Key Terms on your Professional Indemnity Insurance Policy Wording Explained

15/09/17

When you are in the process of taking out Professional Indemnity insurance, or when you’re going through your Professional Indemnity insurance policy, you might find that there are certain terms and phrases you don’t understand. You would not be alone in this situation though, as there are some terms within insurance jargon that can require specialist knowledge to fully understand.

However, like any insurance, having a clear understanding of your Professional Indemnity cover is important in order to help make sure you are purchasing the right policy for you and your circumstances. If you’re unsure as to whether you require this cover for your business, you can consult our guide to who needs professional indemnity insurance here.

Take a look below to see some key insurance terms you might spot in your Professional Indemnity insurance policy wording, or that you might encounter while arranging cover.

It might be that you’re already fairly familiar with some of the insurance jargon listed below and you simply need a reminder, or that you are completely new to such terminology. Whatever the situation, we’ve given a brief explanation of common insurance terms to help you understand more about your respective Professional Indemnity insurance policies.

Key Insurance Terms Glossary

Aggregate excess – this is the maximum excess amount that you will have to pay, regardless of the number of claims you make during the policy period. Only some policies have an aggregate excess, and for those that don’t, the excess will apply to every claim you make.

Aggregation of claims – this is a clause that sees any claims from one or multiple sources being considered as one claim and as such only one excess and limit of liability applies.

‘Any One Claim’ – this refers to the type of limit of indemnity in the policy and means that the stated limit applies separately to each independent claim made during the policy period, no matter how many different claims are made.

Breach of duty – is where a company, professional, group or individual does not meet their duty of care.

Breach of confidence – this is where information is given out or revealed from one party to another without permission or consent.

Cancellation – this is where the Professional Indemnity insurance policy is ended before it has officially expired. Some policies can include cancellation clauses and refunds can apply, however this is subject to the specific terms and conditions of each policy.

Claim – a claim is the written or verbal notice or demand that is made against the policy holder, in this instance by a third party to compensate them for any losses.

Compensation – this is the enforced financial payment made to cover the costs of the claimed losses or personal injury.

Costs inclusive excess – this means the policy excess is paid by you whenever your insurer investigates or defends a claim against you, no matter what the final outcome. This differs to a costs in addition excess, which would only apply when you’re at fault and the insurer has to compensate your client..

Defamation – refers to any slanderous or libellous claims made.

Excess – this is a condition of a policy where the insured will need to pay for part of the loss. This is agreed before the policy is confirmed and can vary depending on different criteria and circumstances.

Inception date – this refers to the date your policy starts and also dictates that you can only make claims after this start date.

Limit of indemnity – refers to the maximum amount of money an insurer pays out either for an individual claim or during the term of the policy.

Negligence – this is any behaviour or conduct by professionals that doesn’t adhere to the required standards set by law.

Omission – this is a failure to act –either deliberately or accidentally - where you are bound to do so. This could take the form of failing to include information within a document or failing to give instructions to a third party on behalf of your client.

Policy period – is the length of time the insurance cover lasts.

Premium – is the term used for the cost of your insurance cover.

Retroactive date – this applies in respect of cover for any work you have done before the start date of your Professional Indemnity insurance policy, but that your client doesn’t make a claim against you for until after your policy’s start date . The retroactive date is the starting point from which work that was carried out before your policy period commenced will be covered. This is not applicable to all and can vary between policies.

Wording – The language used in the statement or document which explains what the insurance policy covers.

For further information on the issues covered by this article, visit https://insurance.aon.co.uk/business-insurance/professional-indemnity-insurance or call 03334552142

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Whilst care has been taken in the production of this publication and the information contained within it has been obtained from sources that Aon UK Limited believes to be reliable, Aon UK Limited does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the publication or any part of it and can accept no liability for any loss incurred in any way whatsoever by any person who may rely on it. In any case any recipient shall be entirely responsible for the use to which it puts this publication.

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