III IC-85 key terms

A contract in which one party transfers the financial risk of a specified loss to an insurer in exchange for a premium, with the insurer promising to indemnify or pay a defined benefit.

The legal requirement that the policyholder would suffer a genuine financial or recognized loss if the insured event occurred, distinguishing insurance from a wager.

The principle that both insurer and policyholder must act honestly and disclose all material facts relevant to the risk throughout the contract's life, including at proposal and renewal.

Any information that would influence a prudent insurer's decision to accept a risk or set its terms and premium; failure to disclose it can allow the insurer to avoid the contract.

The omission of a material fact when applying for or renewing insurance, which may give the insurer grounds to avoid the policy or reduce a claim.

A false or misleading statement made by an applicant or policyholder, whether innocent or deliberate, that induces the insurer to enter the contract on terms it would not otherwise accept.

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

The improvement in the value of repaired or replaced property beyond its pre-loss condition, which an insurer may deduct from a settlement to preserve the indemnity principle.

A settlement basis in which the insurer pays to rebuild or replace damaged property with equivalent new property, usually subject to a declared sum insured and conditions.

The maximum amount the insurer will pay under a policy, or the value declared for the insured property, used as the basis for assessing premium and average.

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

A situation where the sum insured is lower than the true value of the insured interest, exposing the policyholder to proportional claim reductions and higher retained loss.

The first amount of each loss that the policyholder must bear before the insurer pays, used to reduce small claims and lower the premium.

A fixed amount or percentage the insured retains per claim, often applied per occurrence or per policy period, reducing both administration costs and moral hazard for the insurer.

The amount paid by the policyholder to the insurer in exchange for cover, calculated from the risk profile, sums insured, and policy terms.

A variable used in pricing a risk, such as age, location, occupation, or claims history, which adjusts the base rate to reflect expected loss.

The process by which an insurer evaluates the likelihood and severity of potential losses before accepting a risk and deciding on terms, premium, and exclusions.

The tendency of an insured to behave less carefully, or to exploit cover, because the financial consequences of loss are transferred to the insurer.

The tendency for higher-risk applicants to seek or retain insurance more than lower-risk ones, which can distort pricing if the insurer cannot distinguish risk levels.

The dominant, effective cause of a loss, determined by a continuous chain of events not broken by a new and independent cause, used to decide whether cover applies.

A specific event or hazard that may cause loss, such as fire, flood, theft, or accident, and which a policy may cover or exclude.

A condition that increases the likelihood or severity of a loss from a peril, such as poor housekeeping, faulty wiring, or an unsafe working practice.

A policy provision that removes specified perils, property, persons, or circumstances from cover, defining the boundaries of the insurer's promise.

A policy wording that covers all accidental loss or damage except what is expressly excluded, shifting the burden of proving an exclusion to the insurer.

The document attached to a policy that records the insured's details, sums insured, cover sections, excesses, endorsements, and the policy period.

A written amendment to an existing policy that alters cover, conditions, or terms, and which takes effect as part of the contract once agreed.

A policy condition that the insured promises a particular state of affairs is or will be true; breach can discharge the insurer from liability for the claim.

A requirement the insured must satisfy before the insurer's liability arises, such as notifying a claim promptly or providing proof of loss.

The policyholder's duty to inform the insurer of a loss within the period and manner specified in the policy, enabling timely investigation and reserving of liability.

An independent or insurer-appointed specialist who investigates a claim, verifies the cause and amount of loss, and recommends a settlement to the insurer.

The insurer's right, after paying a claim, to step into the insured's legal position and recover the loss from the party responsible for causing it.

The principle allowing an insurer that has paid a claim to recover a proportionate share from other insurers covering the same interest against the same peril.

The situation where the same insured interest is covered by more than one policy against the same risk, entitling the insured to claim but not to recover more than the loss.

Insurance purchased by an insurer to transfer part of its assumed risk to a reinsurer, protecting its capital and enabling it to write larger or more concentrated risks.

The portion of risk an insurer or reinsured keeps for its own account rather than transferring to reinsurers, often expressed as a monetary amount or percentage.

A reinsurance arrangement in which the reinsurer may accept or decline each individual risk offered by the ceding insurer, allowing selective risk transfer.

The stated dates during which the policy provides cover, with losses occurring outside that window generally falling outside the insurer's liability unless an extension applies.