Average Clause
A clause that reduces a claim payout proportionally when a property is underinsured. If your home is insured for 50% of its reinstatement value, your claim payout is reduced by 50%.
Compulsory Excess
The fixed amount set by the insurer that you must pay towards any claim. Unlike voluntary excess, you cannot waive or negotiate this.
Condition Precedent
A policy requirement that must be satisfied for cover to apply. Breach of a condition precedent invalidates the claim, regardless of whether the breach caused the loss.
Consequential Loss
Financial loss that results indirectly from an insured event — such as loss of income following a flood. Standard home and motor policies do not cover consequential loss.
Contra Proferentem
A legal principle that ambiguous contract terms are interpreted against the party who wrote them. Applied to insurance policies, unclear exclusion clauses are interpreted in favour of the policyholder.
Endorsement
An amendment to the standard policy wording — can add cover, restrict it, or impose additional conditions. Endorsements are attached to your policy schedule and take precedence over the main wording.
Excess
The amount you pay towards any claim. Your total excess is the compulsory excess plus any voluntary excess you have agreed to.
Indemnity
The principle that insurance restores you to the financial position you were in before the loss — not better. You cannot profit from an insurance claim.
Insured Peril
A specific risk or cause of loss covered by the policy. Common insured perils include fire, flood, theft, and storm damage. If the cause of loss is not a listed insured peril, it is not covered.
Material Fact
Any fact that would influence a reasonable insurer's decision to provide cover or set a premium. You are legally required to disclose all material facts, even if not directly asked.
New-for-Old
A contents cover basis where a lost or damaged item is replaced with a new equivalent, without deducting for wear and tear. Contrast with indemnity basis, where wear and tear is deducted.
No-Claims Bonus (NCB)
A discount applied to your premium for each year you do not make a claim. Belongs to the policyholder, not the vehicle or property.
Policy Schedule
The document specific to your policy that records your name, the insured item, cover level, sum insured, excess, optional extras, and effective dates. Overrides generic wording in the policy document.
Premium
The amount you pay for insurance cover over the policy period. Typically quoted annually, often paid monthly at a higher total cost (financing charge applies).
Proximate Cause
The dominant, most immediate cause of a loss. For a claim to succeed, the proximate cause must be an insured peril. If an excluded peril is the proximate cause, the claim fails even if an insured peril contributed.
Reinstatement Value
The cost to rebuild a property from scratch — foundations, materials, and labour at current prices. Not the same as market value. Use reinstatement value when setting your buildings sum insured.
Subrogation
The insurer's right to pursue a third party responsible for a loss, after paying a claim to the policyholder. The insurer effectively steps into your shoes to recover costs.
Sum Insured
The maximum amount the insurer will pay for a claim. Must reflect the true value of the insured item — setting it too low triggers the average clause.
Uberrimae Fidei (Utmost Good Faith)
The legal principle underlying all insurance contracts. Both parties — insurer and insured — must act in absolute good faith, disclosing all material facts honestly.
Underinsurance
When the sum insured is less than the true value of the insured item. Activates the average clause and reduces claim payouts proportionally.
Voluntary Excess
An additional excess you agree to pay above the compulsory excess, in exchange for a lower premium. Combined with the compulsory excess, this is the total you pay out of pocket on any claim.
Void ab initio
A policy treated as if it never existed, usually due to material non-disclosure or misrepresentation at inception. The insurer returns the premium but has no obligation to pay any claims.