Insurance can be complicated and confusing. There are so many different terms that you can feel as if you’re reading a different language.
That said, Qdos are committed to helping you navigate your insurance documents, and ensure you have a robust understanding of your policies.
As part of that process, we have compiled this guide to help you understand some commonly queried terms.
Please note that any comment on specific points of coverage apply to policies issued by Qdos only.
Policy wording: The legal agreement between the policyholder and the insurer detailing the scope of the cover, it’s limitations, conditions and exclusions.
It is always important to thoroughly check your policy wording to ensure you understand the scope of your cover.
Policy schedule: This is a summary document issued by the insurer/broker once a policy is in force. The policy wording sets out the key details of an insurance policy, such as the policyholder’s name, the cover in place, limits, excesses, and the period of insurance.
Premium: This refers to the amount of money a policyholder pays in return for insurance cover.
Excess: Your policy excess refers to the contribution the policyholder will need to make in the event of a claim before the insurer pays their proportion.
One example would be if a builder who has public liability insurance causes damage worth £1,500 to a client’s property. If the policy has an excess of £250, then the policyholder will pay that £250 and the insurer covers the remaining £1,250 .
Public Liability Insurance: This is a form of insurance which covers a business or individual if they are held legally responsible for injury to a third party, or damage to a third party’s property, caused whilst providing their services.
For example, if an insured person clips a stone while strimming a client’s lawn, and it smashes a window, public liability insurance can cover the cost of the damage.
Employers’ Liability Insurance: Insurance which covers compensation claims brought by an employee where they have suffered injury, illness, or accidental death because of their employment with the policyholder.
For example, if a worker injures their back lifting something heavy and sues the employer for inadequate training or equipment, this insurance helps cover legal costs and compensation.
Professional Indemnity Insurance: An insurance which provides professionals with cover for the legal costs and compensation if a client alleges that the professional has been negligent or made an error and takes legal action to recover any losses.
An example would include when a copywriter makes an error that unintentionally infringes intellectual property rights, a client may seek to bring legal action for any loss they suffer as a result.
Legal Protection Insurance: This covers the cost of defending or pursuing a variety of legal disputes the policyholder may become involved in.
It will provide expert support against such claims, covering solicitors’ fees and other expenses incurred during the legal proceedings. For example, when dealing with a contract dispute with a client or supplier.
Qdos’ legal protection insurance policies also provide expert representation for HMRC enquiries, and covers the loss of income (up to £500 per day with a £5,000 total limit) should the policyholder (including directors of the insured company) be called to jury service.
Personal Accident Insurance: This is cover which provides a lump sum in the event of suffering a permanent bodily injury because of an accident Qdos’ Cover also includes payment in the event the insured person suffers a fracture, and a daily benefit should they be required to stay in hospital following an accident.
The benefit paid depends on the seriousness of the injury and ranges from £300 for a Grade 1 Fracture, to £50,000 should the insured person suffer permanent brain damage.
Income Protection Insurance: Provides a monthly benefit at an amount of the policyholders choosing should they suffer disease, sickness or bodily injury that prevents them carrying out their occupation. Qdos’ policy also provides a fixed benefit in the event of accidental death.
For example, if someone develops a long-term illness and can’t work as a result, this insurance will make ongoing monthly payments while they’re signed off.
Exclusions: Refers to specific risks, losses, or situations that the insurance policy will not cover. One example would be that a policy might exclude damage caused by intentional acts, so if something is deliberately damaged, the insurer would not pay for the loss.
Conditions: These are obligations that either the policyholder or insurer must comply with for the coverage to remain valid. There are different types of condition but they broadly either impose a particular action on the policyholder, or set out how the insurer will manage certain scenarios. For example, claims conditions will set out how and when the policyholder will need to notify a claim, whereas cancellation conditions may set out the circumstances in which the insurer will cancel the policy (non-payment, fraudulent claims etc.).
Sum insured / Limit of Indemnity: The maximum amount an insurance company is obligated to pay in the event of a loss.
If your equipment is insured for £10,000 and £8,000 worth of damage occurs, then you will be covered for the full amount claimed.
However, if £12,000 worth of damage were to occur then you could only claim up to the £10,000 level (i.e. the sum insured).
Aggregate limit: The maximum limit an insurer will pay for all claims during a policy period, usually one year. This is regardless of how many separate claims are made.
Take the example of a policy which has an aggregate limit of £500,000. Over the period of their policy, they suffer three separate incidents costing £200,000, £150,000, and £200,000. The total cost of these incidents is £550,000, which is higher than the insurance policies aggregate limit. In this case, the insurer would pay out £500,000, leaving the business to cover the remaining £50,000.
Retroactive date: The retroactive date refers to an exclusion in an insurance policy, most commonly Professional Indemnity Insurance, whereby the policy won’t react to services provided /losses that stem from events prior to the retroactive date.
One practical example would be if a consultancy’s professional indemnity policy has a retroactive date of January 31, 2024, then a client claims in 2026 for advice given in February 2024 would be covered, but advice given in December 2023 would not.
Ask away! One of our team will get back to you!
