Glossary of insurance terms

Almost every field contains specific terms that are not readily available to everyone. This insurance dictionary explains the specialized terms in the insurance domain.

Destine Broker is a company specialized in insurance consultancy and in brokering a wide range of insurance products for individuals and legal entities.

Accident

An unexpected event that affects the insured person. Accidents are external to the insured person, unique, unexpected and cause bodily harm. During the duration of the contract, accidents need to be certified immediately by a doctor or through a legal medical certificate.

Insured person/business

A person or a business that signed a contract with an insurance company and, in return for paying insurance premiums, receives indemnification from the insurance company in case of accidents or natural disasters. Both individuals and businesses can get insured for the damage they can cause to other people.

Insurer

The insurer or the insurance company is a legally authorized person or a business that can carry out insurance activities. The insured individuals pay premiums, and, in return, the insurer becomes responsible for financially covering the damages or bodily harm caused by the insured in case of accidents or natural disasters.

Insurance

An arrangement by which a company undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium.

Group Insurance

Group insurance is an insurance that covers a group of people, for example the members of a society or professional association, or the employees of a particular employer for the purpose of taking insurance.

Travel Insurance

Travel insurance is a type of insurance that protects insured individuals during their travels. The risks that can be covered by this type of insurance are accidents, flight cancelations, luggage loss or IDs, but also emergency evacuation and repatriation.

Insurance beneficiary

A person or company that, according to the signed contract, is designated to receive insurance benefits. This person is typically indicated in the insurance contract by the insured. Oftentimes the insurance beneficiary is the insured person themselves. However, the insurance policy can include multiple beneficiaries.

Insurance broker

The insurance broker is a person or company registered as an adviser on matters of insurance and as an arranger of insurance cover with an insurer on behalf of a client. Oftentimes, brokers are commissioned and paid by the insurer.

Bancassurance is a relationship between a bank or non-banking financial institution and an insurance company that is aimed at offering insurance products or insurance benefits to the bank’s customers. In this partnership, bank staff and tellers become the point of sale and point of contact for the customer.

Co-insurance

Co-insurance is the splitting or spreading of risk among multiple parties.

Community group insurance

The same insurance policy covers multiple major risks surrounding goods or social values found in two or more countries that are part of the European Union. This type of insurance is covered by two or more insurers and at least one of them is from a country that is part of the European Union. In case the insured risk happens, the main insurer is responsible for the full coverage of the compensation.

Insurance contract

The insurance contract is the contract signed by the insurer and the insured individual that mentions the fact that, in exchange for a premium, the insurer must financially cover the insured sum or its equivalent in case insured events happen.

Insurance Certificate

The insurance certificate is the insurance document issued by the insurer that attests the existence of the insurance policy.

Commission

The amount of money, fixed or percentage, paid to regulated entities for the services offered to clients.

Cargo

Insurance of goods and assets that are transported by air, rail or road with means of transport owned by the owner of the goods and assets.

Insurance Green Card

An international car insurance certificate based on which motorists who drive in Europe have proof that the vehicle they own, or drive is insured in terms of civil liability in the event of a car accident that causes damage. Compensation for damages is subject to the local legislation of each state in which the Insurance Green Card is valid.

Amount of damage

The financial obligation that the insured must legally bear to compensate for material damage, moral damage or bodily injury caused by him.

Damage

The damage suffered by an insured person following a risk covered by insurance.

Partial damage

Theft or partial damage to the insured goods. The repair, reconditioning or replacement of some component parts returns the insured object to the state it was in before the event that led to its partial damage occurred.

Total Damage

Damage to the insured property to a point where its repair is not economically feasible due to the costs involved.

Compensation

The amount of money paid by the insurer to the insured or to the beneficiary of the insurance policy, if the damage was caused because of the manifestation of the risks covered by the insurance.

Duration of the policy

The insurance validity period according to the terms established in the insurance contract.

Insured Event

Event specific to a type of insurance that, during its production, fulfills all the contractual conditions, so that the insurance indemnity is financially covered by the insurer.

Exclusion

The contractual clause that eliminates the insurance of certain goods, individuals, type of dangers, and damages or particular circumstances.

Force Majeure

An unpredictable and unavoidable situation or event independent of the will of the parties, proven by one of the parties through documents issued by the responsible public authorities that exonerate it from liability.

Franchise

The contractual clause that mentions the percentage amount that will be paid by the insured person in case of damage to an insured asset.

Theft by acts of robbery

Theft involving a person or a group of people who used violence against the insured to force them to give up the insured property.

Burglary

Theft involving breaking into the victimized person’s home or closed space by breaking windows, doors, locking devices.

Risk Inspection

Checking the condition of objects, homes or vehicles to determine the risks and costs that the insurer would have to bear in the event of an accident or other events covered by the insurance. Related documents are also checked for compliance.

Insurance Indemnity

The sum of money that the insurer undertakes to pay to the insured in the event of an accident or an insured event.

Insured Interest

In the case of goods, the interest is represented by the economic value that can be lost by the insured because of the occurrence of an insured event. In the case of civil liability insurance, the interest is represented by the insured’s desire to prevent the reduction of the patrimony by assuming personal liability towards third parties if he commits an act that causes damages. In the case of personal insurance, the interest is represented either by a benefit obtained by the insured in case of accidents that lead to disability, or by the protection of the family in case of death.

Insurance history

A record of the insurance policies held by the applicant in the past.

KID

It is a standardized document at the European level, like PID, that applies to insurance products that have an investment or savings component. The purpose of this document is to facilitate the understanding of the risks associated with investments and to provide essential information about structured individual investment products and those based on insurance.

Liability limit

The maximum amount that the insured can receive from the insurer in the event of an accident, or an event covered by the insurance policy.

Medical Malpractice

An error of the medical personnel while exercising their professional duties – medical or medico-pharmaceutical acts that lead to harm to the patient.

Risk Management

Identification, analysis and control of risks. Risk management is a process created to minimize the negative effects of harmful events on the people, assets, interests and community of an organization.

Brokerage Mandate

The contract signed by the insurance broker as trustee (through which he takes care of the negotiation and/or completion of insurance contracts, the provision of consultancy for the duration of the contract and the regularization of damages in the event of an accident or insured event) and the insured or potential insured as mandated.

Maturity of the insurance contract

The date of conclusion of the contract between the insured and the insurer, when the insured person’s coverage ends. In certain cases, depending on the contractual conditions, the insurer will pay the insured the amount guaranteed at maturity.

The object of the insurance

The object of the insurance is represented by the patrimonial or non-patrimonial values that have been insured: assets, guarantees, credits, civil liability, financial losses, etc.

Insurance offer

The document issued by the insurance company that usually contains the price (premium), timeframe, and the insurance conditions of a product for which the request was made.

Damage

The financial value of the damage suffered by an insured.

The insured period

The time interval in which the insurer must cover the damages suffered by the insured, according to the clauses of the insurance policy mentioned in the insurance contract.

Waiting Period

Immediately after signing an insurance contract, before the insurance policy is active, there is a time interval in which the insurer is not responsible for paying the insurance indemnity in case of an insured event.

PID/ IPID

It is a standardized European document that gives you essential information about your insurance. You get information about the insurance company, covered risks and exclusions, special restrictions, as well as details about validity, payments and the coverage period.

Insurance policy

The insurance policy is a document issued by the insurer after the process of evaluating the insured risk has been completed. The insurance policy certifies the conclusion of the contract between the insured and the insurer.

Insurance premium

The financial responsibility that the insured has towards the insurer, based on the clauses of the insurance contract.

Prepaid insurance

The amount of money paid in full by the insured at the beginning of the contractual period for the entire insured period.

Premium subscription

Income from premiums collected during a financial year.

Civil liability

The obligation to financially cover the damages of a third party caused through material damage or by bodily injury to the insured individual or business.

Professional civil liability

The obligation of a person to cover the financial expenses resulting from a damage caused to a client as a direct result of negligence or acts of imprudence while performing professional duties.

Reinsurance

The process by which an insurer buys an insurance policy from another insurance company. Following this process, the insurer becomes reinsured, and the insurance company with which he signs becomes the reinsurer.

Risk

The possibility of an event to cause damage. In the case of an organization, any activity of the company that could cause bodily harm, civil liability, or an event that hinders financial and social development is considered a risk.

Insurance grace period

The timeframe when insurance coverage is extended after the expiration date of the insurance policy. There are usually 15-30 days in which the insured can pay a new premium to continue coverage.

Underinsurance

An insurance where the insurance premium is lower than the value of the insured object. In case of damage, the compensation paid by the insurer will not fully cover the value of the object.

Subcontractor

The insured signs contracts with third parties to fulfill the contractual obligations he has with his own clients.

The insured amount

Insurance limit, the maximum amount that the insurer undertakes to pay in case of damage.

Proportional coverage system

The asset is insured based on a percentage. In case of damage to the property, following the insured event, the compensation will not exceed the percentage limit at which the insurance was made.

First risk system

The insurer fully covers the damage, within the limit of the insured amount. In this case, the ratio between the value of the asset and the insured amount does not matter.

Limited coverage system

The insurer does not cover the entire value of the damage, but only the deductible or the contractually determined amount.

Risk transfer

A third party transfers part of the financial responsibility for its damage to another party. In the case of insurance, the insured transfers the financial responsibility to the insurer, in exchange for the payment of the insurance premium.

Damaged third party

In the case of civil liability insurances, damaged third parties may be individuals foreign to the insured person. The damaged third party or the injured person is the person who has the right to receive compensation for the damage they suffered.

Wear & tear

The devaluation of an asset, determined according to its condition, use and age.

Accepted value

The accepted value cannot be modified; the only exception to this rule is if the insurer has proof that a fraud was committed.

New goods value

The value of the newly purchased good that coincides with the purchase invoice of the respective good.

 

The sources used for explaining the insurance terms are specialized documents, legislation, explanatory dictionaries, and Wikipedia.

You can find more explained terms on the website of the Financial Supervisory Authority.