Insurance Terms Glossary

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Questions and Answers

What is the term used to describe the possibility of incurring misfortune or loss?

Risk

What is the term used to describe the cause of injury, loss, or damage?

Peril

What is the term used to describe a circumstance that increases the likelihood or probable severity of a loss?

Hazard

What is the role of an actuary in the insurance industry?

Calculates rates, reserves, dividends, and other statistics Signup and view all the answers

What is the role of an adjuster in the insurance industry?

Determines the extent of the insurer's liability for loss when a claim is submitted Signup and view all the answers

What is the term used to describe the process of converting part or all the money in a qualified retirement plan or nonqualified annuity contract into a stream of regular income payments?

Annuitization Signup and view all the answers

What is the term used to describe the 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?

Casualty Insurance Signup and view all the answers

What is the term used to describe the ratio of the reinsurance premiums ceded by the ceding company?

Ceded Reinsurance Signup and view all the answers

What is the term for a demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy?

Claim Signup and view all the answers

What is the purpose of coinsurance in property insurance?

To ensure the policyholder carries insurance equal to a specified percentage of the value of the property to receive full payment on a loss Signup and view all the answers

What is the fee paid to an agent or insurance salesperson as a percentage of the policy premium?

Commission Signup and view all the answers

What is the term for a claim on property, such as a mortgage, a lien for work and materials, or a right of dower?

Encumbrance Signup and view all the answers

What is the term for restoration to the victim of a loss by payment, repair, or replacement?

Indemnity Signup and view all the answers

What type of insurance pays and renders service on behalf of an insured for loss arising out of their responsibility, due to negligence?

Liability Insurance Signup and view all the answers

What is the term for the amount of premium minus the agent's commission?

Net Premium Signup and view all the answers

What is the term for the process of managing the pure risks to which a company might be subject?

Risk Management Signup and view all the answers

What is risk management, and what are the practices involved in handling exposures to the possibility of loss?

Risk management is analyzing 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. Signup and view all the answers

What is the primary purpose of an underwriter in the insurance industry?

The primary purpose of an underwriter is to evaluate risks and determine rates and coverages for them. Signup and view all the answers

What is the main difference between term life insurance and whole life insurance?

Term life insurance provides protection for a specified period of time and does not build up any of the non-forfeiture values associated with whole life policies. Signup and view all the answers

What is the role of the Philippine Life Insurance Association?

The Philippine Life Insurance Association is an association of Life Insurance companies that attend to matters of life insurance business. Signup and view all the answers

What is retention in the context of insurance and reinsurance?

Retention is the amount of premium, and limit of liability retained for the account of insurance and reinsurance company. Signup and view all the answers

What is the purpose of underwriting in the insurance industry?

The purpose of underwriting is to select risks for insurance and classify them according to their degrees of insurability so that the appropriate rates may be assigned. Signup and view all the answers

What is the role of the Philippine Insurers and Reinsurers Association (PIRA)?

PIRA represents the collective interests of the Philippine non-life insurance industry and acts as an advocate for the industry. Signup and view all the answers

What is the percentage of domestic non-life insurance services sold in the Philippines that are accounted for by PIRA members?

90% Signup and view all the answers

Study Notes

Insurance Terms

Risk: The possibility of incurring misfortune or loss, including exposures such as health, dismemberment, and loss of life.
Peril: The cause of injury, loss, or damage.
Hazard: A circumstance that increases the likelihood or probable severity of a loss, such as storing explosives in a home basement.

Professionals

Actuary: A specialist in the mathematics of insurance who calculates rates, reserves, dividends, and other statistics.
Adjuster: A representative of the insurer who determines the extent of the insurer's liability for loss when a claim is submitted.
Agent: An individual who sells and services insurance policies.
Underwriter: The individual trained in evaluating risks and determining rates and coverages for them.

Insurance Concepts

Annuitization: The process of converting part or all of the money in a qualified retirement plan or non-qualified annuity contract into a stream of regular income payments.
Annuity: An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.
Casualty Insurance: 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.

Insurance Policies

Claim: A demand made by the insured or the insured's beneficiary for payment of the benefits as provided by the policy.
Coinsurance: A requirement in property insurance to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss.
Policy: The written contract affecting insurance, including all clauses, riders, endorsements, and papers attached thereto.

Premium and Reinsurance

Commission: A fee paid to an agent or insurance salesperson as a percentage of the policy premium.
Net Premium: The amount of premium minus the agent's commission, or the premium necessary to cover only anticipated losses.
Reinsurance: Insurance that an insurance company buys for its own protection, spreading the risk of loss so that a disproportionately large loss under a single policy doesn't fall on one company.

Risk Management

Risk Management: The management of pure risks to which a company might be subject, involving analyzing all exposures to the possibility of loss and determining how to handle these exposures.
Retention: The amount of premium and limit of liability retained for the account of insurance and reinsurance company.

Insurance Associations in the Philippines

Actuarial Society of the Philippines: An association of actuaries in life insurance.
Philippine Life Insurance Association: An association of life insurance companies that attend to matters of life insurance business.
Philippine Insurers and Reinsurers Association (PIRA): An association that represents the collective interests of the Philippine non-life insurance industry, with around 90 member companies that provide 90% of domestic non-life insurance services sold in the Philippines.

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Description

A basic glossary of key terms in insurance, including risk, peril, and hazard. Learn the definitions and concepts of insurance terminology.