TERMINOLOGIES USED IN INSURANCE RELEVANT TO DAILY BUSINESS ACTIVITIES
In Insurance, the following terms are used;
(i) Insured
This is the person or firm taking out Insurance and who is promised to be compensated by the Insurance company in case of a loss.
(ii) Insurer
This is the Insurance company granting the Insurance policy e.g National Insurance Corporation, Global Insurance company,etc.
(iii) Premium
Is the amount of money the Insured pays to the Insurer as the consideration to the latter’s undertaking to compensate him in event of loss. Premium are always a very small proportion of the total value that the Insurer stands to lose.
(iv) Risk
Is the event against which the Insurance is taken out for example;One may Insure his car against accident and fire. So accident and fire are called the risk.
(v) Insurable Risks
These are Risks whose probability of occurrence can be determined. Such risks include fire, accident, theft, damage of goods in transit. With such risk Insurance Companies are able to estimate the possible future losses and thus premium can be calculated with some degree of precision.
(vi) Non-Insurable Risks
Are those risks which in principle Insurance doesn’t accept to be Insured against. Example; Diseases, natural calamities such as floods, murder, losses due to wars,etc. They are also referred to as Uninsurable Risks.
(vii) Loss
This is an occurrence of an event against which Insurance is taken out. For instance; if one Insured his vehicle against accident and the vehicle is latter destroyed in an accident, the loss of a vehicle has occurred if only party of the property is destroyed.Then the loss is said to be partial loss but when the entire property is destroyed, then that is the total loss.
(viii) Pooling Risks
This means that several individuals bring their risks together and a fund is created into which they all pay. Those who actually suffer loss are paid from this fund and essentially this is how Insurance Companies work.
(ix) Sum Insured
This refers to the value of the property Insured as stated by the owner at the time of applying for Insurance.
(x) Proposal form
This is the document issued by the Insurance company to a person intending to become Insured which he or she fills it in. All the details of the Insurance Policy required and the goods and property involved must be given. The truth, the whole truth and nothing but the truth should be disclosed.
(xi) Cover Note ( Temporary Agreement)
This is the document issued by the Insurance Company as the proof that premiums have been paid and accepted by the Insurance Company. A cover note is issued for the period between the payment of the premium and the issue of the policy.
(xii) The Policy (Permanent Agreement)
In Insurance, it is the major document that contains the terms and conditions of the agreement between the Insurer and the Insured.
(xiii) Reinsurance
This is the practice of Insurance companies Insuring themselves against risks Insured with them by their customer. It is usually done by the Insurance Companies which cover properties of high value like aeroplanes, ships, trains, expensive buildings, etc. It is done to avoid the risk of failure to meet customers’ claims.
(xiv) Co- Insurance
This is the situation where several Insurance Companies come together to share a risk Insured with one of them. Each Insurance Company, accepts the responsibility for part of the risk in the event of a loss. Several Insurance Companies contribute according to the their respective shares of the risk in order to compensate the Insured.
(xv) Claim form
If the Insured event takes place then the Insured person is required to notify the Insurer. He fills a claim form, this form shows the full details of loss. After receipt of the Claim form the Insurance Company sends an assessor to determine the loss of the Insured and on the basis of the assessor the Insurer pays compensation to the Insured.
(xvi) Underwriter
This is any employee of the Insurance Company. His work is to accept or refuse the nature of the risk presented to him. If he accepts it, he is also responsible for computing the premium to be paid. In consultation with the Statistical Department of Insurance.
(xvii) Insurance Agent
This is the one who represents the Insurance Companies Interest in a particular part of country or the world at large.
(xviii) Insurance Broker
This one transacts the Insurance business on behalf of the Insurance company.
(xix) Actually
Is a skilled person in assessing and calculating risks and determining premiums charged by the Insurer.
(xx) Assessor
This is an Insurance official who calculates the amount of danger involved in any risk when the Insured makes a claim on the Insurer.
(xxi) Floating Policy
It is a policy for a certain amount, Insuring goods which are not all in one place, but one spread over a certain District or areas so that the goods are covered with wholly or in part according to their aggregate value as may happen to be either under or above Sum Insured.
(xxii) Renewals
This means giving new life to an Insurance contract so that it continues for a further period after the expiry of its current period. It is at discretion of the Insured to renew the Insurance policy. The Insurer only reminds him of the expiry date of the policy by sending him to renewal notice.
(xxiii) Terminating the policy
This is bringing an Insurance Contract between the Insured and the Insurer to an end. The Insured may terminate the policy by not renewing the policy at its expiry or by stopping to pay premiums.
(xxiv) Surrender Value
This is the amount of money paid back to the Insured when he decides to terminate his life Insurance Policy before it expires.
The policy holder is only refunded a portion of the total amount he had earlier paid as the premium. It should be noted that the premium does not attain surrender value until a specified time.
(xxv) Over Insurance
This happens when the Insured over declares the value of his property at the time of taking out the Insurance. In such case he will be required to pay higher premiums to the Insurer but in the event of total loss he will be paid only the correct value of the property.
(xxvi) Under Insurance
This happens when the Insured under declares the value of his property at the time of taking out Insurance. But in the event of total loss he is paid only the sum Insured and not the correct value.
Also See >> THE NATURE OF EMPLOYMENT CONTRACT