Friday, January 9, 2015

Insurance examinations - Tips on insurance awareness - Part: 005

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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