IC-38 General key terms

A contract in which one party collects a small, regular payment from another and promises to pay a large sum if a specified loss occurs. Risk is transferred from the individual to a shared pool.

The company that accepts the risk under an insurance contract and is legally bound to pay valid claims. It collects premiums and must be licensed by the regulator to transact insurance business.

The person who owns the insurance policy, pays the premium, and holds the contractual rights under it. This may differ from the insured person or the beneficiary named in the policy.

The person whose life, health, or property is covered by the policy and on whom the claim depends. The insured need not be the same person as the policyholder who bought the cover.

The person named in a life policy to receive the death benefit when the insured dies. A valid nomination directs payment and can avoid the proceeds forming part of the estate.

The amount the policyholder pays, usually monthly, quarterly, half-yearly, or annually, to keep the insurance cover in force. It reflects the risk, expenses, and expected claims of the insurer.

The fixed amount stated in the policy that the insurer agrees to pay on the occurrence of the insured event, such as death or maturity. It is the basic measure of cover bought.

A formal request by the policyholder or beneficiary for payment under the policy after an insured event occurs. The insurer verifies documents and admissibility before settling or repudiating it.

A financial relationship in which a person gains from the continued existence of the insured and suffers loss from the insured event. It is required at inception and, in life insurance, also at claim.

The principle that both parties must disclose all material facts honestly and not mislead each other. Breach by the proposer can allow the insurer to avoid the contract.

Any information that would influence a prudent insurer's decision to accept a risk or set its terms and premium. The proposer must disclose such facts truthfully in the proposal form.

Failure by the proposer to reveal a material fact that the insurer needed to assess the risk. Depending on intent and timing, it may let the insurer avoid or reduce the claim.

A false or misleading statement made by the proposer during negotiation of the contract. If it concerns a material fact, the insurer may treat the policy as voidable.

The application document in which the proposer gives personal, health, and financial details. It forms the basis of the contract and the answers are relied on by the underwriter.

The process of assessing a proposed risk and deciding whether to accept it, on what terms, and at what premium. It may involve medical tests, financial checks, and extra loadings.

Collecting many similar but independent risks together so that the losses of the few are shared by the contributions of the many. This makes premiums more predictable and affordable.

A statistical table showing the rate at which people of each age are expected to die within a year. Insurers use it to calculate life insurance premiums and reserves.

A specialist who applies mathematics and statistics to price insurance products, value liabilities, and test solvency. Actuarial certification supports premium rates and reserve calculations.

A specific event, condition, or circumstance listed in the policy for which the insurer will not pay. Reading exclusions is essential because they limit the apparent scope of cover.

The extra time, usually 15 to 30 days, after a premium due date during which cover continues even though payment is late. A claim during this period may have the unpaid premium deducted.

The termination of a policy because premiums were not paid within the grace period. A lapsed policy gives no cover unless it is revived or has acquired a surrender value.

Restoring a lapsed policy to full force by paying arrears and interest and meeting any health or other conditions. Insurers may decline revival if the risk has deteriorated.

The cash amount the insurer pays if the policyholder ends a savings-type policy before maturity. It is usually lower than total premiums paid and applies only after a minimum period.

The date on which a savings or endowment policy reaches the end of its term and the sum assured becomes payable. Survival to maturity is the insured event in such policies.

A life insurance contract that pays the sum assured either on death during the term or on survival to maturity. It combines protection with a savings element.

Pure protection cover that pays the sum assured only if the insured dies within the chosen period. There is no survival benefit, so premiums are relatively low.

The formal written contract issued by the insurer setting out cover, conditions, exclusions, and obligations. It is the primary evidence of the terms the parties agreed to.

The policyholder's written declaration naming who should receive the policy money on death. It helps ensure speedy settlement and may keep proceeds outside the estate.

The insurer's formal rejection of a claim because it is not covered, documents are insufficient, or the contract was breached. The reasons must be communicated to the claimant.

A borrowing facility allowing a policyholder to take money against the surrender value of a policy while it remains in force. Interest is charged and unpaid loans reduce the final payout.

The ability of an insurer to meet all its liabilities as they fall due, measured by the margin of assets over liabilities. Regulators set minimum solvency ratios to protect policyholders.

A licensed intermediary who represents an insurer, sells its products, and helps clients with proposals and claims. The agent acts for the insurer, not as an independent adviser.

A licensed intermediary who represents the client rather than any single insurer and may place cover with several companies. Brokers typically advise on comparing and arranging policies.

The remuneration an insurer pays an intermediary for selling and servicing policies, usually a percentage of premium. Rules require disclosure and cap levels to prevent mis-selling.

The identity and suitability checks an intermediary must complete before selling a policy. It covers identity, address, source of funds, and the client's needs and affordability.

Laws and procedures requiring insurers and intermediaries to detect, report, and prevent the use of insurance products to disguise criminal proceeds. Suspicious transactions must be reported promptly.

A short window, commonly 15 to 30 days after receiving the policy, during which the buyer may cancel and receive a refund less certain charges. It protects against unsuitable purchases.

The formal process by which a policyholder can complain about an insurer's service or claim decision. It usually begins with the insurer's officer and can escalate to the regulator or ombudsman.

An independent official who resolves disputes between policyholders and insurers within specified monetary limits. The process is generally free, quick, and less formal than a court.