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Car Insurance Terminology

Car Insurance Terminology

Last Updated 8 July 2022 | Published 15 June 2017


Getting to Grips with Car Insurance Terms

If you are a driver you have to have insurance to drive a car. However, trying to understand what some of the jargon in an insurance document actually means can be a little confusing.  Here we have put some of the most common car insurance terminology together with an explanation.



Association of British Insurers – is a trade association made up of UK insurance companies.


Act of God

An event which is not the fault of any person, such as lightning strike. These may or may not be insurable, depending on your policy.



A change to your original policy.


Annual Business Mileage

Annual business mileage is the total number of miles you do in a year in connection with your business or employment.


Annual Mileage

Annual mileage is the total number of miles the vehicle will do in a year.


Annual Premium

The amount paid on an annual basis to cover the cost of the insurance policy.


Breakdown Cover

Breakdown cover offers vehicle assistance in event of a vehicle failure that leaves the driver stranded.



An independent intermediary that arranges and sells insurance on behalf of different insurance companies.



Ending your insurance policy. You might be charged if you cancel before your policy is due to end. Your policy documentation will have details of these charges.


Certificate of Motor Insurance

An important document which provides legal evidence of your insurance and the period it is in force.



Any report of an incident or losses incurred in which the policy holder requests a pay-out or indemnity from the insurer under the conditions of the policy.


Comprehensive Cover or Fully Comprehensive

This is the highest level of car insurance you can get.  This will cover you for injuries to others, including their property.  It will cover accidents caused by your passengers or a driver named on your policy. When you take out the policy you will be given a stated limit for which you can claim on Medical expenses and loss of or damaged property within the car. Your car will be covered for fire and theft and accidental damage. If you have a trailer and it is attached at the time of an incident this should also be covered. It is always worth checking these details before paying any money, any changes to a policy will normally incur an admin fee.


Cover Note

Temporary proof of cover for your car while the policy and certificate are being prepared by the insurer.


Cover Type

The type of cover taken out on the vehicle such as: Third Party Only, Third Party Fire and Theft, Comprehensive/Fully Comprehensive.


Duty of Disclosure

If you make any changes which affect your insurance policy, then you need to let your insurer know straight away. This can include changing address or name, changing your vehicle etc.



A change made to an existing insurance policy during the term of cover that adds to or restricts the original coverage terms e.g. change of vehicle.



The excess is the amount you must pay towards any claim, this can include both compulsory and voluntary excesses in which case the insurer will add them together.



Insurance companies won’t pay out for certain risks or types of loss or damage. These exclusions will be clearly set out in your policy terms and conditions.


Fault Claim

A fault claim is any claim for which an insurer is unable to recover their cost against a third party, irrespective of who caused the incident.


Financial Conduct Authority

The UK’s financial watchdog. The FCA regulates financial services companies, including insurance companies.



An indemnity is a sum paid by way of compensation for a particular loss suffered by a third party.  Forms of indemnity include cash payments, repairs, replacement, and reinstatement.


Insurable Interest

To insure any vehicle you must have an insurable interest in the property, and as a result, would suffer a loss if it was damaged.


Insurance Premium Tax

A government tax which is included in the price of your insurance.


Insured Value

The amount which a car is insured for. This amount also influences the annual premium paid to insure the vehicle.



An agreement between motor insurers to cover the costs of damage to their own policy holders car regardless of which driver is to blame.


Main Driver

The person who drives the vehicle most frequently.


Market Value

The cost of replacing the car with another of the same make, specification, model, age, mileage and condition as the car immediately before the loss or damage happened.


Motor Insurance Database MID

The Motor Insurance Database is an independently operated database of all insured cars in the UK. Insurers are required by law to supply certain data to the MID within 14 days of cover inception.



Any changes made to your vehicle which are not classed as factory standard including engine modifications, alloys, spoilers etc.


No-Claims Bonus / Discount

A reward for people who don’t make a claim on their policy. The discount is applied to the premium at renewal.


Non-Fault Claim

A non-fault claim is any claim for which the insurer has been able to recover all of their costs against a third party.


Optional Extras

Additional policy benefits which can be purchased to run alongside the main policy.


Period of Cover

The period of time covered by the policy as shown in the policy schedule.



Should you be convicted of a motoring offence such as speeding, a number of points will be added to your licence. Your insurer must be made aware of any points on your licence as they usually lead to an increase in premium.


Policy Holder

The person who takes out the insurance policy.



The amount you pay to insure yourself or your property



The premium and terms offered by a potential insurance company to insure your car for the cover you require.



Insurance premiums are based on a number of factors such as age, postcode, driving history and occupation – this is commonly known as ‘rating’.


Registered Keeper

The registered keeper is the person who is using / keeping the vehicle and this does not need to be the owner (person who paid for it).



The point at which you are invited to renew your insurance policy for another year.



This is the method by which insurance underwriters decide how likely you are to make a claim and how costly this claim is likely to be. This enables the underwriters to calculate what premium you should pay.



The document which identifies the policyholder and sets out details of the cover the policy provides.



Telematics use ‘black box’ technology to remotely monitor how a car is driven and when it’s driven. This information is sometimes used to calculate insurance premiums


Third Party

A person involved in a claim who is neither the policyholder nor the insurer.


Third Party, Fire and Theft

Covers fire and theft of the vehicle in addition to third party only cover.


Total Loss

In insurance, a total loss or write-off is when an insurer deems the repair cost of a damaged car exceeds the market value of the vehicle.



The company or person providing the insurance cover under your policy.


Uninsured Drivers Agreement

If you are in an accident with an uninsured driver or the offending party refuses to give you their insurance details, and it was their fault, you are required to contact the police and then your insurer, who will try to trace the other driver. In the event that the other driver is not found, you can submit a claim to the Motor Insurers’ Bureau to try and reclaim your losses.


Uninsured Losses

Uninsured losses are those items of expense which are not covered by your own insurance policy.


Untraced Drivers Agreement

This is similar to the Uninsured Drivers Agreement but invoked when you are involved in a hit and run accident or when the driver refuses to share his insurance details with you. The Agreement states that:You must report the incident to the police within 14 days of the accident if you are injured or five days if not
Attempt to trace the driver yourself – you can do this by contacting the DVLA with as much information as possible
Contact your own insurers with as much information as possible
You must submit a claim to the MIB within 9 months of the accident date for property damage – a £300 excess applies. Personal injury claims must be made within 3 years of the date of the accident.


Use / Class of Use

What you use your vehicle for. If you use your vehicle for social and business purposes you are considered a greater risk due to the extra mileage and goods you may carry.


Voluntary Excess

You can usually choose to pay more towards the cost of a claim. This generally reduces the price of your premium.


Write Off

A vehicle damaged beyond repair or so badly damaged that it would cost more to repair than the value of the vehicle.



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