Professional Documents
Culture Documents
Insurance: Insurance is a system where the losses of a few are paid from the premiums of the many.
A risk transfer agreement whereby the responsibility for meeting the losses passes from one
party(insured) to another party(insurer) on payment of a premium.
An arrangement by which a Insurer undertakes to provide a guarantee of compensation
for specified loss, damage, illness, or death in return for payment of a specified
premium.
Insurance is a means of protection from financial loss
Quote: A formal statement setting out the estimated cost for a particular job or service.
Policy – Written contract between insurer and insured listing all clauses, coverages and endorsements
which are offered for specific premium.
Binder: Immediate insurance coverage that can be in oral or written form. Usually provides temporary
coverage for a specified time until a formal policy is issued/accepted or denied.
Declaration – Part of insurance policy that states the name and address of policyholder, asset insured,
its location and description, the policy period, premiums, and supplemental information. Referred to as
the “dec page.” Usually a single page.
Term – the time period thro’ which the policy is effective, typically 6 months or one year.
Insurer – Any person who is licensed to solicit, negotiate, or sell insurance, independent agent or direct
writer.
Bill Plan – How the premiums from a policy will be paid to the insurer, usually includes a payment
schedule and payment mode
Limit: An insurance limit is the maximum amount of money an insurer will pay toward a covered
claim. The higher your coverage limit, the higher your premium may be. Limits often apply to
different types of coverage within a policy.
Deductible - The amount of loss paid by the policyholder, either a dollar amount or a % of claim amount.
The higher the deductible, the lower the premium for the same coverage.
Agent: A person/intermediary who acts on behalf of a single Insurance carrier and services the clients
Broker: Also an Intermediary who can work for multiple Insurance companies.
Underwriting: Assess, accept or reject insurance risk and classify those that are accepted for purposes of
rating.
Rating: Process of arriving at a dollar premium value for the specific application under consideration.
Endorsement: It is a written document attached to an insurance policy that modifies the policy by
changing the coverage afforded under the policy. An endorsement can add coverage for acts or things
that are not covered as a part of the original policy and can be added at the inception of the policy or
later during the term of the policy
Premium - Price an insurance company charges for coverage, based on the frequency and cost of
various types of losses, the LOB specific information and the amount of coverage purchased.
Earned Premium: portion of premium earned or charged for the period of time a policy has been
effective
Unearned Premium: The portion of premium received for which protection has not yet been provided.
Gross vs. Net Premium: Premium paid by the policyholder Vs. portion remitted to office after
commission deductions
Commission: Paid to the agent who sold the policy – a % of the total premium paid at any time.
Return Premium - The amount of money the insurance company must give back to the insured in the
event of the policy cancellation.