A-Z General Insurance Glossary: Words, Meaning & Terms
Glossary on General Insurance Terms A to Z
AS IS WHERE IS : Refers to a present state of condition and location of the goods at the time of sale, in which case the buyer takes on all the risks.
ANY ONE ACCIDENT (AOA) : One or more claims related to the same error or omission in a professional service.
ANY ONE VESSEL (AOV) : Commonly used in Marine Cargo Insurance, refers to the insurer's maximum commitment under the policy for all cargo in respect of any one vessel.
ANY ONE YEAR (AOY) : The concept of AOA and AOY go hand in hand wherein the Insured can select a pre-determined indemnity limit in the ratio of 1:1, 1:2, 1:3, 1:4 of AOA:AOY and the premium is determined based on the AOY limit calculated.
ABSOLUTE LIABILITY : A legal responsibility towards damages that are final and binding and the cause of which need not be proven.
ABSOLUTE OWNERSHIP : An explicit right of ownership and possession which is free from any restrictions or limitations, given to the Insured.
ACCEPTANCE : An event where an insurer accepts an application and issues a policy that will safeguard the applicant from risks stated in the policy.
ACCESS TO THE RECORDS CLAUSE : The ability of the Reinsurer to access/inspect the books of accounts and official records of the Reinsured Company at its own expense.
ACCESSORY : An addition to a motor vehicle that does not change its performance or structure.
ACCIDENT AND HEALTH INSURANCE : A policy that insures the policyholder and his/her dependent against injury, illness or death from an accident. Policy coverage payment reimbursement of the following expenses - visit to the doctor, medical surgeries, medicines and so on.
ACCIDENT AND SICKNESS INSURANCE : A policy that insures against personal accident and sickness, that include a compensation for the period of disablement and reimbursement of medical expenses only for the sickness mentioned in the policy.
ACCIDENT SEVERITY : Sums up the financial worth of the loss incurred in an accident and is used to indicate the premium amount payable for accident insurance.
ACCIDENT, HIT AND RUN : An accident leading to injury or death, caused by collision with an unidentified motor vehicle.
ACCIDENTAL BODILY INJURY : Injury caused to the body due to an accident
ACCIDENTAL DEATH BENEFIT : If the death of the Insured is caused by an accident, in addition to the insured amount, under the policy, an additional sum of money is also paid, in which case it is also called a double indemnity.
ACCIDENTAL MEANS : A clause in the policy which requires the cause of injury / death of the Insured to be accidental and not premeditated. This clause helps reduce fraudulent incidents.
ACCOMMODATION LINE : The sale of an insurance policy by the Insurer to a company / business which does not meet the said requirements but is accomodated to build a rapport and attract prospective policyholders within the organisation.
ACCOMPANIED BAGGAGE : Baggage carried by a person during travel
ACCOUNT- PROFIT & LOSS APPROPRIATION : The accounting format prescribed by IRDA Regulations, used to represent the distribution of the net profit balance between dividend, transfers to General Reserve or Dividend Equalization Reserve etc. during the year.
ACCOUNT- REVENUE : The accounting format prescribed by IRDA Regulations, used to represent the premium underwritten by the Insurer for each department, indicative of the revenue generation.
ACCOUNTING : The recording of revenue and expenses, debts owed by and to others and maintenance of financial statements.
ACCOUNTING - CASH SYSTEM : A method of accounting, adopted by a company that considers only the actual inflows and outflows of money, either in cash or through the bank.
ACCOUNTING- MERCANTILE SYSTEM : A method of accounting, adopted by a company that considers both the actual inflows and outflows of money as well as the outstanding income or expense due to be received or paid respectively.
ACCOUNTING POLICY : Refers to the accounting procedures and rules adopted by a company while making the financial statements.
ACCOUNTING STANDARDS : As per IRDA (Insurance Regulatory Authority), it is mandatory for all insurance companies to follow the accounting standards set in place by The Institute of Chartered Accountants of India to ensure uniform accounting treatment of specific transactions.
ACCOUNT-PROFIT & LOSS : The accounting format prescribed by IRDA Regulations, used to record the income earned and expenses incurred during the year and the difference between the two is the net profit/loss of the company for that year.
ACCUMULATED STOCKS CLAUSE : Pertains to the use of the accumulated finished goods stock at a time when the activities of the business have been affected by fire etc. which has halted the manufacturing process, affecting the bottomline of the company and thereby the potential profit it could have made.
ACCUMULATION PERIOD : The duration for which premium payments are made by the annuitant under life insurance.
ACCUMULATION UNITS : Refer to units accumulated in a trust by reinvestment of funds or dividends into more units instead of opting for a payout.
ACQUIRED IMMUNO DEFICIENCY SYNDROME (AIDS) : A condition that causes illness due to breakdown in the immunity levels. Not covered in a standard Mediclaim Policy.
ACQUISITION COST FACTOR : Cost incurred by the Insurer for acquisition of business, considered by the Reinsurer in the calculation of the reinsurance commission.
ACQUISITION COSTS : Costs incurred in setting up a new business - Product launch and publicity expense, administrative and clerical expense, fee paid to the Medical Examiner, inspection reports expense etc.
ACT IN FORCE CLAUSE : A clause in relation to statutory liability that accounts for changes in the law during the cover period on the amount of compensation, through constant rate revision and adjustment.
ACT LIABILITY WITH FIRE &/OR THEFT : A provision that covers a motor vehicle against the Insured's liability along with damage to the vehicle due to fire, ignition, explosion, burglary or theft which is adjusted through a reduction in the premium due for payment.
ACT OF GOD PERILS : Unforseen events like earthquakes, floods, storms etc. caused by nature which cannot be averted or controlled by man.
ACT ONLY POLICY : Indemnity for the Insured for all motor vehicles as per the limits prescribed in the Motor Vehicle Act, 1988, with respect to his/her legal liability to pay compensation for death, injury or damage to a third person or property in an accident or event.
ACTIVITIES OF DAILY LIVING (ADL) : These include basic activities such as eating, bathing, dressing, walking and using the toilet. In the event that a policy holder is unable to perform two or more of these activities, he/she is then qualified to receive benefits under a long-term care insurance policy.
ACTUAL TOTAL LOSS : A loss whereby the property or goods are missing or damaged and cannot be recovered.
ACTUARIAL ASSESSMENT OF EMPLOYEES : The employer is expected to evaluate (using actuarial valuation) the liabilities due to its employees i.e. gratuity, leave encashment, pension etc. and accrue for the same in the current accounts even though it may be payable to the employees at the time of retirement or on leaving the company.
ACTUARIAL COST METHOD : Also known as actuarial funding method, it is used by the pension company to determine the premium to a pension so that at the time of payout, the company either breaks even or has money in excess of the pension premium and its returns.
ACTUARIAL EQUIVALENT : If the periodic payments on two insurance policies equate to the same present value under some pre-determined assumptions and is generally used to compare policies or plans.
ACTUARIAL SCIENCE : The science of risk evaluation, determination of premiums adequate to meet the risks and provisions for unexpired risks and liabilities.
ACTUARIALLY FAIR : An insurance agreement is said to be actuarially fair if the premium payment equates to the expected value of amount or benefits received under the policy.
ACTUARY : A qualified statistician and mathematician who carries out research in order to effectively calculate risks and premiums related to insurance and is also involved in the preparation of regulatory documentation required to be furnished to IRDA.
AD VALOREM : Calculated proportionately to a value. In this case it refers to insurance premium calculated proportionately to the value of the property or subject under policy coverage.
AD VALOREM DUTY : Duty determined based on percentage of value of cargo.
ADDITIONAL COVER : An insurance policy extended to cover additional risks like riots, strikes etc. on payment of additional premium.
ADDITIONAL EXPENSES-STRIKES : This term used in relation to cargo refers to an event when the destination port is bound by a strike at the time the cargo is due to arrive at that port. The shipowner can choose to deliver the cargo at the nearest alternate port, in which case the cargo owner will have to bear the expense of transporting it to the final port eventually. To provide for this contingency, the cargo owner can opt for an additional expenses (strikes) cover to be effected during a period of 12 months. However this feature will not be available once the strike has already commenced.
ADDITIONAL INSURED : An entity (person or company) not originally included under the insurance policy, but is included as an Insured on being requested by the named Insured.
ADD-ONS : Purchase of additional benefits or cover on the existing policy.
ADHESION CONTRACT : A contract in which the signature of the person accepting the contract need not be valid since the courts will consider the acceptor's interests over that of the issuer of the contract.
ADJUSTABLE LIFE INSURANCE : An life insurance policy whereby the policyholder has the right to change any of the following parameters - premium amount, premium frequency, policy term, death benefit.
ADJUSTED GROSS ESTATE : With reference to Estate tax, it refers to the the sum total value of the decedent's assets plus additions, less the total value of all debts.
ADJUSTER : Carries out the process of investigation and settlement of damages for the Insured.
ADJUSTING : The final process of settlement of losses with the Insured.
ADJUSTMENT BUREAU : An agency formed and supported by property insurers for the purpose of national loss adjusting
ADMINISTRATIVE SERVICES ONLY (AS0) PLAN : A group health self-insurance program undertaken by large employers whereby they are responsible for only the risk while administrative services like making of the administration manual, government reports, summary plans, employee communication, calculation and payout of benefits and accounting are outsourced to the Insurer.
ADVANCE FUNDING : It refers to an upfront payment against a contractual payment due in the future.
ADVANCE PREMIUM MUTUAL : A mutual company, owned by the policyholders, that sells insurance to cover only claims and expenses and not to make profits.
ADVERSE SELECTION : An adverse situation created in an exposure group when people who believe that they are likely to experience a higher probability of loss, buy a lot more insuurance than those who expect a lower probability of loss.
AGE LIMIT : The qualifying age for an insurance policy.
AGENT : A state-licensed, representative, appointed by the insurance company to solicit, negotiate and execute insurance contracts on behalf of the company and also provide services to the policy holder.
AGGREGATE DEDUCTIBLE : The total amount that the Insured can attribute as deductibles over a period of a year.
AGGREGATE INDEMNITY : Maximum coverage for loss for which an insured can be indemnified, irrespective of the amount or number of insurance policies bought.
AGREED VALUE POLICY : A policy that ensures to pay a specific amount, without taking into consideration the current market value at the time of total loss.
AIRWAY BILL : Document bearing details of the goods and consignee name, made by the consignor of goods sent by air freight.
ALIEN INSURER : An insurer domiciled in and licensed under the laws of a country outside a given jurisdiction. Eg From an Indian perspective, a Bangladesh insurer would be an alien insurer.
ALL RISK : An insurance policy that covers every possible claim that has not been specifically excluded from the policy.
ALLIED LINES : Refers to insurance cover for property from the following events - damage from fallen timber, sprinkler systems, and vandalism barring fire damage for which a separate fire policy is bought.
ALLOCATED BENEFITS : Benefits paid to the employee based on the employee payments into the plan during his/her working life, due to which they receive guaranteed benefits irrespective of the future state of the company.
ALL-RISKS POLICY : Coverage provided by an insurance policy for all losses except those specifically excluded from the policy.
ALTERNATE DELIVERY SYSTEMS : A health service (such as nursing facility, hospice and at-home service) which is monetarily cheaper than a hospital or an inpatient care facility.
AMBULATORY CARE : Also referred to as outpatient care, it includes medical services such as diagnosis, observation, consultation, treatment and rehabilitation.
AMENDMENT : A change to an existing rule or protocol, provided in writing.
AMORTIZATION : This occurs when a debt is paid off in regular portions,over a period of time, based on a pre-determined, fixed repayment schedule.
ANNUAL STATEMENT : An annual report, mandated by the state insurance commissioner, containing the incomes, expenses, assets and liabilities of an Insurer.
ANNUITANT : Person who receives an income for life or for a period specified in an annuity contract.
ANNUITY : Flow of payments made periodically over time.
ANNUITY CERTAIN : Guaranteed number or amount of payments received under an annuity.
ANNUITY CONSIDERATION : Money paid by a person to an insurance company in return for an instrument that provides a regular flow of payments for a specified period of time.
ANTISELECTION : An instance where an Insurer would not wish to insure a person whose genetic condition is indicative of an illness which is considered very expensive. Eg Huntington’s disease. This is also known as Adverse Selection.
APPLICATION : A form filled out by the applicant for the purpose of receiving insurance from the Insurer on submission of certain information required in order to provide insurance cover.
APPRAISAL : The evaluation of a claim by a person authorized by the company and the policyholder to assess the extent of damage.
ARBITRATION : A process of resolving disputes with the aid of an unbiased person or committee that helps determine the amount of loss.
ARSON : The burning down of property with a criminal intent.
ASSESSMENT ASSOCIATION : An Insurer that retains the right to charge an additional premium to the policyholder if the losses from the claims are in excess of the initial premium paid by the holder. This is also known as assessment company.
ASSESSMENT MUTUAL : An Insurer that retains the right to charge an additional premium to the policyholder if the losses from the claims are in excess of the initial premium paid by the holder. This is also known as assessable mutual.
ASSESSOR : Also known as the Surveyor, this person determines the estimated value of the goods for the underwriters to be able to settle the claim based on the sum payable arrived at after value estimation.
ASSETS : Property, valuables, investments, bank and cash balances owned by an entity and relected in the Balance Sheet.
ASSIGNED RISK : Assigned Risk - Assigned risk means a driver of a motor vehicle, or a class of such drivers, who would be denied insurance coverage by insurance companies, but are required to be covered under U.S. state law. The term assigned risk is also used in Workers' compensation law. or OR ASSIGNED RISK CLAUSE A method of providing insurance required by state insurance codes for those risks that are unacceptable in the normal insurance market. Every state, with the exception of those that are monopolistic, has a workers compensation assigned risk plan, which is either a stand-alone entity or part of the competitive state fund. All insurers writing workers compensation coverage in the voluntary insurance market must also participate in the plan.
ASSIGNMENT : Transfer of a person's interest in an insurance policy to another person in the legal sense.
ASSOCIATION CAPTIVE : An insurance company whose main purpose is to insure the members of an organization that are either sponsors or owners of the captive.
ASSOCIATION GROUP : Insurance provided to a group consisting of members of an association or health insuranceissued to those members on a franchise basis.
ASSUMED LIABILITY : Also known as Contractual Liability, it refers to the liability of an entity based on the contractual terms.
ASSUMPTION OF RISK DOCTRINE : A legal principle under which the responsibility for loss is passed onto the injured party because he/she had complete knowledge and understanding of the risks involved in the said situation.
ASSUMPTIONS : Risk accepted by a Reinsurer.
ASSURED : Entity indemnified against loss through insurance.
ATTACHMENT POINT : Refers to the level at or beyond which excess insurance or reinsurance limits would apply.
ATTRACTIVE NUISANCE : An exception to the law that relates to trespassers that need special care in an artificial condition on land. (Eg. Children near a swimming pool).
AUTOMATIC PREMIUM LOAN : In life insurance there is an optional provision by way of which the Insurer can pay from the cash value any premium due at the end of the grace period.
AUTOMATIC REINSTATEMENT CLAUSE : An automatic renewal clause included in a property insurance policy whereby on payout of the claim the original policy policy and coverage amount is reinstated.
AUTOMATIC REINSURANCE : "An arrangement whereby the Reinsurer agrees to take on the risk for a certain category of policies from the Insurer. "
AUTOMATIC SPRINKLER : A measure against fire, using a water supply system which distributes the water equitably and with adequate pressure. Strongly recommended by insurance companies to avert property loss or damage and interruption of daily activities.
AUTOMOBILE FLEET : Multiple motor vehicles owned by the same person or company, covered by a single insurance policy.
AUTOMOBILE LIABILITY INSURANCE : Coverage in the event that you are held legally responsible for injury to another person or damage to property as the result of a motor vehicle accident.
AUTOMOBILE PHYSICAL DAMAGE INSURANCE : "Insurance coverage that insures against damage such as collision, vandalism, fire and theft to the insured's own vehicle."
AUTOMOBILE REINSURANCE FACILITY : An insurance plan for drivers who otherwise would not be able to obtain automobile insurance. Each state in the U.S. requires insurers to offer an automobile reinsurance facility, at a higher premium. States assign their uninsurable driver to an insurance company, which must provide coverage. This helps people who, by law, must obtain automobile insurance, but are unable to do so because of a poor driving record or for some other reason. Critics contend that it drives up premiums for all policyholders. It is also called the automobile shared market or automatic assigned risk insurance.
AUTOMOBILE SHARED MARKET : Also known as Automobile Reinsurance Facility
AVERAGE ADJUSTER : An expert who determines the liabilities of various parties to a common maritime and to classify the various items of expenditure between general and particular average, viz, ship, Freight and cargo.
AVERAGE CLAUSE : A clause in the policy which states that if at the time of damage, the property value is less than its real value, then the compensation by the Insurer will be reduced to the extent of the property value after loss.
AVERAGE INDEXED MONTHLY EARNINGS (AIME) : The Average Indexed Monthly Earnings (AIME) is used in the United States' Social Security system to calculate the Primary Insurance Amount which decides the value of benefits paid under Title II of the Social Security Act under the 1978 New Start Method. Specifically, Average Indexed Monthly Earnings is an average of monthly income received by a beneficiary during their work life, adjusted for inflation.OR When we compute an insured worker's benefit, we first adjust or "index" his or her earnings to reflect the change in general wage levels that occurred during the worker's years of employment. Such indexation ensures that a worker's future benefits reflect the general rise in the standard of living that occurred during his or her working lifetime. Up to 35 years of earnings are needed to compute average indexed monthly earnings. After we determine the number of years, we choose those years with the highest indexed earnings, sum such indexed earnings, and divide the total amount by the total number of months in those years. We then round the resulting average amount down to the next lower dollar amount. The result is the AIME.
AVIATION INSURANCE : Includes a master policy that covers employees in a company against the dangers of an aircraft mishap.
AVOIDANCE : An underwriter's right to excuse himself from any liability stated in the policy, in the event that the assured is in breach of good faith or if the risk in voyage policy has not attached within the said time after the risk was underwritten.
AWARD : The favourable outcome of an investigation of the facts and evidence by the Insurer.