Glossary of Insurance Terms

Accident and Health Insurance – insurance benefits payable in case of disease, accident, injury or accidental death.

Accident Indemnity – the most comprehensive type of rider. It provides benefits for death and disability, weekly indemnity, total, partial, permanent or temporary disability benefit, passenger aviation indemnity, waiver of premium benefit and quarantine indemnity and annuity.

Accident Insurance – a contract wherein one or a consideration agrees either to indemnify another against personal injury resulting from an accident, or to pay another a certain sum of money in case of death caused by an accident.

Accidental – unintended, unexpected, and unforeseeable cause of an injury.

Accidental Death & Dismemberment Benefit (AD&D) – almost the same as an Accident Indemnity except for the annuity benefit. It pays double indemnity and is the second-best rider.

Accidental Death Benefit – provides benefit for accidental death only.

Actual mortality – the real mortality experience of a life insurance company in contrast to the mortality that the company has taken into account in computing the premium.

Actuary – a technical expert on life insurance and related fields, particularly on the mathematics of life insurance. He or she is responsible for the calculation of premiums, policy reserve and other values and has additional executive duties in connection with the operations of the company.

Advance Premium – the payment made at the start or beginning of the period covered by the insurance policy.

Adverse Selection – the worst risks seeking life insurance and is adverse to the company.

Age Change – the date halfway between natural birth dates when the age of an individual, for the purpose of life insurance rating, changes to the next higher age, insurance age begins the nearest birthday.

Agents or Sales People – persons who officially represent somebody else in business.

Aleatory – that which depends on an uncertain event.

American Experience Tale of Mortality – one of the best known of all mortality tables published in 1868. It is based on the experience of the Mutual Life Insurance Company of New York for the period of 1843-1858 with the data encompassing all the accumulated experience of the company from the inception of operations.

Annuitant – a person during whose life an annuity is payable to.

Annuity – a contract that provides an income for a specified period of time, such as a number of years or for life.

Annuity Certain – a contract that provides an income for a specified number of years, regardless of life or death.

Assignee – the person to whom the rights under the policy are assigned in whole or in part by the original owner.

Assignment – the transfer of all rights and interest in a policy by the owner to another person.

Assignor – the person who assigns a mortgage or insurance agreement

Assuming Company (Reinsurer) – the company or organization to which the risk is transferred.

Automatic Premium Loan – a provision in a policy that authorizes the insurance company to use money from an insured’s cash value to pay premiums.

Beneficiary – a person, whether natural or juridical, expressly designated in the policy for whose benefit the contract is effected or whom the insurance money is to be paid upon the death of the insured.

Bordereau – the term used in reinsurance for lists of risks, premiums and losses. It is supplied by the ceding insurance company to the reinsurer.

Burial Assistance – contracts intended to indemnify the insured’s estate or relative/s against the anticipated expenses of interring.

Cede – to give reinsurance to a reinsurer.

Ceding Company – an insurance company that places reinsurance business of its original risks with a reinsurance company.

Certificate of Authority – a document showing the powers an insurance company grants to a particular agent; or, the authority granted by the Insurance Commission to insurance companies, general agents and agents.

Certificate of Insurance – a statement of coverage taking the place of the policy as evidence of insurance and often transferring the right to collect claims to the holder of the certificate. In group insurance, it is a statement issued to the member of the group certifying that an insurance contract has been written and containing a summary of the terms applicable to that member.

Cession – the act of transferring the insurance from the direct-writing company to the reinsurer.

Claim – a demand presented usually by a beneficiary for payment of the proceeds of a life insurance contract.

Claimant – an individual asserting a right or presenting a claim for a suffered loss; one who makes or presents a claim.

Concealment – the designed and intentional withholding of any fact material to the risk, which the insured, in honesty and good faith, should communicate to the underwriter. It is the improper suppression of any fact or circumstance by one of the parties to a contract from the other, which, in justice, should be known.

Decline – refuse politely.

Exclusions – the act of excluding something or somebody.

Extended Term Insurance – a non-forfeiture option that uses the cash value of an ordinary life policy as a single premium to purchase term life insurance in the amount of the original policy. The length of the term policy depends on: the size of the cash value; and, the attained age of the insured.

Face Amount – the amount or type of protection provided by an insurance policy.

Grace Period – a period of time, either 30 or 31 days from the policy due date for premium payment within which period the insured is still covered even if he has not yet paid the premiums. In case of death or injury within that period, the insurance company will still be liable. After such period and no premium is paid, the policy lapses, except when the non-forfeiture provisions of a policy are available.

Group – a number of people or things considered together or regarded as belonging together.

Group Insurance – a plan for covering large number of people under one master policy. This is usually issued to an employer, union or association.

Impairment – to lessen the quality, strength, or effectiveness of something.

Incontestability – a period either 1 to 2 years from the effective date of the policy after which the insurance company can no longer question the statements made by the insured in his or her life insurance application.

Individual – a specific person, distinct from others in a group.

Insurable Interest – a relation between the insured and the event insured against such that the occurrence of the event will cause substantial loss or harm of some kind to the insured.

Insurance – a contract wherein one undertakes for a consideration to indemnify another against loss, damage, or liability arising from an unknown or contingent event.

Insurer – a person who undertakes to indemnify another by a contract of insurance.

Lapsed Policy – a policy terminated because of non-payment of premium.

Life Insurance – a mutual agreement by which one party agrees to pay a given sum on the happening of a particular event contingent on the duration of human life, in consideration of the payment of a smaller sum immediately, or in periodical payments, by the other part.

Limited Payment Life – a plan of insurance for the whole of life on which premiums are payable for a specified number of years, or until death, if death occurs before the end of the specified period.

Loss – injury of damage sustained by the insured in consequence of the happening of one or more of the accidents or misfortunes against which the insurer, in consideration of the premium, has undertaken to indemnify the insured.

Misrepresentation – to give an inaccurate or deliberately false account of the nature of somebody or something; in which the insured states with the knowledge that it is untrue and with an intent to deceive; or, which he or she states positively as true without knowing it to be true with the intent to mislead, and which has a tendency to mislead, here such fact in either case is material to the risk.

Misstatement of Age – a provision in the life insurance policy that in case the age of the insured has been misstated as to his true age, then, the policy face amount will be adjusted in accordance with the premiums actually charged.

Moral Hazard – a subjective characteristic of the insured that increases the probability of loss. For example: dishonesty of the insured.

Mortality – the condition of being certain to die eventually.

Non-forfeiture option – the value, if any, either in cash or in other forms of insurance available upon failure to continue the required payments.

Non-participating insurance – an insurance plan on which no dividends are payable. The premium is calculated to cover as closely as possible the anticipated actual cost of the insurance protection.

Occupation – the job by which somebody earns a living.

Ordinary life policy – life insurance usually issued with premiums payable on an annual, semi-annual, quarterly or monthly basis. The term is also used to mean straight life, a plan of insurance for the whole of life with premiums payable until death.

Participating insurance – insurance on which the policyholder is entitled to share in the surplus earnings of the company through dividends that reflect the difference between the premium charged and actual experience.

Policy – a contract that exists between an insurance company and a person or organization buying insurance services; or, the document that lists the contract terms.

Policy Change – to exchange, substitute, or replace something.

Policy dividend – a refund of part of the premiums on a participating life insurance policy. It is a share of the surplus earnings apportioned for distributions and reflects the differences between the premium charged and actual experience.

Policy enemy – refers to a nation at war with the Philippines as well as its every citizen. This, however, does not include robbers, thieves, private depredators or riotous mobs.

Policy owner – the owner of a contract.

Policy reserves – the amounts that an insurance company allocates specifically for the fulfillment of its policy obligations. Reserves are also calculated that, together with future premiums and interest earnings, these will enable the company to pay all future claims.

Premium – the payment or one of the regular periodical payments a policyholder is required to make for an insurance policy.

Proposal – a suggestion or intention, especially one put forward formally or officially.

Reduced Paid-up – life insurance in which a non- forfeiture value is used to purchase a reduced amount of fully paid-up insurance of the same kind as the surrendered policy.

Reinstatement – the process of reviving the policy that has lapsed by submission of all the company’s requirements for revival. Reinstatement, however, is not limited to the submission of proofs of insurability, payment of back premiums, and, re-dating the policy.

Reinsurance – to insure something again, especially to obtain, as an insurer, additional coverage from another insurer for a risk that a customer has been insured against.

Renewable Term Insurance – term insurance providing the right to renew at the end of the term for another term or terms, without evidence of insurability.

Retirement Income Insurance – an insurance contract with an endowment feature where, at maturity, the automatic option is to pay a life income to the insured.

Retrocession – This happens when a reinsurer decides not to hold for his or her own account the full amount ceded to him or her by an insurer, which, in turn, reinsures or retrocedes part of the cession.

Return of Premium – the amount due the insured if a policy is cancelled, reduced in amount, or reduced in rate.

Rider – a form attached to the policy when the company finds it necessary to alter or amend the applicant’s answer to any question in the application.

Riders – an extra clause added to a legislative bill, often not directly related to the main issue.

Risk – the uncertainty surrounding the occurrence of a financial loss. If there is certainty that the loss will occur, there is no risk; but, if there is certainty that it will not occur, there is no risk also.

Salary Savings or Payroll Savings – Life insurance in individual policies issued to employees whose employer automatically deducts the premium from salaries or wages before payment.

Selection – the evaluation of applicants and their proper classification into mortality groups.

Self Insurance – one who is subject to a risk of loss and periodically lays aside sums, which, in time, will provide a fund for reimbursing him or her for any loss that may occur.

Settlement Options – optional methods provided under a policy of distributing the proceeds at death or maturity.

Single Premium – the amount that constitutes payment in full for a contract at its inception.

Single Premium Insurance – a life insurance contract which provides that, for the consideration of a premium paid only once, the insurance company will assume the liability on the contract.

Standard – a level of quality or excellence that is accepted as the norm or by which actual attainments are judged.

Standard Insurance – insurance issued on people whose physical conditions, occupations, family history and habits involve no extra hazard.

Standard Risks – refers to applicants for life insurance companies owned and controlled by stockholders who share in surplus earnings. The company issued in general, non-participating life insurance but may also issue participating life insurance.

Surrender Charge – the charge deducted from the reserve to determine the cash value when a policyholder surrenders his or her policy.

Surrender – refers to the termination of a policy through non-payment  of premiums after termination or surrender values are available.

Triple Indemnity – a provision which provides that the additional payment shall be equal to two times the face amount.

Underwriters – persons who fix the limit of liability that a company will assume on the various classes of risks, and who pass on the desirability of such business offered to the company.

Underwriting – is responsible for risk assessment. It is the process of: assessing and classifying the degree of risk represented by a proposed insured or a group of insureds with respect to a specific insurance product; and, making a decision to accept or decline the risk.

Underwriting Profit – the portion of the earnings of an insured company that comes from the function of underwriting. It excludes the earnings from investments either in the form of income from securities or sale of securities at a profit. The remainder is found by deducting incurred losses and expenses from earned premiums

Unearned Premiums – the part of the premium paid which covers the portion of the premium paid for which no protection had been furnished.

Waiver of Premium – a clause added to an insurance policy providing Waiver of Premium if the premium payer dies or becomes disabled. For example, this option is available on insurance policies on a child’s life where the premium is paid by an adult, or, on life and health policies for adults.