Insurance is a Risk transfer mechanism where the losses of the few are paid by the Premiums of the many. In the insurance Contract, the Insurer provides Indemnity to the Insured for Accidental financial losses which are Proximately Caused by an Insured Peril during the Period of Insurance, providing all the terms of the Contract have been met and Insured has paid the Premium, Disclosed all Material Facts and has an Insurable Interest in the property or event insured.

This is an agreement between two or more parties which creates legal obligations.

This is a document which sets out the terms of the Insurance Contract.

The payment of the Premium is the part of the Insured's performance in terms of the Insurance Contract. It follows that Insurers will not perform their part of the Contract (i.e. Indemnity to the Insured) if the Premium was not paid.

The natural person or legal entity named as the Policyholder/Insured in the Policy Contract who is entitled to compensation, providing they have an Insurable Interest in the insured property.

The party who accepts the Premium of the Insured in terms of the Insurance Contract and performs the act of Indemnity (pays the claim) following an insured event. Also known as the Risk Carrier.

The uncertainty of financial loss.

The Insurer's maximum liability in terms of the Insurance Contract

In South Africa the Insurance period is usually for a period of twelve consecutive months (annual policies) or on a month to month basis (monthly policies).

This is the date on which the cover provided by the Insurance Policy commences.

This is the date on which the Policy commences (if the insurer agrees to renew the Policy) for the next Period of Insurance, after the expiry of the current Period of Insurance as stipulated in the Insurance Contract.

On or before the Inception Date or Renewal Date of the Policy.

The first amount the insured is responsible for in the event of a claim. Also known as a “Deductible”.

The cause of loss.

These are the Perils which are clearly defined in each Policy or section of cover e.g. Fire and Storm in a Fire Policy.

These are the Perils which are specifically excluded from cover e.g. employee dishonesty under a standard Theft business Insurance Policy.

These are the Perils which are not mentioned in the Policy, but which fall totally outside the ambit of Insurance Contracts e.g. Nuclear Risks, Shoplifting, Unexplained Inventory Shortages, Public Opinion, Currency Fluctuation, Trade Risks, War, Inevitable Losses etc.

The direct, dominant cause of a loss - not the remote cause. The insurer is only liable if the Proximate Cause, of the loss claimed for, was an Insured Peril

An act which is beyond human control e.g. storm, earthquake etc

A sudden, unforeseen event that is unexpected or unintentional in nature.

Only events which are sudden and unforeseeable are covered as they then accidental in nature. Inevitable events, like Wear & Tear, are thus not insurable as it is inevitable that property will depreciate over time.

The deliberate and wanton act of an individual which Proximately Causes damage to the insured property (would be deemed a Riot & Strike or SASRIA claim if a group of individuals cause malicious damage collectively).

This is an acronym for the “South African Special Risks Insurance Association”. SASRIA, which is government run organisation, provides cover against loss from Riot, Strike and Public Disorder - these Perils are Excepted Perils on all Insurance policies. SASRIA is a Non Profit Organisation.

The geographical limits within which the Insured Perils are covered.

A duty, imposed by our Common Law, on the part of the Insured to disclose all Material Facts relating to the proposed Risk.

A fact that would influence the mind of an Insurer when deciding whether or not to accept a Risk and if so, at what terms. The Insured has a Duty to Disclose all Material Facts in terms of the Insurance Contract. Many claims have been rejected on the basis of Non Disclosure of Material Facts e.g. undisclosed claims or losses (even if they were uninsured).

Ownership creates Insurable Interest. The assets insured by the Policy must therefore be owned by the Insured. Assets not owned by the Insured need to be insured by the person or entity the owns the property as they will be the party who have an Insurable Interest.

In terms of the Insurance Contract, the Insured must take all reasonable steps to minimise the loss. In other words, the Insured must act as though the loss or potential loss is uninsured and as a direct consequence take all reasonable steps in order to prevent or minimise loss.

The onus is on the Insured to prove that the loss was as a direct result of an insured Peril. In addition, the insured must be able to substantiate the amount claimed for and ownership of the property which is the subject of a claim.

The short answer is as soon as possible. Some insurance contracts stipulate a time period e.g. within 24 hours in the case of high valued motor cars. Non compliance with the Policy condition relating to Claim Notification may well mean your claim will be rejected by your insurer.

If you underinsure your assets in terms of the basis of valuation stipulated in your Insurance Contract (e.g. Full New Replacement Value VAT inclusive) then insurers will deduct the percentage of underinsurance off your claim. For example, if you insure 75% of the Full Value at Risk, insurers will deduct 25% off your claim for Underinsurance.

The act of placing you, the Insured, in the same financial position you enjoyed before the loss. Factors like Underinsurance, inadequate Sums Insured and Excesses can deprive you of receiving a full Indemnity.

The Sum Insured in terms of the insured assets (excluding Stock) is based on the cost to replace or reinstate the asset (to its former condition) without a deduction for depreciation.

The value of the property being the price it will fetch in a transaction between a willing buyer and seller in the open market.

This is a much used basis of Indemnity for Household Contents insurance whereby the insurer agrees to pay the replacement cost of the insured property without any deduction for wear and tear.

A controlled method (usually by way of a fixed percentage) of increasing the value of the insured property, during the Period of Insurance, given the exponential increase in Reinstatement / Replacement Costs over a period of time. The is an effective way of reducing the possibility of Underinsurance applying to your claim.

This is a form of partial insurance where the Insured decides that it is extremely unlikely he could suffer a Total Loss and therefore selects a Sum Insured which reflects the estimated maximum probable loss any one time. First Loss policies are free of Underinsurance (Average) penalties.

A loss of the insured property such that the asset is totally destroyed. This is often seen as a catastrophe loss as if a Building for example is totally decimated by fire and financial consequences of this Total Loss are catastrophic and in most cases business threatening if uninsured.

Cover which provides protection against legal financial obligations to a Third Party, arising out of an Accident which results in physical damage to tangible property or injury/death.

Insurance which is based on Indemnity to the Insured as opposed to Third Party insurance which covers the Insured's legal Liability to another person/entity.

Insurance of the Insured's legal Liability to another person/entity.

This attaches when a person or entity breaches a general duty imposed by law (normally a duty of reasonable care) which gives rise to a civil action on the part of the injured party. Liability policies usually only respond to acts which cause civil wrong as distinct from criminal or contractual wrongs.

Legal Liability which arises out of law based on judicial decisions (precedents) and custom, as distinct from Statute Law.

Legal Liability which arises out of Contract, as distinct from Common and Statute Law.

Liability which attaches without Negligence having to be proved. A good example of this in South African law is Spread of Fire Liability - if a fire emanates from your land you have a Strict Liability to Third Parties for any losses which may arise from the fire spreading.

This is a Liability which attaches to the employer for the actions of his employees/agents which occur within the scope of their authority (agents) or course of their employment (employees).

A Liability Policy that only covers claims reported during the currency of the Policy which occur on or after the Retroactive Date stated in the Policy.

A Liability Policy which covers claims from the Inception Date of the Liability policy. Losses which occur after the policy is terminated are also covered, provided the cover was in force when the incident, giving rise to the claim, occurred. Also called “Event Trigger” Liability Insurance.

The cover, in terms of Liability policies which are issued on a Claims Made basis, only commences from the Inception Date of the Liability Policy. If Retroactive cover is in force, losses which arise between the Inception Date and Retroactive Date of the policy are also covered.

A clause in a Liability Policy which stipulates in which country's courts will have the power to hear and decide law suits. Most South African Liability policies restrict the jurisdiction to RSA courts only.

A hold harmless is an agreement between two parties that obligates one party to protect another against certain risks of legal Liability. A word of caution though - you need to ensure that you are not creating Contractual Liability which increases your insurers Liability Risk beyond Common Law. If so, you run the risk of your insurer rejecting Liability losses arising out of your hold harmless agreement as these losses would then be of a contractual nature.

This endorsement adds another Insured to your Insurance Policy. The person or party that is added then is entitled to compensation in terms of your Policy Contract.

Insurance against financial loss, other than property loss, arising from an Insured Peril.

A period selected by the Insured within which insurers will cover the reduction in Turnover, following a loss covered by an Insured Peril, until the business returns to its normal trading position. It is crucial that a professional broker's advice is sought when determining the Indemnity Period, as a poor decision could have disastrous financial consequences and may even spell the end of the business

These are expenses which are uninsured in terms of a Business Interruption Policy. The typical list of such expenses are: Purchases (Less Discounts Received), Bad Debts and Discounts Allowed. These expenses are excluded as they vary in direct proportion to the Turnover of the business.

The onus is on the Insured to proof their loss, including the amount of such loss, in terms of the Insurance Contract. The expenses that one can incur when proofing a loss can be exorbitant. These costs can be insured under an item termed Claims Preparation Costs.

The insurer contractually assumes the legal rights or remedies of the Insured against the Third Party after paying indemnifying the Insured for their loss. In other words, the insurer may sue the culpable Third Party, in the name of the Insured, for the recoup of the amount they paid the insured as an Indemnity in terms of the Policy.

Compensation paid by the insurer out of sympathy (not out of obligation) in terms of a loss suffered by the Insured which is not covered in terms of the Insurance Contract.

This is a clause in the Insurance Contract which stipulates that the insurer is only liable to make good a rateable proportion of the amount payable where any other insurers cover the insured for the same event. This is also called “Dual Insurance” or “Double Insurance” and in most cases the insured, by mistake, has effected more then one policy. If the insured has mistakenly effected more then one Policy and there is no claim, insurers will decide jointly what the insured's intention was (i.e. which insurer was the intended risk carrier) and refund the insured their Premium overpayments accordingly.

Also termed E-Insurance. Legal Liability and First Party losses may arise from a variety of causes given the proliferation of computers. The following are typical exposures all businesses face in this Age of Technology: Web site content, unauthorised access (hackers), viruses transmitted to Third Parties, business to business exposures to name but a few.

A Policy which covers property which runs on low tension power e.g. computer, faxes etc.

The mechanism of harnessing group critical mass to purchase an unique Insurance product, exclusive to a common group, brand or association. The bulking of large group numbers results in discounted Premiums via a nominated Risk carrier (Insurer). The pooling of the groups Risk Premiums creates empirical group data which enables the Risk carrier to determine the profitability of the group over a finite Period of Insurance.

Employees who suffer occupational injury/death are precluded from suing their employers in terms of current legislation. They are compelled to seek relief via the COID commissioner. The employer on the other hand is compelled by law to register and pay the commensurate fees for all employees as defined in the Act. Failure to do so renders the employer liable to pay staunch penalties in addition to the possibility of compensating the unregistered employees for occupational injury/death.

Also known as “FAIS”. This act, which became effective on the 30/09/2004, compels all financial advisors to be licensed by Financial Services Board (FSB) according to the type of financial service they offer. No financial advisor may give financial advice to an Insured unless they are correctly licensed. Complaints concerning advice and intermediary service must be directed via the FAIS Ombud.