Terms and clauses

Insurance documents compress a lot of meaning into a small amount of language. This dictionary separates the recurring terms and clauses into their own entities so the same explanation can be reused wherever the term appears.

Entries explain the mechanism and point back to the covers, certificates or contracts that use the term. They do not interpret a particular policy for a particular business.

• Certificate of currency — A certificate of currency is a short document from an insurer or broker confirming that a policy is in force. It names the insured entity, the type of cover, the policy number, the period of insurance and the limit of indemnity.
• Certificate of insurance — A certificate of insurance confirms that cover has been arranged. In Australian commercial practice the term is often used interchangeably with certificate of currency, and many insurers issue a single document under either name.
• Interested party — An interested party is a person or entity noted on a policy because it has a financial interest in the insured property or the insured work. Financiers, lessors, principals and landlords all commonly ask to be noted.
• Principal’s indemnity — A principal’s indemnity extension treats the principal to a contract as though it were an insured under the contractor’s liability policy, but only for liability arising out of the contractor’s work.
• Waiver of subrogation — Subrogation is an insurer’s right to step into the shoes of the insured after paying a claim and recover from whoever caused the loss. A waiver of subrogation is the insurer agreeing not to exercise that right against a named party.
• Cross liability clause — A cross liability clause treats each insured under a policy as though it held a separate policy of its own. Where several entities are named as insured, one of them can bring a claim against another and the policy will respond.
• Limit of indemnity per occurrence — The limit of indemnity for any one occurrence is the most an insurer will pay for a single event. It is the headline figure on a liability policy and the one licences, contracts and site requirements normally specify.
• Aggregate limit — An aggregate limit is the most an insurer will pay for all claims in a period of insurance, no matter how many claims there are. Once it is exhausted, the policy has no more to give until it is renewed or reinstated.
• Claims-made basis — A claims-made policy responds to claims first made against the insured during the period of insurance. When the work that caused the claim was performed does not decide whether cover applies; when the claim arrives does.
• Retroactive date — The retroactive date on a claims-made policy is the earliest date of past work the policy will respond to. Work performed before that date is outside cover even if the claim arrives while the policy is current.
• Contract works compared with liability cover — Contract works insurance covers the thing being built. If the partly finished structure, the materials on site or the works in progress are damaged or stolen, contract works responds.
• Subcontractor insurance warranty — A subcontractor insurance warranty is a policy condition requiring the insured to ensure that subcontractors hold their own insurance, usually liability cover at a stated minimum, before they work.