You may not often come across some of the words used when talking about home insurance. Here we explain some of the common terminology.
This usually encompasses any event where your belongings are damaged in an accident, and by accident we mean something that is unexpected and unintended; think spilling red wine on the carpet or dropping the TV and cracking the screen.
An amendment is when you need to make a change to your insurance policy; for example, if you move to a new house, if you build an extension and want it to be covered or if someone comes to live with you who is not a member of your family.
Buildings insurance is cover for the building itself, including your walls, floors or permanent fixtures and fittings. It covers you for the cost of repairing or rebuilding your home if it is damaged or destroyed. You can take out buildings insurance if you own the property, but it is not necessary for tenants.
You can cancel a home insurance policy before the cover comes to the end of its term. However, you may be charged a fee for doing so.
Certificate of insurance
When you take out your policy, your insurer will send you proof of cover in an official document. Referred to as a certificate of insurance, it summarises all the key aspects and conditions of your policy including details of the insurer, your property, type of cover and the period for which you are covered.
When you need to call upon the protection your home insurance policy offers, it is referred to as making a claim. For example, if you are burgled or your property suffers damage during a storm.
If you have contacted your insurer to make a claim in the past, it will have been added to a list of your previous claims, called your claims history. Insurers will check your claims history when working out your premium, for example, how many times you have made claims against your insurance policies in the past. It gives them an idea of the risk of insuring you (how likely you are to make further claims).
This is a type of insurance which covers your possessions if they are damaged, destroyed or stolen from your home. Contents include anything you would be likely to take with you if you moved home, such as furniture, appliances, curtains, bedding and computing equipment.
All insurance policies come with financial and technical cover limits. It means there will be a maximum monetary amount that your policy covers you for. There will also be a limit on how much you can claim to replace a single item.
Over time, your belongings generally lose value due to wear and tear. Depreciation refers to how much the value of the belonging may have fallen since you purchased it, and therefore how much the policy will pay out to replace it, unless you have ‘new for old’ cover (we explain ‘new for old’ cover later in this guide).
The excess is the amount that you will pay towards any claim that you make. You can set your own excess level when taking out your policy.
A home insurance policy may have certain exclusions; events which are not covered under that specific policy. For example, this could include any claim when your home has been left unoccupied for an extended period.
Your contents insurance may include some cover for the items contained in your freezer, which may be ruined in the event of contamination by the chemicals inside, or by a rise or fall in temperature.
Home insurance doesn’t just cover the things inside the building itself; your policy may include a certain amount of garden cover, protecting the belongings you keep outside such as garden furniture or things kept in a shed or garage.
Good state of repair
Your property will generally need to be classed as being in a good state of repair for you to insure it. Essentially, this means the house should be structurally sound with no incomplete building works or signs of issues such as dry rot, damp, loose roof tiles or faulty wiring.
High risk items
These are items most commonly targeted by thieves; things like jewellery, bicycles and electronic goods. Your policy may include a cover limit on the value of these items - for example, only a third of your total contents cover level.
Home emergency cover
This is an add-on to your policy which you may be able to purchase. It offers extra protection in certain emergencies, such as lost keys or plumbing and drainage problems.
Insurance Premium Tax
Tax is charged by the government on every general insurance policy. It is collected by the insurer and passed straight to the government. The standard rate currently stands at 12%.
Legal cover is another optional add-on to your policy. It provides additional cover towards legal fees should you need to make a claim against someone else, for example a personal injury. It can also help with the legal costs if you are the one being sued.
A loss adjuster may be sent out by your insurer to help evaluate the extent of any damage caused. They will tell your insurer the amount they should pay to settle your claim.
New for old
Your contents insurance may include a ‘new for old’ clause. This means that if you make a claim to replace one of your belongings, you will get enough to buy a new one, even if the item in question is quite old.
Non-disclosure is when you have not told your insurer an important piece of information when taking out your policy, for example if the property has a history of flooding. This could cause any payout to be reduced, or even your policy to be voided entirely.
Period of cover
This is how long your cover lasts for. With home insurance, this is usually a term of 12 months, although some providers may offer different options.
Your policy is the home insurance contract which you have taken out, detailing precisely how much cover you have, the cost of that cover, and any other relevant terms and conditions. You’re only covered for what is set out in your policy documents, so it’s important to read them carefully.
The premium is how much you pay for your policy. You can generally pay your premium on a monthly basis or pay in full, though remember that you may be charged interest if you go for the monthly option. As a result, it could cost more.
When you take out buildings insurance, the cover level is not based on the value of the property but on what it would cost to rebuild the property if it was destroyed beyond repair.
This cost is usually lower than your home’s sale price or market value.
When determining whether to offer you cover, an insurer will assess the level of risk associated. Essentially, this is how likely you are to want to make a claim on your policy.
Your policy may come with certain special conditions which affect the cover you enjoy and when you may be able to make a claim.
The underwriter is a person who works for the insurer to assess the level of risk associated with you and your property, sets out the price for that cover and any additional terms and conditions.
If you’re unsure about any of the terms and conditions of your home insurance policy, it’s important to check these with your insurer, so you have the cover you need.
To read more about home insurance, go to Solved.