We know insurance can sometimes be confusing, so here we explain some of the most common terms you might come across:

Premiums – This is the amount you’ll need to pay the insurance company for your cover. You might pay monthly premiums, which spreads the cost out over 12 months. Or you can choose to pay one annual premium, which often works out cheaper. Whichever works for you

Exclusions – These are situations your insurer won’t pay out for. They will be clearly set out in your policy’s terms and conditions. Exclusions include situations that were avoidable and events related to negligence or irresponsible behaviour

Claims – If you experience a situation that’s covered by your policy, you can request compensation from your insurer – this is known as a claim. To claim on your policy, you’ll need to follow the provider’s claims process, which usually involves completing a form and providing supporting information and evidence

Fully comprehensive – The highest level of car insurance you can buy. It covers damage and theft to your car, and any damage you cause to other people, their cars and property

Third-party only (TPO) – The minimum level of motor insurance legally required in the UK. It covers the cost of damage to another person, their car or property but does not cover your vehicle or any injuries you might get from an accident that’s your fault

Single item limit – The maximum amount you can claim for a single item on your home insurance. It can also apply to travel insurance. Items worth more than the single item limit should be listed separately on the policy so their full value can be covered

New for Old – A new for old policy will cover the cost of a new replacement if an item is lost, stolen or destroyed. If the item is damaged, the policy will cover the cost of repair

Indemnity – The insurance will only pay out what the item is worth at the time of the loss or damage. It takes into account wear and tear and pays out for the item’s second-hand value

Lump sum – Often referred to in life insurance policies, a lump sum is a large amount of money that’s paid out as a single payment in one go, rather than through a series of smaller payments over time

No claims bonus – Insurance providers offer a discount to people who don’t claim on their policies. This bonus gives you money off your insurance premiums for each year you don’t claim. Discounts vary but they can be as much as 60% off after five claim-free years

Voluntary excess – An amount you choose to pay on top of the insurer’s compulsory excess. Adding a voluntary excess usually reduces the price of your insurance premium but means you’ll have to pay more towards the cost of a claim.

Write off – A damaged vehicle that’s beyond repair or costs more to repair than it was worth before the damage occurred.

If you’d like to know more, our insurance jargon buster provides an A to Z of the most common terms you’re likely to come across.