Understanding 'Nil' Clauses in Home Insurance Policies

Close-up of insurance contracts file

Home insurance typically covers houses against a variety of sudden perils, including fire, theft and damage from things like wind and rain. Home insurance policies are common, and lenders typically require them when offering mortgages in order to ensure damage to the home can be repaired if disasters occurs. Attached to many such policies is legal wording like "NIL" or "Nils." This language may be more common on United Kingdom policies than American insurance, but it means the same thing no matter where it occurs.

General Definition

In legal language, "nil" is a derivative from Latin that literally means "nothing." When nil shows up in any type of legal document, in means zero, or the absence of any change. Typically legal documents use nil to show that certain actions will have no affect on the document or that no penalties or bonuses will be induced. This often provides a more accurate picture of legal requirements than saying "zero" or "0.0," which can be confusing.

Deductibles

When nil is applied to deductibles, it tends to mean that there is no applicable deductible. Deductibles are amounts that policyholders must pay before the insurer will acknowledge the claim and offer the coverage according to the contract. In some cases, however, specific events will have no deductible at all. Insurers may not require a deductible for losing a key, or for willful destruction through dishonesty by an employee, or for other events. In this case, the required deductible may be marked nil.

Liability

Insurers have a certain amount of liability when it comes to honoring the contract, investigating claims, making payments and overseeing key repairs for home insurance policies. However, sometimes actions by the insured can violate contracts, even if the insured person is not aware of it. Policyholders may leave out key information, act in ways against the specifics of the policy, or forget to make key disclosures. In these cases, insurers may agree to cover the damage anyway (especially if the insured person acted innocently) but the liability of the insurer falls to zero, or nil.

Insurance Changes

In some cases, nil can be used to show the affects of a policy premium change. For instance, insurers often offer a bonus for policyholders that buy both home and auto insurance. They have have rules or schedules that show reductions in premiums that result from specific actions. If an action will not have an affect on premiums during its first stages, the chart may mark the change as "nil."