Glossary of Insurance Terminology - Part 1

Insurance can be a complex area, especially if you are just starting out in business and are looking to taking out business insurance for the first time or perhaps are expanding your business and are looking for additional insurance cover.

Here, we start to explain some of the most commonly used terminology surrounding business insurance. This list is not exhaustive but will help with some of the insurance basics.

Business interruption insurance - This will cover you for any income you may lose or loss of gross profit due to such as fire or storm damage to your business premises. It will cover you until you get your business up and running again.

Compulsory insurance - This is insurance that you are required to have by law or under professional obligations if you run a business or if you are a tradesman. This can include employers liability insurance, motor insurance and/or professional indemnity insurance.

Directors and officers liability - Many small businesses are limited companies and are required to have directors. This can leave the directors open to a range of claims in areas such as fraud, negligence and data protection. Directors and officers liability insurance can cover the cost of such claims.

Excess - Depending on your insurance you may be required to pay a certain amount of any claim you make. This is known as the excess. You can often waive this excess by paying a little more on your premiums.

Exclusions - These are certain risks that are NOT covered by an insurance policy. They should be clearly outlined within your insurance documents and it is important that you have a clear understanding of what they are.

Extensions - Also known as extended coverage, these are extra features that can be added that are not included in the basic policy.

Extra expense insurance - This often comes as a part of business interruption insurance. It covers extra spending by a business if that spending helps it to get back up and running more quickly.

Employers liability insurance- Required by law, employers liability insurance protects a business for its legal liabilities arising from any claims by employees who are injured or become ill at work.

Motor insurance - If a business uses vehicles on public roads it is required to have motor insurance. Special business motor insurance is also required if someone uses their private vehicle for business purposes.

Product liability insurance - This liability insurance covers your legal liabilities arising from claims for any loss or damage to a person or property resulting from a product that you sold or gave them.

Professional indemnity insurance - This insurance is compulsory for certain professions such as lawyers and accountants. It protects against claims for the legal liabilities of a business resulting from negligence.

Policy document - The insurance policy document is the document that forms a contract between you and the insurer. It contains all details, and terms and conditions of the insurance policy, so it must be read carefully.

Premium - This is the cost of the insurance policy and is usually paid annually, though many insurers will offer the option to pay the insurance premium monthly, perhaps with an interest fee added.

Public liability insurance - This covers your legal liabilities arising from claims for loss or injury to any member of the public as a result of your business activities. This should cover legal fees, hospital bills and all other expenses.

Tools and equipment insurance - This is specialist insurance that comes as part of many small business and tradesman insurance policies. It covers against damage, loss or theft to tools and equipment. This insurance can also be bought on its own.

To talk to an expert in your area and get a quote.