INSURANCE GLOSSARY
Insurance.
In plain English.
BI, sum insured, excess β we explain what they mean and why they may matter to your business.
Find a term βThese are brief explanations. When assessing cover, the definitions and terms of your contract matter, including its general terms and conditions (OWU), policy and clauses.
BI β business interruption insurance
Helps protect against the financial consequences of business interruption following damage covered by the contract. Depending on the terms, it covers lost profits and fixed costs incurred despite the interruption. Not every interruption triggers BI cover.
In practice: Damage to your premises is one problem. Wages and rent payable during rebuilding are another.
Calculate downtime costs ββ GlossaryMB β machinery breakdown insurance
Covers damage to the machine itself in the circumstances specified in the contract. It may include particular mechanical or electrical causes. Insuring the machine does not automatically cover lost income.
In practice: The cost of repairing equipment and the cost of a production stoppage need to be checked separately.
Machinery cover ββ GlossaryMLOP β loss of profit following machinery breakdown
Cover for the financial consequences of downtime caused by damage to a machine, linked to the scope of its insurance. It requires an appropriate policy or extension; it is not automatically included in every machinery policy.
In practice: One key machine brings the entire line to a halt. Repairs and lost income are two elements of the programme.
Loss of profit cover ββ GlossarySum insured
An amount specified in the contract for the insured property or another subject of cover. In property insurance, it generally sets the maximum liability, but it is not a promise that the entire amount will be paid.
In practice: After expanding your premises, check whether the sum insured reflects your current assets.
Compare the sum insured with the value ββ GlossaryUnderinsurance
A situation where the sum insured is lower than the value of the insured property calculated on the same basis. This may reduce the payment, even for a partial loss, if the contract contains an average clause.
In practice: Property worth PLN 5 million was insured for PLN 2.5 million. The sum insured is half its value.
Check your own example ββ GlossaryAverage clause
A mechanism included in some policies: the payment is reduced in proportion to the sum insured compared with the property's value. Check when it applies and whether the contract includes a tolerance or an exception.
In practice: At a 50% proportion, a PLN 100 000 loss produces PLN 50 000 in the simplified model, before other deductions and limits.
See the calculator ββ GlossaryFirst-loss insurance
An amount for the anticipated loss is agreed instead of insuring the full value of all the property. In this system, the average clause for underinsurance generally does not apply; the agreed sum insured and other terms still apply.
In practice: Entering a lower sum insured yourself does not turn a standard policy into first-loss insurance.
Check your policy terms ββ GlossaryReinstatement value
The cost of rebuilding property or replacing it with new property of comparable specifications, as defined in the contract. It does not necessarily equal the original purchase price or book value.
In practice: Rising construction costs may mean that a sum insured set a few years ago is no longer sufficient.
Check your sum insured ββ GlossaryActual value
Usually the reinstatement value less allowance for wear and tear. The contract defines the exact method. The sum insured and property value must be compared on the same valuation basis.
In practice: The value of a new machine may differ from its value after years of use.
Property insurance ββ GlossaryLimit of indemnity
The maximum payment for a specific risk, type of property or cost. It may be much lower than the main sum insured. Check whether it applies to one loss or the entire policy period.
In practice: A high sum insured for a building does not mean an equally high limit for every additional expense.
Review your policy limits ββ GlossaryOWU β general terms and conditions of insurance
A document describing, among other things, the scope of cover, exclusions, obligations and how claims are settled. It should be read alongside the policy, clauses and individual agreements.
In practice: The product name alone does not tell you which events your policy covers.
Insurance policy review ββ GlossaryExclusion
A situation, type of loss or circumstance for which the insurer is not liable under the terms of a particular contract. Check the precise wording of the exclusion and any extensions.
In practice: If a claim is refused, compare the stated grounds with the documents and what actually happened.
Help with a refused claim ββ GlossaryInsurance clause
An additional contractual provision that changes or clarifies cover. It may extend cover but can also introduce conditions or limits. The presence of a clause alone is not enough β its wording matters.
In practice: For property kept in a yard, the agreed security requirements are among the important considerations.
Check the clauses ββ GlossaryExcess
The part of a loss that you bear yourself under the contract. It may be a fixed amount or a percentage. The policy terms determine how it is calculated, any minimum and how it combines with other deductions.
In practice: A provision such as β10%, minimum PLN 1,000β requires checking the amount on which the percentage is calculated.
Check the model assumptions ββ GlossaryDeductible excess
An amount or percentage deducted from the compensation payable. In practice, it may be described similarly to an excess; the meaning of the particular provision must be established from the policy.
In practice: If compensation before deductions is PLN 10,000 and the deductible is PLN 1,000, PLN 9,000 remains after that deduction.
Compare deductions ββ GlossaryNon-deductible franchise
A threshold below which the insurer does not pay a claim. Once it is exceeded, the threshold is usually not deducted from the payment. Other contractual limitations may still apply.
In practice: This is a different mechanism from deducting an excess from every payment.
Check your policy ββ GlossaryBI indemnity period
The period for which the insurer may assess the effects of an interruption following an event, up to the maximum stated in the policy. It should reflect the realistic time needed for the business to resume operations.
In practice: Repairs to the premises, delivery of a machine and rebuilding sales may take longer than the repairs alone.
Compare the downtime period ββ GlossaryTime excess
A restriction linked to a specific period of time, found in business interruption cover, for example. Its effect depends on the contract wording β it does not always simply mean subtracting a number of days from the payment period.
In practice: Check when the interruption period starts and how it is assessed.
Talk about BI ββ GlossaryClaims handling
The process of establishing the circumstances of an event, the insurer's liability and the amount payable. It includes notification, documentation and a decision. It does not mean winding up the business.
In practice: Keep photographs, documents and correspondence β they may help clarify disputed circumstances.
First steps after a loss ββ GlossaryInsurance audit
A review of cover against the company's actual activities. It includes sums insured, cover, limits, exclusions and contractual requirements from business partners. It concludes by identifying areas for improvement.
In practice: A new building, machine or contract is a good reason to revisit your policy terms.
How we approach an audit ββ GlossaryNow you understand the terms, check your cover.
We will help relate the policy wording to your companyβs situation: what it covers, where its limitations lie and what may need to change.
Talk to a broker β