INSURANCE GLOSSARY

 INSURANCE GLOSSARY 

A

Accident
Accident must be caused by violent, external and visible means and cause of the injury or injuries solely and independently of any other means. 

Accidental death benefit
Benefit, which provides for the payment of an additional sum (usually equal to the sum insured of the basic policy) in the event of death by an accident. 

Accidental Bodily Injury
Injury to the body as a result of an accident.

Act of God
A flood, snowstorm, an earthquake or any other accident or event caused by nature that is unpredictable and occurs without any human intervention.

Additional insured
A person or party, other than the policyholder, who is added to a policy so that they will also be covered by that policy.

Agent
An insurance company’s representative licensed by IRDAI
An insurance company’s licensed representative authorized to sell and service their insurance policies. This agent can be an independent individual representing more than one insurance company to obtain the best pricing for a client. He usually works on commission which is a percentage of the premium which is paid by the client and a service fee. Also usually paid on commission is the direct agent who works exclusively for one company and sells only that company’s product.

B

Beneficiary
The person or entity (e.g. corporation, trust, etc.) named in the policy as the recipient of insurance proceeds upon the death of the policy holder. 

Burglary Insurance
An insurance against loss of damage resulting from or following the unlawful breaking and entering of designated premises.

C

Cancellation
The discontinuance of an insurance policy before its normal expiration date, either by the insured or the insurance company.

Claim
Written request by an insured for the insurance company to cover an incurred loss, usually submitted on the company's standard form. 

Claimant
Person who has as interest in the policy and making a claim on the policy. Critical illness cover a health insurance policy with the benefits payable on diagnosis of one of a number of specified medical conditions. 

Compulsory Excess
A compulsory excess is an amount that your your car insurance company has decided that you will have to pay towards each claim. In car insurance, the figure will vary according to the age of the driver, the type of car, and even the kind of claim. For instance young drivers, who are considered to be high-risk customers, often have to pay much higher compulsory excesses than their older, more experienced counterparts.

Cover Note
A cover note is a document issued in advance pending the issue of the policy, and is normally required if the policy cannot for some reason or other be issued straight away. Cover notes can also be issued during the course of negotiations to provide cover on a provisional basis. A cover note is not a stamped document but is honored, all the same , by all parties concerned.

D

Date of commencement
The date on which cover begins, following acceptance of the risk by the insurer. 

Death Benefit Payable
The amount payable, as stated in a an insurance policy, to the designated beneficiary (ies) upon the death of the insured. The amount paid is the face value, plus any riders that are applicable, less any outstanding loans. 

Declaration
This is the statement or section of the form where the person is required to declare that the statements or answers are given fully and truthfully and that if it were not so, there would be legal consequences. 

Deductible
A provision whereby an insured may be required to pay part of a loss, the insurance being excess over the amount of the deductible.

Depreciation
A decrease in the value of property over a period of time due to wear and tear or obsolescence. Depreciation is used to determine the actual cash value of property at time of loss.

Disability
Inability to perform all or part of one's occupational duties because of an accident or illness: see Total Disability and Partial Disability.

Doctrine of Utmost Good Faith
Insurance contract is issued on the basis that the applicant truthfully and fully discloses everything he or she knows about his or her health. This arises from the recognition that the insurance company is in a disadvantageous position, as the insurer does not know anything about the applicant. Similarly, the insurance company should deal with the applicant with honesty and integrity. 

E

Effective date
The date upon which the policy is put in force, the inception date

Excess (also refer Deductibles)
Agreed amount up to which no claim is paid under a policy.

Expense ratio
The proportionate relationship of an insurer's expenses to premium expressed as a percentage.

Exclusion
A condition under which the benefit is not paid is referred to as exclusion. This is to avoid any misunderstanding. For example, for accidental policies, there is usually exclusion for suicide or self-inflicted injuries by the policy holder. 

F

Fire
A combustion accompanied by a flame or glow, which escapes its normal limits to cause damage.

Fire insurance
Coverage for losses caused by fire and lightning, as well as the resultant damage caused by smoke and water

Free Look
Provision required in most states whereby policy owners have either 10 or 20 days to examine their new policies at no obligation.

G

Grace period
The period of time following the due date of a policy premium during which the payment of the premium will continue the policy and during which the policy is in full force and effect

H

Hazardous occupation
An occupation that has high risk for insurance purposes. Example: a window cleaner on high - rise buildings.

Health insurance
A generic term applying to all types of insurance indemnifying or reimbursing for losses caused by bodily accident or sickness or for expenses of medical treatment necessitated by sickness or accidental bodily injury.

I

Incurred Loss Ratio
The percentage of losses incurred to premiums earned.

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

Insurer
A licensed legal entity, which underwrites insurance, including a mutual insurance company (but note the exemption of pure reinsurers)

Insurable Interest
A condition in which the person applying for insurance and the person who is to receive the policy benefit will suffer an emotional or financial loss, if any untouched event occurs. Without insurable interest, an insurance contract is invalid.

Insurance
Social device for minimizing risk of uncertainty regarding loss by spreading the risk over a large enough number of similar exposures to predict the individual chance of loss.

Insured
The person or company that holds an insurance policy i.e., a policy holder.

L

Lapse
Termination of an insurance contract because of non-payment of premiums. If there are non-forfeiture values, the policy lapses but may remain effective reduced paid-up insurance. 

Liability
Any legally enforceable obligation

Liability Insurance
Insurance covering the policyholder's legal liability resulting from injuries to other persons or damage to their property. Liability Insurance. Provides protection for the insured against loss arising out of legal liability to third parties

Loss Adjuster
An independent professional appointed by the insurers to settle claims

Loss of Profits
A synonym for business interruption insurance

Loss Ratio
The proportionate relationship of incurred losses to earned premiums expressed as a percentage.

M

Marine insurance
A form of insurance primarily concerned with means of transportation and communication, and with goods in transit

Misrepresentation of material facts
Providing the wrong facts or not giving the entire truth of a matter. This is more serious that non-disclosure. It refers to the applicant stating wrong facts or giving half-truths. They are material because if the underwriter knew of it this information, the decision might be different.

Moral hazard
Underwriting the risk affecting an application based on factors such as the personal reputation and character of the applicant, business ethics or the existence of a criminal record. It concerns the intention or motivation behind the buying of a an insurance policy. 

Morbidity
The probability of disability of a life or group of lives.

Mortality
The probability of death of a life or group of lives.

N

Non-disclosure of material facts
An applicant fails to disclose facts that have an impact on the decision of the underwriter (had the underwriter known of this fact, the decision would have been different)

Non - medical cases
Cases where a medical examination is not necessary. Large number of cases are straightforward and do not have any medical problems. For cases within limits on age and the amount on cover, a medical examination is not necessary.

Nominee
Someone nominated to act on your behalf. For example, traders often hold securities in a nominee name as this makes settlement easier.

P

Package Policy
Any insurance policy which covers two or more lines or types of insurance in the same policy.

Paid-up Value
Paid-up Value is the reduced amount of sum assured paid by the Insurer, in case the Insured discontinues payment of premiums. This is applicable only when the Insured has paid the premiums in full for the first three years.

Peril
The event insured against; the cause of possible loss

Personal Injury
In law, a term used to embrace a broad range of torts that includes bodily injury, libel, slander, discrimination and similar offences. Also a standard insurance coverage that protects against a more limited group of torts (false arrest, detention or imprisonment, malicious prosecution, wrongful entry or eviction, and libel, slander, or defamation)

Physical Damage
Damage to or loss of an automobile resulting from a named peril

Physical Hazard
A condition of the subject of insurance which creates or increases the chance of loss, such as structural defects, occupancy, or similar conditions

Physical hazards
Features or facts that can be observed or evaluated. This includes reports from agents, medical consultants or through investigations.

Policy Document
A booklet that details the full product information and terms and conditions of an insurance policy, and the policy schedule(s) which provides the specific benefits/premiums/payment conditions covered. It provides evidence that a contract exists between the insured and insurer.

Policy face amount
This refers to the amount stated in the policy payable in the event of death or maturity.

Policy Term
The period of coverage provided by an insurance policy.

Premium
This is the contribution / payment that a policyholder makes to an insurance company to obtain insurance cover. He or she has a responsibility to ensure that the correct amount states is paid as and when it falls due as stated in the policy document.

Provisions
The terms or conditions of an insurance policy

Public Liability/Third Party Liability
The insured's liability at law (excluding liability to an employee arising out of employer/employee relationship) to pay compensation for death, injury or illness sustained by any person or damage to property caused by explosion or collapse of boiler and pressure plant or use of lilting and handling plant

R

Reimbursement
The payment of the expenses actually incurred as a result of a accident or sickness, but not to exceed any amount specified in the policy

Repudiation of a claim
This process takes place when the claims examiner looks at the policy document and the evidence submitted to him or her and makes a decision to reject it.

Renewal
Continuance of coverage under a policy beyond its original term by the insurer's acceptance of the premium for a new policy term

Renewal Notice
The notice sent to the policyholder to remind him that an insurance is due for renewal by insurers

Repatriation Expenses
(Under Overseas Mediclaim Policy) Expenses incurred to travel back to home country following sickness abroad

Renewal Receipt
The written evidence that a renewal premium has been paid

S

Settlement
A policy benefit of claim payment

Social Insurance
Compulsory insurance, in which the benefits are prescribed by law and in which the primary emphasis is on social adequacy rather than equity

Sum Insured
The limit of liability of the insurers under a policy

T

Theft
The unlawful taking of property of another: the term includes such crimes as burglary, larceny and robbery.

Third party claim
A demand made by a person against a policyholder and any payment that will be made by that company

Total Disability
An illness or injury which prevents an insured person from continuously performing every duty pertaining to his/her occupation or engaging in any other type of work

U

Under-insurance
The situation where the Sum Insured is less than the total value of property at risk.

Utmost good faith
The principle of utmost good faith requires the applicant to disclose all material facts.

V

Voluntary Excess
Voluntary excess is something that the customer themselves chooses to pay in the event of a claim. In return for opting for a higher excess, the insurance provider will usually lower the premium paid. Bear in mind though that the voluntary excess will always be paid in addition to any compulsory excess. So if you have a compulsory excess of Rs. 1000, and then choose a voluntary excess of Rs. 800, you will have to pay a combined sum of Rs. 1800 towards any claim you might make.

W

Workers Compensation
A system of providing for the cost of medical care and weekly payments to injured employees or to dependants of those killed in the course of or arising out of their employment in industry in which Absolute Liability is imposed on the employer, requiring him or her to pay benefits prescribed by law