Understanding insurance terminology can help you make more informed decisions about your cover. Below are explanations of some of the most common terms used in personal, commercial and hospitality insurance.
Personal Insurance Terms
Excess
An excess is the amount you are responsible for paying when a claim is settled. For example, if your claim is R20,000 and your excess is R2,500, the insurer may contribute the balance, subject to the terms and conditions of the policy.
Sum Insured
The sum insured is the maximum amount an insurer will pay for a particular item, asset or section of cover. It is important that assets are insured for appropriate values to avoid underinsurance.
Unspecified All Risk Insurance
All Risk Insurance generally refers to cover for portable personal belongings that are taken away from the insured premises, such as clothing and personal effects (gym bags, luggage), this usually excludes items such as mobile phones, laptops, cameras, jewellery and sporting equipment which need to be specified. Cover is typically provided against accidental loss, theft or damage, subject to the terms and conditions of the policy.
Specified All Risk Insurance
Specified All Risk Insurance applies to individual items that have been separately declared and insured for a specific value. Examples include engagement rings, luxury watches, bicycles, cameras or other high-value possessions. The insurer records the item and its insured value on the policy schedule, helping to ensure appropriate cover is in place.
Household Contents
Household contents refers to all movable items inside your home, including furniture, appliances, clothing, decor, crockery, linen, electronics and personal possessions. Think about it as turning your house over and shaking it out, everything that falls out would be Contents – anything fixed would be considered buildings.
Replacement Value
Replacement Value is the cost of rebuilding, repairing or replacing an asset using current materials, labour and market prices. Insurance should generally be arranged using accurate replacement values rather than purchase price, market value or municipal valuation, as these figures can differ significantly.
Personal Liability Insurance
Personal Liability Insurance provides protection against legal liability arising from accidental injury to third parties or damage to their property caused by you or members of your household.
Commercial Insurance Terms
Public Liability Insurance
Public Liability Insurance provides protection against legal liability arising from accidental injury to third parties or damage to their property resulting from your business activities.
Business Interruption Insurance
Business Interruption Insurance is designed to assist a business following an insured loss by covering certain financial losses that may arise while normal operations are disrupted. The cover available will depend on the policy wording and basis of cover selected.
Fidelity Guarantee Insurance
Fidelity Guarantee Insurance provides cover for losses arising from dishonest acts committed by employees, subject to policy terms and conditions.
Fleet Insurance
Fleet Insurance provides cover for multiple vehicles under a single policy, helping businesses manage their vehicle-related risks more efficiently.
Goods in Transit Insurance
Goods in Transit Insurance provides cover for loss of or damage to goods while being transported by road, rail or other approved methods of transportation.
Cyber Insurance
Cyber Insurance is designed to assist businesses with risks associated with cybercrime, data breaches, ransomware attacks and other technology-related incidents.
Hospitality & Short-Term Rental Terms
Short-Term Rental Insurance
Short-Term Rental Insurance is designed specifically for properties used for holiday accommodation, Airbnb-style rentals, guest houses and similar accommodation activities. Because paying guests are staying at the property, the risks differ from those associated with a standard residential home.
Depending on the policy, cover may include protection for the building, contents, public liability, theft, accidental or malicious damage caused by guests, business interruption and other risks associated with operating a hospitality business. The cover available will depend on the insurer, policy wording and circumstances of the property.
Guest House Insurance
Guest House Insurance combines elements of personal and commercial insurance to address the unique risks associated with operating guest accommodation. Depending on the policy, cover may include buildings, contents, public liability, guest-related risks and business interruption.
Commercial Public Liability
Commercial Public Liability Insurance helps protect accommodation establishments and businesses against claims arising from injury to guests, visitors or members of the public.
Guest Damage
Guest Damage refers to accidental or malicious damage caused by paying guests during their stay. Cover depends on the specific policy wording, conditions and limits applicable to the policy.
Theft by Guests
Some specialist hospitality policies may provide cover for theft committed by paying guests, subject to policy terms, conditions and limits.
Fixtures and Fittings
Fixtures and fittings include items such as blinds, curtains, fixed appliances, built-in cupboards, décor and other improvements that form part of a property but may not fall within the building structure itself.
Loss of Revenue
Loss of Revenue cover is designed to assist accommodation establishments when an insured event prevents the property from operating normally and results in a reduction in income.
Property Management Company
A Property Management Company is a business appointed to manage accommodation properties on behalf of owners and may be responsible for bookings, guest communication, maintenance coordination, housekeeping oversight and operational management.
Important Insurance Concepts
Underinsurance
Underinsurance occurs when a building, contents or other asset is insured for less than the amount required to replace it following a loss. Underinsurance can result in reduced claim settlements through the application of the Average Clause.
Average Clause
The Average Clause is a policy condition that applies when an asset is insured for less than its actual replacement value at the time of loss. In these circumstances, the insurer may reduce the claim settlement proportionately.
For example, if a building should be insured for R4 million but is only insured for R2 million, it is effectively insured for only 50% of its value. If a claim for R500,000 is submitted, the insurer may only pay 50% of the loss (R250,000), less any applicable excess, because the property was underinsured.
The Average Clause is designed to ensure that policyholders insure their assets for appropriate replacement values and can apply even where the loss is only partial and not a total loss.
Claim
A claim is a formal request made to an insurer for compensation following an insured event. Claims are assessed in accordance with the policy terms, conditions, exclusions and limits applicable to the policy.
Premium
A premium is the amount paid to an insurer in exchange for insurance cover. Premiums are typically paid monthly or annually and are determined by a variety of factors, including risk, claims history and the type of cover selected.
SASRIA
SASRIA (South African Special Risks Insurance Association) provides cover for losses resulting from riots, strikes, public disorder, civil commotion and related events. SASRIA cover is generally provided separately from standard insurance policies and is subject to its own terms and conditions.
Indemnity
Indemnity is the principle that insurance is intended to place the insured back into approximately the same financial position they occupied immediately before a loss occurred, without allowing them to profit from the event.