For many business owners, arranging insurance can feel like stepping into a world of confusing terms and small print. While these words are important for understanding your policy, they’re often written in a way that can seem overly technical. That’s why we’ve created this simple guide to help you cut through the jargon and make sense of what your cover actually means.
Premium
One of the most common terms you’ll hear is Premium. This simply refers to the price you pay for your insurance. It can be charged monthly or annually, depending on your policy and provider. Your premium is influenced by factors such as the level of cover you choose, your claims history, and the type of business you operate.
Excess
Next is Excess, which is the amount you agree to contribute towards a claim before your insurer pays the rest. For example, if your policy has a £250 excess and you make a claim for £1,000, you would pay the first £250 and your insurer would cover the remaining £750. A higher excess can sometimes lower your premium, but it’s important to choose an amount you could realistically afford in the event of a claim.
Sum Insured
The term Sum Insured is also vital to understand. This is the maximum amount your insurer will pay out for a claim. When you take out your policy, you’ll set this figure based on the value of the assets you’re insuring, whether that’s stock, equipment, or property. Getting this number right ensures you’re properly covered without paying for unnecessary extra protection.
Indemnity Period
In business interruption cover, you may come across the phrase Indemnity Period. This is the maximum length of time your insurer will continue to make payments after a covered event, such as a fire or flood, while you get your business back up and running. Choosing an indemnity period that’s too short could leave you without support before you’ve fully recovered.
Endorsement
Another word that often appears in policies is Endorsement. This is an addition or amendment to your insurance terms. Endorsements can expand your cover to include something extra, or they can limit it by excluding certain situations. Always read endorsements carefully to understand exactly how they affect your protection.
Exclusion
Speaking of limitations, Exclusion refers to something your policy specifically does not cover. For instance, certain types of damage or particular business activities might be excluded. Knowing these in advance is essential, as it avoids unpleasant surprises if you ever need to make a claim.
Underinsurance
Finally, there’s Underinsurance, a situation where the value you’ve insured your assets for is less than the true replacement or repair cost. This can lead to a reduced payout, meaning you may have to cover a significant portion of the loss yourself. Regularly reviewing your sums insured helps to prevent this costly oversight.
Choose the Right Cover
Understanding these terms not only makes it easier to choose the right cover but also ensures you know exactly what you’re paying for.
At Ashburnham Insurance, we believe in making business insurance straightforward, transparent, and tailored to your needs. Whether you’re a sole trader or a larger company, our team can guide you through the process, explain the details in plain English, and help you find cover that truly protects what matters most to your business.