call  0120-6771031

Common Insurance terminology and their meaning:

Each Industry has its own specific language and Insurance is no different. This page defines the Terms and definitions used mostly in Insurance business and the sole purpose of compiling this is to make you understand the right meaning of technical terms used in the world of Insurance. These definitions are for general understanding and use only.
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
Abandonment
If the cost of repairs were likely to exceed the value of property, it would not be sensible to undertake repair work for damaged property

Absolute Liability
Liability for damages, despite unproven fault or negligence

Absolute Ownership
This exists where the right of possession of the insured is completely unencumbered and free from qualifications, restrictions, and limitations, such that the possession cannot be taken away without the person’s permission

Accident
An unforeseen or unintended event or occurrence

Actuary
Person with expertise in the realm of risk assessment and estimation of premiums for any insurance plan

Accidental Bodily Injury
Injury sustained to the body by accident

Accident, Hit and Run
An accident on the road, wherein the driver responsible for the accident flees the scene, and despite efforts the driver and vehicle remain untraceable

Accidental Death Benefit
Additional monetary benefit paid to the beneficiary in the event of the death of the insured due to an accident

Accompanied baggage
Baggage carried and always with the person whilst travelling

Accumulation
Allows the policyholder to leave received dividends with the insurer, when these dividends can earn interest

Acquisition Costs
The direct costs incurred by the insurer to acquire a new customer and the premium

Act of God
Sudden and irresistible acts of nature, which are unforeseen, not preventable and cause damage to lives and property, such as storms, earthquakes, lightning strikes, and other such natural occurrences

Actual Total Loss
Loss where goods become irrecoverable or completely lost

Additional cover
The extra cover provided by an insurance policy for additional risks, on payment of an additional / extra premium

Adjuster
Insurer’s representative to determine the liability of loss to the insurer in the event of a claim

Administrator
An organization serving as a third-party administrator to process insurance claims, or a service provider of organization to administer services such as underwriting, customer service, and such

Agent
Representative of an insurance company licensed by the IRDA to negotiate and affect insurance contracts and provide service to the insured on behalf of the insurer

Aggravation of Risk
Enhancing or worsening existing risk or problem

Aggregate Indemnity
Refers to the liability insurance, and the amount of coverage that an insured has as per the policy for a specified period, irrespective of the number of accidents occurring during that period

Agreed value policy
The agreed amount the insurer agrees to pay in case of total loss, irrespective of the current market value

All-risks Policy
Known also as peril coverage, this is the coverage provided by the insurer for all losses, except those expressly omitted by the policy

Annuity
It is an insurance product, which gives the annuitant (person to receive annuity) a series of future payments for his/her lifetime after retirement.

Annuitant
The person named in a specialized life insurance contract, who receives benefits of annuity or pension (as mentioned above)

Arbitration
Method of dispute resolution using the expertise of an unbiased person to ascertain extent and responsibility of loss

Arson
The malicious and willful burning or attempt to burn a structure or other property with fraudulent or criminal intentions

Assessor
Also known as, a surveyor, this person estimates the value of goods to apportion the sum payable by the underwriters when settling a claim

Assignment
Transfer of a property, right or obligation from one party to another in a legal manner

Assured
In the event the insured person dies, the person who receives the proceeds of an assurance policy is the assured
Bailee
A bailee is a person or company, who has temporary possession of a person’s property – example drycleaner, jewelers repairing jewelry, parking valet, repairing companies, and other such. The coverage of the policy would include the items that are in transit to and from the bailee’s premises

Basic Limit
This refers to the liability of the insurer, and indicates the lowest amount for which it is possible to write a policy, and the amount is prescribed either by law, or by the company policy of the insurer.

Basic Rate
This is the standard charge for a certain type of risk, with a basic limit.

Balance sheet
This is the sheet, which shows the reserves or amount expressed as a liability on the insurer’s company. This amount reflects the benefits owed to policy owners. The balance sheet shows the amount of money that an insurance company would need to set aside for future insurance claims.

Beneficiary
This could be a person or entity that the main insured would name to receive benefits in case of the insured’s death. It is possible to name one or more people as beneficiaries.

Bill of Exchange
This is an unconditional order for payment of a determined amount of money, and the order would contain the name of the person or company liable to pay the amount mentioned.

Bill of Lading
This is the receipt issued for goods loaded onto a ship. This receipt would state the terms on which the goods would be carried, and would carry the signature of the person contracted to ship the goods. This would also state the liability of the carrier.

Blanket Contract
This is a contract of insurance for a group of people such as employees, sports teams, and others. This provides a ‘blanket’ cover of benefits such as death or dismemberment by accident.

Bodily Injury
This is a term used to indicate and include illnesses, disease, and physical injury to the insured. It would also include death due to these reasons. However, death resulting from unexplained causes would not qualify as bodily injury

Bonus
The sum the insured would receive during the duration of the insurance plan, or at the time of maturity, provided the insured would have paid all the premium amounts due for a specified minimum number of years.

Borderline Risk
An insured that may appear to be of doubtful integrity or could be a ‘risk’ from an underwriting perspective.

Breach of condition
If a certain condition from the insurance contract were broken or ‘breached’ by the insured, the insuring company may negate the contract from its inception.

Broker
A person or company registered as an adviser on insurance matters and also arranges insurance policies for a client with an insurer

Burglary
Unlawful breaking and entering a premises due to which the insured may suffer losses and or damage. The insurance policy would cover the insured against the expenses from such loss or damage if the plan chosen covers such expenses.

Burning Ratio
This is an insurance rating method based on experience, used often by insurance companies to determine the rates for excess of loss reinsurance, or the insurance cover that an insurance company may buy to protect them when total claims may exceed the total premiums collected by them.

Business Interruption Insurance
Insurance cover for a business owner, which covers any losses resulting from the halting of business due to fire or any other such calamity insured in the policy
Cancellation
Indicates an insurance policy cancelled prior to the end of the coverage period, and often accompanies the return of unearned premium credits

Capacity
Refers to underwriting capacity that denotes the maximum amount of insurance one can buy from an insurance provider

Capital Gain (loss)
Life insurance policies are treated as capital gains taxable assets

Capital sum insured
Represents the amount to be paid to the insured in the case of accidental dismemberment or death.

Captive Agent
A captive agent is a person who works on behalf of an insurance service provider and sell only the policies created by the provider

Cargo Insurance
Refers to policy protection that is extended to all risks arising from damage sustained by sea-borne or air-borne freight

Catastrophe
Natural disasters such as weather events including earthquakes, floods, hurricanes, and terrorist attacks that cause damage to human life, residential property and commercial buildings

Cede
This indicates actions through which an insurance company reinsures its liability with another insurance provider

Ceding Company
An insurance provider that cedes part or all of its risk from insurance business activities enabling it to cut market exposure and to free up operating capital

Certificate of Insurance
Refers to a document detailing the terms and conditions of specific insurance coverage - including information such as limits of coverage, policy numbers, name of the insured, etc.

Cession
Indicates the portions of insurance obligations passed on to a reinsurance company or agency

Claim
Represents a formal request made by an insured entity to an insurance service provider. Upon approval, the insurance company pays out the specified insurance amount

Claim Amount
This indicates the amount of money payable by an insurance service provider to insured entities

Claim settling Agents
Local or international entities authorized to settle claims on behalf of an insurance agency

Claims Cohort
A group or collection of insurance claims that share a common period of origin

Claims reserve
Funds set aside to service future insurance claims from the insured and represent a balance sheet liability for the insurance service provider

Clause
Special conditions included in an insurance policy, which may refer to flood damage, acts of war, motor vehicles, etc.

Claused Bill of Lading
Indicates documents that can be viewed as receipts of goods being shipped. It is a contract defining the extent of a transporter’s liabilities

Clean Bill of Lading
Denotes the fact that merchandise has been received in good condition

Co-insurance
A sharing agreement between the insurer and the insured, which contains the clause stating the insured, will pay a certain percentage of the covered costs of a policy after payment of a deductible amount

Collusion
Unlawful and illegal behavior wherein two parties secretly collude to cheat an insurance service provider

Combined ratio
Expressed as a percentage, this ratio indicates the profitability of an insurance company, and depends on the daily performance of the company

Commercial Lines
Property and casualty insurance products meant for business consumers, which protect businesses from commercial risks and potential losses

Commission
Referred to also as acquisition cost, and this represents a certain percentage of insurance premium paid to insurance agents and brokers as compensation for their efforts

Common carrier
Airplanes, ships, buses, and trucks are common carriers in the insurance business. Accident insurance involving common carriers pay survivors and nominees compensation for accidents involving common carriers.

Common law
Conventions based on customer, usage, and court decisions. In terms of car insurance, a common law partner indicates one of two adults that have been living in a shared address for more than six months.

Comprehensive
Automotive insurance policies, covering vehicle or car damages following accidents, but exclude vehicle collision. These policies cover for fire, vandalism, damages from falling objects, etc.

Compulsory Insurance
Denotes any form of insurance mandatorily required by the law of a country.

Concealment
Refers to situations wherein the insured holds back material information from the insuring company. Insurance providers can void an insurance policy if concealment is proved

Conditions
These indicate the rules and rights of the policyholder and the insurance service provider. Conditions pertain to policy cancellation, changes in coverage, insurance audits, etc.

Consequential Loss
Indicates indirect losses not covered by an insurance policy.

Consideration
The insured receives consideration from insurance provider, when regularly paying policy

Constructive Total Loss
This term is used where the cost of a repair for an item would be more than the current value of the item

Contract of Insurance
The agreement between an insurance service provider and the insured, determining the claims the insurance provider could be required to pay the insured

Contractual liability
The liability imposed upon an entity through the terms of a contract

Contribution
This limits the liability of the insurers, and is used to indicate how much each insurer must pay if there is insurance in more than one company for a particular loss

Contributory negligence
Describes the actions of an insured person or persons contributing to infliction of self-injuries

Cover Note
Temporary coverage issued to the insured by an insurance company and remains in force until the issuance of final insurance policy

Coverage
The degree of risk covered by an insurance policy, and applies to automobile, health, travel, and life insurance policies

Credit insurance
Financial safety net that helps the family of the insured to pay off debts in case of death, disability, or unemployment of the insured

Crop
Farmers, ranchers, and such can purchase crop insurance as a financial safety mechanism. This protects from loss of crops due to hail, droughts, floods, and other factors

Crop-Hail insurance
Protects farmers from damages owing to hail and fire on crops yet to be harvested

Cumulative Bonus
A certain percentage increase in the sum insured at the time of renewal (up to a maximum of 50%) for every claim free year. In the event of a claim, 10% would be reduced at the next renewal

A certain percentage increase in the sum insured at the time of renewal (up to a maximum of 50%) for every claim free year. In the event of a claim, 10% would be reduced at the next renewal
Date of Issue
The date on which the insurer issues the policy to the insured

Days of Grace or Grace Period
A provision within health and life insurance, which allows the insured 30 or 31 days post the premium due date to make premium payment, to allow the insurance to stay in effect

Debris Removal Clause
Added cover to remove debris from an insured property damaged by a cause covered in the policy. This clause usually appears in most commercial property insurance covers

Declination
Rejection of an application for insurance

Deductible
This is the specified amount, which, the insured must pay before the insurer pays towards a covered loss. For example if the deductible is INR10000, and the covered claim is INR20000, the insurer would pay INR10000 towards the claim

Dental insurance
A policy by which the insurer agrees to pay for some or all of the covered dental care costs. Either the insured or the employer would pay premium amounts for the policy, and would need to pay deductibles, co-pays, or co-insurance as well as part of the policy

Depreciation
Depreciation denotes the decrease in the value of a property over time either due to it becoming obsolete or extensive wear and tear. This is used to determine the actual cash value of a property at the time of loss

Directors & Officers Liability
This is a liability insurance covering the directors and officers of a company, for claims made against them while being on the board of directors. The D&O insurance can cover directors and officers of for-profit businesses, privately held firms, not-for-profit organizations, and educational institutions. Such policies are written on a ‘claim-made’ basis, do not contain any explicit function to defend the insured, and cover only monetary damage – thereby excluding BI (bodily injury) and PD (property damage)

Disability
Insurance cover for the insured if the person becomes unable to perform part or all of the job responsibilities owing to illness or accident. Such disability may be partial or total, permanent or temporary, or a combination of these.

Dividend
This is a portion of the profit made by the insurer, which the insurer pays to policyholders (just as it would pay an investor or stockholder). The insured would have several options of how to use these dividends

Double Insurance
The cover provided for the insured of the same risk but through separate and independent insurance policies. The insured would be eligible to make a claim in the event of a loss from both the insurers, and both would be liable to pay as per the cover.
Earned Premium
The total premiums collected by the insurer over a period – earned based on the ratio of the elapsed time on the policies until they are effective. This pro-rated paid in advance premium amount is now ‘earned’ and would belong to the insurer.

Earned but not reported (EBNR)
The amount from premiums that an insurer can reasonably expect to get, even without finalization of contracts and the exact amounts undefined

Effective date
The date from which the policy comes into effect and coverage provided to the insured

Encumbrance
Any claim on a property such as a lien, mortgage or right of dower (right of wife on the husband’s property post his death). The interest for the property owner would reduce by the total amount of encumbrance

Employer’s liability
The legal liability on an employer, placing responsibility to pay damages caused to an employee by way of the negligence of the employer. This sometimes replaces workers compensation, which gains payment for an employee irrespective of whether there was negligence on the part of the employer or not

Endorsement
A written addition / supplement to an existing policy, to change the language and or coverage provided by the original policy. This is referred to also as a ‘rider’

Errors & Omission liability
A professional liability insurance protecting companies and their workers against claims from clients or customers for insufficient work or actions deemed as negligent

Escalation
A contractual provisional, allowing for the passing of an increase in costs to the other party, and could come about due to situations beyond the control of both parties – for example inflation

Estimated Maximum Loss (EML)
An estimate of the monetary loss sustained by the insurer for a single risk – caused by fire or explosion, and having caused material damage only

Ex Gratia
A voluntary payment by the insurer for a loss to the insured – this payment is made despite the insurer not being liable to do so under the terms of the policy

Excess (also refer Deductibles)
This refers to an insurance to cover an unusual or one-time risk, and refers additionally to losses over a certain sum not covered by the regular policy

Excess of loss reinsurance
It is a type of reinsurance in which, the reinsurer compensates the ceding company (company that transfers the insurance portfolio to a reinsurer) for any losses exceeding a pre-determined limit.

Exclusion
These are a list of hazards, circumstances, dangers, or property not covered by a policy, and this list is usually provided in the terms and conditions of a policy

Expense ratio
This is the ratio used in the insurance industry to measure the profitability of a company by dividing the various expenses by the net premiums earned. These expenses usually include cost of acquiring a customer, underwriting, customer service, advertising, employee wages, and commissions for the sales team

Extended coverage insurance
This is cover provided to the insured in combination with a fire insurance policy. This would include cover against loss or damage sustained by windstorm, hail, smoke, explosion, riots, civil commotion, and vehicle and aircraft accidents
Facultative Obligatory Treaty (Also Semi-obligatory Treaty)
The treaty provides the primary insurer with the option of ceding or not, any individual risks. This is subject to the reinsurer accepting the ceded risks

Face Amount
Sum of money paid to obtain an insurance cover. This amount appears on the top sheet (face) of the policy. In the context of life insurance, this is the amount paid on maturity of the policy, death of the insured, or if cover is provided, then on the total disability of the insured

Facultative Treaty
A bond for the reinsurance of a single risk or a predetermined package of risks, under which it is not mandatory for the primary insurer to cede such risks to the reinsurer, and neither, is it necessary for the reinsurer to provide reinsurance cover

Fidelity Bond
This is a type of insurance cover to protect the insured against losses incurred by fraudulent acts by specified individuals. It is usually bought to protect a company against business losses caused by dishonest actions of employees

Financial Loss Insurance
Covers the insured against financial losses only – not covering bodily injury or loss or damage to property

Fire
Combustion that occurs combined by a flame, going beyond the normal limits of causing damage

Fire insurance
Insurance cover to protect the insured against losses caused by fire and lightning, and the resultant damage occurring by smoke and water

Floater Policy
Cover and protection that follows insured moveable property, irrespective of its location

Flood
Overflow of water from its natural setting and boundaries, also defined as the general and temporary condition of partially or completely deluging normally dry land. Flood is also defined as the overflow of tidal waters or the rapid and massive accumulation of surface water from any source

FOB (f.o.b.)
The abbreviation for free-on-board. This is used to describe the value of goods at the point of loading, and does not include transport and insurance expenses.

Franchise
A deductible in which, the insuring company has no liability for losses under a particular amount. However, if the amount specified is exceeded, the insurer would pay in full for the loss

Fraternal Insurance

This is life insurance for individuals who join a fraternal (friendly / brotherly) group, and receive several benefits in addition to life insurance.
General average
Refers to a legal principle mandating a proportional sharing of actual loss incurred during an emergency by all parties involved, mainly in marine business

General damages
Denote non-economic loss such as pain, suffering, emotional distress, etc. It is not possible to allocate an exact rupee value to such damages

Grace period
Refers to the period beyond the contracted date of payment, in which late fees are not levied

Graded commission
Indicates the amount of commission payable to insurance agents based on size of premiums realized from the insured

Goodwill
An intangible business asset

Gross Negligence
Indicates a voluntary act of omission or neglect in the performance of legal duties, leading to harm or damage of life or property of another

Gross Premium
Indicates net premium plus expenses and commissions

Gross Profit
Insurance coverage protecting against business interruptions and covering the cost of restoration of business and compensates for loss of profit

Group insurance
Offers standardized coverage to a certain set of employees or members of a professional association

Group Annuity
Indicates a defined contract for a tax-eligible plan of retirement, where members do not own shares, but ‘units’ in the investment pool
Hail Insurance
Insurance coverage protecting farmers against loss of crop owing to hail

Hazard Insurance
Insurance cover protecting the insured against damages caused by severe storms, earthquakes, fire, and other natural calamities. To receive compensation for these damages they should be covered within the policy bought by the insured

Health Insurance
Insurance covering the whole or part of the expenses the insured might incur due to medical reasons

House Breaking Insurance
Protects the insured from damages caused by robbery, thefts, burglary, etc. or even attempts of such acts

Housekeeping
Cleaning and janitorial services provided by a company. Such companies usually buy insurance to protect against financial risks owing to lawsuits and damage to property

Householders Policy
Insurance policy providing homeowners with a wide range of liability and property cover

Hurricane
Defined as a low pressure storm with high velocity circular winds reaching speeds of 120 miles / hour or more, capable of causing extreme damage to life and property

Hull Insurance
Defined as a low pressure storm with high velocity circular winds reaching speeds of 120 miles / hour or more, Insurance covering physical damage to a sea bound vessel or aircraft
IBNR (Incurred but not Reported) provision
This refers to amounts set aside in ‘reserve’ for claims and or events that may have occurred, but may not yet have been reported by the insured

Illegal Contract
A contract that violates the law and public interests – hence is unsustainable and does not have legal support

Imputed Negligence
Refers to a case where the responsibility of damage is transferrable from the neglectful party to some other person, such as an employer

Incurred Claims
An estimated amount including a realistic estimate outstanding liabilities and paid claims, over a pre-determined valuation period

Incurred Loss Ratio
Indicates the ratio of total amounts paid in claims plus adjustment expenses divided by total premiums

Indemnification
Compensation by the insurer either, by payment, repair, or replacement for a loss to the victim, either in whole or in part

Indemnify
A legal principle specify that the person insured must not ask for more than the actual cash value of a loss incurred, but only as much as would restore them to the same financial position as before the actual loss

Indemnity Period
The period starting from the date of damage during which affects the turnover of the business, and ending when either the turnover reaches the same amount as before the damage or the expiry of the maximum such period, whichever occurs first.

Indemnity principle
The principle stating that the insured must be restored to the approximately same financial position as she or he may have had before the loss

Indirect Loss (Or Damage)
The loss, which is not a direct loss from the peril or hazard, but occurs as a result of the loss from the peril – not covered by insurance policies

Inherent vice
The loss of quality in property causing it to damage or destroy itself

Insurable interest
This exists when the insured gains financial and other benefits from the existence of an insured object, without impairment or damage

Insurance
A contractual agreement between the insurer and insured, where the insurers guarantees compensation for a specified loss, damage, illness, or death, in return of a specified sum of money called premium

Insurance Company
A company providing coverage in the form of compensation to the insured, for loss, damages, illness, injury, hardship, or death in exchange for premium payment

Insurance Entities
The ‘entity’ providing insurance is the insurer or insurance company, and the person buying such insurance is the insured or policyholder

Insurance Product
A financial instrument providing protection to the insured, and stating the terms and conditions, and an overview of which events would lead to claim payout

Insurance Policy
A contract between the insurer and the insured, determining the claims for which the insurer is legally bound to pay the insured

Insured
Refers to a person buying insurance products, and also known as policyholder

Insurer
Refers to an insurance company or insurance services provider underwriting the insurance risk, and undertaking to pay compensation to the insured

Intermediary
Refers to agents, brokers, and financial advisors, representing consumers in insurance transactions

Irrevocable beneficiary
Beneficiary designation disallowing any change in the beneficiary of an insurance policy, without prior consent of the named beneficiary
Jettison
This is the act of throwing part of a ship’s cargo or hull, in an attempt to save a ship from sinking. The insurance policy for this covers the losses incurred from such actions

Jewelers Block Insurance
A package insurance policy protecting jewelers from business risks and losses

Joint-and-Several Liability
Legal principle permitting an injured person to file a lawsuit and recover compensation from one or more of the malefactors, regardless of the wrongdoer’s degree of negligence or carelessness, causing losses and problems

Joint & Last Survivor Liability
Indicates annuity payments, which an insurer pays to the last surviving member of a group of insured persons
Key-Person Insurance
Insurance taken with the intent to protect a business against the loss of income resulting from the disability or death of a critical to success/ key employee
Lapse
Termination of a policy owing to the non-payment of premium by the insured

Larceny
Unlawful usurping, leading, riding or carrying away of another person’s property

Law of large numbers
Used by insurance companies to estimate the losses a particular group of insured people could have in the future

Legal Costs
These are the costs when defending a claim from a third party and a claimant, for which the insured could be liable to pay

Legal liability
Liability imposed by a court of law on a person

Lessee
Person who is a tenant or who has a lease – could be property or motor carrier on hire

Lessor
The person granting the lease / owner – of property or a vehicle to the lessee

Letter of Credit (LOC)
A legal guarantee issued by a bank or any other entity, which states that the entity would pay upon the receipt of certain documents, and the compliance of the terms of the LOC

Liability
A legally enforceable obligation, within the insurance context it means the obligation that one has to pay monetary compensation for damage or injury caused to another from sheer negligence or actions prohibited by law

Liability Insurance
This pays for and renders service on behalf of the insured for any losses to others owing to negligence and irresponsibility on the part of the insured. This is a legally bound contract.

Licensing
The certification provided to a person to sell, solicit, or negotiate insurance terms. This person could be an agent, broker, consultant, intermediary for reinsurance or an excess lines broker (someone licensed to sell insurance not available in the domicile of the insured)

Line
This allows consumers to buy property and casualty insurance through the insurance market regulated by the state. The policyholders, agents, brokers, and insuring companies are all equally able to design and negotiate personalized insurance covers and negotiate

Load
Additional charges on an insurance premium to cover risks that would be above the usual levels

Loss Adjuster
These are independent claim specialists, hired and paid for by an insurance company, to investigate complex or controversial claims

Loss of Profits
Losses in profit in a business may incur from perils such as fire, floods, hurricanes, storms, earthquakes or volcanic eruption

Loss
This could be in any form. Loss of - assets, personnel, property, time, and legal liability

Loss Ratio
This is expressed as a percentage and defined as the comparable relationship between incurred losses and earned premiums

Lloyd`s of London
An insurance market in London, where members form a group to provide insurance and spread the risks involved over several organizations, businesses, and even individuals. This group decides which type of risks they would want to insure as they specialize in managing different types of risks. The focus of this ‘market’ is to act as an arbitrator between clients, brokers, underwriters, and insurance companies
Margin of Solvency
This acts as buffer for an insurance company against risks with regard to investments. It is the amount by which, the assets of an insurance company, by fair assessment, would exceed the liabilities and other similar commitments

Marine
Refers to the sea or the transportation via this route, and is usually divided into ocean and inland marine

Marine Insurance
Insurance covering the risks involved with transportation of goods via the sea route

Market Value
The price, for which anything would sell, in particular assets such as stocks and bonds, is the market value. This value is based on prevailing market conditions

Material Damage Policy
The policy, which, covers damage to property, which may result in interruption to normal course of business

Material Fact
Pertinent information if known would change the underwriting basis of an insurance policy, and would be the cause of insurance application refusal or higher premium charge by the insurer

Misrepresentation
A statement or a circular that falsely states policy terms, thereby misrepresenting the actual policy

Moral Hazard
The probability of loss for the insurer resulting from the dishonesty of the insured, which could cause the person to attempt fraudulent behavior towards the insurer

Mortality
Incidence of death

Morbidity
Incidence of disease / illness

Morale Hazard
This implies indifference of the insured to loss owing to the existence of insurance. This attitude raises the probability, frequency or severity of a loss from an insured peril

Mortgage
Used by a buyer to raise funds to purchase property, while placing collateral on the mortgaged property

Mortgagor
An individual or company borrowing money to buy real estate

MPL (Maximum Probable Loss)
MPL (Maximum Probable Loss)

Multi-Peril Policy
A single package policy, providing protection against several types of perils
Named Perils Policy
A property policy with coverage for specific named perils such as fire, windstorm, theft, smoke, etc, rather than protection against personal loss

Negligence
Negligence could either, be through acts of commission and omission or both. It is the failure to exercise care, which a wise and sensible person would use in similar circumstances

Net Income
The total earnings / profit of a company calculated by deducting the operational costs of business from the total revenues

Net Premium
The present value of a policy’s benefits subtracted from the present value of premiums in the future. The calculation of net premium does not include future expenses associated with maintaining the policy

Net Premiums Earned
Total premiums collected by an insurance company over a period, earned basis the elapsed time on the ‘life’ of policies

Net Premiums Written
The total amount of premiums written by an insurance company over a period, subtracting premiums given to reinsurance companies and any assumed reinsurance

Net Retention
The amount of policies remaining post the accounting for cancelled, lapsed, or ceded to reinsurer. This represents the turnover of the policies of a company over a specific period, and calculated by dividing net premiums by gross written premiums

No Claims Bonus
A reduction in the price of an insurance policy at the time of renewal owing to no claims made on it

No-Fault
A system in insurance where the right to sue another for damages caused through negligence remains limited by offering expanded first party benefits

Nominee
The person named by the insured to receive benefit in case of the death of the insured, thereby giving the authority to the insurer to settle claims
Obligatory Treaty
A reinsurance contract under which business may be surrendered according to the terms and conditions therein. The reinsurer must accept these terms

Occupational Hazards
The dangers that an insured may be exposed to given the nature of their job / occupation, dangers, which would be greater than normal. This refers also to the periods of absence due to disability owing to the nature of the occupation

Ombudsman
The person in authority created by the Government to enable individual policyholders to settle their complaints out of court in a swift, effective, and economical manner

Open cover
Automatic insurance cover to ensure that no shipments remain uninsured

Opening Form
The form that persons need to fill in order to open an online insurance account

Operative Clause
This sets out the circumstances that should be present prior to the insurer making any payment for claims made by the insured
Package Policy
It is a single policy, which is a combination of two or more individual policies

Partial Disability
A condition resulting from illness or injury, preventing the insured from performing one or more tasks of her or his regular job

Particular Average
A partial / any other loss apart from total loss, caused by an insured peril

Peril
A possible cause of either total or partial loss

Personal Injury
Indicates bodily injury, false arrest, detention or imprisonment, wrongful eviction or entry, vicious trial, defamation or slander against a person

Physical Damage
The loss or damage to a vehicle from a named and insured peril

Physical Hazard
It is a condition, which creates or increases the possibility of loss

Pilferage
Pilferage

Policy
The written contract between the insurer and the insured, which comprises of policy form, declarations page, and riders amending the form

Policyholder
The insured / the person in possession of the insurance policy

Policyholder's funds
This represents the deposits made by the customer, and includes credited interest at contractual rates

Policy Period
The duration of the policy including the time and date of policy inception to the time and date of its expiration

Policyholder's surplus
The amount difference between the declared assets and liabilities of the insurer, determining the insurer’s financial prowess to take more business

Policy Term
The coverage period afforded by an insurance policy

Pool
A system allowing risk sharing, in which members of a group are collectively responsible for loss

Premium
The charge by an insurer to provide insurance coverage as illustrated in the policy document

Premium Notice
The notice from an insurer informing the insured of premium due

Principal
The person or group of persons authorizing an agent to act and make decisions on their behalf

Pro Rata Cancellation
This is the cancellation of an insurance policy where the insurer completely refunds any premiums paid in advance by the insured

Product Liability Insurance
The insurance cover for manufacturers, merchants, or distributors for any financial loss that could arise from legal liability owing to injury or damage to another from the use of the products covered under insurance

Professional Indemnity
Insurance cover for professionals (such as doctors), against legal liability for claims resulting from professional misdemeanor

Property Insurance
Financial protection from insurance against losses or damage to personal property caused by covered perils such as fire, hail, windstorm, theft, explosion, riots, aircraft, motor vehicles, acts of riots, civil commotion, and vandalism, and smoke

Proposal
The contract between the insured and insurer listing out terms and conditions

Proposal Form
The form required to formalize the contract between the insured and insurer – this form has the details of the insured

Proposer
Another name for the insured – person, seeking protection from unforeseen losses that could happen due to an eventuality

Prospectus
The document with the summary of the features entailed in an insurance policy

Provisions
Provisions

Proximate Cause
This is the reason determining why loss or damage occurs, and whether the loss or damage were actually a result of a covered peril

Public Liability/Third Party Liability
Public Liability/Third Party Liability

Punitive Damages
Punishment in addition to compensatory damages, awarded to a wrongdoer for malicious acts or misdemeanor, resulting in harm to another

Pure Risk
Conditions that create possible opportunities for loss and absolutely no possibility of gain
Quota Share Reinsurance
This is automatic reinsurance, which binds the surrendering company to give up a fixed percentage of every risk, irrespective of the quality or size of the risk

Quote
The estimated cost of insurance the insurer offers, based on the information provided by the person applying for an insurance policy
Rate
The price factor determining the premium the buyer would need to pay

Recurring Clause
A provision provided in health insurance, which determines the time elapse required between periods of disability, for its recurrence to be viewed as a new period of benefit

Reimbursement
Recompense provided to the insured by the insurer for expenses incurred on an accident or illness. This amount would however, not exceed, the compensation specified in the insurance policy

Reinstatement
Restoration of a lapsed policy

Reinsurance
The underwriter placing insurance under a different company in order to cut down the risk for the original insurer

Renewal
The continuation of terms and conditions under an existing policy, mostly without an increase in the premium

Renewal Notice
An official reminder from the insurer reminding the insured of the time and conditions for renewing the existing policy, and this notice would need to be signed by the insured and returned to the insurer

Renewal Receipt
A proof of payment by the insurer provided to the insured. This can be submitted by the insured to secure tax saving benefits

Repatriation Expenses
Expenses incurred by the insured to travel back to their home country following an illness when traveling overseas.

Replacement Cost
The cost of repairing or replacing a property at the cost of construction prevalent at the time the loss is incurred

Representation
Statement made by an applicant stating that all details provided in the insurance application would be true to the best of her or his knowledge, but no warranted as being exact

Rescission
Rescinding of the insurance policy by the insurer on grounds of misstatement and misrepresentation by the insured

Reserve
A certain sum or percentage of liquid assets, which an insurer must have as a standby to fulfill all claims of insurance policies and any other liabilities

Respondentia
A type of marine insurance for the cargo onboard

Restoration
Reinstatement of the sum assured, albeit with different conditions

Retention
The sum of money the insured person or business would need to pay in the event of a claim for loss

Retrocession
The amount of risk taken on by the reinsurance company

Retrospective Date
This is date added to a policy to cover professional insurance claims even before the policy actually came into effect

Return Premium
A fraction of the paid premium returned to the insured in the event - the policy is cancelled, there is an adjustment to the rate, or in case of overpayment of an advance premium

Revocable Beneficiary
The change of the designation of the beneficiary made by the owner of the policy, without prior information to the current beneficiary

Rider
An amendment to a policy, which adds or removes coverage, also referred to as an endorsement

Risk
A potential source of loss through damage, injury, liability, or any other untoward incident, which could be avoided by anticipatory action.

Risk Management
Practice of identifying possible ‘risks’ before they happen, analyzing possible causes, and taking precautionary steps to reduce or remove them

Robbery
Use of force or threat while committing a theft

Running Down Clause
Rider to an Ocean Marine Hull policy, which provides protection against damage caused to another ship due to collision
Salvage
Damaged property taken over by the insurer to decrease the loss post paying a claim

Schedule
The framework of the cover provided by a policy, giving details of the insured such as occupation, limits of the cover, sum insured, and any excess

Self-Insurance
Insuring one’s interest and future by maintaining adequate funds instead of buying insurance to cover possible losses by eventualities

Settlement
The amount payable at maturity to the insured in structured regular installments, up to a pre-determined sum. These are payouts replace a lump sum amount, and the insured is informed of them in advance

Short period rates
If a policy is cancelled by the insured, this method is applied to calculate the amount of premium to be refunded

Short Rate Cancellation
This serves as a deterrent for the insured to cancel the policy before its expiration. The insurer is entitled to retain a larger percentage of the unearned premium than otherwise applicable

Social Insurance
Compulsory contribution to enable funds during sickness, unemployment, or other such conditions

Solvency margin
The amounts / assets, which by fair calculation, would be said to exceed the insurer’s liabilities and other similar commitments to the policyholders

Special Damages
Compensation awarded to an injured party for tangible losses such as medical expenses, wage loss, loss through usage, etc.

Speculative Risk
The term for a situation where there is a possibility of either loss or gain financially – however because it is unpredictable, these are not usually insurable

Sprinkler Leakage Insurance
Cover provided by insurance against possible loss from damage to property caused by the accidental leak of an automatic sprinkler system

Standing Charges
The normal / regular charges through which the insurer agrees to provide cover

Statutory Inspections
Certain equipment and factories are legally mandated to be inspected – if there is such a requirement, the insurer arranges the inspection

Strict Liability
A legal principle through which liability is imposed due to possible injury or damage that could arise from some types of hazardous activities

Subrogation
The right of an insurer to press legal charges on a third party who would have caused loss of insurance to the insured – as a way to recover the claim amount by the insured on account of loss incurred by the third party

Subsidence
The downward movement of soil due to compression by the weight of buildings within 10 years of construction – not including settlement

Sum Insured
The maximum amount the insurer would pay in case of eventuality – there is no surety however, that this amount would sufficiently cover the damage

Surety Bond
A promise by a guarantor to pay one party a certain sum if the other party fails to meet an obligation, possibly fulfillment of the terms of a contract

Surplus
Excess profits earned by an insurer

Surrender Value
The amount of money the insurer pays the insured in case of voluntary termination of the policy before maturity

Surrounding Property
The properties surrounding the property of the owner, which could be possibly damaged due to ongoing construction work

Surveyor
The person authorized to carry out survey for claims to estimate the extent of loss
Tail coverage
Clause permitting the insured to bring out claims made against the insured post the expiration or cancellation of the policy, even if the eventuality took place while the policy expired or was cancelled. To get this coverage, the insured would need to pay additional premium

Term
The duration for which a policy provides cover against eventualities

Term Insurance
This insurance provides cover for a certain timeframe / years. In the event of the death of the insured during the policy cover, a death benefit is paid out to the nominee

Technical provision
The provisions required by the insurer to fulfill its obligations, and ensure settlement of commitments to its policyholders

Tenants Liability
A form of insurance provided cover from bodily injury or damage to property due to the negligence of the owner

Theft
The act of stealing in all forms

Third party
An entity involved in some way in the interactions that take place between two other entities

Third party claim
The liability put forward by persons claiming injury or harm by the insured – the insured being the first party, insurer second party, and the person claiming being the third party

Third Party Liability
Accountability of the insured against claims made by a third party for loss incurred by the third party – losses could be cause by the insured or by the third party

Tornado
A violent storm of a tall column of fast spinning air, capable of extreme damage

Tort
A private or civil wrongful act, which would raise legal liability

Total Disability
The complete inability of a person to work as before, owing to sickness or injury

Total Loss
A judgment issued by the insurer, stating that the value of loss or cost of repair for a damaged property would exceed the value of the cover provided in the policy

Treaty
A written agreement between an insurer and reinsurer, mentioning the types or kinds of business that the reinsurer would take on from the insurer

Turnover
The rate / percentage at which employees leave the employment of a company during a particular period
Uberrimae Fideit
This is a phrase in Latin meaning ‘most good faith’ – and is the legal terminology governing insurance contracts

Umbrella Liability
Extra liability insurance protecting the insured from any major claims and or lawsuits – thereby providing cover for existing assets and the future

Under-insurance
Less than adequate insurance cover for an insured – this could lead to financial losses for the insured in the event of a claim, since the claim could exceed the maximum amount that the insurer would pay

Underwriter
The person in insurance responsible to take decisions regarding the feasibility of an insurance application, and this person would be responsible for determining the price, amount, and terms and conditions under which an application may be accepted

Underwriting
The process of determining acceptance of a risk, what amount of insurance would be applicable for the risk, and the premium amount for such insurance

Underwriting Profit or Loss
The profit or loss that an insuring company could have from providing insurance or reinsurance

Unearned premium
The premium equivalent to the time remaining on a policy – proportionate to the ‘live’ portion of the insurance, which therefore would appear as a liability on the books of the insurer

Unenforceable Contract
A contract that cannot be legally enforceable since it could be violating a law, or, would go against public policy, or could be part of a banned activity. Owing to it not being legally binding, the insured would be unable to force the insurer by law to pay benefits, and neither would the insurer be able to claim premium payment

Uninsurable Risk
A condition with a high likelihood of loss, or which according to insurance would be against the law – insurers limit the amount of their losses by not covering certain risks that would most likely result in loss

Utmost Good Faith
This means that persons buying insurance have a legal obligation to act in good faith towards the insurer
Valuation
The clause within an insurance policy clearly determining the amount of money the insured would receive from the insurer in case the insured incurs loss when a covered event were to occur

Valued Policy
This pays a predetermined loss amount, not related to the actual incurred loss – mostly used in life and death insurance policies

Void
This means not enforceable by law – a number of actions by the insured could render an insurance policy void

Void Contract
The contract between the insured and insurer that ceases to be legally enforceable or valid due to some reason, during any time of its existence

Voidable Contract
This can be legally binding and enforceable depending on the handling of the defect in the contract
Warranty
The promise by the insured, stating that all information and statements declared in the insurance contract are true

Warrant
A mechanism, which affords the policyholder, the right to buy or sell interest at a price and time determined in the warrant agreement

Whole Life Insurance
A life insurance policy guaranteed to remain in force during the entire life of the insured or until the date of policy maturity, subject to the payment of premium

Workers Compensation
Provides wage replacement and medical benefits to those employees, injured during their employment, in return for the employee not suing the company for negligence

Written Premiums
The premium amounts registered with the insurer or reinsurer at the time a policy is issued to a person, and the premium paid up