ISR glossary.
The common terms you will run into in an Industrial Special Risks policy, written in plain language. Not exhaustive. If a term you have hit is not here, ask us and we will add it. Type to filter. Click a letter to jump.
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Adjuster
See Loss adjuster. The independent specialist appointed by the insurer to assess a claim, agree on quantum, and recommend settlement. On large losses they often arrive within 48 hours.
AICOW (Additional Increased Cost of Working)
Cover for expenses you incur during a loss that do not strictly reduce the business interruption loss but are commercially necessary, such as expediting customer deliveries to keep relationships intact. Sits inside Section 2.
Aggregate limit
The maximum the insurer will pay across all claims during the policy period for a particular section or extension. Distinct from the per-claim limit.
All risks
A policy basis where every cause of loss is covered unless specifically excluded. The opposite of a named perils policy. ISR is written on an all risks basis.
Average clause (Co-insurance)
A clause that reduces a claim payout proportionally if the declared value of insured property is below a threshold (usually 80 to 85%) of the actual replacement cost at the time of loss. The single biggest reason large claims pay out short.
Binder
Confirmation that an insurer has accepted the risk and cover is in force, usually pending the formal policy schedule.
Business interruption
Cover for the financial consequence of a physical loss. Replaces lost gross profit, insured wages, and the increased costs of working until your business returns to where it would have been. Section 2 of an ISR policy.
Business pack
A packaged commercial policy built for small to medium businesses. Covers a defined list of named perils with standard sub-limits. The product most growing operations outgrow before they realise it.
Claim excess
See Excess. The first portion of any claim that you wear before the insurer pays.
Co-insurance
See Average clause. The arrangement under which the insured is treated as insurer for any shortfall between declared values and the actual replacement cost.
Combined limit of liability
The single maximum amount the insurer will pay under Section 1 across all insured property at all locations. Replaces individual sums insured per location.
Construction risk
The factors underwriters use to price physical loss exposure. Wall and roof materials, fire protection, sprinklers, presence of EPS or ACP, electrical age, security, and proximity to other risks.
Debris removal
The cost of removing damaged property and debris from the site after a loss, including disposal at a licensed facility. Almost always insured as a sub-limit, often expressed as a percentage of declared values.
Declared values
The values you tell the insurer your insured property is worth, broken down by location and category. Drives the premium and triggers the average clause if the figures sit too low.
Deductible
See Excess.
Defined value
A way of insuring property at an agreed sum, regardless of replacement cost at the time of loss. Less common than declared values for ISR. Useful for items with a clear independent valuation.
Disclosure (duty of)
The obligation under the Insurance Contracts Act 1984 to tell insurers anything you know, or should know, that is relevant to their decision to insure. Failure can let the insurer reduce a claim or void cover.
Dual payroll
A way of structuring payroll cover inside business interruption. Pays 100% of insured wages for the first 13 weeks (often), then a percentage (commonly 50%) for the balance of the indemnity period. Reflects the reality that headcount would be restructured in a long outage.
Endorsement
A change to the policy after binding. Adds, removes, or amends cover. Issued as a written endorsement to the schedule.
Excess
The first part of every claim that you pay before the insurer responds. Higher excesses lower premium. Different sections often carry different excesses.
Exclusion
A cause of loss the policy specifically does not cover. Common exclusions on ISR include war, nuclear, wear and tear, cyber, inherent vice, and mechanical breakdown unless separately insured.
Extra cost of reinstatement
The additional cost of complying with current building regulations when rebuilding after a loss. Almost always written as a sub-limit. Critical for older buildings.
Fidelity (employee dishonesty)
Cover for loss caused by theft or fraud by your own employees. A defined sub-limit. Particularly important for hospitality, retail, and businesses handling cash.
General advice
Information that does not take account of your individual objectives, financial situation, or needs. The default category for educational content like this site, governed by ASIC RG 234.
Gross profit
The basis on which business interruption is insured under most ISR wordings. Defined in the policy as turnover minus specified working expenses, with adjustments for opening and closing stock. Not the accounting definition.
Hard market
A period when insurers are pulling back from a class of business, premiums are rising, capacity is short, and terms are restricting. The opposite is a soft market.
ICOW (Increased Cost of Working)
Cover for the additional expenses you incur to reduce or avoid a business interruption loss. Renting temporary premises, hiring temporary plant, expediting freight. Sits inside Section 2.
Indemnity period
The maximum length of time business interruption cover will pay for after a loss. Usually 12, 18, 24, 30, or 36 months. The wrong length is the most common business interruption mistake.
Insurer
The licensed entity carrying the risk. Different from your broker, who arranges the cover with the insurer.
ISR (Industrial Special Risks)
A broad-form commercial insurance contract written on an all risks basis. Combines property damage (Section 1) and business interruption (Section 2) inside one wording. The default product for businesses with material assets and revenue at stake.
Lloyd's of London
The London-based market that backs specialist risks Australian insurers do not have appetite for. Accessed in Australia through specialist underwriters and brokers connected to the market.
Loss adjuster
The independent specialist appointed by the insurer to assess a claim. Usually arrives quickly on large losses. Negotiates with you and your broker on quantum and recommends settlement to the insurer.
Mark IV / Mark V wording
Standard ISR policy wordings that have evolved over decades in the Australian market. Most insurers issue policies based on, or adapted from, these templates. Mark V is the more recent revision.
Material damage proviso
A clause in business interruption cover requiring that there has also been physical damage covered under Section 1 for the BI claim to respond. Almost universal in ISR.
Named perils
A policy basis where only the causes of loss specifically listed are covered. The opposite of all risks. Most business packs are named perils policies.
PDS (Product Disclosure Statement)
The retail-style disclosure document required for general insurance products sold to retail clients. ISR is not a retail product, so a PDS is not always required, but most insurers still issue one.
Proposal form
The structured form you complete to apply for cover. Captures values, occupancy, construction, fire protection, claims, and any unusual exposures. The document underwriters work from.
Property damage
Section 1 of an ISR policy. Covers physical loss or damage to insured property at insured locations. Building, contents, plant, stock, and items extensions cover.
Reinstatement
Restoring damaged property to the same condition as before the loss, on a new for old basis. The default settlement basis for declared values cover under Section 1.
Replacement value
The cost to rebuild, repair, or replace insured property to the same condition as new. The basis on which declared values should be set under most ISR wordings.
Schedule
The page of the policy that records the specifics for your cover. Insured name, insured locations, declared values, sub-limits, indemnity period, excesses, and the wording version.
Section 1 / Section 2
The two principal halves of an ISR policy. Section 1 is property damage. Section 2 is business interruption. Both sit inside one wording with one set of definitions.
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Sub-limit
A defined cap inside the policy on a specific cover or extension. Smaller than the combined limit of liability. Common sub-limits include theft, money, glass, debris removal, and prevention of access.
Subjectivity
A condition the insurer attaches to cover that must be met within a defined timeframe after binding. Common examples include a site survey within 60 days, or an updated valuation within three months.
Sum insured
The amount nominated for a particular item or category of insured property. Under ISR with declared values and a combined limit of liability, the term is often replaced by declared values plus the limit.
Survey
An on-site risk inspection by an insurer-appointed engineer. Documents construction, fire protection, security, housekeeping, and risk improvement opportunities. Often required as a subjectivity for larger or more complex placements.
Underinsurance
The condition in which declared values sit below the actual replacement cost of insured property. Triggers the average clause at claim time and reduces the payout proportionally.
Underwriter
The decision-maker inside the insurer (or specialist underwriting agency) who decides whether to take the risk, on what terms, and at what price.
Wear and tear
Gradual deterioration of property through normal use and ageing. Excluded under all ISR policies because it is a maintenance issue, not an insurable event.