Insurance Terminologies & a Broader Explanations of Insurance Practice

Insurance Terminologies: Insurance terminologies can define as the meaning of certain terms and their application in insurance practice. It is the identification of those words that enhances insurance practice.

In insurance practice, the following terminologies must be given utmost attention. Among these include.

SHIP: A ship is a document that contains all the relevant information about the risk that a broker wants to place to the insurers in the insurance market. It is a detailed document issued by the insurance company to the insured showing the risk a broker wants to place the insurer.

Certificate of Motor Insurance:

The wording of the certificate of motor insurance may likely vary according to the vehicle involved.

Some insurers still print a different certificates for private cars; commercial vehicles motorcycles and motor trade risks with many different wordings according to the type of use of the vehicle concerned.

But the motor certificate is compulsory for all the users of the road and it is an offense to drive a vehicle on the road without having a motor insurance certificate.

Certificate of motor insurance contains the following:

a. certificate number

b. The registration mark of the vehicle

c. Name of the policyholder

d. The effective date of the commencement of the insurance contract

e. Date of expiring

Reinsurance: Insurance can be defined as an agreement between two parties-the ceding company and the reinsurance company whereby the ceding company agrees to cede and the reinsurance companies agree to accept based on the terms of the agreement.

Long-term agreement: This is an agreement to ensure a fixed number of years. But either party is not obligated to insure and also the premium can be changed and subsequent renewals. There may be some amendments. So nothing is binding on any party.

Franchise: Franchising means a different thing in insurance than how it is selling other everyday English media. Franchising in ordinary English media is the right role.

But in insurance is a process in which the insurance company tries to reduce the insured company to make trial claims. But if a loss occurs between a certain limit, the insured will bear it, but once it is above that limit, the insurance company will come and pay for everything.

Examples: Losses between N100 insured should bear. But from N101 and above the insurance company will come and pay for everything.

Risk Premium: Premium simply means the amount given by the insurance company to the insured with respect Sum assured in the value of the subject matter insured except otherwise stated.

If the value of a building is $1000. That should be the sum assured, but there may be under insurance if the insured insures less than the value.

Average: Average in other classes of insurance. Average means proportion, part off; quota; Average is usually used to fight under insurance in general insurance, average does not apply to life assurance policies.

Risk premium: Simply means charging the subject matter without considering any other thing. A risk premium is an actual premium for the subject matter and the addition of profit, claim administrative expenses catastrophe, and reserve brings the normal premium.

Sum assured: This is the value of the subject matter insured except otherwise stated. If the value of a car is $400,000. that should be the sum assured,

Non-proposal: This is also a term used in reinsurance which means that the spreading of risk is by negotiation and not by obligation and it exists in excess of the loss ratio or stops loss.

Reinsurance Pool
This is the type of insurance whereby insurance companies that insured a particular risk that is too big like a jumbo jet, will also reinsure their own proportion of the risk; this type of insurance is called a reinsurance pool.

Maturity age: The maturity age is the age of the life assured at which the policy ends or terminates. This is similar to policy tenure, but a different way to say how long the plan will be in force. Basically, the life insurance company declares up front the maximum age till which the life insurance coverage will be provided to the life insured. For instance, if you are 30 years old, you opt for a term plan with a maturity age of 65 years. That means the policy will have coverage till you are 65 years old, which also means, the maximum policy tenure for a 30-year-old is 35 years.

 RISK MANAGEMENT – Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.  

MORTGAGEE: The creditor to whom a mortgage is given, and who lends money on the security of the value of the property mortgaged.

 NAMED PERILS: Named perils are the specific dangers a policy insures you against – such as fire, windstorm, and hail in a homeowner’s policy. These perils are “named” or listed in the policy.

ACCIDENT: An unexpected event, which happens by chance and is not expected in the normal course of events.

ADJUSTER: A person who investigates a loss and negotiates a settlement with the claimant on the company’s behalf.

 BROKER: An independent person or firm who acts on behalf of the insured in placing business with the insurance company. They are responsible for the collection of premiums but do not have the authority to give coverage on the insurance company’s behalf without their specific agreement. Compensation is on a commission basis.

 INSURER: The Insurance Company that takes care of the loss on behalf of the insured.

COLLISION & COMPREHENSIVE: These are the three main types of coverage available in an auto insurance policy. Liability pays other people if you’ve injured them or damaged their property. Collision pays to repair damage to your car caused by collisions. Comprehensive pays you for your losses due to theft and other calamities that are unrelated to collisions, such as damage from hail, fire, vandalism, floods, etc.

 

Conclusion:

Insurance terminologies are those keywords that are associated with insurance and which stand as a basis for insurance practice.

If one is acquainted with the terminologies of a particular field it guarantees boldness and confidence in the use of words related to it.