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What do those car insurance terms mean?

Understanding car insurance

Whether you're applying for car insurance, renewing or making changes to your policy or making a claim, the jargon used by car insurance companies can be confusing. Here’s a plain English explanation of some of the phrases commonly used by car insurers to help you out.

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 Named driver Third party liability
Cover note No claims bonus (or NCB or discount) Total loss
Disclosure Non-fault claim Uninsured losses
Driving other cars (DOC cover) Policy Uninsured loss recovery
Excess Policyholder or Proposer Under-insurance
Fault Claim Premium Underwriter
Geographical limits Proposal form Voluntary Excess

Additional premium

An additional premium, over and above what you paid at the start of the policy, might be payable if there is a mid-term amendment to the policy that significantly increases the risk to the insurance company. 

Examples of when you might have to pay an additional premium are:

  • adding a young driver to the policy
  • notifying the insurer of new motoring convictions
  • changing your car to one that's in a higher insurance group.

Adjuster (Claims Adjuster or Loss Adjuster)

A loss adjuster (sometimes called a claims adjuster) is an insurance professional who investigates and gathers information about a claim to decide if it is covered by your policy, and to what extent. They are usually employed by the insurance company, and play a particularly important role in large or contentious claims, where they will negotiate a settlement with the claimant.

A common situation for many car insurance claims is that the loss adjuster will assess the extent of damage to your vehicle before authorising repairs to go ahead.

Approved Repairer

If your car has been damaged in an accident, most insurance companies have a network of approved repair centres which can begin repairs quickly and get you back on the road as soon as possible. The work done by an approved repairer is usually guaranteed for three years.

You're not obliged to get your car repaired by an approved repair centre, but there can be drawbacks to choosing your own garage.

  • Your policy may stipulate a higher excess when the vehicle is not repaired at an approved repairer.
  • You'll probably also have to submit quotes before the insurance company authorises repairs
  • Sometimes, your insurer may not agree to pay the full cost of repairs, arguing that they could have got them done more cheaply at an approved repair centre.


Cancellation refers to the termination of an insurance policy before it is due to expire, either by the insurance company or the policyholder. For example:

  • You might cancel your insurance policy if you sell your car
  • Your insurer might cancel the policy if you have withheld important information about your driving history in your application or at renewal

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

Your insurance certificate is legal proof of your car insurance, so keep it safe. It shows all the basic information about your policy, such as:

  • the policy number and the effective dates of the insurance period
  • who is insured to drive
  • what car is insured
  • the level of cover


A claim for compensation can be made following any loss that is insured under the terms of a policy. In car insurance, claims are most frequently for damage to, or theft of, a vehicle. This causes a liability to the insurance company. Once your claim has been validated and approved, the insurer will issue payment.

Comprehensive insurance (sometimes called “fully comp”)

The highest level of car insurance cover is comprehensive cover. It provides financial protection for accidental damage, fire or theft of your vehicle, as well as covering your liability for any third party claims made against you. 

Comprehensive insurance often provide other cover, too, for things like windscreens, personal injury, personal possessions, or driving other cars (usually restricted to third party cover).

Compulsory excess

See Excess.


In insurance terms, concealment refers to deliberately or inadvertantly withholding material information to the insurance company that may affect their decision to issue a policy, or their calculation of the risk.  Examples might be concealing claims or convictions in order to get a cheaper premium, or concealing that you are not the main driver of the vehicle.

Concealing material information could result in a policy being cancelled or voided.  

Cover note

A cover-note is a temporary document issued by the insurance company to confirm cover on your vehicle, pending delivery of the final insurance documents. These days, the internet means many insurers issue the full set of documents immediately, making cover-notes unnecessary.


When you apply for car insurance, the insurer will ask you lots of questions to find out the level of risk involved in insuring you. This process of disclosure might affect their decision to insure you and also the terms on which they insure you, for example the premium and the compulsory excess.

If you fail to fully disclose information which affects those decisions (see also Material Fact), the insurer could cancel or void your policy.

Driving other cars (DOC cover)

If you have comprehensive insurance on your own car, you might also be covered for driving other cars on a third party basis only, with the owner's permission. This isn’t a standard feature of all comprehensive insurance policies, though, so be careful to check your policy wording before getting behind the wheel of someone else's car. 

Cover for driving other cars is useful for emergencies, but the restriction to third party cover only means you won't be covered for any damage to the car if you're in an accident. It's probably not a good idea to rely on this feature for regular driving - become a named driver instead.


The excess is the first portion of a claim which must be paid by the policyholder. For example, if it costs £1,000 to repair your car after an accident, and your insurance excess is £200, your insurer pays £800 and you pay £200.

You might hear phrases such as "compulsory excess" and "voluntary excess". A compulsory excess is imposed by the insurance company for underwriting reasons relating to the risk of insuring you.  In addition to this, you might choose to pay a voluntary excess as a way of reducing your premium. 

Fault Claim

An accident or loss where the insured person is considered at fault. For the purposes of determining whether your no claims bonus is affected, 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. (See also Policyholder.)

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.


The word "Loss" simply refers to the basis of your claim under the terms of your policy. For a car insurance claim the loss could refer to damage caused by an accident or fire, or theft of a vehicle or personal possesions.

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. (See also Disclosure)

Named driver

In car insurance, a named driver is someone who is insured to drive a vehicle, but they are not the main driver. The main driver should be the policyholder. Named drivers have the same level of cover as the main driver (i.e. comprehensive, or third party, fire and theft), but the insurer may impose a different excess (for example, a young driver named on the policy might have a higher excess).

No claims bonus (or NCB or discount)

A common phrase in motor insurance, where the insurance company gives a rebate on the insured person'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. 

Read a full explanation of How No Claims Bonuses Work.

Non-fault claim

For the purpose of determining whether your No Claims Discount (NCD) will be affected after a claim, a non-fault claim is one where your insurance company is able to recover any outlay from a third party. If they cannot, your NCD will be affected, even if you feel you were not to blame for the accident or loss.


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

Policyholder or Proposer

In car insurance, the Policyholder can also be referred to as the Proposer or the Insured. This is the person in whose name the insurance policy is issued, and to whom the insurance company would pay any benefits, should a claim arise under the policy.


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 potential policyholder is asked to complete when they require insurance. These days, many proposal forms are complete online or over the phone. The proposal form is usually sufficent to supply the insurance company with the information they need to assess the risk and calculate the terms and conditions of a policy if they accept it.


A quote is a statement issued by the insurance company after you've filled out a proposal form. It sets out the premium and the terms and conditions they will require in return for accepting the risk of the proposed insurance. Insurers may vary as to how long a quote is valid; 30 days is common, up to 60 days is possible. 


The continuation of an insurance policy from one period of insurance to the next. Car insurance policies generally run for 12 months, so if, for example, your cover started on 1st June, the policy will expire on 31st May the following year and the renewal date is 1st June. 


You might hear the word "risk" used in a couple of ways relating to car insurance. The first refers to the peril which the insurance company agrees to insure against, for example accidental damage, fire, theft etc.

The second refers to the many risk factors by which an insurer determines whether to issue a policy to an individual and on what terms. Examples of risk factors are the safety and value of the car to be insured, the driver's age, occupation, post-code and driving history etc.


"Settlement" is simply another word to describe the payment made by your insurance company to settle a claim.

Social, domestic and pleasure (SD&P)

An insurer's description of a type of cover, depending on how your car will be used. If you will only use your car for personal use such as  visiting friends and family, shopping and day trips, insuring your car for social, domestic and pleasure use is enough. If you also use your car for  travelling to and from your regular place of work, you'll need to add "Commuting" to social, domestic and pleasure use.

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.

Telematic insurance

Telematic insurance is lso known as black box insurance. Remote technology, in conjunction with a small piece of equipment fitted to your car, is used by your insurer to track your driving behaviour. The data from the black box is assessed on a regular basis and your insurance premium adjusted to reflect a higher or lower risk.

We've written a great deal about Black Box insurance. Find out more here, or read the Pros & Cons of Black Box Insurance.

Third party

A person who makes a claim against the insured person. For the purposes of car insurance, the third party might be the driver or passenger of another car if you're involved in an accident,  an injured pedestrian or property owner. 

Third party insurance

The lowest level of car insurance, third party insurance covers your liability to other people and their property in the event of an accident, but it does not cover the cost of repairing your own car. In practice, this means that if you are at fault in a road accident, your insurer will pay any third party costs, such as vehicle repairs, personal injury, hire costs, loss of earnings etc. You'll have to pay your own out-of-pocket expenses, though.

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 legal responsibility or obligation of the policyholder to persons (third parties) who are not covered under the insurance policy.

Total loss

The phrase "total loss" can be 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 for one of similar market value. The phrase "write-off" means the same thing as "total loss" - it's not economically viable to repair the car.

If you have comprehensive insurance, an insurance assessor will examine your vehicle and make a recommendation to the insurer if he decides it's a total loss.  

Uninsured losses

Uninsured losses are 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 could find yourself out of pocket. If you were not to blame for the accident, you can try to recover your uninsured losses from the third party (or their insurance company) if they were to blame. Services for uninsured loss recovery are sometimes offered as an optional extra when you buy your insurance policy. 


For car insurance, 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