Insurance Terms & Phrases


When you simply abandon or rent/hire out a vehicle or sell a vehicle without having received the money for it or when you simply lend out the vehicle and the other party runs off or disappears with the vehicle-the willing giving up by an Insured of property when a total loss is claimed.

Note that this is NOT covered by Insurance, so make sure you NEVER get into a situation like this.


An Occurrence which produces loss, damage, death or injury and which occur unintentionally and unexpectedly. Alternatively, an unforeseen and unintended event or occurrence.


Normally on vehicles older than 10 years or vehicles that are not appearing in the Mead and McGrouther value book like Imported vehicles, then the Insured obtains a valuation certificate on an annual basis and then it is agreed with the Insurers to Insure according to the valuation certificate.


Instead of an excess which is individually applicable to each and every loss, aggregate excess is deducted from the total of all losses over a specified period of time, and the client is usually only compensated after the full amount of the aggregate is “used up” or exceeded.


Provides that a claim for damages will not be defeated by the contributory negligence of the claimant, but that the damages recoverable shall be reduced by the court to such an extent as it may deem just and equitable having regard for the degree of contributory negligence.


A means of settling disputes legally without going to court where the issue concerns the amount of a claim and not liability. A qualified person or persons whose appointment has been agreed to by the parties involved, will hear the case and give a decision.


Where the sum insured is less than the value of the insured property at the time and place of the loss (value at risk) the Company’s liability is calculated as follows:

Incorrect Sum insured divided by correct sum insured x loss = Insurers’ Liability.


The object of indemnity is to give the Insured, after rebuilding or repairs, as nearly as possible the same as what he had prior to the destruction of, or damage to the property insured. Where the property is improved by rebuilding or repairs, the Insured must contribute towards the costs of rebuilding / repairs to the extent of the improve / betterment. Also vehicles tyres- the portion of the tyres already used are deducted from a claim when such tyres are replaced with new ones.


The main use of this term comes from the application of the contribution condition in the policy; In some instances claims arise where the claimant has two policies covering the same subject matter. Details of the other insurance are normally disclosed on the claim form.

Contribution on the basis of independent liability is governed by the limits of liability under the policies involved in relation to the total cost of the settlement. Contribution may also happen in for example an accident where 2 parties are involved and a Judge apportion the cause of the accident to both parties, example one party had a 70 % involvement and the other a 30 % involvement in the accident.


The first amount borne by the insured for his own account of each loss.


When the Third Party fails to enter an appearance to defend, default judgment may be obtained against him. Where the Third Party elected to defend the matter but loses the case judgment is also given against him. If the judgment debtor fails to pay in accordance with the courts judgment the sheriff is sent to his home to attach his assets/property, thereafter the sheriff will sell the property to satisfy the claim.


“An act of grace” The payment or part payment of a loss when there is no requirement to pay the claim in terms of the policy. This payment is made without admission of liability and without wavering the rights in terms of the policy wording.


Any loss must be entirely fortuitous as far as the person seeking insurance is concerned. Any event that will occur with certainty is not insurable as there is no chance of a loss.


Alternative to an excess.  Example: Franchise amount is R 10 000 and if claim is R 9999,99, then client pays the full claim amount and if a claim is R 10001,00, then Insurers pays the amount from the ground up, from the first cent.


Both parties to an insurance contract are required to observe the contract of good faith. This means that the insurer must not deceive the proposer as to the terms of the policy, which they issue in response to the proposal. The proposer in due course must also not fail to disclose any details which might affect the underwriting of the policy.

It is the duty of the insured to inform the insurer about any material facts which may affect the changes of a loss occurring.


Most insurance policies, excluding Personal Accident, are policies of indemnity. Indemnity means “to place a person in the same (financial) position after an event as he was in before the event, so that he neither loses, nor profits”-subject the Average condition ( if applicable).


A person effecting insurance must have a legally recognised relationship to what is insured.


An insured event is an event that is covered in terms of the policy wording. When we insure be it our property or motor vehicles, we insure against certain occurrences that are covered in terms of the policy. Let’s look at an example, if financial loss is experienced due to one or more INSURED EVENTS taking place the insured will be compensated in terms of the policy. When reading through a policy document it is important to take into account the exclusions listed in that section.  Cover less exceptions, warranties, conditions and exclusions = nett cover.


Anything which would affect the judgment of a prudent Underwriter in accepting, or deciding acceptance of a risk. This applies also after a policy incepts and there are any changes like lending a vehicle to someone else as an example etc etc.

Failure to disclose a material fact could enable Insurers to reject a claim or treat the policy as null and void.


The policy is void from inception at common law where there is misrepresentation, misdescription, or non-disclosure.  This must lie in a material fact.  The entire contract is voidable irrespective of whether the misdescription concerns only one item of the policy, as a breach of good faith goes to the root of the contract and this affects the entire contract.


In liability claims, the question of negligence is of paramount importance. Possibly the definition of “negligence” is of paramount importance.


NEGLIGENCE – the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something, which a prudent and reasonable man would not do”. OR a more simple version; failing to act in what the law considers to be a reasonable manner. In simple Insurance terms, the term Liability means that your negligence is covered (negligence needs to be proven).


This is the time within which one hat to institute legal proceedings against a third party. The period is normally three years and is calculated from the date of the accident until service of summons on the third party. There are certain bodies such as the SAPS, The Defence Force and Provincial and Local Authorities who enjoy special privileges and for whom prescription expires sooner.


The direct cause of a loss without the interference of a new and separate cause. In considering whether a loss has been caused by an insured peril regard must be given to the proximate and not the remote cause of the loss.

“The active efficient cause that sets in motion a train of events which brings about a result without the intervention of any force started and working actively from a new and independent source.”

Following upon this a further definition:

“The cause is that which is the Effective or Dominant cause of the occurrence – what is in substance the cause – such cause to be determined by common sense:”


A policy condition or warranty whose observance is essential for the enforcement of the contract.


In terms of company policy the policyholders must take all reasonable precautions to ensure the following:

a) Prevent loss or damage.

b) Maintain their property in good condition.

c) help preserving Salvage in the event of a loss.


The value of property as indicated by the current purchase price of a similar article, VAT included.


Whatever is recovered of an insured item or part of it, on which a claim has been paid.


Subrogation is the right of the insurer to take over the rights of recourse to a third party to claim damages from the third party.


When a vehicle is stolen/written off and is still under finance, then the client chooses a similar vehicle to replace that, keeps the Bank Finance contract as is intact and the bank simply makes an inscription on the contract, changing the Vin, Engine and Registration number of the alternative vehicle.


A policy condition, which must be complied with literally for cover to be provided- this is very onerous.

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