CFP India - independent subject foundations key terms

A person, asset, activity or financial interest subject to a possible loss, which must be identified before treatment alternatives are compared.

The number or rate of loss events over a defined exposure and period, distinct from the size of each loss.

The monetary or other defined magnitude of an event’s consequences, requiring a consistent unit and scope when observations are compared.

Keeping specified financial consequences within the organization or household rather than transferring those consequences through an external contract.

Allocation of specified financial consequences to another party under an arrangement, with residual contractual and counterparty risks potentially remaining.

An amount of covered loss retained by the policyholder under the contract’s stated calculation, which must not be assumed identical across products.

A contractual upper boundary on specified payments or coverage, applied using the actual wording, aggregation period and relevant sublimits.

Contract wording removing a specified circumstance or cause from coverage, subject to the actual policy and applicable legal interpretation.

A contractual amendment that can alter a policy’s terms, so coverage analysis must read it together with the relevant base wording.

Evaluation of a proposed exposure and the terms on which protection may be offered, using appropriate information and applicable constraints.

The contractual amount charged for defined insurance protection, distinct from a guaranteed investment return or the amount payable for every loss.

A request for a benefit or payment arising from an alleged insured event, requiring examination of coverage and supporting evidence.

A principle relating some insurance payments to a covered financial loss, whose operation and exceptions depend on product and law.

A concept concerning an insurer’s pursuit of certain recovery rights after payment, dependent on the actual contract and applicable law.

A separate arrangement transferring specified insurer exposure to another insurer, without automatically releasing the original policyholder obligation.

An arrangement allocating specified premiums and losses in agreed proportions, with the contract defining the exact scope and calculation.

A specified loss interval above an attachment amount and subject to a limit, rather than automatic cover of every consequence.

The premium amount attributed to expired coverage under a specified accounting model, distinct from the entire premium written or cash received.

An estimate of obligations associated with claims under a defined measurement framework, rather than necessarily an equivalent dedicated cash asset.

A measure combining defined loss and expense ratios to analyze underwriting, whose components and denominators must be checked before calculation.

Costing method that assigns both variable and fixed production overheads to units produced, usually through predetermined overhead absorption rates, so inventory includes a share of fixed cost.

Costing method charging only variable costs to units, treating fixed costs as period costs, and using contribution to judge profitability and short-term decisions.

Selling price less variable cost per unit, the amount each unit contributes towards covering fixed costs and then generating profit; used in break-even and limiting-factor decisions.

Level of sales at which total contribution equals fixed costs, so the business makes neither profit nor loss, expressed in units or in revenue.

A future cash flow that differs between the alternatives under consideration, including opportunity costs but excluding already unavoidable sunk expenditure.

Sales revenue less variable costs within the stated decision model; it first covers fixed costs before producing an operating profit.

A scarce resource that restricts feasible activity, requiring comparison of contribution per unit of that resource when the assumptions justify it.

A budget recalculated for a specified activity level using the applicable cost behavior assumptions, allowing more meaningful performance comparisons.

An approach assigning resource costs to activities and then to products using drivers reflecting their consumption of those activities.

The allowable cost derived from a market-based price less the desired profit, used to investigate design and process alternatives.