III IC-11 key terms

A financial or legal stake in the continued life of the person insured, such that a loss would be suffered if that life ended. It must exist at policy inception for the contract to be valid.

The mutual duty of applicant and insurer to disclose all material facts honestly and completely, since the insurer cannot physically inspect the life being insured. Breach can make a life policy voidable.

Any information that would influence a prudent insurer's decision to accept a risk or set its terms, such as health history, occupation, or hazardous hobbies. It must be disclosed in the proposal.

The principle that insurance restores the insured to the financial position held before a loss, no better and no worse. It applies to general insurance but not to life insurance, which pays an agreed sum.

A risk that is measurable, accidental, large enough to matter, and spread across many similar exposures, and whose losses are calculable so a premium can be set. Speculative and certain events are excluded.

A risk involving only the possibility of loss or no change, with no chance of gain, such as premature death. Life insurance is designed to transfer this type of risk.

The uncertainty about when death will occur for an individual or group. Insurers pool this risk across many lives so that the cost of claims becomes statistically predictable.

Combining many independent exposures so that the collective contributions of the group fund the losses of the few. It is the core mechanism that makes insurance affordable and stable.

The application document on which a candidate answers questions about health, family history, occupation, and coverage sought. It forms the basis of the contract and supports underwriting decisions.

The process of assessing a proposed life for risk, classifying it, and deciding whether to accept it, decline it, or accept it on special terms such as extra premium or exclusions.

A life whose health, habits, and occupation fall within normal expectations, so it is accepted at ordinary premium rates. Most applicants are classified this way.

A life presenting higher than average mortality, such as due to a medical condition or dangerous occupation, accepted only with an extra premium, a lien, or a reduced benefit.

The amount stated in the policy that the insurer will pay on death or maturity, before bonuses or adjustments. It is the basic measure of cover purchased.

The money the policyholder pays, periodically or as a single amount, in exchange for cover. It reflects mortality, interest, expenses, and any loading for risk.

A period, commonly one month, after a due date during which an unpaid premium may still be paid without the policy lapsing. Cover usually continues during this window.

The termination of cover because premiums were not paid within the grace period and the policy had no sufficient cash value to sustain it. Revival may still be possible.

Restoring a lapsed policy to full force by paying overdue premiums with interest and providing satisfactory evidence of continued insurability. It preserves the original terms.

The cash amount a policyholder receives if a policy with accumulated value is terminated early by choice. It is typically lower than total premiums paid in the early years.

The savings component that builds inside permanent life policies, such as whole life or endowment, on which the insurer may pay interest or a loan. Term policies generally have none.

A borrowing against the cash value of a permanent policy, made by the insurer at a stated interest rate. Unpaid loans plus interest reduce the eventual benefit.

The person or entity named in the policy to receive the death benefit. A valid nomination ensures the proceeds reach the intended recipient, subject to applicable law.

The amount payable to the beneficiary when the insured dies while the policy is in force, including any declared bonuses and after deductions such as outstanding policy loans.

A short window after delivery of the policy during which the policyholder may cancel and receive a refund of premiums, giving time to review the terms. Common in unit-linked products.

The formal written contract issued by the insurer setting out cover, exclusions, premium, beneficiary, and conditions. It governs the rights and duties of both parties.

A stated circumstance or cause for which the insurer will not pay, such as suicide within a set period or death from an unapproved hazardous activity. Exclusions must be clearly disclosed.

The policyholder's formal designation of a person to receive benefits, recorded with the insurer. It can usually be changed during the policyholder's lifetime unless made irrevocable.

Selling a policy by misrepresenting its features, benefits, or costs, or by pushing a product unsuited to the customer's needs. Regulators require suitability assessment and disclosure to prevent it.

The requirement that an adviser recommend a product matching the customer's needs, objectives, financial situation, and risk appetite, documented through a needs analysis.

The excess of an insurer's admissible assets over its liabilities, required by regulators as a buffer against unexpected claims. Failure to maintain it can trigger supervisory action.

Insurance bought by an insurer to transfer part of its risk to another insurer, protecting it against large or concentrated claims. It supports solvency and capacity to accept more business.

The portion of risk an insurer keeps for its own account after ceding the remainder to reinsurers. It is set with reference to capital, solvency needs, and appetite.

The liability an insurer holds for future policy obligations, calculated from assumptions about mortality, interest, and expenses. It represents the present value of expected benefits less future premiums.

The portion of premium needed to cover expected mortality cost, excluding expense and profit loadings. It is the basis for calculating mathematical reserves.

The total premium charged to the policyholder, comprising the net premium plus loadings for expenses, profit, and any risk or contingency margins.

The addition to the net premium to cover commissions, administration, and other costs of acquiring and maintaining the policy. It is a component of the gross premium.

The number of deaths in a defined group during a period, usually expressed per thousand lives. Insurers use mortality tables to price cover and set reserves.

The frequency of illness or disability in a defined population during a period. It is the key pricing input for health and disability riders and standalone products.

The choices available when a permanent policyholder stops paying premiums, such as taking a reduced paid-up sum assured, extended term cover, or cash surrender. They protect accumulated value.

A restriction imposed on a substandard policy under which the full sum assured is paid only after a stated number of years, or a reduced amount is paid if death occurs earlier.