Insurance Terminology

kalpitagarwal1's version from 2015-04-19 06:44


Question Answer
IndemnityInsurance is designed to restore the policyholder to the same financial condition enjoyed prior to a loss. The intent is to cover the amount of the actual loss only and to avoid paying amounts that allow an insured to profit from a loss situation. This is known as the Principle of Indemnity. Health insurance follows this concept, but Life insurance doesn't. All Life policies pay in addition to each other!
Industrial LifeLife insurance generally with a face amount of less than $1,000, with premiums collected weekly by the producer in person. The grace period for this type of insurance is 28 days. Also known as "Home Service" Life insurance. There are 3 types of Life insurance: Ordinary (which includes Whole Life, Term and Endowment), Group and Industrial.
Insurable InterestAn interest in the life of an individual by which there will be a loss if the insured dies. The interest may be based on either a family relationship or on economic factors. Must exist at the time of application, not necessarily at the time of loss. If you would benefit if a person continues to live, you have an insurable interest in that person.
InsuranceA contract or device for the transfer of pure risk to an insurer, who agrees, for a consideration, to indemnify or pay a specified amount for losses suffered by the insured. Risk is defined as the chance or uncertainty of loss. Pure risk is the chance of loss, with no chance for gain. It is the only type of risk that is insurable. Speculative risk, which is the chance for loss or gain, is not insurable.
Insurance AgeAn age upon which current premium rates may be established. It is commonly based on age at last birthday, age next birthday, or age at nearest birthday. Also known as "original" age.
Insurance CommissionerCommon title for head of a state Department or Division of Insurance. Also known as the Director of Insurance in some states. Insurance is regulated by state law. The Commissioner's job is to protect the insurance buying public by administering state insurance laws and regulations. The Commissioner does not make the laws, he enforces them.
InsuredThe party to an insurance contract to whom, or on behalf of, the insurance company agrees to indemnify for losses, provide benefits, or render services. In Prepaid Hospital Service plans (HMOs), the insured is called the subscriber.
InsurerThe insurance company assuming risk and agreeing to pay claims or provide services. Insurers write "indemnity" plans, covering the insured. HMOs are not true insurance companies. They write prepaid "service" plans for their "subscribers".
Insuring ClauseThe clause in a policy that specifies in brief the contract's intent and benefits. Also known as the Insuring Agreement. It specifies the covered perils, such as accident and sickness on Health insurance. A peril is a cause of loss.
Interest OptionA Life insurance settlement option under which the insurer keeps the insurance proceeds and invests them on behalf of the beneficiary. The beneficiary receives the interest from the investment. The proceeds remain the property of the beneficiary. The proceeds are not taxable but the interest earned is.