INSURANCE TERMS

SOME INSURANCE TERMS

• ACT OF GOD: Even caused by nature that is so unpredictable as to be unavoidable, for example, the timing and location of earthquakes or floods. Acts of God are normally insured against as a matter of course.
• ACTUARY: A person professionally trained in the technical aspects of insurance and related fields. The actuary estimates how much money must be contributed to an insurance pension fund in order to provide future funds.
• ANNUITY PLANS: These plans provide for a “pension” (or a mix of a lumpsum amount and a pension) to be paid to the policy holder or his spouse. In the event of death of both of them during the policy period, a lumpsum amount is provided for the next of kin.
• ASSIGNMENT: A legal option by which the policy holder can transfer his interest in the policy to another person, usually to a creditor (bank). An assignment can be made by an endorsement on the policy document or as a separate deed.
• ASSURANCE: Insurance that provides for an event that will certainly happen (such as death), as opposed to an event that may happen. There are many types of assurance policies such as endowment assurance, life assurance, and so on.
• ASSURED (INSURED): The person whose life is covered by a policy of insurance.
• AVERAGE CLAUSE (CONDITION OF AVERAGE): In marine and commercial insurance and some fire insurance policies, a clause in the policy that stipulates certain items shall be subject to average if there is under insurance.
• CAVEAT EMPTOR: Latin for “buyers beware”. In legal terms this maxim means that a buyer of goods should use his or her own common sense, and that the law is not prepared to aid someone who buys goods foolishly.
• COVER NOTE: Document issued by an insurance company giving cover for a short time, often one month, while a complete policy (and, possibly, an insurance certificate) is drawn up and issued.
• DEPRECIATION: A decrease in the value of property over a period of time due to wear and tear or adolescence. Depreciation is used to determine the actual cash value of property at time of loss.
• ENDOWMENT POLICY: In this type of policy, the person assured has to pay an annual premium which is determined on the basis of the assured’s age at entry and the term of the policy. The insured amount is payable either at the end of specified number of years or upon the death of the insured person, whichever is earlier.
• ESTOPPEL: Legal restrictions on a person’s actions. The law insists that a person must bear liability for previous actions. Estoppel is generally used to prevent a denial of responsibility, for example, the parties to a contract cannot subsequently claim that they were unaware of its conditions.
• Ex- GRATIA PAYMENT: In insurance, a payment made to settle an issue (such as an insurance claim) but without admitting liability.
• FREE LOOK PERIOD: It refers to the short period available immediately after buying a policy with in which policyholder has the option to return the policy if not satisfied with the terms and conditions of the policy. The premium paid by the policyholder is also returned after deducting expenses.
• GRACE PERIOD: It refers to the period available after the due date for paying the premium during which it can be deposited, along with the penalty, if stipulated.
• INDEMNITY: Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately same financial position that existed before loss.
• INSURANCE: A contract under which the insurer agrees to provide compensation to the insured in the event of a specified occurrence, for example, loss of life or damage to property, and in return the insured pays the insurer a premium, usually at fixed intervals.
• LAPSED POLICY: A policy which has terminated due to non-payment of the premium due and is no longer in force.
• MATURITY CLAIM: The payment to the policy holder at the end of the stipulated term of the policy is called maturity claim.
• MONEY BACK POLICY: Unlike endowment plans, in money back policies, the policy holder gets periodic “survivance payments” during the term of the policy and a lumpsum amount on surviving its term.
• PREMIUM: The payment, or one of the regular periodic payments, that a policy holder makes to an insurer in exchange for the insurer’s obligation to pay benefits upon the occurrence of the contractually specified contingency (e.g. death).
• SURRENDER VALUE: The amount payable to the policy holder in the event of his deciding to terminate the policy before the maturity of the policy.
• RISK: It is the obligation assumed by the insurer when it issues a policy. The spreading of risk across a broad base of the population, adjusted for statistical probability, and the protection against catastrophic loss, forms the basis of insurance business.
• SURVIVAL BENEFIT: The payment of sum assured to the insured person which has become due by installments under a money back policy.
• UNDERWRITER: Person or institution that agrees to take up a proportion of the risk of something, in return for a commission. For example, an underwriter may take up the shares of an issue that are not taken up by the public.
• VESTING AGE: The age at which the receipt of pension starts in an insurance-cum-pension plan.
• VOID CONTRACT: Contract that was drawn up on the basis of what turns out to be misunderstandings on both sides. Such a contract is deemed in law never to have existed.
• WHOLE LIFE POLICY: A policy in which premiums are paid throughout the life time of life assured.
• WITHOUT-PROFIT POLICY: These policies are not entitled to participate in bonuses.
• WITH-PROFIT POLICY: Policies entitled to bonus, which is paid at the time of claim-death or maturity one with profit policies.