Understanding Your Car Insurance: Glossary of Contract Terms

Autos & TrucksInsurance

  • Author Laura Ginn
  • Published January 6, 2014
  • Word count 709

The best way to understand your car insurance policy is to become familiar with some of the terms used in your contract when signing up for a deal. It can be easy to get lost in insurance jargon and end up confused about some of the stipulations of your policy.

The car insurance glossary below lists several terms that you are likely to encounter when reading over your contract.

Cancellation Clause/Cooling off Period

The cancellation clause is an important part of your contract that gives both you and your insurer the right to cancel the policy within a short period of time after it has gone into effect. This period of time is typically around 14 days, so make sure to cancel within this time if you have any issues with the policy. If cancelled within this period, you will not need to provide any reason for why you wanted out of your policy.

Cash Surrender Value

This is the amount of money that you could get back if you cancel your insurance before the year has ended. Your contract will determine how much you can be reimbursed.

Compulsory Excess

A compulsory excess is the amount that you would have to pay if you ever make a claim. Your insurance will cover whatever is left to pay after the compulsory excess. People who are seen as a greater insurance risk will have to pay a higher compulsory excess.


Exclusion refers to some event that your insurer will not cover. You will not be able to make a claim if you receive any damages as a result of this stipulated event.

Geographical/Territorial Limits

These are the limits within which your car insurance will be considered valid. The typical geographical limit for your UK insurance will be within the UK. Take a look at your contract to see if you will be covered in any other countries.


An indemnity simply means that you have been compensated or have received reparation payments. It is when you have returned to the same state that you were in before a loss, after having your damages paid for and repaired.


This is simply a contract term that refers to the person who is being covered by the policy.

Legal Liability

Legal liability means that it is your responsibility to compensate someone after causing damages.


"Partner" is a term that may be used in your contract to refer to the person you are living with. They do not have to be married to you to be considered your partner.


This is another term for "insured."


"Proposer" is another term for both "insured" and "policyholder." It is the person taking out insurance.

Registered Keeper

The register keeper of a vehicle has the responsibility of making sure that the car is licensed and for paying any tickets. The registered keeper, however, does not have to be the owner of the car. They just need to be the person who uses it.


The payout that you or somebody else received from an insurance company is referred to as the settlement.

Social Domestic and Pleasure (SD & P)

When you take out a car insurance policy, your insurer is going to want to know how you intend to use your car. They will ask whether you will be using it to get to and from work, for SD & P purposes, or for both. If you are going to be using your car to do things such as take trips, visit friends, and go shopping, then you are using it for SD & P.


An underwriter assesses how much of an insurance risk you are likely to present for an insurer, and how much your premiums will be. They take into account factors such as where you live, how old you are, any points on your license, what sort of car you drive, and even where your car will be parked overnight.

Voluntary Excess

A voluntary excess is how much you can agree to pay on top of your compulsory excess. If you can afford to make a bigger payment in the event of a claim, then you may benefit from lower premiums, as this will guarantee a smaller cost for your insurance company.

Eva Kurilovaappreciates that the language used by insurance companies can be confusing and difficult to understand which is why she likes the idea of an online car insurance glossary. Visit the uSwitch.com website to use their free glossary tools and learn more about your insurance.

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