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An insight into the meanings of some common insurance terminology

Tools & Guidance


We understand that insurance jargon can be overwhelming at times. This glossary of common terms may help you to gain a better understanding of your insurance needs. Your policy wordings will provide you with applicable definitions, and they will always apply to your actual policies. This glossary is simply to help you better understand the terminology.



An event that is sudden, unforeseen and unintended


The total amount an insurer will pay in claims costs during any one period of cover

Agreed Value

The value placed on an insured asset that has been agreed upon by both the insurer and the insured


Also known as a loss adjustor, this is a person who investigates a claim on behalf of the insurer



A person or company that acts as an intermediary between the insurer and the insured


A set commission amount that a broker receives from an insurer when a policy is placed with that insurer


Where assets are stolen from a building or vehicle where force, violence or threat of violence has been used to gain entry

Business Interruption

Insurance cover for loss of income or additional costs incurred in the event of a material damage loss



The termination of an insurance policy before the expiry date


Notification to the insurer of a loss that is covered by the policy


The person who makes a claim, usually the insured


The scope of protection an insurer provides with an insurance policy



Also known as the excess, this is the portion of any insurance claim that the insured is responsible for paying first, before the insurer will make any payment


The reduction in the value of an asset due to time, wear and tear

Duty of Disclosure

The duty of the insured to inform the insurer of all facts that are considered material


Earthquake Commission (EQC)

A government agency of New Zealand that provides cover under residential home and contents policies in the event of an earthquake or natural disaster


A change to an existing insurance policy made during the period of cover, usually to add or reduce the current cover

EQC Premium

A compulsory premium charged on all residential home and contents policies by EQC

Ex Gratia

A payment made by an insurer as a gesture of goodwill when they are not required to make payment under the policy


Also known as the deductible, this is the portion of any insurance claim that the insured is responsible for paying first, before the insurer will make any payment


A term in an insurance policy which excludes a particular circumstance from cover

Expiry Date

The date that an insurance policy will cease


Fair Insurance Code

A code of practice that must be adhered to by all members of the Insurance Council, which sets standards for insurance companies to abide by

Fire Services Levy

A compulsory premium charged by the New Zealand Fire Service on all policies where fire cover is provided


Inception Date

The date that an insurance policy comes into effect

Indemnity Value

The current value of an asset, taking into account its age and current condition

Indemnity Period

A time period during which cover is provided under a policy for losses incurred due to disruption to your business activities, usually found in a business interruption policy

Insurance Contract

A formal agreement between the insured and the insurer, agreeing to the cover being provided. Usually an insurance contract is made based on a written application or declaration in return for a policy schedule and policy wording


A person who is insured under the insurance contract


The provider of insurance cover under the insurance contract


Knock-for-Knock Agreement

An agreement formed between some insurers in relation to motor vehicle claims, where each insurer pays the repair costs for their own customers, without attempting to recover from the insurer of the at fault party


Lapsed Policy

A policy that has expired at the end of the period of cover without being renewed


The responsibility of a person or entity for injury or damage caused to a third party


Damage, injury, financial loss or liability suffered by the insured

Loss Adjuster

Also known as an assessor, this is a person who investigates a claim on behalf of the insurer


Market Value

The value of the asset (usually a vehicle) in today’s market, prior to a loss occurring

Material Damage

An insurance policy that provides cover for physical loss or damage to business assets

Material Fact

A fact that would influence an insurer when determining whether they would offer cover, or when determining the terms and conditions of that cover


Natural Disaster

An earthquake, natural landslip, volcanic eruption, hydrothermal activity or tsunami


When a person or entity fails to exercise reasonable care so as not to cause injury, damage or loss to another person or property

No Claims Bonus

A discount to an insurance premium earned when no claims are made by the insured in a given period of time


When the insured fails to inform the insurer of a material fact



An event that causes a loss, such as fire, burglary, flood etc

Period of Cover

The time period in which an insurance policy is valid


A person who is insured under the insurance contract

Policy Limit

The maximum amount the Insured will pay under the insurance policy

Policy Schedule

A document issued by the insurer outlining the limits, terms and conditions of the insurance contract

Policy Summary

A document issued to the insured summarising the terms and conditions of the insurance contract. This is usually provided by a broker, and does not always have the full information provided by a policy schedule.


The amount paid by the insured to confirm acceptance of the cover offered by the insurer

Present Value

The cost to repair or replace an asset to return it to its condition prior to the loss, taking into account its age and condition



An estimate of the premium required to confirm an offer of an insurance policy


Reinstatement or Replacement Value

The cost to repair or replace an asset, using current building standards or equivalents


Insurance cover purchased by insurance companies


A company that provides insurance to insurance companies


When both the insurer and the insured agree to continue a policy past the expiry date


An exposure that has the possibility of resulting in a loss


Specified Item

An item that is listed separately on the policy with a specified sum insured


A limitation on the policy for a particular event or loss, even though the sum insured may be higher than the sub-limit

Sum Insured

The maximum amount of cover provided under the policy for an insured item



Where assets are stolen without any sign of forced entry, violence or threat of violence

Third Party

Any person or entity that suffers a loss other than the insured

Third Party Liability

Cover for your liability in relation to damage, injury or loss caused to a third party

Total Loss

When the asset is uneconomical to repair, or the repair costs exceeds the value of the asset



When the sum insured on the policy is less than the value of the insured item


The process an insurer undertakes to assess the risk and determine premiums and policy conditions


The person or entity who underwrites insurance policies. Is often used when referring to an insurer

Uneconomic to Repair

When the repair cost of the asset exceeds the market value

Utmost Good Faith

A legal principle where each party in a contract is required to act in good faith towards each other. In insurance, this refers to the insured and the insurer



A condition on a policy that states certain conditions that must be fulfilled in order for cover to apply

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