Frequently Used Insurance Terms
1. What is a "Risk"?
Risk is nothing but a possibility of adverse results arising from any occurrence. Therefore Risk arises out of uncertainty.
In Insurance business, the term risk is used to mean: either a peril to be insured against (fire is a risk to which property is exposed) or a person or property protected by insurance, (miners are not considered as good risk for accident insurance)
2. What is a peril?
A peril is the cause of loss in a situation i.e. fire, storm, flood or theft etc. By taking an insurance cover, one protects himself or his property against certain perils.
3. What is a cover note?
It is not always possible on the part of the Insurance Company to issue an actual policy document immediately as soon as the proposal is signed and premium is paid. There may be a need for the insured to prove that the cover is in force, for instance in motor insurance, there is a legal requirement.
In such cases as a temporary measure, a document which is known as 'cover note' is issued to the insured which briefly gives the details of the cover. Subsequently, cover note is replaced by the policy document.
4. What is utmost Good Faith?
This is one of the basic principles of insurance. When a person comes to the Insurance Company for any Insurance, he knows everything about the property or the person to be insured whereas the insurance company knows nothing. Hence it is the duty of the insured to make a full disclosure to the insurance company without being asked of all material circumstances. This is expressed by saying it is a contract of the utmost good faith.
5. What is insurable interest?
The existence of insurable...