01. Glossary of insurance
terms:
Abandonment – The
insured relinquishes the ownership of the property, covered by the insurance
policy to the insurance company
Additional cover- An insurance policy extended to cover additional risk perils such as
strikes, riots and civil commotion etc., on payment of extra premium
Advolerem duty – Duty
evaluated on percentage of cargo value
Affreightment- A
contract for the carriage of goods by sea for payment expressed in bill of
lading
Alien insurance – An insurance company domiciled in another country
Annuitant – The person
who receives the annuity during whose life annuity is payable
Annuity consideration – An annuitant making one of the regular periodic payments for an
annuity
Arbitration – A
form of alternative dispute resolution where an unbiased person or panel gives
an opinion about quantum of loss
Arson – The willful
and malicious burning of the property often with criminal intent
Assessor – The person
who estimates the value of goods for the purpose of apportioning the sum
payable by the underwriters to settle the claims. He is also called as the
surveyor
Assignment – An
individual’s personal interest in an insurance policy transferred legally to
another person
Association captive – It is a type of captive insurer owned by the members of a
sponsoring organization or group such as a trade association
Assurance – Cover for
an event that happens some time – e.g. death
Award – The decision
in arbitration
Barratry – It is the
wrongful act committed willfully by the master and/crew against the shipowner
Beaching – Voluntary
standing of a vessel
Bonus – The amount
added or allocated to the sum assured under a “par” life assurance policy
Burglary – It is a
theft committed by breaking into or out of the premises and the evidence of
breaking is essential in order to claim insurance benefits
Blanket contract – A contract of health insurance affording benefits, such as
accidental death and dismemberment for all of a class of persons not individual
identified and it is used for such groups as athletic teams, campers, travel
policy for employees etc
Capital sum assured – It is the sum insured for which cover is required under a personal
accident policy
Cession – Amount of
the insurance ceded to a reinsurer by risk underwriting company in a
reinsurance operation
Collective policy – A policy arranged by several insurance companies to cover large
risks as no single insurer would like to run the risk
Contribution –
Where several insurers cover the same property against the same risks and they
share the loss
Cover note – It is the
document that is issued provisionally pending issuance of insurance policy
Cross purchase plan – An agreement that provides that upon a business owner’s death,
surviving owners will purchase the deceased’s interest, often with funds from
life insurance
Deferred annuity – An annuity plan in which the income benefits begin at some
specified future date
Disability income insurance – A health insurance plan providing periodic payments to replace
income when the insured person is unable to work as a result of illness, injury
and disease
Dismemberment insurance – A form of health insurance that provides payment in case of loss by
bodily injury of one or more body members (such as hands or feet) or the sight
of one or both eyes
Earned premium – The
part of the total insurance policy premium which applies to the portion of the
policy period which has already expired
Effective date – The
date on which the insurance under a policy begins
Ex-gratia payment – The payment by an insurer made(out of grace) without any legal
obligation to do so
Excess – The fixed
amount of loss borne by the policyholder. When Rs. 1000/- is considered as
excess, the first Rs. 1000 of claim has to be borne by the insured
Exclusions – The hazards
or perils not covered by a policy of insurance and the loss arising out of
these exclusions is not paid by the insurers
Face amount – The
amount of insurance provided by an insurance policy and it is also called as
sum assured
Facultative reinsurance – A type of reinsurance in which the reinsurer can accept or reject
any risk presented by an insurance company seeking reinsurance
First party claim – A demand made by a policyholder reorting an insured event directly
to his company
Fixed annuity –
Annuity which guarantees a fixed amount for the periodic payments
Flat schedule – A
type of schedule in group insurance under which everyone is insured for the
same benefits regardless of salary, position or other circumstances
Guaranteed term – The
insurance company cannot terminate the policy during the period of coverage
under a life insurance policy
Immediate annuity – An annuity wherein payment begins immediately
Inchmaree clause – A clause included in marine insurance policy by which perils other
than the perils of the sea are covered
Jettison – It means
throwing off some of the cargo from the ship to save the ship from sinking
Jewellers block insurance – Broad policies insuring the jewelers against all losses to their stock in trade
Juvenile insurance – Life insurance policies written on the lives of children within
specified age limits
Key person insurance – Insurance designed to protect a business firm against the loss of
income resulting from the death or disability of a key employee
Knock for knock agreement – Mutual agreement between insurance companies for simplifying and
reducing administrative costs of settling motor insurance claims
Lapsed policy – A
policy terminated because of non payment of premium
Level premium – A
policy whereunder amount of premium remains unchanged during the entire term of
the policy
Limited payment policy – Life assured pays the premium for a shorter duration than the term
of the policy – i.e. the premiums are limited
Loss adjuster – A
professional expert engaged by an insurer to establish the cause and amount of
a loss or damage
Limits of liability – A sum fixed to be the maximum amount of the liability that an
insurer may pay under a policy
Marine perils – The
risks covered by a marine insurance policy
Material fact – The
information having objective reality that influences an insurer in granting or
not granting insurance coverage
Money insurance – the
cover for loss of money from premises, home or in transit to/from the bank
Moral hazard – A
condition or characteristic by which an insured intends to profit from an insured
loss
Mortality table – A
statistical table that indicates the probability of death and survival at each
age
Net premium – The
portion of the premium rate which is designed to cover the benefits of the
policy excluding the expenses, contingencies and profit
No claim bonus – The
reduction allowed in a renewal premium if no claim was made during the period
of insurance
Open cover – It is a
mechanism by which all the shipments are covered automatically
Optional renewal contract – A contract of insurance in which the insurer reserves the right to
terminate that coverage at any anniversary or in some cases at any premium due
date but does not have the right to terminate coverage between such dates
Package policy – It
is a combination of two or more individual policies or coverages into a single
policy. A householder’s policy for example is a package combining property,
liability and theft coverages for the individual homeowner
Partial loss – Where
the subject matter insured or goods are partly destroyed, there is partial
loss. Partial loss may be particular average, general average or salvage charge
Particular average – In ocean marine insurance, a loss (partial or total) which falls on
one or more property or interest being shipped as opposed to a general average
Plate glass insurance – A kind of insurance which provides for losses caused by breakage of
glass
Professional indemnity – It is a cover granted to professionals covering their legal
liability for any claims arising out of professional misconduct
Public liability insurance – A kind of insurance that offers protection to the insured against
the legal liability for accidental death of or bodily injury to third parties
or damage to their property arising from activities defined in the policy
Quota share reinsurance – It is an automatic reinsurance whereby the ceding company is bound
to cede a fixed percentage of every risk written by it irrespective of the size
or quality of the risk
Re-entry option – An
option in a renewable term life policy under which the policyholder is
guaranteed at the end of the term to be able to renew his or her coverage
without evidence of insurability at a premium rate specified in the policy
Reciprocal insurance – It is an insurance done by insurance company at a reciprocal
exchange. That is to say – the business is given to the reinsurer by insurance
company and some business is placed by reinsurer with main insurer on a
reciprocal basis
Renewal term insurance – A term policy that can be renewed for another period without
evidence of insurability
Running down clause – The clause in an ocean marine hull policy which covers damage done
to another ship by collision and other property damage caused by collision
Salvage – Recovery
made by an insurance company by the sale of property which has been taken over
from the insured as part of loss settlement and it can be the remains of
damaged vehicle or any other property
Schedule rating –
Adjusting the premium on the basis of physical conditions which affect the
probability of loss
Self – insurance – Protecting against losses by settling aside own money instead of
using conventional insurance
Sickness insurance – A form of health insurance providing benefits for loss resulting
from illness or disease
Single premium – Payment
of the entire premium in one instalment at the time of purchasing the policy
Sprinkler leakage insurance – A kind of insurance cover to provide for the damage caused by
accidental flow of water from a sprinkler
Standard risk –
Person who, according to a company’s underwriting standards, is entitled to
insurance protection without extra rating or special restrictions
Substandard risk – Person who is considered as under average or impaired insurance
risk because of physical condition, family or personal history of disease,
occupation
Sue and labour clause – It is a marine insurance clause that requires the policyholder in
the event of loss to take all necessary means to save the property from further
loss and recover from others who caused the loss. The insurer agrees to pay the
costs, even if they exceed the policy limits of liability
Suicide clause – A
clause included in the life insurance policy which provides for non payment of
sum assured in case of assured commits suicide
Temporary total disablement – Disablement suffered following an accident for a specified period
of time
Third party – Any
person other than the two parties signing an insurance contract
Tort – A civil
wrong other than a breach of contract for which a court of law will afford
legal relief e.g. harming another by an act of negligence while driving an auto
Total disability – As illness or injury that prevents an insured continuously
performing every duty pertaining to his occupation or from engaging in any
other type of work for remuneration
Total loss – Loss of all
the insured property under a given policy, a loss involving the maximum amount
for which policy is liable
Travel accident policy – A limited contract covering only accident while an insured person
is travelling
Treaty – An
agreement between a reinsurer and a ceding insurer setting forth details of the
reinsurance agreement
Uberrima fidei –
Utmost good faith; a duty to disclose all material facts
Uninsurable risk – That which is not acceptable for insurance due to excessive risk
Valued policy – A
policy under which an agreed sum is paid to the insured in the event of total
loss without deductions for wear and tear
Variable annuity – An annuity where the investment results of a life insurance
company’s separate account for the variation in the benefits
Voluntary excess – A proposer for insurance agrees to bear a percentage of fixed
amount for any loss generally to reduce the premium such as Es. 2000 excess for
car insurance
Warehouse to warehouse clause – A clause included in the marine insurance policy which covers the
risks from the originating warehouse to the terminating warehouse
Warranty – A statement
by the insured on the literal truth of which the insurance contract depends
Waiver of premium – One of the provisions under an insurance policy where, during a
period of continuous total disability lasting for specified period of time, the
insured is relieved of premium payments falling due during that time
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