Insurance Glossary
Clear, plain-English definitions for the most common insurance terms in the UK.
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Comprehensive Cover
The highest level of vehicle insurance. It covers damage to other people's property and vehicles, as well as damage to your own vehicle, even if the accident was your fault.
Compulsory Excess
A fixed amount set by the insurer that you must pay towards the cost of any claim. For example, if your claim is for £1,000 and the compulsory excess is £200, the insurer will only pay out £800.
Cooling-Off Period
A legal right allowing you to cancel an insurance policy within 14 days of receiving the policy documents, usually for a full refund (minus a small administrative fee for the days you were covered).
Exclusion
Specific situations, events, or circumstances that are explicitly not covered by your insurance policy. For example, travel insurance often excludes claims related to pre-existing medical conditions unless declared.
Indemnity
The core principle of insurance: placing you back in the same financial position you were in immediately before the loss occurred, without allowing you to profit from the claim.
No Claims Discount (NCD)
A reduction in your insurance premium (usually motor insurance) rewarded for each consecutive year you hold a policy without making a claim. It can significantly reduce the cost of insurance.
Premium
The amount of money you pay to the insurance company in exchange for the cover provided. This can usually be paid as a single annual lump sum or in monthly instalments (which often includes an interest charge).
Public Liability
Insurance that covers the cost of claims made by members of the public for incidents that occur in connection with your business activities or property, causing injury or property damage.
Third Party, Fire and Theft
A mid-level motor insurance policy. It covers damage you cause to others, plus covers your own vehicle if it is stolen or damaged by fire. It does not cover damage to your own car in an accident.
Voluntary Excess
An additional amount you agree to pay towards a claim, on top of the compulsory excess. Choosing a higher voluntary excess usually lowers your overall insurance premium.
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