News

Demystifying insurance terminology

3 September, 2010

It happens to us all at some time or other: we’re confronted with a term that’s fairly familiar, but there’s a grey area or we’re not 100% sure of the exact definition within a specific context.

To make life a little easier when it comes to navigating insurance jargon, we’ve put together a few oft-used insurance terms and their definitions.

If you can think of other examples that would be useful to define and post on the Etana website, let us know and we’ll add them here.

First loss insurance

In most cases it’s unlikely that an insured’s entire contents will be stolen at one time. In this instance, the insured selects a sum insured which represents, in his opinion, the maximum probable amount of cover needed.  This becomes the limit of the insurer’s liability. Insurers either use a sliding scale of rates for first loss theft insurance – depending on the first loss amount and the total value of the contents insured – or charge a full-value premium and discount it for the first loss.

First loss insurance is a type of partial insurance (which covers less than the full value of goods or property at risk), where both the insured and the insurer acknowledge that the “subject to average” (see average) rule does not apply. These policies cover only the estimated largest possible loss, and are used commonly in burglary or theft insurance where the possibility of total loss is extremely remote (such as in the case of a large store).

Claims made basis

Regardless of policy issuance or renewal dates, claims are covered if the insurer has been notified or if the claim has been mentioned (made) to the insurer within the insurance period.

This type of insurance policy pays only those claims that occur and are filed during the period covered by the policy. See also claims occurrence basis.

Occurrence basis/Losses occurring

Policies taken out on this basis cover all losses occurring during the period of insurance which stem from insurance policies in force during that time. The claim should be for an event that occurred during the period of time when the policy was active – for example, if an insured is injured while covered and only claims once the policy has been cancelled.

This type of insurance policy pays only those claims that occur during the period covered by the policy; it does not matter when they are filed. See also claims made basis.

Difference basis

Secondary insurance cover (usually bought by a tenant) for protection of physical assets against perils not included in a primary property insurance cover (usually bought by a landlord).