We get it – the world of insurance can be quite confusing. From ‘premium’ to ‘quote’, there are a lot of words that might have you searching for your dictionary to find out what they mean – and it can make your insurance hard to understand. We don’t believe that insurance has to be confusing – which is why we’ve created a jargon buster to clarify all those terms that might leave you scratching your head when you read your documents.
Annual percentage rate (APR): Annual percentage rate is when interest is added to a loan. For example, if you pay monthly for your insurance, you’re essentially repaying a loan for the price of your insurance. Due to this, APR will be charged additionally on top of your loan, meaning that the monthly price of your insurance will cost more than if you pay one full payment at the policy’s beginning.
Broker: As you may have heard before, WiseDriving is an insurance broker – this means we sell, arrange and administrate your insurance, which is why most of the contact you have surrounding your policy will be from us. However, we aren’t your insurer – to find out who your insurer is, check your policy schedule. This means any claims you make, and the terms of your insurance, are in the hands of your insurer and not us, the broker.
Certificate of insurance: A certificate of insurance is essentially your proof that you’re insured – it will contain all the important details about your insurance, including who is being insurer and the end date of the policy. As well as proving your insured to drive in the UK, the certificate can also act as proof of insurance if you’re driving in certain EU countries, meaning it can be a very important document.
Cover - fully comprehensive and third party, fire and theft: These are both different types of insurance cover – when you purchase a policy, you’ll be asked which you want.
- Third party fire and theft means you will be covered if your car is stolen or catches fire, and will cover costs to another driver in the event of a collision between your car and another, but won’t cover damage to your own vehicle.
- Fully comprehensive, however, means you’re covered for everything – fire, theft, damages to your car, and any claims by third party drivers. Make sure to check your policy details to find out what exactly is covered, though – some things, like lost key claims or windscreen damage, may have to be added on as optional extras.
Deposit: When you first take out a new policy, you’ll be asked to pay a deposit if you choose to pay monthly – usually a certain amount of the overall price, in order to enter an agreement of insurance. Deposits aren’t an extra cost to pay on top of your insurance – you’ll be left an amount minus the deposit to pay over the remainder of your policy. This means that the deposit becomes part of your overall insurance payment as opposed to a separate payment.
Driving Behaviour Score (DBS): All of our customers are rated on how they drive, with braking, accelerating, speed and time of journeys all monitored to make one overall score – this is known as your Driving Behaviour Score. This score is also used to calculate how much you should pay for your insurance – the higher the score, the better. You can also keep an eye on this in your online account.
Endorsement: An insurance endorsement is something that amends your policy, such as adding or limiting something. For example, an endorsement might exclude you driving other cars, or exclude personal accident cover. Endorsements can be seen as the ‘terms and conditions’ of your policy – the things you’re covered for and the things you aren’t, and you should check your policy documents to find out if you’ve got any endorsements.
Excess: Many insurance policies have a ‘compulsory excess’. This is the amount you would have to pay in the event of a claim – for example, if your car is damaged after an accident, and repairs will cost £1000, and your compulsory excess is £200, you’ll pay the £200 and your insurer will pay the remaining £800. On top of this, you can also choose to take out a voluntary excess when you buy your insurance. You can choose the amount of this voluntary excess, and, in the event of a claim, this will be added to your compulsory excess and you’ll need to pay the combined amount. You can choose not to add a voluntary excess – although, in some cases, having one can make your insurance price cheaper.
Fault: You may have heard of there are two types: fault and non-fault insurance claims, but what do they mean? In the event that you have an accident, such as a crash with another driver, and make a claim, your insurer will investigate to determine who was at fault. Non-fault claims mean that the third party has been found to be at fault and will have to pay the costs, - and, in some cases, you may be able to keep your no claims bonus. It’s important to note that not all claims will result with one party being 100% at fault – it’s possible for two drivers to share the fault equally, or even different portions of the fault. Your insurer and the third party’s insurer will work this out from the circumstances surrounding the incident and let you know the outcome. If you have a claim where there is no third party to claim against – such if your car is stolen, vandalised, hit by an uninsured driver or hit by a driver who leaves no details, - it may be classed as a ‘fault’ claim for you as there will be nobody for your insurer to claim against.
Fronting: ‘Fronting’ is when a more experienced driver (such as parent) takes out a policy on a car in their name, despite not being the main car user. Instead, they add the main car user (which may be their child who has just passed their test) as a named driver, but this named driver will actually be using the car more frequently than the policy holder. The main reason for this is usually to save money by having the policy in the name of a more experienced and less at risk driver, but it’s actually illegal. Doing this could make your insurance invalid in the case of a claim, if the named driver is the one involved, meaning your insurer won’t cover the costs. It could also lead to the cancellation of your policy and a fine.
Green card cover: If you’re driving in the EU, you may need to have a green card as proof of your insurance. Not all countries require you to have a green card, but if you’re planning to drive in an EU country outside of the UK, it’s important to check if you need one. Your insurer will be able to assist you with this and let you know what you need to drive abroad.
Indemnity: Insurers provide indemnity – this means that, in the event of a claim, you will be protected against financial loss, such as paying for repairs or if your car is written-off. This doesn’t mean you won’t have to pay anything – things like excesses may require you to still pay some money – but you should be able to stay in the same financial position as you were before the claim. Indemnity also means if there are any issues with your insurance – for example, if your vehicle doesn’t show up on the database even though you’re covered – and you are pulled over for having no insurance, your insurer will be able to indemnify you by confirming cover.
Insurable interest: Insurable interest is another term you may hear in the world of car insurance. A person has insurable interest when they stand to lose out (such as financially) should the insured item be stolen or damaged. When you buy a car, you’ll have an insurable interest in it – because you would suffer a loss if it was stolen. This means you can’t insure just anything – it must be something of value, such as a car or house, as well as something you personally have a financial interest in.
Lapse: If you choose not to renew your policy with your insurer, this is referred to as a lapse. This differs from a cancellation as usually the policy will have completed and will be paid completely. As you’ll probably know, it’s illegal to drive and own a car without insurance (unless it’s kept off-road and you’ve received a Statutory Off Road Notice or SORN certificate), so if your insurance lapses, you won’t be able to use your car until you arrange alternative cover.
Legal protection: Legal protection is a common optional add-on for car insurance policies. While in most cases, claims can be sorted through your insurer, there may be cases where you need to go to court in order to receive compensation following an accident – for example, if you’re injured and can’t work, or if you need to use a hire car because yours isn’t roadworthy. Legal protection will cover all of the costs within the limits set by the provider and can offer you access to a legal advice helpline to help proceedings.
Liability: When you are covered by an insurer, they have a duty to protect you in the event of a third-party claim – this duty is known as liability. This means that, should another driver claim against you, your insurer will cover you, as well as provide any legal support if a claim results in a lawsuit.
Material fact: Material fact is the information that you are required to give to your insurer when taking up a policy from them. This means that you have to give all the relevant information required so that your insurer can make an accurate decision of the risk you pose and how much your insurance should cost. If you leave out any information or give incorrect information, this may make your insurance invalid.
Mid-term adjustment (MTA): Sometimes you’ll have to change your insurance details between your policy’s start and end date – this is known as a mid-term adjustment. An ‘adjustment’ can be a change of car, change of your personal details (e.g. if you move house), adding a new driver, alongside many more. It may also be if your Driving Behaviour Score changes and the price of your insurance is altered accordingly. Any mid-term changes you make to your policy may change the price of your insurance too, whether that’s increasing or lowering it.
No claims discount (NCD): You might know that no claims discount (often called a no claims bonus, or NCD/NCB) is a beneficial thing to have. Basically, no claims discount is when a driver is rewarded for having not claimed on their insurance for a year with discounted insurance. No claims discounts can be a minimum of a year, and the more consecutive years you have, the lower the cost of your insurance is likely to be. Most insurers have a maximum number of years’ NCD they’ll accept, so it’s worth checking with your insurer for their maximum limit. Any NCD you add will also require proof, which you can get from your previous insurer.
Non-disclosure: This is when a policyholder fails to give all the correct information on their insurance policy when buying or renewing their insurance. For example, if you put an incorrect address, or don’t list all of your claim history, this would be seen as non-disclosure. Doing this can make your policy invalid, meaning you won’t be covered in the event of a claim.
Notification only: In some cases, an accident in your car may not always result in damage, so you may not need to claim off your insurance – however, you should always notify your insurer of the incident in case it results in any claims later on or from a third party. These claims are known as ‘notification only’ claims, and most insurers will require you to declare notification claims from the last 5 years when taking out your policy. While these won’t result in a pay-out like a normal claim, notification only claims can increase your premiums as it suggests an increased risk to your vehicle.
Optional extras: While your insurance policy will cover you for most things – like repairs to your car after an accident – there are some things it won’t cover. That’s why, when you buy your insurance, you’ll often have the option to add on extras for additional cost, meaning you’re covered for different circumstances. These optional extras can range vastly – some common extras include breakdown cover (meaning you can get assistance if you breakdown out on the road), key cover (which covers you if you lose your car keys), windscreen cover (for damages to your windscreen) and personal injury cover (which will pay out if you are injured following a car accident). You aren’t legally required to have any of these add-ons, but they can give you piece of mind and enhance your policy.
Premium: This is a word that will likely appear often when it comes to your insurance. Essentially, this is the price you pay for your insurance each year. If you’re a WiseDriving customer, you might have heard of ‘additional’ or ‘return’ premium too:
- ‘Additional premium’ means the price of your policy has increased and you have to pay more, following a change to your policy or a low driving score.
- ‘Return premium’ means you’ll be getting money back from your insurance.
Quote: An insurance quote is the estimated price of your insurance. Quotes are created using the details you give, such as your car type, your personal details and what you require from your insurance. However, it isn’t an insurance contract – quotes are specific to the information you give and the time you receive the quote, meaning they can vary if any details change.
Registered owner and keeper: We’ve already spoken about the V5 document, which shows the registered keeper of a car – this is the person who will be looking after and driving the car, as well as keeping it at their address. However, this may not necessarily be the person who owns the car, who can be defined as the person paying for the car.
Risk: Risk is the likelihood that an event will occur. In car insurance, the risk you pose will be calculated using your details, such as your age, where you live and the type of car you drive, as well as things like your claim history, to predict the likelihood of you having to make a claim in the event of an accident, theft or other. The more risk you pose, the higher the cost of your insurance is likely to be. This means even small changes to your policy, like a change of address, can actually cause your insurance price to rise or fall due to a changed level of risk.
Schedule: Your policy schedule, also known as a schedule of insurance, is part of your insurance contract, and offers details on who the policyholder is, who you’re insured by and what is covered under the policy. It will also include information on the level of coverage, any exclusions, how the policy is being paid and when payments are due. This will be provided to you at the beginning of your insurance.
Statement of fact: A statement of fact is a document that details the information you have provided for your policy and that has been used to organise your policy details and price of your insurance. Statement of facts will also clarify what conditions are to the insurance and any limitations that may apply.
Sum insured: The sum insured by your policy is the maximum amount your insurer will pay out in the event of a claim. Claims investigators will look into the market value of your car to work out how much it’s worth, and this is usually the sum you’re insured for. This may not necessarily be the price you paid for your car as value tends to drop over time. Things like excesses can still be taken off of this amount, so you may not necessarily receive the same amount back in the event of a claim as your sum insured.
Telematics: WiseDriving provides telematics insurance – this means that all of our policies come with either a black box or mobile device which monitors your driving. ‘Telematics’ is involved with collecting computerised data (e.g. on how you drive), and this is how we can offer you tailored insurance quotes.
Underwriter: For all of our policies, we have a panel of insurance underwriters who set out the terms of your policy, including the price you pay, and these are who provide your insurance. When we offer you a quote, we’ll search through our panel of underwriters and find the best policy for you – and this underwriter will be your insurer.
Use: When you take up an insurance policy, you’ll be asked about how you intend to use the car – this essentially means where you’ll be driving it.
There are different levels of use:
- Business use – the levels of this can vary depending what your ‘business use’ entails, but this will mainly cover driving to different places for work (not just driving from home to the office and back).
- Social, domestic and pleasure – this will cover you to use your car outside of work, such as to run errands, drive to visit friends or driving somewhere in your free time. This often also includes commuting, meaning you’re covered driving between your place of work and your home.
- Social, domestic and pleasure (excluding commuting) – this is the same of social, domestic and pleasure, but commuting won’t be included.
It’s important to give the right use when you take out your policy, as this helps insurers calculate the risk of your policy. Giving the wrong use could also make your policy invalid, so it’s important to be honest about how you’ll be using your car.
V5: A V5 is otherwise known as a vehicle logbook or a vehicle registration document, and it’s the document which registers your vehicle with the Driver and Vehicle Licensing Agency (DVLA) and has details of your car, as well as who is its registered keeper. When you buy a new car, you’ll be sent a new V5 in the post which proves that you are the keeper of the car. It’s important to keep this, as your insurer may require a copy of it, and you’ll need it for your road tax and if you wish to sell your car on.
Write-off: In the event of a claim, if your car receives substantial damage, it may be written-off. This means that your insurer deems the cost of repairing your car more than it’s actually worth. Most insurers will use a repair-to-value ratio for this, which can vary, meaning if your car is worth £1000, you won’t necessarily have to do £1000 worth of damage – if the insurer uses a ratio of 50%, £500 worth of damage could still result in a write-off.
Write-off categories: Differing levels of damage can result in an insurance write-off – due to this, there are different categories of write-offs for cars:
- A is the worst category, and cars in this category will have been so badly damaged that the car and all its parts must be scrapped and not used on the road again.
- Cars in category B will need to have their shell scrapped due to the damage caused, and the car should never reappear on the road – however, parts of the car can be salvaged if they remain in good condition and used in other cars.
- Category S (formerly known as C) means the car has received structural damage, but is not beyond the point of repair. Any damage must be fixed before the car reappears on the road.
- Category N (formerly known as D) means the car isn’t damaged structurally, but that any damage caused would cost more than would be deemed economical to fix. This damage may still leave the car unsafe for the road, with issues such as brakes and steering able to appear in this category.
It is possible to insure a category S or N car once the damages have been fixed – however, you will have to declare the car has previously been written-off.