A Glossary of Insurance Terms

Understanding car insurance

The jargon used by car insurance companies can be confusing. Here’s a plain English explanation of most of the common terms used in car insurance to help you understand them better.

Click on any insurance phrase in the list below to jump to an explanation

Additional premium Indemnity Renewal
Adjuster (Claims Adjuster or Loss Adjuster) Insured Risk
Approved Repairer Insured value Settlement
Cancellation Insurer Social, domestic & pleasure (SD&P)
Certificate of Insurance Lapse Telematics
Claim Loss Third party
Comprehensive insurance (also called “fully comp”) Market value Third party insurance
Compulsory excess Material fact Third party, fire and theft insurance
Concealment No claims bonus (or NCB or discount) Third party liability
Cover note Non-fault claim Total loss
Disclosure Policy Uninsured losses
Driving other cars (DOC cover) Policyholder Uninsured loss recovery
Excess Premium Under-insurance
Fault Claim Proposal form Underwriter
Geographical limits Quote Voluntary Excess

Additional premium

An extra premium incurred by the insured person as a result of a policy amendment. The amendment may have increased the risk, the policy conditions or the value of the vehicle insured by the policy.

Adjuster (Claims Adjuster or Loss Adjuster)

A professional who investigates and assesses claims on behalf of an insurance company. A loss adjuster is usually an independent third party, ensuring that your claim is dealt with fairly.

Approved Repairer

A garage which is approved by your insurance company for repairs to your car which are covered by your policy


The termination of an insurance policy before it is due to expire. Most policies contain a cancellation clause which specifies the conditions under which the policy can be cancelled, i.e. 48 hours, three months etc. Cancellation of a policy will usually result in in a return premium being paid to the insured.

Certificate of Insurance

Legal proof of your car insurance. It shows details such as who is insured to drive, what car is insured and the level of cover.


A loss arising to the insured person, such as the damage or theft of their vehicle. This causes a liability to the insurance company under the terms of the policy.

Comprehensive insurance (also called “fully comp”)

The top level of car insurance cover is comprehensive cover, as it covers the vehicle for damage caused in an accident, even if it was your fault, as well as your liability to third parties.

Compulsory excess

See excess


This refers to deliberate withholding of material information to the insurance company in order to obtain a cheaper premium or cover where it might otherwise have been turned down. Concealment makes an insurance policy null and void.

Cover note

A document issued by the insurance company to confirm cover. Most often associated with motor insurance.


Before you enter into a contract of insurance, you must tell the insurance company anything you know (or could reasonably be expected to know) which might affect their decision to insure you and if so, on what terms (see also Material fact).

Driving other cars (DOC cover)

Cover to drive someone else’s car. This isn’t a standard feature of all car insurance policies so be sure to check before getting behind the wheel, and where it is included, you usually only have third party cover.


The first portion of a claim which must be paid by the insured person. A higher voluntary excess may be agreed by the insured as a means to obtain a reduced premium, or a compulsory excess might be imposed by the insurance company for underwriting reasons.

Fault Claim

An accident or loss where the insured person is considered at fault. You are deemed to be at fault if your insurance company cannot recover its costs from someone else.

Geographical limits

The geographical areas where your insurance policy is valid


The principle under which the insurance company seeks to return the insured to the same financial position he was in before a loss occurred.


The person whose property is insured under the terms of the policy

Insured value

In the case of car insurance, this is the maximum amount the insurance company will pay out in the event of a claim. This will either be the amount you stated the vehicle was worth at the inception of the policy, or the market value of the vehicle at the time of the loss, whichever is lower.


An insurance company or Lloyds’ underwriter who agrees to provide cover for loss or damage as a result of an accident or some other agreed risk, in return for a premium paid by the insured person.


The non-renewal of an insurance policy. For example, if you do not pay the renewal premium of your car insurance policy, it will lapse.


Another word for “claim”.

Market Value

The value of your car immediately before an accident or loss occurred, compared with a similar type car, taking into account its age, condition and mileage.

Material fact

A fact which would sway the insurer to either accept or decline an insurance proposal, or fix the rate of premium or set terms and conditions, based on the associated risk. A proposer should disclose any material fact to the insurance company.

No claims bonus (or NCB or discount)

A common phrase in motor insurance, where the insurance company gives a rebate on the insured’s premium in circumstances where no claim has been made in the previous period of insurance. No claims bonuses can increase year on year to a maximum amount decided by the insurance company. 

Non-fault claim

An insurance claim where your insurance company is able to recover their costs from someone else.


A legal document, issued by an insurance company, detailing the terms and conditions of an insurance contract between themselves and the insured person.


Also known as the Insured. The person in whose name the insurance policy is issued.


The amount of money (also known as the consideration) paid by the policyholder in return for a contract of insurance.

Proposal form

A form the proposer is asked to complete when they require insurance in order to supply the insurance company with sufficient information to assess the risk and calculate the terms and conditions of a policy if they accept the risk.


A statement issued by the insurance company which sets out the premium and the terms and conditions they will require in return for accepting the risk of the proposed insurance.


The continuation of an insurance policy from one period of insurance to the next.


The peril which the insurance company agrees to insure against.


The payment made by your insurance company to settle a claim.

Social, domestic and pleasure (SD&P)

A description of how your car will be used. If you will only use your car for visiting friends and family, shopping, day trips and travelling to and from your regular place of work, social, domestic and pleasure describes your car usage.

If you also use your car to drive between different work offices or to visit customers, you need to add business use to your cover.


Also known as black box. Remote technology used by your insurer to track your driving behaviour. The data can be assessed to calculate your car’s risk and the insurance premium.

Third party

A person who makes a claim against the insured person.

Third party insurance

The lowest level of car insurance, third party insurance covers your liability to other people in the event of an accident, but it does not cover the cost of repairing your car.

Third party, fire and theft insurance

The same level of car insurance as third party insurance, plus cover for fire or theft of your car.

Third party liability

The liability of the policyholder to persons who are not covered under the insurance policy.

Total loss

A phrase used in the event of a claim when the insurer thinks the cost of repairing your car will be more than the cost of replacing it.

Uninsured losses

Any “out-of-pocket” expenses you incur which are not insured under the terms of your policy. This includes the policy excess, loss of earnings, compensation for injuries etc.

Uninsured loss recovery

If you have incurred uninsured losses as a result of an accident which was not your fault, you may receive assistance in recovering those expenses from the third party (or their insurance company) if they were to blame.


Under-insurance occurs when you withhold the true value of your car to the insurance company, perhaps hoping that by doing so you’ll get a cheaper premium. This is a false economy, however, as the insurance company will not pay you the full market value of your car in the event of a claim. For example, you tell your insurer that your £20,000 car is actually worth £15,000. They could refuse to pay 25% of any claim.


An underwriter is the person who decides whether to accept your proposal for insurance. They assess the risk and calculate the premium based on that assessment.

Voluntary Excess

See Excess

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