Glossary on General Insurance Terms starting with B
BALANCE AS PER CONTRA : Insurance companies at times invest funds and create investments specific to the funds. These assets cannot be categorized as the insurance company’s assets. These are shown as assets combined with the words “as per contra”, which imply similar amounts being shown on the liabilities side also. The liability side balance depicts the investments made on behalf of the funds.
BALANCE SHEET : Depicts the snapshot on a company’s financial situation at a given point in time. The balance sheet shows the value of total assets, surplus, capital, and liabilities on the given date. This statement is prepared in the format prescribed by the IRDA on the last day of every financial year. The balance sheet gives the value of the assets and liabilities (which must be equal) on a particular date.
BALANCE SHEET RESERVES : This is the amount shown as the liability in the balance sheet for the benefits that are owed to the policy holders. The reserves are determined according to the Insurance Act guidelines, actuarial formulae, and the IRDA regulations. The reserves guarantee that policyholders will receive their benefits for all the premiums paid by them.
BALANCES- AGENTS : Most insurance companies rely on agents to get business. The premiums are accounted according to the agents to calculate the dues payable or receivable from them at the end of the financial year. Because number of transactions is huge, the transactions are classified as premiums and commissions. The debit balances are reflected as assets and credit balances as liabilities in the balance sheet.
BALANCES- AGING OF : Account balances comprise various entries during the year and at the end of the year. The balances could result either from last few transactions or through initial few transactions. Identifying the period for which these transactions have remained outstanding is crucial. Meaningful analysis to adapt the necessary steps is needed, which can be done by classifying the end of year balances as per the age of the various transactions.
BALANCES- COINSURANCE : Certain risks are shared between direct insurance companies at the insured individuals’ instances and are known as coinsurance transactions. The lead insurer collects the entire premium amount and distributes it among the various co-insurers. For claims, the money is first paid by the lead service provider and the respective amounts are then collected from other insurers. All these transactions are done through co-insurance company codes and the balances are either shown as assets or liabilities.
BALANCES- CONFIRMED : Balances in the insurance company’s account may be arising from transactions done with external parties and these balances need to be confirmed to assert their correctness. Confirmed balances are important to ensure the correctness of the transactions.
BALANCES- INTER BRANCH/ OFFICE : Insurance companies with multiple branches undertake transactions between the head office and branches as well as within different branches. The balances under each of the branch accounts are classified under Inter Branch Account Balances and reflect in the insurer’s balance sheet.
BALANCES- RECONCILED : The different account balances at the end of the financial year comprise several accounting entries. Every entry within each account must be reconciled with the corresponding entry to explain the items reflected in the account balance at the year end. When this detailed analysis is completed, the balances are known as reconciled else are referred to as reconciled balances.
BALANCES-REINSURANCE COMPANY : Direct insurers have treaty or facultative based transactions with reinsurers. Such transactions are related either to claim recoveries or premium cessions as well as reinsurance commission contracts. The balances in reinsurance accounts are grouped under the respective balances and shown as assets or liabilities based on the nature of these balances.
B/L : Bill of Lading is the receipt signed on the ocean carrier’s behalf. It indicates the condition and order of the goods that are received on board. This may not be the entire carriage of goods contract and is generally the evidence of the agreement. Because it is a title document, the bill of lading is also a transfer document.
BACK OFFICE : It is the controlling office that has no direct business but controls and monitors the different sales offices. Primary functions include checking accounting records, ensuring compliance by the marketing offices to all the regulatory guidelines, and company guidelines and directives. It is also responsible for communicating with the sales offices about matters related to the needs of either side.
BACKLOG : This refers to proposals that remain unattended, un-responded references or enquiries, documents and/or policies that are not issued, and claims that are still not disposed.
BACK-UP XL COVERS : There are situations when the XL Cover expires prior to the regular expiry date because of one reinstatement provision that exhausts the coverage limit by two losses. The Back-up XL Covers are used as additional reinstatement covers during the period that still remains.
BAD DEBTS : Debts that have become impossible to be recovered making these of no value to the creditors are classified as Bad Debts.
BAGGAGE INSURANCE : This insurance coverage is available to the insured or his or her family and provides protection against damage or loss of personal baggage. Such loss can arise through theft, fire, or accidents and cover such instances occurring during the insured’s travel within the country. The policy excludes regular travel from home to office, robbery from unattended cars, articles worn by a person, and loss due to wars. The policies could be modified to suit the needs of individuals by mutual consent. Such modifications must be within the “file and use” guidelines laid down by the IRDA.
BAGGED CARGO WARRANTY : Marine cargo insurance excludes any loss of content from the bags through the seams and natural losses to cargo weight. To ensure appropriate addressing of this issue, the insurers include a warranty within the policies stating Shortage in and damaged baggage shall be calculated through a comparison of bags with similar weight within the same lot that arrive undamaged at the destination and the cover excludes shortage through sound bags.
BAILEE : Any individual legally possessing goods that belong to others. The person is supposed to take care of these goods as taken by the owner. The possessor has insurable interest in these goods and can avail it in his or her name.
BAILMENT : It is a contract that transfers the property from the bailor to the bailee.
BAILOR : Is an individual transferring his or her property to the temporary custody, care, and control of another person while ensuring the ownership is retained with him or her.
BALLAST : It is the material that is used to provide stability to vessels that are carrying no cargo.
BANK BALANCE AS PER BOOKS AND AS PER BANK : Similar to the insurance company entering all bank related transactions in its bank account, the bank maintains a ledger account for recording the transactions related to that company. This is reflected in the pass book and also shown as bank balance on a particular date. The bank account shows balance as per the company accounts as well as the bank books.
BANK CHARGES : Banks levy certain types of charges for operating the banking accounts, such as realization of outstation cheques, initiating and executing fund transfers, return charges for dishonored cheques, and other such transactions. These charges are classified as bank charges in the company’s book through journal entries.
BANK GUARANTEE : Related to the insurance industry, bank guarantee refers to the guarantees executed by banks in favor of the insurers to guarantee the payment of the premium by the insured for certain types of policies within the stipulated time period. According to the Indian laws, all premiums must be physically paid to the insurance company on or before the start of the coverage. According to the Insurance Act and Rules, bank guarantee in favor of the insurer is acceptable only when premium cannot be determined when coverage commences.
BANK RECONCILIATION : The balance according to the bank account in the company’s book must be equal to the amount shown as per the bank. There are certain instances when cheques are deposited and the amount is already added in the company books. In the bank accounts, the cheques are still under clearing showing lesser balance. This is why the insurance company is required to prepare a statement that shows the difference between the two balances and the reasons for the same. This statement that reconciles the bank balance according to the company’s books of account is known as the Bank Reconciliation Statement.
BANK TRANSFERS : A bank transfer entry needs to be recorded when the insurance company transfers money from one bank account to another.
BANKERS INDEMNITY POLICY : This is a specialized policy available for banks and protects the bank against destruction or losses of money and/or securities due to fire, burglary, riot, or terrorism inside or outside the premises caused by employees or other persons. The cover is also available for securities or money lost while in transit, misappropriated funds, or is stolen either due to fraudulent employee practices or negligence. Any financial loss suffered by the banks as a result of altercation or forgery by employees is also covered under this policy. If the bank loses money or goods held in trust because of employee dishonesty or criminal act is also protected through this policy.
BAR CHART : This is a graphical representation of information and highlights the important features of frequency distributions covering different risks and possible consequences.
BAREBOAT CHARTER : This is a certain kind of charter where the person chartering the vessel incurs all the expenses incurred during the period when the charter agreement is valid.
BARGES : These are small vessels used to transmit goods from one port to another. Most of these are used to carry bulk cargo. Some barges are used for transporting cargo from the shore to the ships. These run the risk of capsizing in harsh weather conditions and can either be dumb or power-driven.
BARRATRY : This is a wrongful act willingly committed by the crew or the master to the prejudice of the person chartering the vessel or the owner. Some instances include scuttling of the vessel by the crew, deliberately running aground, or setting the boat on fire. Losses arising due to such acts are covered under Clauses ITC – Hulls and ICC (A).
BASE PREMIUM : This is the amount of premium charged by the direct insurers.
BASIC COMMISSION : This is the commission on a reinsurance proportional treaty. This is always applicable on the written premium of the contract.
BASIC PREMIUM : This is the gross amount charged by the insurance company to the policyholder for providing coverage under the policy.
BASIC RATE : This represents the rate of premium shown in the Rate Guide or the Insurance Company Manual for specific kinds of insurance coverage.
BASIS OF LOSS SETTLEMENT : This is a distinct section inserted within the policy document listing the basis of settling different kinds of claims covered under the policy.
BASIS OF VALUATION CLAUSE : Provision that describes the method to calculate the value of the cargo for the purposes of declaration under marine cargo insurance open coverage and policies. It also relates to the provision found in the conditions associated with fire declaration policies for securities and dealing with the valuation of securities for periodic declaration objectives.
BILL OF EXCHANGE : Non-interest paying written order used for international trading. It binds one party to pay a fixed amount to another party on a specific date in the future. Generally drawn by banks and individuals and are transferable instruments.
BLANKET CONTRACT : Health insurance contract providing benefits like accidental death or dismemberment for all classes of people not identified individually. Primarily used for groups like sport teams, campers, and travel insurance for company personnel
BREACH OF CONDITION : Violation of any terms or conditions that have been agreed upon in the insurance policy document, could result in the coverage being withdrawn in case of severe breach
BROKER : Marketing expert representing property buyers and liability insurance dealing with agents or insurance companies to arrange for coverage required by the clients
BULK CARGO : Cargo that is not packaged and is directly loaded in the vessels' holds.
BULK CARRIER : Consignor of bulk cargo tendering the cargo for transporting to the consignee
BURGLARY : Unauthorized or unforeseen entries to or exists from the premises covered under the insurance through detetctable and aggressive methods with the primary intent of stealing the contents contained therein
BUSINESS INTERRUPTION INSURANCE : Covers any loss of income resulting from disasters suffered by the businesses. The loss of income may be because of disaster-related closure of the business or the rebuilding procedure after the disasters
BAD FAITH : Insurer's refusal to pay legitimate claim of policyholder. Can also refer to insurance company's refusal to process and investigate the claim within a reasonable period of time.
BAILEES CUSTOMERS POLICY : Policy that covers any loss or damage to properties of policyholders irrespective of the bailee's liability in legal terms
BASIC FORM : Property related insurance policies insuring the dwellings at their actual values along with other structures, fair rentals, personal property, and other certain covers. This policy offers cover against only limited perils
BASIS : Amount that is attributable to any asset for the purpose of income tax. It is used to determine the loss or gain from transfer; and to determine gift value
BENEFIT PERIOD : Time period (generally between 1 and 3 years) during which any major medical benefits are payable on the satisfaction of the deductible. At the end of the benefit period, insured individuals are required to satisfy new deductibles to continue enjoying new benefit period
BENEFITS : This is the amount that the insurance company will have to pay claimants, assignees, or beneficiaries under each kind of policy
BINDER : Written or oral contract that has been temporarily issued for placing the insurance in force when the possibility of issuing new policy or endorse the existing cover is non existent. The binder is subject to the terms and conditions of the policy and the premium amount
BINDING RECEIPT : A receipt provided for payment of the premium and accompanies the insurance application. When the policy is approved, it binds the insurer for making the policy effective from the date on this receipt
BLACKOUT PERIOD : This is the time when social security benefits are unavailable to the surviving spouse; the period between the sixtieth birthday of the widow and the youngest child attaining the age of sixteen
BLANKET MEDICAL EXPENSE : It is a provision that entitles insured persons to collect the maximum amount towards the coverage of hospital and medical expenses included under the policy. This is without any limitation on the types of individual medical expenses
BLUE CROSS : This is an independent not-for-profit membership organization offering protection on service basis against expenses incurred towards hospital care within limited geographies
BOAT OWNERS PACKAGE POLICY : Special policy package for owners of boats combining physical damage insurance, liability insurance, medical cost insurance, and other covers within one single contract
BOILER AND MACHINERY INSURANCE : Covers loss arising from the operations of pressure, electrical, and mechanical equipment. The policy covers the loss to the boiler or machinery, business interruption loss, and property damages
BOND : Government issued certificate or corporate certificate available as evidence of debt. Issuer promises to pay the holder specific interest during a particular period and repay the entire loan amount on maturity
BOOK OF BUSINESS : It is the size, number, and type of accounts owned by a particular agent
BOOK VALUE : The purchasing cost after deducting depreciation
BORDEREAU : Itemized transaction statement (in spreadsheet format) used in reinsurance
BRANCH OFFICE SYSTEM : The life insurance marketing system where multiple offices are established in different locations. Branch managers hired by the insurance company are responsible for training and hiring new recruits
BREAK IN SERVICE : Any calendar year, plan year, or 12 consecutive month period in which a participant is unable to complete over 500 service hours
BROAD FORM : Property insurance covering the dwelling and other structures at their replacement costs. Provides additional coverage with greater list of possible perils
BURGLARY AND THEFT INSURANCE : Insurance cover provided for property losses arising from robbery, burglary, or larceny
BUSINESS INCOME EXPOSURE : Profits lost due to property damages resulting in halting the business
BUSINESS INSURANCE : Insurance policy providing different benefits to businesses and is issued for indemnification of businesses for any loss of services due to disability of key employee or partner
BUSINESS INTERRUPTION INSURANCE : Losses arising due to temporary halting and shutdown of business due to fire or other insured perils. Insurer provides reimbursement of profits and continuing expenditure
BUSINESS LIFE INSURANCE : Life insurance availed by a business on the life of any member of the company. Often availed by partnerships to protect surviving partners against possible loss arising due to demise of partner or by companies for reimbursing the loss caused by death of any key personnel
BUY-SELL AGREEMENT : Agreement between business owners for purchasing the shares of deceased or disabled owner. Value of each owner's share and the specific terms guiding the buy - sell process is established prior to death or disability
BASIC COVERAGE FORM : Commercial or personal insurance property forms providing basic covers. Generally offer the most limited kinds of coverage surpassed by terms like "special forms" or "broad forms"
BENEFICIARY : Person/s or entity/ies named in the insurance policy as the recipient of the proceeds in the event of the demise of the insured
BENEFIT OF INSURANCE CLAUSE : A term in the policy document under which the bailee of goods claims benefits through an insurance policy procured by the owner on the goods under the care of such bailee. Any such clause included in contract of carriage that has been issued according to the Carriage of Goods Sea Act is not legally valid
BLANKET INSURANCE : A health insurance contract covering all classes of people not identifiable individually. Also refers to property liability insurance policies covering single property type at one location under one policy instead of separate items or can be for multiple kinds of properties located in various locations
BODILY INJURY LIABILITY : Liability arising from injury or death of another person
BOILER AND MACHINERY POLICY : Protection against any loss arising due to accidents related to the pressure vessels, boilers, and other kind of machinery inclsuive of the equipment. Also covers liability arising due to such accidents
BUILDER'S RISK COVERAGE FORM : Commercial property coverage form specially created for buildings under construction
BUILDER'S RISK INSURANCE : Insurance protection against any losses to the buildings or structures that are still under construction
BUILDINGS AND PERSONAL PROPERTY COVERAGE FORM : Commercial property coverage form for insuring most kinds of commerical premises (includes building as well the contents inside). Commonly used kind of insurance replacing other options like Special Personal Property Form, General Property Form, and Special Building Form
BUSINESS AUTO COVERAGE FORM : Latest insurance coverage for commercial automobiles written as monoline policy or a component of the commercial package. It has legally replaced the old Business Auto Policy
BUSINESS INCOME COVERAGE FORM : Form related to commerical property coverage offering protection against indirect losses due to damage to the property, which can include incurring additional expenses or loss of income due to such damage. Replacement for Business Interruption and Extra Expenses forms
BUSINESS LIABILITY : Describes liability covers provided under the Business Owners Liability Coverage Form. Includes bodily injuries, fire damages, property damages, advertising, and personal injuries
BUSINESS PERSONAL PROPERTY : Conventionally, these are known as "contents" business personal property includes machinery, equipment, furniture, materials, fixtures, and other owner's properties used for the business