasters, where money is the last thing you want to be worrying about.

It is essential that homeowners make sure they have adequate insurance – but this does not mean the property’s market value. Buildings insurance tends to take into account how much it would cost to rebuild the property from scratch, including all the labour and materials.

Certificate of Insurance

You will often be sent a hard-copy proof of insurance, although some companies are moving to electronic certificates. This is your certificate of insurance.


A home insurance policy will always feature a list of conditions. If you break a condition, the policy could be invalidated and if you need to make claim, it may not be paid out.

Contents Insurance

Contents insurance protects all the valuable things you keep inside your home against loss, theft and damage. Simply put, it tends to cover things inside the house that are not protected by buildings insurance. While buildings insurance looks after fixtures permanently attached to the property, like fitted wardrobes and kitchen sinks, contents insurance takes care of the rest including furniture, electrical goods, carpets and curtains. What’s more, contents insurance is able to cover items outside of the home enabling you to be covered when you’re out and about.

While contents insurance is completely optional, by its nature it is clearly an extremely useful policy to hold in the case of an emergency. When considering securing home contents insurance, it is useful to think about how much it would set you back to replace all your possessions. It is also essential to make sure you take an accurate evaluation of your belongings – underinsuring could leave you out of pocket as your insurer may only pay a proportion of your claim if you have not insured the full value of your contents. If it would take £50,000 to replace all your contents, but you only insurer them for £25,000 and then make a claim for £5,000, your insurer may only pay you £2,500 minus your excess, which is 50% of your claim as you only paid to cover 50% of your contents.

Cover Limits

Cover limits are maximum amounts that you are covered for under an insurance policy in the event of a claim. The cover limit will vary depending on what you are claiming for.

Depreciation (Wear and Tear)

Depreciation refers to the amount of expected wear and tear an item you’re claiming for will have been through since you purchased it. The amount of depreciation will be amount deducted from any payout unless you have a new-for-old clause in your policy.

Due Diligence

Due Diligence refers to the level of reasonable care that you are expected to take when looking after your property. If it’s found that due diligence wasn’t exercised, your insurer may deny compensation.

Duty of Disclosure

Duty of Disclosure is an obligation requiring you to give accurate and honest information when taking out any insurance and that you notify them of any incidents or changes to your details during the life of the policy.

Duty to Minimise Loss

If an event occurs in your home and you make a claim, you have a duty to act to ensure that things don’t get worse, resulting in the claim growing.


Endorsement are added to your policy if it needs to be modified in any way.


An Excess is the money paid by you towards the costs in the event of a claim. Offering to pay a larger excess will often result in cheaper premiums.


Exclusions and refer to anything that is not covered in an insurance policy. It is important that you read the policy documents provided in order to understand any exclusions.

Good State of Repair

Unless your property is in a good state of repair, you will find it difficult to find insurance. A house in good state of repair is often described as being structurally sound with no incomplete building works and no evidence of dry rot, damp, animal or insect infestation, faulty wiring or plumbing, or damage to the roof or chimney.

High-Risk Items

High-risk items are possessions which burglars are more likely to target during a break in.


This is the main principle of insurance. An indemnity seeks to restore an insured person to the same financial position they were in immediately before they suffered the loss that resulted in their claim.

Insured Incident

Any event which is covered by your home insurance is known as an insured incident.

Insured Value

This is the maximum amount an insurance company will pay out on your property.

Insurance Premium Tax (IPT)

IPT is a government tax on insurance. The standard rate is 5% and is automatically included in the quotes you receive.

Joint Proposer

If you are buying a home insurance policy with someone else you share the home with, you are both joint proposers.


Liability insurance is about financial protection for you and your family. The personal liability coverage within your insurance policy provides coverage for bodily injury and property damage sustained by others for which you or your family members are legally responsible. For example, someone falls down your stairs, or your child accidentally throws a ball through a neighbour’s window, breaking an expensive Chinese vase – you may be held responsible for the damages caused. Under personal liability coverage, the insurance company defends you if you are sued, and pays damages to the injured person up to the limit of liability.


A loss is a reduction in value to your overall wealth, due to the devaluation of your property through damage or theft.

Loss Adjustor

Loss adjustors are employed by insurance companies to investigate and settle insurance claims.

Loss Assessor

A loss assessor looks at the level of risk associated with an undertaking, decided if it is insurable and what the premium should be if it is. Today much of the loss assessor’s job is automated, which is how you are able to receive online quotes so quickly.

Material Fact

Any factor that might affect an underwriter’s decision to provide you with insurance is a material fact. If you withhold or give inaccurate material facts when applying for home insurance, the insurer could refuse payment if you make a claim.


New-for-cover will entitle you to a brand new replacement for any insured items that are stolen or damaged.

Obligation to Notify

You have an obligation to notify your insurance providers of any incidents or changes to your details over the life of your policy.

Over insured

Being over insured means you have bought more insurance than you need. For instance, you only need buildings insurance cover up to the rebuild value of the home, and not its market value – which is often significantly more. Over insuring your property will result in unnecessarily high premiums.

Period of Cover

This is the length of your insurance. Home insurance typically lasts for 12 months, so your period of cover will normally be 12 months from the policy start date.


The premium is the amount you pay for you insurance.


While applying for insurance and waiting for approval, you are known to the insurance company as the proposer.

Rating Factors

Rating factors are used by insurers to determine the price of your insurance. They include such things as where you live, claims history and the number of children in the house.

Rebuild Cost

This is the cost of rebuilding your home if it is destroyed. You can use a rebuild calculator or a surveyor to help find the cost.


Risk is an assessment of the likelihood of a claim being made on your home. Home insurance can only be offered after and insurer has assessed the property’s risk.


Your insurance documents will usually include a policy schedule. The schedule is likely to include information such as the sum insured, any discount details, the period of insurance and details of premiums.


The amount an insurance company agrees to pay out on a claim.

Single Article Limit

This is the maximum amount any single item can be insured for in your home under an insurance company’s standard policy.

Special Conditions

Insurance companies can include Special Conditions on an insurance policy. Always check the policy’s and read the conditions of your cover.

Sum Insured

This refers to the maximum amount of money your buildings and contents are insured for, and the insurance company will not pay out more than this amount in the event of damage or theft.

Under Insured

Under insuring happens when you undervalue your property or fail to cover new property when applying for home insurance. It’s vital not to under insure as insurance providers might not pay out a full claim if you are not properly covered.


An underwriter assesses the risk of a person who has made an insurance application on a particular property, decides whether to accept that risk, and then sets the terms of acceptance which includes conditions and premiums.