November 21, 2022

Some common terms used in insurance you should know.

 

There are quite many terms used in insurance that both insured and insurer need to understanding for successfull insurance policies to take ground.

 

These insurance terms if well understood make communication easier in-between the insured and the insurer.

Most of these terms have been defined to their simplest form for both the insured and insurer to understand properly while coming into business.

 

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1. Insurance

This is a fund into which individuals called the insured who are expecting to face losses paying periodical amount of money called premiums to the insurer from which those who suffer losses are compensated by the insurer.

Here two parties have to be involved i.e insured and insurer to sign an agreement called Insurance policy.

 

2. Insurance policy

This is a formal document that constitutes the contract in-between the insured and insurer

 

3. Insurer

This is an individual or a company which accepts to take up the insurance policy awaiting for compensation

 

4. Insured

This is a surbodinate party that has subjected/ been subjected to a specific insurance policy into which the insurer has come into an understanding to pay compensation for stipulated risks/ losses

 

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5. Risk.

This is an occurrence/ happening/ event against which an insurance policy is taken.

 

6. Risk management

This refers to precautions taken by the insured so as to minimize the occurrence of risks insured against by the insurer.

 

7. Re-insurance

This is when one firm has under taken the risks to insure another firm against big losses for example destruction of firm aeroplanes.

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8. Sum insured

This is the total amount of property/ things/ belongings of the insured being insured by the insurer as stated under the insurance policy

 

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9. Self insurance

This is a process by which an individual, business or company recognizes existence of many risks and decide(s) to take up a particular risk, bear that risk without taking any insurance against that risk.

 

10. Over Insurance

This is a situation in which the insured buys insurance coverage for more than the actual value of the liabilities stated in the insurance policy they have taken with the insurer.

 

11. Under insurance.

This is the sole condition in which inadequate insurance is taken against the actual value of the liability to be insured/ has been insured. Also popular with home insurance policy.

 

12. Outstanding claims.

These are the total liabilities stated in the insurance policy that the insured seeks compensation for and have not been settled by the insurer

 

13. Indemnity insurance.

This is a kind of insurance which enhances restoration of the insured to a position as close as possible to what their financial status was before they had suffered the loss insured against by the insurer.

 

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14. Actuary.

This is a specialised high professional individual who deals in assessment of insurance policies, risk management, calculations of premiums, policy reserves and the insured value.

 

15. Premiums.

These are agreed payments the insured pays to the insurer so as to properly cover the insurance policy agreed upon a particular period of time.

 

17. co-insurance

This is a situation when the insured decides to insure the same property with more than one insurance company in fear of huge losses in any even of loss.

 

18. Surrender Value.

This refers to the money paid back to the insured when he/ she decides to cancel the insurance policy before the agreed specified period of time.

 

19. No claim bonus

This is a discount given to the insured who makes no claim from his insurance policy.

This reduces on the amount of premiums to be paid by the insured. Very careful drivers are always beneficiaries of this.

 

20. Assurance.

This is a cover against an event which is bound to happen.

the best example here is death for life insurance policy.

 

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