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Earnings cap

Sets a limit on how much of a person’s income can be used to calculate the contribution that can be paid to, and the benefits that can be paid by, tax approved pension schemes. Contribution limits are expressed as percentages of earnings (15 per cent for occupational scheme members) subject to the annually adjustable cap, £99,000 (2003/4). The cap affects class A members only.

Earnings threshold

The total amount an individual and/or his employer may pay to the individual’s personal pension scheme every year, regardless of whether they have any earnings or how much they are. For 2003/4 the figure was £4,615. The threshold includes tax relief at basic rate. Individuals wishing to pay more have to justify their case by their age and earnings level.

Earthquake/earthquake insurance

Natural phenomenon in the form of a violent convulsion of the earth’s surface. The risks of earthquake and subterranean fire (fire of volcanic origin) are excluded from the standard fire policy. High risk areas are designated as ‘earthquake zones’. Earthquake cover can be obtained for either fire damage or earthquake shock damage as an additional peril. Subterranean fire can also be insured in this way. The risk is sometimes securitised as a catastrophe bond.

Ecclesiastical property

Churches, chapels and their equivalents, halls, Sunday school buildings, etc. As sums insured are not easy to assess, the fire policies covering these properties are made subject to the special condition of average. The Ecclesiastical Dilapidations Measures 1923 oblige the Church Commissioners to insure property, including the parsonage house, belonging to the benefice.

Economy wording

A co-insurance economy measure whereby the full specification of the property insured is set out in, or attached to, the policy of the leading insurer only. The policies of the co-insurers are worded to cover the relevant proportions of the property as set out in the leading company’s policy or specification.
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Where, in fire insurance, co-insurers issue separate policies the full specifications may be included only in the policy of the leading insurer, other policies containing an outline only, as a measure of economy.

EEA firms

European Economic Area firms ‘passporting’ into the UK under single market directives such as the Insurance Directive. EEA firms are EU Member States plus Norway, Iceland and Liechtenstein. The FSMA 2000 (EEA Passport Rights) Regulations 2001 deal with the exercise of passport rights created under Schedule 3 of FSMA. They set out the information that must be provided to the FSA by an EEA firm exercising its passport rights. Proper notification by the EEA firm secures automatic authorisation.

Effective Date/ Inception Date

The start date of a policy.

The policy’s inception date and effective date are interchangeable terms. They refer to the date at which coverage under the terms described on the insurance policy begins. It signals the start of the contract and, from then until the expiry date, both parties are bound to adhere to the conditions of the insurance policy.

However, in some cases, the inception date refers to the date on which the insured first enters into an insurance contract with a specific insurer, whereas the effective date marks the start of coverage under a specific policy. In these cases, the effective date is updated each time the policy is renewed, while the inception date remains constant.

These dates are important for two reasons. First, as of the policy’s effective date, the insured must begin adhering to the policy’s terms, conditions, and responsibilities. Otherwise, they risk not being fully covered by the policy. Second, any losses that occur prior to the policy’s effective (or inception) date will not be covered.