Insurance Glossary E-I

See ‘Additional Peril’ under a Fire policy.

The date upon which cover under an insurance policy becomes effective. Usually this will not be until an insurer has accepted the proposal and confirmed cover in writing by issuing a cover note or cover confirmation.

The legal rights of an employee are usually defined in law under a country’s Employment Code or Workmen’s Compensation Acts. Usually these laws provide for certain fixed sums to be paid by a government body to an employee if the employee is injured in the course of his work. The sums are usually funded by a government levy imposed upon all employers. This may be the only compensation employees are entitled to and is usually payable without any need to prove negligence on the part of the employer. However, in some territories it is possible for the employee to take legal action in common law to recover damages for injury if the accident occurred as a result of the negligence of the employer. Negligence on the part of the employer could come about for example by the employer providing unsafe equipment, an unsafe system of work or perhaps through the negligence of another employee.
Any damages awarded and the legal costs of defending any claim can be covered under an Employer’s Liability Policy.

Also known as Machinery Breakdown or Plant All Risks Insurance, this type of insurance provides very broad cover for damage to electrical and mechanical machinery.

An endorsement is a special amendment to a policy wording. It may be attached to the policy from inception or it may be added to the policy mid term. Mid term endorsements are often issued at the request of the Insured. For example an endorsement may be issued to note a change of address of the Insured.

An erection all risks policy offers cover very similar to a contractors all risks or construction all risks policy. It is however aimed more at erection of plant and machinery rather than the construction of buildings.

Engineers, architects, lawyers, accountants and even insurance brokers hold themselves out as professionals capable of offering accurate and well considered advice. If they fail in their duty to provide “best” advice they leave themselves exposed to claims for errors and omissions or professional negligence. There have been some spectacular claims in recent years with accountants failing to provide accurate reports on the financial status of companies, which are involved in takeovers. Losses also occur when insurance brokers fail to properly carryout instructions of their client and perhaps leave parts of the client’s business uninsured. For this reason you should always ensure that your insurance broker carries appropriate levels of Errors and Omissions or Professional Indemnity insurance.
At Trafalgar International we offer a professional service from a highly qualified team but we know that mistakes can happen. To protect your business and ours we carry appropriate levels of insurance

The amount of any claim which is the responsibility of the Insured and which the insurer will deduct from any claim payment. Often this is referred to as a deductible. Sometimes excesses are voluntary and a premium discount allowed. Sometimes they are imposed by insurers as an underwriting requirement to avoid large numbers of small claims and their associated administration costs.

Insurance companies can rarely bear a total loss on the business that is offered to them. They usually choose to share the risk with other insurers through co-insurance or re-insurance. Excess of Loss Reinsurance is a form of reinsurance whereby the original insurer decides the amount that it is prepared to bear on any one loss, and the reinsurer pays the amount of any claim in excess of this retention.

Also known as Exceptions. All contracts contain certain conditions and it is important that you are aware how these affect your rights under a contract. An insurance policy is no different in this respect. You should review any policy with your professional adviser to fully understand what areas are covered and what claims will not be paid.
Some exclusions are very standard for example, war risks on land, nuclear radiation and the deliberate acts of the Insured. However some are imposed in exchange for premium discounts for example health insurance may exclude elective treatment in the USA where medical costs are very expensive.

A claim settlement made by an insurer even when the loss is not covered by the policy. Usually made for commercial reasons where the claims experience has otherwise been good.

Costs incurred in returning a business to its normal trading status in the minimum possible time, following a loss for example, overtime, express freight and premium prices paid to secure replacement plant at short notice. Expediting expenses are not automatically covered and your policy should be appropriately extended.

See ‘Additional Peril’ under a Fire policy. A standard fire policy usually insures against fire that results from an explosion, but not the shock and concussion damage that can result. This should be covered under an explosion extension. UK policies do extend to include shock damage caused by explosion of domestic boilers and gas used for domestic purposes.

See Political Risks Insurance

Insurance companies can rarely bear a total loss on the business that is offered to them. They usually choose to share the risk with other insurers through co-insurance or re-insurance. Facultative Reinsurance is a form of reinsurance whereby the original insurer decides what level of risk it is prepared to retain on any one policy and offers to share the risk (for a premium) with a reinsurer. The reinsurer will then decide whether the reinsurance premium is adequate and how much of the risk he wishes to reinsure, according to the merits of the individual case. See also Treaty Reinsurance.

An all risks, theft or burglary policy will usually exclude losses due to theft by people legally on the premises. This obviously excludes losses caused by employee theft. Such losses are covered under a Fidelity Guarantee policy. Usually such policies are subject to deductibles or coinsurance by the Insured to ensure that recruiting policies are maintained and references properly followed up.

A limited form of cover for motor vehicles offered as an extension to a basic third party only policy

Depending upon the individual territory, a standard Fire policy usually covers fire, lightning and explosion of gas or boilers used for domestic purposes. Fire means “actual ignition”. Scorching or charring is not covered. Cover will sometimes extend to cover fire arising from any cause, but more often it is subject to policy exclusions for example fire damage caused by a riot may not be covered unless the policy is extended to include Riot. It is important to consult you insurance professional, Trafalgar International to be sure you have the correct level of cover.
A fire policy is usually extended to include Additional Perils.

This is a form of partial insurance where the Insured decides he could not suffer a total loss and selects a maximum sum to insure for any loss. First Loss Policies are often used in Theft insurance high-value goods which would be physically impossible to steal in a single burglary. It is most important that first loss sums insured are only used on first loss policies where “Average” does not apply. Otherwise the sum insured should represent the full value or you will not obtain a full settlement of any loss.

A single policy covering a number of vehicles usually issued to a company operating a large fleet of vehicles. Premiums are usually calculated on the basis of historic claims or a straight discount allowed for the reduced administration costs in combining several policies into one.

See ‘Additional Peril’ under a Fire policy.

“FOB” or Free on Board is a contractual basis for the sale of goods internationally. On an FOB basis the seller’s interest in the goods ceases when they are loaded onboard the carrying vessel. This is usually an appropriate time, as the ship’s representative will normally inspect the goods on loading to ensure they are in good condition and record any damage. Once loaded onboard the carrying vessel, the buyer takes over responsibility for the goods and is responsible for any necessary insurance.

A franchise is similar to a deductible in that the insurer makes no settlement if the total claim is below the franchise figure. However, if the claim is above the franchise figure, the claim is paid in full. Franchises are very unusual in modern insurance practice though machinery breakdown covers sometimes use time franchises.

Particular Average means partial loss so Free of Particular Average means excluding partial losses or Total Loss only. FPA is a set of marine cargo insurance conditions providing very narrow cover (though not limited to total loss only!). FPA conditions have now generally been replaced by the more modern “Institute Cargo Clauses C”.

Most Theft or Burglary policies cover theft only if it involves forcible or violent entry to or exit from the premises. Full theft cover extends this cover to any dishonest appropriation. Full theft cover is not normally available to shops or hotels, which are susceptible to casual theft.

In some territories this may mean merely an insurance agency involved in all types of insurance. In other territories it may mean an insurance agency for an overseas insurer and empowered to underwrite risks and settle claims on behalf of that insurer.

In order to save a ship in peril of sinking during a storm, some of the cargo may have to be thrown overboard. The ship owner and the owners of the saved cargo obviously benefit at the expense of the owners of the jettisoned cargo. This was deemed unfair and the principal of “General Average” evolved so that all parties would contribute in such a situation.
Thus if you ship cargo on a vessel that is involved in a loss, you may face a claim against you even though your goods are undamaged. Luckily, your marine insurance policy, if properly arranged, will protect in such cases where General Average is declared

Insurance practice has developed over many years in many territories and been added to and amended by the courts or governments. However certain basic principles have been established as the basis on which insurance is written and operates. These principles include Indemnity and its corollaries Contribution and Subrogation, Utmost Good Faith and Proximate Cause.

See territorial limits

Glass insurance is normally provided as part of a package policy for shops and other small risks but can be obtained a separate policy. The policy covers breakage of fixed glass from any cause but normally excludes damage to frames.

A sportsman’s package policy which covers loss of or damage to golfing equipment, liability to third parties, personal accident and entertainment expenses incurred at the 19th hole celebrating that elusive “hole in one”. Cover is available as part of the Trafalgar International Domestic Insurance Programme. Click here for further information.

Property, especially stock, does not necessarily remain at your premises alone. It moves around the country and maybe internationally to be delivered from suppliers or to customers. Goods in Transit insurance provides cover for inland transit by road or rail and often extends to include inland and coastal waters. Cover may be arranged by the owner or by the haulier to protect him against his liabilities under the haulage contract.
International transit by sea or air is insured under a Marine policy.

The sum insured under a Business Interruption insurance. Your accountant may regard Gross Profit as being profit before tax, but this is not the insurance definition. Your broker should check through your management reports to ensure that the gross profit is properly defined to protect your business and that you have given your insurer the correct figures.
Gross profit is normally defined by insurers as the amount by which the sum of the turnover and the closing stock shall exceed the sum of the opening stock and the uninsured working expenses. These uninsured working expenses vary from one business to another and should be specified in the policy.
Arranging business interruption insurance correctly and at best terms is a core competency of Trafalgar International. Contact us now if you want to ensure your business interests are properly protected.

An agreement amending the Warsaw Convention Limits relating to an airline operator’s liability to passengers and goods carried by air.

Referred to in Bills of Lading, the Hague Visby Rules set out the conditions upon which goods are carried by and the obligations and responsibilities of the carrier and ship.

Hazard is another word for risk. Insurers often separate risk into two areas: the physical hazard and the moral hazard.
Physical hazard refers to the physical aspects of the risk that could make a loss more or less likely, or affect the severity of that loss. Moral hazard on the other hand refers to the attitude and conduct of the Insured himself. While physical hazard can nearly always be addressed by insurers through recommended risk improvements, policy conditions and premium rate, moral hazard can only be addressed by declining the risk absolutely.

As the term suggests, HPR risks are those risks that are of the highest quality in terms of physical hazard. Both frequency and severity of loss will have been addressed by the installation of sprinkler systems, haylon systems, water hydrants and fire and smoke alarms. HPR risks enjoy a low premium rating.

Hiring contracts for plant and equipment usually make the hirer-in totally liable for any damage to the plant from the time the plant leaves the hirer-out’s premises until the time it is returned unless it can be shown that a loss is due to bad maintenance by the hirer-out. The hirer-in should therefore arrange appropriate insurance under a hired-in plant policy. This can usually be arranged on an annual basis with the premium based on a percentage of annual hiring charges. An existing policy for owned plant may normally be endorsed to cover any sums you become legally liable to pay under the hiring agreement.
If you do hire in mobile plant, you must insure the road traffic act liabilities if the plant is to be used on the public road

If you hire premises for meetings, you may be responsible to the owners under the hire contract with them. The contract wording should be checked carefully and your Public Liability policy extended to include the risk of damage to property in your custody or control.”

Your legal liability arising from the operation of lifts or hoists may be excluded from your public liability policy. Check the wording carefully to ensure cover is adequate or ask Trafalgar International for a full risk management review of you operations. Machinery Breakdown insurance is available to cover unforeseen damage to lifts and hoists

By tradition a golfer will buy drinks at the 19th hole (the clubhouse) to celebrate a hole-in-one. A golfer’s policy normally includes cover for these entertainment expenses up to a certain limit. Trafalgar International’s domestic insurance package can provide cover for those “hole in one” obligations and a wide range of other domestic insurance needs. Click here for details.

Household or domestic insurance policies provide a wide range of personal insurance cover. Trafalgar International have negotiated very competitive terms for such insurance ad would be delighted to discuss your personal insurance needs with you.

Ships or “Hulls”, like cargo, are insured under marine insurance policies usually based on “Marine Institute Clauses”. In the case of ships, the normal basis of cover is Institute Time Clauses – Hulls. The Institute Clauses are complicated, old-fashioned wordings which, though often difficult to understand by the layman, have been subject to numerous legal precedents and the extent of the liability of insurers in almost all situations has been firmly established

See ‘Additional Peril’ under a Fire policy. Impact covers damage to property by any road vehicle and often by animals as well. Wordings used to exclude damage caused by the Insured’s own vehicles.

Certain policy conditions are not actually written into the policy but that have evolved from basic insurance principles over the years. For instance, the insurance cannot cover illegal operations and there must be an insurable interest in any insured property.

Increased costs may be incurred by an Insured in trying to maintain turnover following an insured loss. Such costs, with certain limits can be insured under a Business Interruption Policy.

Indemnity is one of the basic principles of insurance and has been legally defined on several occasions. It states that the Insured should not profit by any claim, but should be returned to as near as possible the same financial position as he would have been had the loss not occurred.
Certain policies are not subject to the principle of indemnity, notably Personal Accident and Life policies with fixed sums insured. The modern approach of “reinstatement” and “new for old” covers put the Insured in a financial better position, but this is justified by the fact that second-hand replacement items may not be readily available.

Index Linked Policies increase sums insured automatically at renewal by the amount of a given index.

Also known as Industrial Special Risks, IAR or ISR policies offer wider cover than property covers written on a fire and allied perils basis. While accidental damage cover is given in addition to the fire and allied perils, the main difference is probably the difference in the way cover is described. Under a fire and allied perils policy, the wording defines exactly what perils are covered. Under an IAR policy everything is covered other than the exclusions, defined in the wording.
IAR policies are usually available only to especially large accounts.

Certain goods are, by their very nature susceptible to damage and it would be unreasonable to expect insurers to pay for such damage. Examples of inherent vice are would be deterioration of imperfectly cured skins, spontaneous fermentation or combustion of improperly dried grain.

Certain Medical Expenses policies are restricted to expenses incurred during hospitalisation and do not cover out-patient care. Such policies are said to provide In-Patient Cover only.

The cover under a Marine Cargo policy is defined by standard policy wordings issued by the Institute of London Underwriters (or the American Institute of Marine Underwriters). These are called Institute Cargo Clauses. While there are numerous clauses and different clauses will apply to different cargoes, normally the widest cover is provided under Institute Cargo Clauses A with more restrictive cover under, Institute Cargo Clauses B and Institute Cargo Clauses C. These new clauses replaced the previous Institute Cargo Clauses All Risks, With Average (WA) and Free of Particular Average (FPA).

Insurable Interest is one of the basic principles of insurance. It states that the Insured must have a financial interest in the property insured such that he benefits from its continued existence and will be prejudiced by its loss or damage. This basically differentiates insurance from gambling. The insurance policy insures the interest of the policyholder in the property. If there is no insurable interest, the policy will not respond.
Many legal precedents have been seen relating to insurable interest and when it must be effective. With life insurance an insurable interest must be present when a policy is arranged but not necessarily when a claim occurs, with marine insurance an insurable interest must be present when a claim occurs but not necessarily when a policy is arranged and with most other insurance arrangements an insurable interest must be present when a policy is arranged and when a claim occurs.

The insurance industry uses intermediaries to introduce clients to insurers and to provide day to day servicing of a client’s insurance needs. The intermediary may be an international insurance broker offering a wide range of professional risk management services and access to world wide markets or he may be a part time tied agent acting purely as a commission agent. Trafalgar International are among the largest insurance brokers in Thailand and can offer access to international markets and a highly professional insurance service.