dec132017 05 26 11 36 289993111568ccg50000 1 - Busting Car Insurance Jargon – Simple Explanations for Car Insurance Terms

Busting Car Insurance Jargon – Simple Explanations for Car Insurance Terms

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Motorway lit up

Getting your car insured or making a claim can be a frustrating experience. Let’s face it – all those questions, knowing what information you need to have at your fingertips, the small print. And to top it off, there’s all the car insurance jargon!

We’ve put together this handy jargon-buster to explain the most common car insurance terms you’re likely to come across when you get a quote, browse our website, or read your policy document.


Additional premium

An additional premium might be due to the insurance company if you change something about your policy part-way through the period of insurance. Examples might be moving to a riskier postcode, buying a more powerful car or adding a less experienced named driver to the policy.

Annual mileage

Your annual mileage is the number of miles you reasonably estimate you’ll drive over the course of the next 12 months. Annual mileage should include estimates for things like:

  • commuting to work
  • any business travel in your car
  • the miles you might drive for social reasons, like visiting friends and family, and domestic reasons, such as shopping trips.

Approved repairer

If you make a claim, most insurance companies will recommend a local approved repairer to fix your car. You don’t have to use an approved repairer, but there can be disadvantages for choosing your own, such as:

  • The insurer may not guarantee the repairs
  • You might have to pay a higher excess
  • You might only be entitled to a courtesy car if you use the approved repairer
  • Your insurer may not pay the full cost of repairs if they believe the approved repairer could have fixed the car more cheaply.

Read your policy terms carefully so you understand exactly what conditions apply to car repairs.

Association of British Insurers (ABI)

The Association of British Insurers is the public voice of the British insurance industry. It helps consumers to understand insurance products with a wide range of information, but it doesn’t play a role in regulation or arbitration. The ABI helps to inform public policy debates, engaging with politicians, policy-makers and regulators in Britain and overseas.

Beyond economical repair

If your car is damaged in an accident, your insurer might tell you that it is “beyond economical repair”. This means it’s not cost-effective to repair the vehicle when its market value and the cost of repairs are taken into account. In this situation, your car will be declared a write-off.

Black box insurance

Also known as telematic insurance, black box insurance is a type of cover that depends on data from a small device fitted into the vehicle. The device (the black box) relays information about your car journeys and your driving behaviour, which in turn helps insurers calculate the insurance premium. Black box insurance is often sought by young drivers as a more affordable option for careful drivers.

Breakdown cover

As the name implies, breakdown cover gives you roadside assistance or even help from home if your car has a mechanical failure or breakdown. Many insurers offer breakdown cover as an optional extra to a car insurance policy, while a few include it as a standard feature.

Business use

“Business use” in car insurance terms means use of your vehicle for business purposes (not just commuting to a fixed office location). Examples are: visiting customers’ premises, driving to more than one place of work, taking your company’s mail to the post office, etc. Insurers calculate premiums for business use differently to those for social, domestic and pleasure, or social, domestic, pleasure and commuting.

Cancelled policy

An insurer has the right to cancel a policy before it is due to expire if there has been non-payment, non-disclosure of material information or fraud. As any new application for insurance requires you to disclose a previously cancelled policy, this can affect your ability to find affordable insurance in future.

Car insurance policy

Your car insurance documents, which detail the legally binding terms and conditions of the contract between you and the insurance company.

Certificate of insurance

The certificate of insurance is evidence that your car is insured. All certificates contain mandatory information such as:

  • The certificate number
  • The name and address of the insurance company
  • Start and end date of the insurance period.
  • The registration number of the insured vehicle
  • The names of all insured drivers

Sometimes you’ll receive a physical certificate of insurance through the post, but it’s more common these days for it to be emailed to you.


A claim is the process you go through when you apply to the insurer for compensation if you’ve suffered a loss that’s covered by your policy. An example is claiming for the cost of car repairs following an accident if you have comprehensive insurance. Another example could be where you have been hit by a third party and notify your insurer that you have been involved in an accident, even if the claim is being pursued through the third party insurer.

Claims history

Your claims history is a record of all the losses for which you have made claims on your insurance over the years. Insurers can independently check your claims history on the Claims and Underwriting Exchange (as can you, if you’ve forgotten the details). However, they will still expect you to disclose accurate information about previous claims when you apply for insurance.

Class of use

Class of use refers to the purpose for which you will use your car and wish to be insured. There are three main types:

1. Social, domestic and pleasure. Learn more
2. Social, domestic, pleasure and commuting. Learn more
3. Business use. Learn more

Insurance premiums are calculated differently, depending on the class of use you need. Business use tends to be more expensive.

Comprehensive cover

Comprehensive insurance is the type of cover that gives the policyholder the widest protection. It covers:

  • Third party liability for damage or injury to other people and their property
  • Fire damage or theft of your vehicle
  • Accidental damage to your vehicle, even if it was your fault, as well as damage caused by others.

Of course, each insurer will have their own limits and rules around comprehensive cover, so it’s important to be familiar with your policy’s terms and conditions.

Row of black cars

Compulsory car insurance excess

A compulsory insurance excess is a fixed amount that the policyholder is required to pay in the event of a claim. For example, if car repairs cost £1,000 and your excess is £200, your insurer will pay £800 of a claim.

Each policy sets out what the excess will be, and it can be different for everyone. For example, a young driver or a driver with a high performance car might have a higher compulsory excess.

A compulsory insurance excess is a little different to a voluntary excess, which is explained below.


In insurance terms, concealment is the withholding of information by the applicant or policyholder that would affect the premium or other terms offered by the insurer. For example, concealing information about driving convictions or claims, or even minor details such as where the vehicle is parked overnight.

The insurer is entitled to cancel or void a policy if they later discover information that would have affected their assessment of the insurance risk.

Conviction code

Also called endorsement codes, conviction codes denote the particular offence for which a driver has been convicted. You can see a full list of conviction codes on the government website. This also has details of how long each conviction code stays on your licence, and the penalties associated with it.

Courtesy car

Many comprehensive policies offer the benefit of a courtesy car if the policyholder’s vehicle is off the road following an accident, theft etc. Some insurers offer this as standard, while for others it’s an optional extra.

The type of courtesy car provided, and the length of time it’s provided to the policyholder can vary, so check your own policy for details.

Cover note

A cover note is a temporary document that can be issued for a new policy to prove that your car is insured. It is not the same as the certificate of insurance.

Cover notes were more common in the days when the official policy documents took longer to send to the policyholder. They are seen less in today’s era of fast electronic mail.

Driving other cars cover

Primarily, your policy provides cover for a named vehicle for which you are the main driver. Some comprehensive insurance policies, however, also provide third party only cover for driving other vehicles (with the owner’s permission).

Cover for driving other cars is by no means a standard feature, though, so check your policy wording and don’t assume that you’re covered.


If you are convicted of a driving offence, your driving licence will be endorsed with details of the conviction code. Endorsements stay on your licence for a minimum of four years, or longer, depending on the offence.


As well as explaining what is covered, your policy document will explain what is not covered. These are called the exclusions.

Common exclusions might relate to:

  • who can drive your car
  • geographical exclusions
  • driving under the influence of drugs or alcohol
  • using your car for racing or speed trials
  • acts of war, terrorism or nature.

Refer to your policy document for a full list of exclusions.


The insurance excess is the contribution that a policyholder with comprehensive cover is required to make towards the cost of an insurance claim. The amount can vary between insurers and even on different policies, depending on the risk, but is set out at the start of the policy term.

For example, if the total cost of repairing the insured’s vehicle after an accident is £1,000, and the excess is £150, the insurance company pays £850 and the car owner pays £150.

It’s sometimes possible to reduce an insurance quote by volunteering to pay a higher amount than the compulsory excess stipulated by the insurance company.

Fault Claim

A claim in which you are deemed to be at fault for the accident or loss, and where your insurer can’t recover their losses. Fault claims are likely to affect your No Claims Discount.

Apportioning blame after an accident isn’t always a black and white decision. Our article, Car Insurance Claims – How is Fault Decided?, explains in more detail how this works.

Financial Conduct Authority

The Financial Conduct Authority (FCA) is the conduct regulator for all financial services firms and financial markets in the UK. Their role is to protect consumers, maintain a stable financial services industry and promote healthy competition between financial services providers.

You can read more about the FCA on their website.


Fronting describes a situation where a policy is taken out by someone who is not the main driver of the insured vehicle. They might do this in order to obtain a cheaper premium for the person who is the main driver.

A common example of fronting: a parent takes out a policy on behalf of their child, even though the child is the main driver. They do this to help their child avoid the high premiums associated with young, inexperienced drivers.

Fronting is a form of insurance fraud with serious consequences, which you can read about in more detail here.

GAP insurance

GAP insurance is short for Guaranteed Asset Protection. It covers the difference between the amount you paid for your car and the amount your insurer will pay out if it is stolen or written off. For newer cars that depreciate more quickly, or where the owner has outstanding finance on the vehicle, GAP insurance can be an attractive option.

Green card

A green card is proof that you have the necessary third party insurance when you drive abroad. You should apply to your insurer for a green card before you travel; they may send you an electronic version that you can print off yourself. Keep your green card with you when you drive; you may be asked to produce it at international borders and police checkpoints. You’ll definitely need it if you are involved in a road accident. It is important to print the green card onto white paper, and you must have a physical copy as a digital version will not be accepted.

High risk

Car insurance premiums are calculated on an assessment of various risk factors. Examples of high risk policyholders might be:

  • Young drivers under 25
  • Drivers of high performance or high value cars
  • Drivers with previous claims or convictions
  • Drivers in postcodes with a high incidence of claims
  • Drivers in certain occupations.


An immobiliser is a device (mandatory in new cars since 1998), which prevents the engine being started unless the correct key or fob is used. Immobilisers reduce the risk of your car being targeted by thieves.

Import / Imported vehicle

An import, or imported vehicle, is one which is legally imported from another country through channels other than the manufacturer’s official distributors. An import can be a new or used vehicle.

It can be more expensive to insure an imported vehicle if it’s an unusual make and model that needs a specialist repairer, or has costly parts that are difficult to source.

Indemnity forms the basis of most insurance contracts. It describes the agreement to compensate the policyholder for losses they incur. For example, in exchange for an agreed premium, a driver’s car insurance provides indemnity against financial loss if their car is damaged or stolen.

Insurable interest

In simple terms, insurable interest is the concern of someone to protect their property against financial loss. For example, a car owner has an insurable interest to protect it from theft or damage, and to protect themselves against third-party liability.

If a car is bought with a loan, the lender also has an insurable interest until the loan is repaid.

Insurance broker

An insurance broker acts as a go-between for insurance companies and customers. With specialist knowledge of the insurance market, they offer expert advice and can quickly scour many products to help customers find the policy that best suits their needs.

Insurance brokers’ services often extend beyond selling you a policy, assisting with claims and finding the best renewal quotes. In the UK, brokers are regulated by the Financial Conduct Authority. In general, they don’t charge for their services; they earn commission from the insurance companies. Some may charge administration fees.

Complete Cover Group is an insurance broker.

Insurance Premium Tax

Insurance premium Tax (IPT) is a mandatory tax levied on general insurance premiums. It’s levied on insurance providers, but most insurers pass the costs on to their customers. For most car insurance, the tax adds 12% to the cost of your premium.


Insurance terminology often refers to the “insurer” and “the insured”. The insurer is the insurance provider, and the insured is the person covered by the insurance.


If it’s not clear who was at fault following a road traffic accident, insurers may agree to each pay their own policyholder’s costs without assigning blame. This will impact the insured’s No Claims Discount, as their insurer remains out of pocket.

See also Fault Claim  and our article, Car Insurance Claims – How is Fault Decided?

Legal expenses cover

Legal expenses cover with car insurance is sometimes an optional extra but can also be a standard feature of your policy. Legal expenses cover can help you recover any uninsured financial losses from a non-fault claim. This can include things like legal fees, expenses relating to repair costs, and recovering your excess.

Legal owner

If you have paid for a vehicle and have proof of purchase, you are the legal owner. The owner is not necessarily the same person as the registered keeper. For example, a company car has been bought by the business, and is the legal owner, but an employee is its day-to-day keeper and main user.


In insurance terms, liability refers to a financial responsibility. For example, “third party liability insurance” is insurance which covers costs if you are found to be responsible for injury or damage to another person or their property.

Licence type

There are two main types of driving licence in the UK. Before you have passed your driving theory and practical tests, you’ll have a provisional licence. After that, you can apply for a full UK licence.

Limit of liability

The limit of liability refers to the maximum amount your insurer will pay for a claim. Read the terms and conditions of your policy to find out your insurer’s limits.


Insurance jargon often uses the word “loss”. it simply means the damage or injury giving rise to a claim under an insurance policy.

Loss adjuster

A loss adjuster is a claims specialist appointed by an insurance company to obtain all the necessary facts about a claim. This helps your insurer determine whether a claim is valid, and the correct amount to pay you. A loss adjuster is not the same as a loss assessor. See below.

Loss assessor

A loss assessor can be appointed by the policyholder to manage a claim on their behalf. If your claim is complex, or you would rather not have to deal with the insurance company or loss adjuster, a loss assessor can help everything go smoothly. They can also help to negotiate the best possible settlement.

Main driver

The person who is the most regular driver of the insured vehicle, and who generally has responsibility for the car’s maintenance and running costs. The main driver is usually also the registered keeper and legal owner, but not always.

Market value

The market value of your car is based on the cost to replace it on the open market for a car of the same type, and of a similar age, condition and mileage. If your car is written off, the insurance company will assess its current market value to help them settle your claim. Because of depreciation over time, the market value at that point probably won’t be as much as the amount you paid for the vehicle.

Material fact

A material fact is any information which might influence an insurer’s decision to offer you cover, or their calculation of the premium in relation to the insurance risk. Material facts should be disclosed at the application stage, at renewal, or at any time through the term of a policy if new material facts arise.

Find out what happens if you lie or withhold relevant information to your insurer.


A car modification is defined as the vehicle having been changed in some way from the manufacturer’s original factory specification. Owners modify their vehicles for many different reasons and in many different ways.

It matters to an insurer because modifying your car can affect the likelihood of a claim arising. Read more about insurance for modified cars.

Motor Insurance Bureau

The Motor Insurers’ Bureau is an organisation which helps victims of accidents caused by uninsured drivers and untraced drivers claim compensation for their losses. It is funded by contributions from every insured driver’s premiums.

No-Claims Bonus

Also referred to as a no-claims discount, it accumulates for each year a person drives without making a claim on their policy. It reduces the total premium cost for the following year. It is often possible to pay to protect a no-claims bonus, which allows the insured person to claim for a maximum number of fault claims without affecting their no-claims bonus. Different providers calculate no-claims bonuses in different ways.

Named driver

Additional named drivers can be added to a policy so they are legally covered to drive the insured vehicle on an occasional basis. Common examples of named drivers might be a spouse, partner or child. A named driver must not be the main driver or owner of the vehicle, as this could be construed as fronting, which is a type of insurance fraud.

No claims discount / No claims bonus

A no claims discount, also called a no claims bonus sometimes, is an annual discount on your car insurance premium. It’s based on the number of years you’ve been driving without making a claim.

A discount scale is applied for every claim-free insurance year. For example 30% at the end of the first year, going up each year to a maximum of perhaps 70% after five years. The discount scale can differ between insurers.

Read a full guide to your no claims discount.


Non-disclosure describes a situation where an applicant for insurance hasn’t told their insurer all the material facts  which affect the offer of insurance, or the calculation of the premium. This can result in their policy being cancelled or voided, refusal to renew, or charges of insurance fraud.

 Find out more about the consequences of non-disclosure to your insurer.

Non-fault claim

In insurance terms, a non-fault claim describes a situation where your insurer has been able to recover their financial outlay from the third party insurers. It’s not always straightforward to determine who was at fault in an accident. Even if you believe you were not to blame, it may not always result in a non-fault claim. See also Fault claims  and Knock-for-Knock .

 A non-fault claim should not affect your no claims discount.

 Read more about how fault is determined in an insurance claim.

Car on motorway

Non-UK specification

This refers to an overseas vehicle imported into the UK which differs from current UK specifications. Non-UK specifications often involve extra expense and difficulty to source and buy parts. In general, imports are more expensive and difficult to insure.

Period of insurance

The period of insurance is the date range for which cover under your insurance policy is effective.

Penalty Points

Convictions for driving offences can result in a number of penalty points on a driver’s licence. The number of penalty points depends on the type of conviction code and the seriousness of the offence. You can be banned from driving if you have 12 or more penalty points.

This article explains in full how penalty points work.

Policy schedule

Your policy schedule is a summary of the cover your insurer provides under your policy. It will show your details, details of the vehicle insured, the level of cover (e.g. comprehensive), any named drivers and the excess payable in the event of a claim. It’s not the same document as the Certificate of Insurance.

Policyholder or proposer

The policyholder, also sometimes called the proposer, is usually the person who applies for the insurance coverage. It’s the person to whom the insurance company issues the policy, and to whom any payment will be made in the event of a claim arising.


Your insurance premium is the money due to the insurer in exchange for an agreed period of insurance coverage. Premiums for car insurance are calculated on a number of risk factors relating to the policyholder, their postcode, other drivers, the vehicle and its use.

Protected no claims discount

Your no claims discount  can be at risk if you have an at-fault claim, usually stepping back by two years on the discount scale. But if you have the maximum no claims discount, you can protect it with an optional extra charge. This means that even if you have an at-fault claim, your no claims discount won’t be affected.

You’ll find more information here about protecting your no claims discount.

Registered keeper

The registered keeper is the person who uses and keeps the vehicle, and who is responsible for official correspondence from the police or the DVLA. A vehicle’s registration document, the V5, should be in the name of the registered keeper.

Commonly, the registered keeper is the same person that owns the car (the legal owner ), but this is not always the case.


Your insurance policy is due for renewal when the initial period of cover expires, for example at the end of a 12-month policy for car insurance. The renewal date is the day following the last day of cover.

Your insurer will send you a renewal notice ahead of time so you can decide whether to stay with your current provider or shop around for alternative cover.

Renewal notice

Insurers typically send a renewal notice up to 30 days before the expiry of your current period of insurance. The renewal notice sets out details of the insurance cover and the new premium required to carry your policy forward. It should also tell you what last year’s premium was, so you can easily compare it to the renewal premium.


“Risk” is the cornerstone of insurance coverage. Underwriters calculate premiums  based on the chances of loss, danger, damage, theft etc., which might give rise to a claim. In car insurance, for example, risk factors can relate to the driver, the vehicle, its use or the post-code of the policyholder.


When an insurer makes a payment to a policyholder or third party following a claim , this is often referred to as settlement of the claim. It’s common for an insurer to use a phrase such as, “in full and final settlement”. This means that, in accepting the payment, the recipient agrees not to take the claim any further.

Social, domestic and pleasure

Social, domestic and pleasure is a class of use  in car insurance terms

Insurance for this class of use covers the driver for journeys such as visiting friends, going on holiday, shopping or doing the school run. It doesn’t cover you for driving to work.

Social, domestic, pleasure and commuting

As for social, domestic and pleasure, above, but also including cover to use your vehicle for travelling to and from one place of work.

Telematics car insurance

Please see “black box insurance ”.

Third party

“Third party” refers to someone who is not involved in the insurance agreement between the policyholder (the first party) and the insurer (the second party). In practice, for example, the third party could be the person who claims against your insurance following a road traffic accident.

Third-party cover

This is the level of insurance cover that provides the least protection for policyholders. Third party cover is a legal minimum in the UK. It covers your liability for damage or injury to other people and their property.

Third-party, fire and theft

Third-party, fire and theft is a step up from third-party only insurance. It also provides cover if your vehicle is stolen, repairs if it is damaged in an attempt to steal it, or if it is damaged or destroyed by fire.


Insurance underwriters analyse the various risks associated with different types of insurance. Their evaluations help insurance companies set premiums, or decide whether to offer cover at all. Underwriters are essential to make sure an insurance company remains financially viable.

Uninsured losses

Uninsured losses are expenses that are not covered by your own insurance policy. The policy excess is an obvious uninsured loss for everyone. Other examples could be vehicle repair costs (unless you have comprehensive cover ), hiring a replacement car, or compensation for personal injury.

You might be able to claim back any uninsured losses from the third party’s insurer if you were not at fault.

Voided policy

In some circumstances, insurers can rule that a policy is legally invalid – in other words, it has been voided. This usually comes about when the insurer discovers serious errors or omissions of material facts  by the policyholder, but it can also happen if the premium isn’t paid.

If a policy is voided, it is as if it never existed, which can have serious implications where a claim has arisen.

Voluntary car insurance excess

Policyholders can sometimes choose to pay more than the compulsory insurance excess  set by the insurance company. This is called a voluntary excess. If a claim arises, you’ll pay the voluntary excess in addition to any compulsory excess. This option will lower your premium, but the savings should be weighed against the extra costs if you make a claim.


A “write-off” means any vehicle that is so badly damaged it would be unsafe for it to go back on the road, or a vehicle that is beyond economical repair. If you have comprehensive cover and your vehicle is written off, your insurer will offer you a cash payout to reflect its market value before the damage occurred.



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