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The car insurance glossary

When getting your car insured, it's important that you're clear on everything in the small print. Some of the jargon can be a little tough to decipher, though, so with that in mind, we've put together a handy glossary of common car insurance terms. Having an understanding of exactly what everything will ensure that you have the right coverage for you.

A

  • Act of God: an event not caused directly by an individual that causes damage to your vehicle - for example, flooding or extreme weather. Acts of God are not usually insurable.
  • Aggravated theft: the forceful theft of your vehicle while you or your spouse is inside.

B

  • Betterment: a payment you (the insured party) make towards a claim if the vehicle will be worth more after any repairs made as part of that claim.

C

  • Car: seems simple, but this can refer to any motor vehicle that we've insured - whether it's a car, truck, van, and so on.
  • Car alarm: an anti-theft device installed in your car.
  • Certificate of Insurance: proof of insurance. The certificate of motor insurance shows what car is covered, who is allowed to drive the car and what the car can be used for. If your certificate of motor insurance allows for any driver, you need to refer to your schedule for any restrictions.
  • Claim: an application by you (the insured party) to recover damages from the insurance company under the policy.
  • Comprehensive cover: the widest-ranging type of coverage. Including third party, fire and theft insurance, this covers your car against any damage caused by an accident or someone else, whether you were at fault or not.
  • Comprehensive insurance: cover for you and your car, and for third parties and their cars when you're at fault.
  • Compulsory excess: most car insurance policies have a compulsory excess. This is the amount you have to pay to your insurer if you're ever in an accident and want to make a claim. How much this will be depends on the type of policy you have, the type of car you drive and your claim history.

E

  • Endorsement: a clause that alters the standard cover provided by the policy.
  • Excess: the part of a claim you must pay. Excess payable can include compulsory excess and voluntary excess.
  • Exclusion: an event or circumstance in which the insurance company is not obliged to pay out under the policy.

F

  • Fault claim: when you're considered the one to blame for an accident, or when your insurer can't recover costs from a third party.
  • Financial Conduct Authority (FCA): as the UK's financial watchdog, the FCA regulates financial services companies, including insurance companies.

G

  • Geographical limits: the areas where your insurance policy is valid.

I

  • Indemnity: after you make a claim, indemnity ensures that you're returned to the same financial position that you were in before the insured loss.
  • Insurance premium tax: a tax on nearly all non-life insurance policies - including car insurance policies - that's payable by the policy holder.
  • Insured value: the total your insurer will pay out for your car if it's damaged beyond repair. This might be how much you told your insurer the car was worth, or your car's current market value at the time you made the claim.

M

  • Market value: the cost of replacing the car with one of a similar age, type, mileage and condition, immediately before the loss or damage happened.

N

  • Non-fault claim: when you're not considered to be at fault for the accident, and your insurer can recover the cost of the claim from the other party.

P

  • Period of insurance: the length of time that a contract of insurance applies for.
  • Policy: the contract or document between the insurance company and the policy holder.
  • Premium: the amount paid by the policy holder for insurance.

R

  • Renewal notice: the notice sent by your insurance company inviting you to renew your policy.

S

  • Schedule: this forms part of the contract of insurance and gives details of the period of insurance, the parts of the policy that apply to you, your car details and information on your excess and endorsements.
  • Settlement: the amount your insurer pays out for a claim.
  • Statement of fact: a form showing the information you gave us, or was given on your behalf. The statement of fact forms part of the contract of insurance.

T

  • Telematics: technology that can remotely monitor your driving. Insurers can use the information to assess your car's risk and calculate your premium.
  • Third party: someone who is involved in the claim but isn't the policy holder or the insurer.
  • Third party only: the minimum level of cover required to drive on UK roads, third party only will cover injury to anyone else involved in an accident, or damage to their vehicle or property.
  • Third party fire and theft: cover that provides the same level of cover as third party only, as well as protecting you against damage to your vehicle from fire, theft or another vehicle as long as you're not at fault.
  • Total loss: when the insurance company thinks a car is incapable of being repaired or that it will cost more to repair than to replace.

U

  • Uninsured losses: any losses not covered by your insurance policy. This would include excess, expenses following an accident - loss or damage of jewellery for example - or compensation for injury caused by the accident.

V

  • Van insurance: insurance specifically for vans.
  • Voluntary excess: insurers will often offer you a reduction in your premiums if you agree to pay a voluntary excess in the event of an accident, along with your compulsory excess. Generally, the higher the voluntary excess the lower your premium.

Y

  • You, your: the person shown in the policy details.