It is useful for those involved in alliancing projects to be familiar with some commonly used insurance terms for a basic understanding of how insurance works.
Aggregate limit: This usually refers to liability insurance and indicates the maximum amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents might occur.
Attachment point: This is the point at which the insurance cover is in force.
Broker: An insurance professional who assists a client to obtain the insurance cover-although strictly an agent for the insured, the broker is often remunerated by way of commission from the insurer.
Brokerage: A form of broker remuneration typically expressed as a percentage of premium.
Claim: A demand made by the insured, or the insured's beneficiary, for payment of the benefits provided by the insurance policy when the event insured under the policy has occurred. A claim, depending on its context, also means a claim against an insured by a third party for economic loss, property damage or personal injury incurred (usually referred to as the claimant), which then triggers the insurance claim.
Claims occurrence: A policy term that provides access to indemnity as long as the insured was insured at the time an incident giving rise to a claim occurred. Should a claim-related to the period the policyholder was insured-arise years later, the policyholder can still claim.
Claims made: This term refers to liability policies covering all claims notified in the policy period, and first made against the insured in the same policy period.
Contract works: Contract works insurance provides coverage for physical loss or damage to the works. The policy provides indemnity for the insured parties which should reflect the complexities of the contract entered into. This specifically should include the contractor, the Owner, subcontractors, financiers and other parties to the contract.
Compulsory third-party (CTP) insurance: Prescribed as compulsory insurance under various jurisdictional legislation, CTP insurance covers liability for bodily injury to third parties arising out of the use of a motor vehicle.
Damage: This involves loss or injury suffered by a person, normally calculated in monetary terms.
Damages: Damages are compensation for loss suffered, which is awarded by courts and endeavours to place a person in the position where they would have been had the loss not been suffered.
Deductible: This is the amount of loss that is to be borne by the insured before being able to claim under a policy. It is sometimes called an 'excess'.
Directors' and officers' insurance: This is coverage for when a director or officer of a company commits a negligent act or omission, or misstatement, or misleading statement, or a breach of statutory or common law duties while acting as a director or officer of the company.
Exposure: This is the measurement of the extent of a risk assumed by an insurer or indemnifier.
First party: The first party is the insured party. A first-party policy may also refer to insurance for the policyholder's own property or person (a third party is not a party to the contract but a party who seeks to be compensated for some injury or loss caused by the insured).
General liability insurance: This is insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured's premises or operations, products sold by the insured, operations completed by the insured, and contractual liability. The most common form of this cover is public and products liability insurance.
Indemnity (insurance): This is the legal principle that ensures a policyholder is restored to the same financial position after a loss, as was enjoyed immediately before the loss, subject to policy terms. There are two main ways of providing an indemnity. Property can be replaced on a new-for-old basis; this is known as reinstatement or replacement and is a common means of settlement for personal insurance policies. Alternatively, a policy may provide for property to be assessed at its current value at time of loss, with allowances made for wear and tear, depreciation and betterment. This second approach is commonly referred to as indemnity conditions, to distinguish it from replacement conditions.
Insurance: This is a device for transferring specified risks to an insurer. The insurer agrees, for consideration (usually payment of a premium), to assume, to a specified extent, certain losses that may be suffered by the insured.
Insurance advisor: An independent person with specialist expertise in insurance, the role of the insurance advisor is to support the process of procuring appropriate insurance.
Insured: This is the party to an insurance arrangement to whom the insurer agrees to provide cover against specified losses, or to render services, subject to the terms of the insurance contract.
Insurer: This is the party to an insurance arrangement who undertakes to provide cover or to render services, when specified events happen.
Insured event: These are occurrences or circumstances causing loss and damage which are covered in the relevant policy.
Liability insurance: This is a form of general insurance that provides cover in regard to the insured's legal obligation for loss or damage to another person.
Loss adjuster: A specialist claims investigator, adjustors are usually appointed by an insurer to investigate and report on the claim and the amount validly claimed under the policy.
Non-Owner Participant (NOP): This includes any service provider such as designers, constructors, specialist consultants, etc, forming the alliance, and can also include an agency or government-backed enterprise acting as a service provider rather than the Owner.
Occurrence: An event that results in an insured loss; In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn't have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.
Personal lines: This is insurance for personal assets such as a vehicle or house. It doesn't extend to businesses, which are classified under 'commercial lines' risks.
Policy: This is the underwriting document that details the scope of the insurance cover.
Policy schedule: This document is read in conjunction with the policy to provide full details of the terms and conditions of the insurance cover.
Premium: The amount paid to the insurer for the provision of the insurance coverage is described as the premium.
Professional indemnity insurance: This provides indemnity to professionals against claims made against them resulting from legal liability to others for loss or damage arising out of professional negligence on the professional's part. 'Profession' is now accepted as the application of skill and care.
Products liability insurance: This is insurance taken out to cover liability claims arising from the manufacture, alteration, repair, modification, re-supply or distribution of products.
Public liability insurance: This insurance provides cover in the event of bodily injury or property damage that a business may negligently cause to others.
Risk advisor: Risk advisors are the individuals appointed by the Owner at the time the Business Case is being developed to assist in identifying and managing project risks.
Sum insured: The sum insured is the maximum liability the insurer accepts under an insurance contract.
Subrogation: The statutory or legal right of an insurer to recover from a third party who is wholly or partially responsible for a loss paid by the insurer. Subrogation permits the insurer to make a claim in the name of the insured and to pursue a third party to recover part or all its losses incurred under its insurance contract with the insured.
Underwriter: An underwriter is a technical person trained to evaluate risks and premiums, and coverage terms and conditions.
Underwriting: This is the process of assessing and selecting applicants and risks for insurance and classifying them according to their degrees of insurability so that the appropriate premium may be charged. The process includes rejecting unacceptable risks.