IFMP Non-Life Insurance Agents Certification (NLIAC), Pakistan key terms

A contract arrangement in which one party collects small regular payments from many people and uses the pooled money to compensate those who suffer specified losses, in exchange for a promise of protection.

The company licensed to sell insurance policies, which accepts the financial risk of covered losses and is legally obliged to pay valid claims made under the contracts it issues.

The person or organisation whose property, liability, or other interest is protected by an insurance policy, and who is entitled to the benefits the contract provides.

The amount of money the insured pays the insurer, usually in instalments or a lump sum, in return for the cover provided during the policy period.

The written document setting out the terms of an insurance contract, including what risks are covered, what is excluded, the sum insured, the premium, and the duties of both parties.

The maximum amount the insurer agrees to pay for a covered loss under a policy, representing the value placed on the insured interest at the time the contract begins.

The principle that insurance should restore the insured to the same financial position as before the loss, no better and no worse, so that no profit is made from a claim.

A financial relationship with the subject matter of insurance that would cause the insured to suffer genuine loss if the insured event occurred, which is required for a valid contract.

The duty on both parties, especially the proposer, to disclose all material facts honestly and completely when applying for cover, because the insurer relies on that information to decide whether and on what terms to accept the risk.

A piece of information that would influence a prudent insurer's decision on whether to accept a risk, what premium to charge, or what conditions to impose on the contract.

Failure by the proposer to reveal a material fact to the insurer, whether deliberately or by oversight, which may entitle the insurer to avoid the contract or reduce a claim.

A false or misleading statement of fact made by a proposer or insured, whether innocent or deliberate, which the insurer relied on when accepting the risk or settling a claim.

The application document completed by a person seeking insurance, which collects details about the risk and forms the basis of the contract between proposer and insurer.

The process by which an insurer assesses a proposed risk, decides whether to accept it, and determines the premium, terms, conditions, and any exclusions that will apply.

The evaluation of the likelihood and possible size of a loss, based on factors such as the nature of the property, its location, its use, and the loss history of the insured.

A risk that offers only the possibility of loss or no loss, with no chance of gain, such as fire or theft, and is the type of risk that insurance is designed to handle.

A risk that involves the possibility of either gain or loss, such as investing in shares or launching a business, and which is normally not insurable.

The specific event or cause of loss that is covered by an insurance policy, such as fire, lightning, flood, theft, or accident.

A condition or circumstance that increases the chance of a loss occurring or makes the loss more severe, such as poor wiring, careless storage of flammable materials, or bad housekeeping.

The tendency of an insured to be less careful about protecting property, or to behave dishonestly, because insurance cover exists, which insurers try to control through deductibles and conditions.

The dominant, effective cause of a loss, which sets the chain of events in motion without interruption, and which determines whether a claim falls within the cover provided.

A provision in a policy that removes a specified peril, property, or circumstance from the cover, so that losses arising from it are not payable by the insurer.

A promise or condition in a policy that the insured must comply with exactly, such as maintaining a fire alarm, and breach of which may allow the insurer to reject a claim.

A term in the policy that sets out duties and rules for both parties, such as notifying claims promptly or maintaining protective measures, which affects the validity of cover.

The first portion of a loss that the insured must bear personally before the insurer pays anything, often used to discourage small claims and reduce moral hazard.

A fixed amount or percentage deducted from a loss before the insurer's liability begins, or a sum the insured agrees to contribute towards each claim under the policy.

A formal request by the insured for payment under a policy after a loss has occurred, supported by evidence such as a claim form, receipts, and a police or fire report.

An independent professional appointed by the insurer to investigate a claim, assess the cause and amount of loss, and recommend a settlement figure to the insurer.

The remaining value of damaged property after a loss, which the insurer may take over or sell to reduce the net claim payable, or which the insured may retain with an appropriate deduction.

The insurer's right, after paying a claim, to step into the insured's position and recover the loss from the third party who caused it, preventing double recovery by the insured.

Insurance bought by an insurer from another insurer to spread the risk of large or many claims, protecting the insurer's own solvency while the original policy remains with the insured.

The amount of risk an insurer or reinsurer keeps for its own account rather than passing on to others, often expressed as a fixed sum or a percentage of the sum insured.

An arrangement in which two or more insurers share a single large risk under one policy, each accepting a stated proportion of the sum insured and of each claim.

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

A policy provision that reduces a claim in the same proportion as the sum insured bears to the actual value of the property, penalising the insured for underinsurance.

The cost of repairing or rebuilding damaged property with new materials of similar quality, which is higher than indemnity value and may be offered as an optional basis of settlement.

Legal liability owed to someone other than the insured, such as a member of the public injured by the insured's negligence, which liability policies may cover.

A class of liability insurance that covers the insured's legal responsibility for bodily injury or property damage suffered by third parties, such as visitors or passers-by, in connection with the insured's activities.

The core insurance mechanism in which contributions from many policyholders are collected into a common fund from which the losses of the few are paid, spreading the burden across the group.