Insurance and Risk Management

Terminologies

Terms Meaning
Perils Exposure to risk or harm.
Accident A onetime event, definite in time and place and is unintended, unforeseen,
and unexpected.
Insurable risk A risk which can be insured by an insurer. The conditions that make a risk
insurable may be probability of occurrence of loss, loss not in control of
insured, capability of loss to be calculable, etc.
Insurance company Any corporation primarily engaged in the business of furnishing insurance
protect to the public.
Insurance policy The printed form, which serves as the contract between an insurer and an
insured.
Policy document The document which contains all the conditions of issue of an insurance
cover. It certifies the issuance of cover to the insured.
Insured A person or an organization covered by an insurance policy.
Assured The person or party protected by a policy of the insurance. It is another
word for insured.
Beneficiary An individual designated in a will to receive an inheritance, or to receive
the proceeds of an insurance policy, retirement account, trust, or other
asset.
Nomination An act by which the policy holder authorizes another person to receive the
policy money. The person so authorized is called Nominee.
Insurer The party who promises to pay losses or benefits to the insured under the
insurance contract.
Insuring That part of insurance contract that states the promises of the insurance
agreement/Contract company.
Maturity The date upon which the face amount of a life insurance policy, if not
previously invoked due to the contingency covered (death), is paid to the
policyholder.
Sum assured Sum assured is the amount that an insurer agrees to pay on the
 occurrence of an insured event.
Maturity claim The payment to the policyholder at the end of the stipulated term of the
policy is called maturity claim.
Contingency A happening dependent on something which may occur in future.
Coverage The scope of protection provided under the contract of insurance.
Contract A binding agreement between two or more parties for doing or not doing
certain things. Insurance is also a contract and it is in form of a written
document called the policy.
Cancellation The termination of a contract before it's ending. Condition: Something
established or agreed upon to be necessary to make the policy of
insurance effective.
Double insurance Insurance policy taken from more than one underwriter (insurer) where the
period of insurance and subject matter of insurance are same. The total of
sum assured for all the policies is greater than the value of the property
insured.
Lloyd's of London Insurance marketplace in London.
Flood insurance Coverage against loss resulting from the flood peril.
Agent An insurance company representative, licensed to solicit, negotiate or
affect contracts of insurance, and provide service to the policyholder for
the insurer.
Indemnification Compensation to the victim for a loss, in whole or in part, by way of
payment, repair, or replacement.
Insurability All conditions pertaining to individuals that affect their health, susceptibility
to injury and life expectancy. In other words, it is the condition of
acceptability of an insurance proposal.
Offer The communication of the term of a contract by one party to another.
Legal object The purpose for which the agreement entered into should not be illegal.
Proximate cause The nearest cause of loss is considered for the purpose of indemnity in
insurance contracts.
Material facts The facts which influence the judgment of the insurer in deciding whether
insurance should be granted or not.
Minor A person below the age of legal capacity i.e. 18 years.
Underwriting The process of selection of risks for insurance in light of terms on which
 the insurance company will accept the risk
Life expectancy The term for an average number of years of life remaining for a group of
persons of a given age according to a particular mortality table
Mortality rate Refers to the number of deaths in a group of people usually expressed as
deaths per thousand
Gross premium The total premium that a policyholder pays.
Level premium A premium which remains unchanged throughout the life of a policy.
Waiver of premium Provision to relieve the insured of premium payments due to total disability
or certain other reasons.
Annuity/Pension An annuity is an investment that one makes, either in a single lumpsum or
Plan through installments paid over a certain number of years, in return for
which, one receives a specific sum periodically i.e. annually, biannually,
monthly, either for life or for a fixed number of years.
Mortality rate The number of deaths in a group of people usually expressed as deaths
per thousand.
Mortality table A table showing how many members of a group, starting at a certain age,
will be alive at each succeeding age. It is used to calculate the probability
of dying in, or surviving through, any period, and for the valuation on an
annuity. To be appropriate for a specific group, it should be based on the
experience of individuals having common characteristics, such as sex or
occupation.
Mode of premium The frequency with which premiums are paid monthly, quarterly, semi-
payment annually, or annually.
Human Life Value For purpose of life insurance, the present value of family’s share of
deceased breadwinner’s future earnings is considered as human life value
Partial disability A term found in disability income policies providing for the payment of
reduced monthly income if insure can’t work full time and/or is prevented
from performing one or more important daily duties pertaining to his
occupation.
Total disability An illness or injury which prevents an insured person from continuing to
perform his own duties pertaining to his/ her occupation or engaging in
any work.
Disability Benefit A feature added to some life insurance policies which provides for the
 waiver of premiums upon the furnishing of proof that the insured has
become totally abd permanently disabled.
Actuary A social mathematician who uses mathematical skills to define, analyze
and solve complex business and social problems involving insurance and
employee benefit programs.
Age limits Every life insurance company stipulates minimum and maximum ages
below and above which the company will not accept applications or will
not renew policies.
Bonus Bonus being a portion of surplus of the insurance company, added to the
basic sum assured under a with-profit life insurance policy
Days of Grace Policyholders are expected to pay premium on due dates, a period of 15-
30 days is allowed as grace to make payment of premium from the due
date.
Death Benefit The amount of money paid to the beneficiary when the insured dies.
Lapse Termination of policy due to policyholder’s failure to pay the premium
within the grace period provided by the insurer.