Insurance Dictionary
Every term that has ever confused you.
84 words insurers use, written the way we would explain them to a friend — each with a real example, because definitions alone are what made them confusing in the first place.
If a broker cannot explain a term to you without reading from the policy, that is a problem with the broker, not with you.
84 terms
Actuary
The mathematician who works out how likely a loss is and therefore what a policy should cost. They are the reason premiums differ between a 22-year-old driver and a 45-year-old one.
For example
An actuary decides that comprehensive motor cover on a Lagos commercial vehicle should cost more than on a private car, because it is on the road far more hours per week.
Additional insured
Someone other than the policyholder who is also protected by the policy. Often required by a contract before you can start work.
For example
A shopping mall requires your construction firm to name the mall as an additional insured on your liability policy before you can begin the fit-out.
Adjuster / Loss adjuster
Also called: Assessor
The person the insurer sends to investigate your claim and work out what it should pay. They work for the insurer, not for you — which is exactly why having a broker matters.
For example
After a warehouse fire, the loss adjuster visits, photographs the damage and produces a report the insurer uses to decide the settlement.
Agent
Someone who sells insurance on behalf of one insurance company. An agent represents the insurer. A broker represents you. It is a meaningful difference.
For example
An agent for a single insurer can only offer you that insurer's motor policy, even if three other companies would cover you better or cheaper.
All risks
Cover that protects against any cause of loss except the ones the policy specifically excludes. Broader than named-perils cover — but 'all risks' never means 'everything'.
For example
An all-risks policy on a laptop covers dropping it, spilling water on it and having it stolen — but still excludes wear and tear.
Annuity
A product you buy with a lump sum that then pays you a regular income, usually for the rest of your life. Commonly used at retirement.
For example
You use your retirement savings to buy an annuity that pays ₦250,000 every month for as long as you live.
Average clause
Also called: Condition of average, Underinsurance clause
A rule that cuts your payout by the same proportion you were under-insured. If you insured a building for half its real value, the insurer pays half of any claim — even a small one. This catches more people than any other clause.
For example
Your factory is worth ₦100m but you insured it for ₦50m. A ₦10m fire occurs. Because you were 50% under-insured, the insurer pays ₦5m, not ₦10m.
Aviation insurance
Cover for aircraft, their operation and the liabilities that come with them. Highly specialised and placed with a small number of insurers.
For example
An operator insures hull damage plus passenger and third-party liability under one aviation programme.
Beneficiary
The person who receives the money from a life policy when the insured person dies. You choose them, and you can change them.
For example
You name your spouse as the beneficiary on your ₦20m life policy, so the payout goes directly to them without waiting on the estate.
Betterment
When a repair leaves you better off than before the loss, the insurer may ask you to contribute the difference. Insurance restores your position; it does not upgrade it.
For example
A fire destroys a 10-year-old roof. The replacement is brand new, so the insurer asks you to contribute towards the improvement in value.
Bill of lading
The shipping document that acts as receipt, contract of carriage and proof of ownership. Essential to any marine cargo claim.
For example
A cargo claim stalls because the bill of lading was signed clean, without noting the damage visible at delivery.
Broker
An intermediary who works for you, not for an insurer. A broker compares cover across the market, advises on what suits you, arranges the policy and argues your corner at claim time.
For example
Rather than accepting the first motor quote you find, a broker checks several insurers, explains where the cover differs, and recommends one.
Business interruption
Also called: Consequential loss, BI
Cover for the money you stop earning while your business is closed after a loss. The fire policy rebuilds the building; this replaces the trade you lost while it was being rebuilt.
For example
A fire shuts your restaurant for four months. Property cover pays for the rebuild; business interruption cover replaces the four months of lost profit and keeps paying your staff.
Certificate of insurance
A one-page document proving cover exists. Often demanded by landlords, banks and clients before they will deal with you.
For example
Before awarding a haulage contract, a manufacturer asks for a certificate of insurance showing your goods-in-transit cover is current.
Claim
Your formal request to the insurer to pay for a loss the policy covers. It is the only moment the policy actually does anything.
For example
After a burglary you make a claim, supported by a police report and a list of what was taken.
Claims history
Also called: Loss history, Claims experience
The record of claims you have made. Insurers use it to price your next policy — a clean history usually earns a discount.
For example
Three years without a motor claim earns you a no-claims discount at renewal.
Co-insurance
Two meanings. In commercial insurance, several insurers each take a share of one large risk. In health insurance, it is the percentage of a bill you pay yourself.
For example
A ₦5bn refinery risk is shared between four insurers, each taking 25%. Separately, a health plan with 10% co-insurance means you pay ₦10,000 of a ₦100,000 bill.
Commission
How brokers are usually paid — a percentage of the premium, paid by the insurer rather than billed to you. Worth asking any broker about, so you understand their incentives.
For example
On a ₦500,000 premium, the insurer pays the broker a percentage as commission. The client is not separately invoiced.
Comprehensive cover
Motor insurance that covers damage to your own vehicle as well as damage you cause to others. The step up from third-party cover.
For example
You skid into a wall with nobody else involved. Comprehensive cover repairs your car; third-party cover would pay nothing.
Contribution
Where two policies cover the same loss, they share the cost between them rather than each paying in full. It is why being double-insured wastes money instead of doubling your payout.
For example
Your home contents and your business policy both cover the same laptop. They contribute proportionally; you cannot claim its full value twice.
Cover note
Temporary written proof that cover has started while the full policy document is being prepared.
For example
You collect a new car on Friday and drive away on a cover note; the full motor policy arrives the following week.
Declinature
Also called: Declined claim, Repudiation
The insurer's refusal to pay a claim. A declinature is not automatically the end — many are successfully challenged, especially with a broker arguing the point.
For example
A claim is declined for late notification. The broker demonstrates the delay caused the insurer no prejudice, and the decision is reversed.
Depreciation
The loss of value of an item through age and use. On an indemnity basis, insurers deduct it — you are paid what the item was worth, not what a new one costs.
For example
A five-year-old generator that cost ₦800,000 new might be valued at ₦350,000 at claim time, unless you bought new-for-old cover.
Double insurance
Holding two policies covering the same thing. You do not get paid twice; you simply pay two premiums for one recovery.
For example
Your travel policy and your credit card both include travel medical cover. Only one meaningful recovery is available, but both premiums were paid.
Employee benefits
Insurance an employer arranges for staff — typically health cover, group life and personal accident. Often the cheapest way for an individual to be covered.
For example
A company arranges an HMO plan and ₦5m group life cover for all 40 employees at a fraction of what each would pay individually.
Endorsement
A written change to a policy after it has started. It becomes part of the contract, so it should always be read.
For example
You buy a new delivery van mid-year; an endorsement adds it to your existing fleet policy.
Engineering insurance
Cover for machinery, plant and construction works — including breakdown, which a standard fire policy never covers.
For example
A generator's alternator fails from an internal fault. Fire cover pays nothing; machinery breakdown cover does.
Excess
Also called: Deductible
The first part of any claim that you pay yourself. A higher excess lowers your premium — but you carry more of every loss.
For example
With a ₦50,000 excess and a ₦300,000 repair bill, the insurer pays ₦250,000 and you pay the rest.
Exclusion
Something the policy specifically does not cover. Exclusions matter more than the headline cover — they are where most declined claims come from.
For example
A standard property policy excludes damage caused by wear and tear, so a roof that failed through age is not claimable.
Fire & special perils
The standard commercial property policy. Covers fire, lightning and explosion as a base, with named extras such as flood, storm, riot and impact added on.
For example
A flood damages your ground-floor stock. It is covered only if flood was added as a special peril — the base fire policy alone would not respond.
Franchise
A threshold, not a deduction. Below it the insurer pays nothing; above it the insurer pays the whole claim. Different from an excess, which is always deducted.
For example
With a ₦100,000 franchise, a ₦90,000 claim pays nothing, but a ₦120,000 claim pays the full ₦120,000.
Goods-in-transit
Also called: GIT
Cover for your goods while they are being moved. A property policy stops at the warehouse door; this covers what happens on the road.
For example
A truck carrying ₦8m of electronics overturns on the expressway. Goods-in-transit cover pays for the cargo; the motor policy only covers the truck.
Grace period
A short window after a premium due date in which cover continues even though you have not paid. Not all policies have one — never assume.
For example
A life policy with a 30-day grace period stays in force if you pay on day 20 after the due date.
Gross profit (insurance definition)
In a business interruption policy this is a specific calculation — turnover less specified variable costs — and it is usually not the same figure your accountant calls gross profit. Getting it wrong causes under-insurance.
For example
Your accounts show ₦40m gross profit, but the insurance definition produces ₦55m. Insuring for ₦40m leaves you under-insured by ₦15m.
Group life
One life insurance policy covering a whole group of employees. Cheaper per person than individual cover, and usually requires no medical examination.
For example
An employer provides group life cover of three times annual salary for every member of staff.
Health insurance
Also called: HMO cover, Medical insurance
Cover for medical treatment. In Nigeria it is usually delivered through an HMO with a defined list of hospitals you can use.
For example
You attend a hospital on your HMO's provider list, present your card, and are treated without paying up front.
Indemnity
The core principle of insurance: you are put back in the financial position you were in before the loss — no worse, and no better. It is why insurance is not a way to profit from misfortune.
For example
Your three-year-old phone is stolen. Indemnity pays what that phone was worth, not the price of the newest model.
Indemnity period
In business interruption cover, how long the policy keeps paying after a loss. Choosing too short a period is one of the most expensive mistakes in commercial insurance.
For example
You select a 12-month indemnity period, but rebuilding the factory takes 18. The last six months of lost profit are yours to absorb.
Insurable interest
You can only insure something you would actually lose out from. It is what separates insurance from gambling.
For example
You cannot insure your neighbour's car, because its destruction costs you nothing. You can insure your own.
Insured
The person or business the policy protects. Sometimes the same as the policyholder, sometimes not.
For example
A company is the policyholder on a group life scheme, while each employee is an insured person.
Insurer
Also called: Underwriter, Insurance company
The company that carries the risk and pays the claims. Your broker arranges the policy; the insurer is who the money actually comes from.
For example
Jedrick places your policy with an insurer registered with NAICOM, and that insurer pays your claim.
Intermediary
The umbrella term for anyone standing between you and an insurer — brokers and agents both. In Nigeria, intermediaries must be registered with NAICOM.
For example
Before dealing with any intermediary, you can ask for their NAICOM registration number.
Key person insurance
Cover that pays the business — not the family — if someone the business depends on dies or becomes unable to work. It buys time to reorganise.
For example
A firm insures its lead engineer for ₦50m, so it can survive the disruption and recruit a replacement if the worst happens.
Lapse
When a policy ends because the premium was not paid. Cover stops, usually with no refund, and restarting may require fresh underwriting.
For example
A life policy lapses after three missed monthly premiums, and reinstating it requires a new medical questionnaire.
Liability
Legal responsibility for harm or loss suffered by someone else. Liability insurance pays what you become legally obliged to pay — plus the cost of defending you.
For example
A customer slips on a wet floor in your shop and sues. Liability cover pays the damages and the lawyers.
Life insurance
Cover that pays a lump sum when the insured person dies. It is not really for you — it is for whoever depends on your income.
For example
A ₦20m life policy means your family can keep paying rent and school fees if your income stops permanently.
Loss
The insurance word for the thing that went wrong — damage, theft, injury or financial harm. A 'total loss' means the item cannot economically be repaired.
For example
After a serious accident the assessor declares the vehicle a total loss and the insurer pays its value rather than repairing it.
Marine insurance
Cover for goods moving by sea or air, and for the vessels themselves. Most Nigerian importers meet it as marine cargo cover.
For example
A container of machinery is damaged by seawater in transit from Shanghai. Marine cargo cover responds.
Material fact
Any information that would affect an insurer's decision to cover you or the price they charge. You must disclose these, whether or not you are asked directly.
For example
A previous fire at your premises is a material fact. Not mentioning it can void the policy entirely.
Motor insurance
Cover for vehicles. Third-party cover is the legal minimum in Nigeria; comprehensive adds damage to your own vehicle.
For example
Third-party cover pays for the car you hit. Comprehensive also repairs yours.
NAICOM
The National Insurance Commission — the regulator for insurance in Nigeria. It licenses insurers and brokers, and you can verify any of them with it.
For example
Before placing your cover, check that both the broker and the insurer hold current NAICOM registration.
Named perils
Cover that only responds to causes specifically listed in the policy. If it is not on the list, it is not covered.
For example
A named-perils policy lists fire, lightning and explosion. Flood damage is not covered unless flood was added by name.
No-claims discount
Also called: NCD, No-claims bonus
A reduction in premium earned by not claiming. It is why claiming for a small amount can cost more over time than paying for it yourself.
For example
A ₦60,000 scratch repair claim wipes out a discount worth ₦120,000 over the following three years.
Nominee
The person named to receive a policy payout. Keeping the nomination current matters — after a marriage, a birth, or a death, an out-of-date one causes real problems.
For example
A policy still naming a parent from ten years ago delays payment to the spouse who actually depends on it.
Non-disclosure
Failing to tell the insurer something material. It is the most common reason a policy is voided — and it is usually accidental rather than dishonest.
For example
You forget to mention that the building is partly used as a workshop. The insurer voids the policy after a fire.
Oil & gas insurance
Energy-sector cover for property, control of well, and the very large liabilities the industry carries. Usually placed as a structured programme rather than a single policy.
For example
An operator arranges offshore property, control of well and third-party liability cover as one coordinated programme.
Own damage
The part of a motor policy that pays for damage to your own vehicle. Third-party cover does not include it.
For example
You reverse into a pillar in a car park. Only own-damage cover will repair the bumper.
Personal accident
Cover paying a fixed sum for death or disability caused by an accident. It pays regardless of medical bills or lost income.
For example
An accident causing permanent loss of a hand triggers a set payout under the policy's benefit table.
Policy document
Also called: Policy wording, Schedule
The actual contract. The schedule shows your specific details; the wording sets out what is and is not covered. If a broker cannot explain it in plain language, that is a warning sign.
For example
Your schedule lists a ₦25m sum insured; the wording explains the average clause that applies to it.
Policyholder
The person or business that owns the policy, pays the premium and can change it.
For example
A company is the policyholder on a fleet policy, even though individual drivers are the ones covered.
Pre-existing condition
A medical condition you already had before the health policy started. Often excluded at first, sometimes covered after a waiting period.
For example
A plan excludes treatment for diabetes diagnosed before the start date, but covers it after 12 months of continuous membership.
Professional indemnity
Also called: PI, Errors and omissions
Cover for claims that your professional advice or work caused someone a financial loss. Essential for anyone whose product is their judgement.
For example
An engineering firm's design specification proves faulty and the client sues for the cost of rectification.
Property insurance
Cover for buildings and their contents against physical damage. The foundation of most business and household insurance programmes.
For example
A burst pipe damages your office ceiling and furniture; property cover pays for the repairs and replacements.
Provider network
Also called: Panel hospitals
The hospitals and clinics your health plan has arranged to treat you without payment up front. Going outside it usually means paying and claiming back — if it is covered at all.
For example
Checking the provider list before an appointment avoids paying ₦180,000 out of pocket at a hospital that is not on it.
Proximate cause
The dominant reason a loss happened. Insurers pay based on this, not on the last thing that occurred in the chain of events.
For example
A fire is put out with water that damages stock. The proximate cause is the fire, so the water damage is covered too.
Public liability
Cover for injury or damage your business causes to members of the public or their property.
For example
A signboard falls from your shopfront and injures a passer-by. Public liability cover pays the damages and legal costs.
Reinstatement value
Also called: New for old, Replacement cost
Cover based on what it costs to rebuild or replace new today, with no deduction for age. More expensive than indemnity cover — and usually worth it.
For example
A 12-year-old roof destroyed by storm is replaced with a new one at no cost to you, rather than being paid at depreciated value.
Reinsurance
Insurance bought by insurers, so that one very large loss does not sink them. It is why a single insurer can cover a refinery.
For example
An insurer covering a ₦20bn plant passes most of that exposure to international reinsurers.
Renewal
The point each year at which the policy ends and must be re-agreed. The best moment to review cover, re-check sums insured and test the market.
For example
At renewal your broker re-quotes across several insurers rather than accepting the existing one's increase.
Rider
Also called: Add-on, Extension
An optional extra bolted onto a policy for an additional premium.
For example
A critical illness rider is added to a life policy, paying out on diagnosis rather than only on death.
Salvage
What remains of damaged property after a claim is paid. Once the insurer has paid in full, the remains usually belong to them.
For example
After a written-off vehicle is paid out, the insurer takes and sells the wreck as salvage.
Subrogation
After paying your claim, the insurer takes over your right to recover from whoever caused the loss. It happens in the background and costs you nothing.
For example
Your insurer repairs your car after another driver hit you, then pursues that driver's insurer to recover the money.
Sum insured
Also called: Limit of indemnity
The maximum the policy will pay. Setting it correctly is the single most important number in your policy — too low and the average clause bites, too high and you overpay.
For example
Insuring a warehouse for ₦80m when rebuilding costs ₦120m leaves you badly exposed on every claim, not just a total loss.
Surrender value
The cash you get back if you cancel a savings-type life policy early. Usually far less than you have paid in during the first years.
For example
Cancelling an endowment policy after three years returns a surrender value well below the total premiums paid.
Term life
Life cover for a fixed number of years, with no savings element. The cheapest way to buy a large amount of protection.
For example
A 20-year term policy for ₦30m costs a fraction of a whole-life policy for the same sum, because it builds no cash value.
Third party
Anyone other than you and your insurer — typically the other person in an accident. Third-party cover pays for the harm you cause them, and nothing for you.
For example
Third-party motor cover repairs the car you hit but leaves your own repairs entirely to you.
Travel insurance
Cover for medical treatment, cancellation, delay and lost baggage while travelling. Often also a visa requirement.
For example
Emergency treatment abroad is billed at local rates in local currency up front; travel cover is what stops that becoming your problem.
Under-insurance
Insuring for less than the true value. It is the most common and most expensive mistake in insurance, and it usually only comes to light at claim time.
For example
Sums insured set five years ago no longer reflect today's rebuild costs, so every claim is scaled down by the average clause.
Underwriting
The insurer's process of deciding whether to cover you, on what terms and at what price.
For example
Underwriting a factory may involve a physical survey of the fire protection before terms are offered.
Utmost good faith
Also called: Uberrimae fidei
The legal duty on both sides to be completely honest. You must disclose everything material; the insurer must deal with you fairly.
For example
Answering a proposal form carelessly rather than dishonestly can still breach this duty and void the policy.
Waiting period
A stretch of time at the start of a policy during which certain benefits are not yet available.
For example
A health plan applies a 60-day waiting period before maternity benefits can be used.
Whole life
Life cover that lasts your whole life and builds a cash value. More expensive than term cover, because it is part protection and part savings.
For example
A whole-life policy pays out whenever death occurs, and can be surrendered for cash during your lifetime.
Write-off
Also called: Total loss, Constructive total loss
When repairing something costs more than it is worth, so the insurer pays its value instead of fixing it.
For example
Repairs are quoted at ₦2.4m on a vehicle worth ₦2m. It is written off and you are paid ₦2m less any excess.
Still not clear? That is what we are for.
Send us the sentence you are stuck on — from your own policy, or from a quote someone has given you. We will tell you what it actually means for you.