Glossary of Insurance Terms
Insurance is an old business and often legal and old fashioned words are used by insurers to express what is covered under a policy or what practices and procedures are to be followed. Although policy wordings are getting better, there are still quite a few not so common words that are being used. We want to help you understand these better so we have compiled this overview of common terms from different sources to help you understand your insurance arrangements better.
These explanations are general and may not be perfect and/ or apply in every circumstance. They are purely meant to give you a little guidance in making sense of it all. We welcome you to share possible improvements or additions to the list. Please send them to firstname.lastname@example.org. If you have further questions or need further explanations please mail us at email@example.com or give us a call on our customer hotline: +65 3158 4293.
Accidental Death Benefit – benefit paid to the beneficiary, should death occur due to an accident. There can be certain exclusions as well as time and age limits.
Actual Cash Value – Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year-old tv set will not be replaced at current full value because of depreciation.
Agent – individual who sells and services insurance policies in either of two classifications:
- Independent agent represents at most 3 insurance companies and (at least in theory) services clients by searching the market for the most advantageous price for the most coverage. The agent’s commission is a percentage of each premium paid and includes a fee for servicing the insured’s policy.
- A direct or career agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent.
Aggregate Limit – Usually refers to liability insurance and indicates the amount of coverage that the insured has under a contract for a specific period of time
All Risks – All risk exposures including accidental means are covered by the insurer, other than those specifically excluded.
Annuity – An agreement by an insurer to make periodic payments that continue during the survival of the insured person or for a specified period.
Average Clause – If the insured under-insures a building, the insurer will not pay for the full reinstatement cost, but will pro-rate the payment according to the under-insurance. To avoid such a situation, the insured must ensure that the sum insured under the policy is sufficient to cover the reinstatement cost of the building.
Benefit Period – In health insurance, the number of days for which benefits are paid to the named insured and his or her dependents. For example, the number of days that benefits are calculated for a calendar year consists of the days beginning on Jan. 1 and ending on Dec. 31 of each year.
Broker – Independent insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.
Casualty – Liability or loss resulting from an accident.
Casualty Insurance – That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.
Claim – A demand made by the insured, or the insured’s beneficiary, for payment of the benefits as provided by the policy.
COE (The Certificate of Entitlement) – is the quota license received from a successful winning bid in an open bid uniform price auction which grants the legal right of the holder to register, own and use a car in Singapore for a period of 10 years.
Coinsurance – In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20% health insurance coinsurance clause, the policyholder pays for the deductible plus 20% of his covered losses. After paying 80% of losses up to a specified ceiling, the insurer starts paying 100% of losses.
Collision Insurance – Covers physical damage to the insured’s automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.
Commercial or Corporate Lines – Refers to insurance for businesses, professionals and commercial establishments.
Commission – Fee paid to an agent or broker as a percentage of the policy premium. The percentage varies widely depending on coverage, the insurer and the marketing methods.
Comprehensive Insurance – Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car in addition to the mandatory third party liability insurance.
Coverage – The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.
Copayment – A predetermined, flat fee an individual pays for health-care services, in addition to what insurance covers. Copayments are not usually specified by percentages.
Coverage Area – The geographic region covered by travel insurance.
Death Benefit – The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.
Deductible – Amount of loss that the insured pays before the insurance kicks in.
Direct Writer – An insurer whose distribution mechanism is either the direct selling system or the exclusive agency system.
Dividend – The return of part of the policy’s premium for a policy issued on a participating basis by either a mutual or stock insurer. A portion of the surplus paid to the stockholders of a corporation.
Elimination Period – The time which must pass after filing a claim before policyholder can collect insurance benefits. Also known as “waiting period.”
Employers Liability Insurance – Coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by a workers’ compensation law.
Errors & Omissions Insurance – Also known as Professional Liability Insurance protects your organisation from claims if your client holds you liable for errors, or failure to deliver work as promised in the contract.
Exclusions – Items or conditions that are not covered by the general insurance contract.
Excess – The portion of claim for which the Insured is liable.
Exposure – Measure of vulnerability to loss, usually expressed in dollars or units.
First Loss – “First Loss” provides only partial insurance coverage. In the event of a claim, the policyholder is covered up to an amount agreed in the policy being part of the total value. In return, the insurer agrees not to penalise the policyholder for under-insuring his contents or property.
Floater – A separate policy available to cover the value of goods beyond the coverage of a standard renters insurance policy including movable property such as jewellery or sports equipment.
Foreign Domestic Worker (FDW) – Foreigners employed as domestic helpers in Singapore.
Full Value – In the event of a claim, the policyholder is covered for the full value of damaged, destroyed or stolen contents/property.
General Liability Insurance – Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured’s premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.
Grace Period – The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time.
Hazard – A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.
Indemnity – Restoration to the victim of a loss by payment, repair or replacement.
Inflation Protection – An optional property coverage endorsement offered by some insurers that increases the policy’s limits of insurance during the policy term to keep pace with inflation.
Insurable Interest – Interest in property such that loss or destruction of the property could cause a financial loss.
Insurance Adjuster – A representative of the insurer who seeks to determine the extent of the insurer’s liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an “as needed” basis and might work for several insurance companies at the same time. Independent adjusters charge insurance companies both by the hour and by miles travelled.
Least Expensive Alternative Treatment – The amount an insurance company will pay based on its determination of cost for a particular procedure.
Liability – Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense.
Liability Insurance – Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.
Lloyd’s – Generally refers to Lloyd’s of London, England, an institution within which individual underwriters accept or reject the risks offered to them. The Lloyd’s Corp. provides the support facility for their activities.
Loss Control – All methods taken to reduce the frequency and/or severity of losses including exposure avoidance, loss prevention, loss reduction, segregation of exposure units and noninsurance transfer of risk. A combination of risk control techniques with risk financing techniques forms the nucleus of a risk management program. The use of appropriate insurance, avoidance of risk, loss control, risk retention, self-insuring, and other techniques that minimise the risks of a business, individual, or organisation.
MAS (Monetary Authority of Singapore) – Singapore’s central bank and financial regulatory authority. It administers the various statutes pertaining to money, banking, insurance, securities and the financial sector in general, as well as currency issuance.
Medical Evacuation & Repatriation Insurance – Covers expenses to transport you to a capable medical facility in case a local medical centre isn’t able to provide adequate treatment
MOM (Ministry Of Manpower) – responsible for the formulation and implementation of labour policies related to the workforce in Singapore.
Mortgage Insurance Policy – In life and health insurance, a policy covering a mortgagor with benefits intended to pay off the balance due on a mortgage upon the insured’s death, or to meet the payments due on a mortgage in case of the insured’s death or disability.
Named Perils – Perils specifically covered on insured property.
NCD (No-Claim Discount) – is awarded annually by your insurer if you have not made any claim on your existing car insurance policy. This is your insurer’s way of recognising you for having been a careful driver.
Occurrence – An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn’t have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.
Out-of-Pocket Limit – A predetermined amount of money that an individual must pay before insurance will pay 100% for an individual’s health-care expenses.
Own Occupation – Insurance contract provision that allows policyholders to collect benefits if they can no longer work in their own occupation.
Peril – The cause of a possible loss.
Personal Lines – Insurance for individuals and families, such as private-passenger auto and home owners insurance.
Personal Accident insurance – Coverage against an identifiable event which is experienced by the Insured Person in a sudden, unforeseen or unexpected manner and which solely and independently of any other cause results in Bodily Injury to the Insured Person.
Permanent Total Disablement – a state of incapacity resulting from the Insured Person suffering Bodily Injury which results in his/her permanent total disablement from gainful employment of any and every kind where such incapability is medically certified within specified time frame from the date of the Accidental Bodily Injury.
Policy – The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
Policy Schedule – The typed sheet attached to a Policy providing details of the subject matter.
Pre-Existing Condition – A coverage limitation included in many health policies which states that certain physical or mental conditions, either previously diagnosed or which would normally be expected to require treatment prior to issue. They will often not be covered under a new policy for a specified period of time.
Qualifying Event – An occurrence that triggers an insured’s protection.
Reinsurance – In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn’t fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilise its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period.
Renewal – The automatic re-establishment of in-force status effected by the payment of another premium.
Replacement Cost – The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
Risk Class – Risk class, in insurance underwriting, is a grouping of insureds with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.
Risk Management – Management of the pure risks to which a company might be subject. It involves analysing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.
Secondary Market – The secondary market is populated by buyers willing to pay what they determine to be fair market value.
Stop Loss – Any provision in a policy designed to cut off an insurer’s losses at a given point.
Subrogation – The right of an insurer who has taken over another’s loss also to take over the other person’s right to pursue remedies against a third party.
Security Bond – a binding pledge to pay the government expenses or fines if you break the law or the conditions governing the employment of a maid.
Temporary Total Disablement – a state of incapacity resulting from the Insured Person suffering Bodily Injury which temporarily totally prevents the Insured Person from engaging in his/her Occupation.
Temporary Partial Disablement – a state of incapacity resulting from the Insured Person suffering Bodily Injury which temporarily prevents that Insured Person from engaging in a substantial part of his/her Occupation.
Term Life Insurance – Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn’t build up any of the non-forfeiture values associated with whole life policies.
Tort – A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.
Total Loss – A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.
Underwriter – The individual trained in evaluating risks and determining rates and coverages for them. Also, an insurer.
Underwriting – The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.
Unearned Premiums – That part of the premium applicable to the unexpired part of the policy period.
Valuation – A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial condition of a pension plan.
Waiting Period – The time which must pass after filing a claim before policyholder can collect insurance benefits.
Waiver of Premium – A provision in some insurance contracts which enables an insurance company to waive the collection of premiums while keeping the policy in force if the policyholder becomes unable to work because of an accident or injury. The waiver of premium for disability remains in effect as long as the insured is disabled.
War and Terrorism & Political Violence Insurance: Coverage extension can be added to several types of policies to protect personnel, assets and liabilities from the political violence risks such as civil unrest, war, riots, strikes, and acts of terrorism.
Whole Life Insurance – Life insurance which might be kept in force for a person’s whole life and which pays a benefit upon the person’s death, whenever that might be.