III IC-01 key terms

The chance of loss or the uncertainty about whether a loss will occur, measured by the possibility and size of an adverse outcome.

A situation with only the possibility of loss or no loss, never gain, such as fire or liability exposure. It is the type of risk insurance is designed to handle.

A situation offering the chance of gain as well as loss, such as investing in shares or launching a business. It is generally not insurable.

The specific cause of a loss, such as fire, flood, theft, windstorm, or collision. A policy names the perils it covers or excludes.

A condition that increases the likelihood or severity of a loss from a peril, such as faulty wiring, icy steps, or a careless driving record.

A tangible condition of property or surroundings that raises the chance of loss, such as a combustible building, steep stairs, or a poorly maintained vehicle.

A hazard arising from dishonest intent, where a person may create or exaggerate a loss to collect insurance money, such as staging a theft or arson.

Carelessness or indifference toward loss because insurance exists, such as leaving a car unlocked or neglecting maintenance, which raises the chance of a claim.

A financial stake in the person or property insured such that the policyholder benefits from its survival and suffers a loss from its damage or destruction.

The principle that insurance restores the insured to roughly the same financial position as before the loss, no better and no worse, rather than allowing profit from a claim.

The mutual duty of the insurer and the applicant to deal honestly and disclose all material facts relevant to the risk, without being asked.

Information that would influence an insurer's decision to accept a risk or set its terms and premium, such as prior claims, health history, or hazardous activities.

The failure to reveal a material fact when applying for or renewing insurance, which may allow the insurer to avoid the policy or refuse a claim.

A false or misleading statement of fact made by an applicant or insurer, whether innocent or deliberate, that may affect the validity of the contract.

The dominant, effective cause of a loss that sets events in motion without interruption. It determines whether a claim falls within the policy.

A cause that is too distant or incidental in the chain of events to be treated as the legal cause of a loss when a closer cause exists.

The insurer's right, after paying a claim, to step into the insured's shoes and recover the amount paid from the party responsible for the loss.

The principle allowing an insurer that has paid a claim to collect a proportionate share from other insurers covering the same loss, so the insured does not recover twice.

A property clause requiring the insured to carry coverage equal to a stated percentage of value; failing that, claims are reduced in proportion to the shortfall.

A policy provision that reduces a claim payment in proportion to any underinsurance, calculated by comparing the sum insured with the value at risk.

The maximum amount an insurer will pay under a policy for a covered loss, as stated in the schedule and used to calculate premium.

The cap on the insurer's liability for a claim or for all claims during the policy period, which may apply per occurrence or in aggregate.

The maximum total an insurer will pay for all covered claims across the entire policy period, distinct from a limit that resets for each occurrence.

The amount the insured must bear before the insurer pays anything on a claim, which reduces premium and discourages small claims.

The portion of a loss the insured retains above a stated amount, or the amount by which a claim exceeds the sum insured and is therefore not covered.

The money paid by the insured to the insurer in exchange for cover, calculated from the risk, sum insured, claims history, and policy terms.

The process of setting a premium by applying rates to the factors that describe a risk, such as age, property type, location, or occupation.

An addition to the standard premium to reflect above-average risk, such as a poor claims record, hazardous occupation, or substandard construction.

A premium reduction earned for each claim-free period, often lost or reduced when a claim is made.

A valuation method equal to replacement cost minus depreciation, reflecting what the damaged property was worth just before the loss.

The amount needed to repair or rebuild property with new materials of like kind and quality, without deducting for age or wear.

The reduction in property value caused by age, wear and tear, or obsolescence, used to calculate actual cash value.

An event, accident, or continuous exposure that causes loss during the policy period, often the trigger for a claim under liability and property covers.

A liability trigger where cover responds to claims first made or reported during the policy period, regardless of when the incident occurred, subject to a retroactive date.

The earliest date from which covered incidents are protected under a claims-made policy; losses occurring before that date are excluded.

A policy clause that removes specified perils, property, persons, or circumstances from cover, such as war, wear and tear, or intentional acts.

A policy basis that covers only the perils expressly listed, such as fire, lightning, and theft, leaving all other causes outside cover.

A policy basis that covers all loss or damage except the perils and circumstances expressly excluded, placing the burden of proof on the insurer.

A specific promise or condition in the policy that the insured must satisfy, such as maintaining a security system or not storing flammable goods.

A policy provision stating duties or circumstances that affect the validity of cover or payment, such as prompt notification, proof of loss, or protective safeguards.