III IC-72 key terms

A contract in which one party collects a small, regular payment from another and promises to pay a defined sum if a specified loss event occurs, spreading risk across many people.

The company licensed to sell insurance contracts, which accepts the financial risk of covered losses and pays valid claims from the pool of premiums it collects.

The person or organization that owns an insurance policy, pays the premium, and holds the contractual right to claim under it, even where someone else is insured.

The money a policyholder pays the insurer in exchange for cover, calculated from expected claims, expenses, profit margin, and the risk characteristics of what is being insured.

The maximum amount the insurer will pay under a policy for a covered loss, and the value on which the premium is usually calculated at the start of cover.

The guaranteed amount payable on the occurrence of the insured event in a life policy, such as death or maturity, fixed at the outset and stated in the policy schedule.

A financial relationship in which the insured benefits from the continued existence of the subject matter and would suffer measurable loss if it were destroyed; it must exist when the contract starts.

The principle requiring both insurer and insured to disclose all material facts honestly and fully, because the insurer cannot inspect everything it is being asked to cover.

Any information that would influence a prudent insurer's decision to accept a risk, set its terms, or fix the premium, and which the proposer is therefore bound to disclose.

Failure by a proposer to reveal a material fact, whether deliberate or accidental, which may allow the insurer to avoid the contract or reduce a claim if the omission was significant.

A false or misleading statement of fact made by a proposer or insured, which may entitle the insurer to cancel the policy or refuse a claim if the statement induced the contract.

The principle that a property or liability claim should restore the insured to roughly the financial position held before the loss, without allowing profit from it.

The insurer's right, after paying a claim, to step into the insured's shoes and recover the loss from the party legally responsible, preventing double recovery.

The principle that where two or more policies cover the same loss on the same interest, each insurer pays its share and the insured cannot recover more than the actual loss.

The dominant, effective event that sets off an unbroken chain leading to a loss; insurers use it to decide whether an excluded or covered peril actually caused the damage.

A specific event or hazard that can cause loss, such as fire, flood, theft, or collision, and which a policy may list as covered or excluded.

A condition that increases the likelihood or severity of a loss from a peril, whether physical like poor wiring or moral like deliberate carelessness by the insured.

The tendency of insured people to behave less carefully, or to claim dishonestly, because the financial consequences of loss are shifted to the insurer.

A stated peril, property, or circumstance that the policy does not cover, delimiting the insurer's liability and often reflecting risks better handled elsewhere or deliberately retained.

The first portion of a loss that the insured must bear before the insurer pays, reducing small claims and giving the insured a reason to prevent losses.

A fixed amount or percentage deducted from a claim, or a threshold above which cover begins, often applied to motor and property policies to share risk with the insured.

A clause under which the insurer pays the full claim only if the loss exceeds a stated amount, and pays nothing if the loss falls below it.

A written amendment attached to a policy that alters its terms, adding or removing cover, changing sums insured, or updating details, and which overrides the original wording.

The page of a policy that records the specific details of the contract, including the insured's name, the property or life covered, sums insured, premium, and period of cover.

The application document completed by a prospective insured, providing the information the insurer uses to assess the risk and decide whether and on what terms to accept it.

The process by which an insurer evaluates a proposed risk, classifies it, and decides whether to accept it and at what premium, terms, or exclusions.

The method used to calculate a premium, applying base rates to the sum insured or other exposure measure and adjusting for the individual risk's characteristics.

An addition to the standard premium charged when a risk is worse than average, for example due to poor health, hazardous occupation, or a claims history.

A discount on renewal premium granted when no claim has been made during the preceding policy year, rewarding careful behaviour and encouraging retention.

The continuation of a policy for a further term at its expiry, usually subject to fresh acceptance of risk and payment of premium, and not an automatic right.

A formal request by the insured for payment under the policy after an insured event, supported by evidence of loss, which the insurer then investigates and settles.

The residual value of damaged property after a loss; the insurer may take it over or deduct its value from the claim to avoid the insured gaining from the incident.

A loss where the insured property is destroyed or damaged beyond economic repair, or where the loss equals or exceeds the sum insured, triggering full settlement.

A situation where the sum insured is less than the actual value of the property, so that claim payments are reduced in proportion to the shortfall.

A condition applying the proportion that the sum insured bears to the actual value of the property, so that underinsurance reduces the claim payment accordingly.

Insurance bought by an insurer from another insurer to transfer part of the risks it has accepted, protecting its solvency and enabling it to write larger or more concentrated risks.

The portion of risk an insurer or reinsurer keeps for its own account after ceding the rest to reinsurers, or the deliberate choice to bear risk rather than transfer it.

The excess of an insurer's admissible assets over its liabilities, required by regulators as a buffer so that claims can still be paid in adverse conditions.

A professional who uses mathematics and statistics to price insurance, value liabilities, model risks, and assess the capital an insurer needs to remain solvent.

A statistical table showing the rate at which people of each age are expected to die, used by life insurers to calculate premiums and value liabilities.

The insured's written direction naming a person to receive policy benefits on the insured's death, ensuring the money reaches the intended recipient.

The person entitled to receive the policy proceeds when the insured event occurs, identified in the policy through nomination or by operation of law.

The termination of cover because premiums were not paid within the permitted period, after which the policy may have little or no value unless a surrender value has accrued.

The amount a life insurer pays to a policyholder who voluntarily ends the policy before maturity, reflecting the accumulated value of premiums paid.

The sum payable by a life insurer when a policy runs its full term without a claim, typically the sum assured plus any declared bonuses.

Cover for the insured's legal obligation to compensate other people for death, injury, or damage caused by the insured's property, vehicle, or operations.

A class of policy covering damage to vehicles and legal liability for injury or property damage caused to others in a road accident, with compulsory third-party cover in most jurisdictions.

The section of a motor policy that pays for accidental damage to the insured's own vehicle, subject to deductibles, depreciation, and the sum insured.

Property cover for loss or damage caused by fire, lightning, and specified allied perils, protecting buildings, plant, machinery, and stock to the stated sum insured.

The cost of replacing or rebuilding damaged property with new material of similar kind and quality, used as a basis of settlement instead of depreciated market value.

Cover for ships, cargo, and freight against perils of the sea and transit, traditionally the origin of many core insurance principles such as indemnity and subrogation.

Cover that reimburses or pays for medical treatment costs, or provides a fixed benefit on hospitalisation, subject to waiting periods, sub-limits, and exclusions.

Insurance protecting a business against claims from members of the public for injury or property damage arising from its premises, operations, or products.

The possibility of loss or an adverse outcome, measured by its likelihood and financial impact, and the thing an insurer agrees to carry for a premium.

A deliberate decision to keep a particular risk rather than insure it, often because the potential loss is small or the cost of cover is disproportionate.