definitions
Insurance Definitions
Submitted by byrnie on Mon, 2011-04-11 21:23Department:
Definitions
Short description:
Insurance terms can be bewildering, especially when claiming - we explain it all.
Content:
In the event of a claim you may come across insurance terms that can sometimes be very confusing. We listed a few of these terms below with an explanation for your ease of reference:
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
Abandonment
the giving up by an insured to the insurer of damaged property when a total loss is claimed.
Acceptance
an absolute and unqualified agreement to the terms of an offer, so creating a contract.
Accident
an unforeseen and unintended event or occurrence.
Accommodation Business
normally unacceptable business taken by an insurer as a goodwill gesture in the hope that further business will materialise.
Act Of God
an event that is the result of natural forces and which arises without human intervention.
Adjustable Policy
a policy where the exact extent of the value at risk cannot be known in advance (e.g. goods in transit insurance). A provisional premium is charged and adjusted at the end of each period of insurance.
Adjuster/Assessor
see LOSS ADJUSTER/ASSESSOR.
Agent
a person who acts on behalf of another and in the case of insurance is the intermediary between the proposer and the insurer.
Agreed Value
the sum to be paid in the event of a total loss under a valued policy.
Arbitration
a means of settling disputes legally without going to court where the issue concerns the amount of a claim and not liability. A qualified person or persons whose appointment has been agreed to by the parties involved, will hear the case and give a decision.
Asset
a property or financial commodity which can, if necessary, be converted into cash.
Assurance
a term interchangeable with insurance, which is often used in the case of Life and Marine business.
Attestation
the signing clause in a contract of insurance.
Average
Average occurs where the sum insured of the contents or buildings insured in terms of a policy, is less than the replacement value. In this case you are regarded as insuring the balance of the value of your possessions yourself and the insurer is only liable to pay a portion of the damage in the event of a claim. The portion paid by the insurer is calculated by taking into account both the replacement value and the sum insured, applying the percentage by which you are underinsured to the amount of any claim.
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Balance Of Third Party
the terms used in South Africa for the form of motor insurance which covers the insured's liability' for:
(i)injury to passengers not covered in terms of the Road Accident Act 1996; and
(ii)damage to the property of third parties caused by the vehicle.
Betterment
It is the obligation of the insurer to reinstate you to the position you were prior to the occurrence of a loss. Where the settlement of a claim results in you being in a better position than you were prior to the loss, the extent of improvement is known as "betterment" and you are expected to contribute towards the settlement of the claim.
Blanket Policy
a policy covering several items under one sum insured.
Bordereaux
the sheets of information prepared by an insurer detailing cessions under reinsurance treaties.
Broker
A professional full-time independent agent or intermediary.
Brokerage
the commission or fee paid to the brokers by the insurers for placing business with them.
Burning Costs
method of calculating the insurance premium (especially in reinsurance) taking account of previous claims.
Business Interruption Insurance
the class of insurance which provides cover for consequential loss arising directly from another loss (e.g. loss of profits following fire damage).
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Cancellation Clause
the clause in a policy which allows one party to cancel the contract following due notice to the other.
Captive Insurance Company
an insurance company set up by a parent company, in order to receive that parent's insurance business.
Catastrophe Cover
a form of excess of loss reinsurance which protects the insurer against losses arising from major catastrophes.
Certificate Of Insurance
a document issued by an insurer which is used mainly in the marine market to certify that cover is in force.
Cession
that part of an insurance transferred to a reinsurer. The transfer of rights, title and interest under a contract.
Chance
The probability or likelihood that an event occur.
Claim
a demand made by the insured for payment after the occurrence of loss or damage covered by the policy.
Claim Form
a form supplied by an insurer to enable an insured to lodge a claim in terms of the policy.
Claim-Free Group
Claim free groups have been introduced to give additional rate discounts for clients who have remained claim free for an extended period of time. In the event of a claim, your claim free group is adjusted downwards, resulting in a premium increase for the next period of insurance. If you pay your premiums annually, the rate will be adjusted at renewal of your policy. In the case of monthly premium payment, the rate will be increased the first day of the month following finalisation of the claim. Claim free groups are only applicable to household contents cover.
Claims Ratio
see LOSS RATIO
Co-Insurance
the division of a risk between two or more insurers where each is individually liable to the insured for their proportion of claims.
Co-Insurer
an insurer who shares with others in co-insurance.
Collective Policy
policy issued by the leading insurer on behalf of all the insurers who share a risk by way of co-insurance.
Commission
the payment made to intermediaries by insurers for placing business with them.
Common Law
the part of a country's legislation built up from customs and usages which have been recognised by its courts and thereby given the force of law.
Composite Insurance Company
an insurer undertaking both life and non-life business.
Comprehensive Policy
a policy covering a wide variety of perils.
Condition
part of a contract which must be complied with by one party or another.
Consequential Loss
a loss directly arising from another loss. The term is used to describe the class of business also known as LOSS OF PROFITS or BUSINESS INTERRUPTION INSURANCE.
Consideration
the payment or promise of payment for goods or services, this being the premium in the case of insurance.
Contingency
an unforeseen occurrence.
Contingency Fund
monies put aside by a company in order to pay for unexpected losses.
Contra Proferentum Rule
any ambiguity in contract wordings is construed against the drafter of those wordings.
Contract
an agreement made by two or more parties with the intention of creating a legal obligation between them.
Contract Of Insurance
an agreement between insurer and insured whereby, in return for the payment of a premium, the insurer undertakes to indemnify the insured upon the happening of a specified event.
Contribution
the principle whereby two or more insurers covering the same risk contribute proportionately to any losses.
Cover
the protection provided by insurance.
Cover Note
temporary evidence of the granting of insurance.
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Damages
an amount of money claimed by or awarded to a third party as compensation for injury or loss.
Declaration
the statement on a proposal form signed by the proposer certifying the truthfulness and accuracy of the information supplied.
Declaration Policy
a policy requiring the insured to declare periodically the value of fluctuating items, such as stocks or goods-in-transit, to enable the insurer to adjust the premium accordingly.
Deductible
an American term, similar in meaning to excess an being the first portion of a loss payable by the insured.
Delegated Authority
the authority given to an agent of an insurer to act on its behalf in accepting risks within agreed guidelines.
Deposit Premium
an advance payment made by the insured before the actual premium has been decided.
Depreciation
the extent to which (insured) property has diminished in value due to factors such as wear and tear.
Direct Insurance
an original insurance contract between insurer and insured.
Direct Insurer
an insurer in contact with insuring members of the public or corporations.
Disclosure
the duty of the parties to a contract of insurance to reveal all material facts to each other before it is concluded and prior to each renewal.
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Earned Premium
that part of a premium relating to a completed or expired period of risk; the actual premium chargeable under an adjustable policy.
Endorsement
documentary evidence of some alteration to a policy of insurance.
Escalator Clause
the clause in a policy which allows the sum insured on property to rise throughout the period of insurance in step with the assumed rate of inflation.
Ex Gratia Payment
a payment made to an insured where there is no liability under the policy.
Exception
a peril specifically excluded from the insurance.
Excess (or First Amount Payable)
In the event of a home claim, you are responsible for payment of the first R 1,000 of that claim amount, unless the option of excess waiver had been selected. Where you had selected an additional voluntary excess in order to reduce your premium rates, you will be responsible for payment of the basic excess (the first R 1,000) as well as the selected voluntary excess. First amounts payable are due even where a claim resulted owing to the fault of a third party. Although excesses are recoverable in terms with South African law, it is rarely worth the effort and legal costs involved.
It must be noted that MUA does not apply the basic excess to any claims in excess of R 100,000 or to any claims payment in terms of the extensions of our policy cover.
Excess Of Loss
a form of insurance where the reinsurer agrees to pay the balance of any losses exceeding a stated monetary amount.
Executor
the person named in a will who has agreed to carry out its terms.
Expense Loading
that part of the premium which meets the policyholder's share of the insurer's administrative costs
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Fire
the accidental or fortuitous ignition of something that should not be on fire.
First Amount Payable
the amount payable by an insured in the event of a claim
First Loss Policy
an insurance policy where the insurer pays all losses up to a given limit.
Fleet Insurance
a motor policy covering a group of vehicles with the premiums calculated on an experience basis.
Franchise
the amount of a loss at or below which no claim is payable by the insurer. Above that amount, the loss will be met in full.
Fraudulent claims
It is a well-publicised fact that fraudulent claims are abundant in the South African short term insurance market. The following would constitute a fraudulent claim:
- A claim submitted for loss of or damage to fictional items
- Inflation of the value of items actually lost or stolen
- Incorrect declaration of the circumstances giving rise to a claim
Making a fraudulent claim is a criminal offence, which can result in the cancellation of the insurance contract by the insurer. Clients whose short-term contracts had been cancelled by the insurer may never be able to obtain insurance cover again. In addition, most insurers take legal action against fraudulent claimants.
Fund
the common pool into which premiums for each class of insurance are paid and from which the losses are met.
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General Insurance
insurance which is not long-term business.
Good Faith
see under Uberrima fides
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Hazard
a physical or moral feature that affects the likelihood of a loss occurring or has an influence on the size of the loss.
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Incurred But Not Reported
claims which have occurred but are not yet reported to the insurers. Many governments require insurers to establish reserves to cover such losses.
Indemnity
the placing of the insured in the same financial position after a loss as he was in immediately prior to the occurrence.
Indexing
a method of adjusting sums insured to provide for inflationary increases in values.
Inspector
a official of an insurance company whose duties involve the selling and servicing of its policies either directly to the public or through intermediaries.
Insurable Interest
You must have an insurable interest in the property insured in terms of your short-term insurance policy. This means that you must have a relationship to the property insured such that you will suffer a financial loss in the event of loss of or damage to the property. The term policyholder with regards to our home product includes life partners and family members permanently residing at the risk address insured in terms of the policy.
Insurance
A risk transfer arrangement whereby the responsibility for meeting losses passes from one party (the insured) to another (the insurer) on payment of a premium.
Insurance Policy
a document which is evidence of a contract of insurance.
Insured
a person or organisation purchasing insurance.
Insurer
a company or society transacting insurance business.
Intermediary
a person who arranges insurance on behalf of another.
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Knock For Knock Agreement
an agreement between motor insurers whereby following a collision, each pays the cost of repairs to its own policyholder's vehicle, regardless of fault, provided that the vehicles involved are all insured for accidental damage.
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Lapse
the termination of an insurance contract through the non-payment of the s decision not to invite renewal.=premium or by the insurer.
Law
the rules enacted or customary in a country ordering or prohibiting certain actions.
Leading Case
a legal case where the decision has been widely followed.
Leading Insurer
the insurer who accepts a share of risk on a co-insurance agreement - often the one who first signs a broker's slip.
Letter Of Acceptance
a letter from an insurer to a proposer indicating that his application for cover has been accepted.
Liability
a claim upon one's assets by another person.
Limit Of Liability
the maximum amount that an insurer will pay for one loss in terms of a liability policy.
Line
a share of an insurance which is divided among two or more insurers
Lloyd's
the corporation which organises the market of individual underwriters in London (but accepts business introduced by brokers from all parts of the world) and provides a full range of ancillary services.
Loading
Those elements added to a premium to allow for insurer's expenses.
Loss Adjuster/Assessor
External loss adjusters are appointed on all home claims in excess of R 20,000 or where the circumstances warrant such appointment. Loss adjusters are not appointed to reduce the claim amount, but to act on behalf of both the policyholder and the insurer in order to assess circumstances of the event and the loss or damage incurred and assist in the speedy settlement of the claim.
All loss adjusters on MUA's panel of loss adjusters are members of the Institute of Loss Adjusters and are remunerated in accordance with prior agreed, contractual rates.
Loss Of Profits Insurance
see BUSINESS INTERRUPTION INSURANCE.
Loss Prevention
activities undertaken to prevent losses from occurring.
Loss Ratio
the ratio of claims to premiums.
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Market Value
the price at which an investment can be sold or bought at any specific time.
Material Damage Warranty
before interruption insurance is effective, a material damage claim under other property insurances must have been admitted.
Material Fact
anything which would affect the judgement of a prudent underwriter in accepting or deciding terms for a risk.
Misdescription
a false description of a material fact.
Misrepresentation
a false statement of a material fact which can be innocent or fraudulent.
Mortgage Bond
a loan made for the purpose of purchasing, adding to or improving property
Mutual Insurance Company
an insurance company owned by its policyholders i.e. it has no shareholders.
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Name
an underwriting member of Lloyd's.
Negligence
failing to act in what the law considers to be a reasonable manner.
Net Claim
The insurer's own share of claim payments after deduction of the amount payable by the reinsurers.
New For Old
insurance where the replacement value of the property which has been lost or damaged is payable without deduction for depreciation.
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Offer
The communication of the proposed terms of a contract by one party to another
Operative Clause
the clause in a policy which sets out the circumstances in which the insurers will make claim payments.
Outstanding Claims Reserves
The funds put aside by insurers to cover claims that have been incurred but not yet paid.
Outstanding Losses
s=claims not yet paid where estimated figures are used in the insurer accounts
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Package Policy
a policy into which several different types of insurance have been combined.
Peril
A contingency or fortuitous happening which could cause losses.
Policy
Written evidence of the terms of an insurance contract.
Policyholder
the insured person.
Pooling
The basis of insurance whereby premium contributions are funded and used to pay losses.
Preamble Clause
the clause in a policy which sets out the essential elements of the contract.
Premium
The money paid by the insured to the insurer for cover as provided in the policy.
Premium Rate
the price per unit of insurance
Principal
A person instructing an agent to act on his behalf.
Pro Rata Premium
the premium based on the length of time for which the insurer was actually on risk.
Probability
the chance of an event occurring.
Professional Reinsurer
a reinsurance company not transacting any direct insurance business.
Proportional Reinsurance
reinsurance where reinsurers take a given proportion of the direct insurer premiums and losses.
Proposal Form
an application for insurance which seeks to obtain from the proposer all the information relating to the risk.
Proposer
The individual or organisation seeking insurance.
Proprietary Company
a company owned by its shareholders.
Proviso
A policy condition whose observance is essential for the enforcement of the contract.
Proximate Cause
the direct cause of a loss uninterrupted by any other event.
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Quota Share
proportional reinsurance where the reinsurer accepts a fixed percentage of every risk written by the ceding company.
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Rate
The sum charged per unit of exposure by which the premium is calculated.
Rated Up
The term applied to insurance where the premium is higher than usual.
Reinstatement
the making good of damaged property; the restoration of the sum insured after settlement of a loss on payment of an additional premium.
Reinstatement Of Sum Insured
The restoration of the sum insured after it has been reduced through the payment of a claim.
Reinsured
An insurer who effects and is entitled to be indemnified under a contract of reinsurance.
Reinsurer
An insurer or reinsurance company which accepts contracts of reinsurance.
Renewal
The process for continuing an insurance for a further period after the first or current period of cover has ended.
Renewal Notice
the notice issued by a short term insurer to remind a policyholder that his contract will shortly terminate.
Replacement Cost
the value of property as indicated by the current purchase price of a similar article.
Representation
a written or spoken statement made during contract negotiations.
Retention Limit
the maximum liability which an insurer wishes to keep for his own account in respect of a particular risk.
Risk
a) a situation which cannot be controlled or perfectly foreseen, b) the subject matter of an insurance contract.
Risk Management
the business discipline applied by large commercial and industrial organisation to manage those risks which can cause losses.
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Salvage
whatever is recovered of an insured item or part of it, on which a claim has been paid.
Schedule
the list of personal details of the insured and the subject matter of the insurance in a policy.
Self-Insurance
insurance which a business organisation finances internally by establishing a fund to meet losses.
Short Term Insurance
insurance that operates on a year to year basis and which may be terminated by the insurer or the insured.
Short-Period Rate
the rate of premium applied to insurances in force for periods of less than twelve months and which is higher proportionately than the annual rate.
Single Trauma Philosophy
We at MUA have adopted a "single trauma" approach to claims handling. Our philosophy is to ensure that the loss or damage giving rise to a claim, is the first and only trauma you will suffer, with no added trauma being caused by the manner in which we handle and administer your claim. We endorse the professional handling of any claim with fairness, honesty, good faith, integrity, without delay or discrimination and in a transparent manner.
Slip
A form submitted by a broker to underwriters containing particulars of the risk proposed for insurance.
Solvency Margin
the minimum size of shareholders' funds required by the supervisory authorities.
Special Perils
extra risks added to a policy to give cover not provided in terms of the basis wording; the term usually applies to storm, water, wind and impact damage added to a fire policy.
Specification
the form on which details of large risks are set out and appended to the policy.
Statute Law
laws promulgated by the government of a country.
Stop Loss Reinsurance
a form of reinsurance used as a means of limiting aggregate net losses on a particular class of business in any one year of account.
Subrogation
the right of one party to stand in a place of another and take up the latter's legal rights against a third party.
Sum Insured
the monetary limit of the insurer's liability under a policy.
Surplus
That part of the sum insured which the insurer does not retain and consequently reinsures.
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Target Risk
The main risk where the client has more than one premises. This is the risk which if damaged, will affect the insurer the most.
Third Party
a person who is not a party to a contract.
Third Party Fire And Theft Insurance (Motor)
third party insurance plus cover for fire damage to and the theft of the insured's own vehicle.
Third Party Insurance (Motor)
motor insurance cover providing compensation for injury to third parties and damage to their property.
Treaty Reinsurance
a contract between an insurer and a reinsuring company under which the former agrees to give and the reinsurer agrees to accept reinsurance for risks falling within the terms of the agreement.
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Uberrima Fides
the duty of good faith imposed on both parties to an insurance contract to disclose all material facts.
Under Insurance
insurance for a sum insured less than the value at risk.
Underwriter
an insurer; a person who makes decisions on whether or not to accept insurance business.
Underwriting
the process of assessing a proposal for insurance to decide on its acceptability and if so, on what terms.
Utmost Good Faith
see UBERRIMA FIDES ("Utmost" has been ruled to have no particular meaning in South Africa)
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Valuations
a list of property with values allocated to each item as the basis of insurance.
Valued Policy
a contract in which the insurers agree to pay the sum stated in the event of total loss without the usual allowance for depreciation or appreciation.
Void Contract
a contract that cannot be enforced by either party.
Voidable Contract
a contract which one party can choose not to inforce.
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Warranty
A condition, which must be complied with literally
Write (Insurance Business)
provide insurance cover
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