Lesson 2
Introduction of the Host
Mr. Harikumar is a freelance journalist with rich experience gained from working with leading periodicals and dotcoms. His association with leading financial portals has contributed greatly to his ability to deal with classroom sessions in the financial sector, especially investments. Currently, he is a columnist with some of the well known publishing companies. Some of his published works on mutual funds and insurance have got wide acclaim.

Essential Terms & Usages in Vogue

In this class we will take a look at some of the most commonly used words in the segment of insurance. To be better armed to deal with insurance and the connected. The glossary, however is not very comprehensive. Other terms shall be explained when the respective segment of insurance is considered in the ensuing classes.

AVERAGE CLAUSE
The main aim of this clause is to check under-insurance. Under this clause, the insurer and the insured share the loss in proportion to the risk that each is carrying. This will encourage the owner to value his property accurately before insuring

ASSIGNMENT
Assignment is the transfer of claims to third parties. Assignment may be in the form of sale, mortgage or settlement. This is done by endorsing the policy itself.

CONTRIBUTION
When there is more than one insurer for the same subject matter, the insurer concerned has got the right to call upon insurers to contribute to the amount of loss. It enables the total claim to be shared among all the insurers in a reasonable manner.

CAUSA PROXIMA
Means proximate cause. Every loss that proximately results is another inference. Here, the insurer will look into the nearest cause of the loss, not the remote cause. eg: loss of stock by fire is Causa Proxima and the loss of profit arising from this is a remote cause

CLAIM
Claim is a process of recovering the damage caused from the insurance company. The insured gives notice of damage to the insurance company, to enable the latter to take prompt action to safeguard the interest. The insured also has to give full details of the property damaged, along with the notice. Failure to do this may prove fatal for the recovery of damages.

COVER NOTE
Cover note or Interim Certificate is the acknowledgement and commitment issued by the insurance company to the insured public before finally agreeing to the proposal and issuance of policy. This is a valid, legal document for having received the proposal of insurance.

DAYS OF GRACE
These are the days allowed ex-gratia by the insurance company after the expiry of the stipulated period of insurance during which the assured can pay the premium to continue/renew the insurance policy. If the insured still fails to pay the premium during the period and if any loss is sustained meanwhile, the company will not be liable to pay for the damage or loss.

DOUBLE INSURANCE
When the same subject matter is insured with two or more insurance companies, it is called double insurance. This amounts to over-insurance. But in the event of loss, the insured will not get more than his actual loss. He is entitled to claim payment from the insurers in any order as he thinks fit.

INSURER
Insurer is the person who insures a subject matter of insurance at the instruction of the person who has insurable interest. Normally the insurer would be an insurance company. eg: LIC, GIC, etc.

INSURED
Insured is the person whose interest is protected by the insurance company. He is the person against whose property/life, the insurance coverage is given.

INSURABLE INTEREST
The financial interest of the insured in the subject matter of insurance. The subject matter could be either building, injury, life or damage for which the insured has a pecuniary interest. The insurable interest can be applied to life, liability or property.

INDEMNITY
Excepting life assurance, personal accident and sickness insurance, a contract of insurance does not guarantee to pay a specific sum on a certain contingency, but will make good for the insured what he actually loses. Thus the insured is not entitled to make a profit of his loss.

INSURABLE VALUE
It is the amount of the valuation of the insurable interest for the purpose of insurance.

INTERMEDIARIES
Intermediaries are connecting links between the insurer and the insured. Intermediaries can be agents, brokers, consultants, home service representatives, insurance surveyors, selling institutions, distributors or re-insurance companies.

NOMINATION
Nomination is agreeing to transfer the interest/claim and to pay the amount to a desired person, after the death of the insured. The nomination shall be registered by the insurer and can be cancelled at the instance of the insured before the policy matures for payment. But if an Assignment is already given, nomination automatically stands cancelled.

PREMIUM
Premium is the consideration or amount of installment to be paid to the insurance company by the insured at specific intervals, as agreed to between them. The profit of an insurance company mainly depends on the amount of premium collected. Similarly for the insured, the prompt payment of premium is an assurance on the coverage of risk by the insurance company. This is a charge against insurance and a possible return for the insured/assured

POLICY
The policy is a formal, legally enforceable, stamped document signed by the insurance company. The policy comprises the terms of the contracts between the parties. There is no particular form of policy prescribed except for marine insurance. The policy can be utilized as a collateral or additional security for any personal loan taken.

PROPOSAL FORM
This is the document submitted by the insured to the insurer detailing personal information and risks to be insured. The form can be submitted to the insurance company either directly or through intermediaries.

RISK
Risk is the possibility of an adverse effect, arising out of uncertainty, different from the expected. It is a peril against which insurance is taken. eg: insurance against theft. In insurance, only financial risks are considered, not non-financial.

RE-INSURANCE
If the risk involves big money and the chances of risk are more, the insurance companies again insures a part of its risk with another insurance company. This process is generally termed as re-insurance. This is a device to pass the buck to some one else with similar capacity to mitigate and spread the weight of loss. However, if the original contract is altered without the knowledge and consent of the re-insurer, the re-insurer is discharged.

SURRENDER
In this case, the assured wishes to discharge the contract by putting an end to the contract and furnishing back the policy. This will nullify any further claim on it. The surrender value is based on the total premium paid. But before surrender, the policy should have run for at least three to four months, as specified.

SUBROGATION
When an insurance company has paid the claim and if a third party is involved in the cost of loss, the third party should not wash his hands of the responsibility. Thus the insurer will be entitled to all the rights and remedies of the insured in reducing the loss to the extent possible. ..

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