Understanding Your Car Insurance: Glossary of Contract Terms

In Auto Insurance
June 23, 2022
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When you sign up for a car insurance deal, you might come across some terms in the contract that can be difficult to understand. However, it is important to comprehend the language used, so you know what you are agreeing to. In this article, we provide a glossary of car insurance contract terms that may

When you sign up for a car insurance deal, you might come across some terms in the contract that can be difficult to understand. However, it is important to comprehend the language used, so you know what you are agreeing to. In this article, we provide a glossary of car insurance contract terms that may help.

Here are some terms you may encounter in your car insurance policy:

Cancellation Clause/Cooling off Period: This clause allows you and the insurer to cancel the policy within a short period of time (usually around 14 days). No reason is needed if cancelled within this period.
Cash Surrender Value: This refers to the amount of money you can get back if you cancel your policy before the year is up, as determined by your contract.
Compulsory Excess: The amount you must pay if you make a claim. Insurers charge a higher excess for those perceived as high-risk drivers.
Exclusion: An event that your insurer will not cover. You cannot make a claim if damages result from this event.
Geographical/Territorial Limits: The locations where your insurance policy is considered valid. Your UK insurance will likely cover only the UK, but check your contract for other countries.
Indemnity: When the insurer compensates you and repairs the damages to return you to the state you were in before the loss.
Insured: The person who is covered by the policy.
Legal Liability: Your responsibility to compensate someone for damages you caused.
Partner: Your significant other, regardless of marital status, may be referred to as your partner in the contract.
Policyholder: Another term for “insured.”
Proposer: Another term for “insured” or “policyholder,” the person taking out the insurance.
Registered Keeper: The person responsible for licensing and paying tickets for a vehicle, not necessarily the owner.
Settlement: The amount of payout received from an insurance company.
Social Domestic and Pleasure (SD & P): The use of your car for personal reasons, such as trips, visits, and shopping.
Underwriter: The person who assesses your insurance risk and determines your premiums based on factors like age, location, car type, and driving record.
Voluntary Excess: The additional amount you agree to pay on top of the compulsory excess for lower premiums.