Charity insurance jargon buster

Here's our charity insurance jargon buster to help you understand more about the process of charity insurance.

Average
This is applied when a claim occurs and the sum insured under the policy is below the actual value of the item. Insurers will then apply ‘average’ to the settlement of the claim. This effectively reduces the payment made by the percentage of under-insurance. For example, if you're under-insured by 5% of the total property value, your insurer will decrease the claim payment by 5%. 

Claims made
Type of insurance policy which pays only those claims that occur and are filed during the period covered by the policy.

Claims occurring
Type of insurance policy which pays only those claims that occur during the period covered by the policy; it does not matter when they are filed.

Clauses
The clauses records changes to the standard terms and conditions of the policy or relevant section.

Day one items declared value
The declared value is the cost of rebuilding or replacing the property on the first day of the period of insurance. The policy schedule shows the value you have given us.

The declared value does not allow for future inflation. The sum insured shows the declared value increased by the percentage amount you have chosen as protection against inflation during the time it would take to rebuild or replace the property.

Declaration-linked basis
The declaration-linked basis is a way of providing inflation protection for your sum insured. The premium and the sum insured are based on estimates you have provided. At the end of each year, you provide us with declarations of your profits, and the sum insured and premium are adjusted in accordance with the declaration-linked basis special condition in the policy document. Insurers liability shall not exceed 133% of the Estimated revenue declared.

Estimated
Estimated figures allow Insurers to provisionally assess the premium they require. When the policy is renewed, you should tell us the actual figure so that your Insurer may make the necessary additional premium charge or refund and create a new estimate for the year ahead.

Excess / deductible
This is the amount for which the Insured is responsible for following an insured loss. Your Insurer will only settle any claim over and above the policy excess / deductible.

First loss items
First loss items are those where the total loss is not expected. The amount we have agreed with you as the maximum likely loss following any one occurrence is shown under the sum insured. The full value represents the full reinstatement value.

Indemnity period
This applies to the Business Interruption cover and is selected by you as being the maximum period that your business could be affected by a loss, taking into account the time required to replace the physical assets of the business, together with the time required to recover the level of business that you currently enjoy.

Index-linked
The sum insured for each item insured under the Material Damage section will be adjusted annually in accordance with suitable indices selected by your Insurer.

Insurable interest
For a contract of insurance to be valid the policyholder must have an interest in the insured item that is recognised at law whereby he benefits from its safety, well being or freedom from liability and would be prejudiced by its damage or the existence of liability. This is called the insurable interest and must exist at the time the policy is taken out and at the time of the loss.

Insurance Premium Tax
This is a 12% tax, which is added to your insurance premium, levied by the Government and not reclaimable.

Material fact
Material fact is one which would influence an underwriter when they were deciding whether to accept the risk, and the terms and conditions that should apply. If a customer fails to disclose (or misrepresents) a material fact and this induces the insurer to accept the proposed risk, the legal remedy is to "avoid" the policy. This means the insurer is entitled to treat the policy as though it never existed.

Trustee
Anyone who is at any time a trustee, director, officer or member of the management committee of the charity or the related body who is not:

1. A trust corporation.
2. The receiver administrator, administrative receiver, liquidator or external auditor of the charity or related body.

Cover such as charity trustee indemnity insurance helps protect trustees if a claim is made against them for committing a wrongful act that is damaging to the organisation.

Utmost good faith
An insurance contract is a "contract of utmost good faith", which means that all parties to the contract are under a strict duty to deal fully and frankly with each other. Customers must disclose all facts that are "material" (or relevant) to the risk for which they are seeking cover.

Wrongful act
This means any actual or alleged act which is wrongfully committed or attempted by an Insured person whilst carrying out their duties