Glossary - Getting To Grips With Car Insurance Terms
As with most professions there are a number of very specific words/phrases that mean something to those in the profession but little to those outside. In order to assist you in understanding these words and terminologies we have put together a glossary of terms with a brief explanation of what they mean.
ABI group – the insurance industry categorises all cars makes/ models into a list from 1 to 50 that reflects the risk they present i.e. high value, very fast, more likely to be stolen/crashed etc with 1 being the lowest and cheapest to insure and 50 the most expensive.
Algorithm – this is the mathematical and statistical means by which the insurer calculates the premium for a car/driver and a table is drawn up with complex formulas to calculate the price.
Approved repairer – these are repairers that are approved by a particular insurer and they will vary from insurer to insurer. They are approved by the insurer and operate on a lower cost base to the insurer to keep claim costs down but have SLA’s with the insurer to deliver quality repair work for the customer.
Business use – in order to undertake any driving whilst at work that is not personal, you must have business cover. This applies if you run an errand for your boss, drop the post off or undertake more formal business travelling. Driving on SD&P at work for any work related duties means you are not covered on your insurance.
Comprehensive – this is the best type of motor insurance cover you can buy and covers damage to third party vehicles, other property and people as well as your own vehicle damage subject to the relevant excess.
Driving Other Cars (DOC) cover – your insurance policy covers you to drive a specific named vehicle by its registration number. If your policy allows you to drive other cars then you would only be covered third party so any damage to the borrowed vehicle would not be covered.
Excess – this is the amount that you have to pay towards any claim for repair to your vehicle.
Fault/no-fault claim – a fault claim is where your driving caused the accident and you are to blame therefore your insurance policy will pay the third party damages. A no-fault claim is the opposite and you were not to blame at all for the accident.
Insurance premium Tax (IPT) – this is the tax that the government impose on the sale of an insurance policy which is currently 6% for most insurance products. It is similar to VAT on the purchase of goods
Loss adjuster – the loss adjuster is the representative of the insurance company who assesses the value of a claim to make sure it is reasonable and often negotiates the settlement.
Material fact – when you complete an application for a car insurance policy or at any time during the life of the policy a material fact is something you must disclose to the insurer which could affect whether they would be prepared to insure you.
Motor Insurer Database (MID) – the MID is the database that all car insurance policies are uploaded to for the police and other insurers to check against to see if there is a policy of insurance for a vehicle.
No Claims Discount (NCD) – this is the discount applied by insurers against the base premium to reduce the cost and relates to the number of years of claim free motoring.
Social domestic & Pleasure (SD&P) – this is cover for social domestic and pleasure uses of a motor vehicle. It does not cover driving at work known as business cover.
Settlement – this is the monetary figure that the insurer pays out to settle a completed claim on your insurance policy.
Third Party Fire & Theft (TPFT) – this is cover only for third party damage, fire or theft of your vehicle. It does not cover damage to your own vehicle.
Third Party Only (TPO) – this means you are only covered for damages to third parties so if your car is stolen or sets on fire you have no cover.
Underwriter – the underwriter is the insurance company that pays out under a claim on your car insurance policy.
RAC Motor Legal Expenses – this is the separate insurance cover provided free of charge to help you recover your uninsured losses.
Uninsured losses – these are damages not covered under your insurance policy if you are the no fault party and can include your excess, damage to property, personal injuries and replacement cars costs.