Important words in Insurance

S.No	Important Words	SUMMARY
1	proposer	A person who requests to buy a policy for self, spouse or child.
2	Proposal form	This is a form to be filled by person who wishes to take a policy. (all a person in whose name policy is taken.
3	Policy holder	A person in whose name policy is taken.
4	Premium	Amount to buy a policy or installment. (Annually, semi annually, quarterly, monthly (ECS-electronic clearing system)
5	agent	Intermediate between company & policy holder. (one who sells policies on commission basis)
6	insurer	Insurance company who sells policy & also gives money (SA/maturity) at the end of the period.
7	contract	Agreement between company& policy holder. (one giving & one taking)
8	nominee	A person who receives the money on death of the life insured
9	rider	It can be taken along with normal policy for extra benefits (WOP, CI AD &D, SC, HC)
10	Sum assured	The limit of the policy amount. (risk amount- sum at risk)
11	claim	Payment of sum assured on death or maturity.
12	Risk/peril/hazard	Risk- chance of damage of loss, peril- event which might cause a loss, hazard- conditions that a peril would happen.
13	Coroner (investigator)	A person who investigates in case of death cases.
14	Medical referee	Panel of doctors who are appointed for medical checkups. (not company employee)
15	underwriter	He is a company employee who decides to give the policy or not

Life insurance products

Life insurance products

v  Return of premium plan      

v  Pure endowment plan

v  Endowment insurance plan

v  Whole life insurance plans

v  Convertible insurance plans

v  Joint life insurance plans

v  Annuities

v  Group insurance plans

v  Micro-insurance plans

v   unit-linked insurance plans

v  Child plans

v  Money-back policies

v  Salary saving schemes,

INSURANCE PRINCIPLES

Ø The following are the essential features of a valid contract:

·        Offer and acceptance-one party makes an offer accepted unconditionally by the other

·        Consideration-a contract must be supported by a consideration in order to be valid. Premium is the insured’s consideration.

·        Capacity to contract – individuals are said to be competent to enter into a contract if the are:

§  Of the age of majority (age 18 );

§  Of sound mind; and

§  Not disqualified, buy law, from entering into contracts

·        Any contracts entered into by people not competent to contract will be null and void.

·        Consensus ad idem- in simple terms: both parties to the contract must understand and agree upon the same thing, in the same sense.

·        Legality of object or purpose- the objective of both the parties to the contract should be to create a legal relationship.

·        Capability of performance- the contract must be capable of being performed by both the parties.

Law of large numbers

Ø Insurance companies apply the law of large numbers to determine the cost of total annual claim.

Ø Determine the probability that a certain amount of claim will have to be paid by insurer if a large number of people re insured for a similar risk.

Ø Set the rates of premiums according to the number of claims expected over the term of the policy.