| A |
| Accident |
|
An event that is unforeseen, unexpected, and unintended |
| |
| Accidental bodily injury |
| Physical injury sustained as the result of an accident |
| |
| Accidental death benefits |
| A provision added to a life insurance policy for payment of an additional benefit in case of death that results from an accident. This provision is often called "double indemnity." |
| |
| Act of God |
| An event arising out of natural causes with no human intervention which could not have been prevented by reasonable care or foresight. Examples are floods, lightning, and earthquakes. |
| |
| Actuary |
| Someone professionally trained in the technical aspects of insurance and related fields, particularly in the mathematics of insurance (the calculation of premiums, reserves and other values). |
| |
| Adhesion |
| This is a characteristic of a unilateral contract which is offered on a "take it or leave it" basis. Most insurance policies are contracts of "adhesion," because the terms are drawn up by the insurer and the insured simply "adheres." For this reason ambiguous provisions are often interpreted by courts in favor of the insured. |
| |
| Adjuster |
| An individual or a company employed by a property/casualty insurer to evaluate and adjust and in some instances, investigate losses and claims |
| |
| Agent |
| An authorized representative of an insurance company who sells and services insurance contracts |
| |
| Aggregate indemnity |
| The maximum amount that may be collected for any disability, or period of disability, under an insurance policy |
| |
| Aggregate Limit |
| Usually refers to Liability Insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents may occur |
| |
| All-risks |
| "All Risks" is used to mean insurance against loss of or damage to property arising from any fortuitous cause except those that are specifically excluded. An insurance contract which provides All-Risks Insurance is an All-Risks policy in contrast with Named Perils policy |
| |
| Annuitant |
| The person entitled to receive annuity payments or who now receives them |
| |
| Annuities |
| Annuities are contracts sold by life insurance companies. In their simplest form, a person pays a sum of money (either a lump sum or a series of payments) and the insurance company makes periodic payments to that person, beginning on the date in the contract and continuing for the rest of his/her life |
| |
| Arson |
| The deliberate setting of a fire |
|
| B |
| Balance Sheet |
| Provides a snapshot of a company's financial condition at one point in time. In respect of an insurance company, it shows assets, including investments and reinsurance, and liabilities, such as loss reserves to pay claims in the future, as of a certain date. |
| |
| Beneficiary |
| The person or financial institution named in the policy as the recipient of insurance money in the event of the policyholder's death. |
| |
| Benefit |
| Amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss |
| |
| Boiler Insurance |
| A breakdown insurance that covers damage caused by the malfunction or explosion or breakdown of boilers, and includes loss or damage to surrounding property and third party death, bodily injury and property damage. |
| |
| Bond Insurance |
| In insurance, a form of suretyship. Bonds of various types guarantee a payment or a reimbursement for financial losses resulting from dishonesty, failure to perform and other acts. There are various types of bonds, Bid Bonds, Performance Bonds, Advance Payment Bonds, Retention Bonds, and Supply Bonds etc. |
| |
| Broker |
| An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and generally selling insurance of various kinds and for several insurance companies. Brokers must be licensed. Brokers resemble agents, except for the fact that, in a legal sense, brokers represent the party seeking insurance rather than the insurance company. |
| |
| Burglary Insurance |
| Insurance for the loss of property due to burglary involving forcible and violent entry to or exit from the premises, including any threat thereof to the occupants of the premises. |
|
| C |
| Cancellation |
| Termination of a contract of insurance in force by voluntary act of the insurer or insured in accordance with the provisions in the contract or by mutual agreement. |
| |
| Capital Sum |
| The maximum lump sum payable in the event of accidental death or dismemberment |
| |
| Captives Insurers |
| Insurance company created and wholly-owned by one or more non-insurers, to provide owners with coverage. A form of self-insurance |
| |
| Cash Flow Underwriting |
| The use of rating and premium collection techniques by insurance companies to maximize interest earnings on premiums |
| |
| Catastrophe |
| Term used for statistical recording purposes to refer to a single incident or a series of closely related incidents causing severe insured property losses. |
| |
| Caveat Emptor |
| Let the buyer beware |
| |
| Cede |
| To reinsure the liabilities associated with insurance policies by passing a portion of the risk exposure and the related premium to a reinsurer |
| |
| Ceding commission |
| A fee paid to the primary insurer by the reinsurer to compensate the primary insurer for underwriting expenses such as marketing, administration, premium tax, etc. |
| |
| Certificate of Insurance |
| A statement of the coverage and provisions of a master contract in group insurance that is issued to individuals covered in the group. It is also a form which verifies that a policy has been written and states the coverage in general, often used as proof of insurance for other legal requirements |
| |
| Claim |
| A demand made by the insured, or the insured's beneficiary, for payment of the benefits provided by the contract |
| |
| Claimant |
| The person making a demand for payment of benefits |
| |
| Claims-made basis |
| A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers' exposure to unknown future liabilities |
| |
| Clause |
| A section of a policy contract or endorsement dealing with a particular subject |
| |
| Co-insurance |
| Arrangement by which the insurer and the insured share, in a specific ratio, payment for losses covered by the policy, after the deductible is met |
| |
| Collateral |
| Property that is offered to secure a loan or other credit (also called security) |
| |
| Combined ratio |
| The sum of the loss ratio plus the expense ratio. A decrease in the combined ratio means financial results are improving; an increase means they are deteriorating |
| |
| Commercial General Liability Insurance / CGL |
| A broad commercial policy that covers all liability exposures of a business that are not specifically excluded. Coverage includes product liability |
| |
| Commission |
| Fee paid to an agent, broker or insurance salesperson as a percentage of the policy premium. The percentage varies widely depending on coverage, term, the insurer and other marketing factors |
| |
| Contingent Liability |
| Liability of individuals, corporations, or partnerships for accidents caused by people other than employees for whose acts or omissions the corporations or partnerships are responsible |
| |
| Cover Note |
| A Cover Note is usually written by an agent/broker or an insurance company, and it informs the insured that coverage is in effect. |
| |
| Credit Insurance |
| Commercial coverage against losses resulting from the failure of business debtors to pay their obligation to the insured, usually due to insolvency. The coverage is geared to manufacturers, wholesalers, and service providers who may be dependent on a few accounts and therefore could lose significant income in the event of insolvency |
|
| D |
| Date of Issue |
| The date stated in a policy as the date on which the contract was issued by the insurer. This is not necessarily the effective date of the policy |
| |
| Decreasing Term Insurance |
| (see Mortgage Protection Insurance) |
| |
| Deductible |
| The amount of loss paid by the policyholder either a specified Rupee amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage |
| |
| Deposit (or Provisional) Premium |
| The premium paid at the inception of a contract which provides for future premium adjustments. It is based on an estimate of what the final premium will be |
| |
| Depreciation |
| A decrease in the value of any type of tangible property over a period of time resulting from use, wear and tear, or obsolescence |
| |
| Difference in Conditions |
| Policy designed to fill in gaps in a business's commercial property insurance coverage. There is no standard policy. Policies are specifically tailored to the policyholder's needs. |
| |
| Directors and Officers Liability Insurance / D&O |
| Covers directors and officers of a company for negligent acts or omissions, and for misleading statements that result in suits against the company, often by shareholders. Director's and officer's insurance policies usually contain two coverages: personal coverage for individual directors and officers who are not indemnified by the corporation for their legal expenses or judgments against them and corporate reimbursement coverage for indemnifying directors and officers. Entity coverage for claims made specifically against the company may also be available |
| |
| Dividends |
| Money returned to policyholders from an insurance company's earnings. Many life insurance policies and some property/casualty policies pay dividends to their owners. Life insurance policies that pay dividends are called participating policies |
|
| E |
| Earned Premium |
| The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires |
| |
| Economic Loss |
| Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property. Includes the loss of earnings, medical expenses, funeral expenses, the cost of restoring or replacing property, and legal expenses. It does not include non-economic losses, such as pain caused by an injury |
| |
| Effective Date |
| The date on which the protection of an insurance policy or bond goes into effect |
| |
| Elimination Period |
| A kind of deductible or waiting period usually found in disability policies. It is counted in days from the beginning of the illness or injury |
| |
| Employee Dishonesty Coverage |
| see Fidelity Guarantee Insurance |
| |
| Employer's Liability Insurance |
| An insurance policy that provides coverage for lawsuits filed by injured employees who, under certain circumstances, can sue under common law or under the Workmen's Compensation Act |
| |
| Endorsement |
| A written form attached to an insurance policy that alters the policy's coverage, terms, or conditions. Sometimes called a rider |
| |
| Errors and Omissions Coverage / E&O |
| A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients |
| |
| Excess of Loss Reinsurance |
| A contract between an insurer and a reinsurer, whereby the insurer agrees to pay a specified portion of a claim and the reinsurer to pay all or a part of the claim above that amount |
| |
| Ex Gratia Payment |
| Latin for "from favor." A payment by an insurer to an insured for which there is no liability under the contract. In some cases an insurer may feel there has been a mistake or a misunderstanding, and he may pay a claim even though he does not appear to be liable |
| |
| Excess Insurance |
| A coverage designed to be in excess over one or more primary coverages, and which does not pay a loss until the loss amount exceeds a certain sum |
| |
| Exclusion |
| A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations |
|
| F |
| Facultative Reinsurance |
| A reinsurance placement that provides an insurer with coverage for specific individual risks that are unusual or so large that they aren't covered in the insurance company's reinsurance treaties. Reinsurers have no obligation to accept the risk offered, but can assess each risk individually in contrast to under treaty reinsurance, whereby the reinsurer agrees to assume a certain percentage of entire classes of business, up to preset limit |
| |
| Fidelity Guarantee Insurance |
| A form of protection that covers policyholders (employers and owners) for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees |
| |
| Fire Insurance |
| An insurance protecting property against losses caused by a fire and lightning and usually extended to cover several additional perils |
| |
| First Loss Insurance |
| A contract written in such an amount as to cover only the insured's expected loss during the policy period |
| |
| Fraud |
| Intentional lying or concealment by policyholders or his/her representatives with his/her consent to obtain payment of an insurance claim that would otherwise not be paid for financial gain |
| |
| Fronting |
| A procedure in which a primary insurer acts as the insurer of record by issuing a policy, but then passes the entire risk to a reinsurer in exchange for a commission |
|
| G |
| Glass Insurance |
| Coverage for glass breakage caused by all risks. Fire and war are sometimes excluded. Insurance can be bought for windows, structural glass, leaded glass, and mirrors |
| |
| Gross Written Premium |
| (see Premiums Written) |
| |
| Group Insurance |
| A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents |
|
| H |
| Hazard |
| A specific situation that increases the probability of the occurrence of loss arising from a peril, or that may influence the extent of the loss |
| |
| Householder's Comprehensive Insurance Policy |
- The typical homeowners' insurance policy covers the house, the garage and other structures on the premises, as well as personal possessions inside the house such as furniture, appliances and clothing, against a wide variety of perils including windstorms, fire and theft, liability to third parties etc.
|
|
| I |
| Incurred But Not Reported |
| This refers to losses which have occurred during a stated period, usually a calendar year, but have not yet been reported to the insurer as of the date under consideration. For instance, insurance company statements prepared after the end of the calendar year would have to include an estimate of losses that occurred during that year but have not yet been reported |
| |
| Indemnify |
| Provide financial compensation for losses in order to place the insured in the same pecuniary position he enjoyed before the loss after the insured event had occurred |
| |
| Insolvency |
| Insurer's inability to pay debts |
| |
| Insurance |
| A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium. It is a form of risk transfer to another |
| |
| Insurable Interest |
| Legal right to insure arising out of legally recognizable relationship with the object for insurance which is capable of financial valuation |
| |
| Insured |
| The party to an insurance arrangement whom the insurer agrees to indemnify for losses, provide benefits for, or render services to. This term is preferred to such terms as policyholder, policy owner, and assured |
| |
| Insurer |
| The party to an insurance arrangement who undertakes to indemnify for losses, provide pecuniary benefits, or render services |
|
| J |
| Joint and Survivor Annuity |
| An annuity with two annuitants, usually spouses. Payments continue until the death of the longest living of the two |
|
| K |
| Key-man Insurance |
|
Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss |
| |
| Kidnap and Ransom Insurance |
| Coverage up to specific limits for the cost of ransom or extortion payments and related expenses. Often bought by international corporations to cover employees. Most policies have large deductibles and may exclude certain geographic areas. Some policies require that the policyholder not reveal the coverage's existence |
|
| L |
| Lapse |
| Termination of a policy because of failure to pay the premium |
| |
| Law of Large Numbers |
| The theory of probability on which the business of insurance is based. Simply put, this mathematical premise says that the larger the group of units insured, the more accurate the predictions of loss will be |
| |
| Limits |
| Maximum amount of insurance that can be paid for a covered loss |
| |
| Liquidity |
| The ability and speed with which a security can be converted into cash |
| |
| Lloyd's of London |
| A marketplace where underwriting syndicates, gather to sell insurance policies and reinsurance. Each syndicate is managed by an underwriter who decides whether or not to accept the risk. The Lloyd's market is a major player in the international reinsurance market as well as a primary market for large risks |
| |
| Lloyd's Broker |
| A person who has the authority to negotiate insurance contracts with the underwriters on the floor at Lloyd's |
| |
| Lloyd's Syndicate |
| A consortium of individual Lloyd's or London underwriters. Usually one person acts for the syndicate in accepting risks or rejecting them |
| |
| Lloyd's Underwriter |
| An individual who underwrites risks through the facility of Lloyd's. These individuals are liable only for their own assumptions of risk and not those assumed by others in the same syndicate or in the overall Lloyd's organization |
| |
| Loss Costs |
| The portion of an insurance rate used to cover claims and the costs of adjusting claims |
| |
| Loss Reserves |
| The company's best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer's balance sheet |
|
| M |
|
Malpractice Insurance |
| Professional liability coverage for physicians, lawyers, and other specialists against suits alleging negligence or errors and omissions that have harmed clients |
| |
| Managed Care |
| Arrangement between an insurer and selected providers to provide comprehensive health care at a discount to members of the insured group and coordinate the financing and delivery of health care. Managed care uses medical protocols and procedures agreed on by the medical profession to be cost effective |
| |
| Marine Insurance |
| Coverage for goods in transit, on water, air and over land. Covers damage or destruction of cargo due to various perils including collision, sinking, capsizing of vessel, being stranded, fire, piracy, and jettisoning cargo to save other property. |
| |
| Moral Hazard |
| A condition of morals or habits that increases the probability of loss from a peril |
| |
| Mortgage Protection Insurance |
| A form of decreasing term insurance that covers the life of a person taking out a mortgage. Death benefits provide for payment of the outstanding balance of the loan. Coverage is in decreasing term insurance, so the amount of coverage decreases as the debt decreases. |
| |
| Mutual Insurance Company |
| A company owned by its policyholders that returns part of its profits to the policyholders as dividends. The insurer uses the rest as a surplus cushion in case of large and unexpected losses |
|
| N |
| Named Peril |
| Peril specifically mentioned as covered in an insurance policy |
| |
| Notice o Loss |
| A written notice required by insurance companies immediately after an accident or other loss. Part of the standard provisions defining a policyholder's responsibilities after a loss. |
|
| O |
| Occupational Disease |
| Abnormal condition or illness caused by factors associated with the workplace. Like occupational injuries, this is covered by workers compensation policies |
| |
Occurrence Policy |
| Insurance that pays claims arising out of incidents that occur during the policy term, even if they are filed many years later |
| |
| Ordinary Life Insurance |
| A life insurance policy that remains in force for the policyholder's lifetime rather than for a term. It contrasts with term insurance, which only lasts for a specified number of years and may or may not be renewable |
|
| P |
| Package Policy |
| A single insurance policy that combines several coverages previously sold separately |
| |
| Pensions |
| Programs to provide employees with retirement income after they meet minimum age and service requirements. Life insurers provide these types of insurance |
| |
| Peril |
| A specific risk or cause of loss covered by an insurance policy |
| |
| Personal Lines |
| Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies |
| |
| Policy |
| Evidence of a contract for insurance between an insurance company and policyholder stating details of coverage |
| |
| Political Risk Insurance |
| Coverage for businesses operating abroad against loss due to political upheaval such as war, revolution, or confiscation of property |
| |
| Premium |
| The price of an insurance policy, typically charged annually or semiannually for non-life and either annually, semi-annually, quarterly or monthly in respect of life assurance |
| |
| Premiums Written |
| The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Net premiums written are premiums written after reinsurance transactions |
| |
| Product Liability Insurance |
| An insurance to protect against liability if the defective product injures someone. Protects manufacturers' and distributors' exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product |
| |
| Professional Liability Insurance |
| Covers professionals for negligence and errors or omissions that injure their clients |
| |
| Proof of Loss |
| Documents showing the insurance company that a loss occurred |
| |
| Proximate Cause |
| It is the active, efficient and dominating cause that brings about the loss |
|
| Q |
|
| R |
| Reinsurance |
| Insurance bought by insurers. A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer's capital and therefore its capacity to sell more coverage. Reinsurers don't pay policyholder claims; instead, they reimburse insurers for claims paid |
| |
| Retention |
| The amount of risk retained by an insurance company that is not reinsured |
| |
| Retrocession |
| The reinsurance bought by reinsurers to protect their financial stability |
| |
| Return on Equity |
| Net income divided by total equity. Measures profitability by showing how efficiently invested capital is being used |
| |
| Rider |
| An attachment to an insurance policy that alters the policy's coverage or terms |
| |
| Risk |
| The chance of loss or the person or entity that is insured |
| |
| Risk Management |
| Management of the varied risks to which a business firm or association might be subject. It includes analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize loss. These options typically include reducing and eliminating the risk with safety measures, buying insurance, and self-insurance |
| |
| Risk-Based Capital |
| The need for insurance companies to be capitalized according to the inherent riskiness of the type of insurance they sell. Higher-risk types of insurance, liability as opposed to property business, generally necessitate higher levels of capital |
|
| S |
|
Salvage |
| Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims |
| |
| Schedule |
| A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items |
| |
| Self-Insurance |
| The concept of assuming a financial risk oneself, instead of transferring the risk to an insurance company. Every policyholder is a self-insurer in terms of paying a deductible and co-payments |
| |
| Severity |
| Size of a loss which is one of the criteria used in calculating premiums rates |
| |
| Solvency |
| Insurance companies' ability to pay the claims of policyholders. Regulations to promote solvency include minimum capital and surplus requirements, statutory accounting conventions, limits to insurance company investment and corporate activities, financial ratio tests, and financial data disclosure |
| |
| |
| Uncertainty as to whether a gain or loss will occur |
| |
| Subrogation |
| The legal process by which an insurance company, after paying a loss, seeks to recover the amount of the loss from another party who is legally liable for it |
|
| T |
| Term Insurance |
| A form of life insurance that covers the insured person for a certain period of time, the "term" that is specified in the policy. It pays a benefit to a designated beneficiary only when the insured dies within that specified period which can be one, five, 10 or even 20 years |
| |
| Third-Party Administrator |
| Outside group that performs clerical functions for an insurance company |
| |
| Third-Party Coverage |
| Liability coverage purchased by the policyholder as a protection against possible lawsuits filed by a third party. The insured and the insurer are the first and second parties to the insurance contract |
| |
| Title Insurance |
| Insurance that indemnifies the owner of real estate in the event that his or her clear ownership of property is challenged by the discovery of faults in the title |
| |
| Total Loss |
| The condition of a property when damage is so extensive that repair costs would exceed the value of the property |
| |
| Travel Insurance |
| Insurance to cover problems associated with traveling, generally include personal accident, medical expenses, trip cancellation due to illness, lost luggage and other incidents |
| |
| Treaty Reinsurance |
| A standing agreement between insurers and reinsurers. Under a treaty each party automatically accepts specific percentages of the insurer's business |
|
| U |
|
Underinsurance |
| The result of the policyholder's failure to buy sufficient insurance or under valuing the asset for insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy |
| |
| Underwriter |
| A technician trained in evaluating risks and determining rates and coverages for them. The term derives from the practice at Lloyd's of each person willing to accept a portion of the risk writing his name under the description of the risk |
| |
| Underwriting |
| Examining, accepting, or rejecting insurance risks and classifying the ones that are accepted, in order to charge appropriate premiums for them |
| |
| Unearned Premium |
| The portion of a premium already received by the insurer under which protection has not yet been provided. The entire premium is not earned until the policy period expires, even though premiums are typically paid in advance |
| |
| Utmost Good Faith |
| Voluntary duty to disclose all material information relevant to the risk proposed for insurance by the proposer whether asked for them or not which otherwise would make the contract of insurance void |
|
| V |
| Valued Policy |
| A policy under which the insurer pays a specified amount of money to or on behalf of the insured upon the occurrence of a defined loss. The money amount is not related to the extent of the loss. Life insurance policies are an example |
| |
| Vandalism |
| The malicious and often random destruction or spoilage of another person's property |
| |
| Void |
| A policy contract that for some reason specified in the policy becomes free of all legal effect |
|
| W |
| Weather Insurance |
| A type of business interruption insurance that compensates for financial losses caused by adverse weather conditions, such as constant rain on the day scheduled for a major outdoor concert |
| |
| Workers Compensation |
| Insurance that pays for medical care and physical rehabilitation of injured workers and helps to replace lost wages while they are unable to work. State laws, which vary significantly, govern the amount of benefits paid and other compensation provisions |
|
| X |
|
| Y |
| You/Your |
| These words are used to refer to the named insured in many of the modernized/personalized policy forms |
|
| Z |
|
