Insurance Law and Regulations
Expert-defined terms from the Postgraduate Certificate in Level 7 Insurance and Risk Management course at London School of Planning and Management. Free to read, free to share, paired with a globally recognised certification pathway.
Insurance Law and Regulations Glossary #
Insurance Law and Regulations Glossary
1. Actuary #
An actuary is a professional who uses mathematics, statistics, and financial theory to study uncertain future events, especially those of concern to insurance and pension programs.
2. Adverse Selection #
Adverse selection refers to the tendency of those in dangerous jobs or high-risk lifestyles to seek out and maintain insurance coverage more often than those in safer jobs or low-risk lifestyles. This can lead to higher premiums for everyone.
3. Agent #
An insurance agent is a professional who sells insurance policies to individuals or businesses on behalf of insurance companies.
4. Appraisal Clause #
An appraisal clause is a provision in an insurance policy that allows the policyholder and the insurance company to resolve disputes over the value of a loss by hiring independent appraisers.
5. Arbitration #
Arbitration is a legal process in which a neutral third party hears both sides of a dispute and makes a binding decision to resolve the conflict.
6. Binder #
A binder is a temporary insurance contract that provides proof of coverage until a formal policy is issued.
7. Broker #
An insurance broker is a professional who works with multiple insurance companies to find the best policies for their clients.
8. Cancellation #
Cancellation is the termination of an insurance policy before its expiration date.
9. Claim #
A claim is a request made by a policyholder to an insurance company for payment of a covered loss.
10. Coinsurance #
Coinsurance is a provision in an insurance policy that requires the policyholder to pay a specified percentage of covered expenses after the deductible has been met.
11. Deductible #
A deductible is the amount of money that a policyholder must pay out of pocket before an insurance company will pay any expenses.
12. Endorsement #
An endorsement is a written amendment to an insurance policy that changes the terms or coverage of the policy.
13. Exclusion #
An exclusion is a provision in an insurance policy that specifies what is not covered by the policy.
14. Indemnity #
Indemnity is the principle in insurance that states that the insured should be restored to the same financial position after a loss as they were in before the loss occurred.
15. Insurable Interest #
Insurable interest is a requirement in insurance that the policyholder must have a financial stake in the insured property or person in order to purchase insurance.
16. Insured #
The insured is the person or entity covered by an insurance policy.
17. Insurer #
An insurer is an insurance company that provides coverage to policyholders in exchange for premiums.
18. Liability Insurance #
Liability insurance is a type of insurance that protects the insured from claims arising from injuries or damage to other people or property.
19. Policyholder #
The policyholder is the person or entity that owns an insurance policy.
21. Reinsurance #
Reinsurance is a process by which insurance companies transfer some of their risk to other insurance companies.
22. Subrogation #
Subrogation is the legal right of an insurance company to recover the amount of a claim paid to the insured from a third party that caused the loss.
23. Underwriting #
Underwriting is the process by which insurance companies evaluate the risk of insuring a particular person or entity and determine the premiums to charge.
24. Uninsured Motorist Coverage #
Uninsured motorist coverage is a type of insurance that protects the insured from damages caused by a driver who does not have insurance.
25. Workers' Compensation #
Workers' compensation is a type of insurance that provides benefits to employees who are injured on the job.
26. Absolute Liability #
Absolute liability is a legal doctrine that holds a party responsible for damages, regardless of fault or negligence.
27. Act of God #
An act of God is an event that is beyond human control, such as a natural disaster, for which no one can be held responsible.
28. Aggregate Limit #
An aggregate limit is the maximum amount of coverage available under an insurance policy for all covered losses during a specified period.
29. All #
Risk Policy: An all-risk policy is an insurance policy that covers all perils unless specifically excluded.
30. Arbitration Clause #
An arbitration clause is a provision in an insurance policy that requires disputes to be resolved through arbitration rather than through the court system.
31. Assignment #
An assignment is the transfer of rights under an insurance policy from one party to another.
32. Binder #
A binder is a temporary insurance contract that provides coverage until a formal policy is issued.
33. Captive Insurance Company #
A captive insurance company is a subsidiary established by a parent company to provide insurance coverage for the parent company's risks.
34. Certificate of Insurance #
A certificate of insurance is a document that verifies the existence of an insurance policy.
35. Claimant #
A claimant is a person or entity that makes a claim for benefits under an insurance policy.
36. Consequential Loss #
A consequential loss is a loss that occurs as a result of a covered peril, such as lost income due to property damage.
37. Declarations Page #
The declarations page is the part of an insurance policy that outlines the basic details of the coverage, including the insured's name, the policy period, and the limits of coverage.
38. Errors and Omissions Insurance #
Errors and omissions insurance is a type of professional liability insurance that protects individuals and companies from claims of inadequate work or negligent actions.
39. Excess Insurance #
Excess insurance is a type of insurance that provides coverage above the limits of a primary insurance policy.
40. Fidelity Bond #
A fidelity bond is a type of insurance that protects a business from losses due to employee theft or fraud.
41. Floater Policy #
A floater policy is an insurance policy that covers movable property, such as jewelry or fine art, wherever it may be located.
42. Grace Period #
A grace period is a specified period after the due date of an insurance premium during which the policy remains in force.
43. Hazard #
A hazard is a condition that increases the likelihood of a loss occurring.
44. Indemnification #
Indemnification is the act of compensating someone for a loss.
45. Insurable Risk #
An insurable risk is a risk that meets the criteria for being considered insurable by an insurance company.
46. Insured Location #
An insured location is a property or premises covered by an insurance policy.
47. Insurer Insolvency #
Insurer insolvency occurs when an insurance company is unable to meet its financial obligations.
48. Lapse #
A lapse occurs when an insurance policy is terminated due to non-payment of premiums.
49. Loss Adjustment #
Loss adjustment is the process of investigating and settling insurance claims.
50. Loss Ratio #
The loss ratio is the ratio of losses incurred by an insurance company to the premiums earned.
51. Material Misrepresentation #
A material misrepresentation is a false statement made by an applicant for insurance that would have affected the insurer's decision to issue the policy.
52. Misrepresentation #
Misrepresentation is the act of providing false information to an insurance company.
53. Moral Hazard #
Moral hazard is the tendency of people to take risks because they are protected from the consequences.
54. Negligence #
Negligence is the failure to exercise the care that a reasonably prudent person would under similar circumstances.
55. Occurrence Policy #
An occurrence policy is an insurance policy that covers claims that occur during the policy period, regardless of when the claim is reported.
56. Peril #
A peril is a specific event that causes a loss, such as a fire or theft.
57. Policy Term #
The policy term is the period during which an insurance policy is in effect.
59. Property Insurance #
Property insurance is a type of insurance that protects against damage to or loss of property.
60. Proximate Cause #
Proximate cause is the primary cause of a loss that sets in motion a chain of events leading to the loss.
61. Pure Risk #
A pure risk is a risk that can only result in a loss or no change, such as death or disability.
62. Reinstatement #
Reinstatement is the process of restoring an insurance policy that has lapsed due to non-payment of premiums.
63. Risk Management #
Risk management is the process of identifying, assessing, and controlling risks to minimize their impact on an organization.
64. Salvage #
Salvage is the recovery of value from damaged property.
65. Self #
Insurance: Self-insurance is a risk management strategy in which a company sets aside funds to cover potential losses instead of purchasing insurance.
66. Sublimit #
A sublimit is a specified limit of coverage within an insurance policy that is less than the overall policy limit.
67. Terrorism Insurance #
Terrorism insurance is a type of insurance that provides coverage for losses caused by acts of terrorism.
68. Third #
Party Administrator (TPA): A third-party administrator is a company that administers claims and processes for an insurance company.
69. Tort #
A tort is a civil wrong that causes harm for which the injured party may seek compensation.
71. Underinsured Motorist Coverage #
Underinsured motorist coverage is a type of insurance that protects the insured from damages caused by a driver who does not have enough insurance to cover the full extent of the damages.
72. Waiver #
A waiver is the voluntary relinquishment of a known right or privilege.
73. Warranty #
A warranty is a promise made by the insured in an insurance policy that certain conditions will be met.
74. Workers' Compensation Exclusive Remedy #
Workers' compensation exclusive remedy is a legal doctrine that limits the ability of employees to sue their employers for workplace injuries, as workers' compensation provides the exclusive remedy for such injuries.
76. Aggregate Limit #
The maximum amount an insurer will pay under a policy during a specified period, regardless of the number of claims made.
77. Appraisal #
A process for resolving disputes over the amount of a loss, where each party hires an appraiser to value the loss, and a neutral umpire decides if the two appraisals differ.
78. Bad Faith #
A legal term that describes an insurer's failure to act in good faith towards its policyholders, such as denying a valid claim without a reasonable basis.
79. Binder #
A temporary agreement that provides immediate coverage until a formal insurance policy is issued.
80. Broker #
An intermediary who sells insurance policies on behalf of insurance companies to customers.
81. Cede #
To transfer part of the risk assumed by an insurer to a reinsurer.
82. Coinsurance #
A provision in an insurance policy that requires the insured to share in the cost of covered services after the deductible is met.
83. Coverage #
The specific risks or perils for which an insurance policy provides protection.
84. Declarations #
The part of an insurance policy that includes basic information such as the insured's name, policy period, and coverage limits.
85. Deductible #
The amount the insured must pay out of pocket before the insurance company will start to pay on a claim.
86. Endorsement #
A written amendment to an insurance policy that changes the policy's terms or coverage.
87. Exclusion #
A provision in an insurance policy that specifies what is not covered by the policy.
88. Indemnity #
The principle in insurance that the insured should be restored to the same financial position after a loss as they were in before the loss occurred.
89. Insurable Interest #
The requirement that the policyholder must have a financial stake in the insured property or person in order to purchase insurance.
90. Insured #
The person or entity covered by an insurance policy.
91. Insurer #
An insurance company that provides coverage to policyholders in exchange for premiums.
92. Liability Insurance #
Insurance that protects the insured from claims arising from injuries or damage to other people or property.
93. Loss Ratio #
The ratio of losses incurred by an insurance company to the premiums earned.
94. Material Misrepresentation #
A false statement made by an applicant for insurance that would have affected the insurer's decision to issue the policy.
95. Negligence #
The failure to exercise the care that a reasonably prudent person would under similar circumstances.
96. Peril #
A specific event that causes a loss, such as a fire or theft.
97. Policyholder #
The person or entity that owns an insurance policy.
99. Proximate Cause #
The primary cause of a loss that sets in motion a chain of events leading to the loss.
100. Reinsurance #
The process by which insurance companies transfer some of their risk to other insurance companies.
101. Salvage #
The recovery of value from damaged property.
102. Subrogation #
The legal right of an insurance company to recover the amount of a claim paid to the insured from a third party that caused the loss.
103. Underwriting #
The process by which insurance companies evaluate the risk of insuring a particular person or entity and determine the premiums to charge.
104. Uninsured Motorist Coverage #
Insurance that protects the insured from damages caused by a driver who does not have insurance.
105. Workers' Compensation #
Insurance that provides benefits to employees who are injured on the job.
106. Absolute Liability #
A legal doctrine that holds a party responsible for damages, regardless of fault or negligence.
107. Act of God #
An event that is beyond human control, such as a natural disaster, for which no one can be held responsible.
108. Aggregate Limit #
The maximum amount of coverage available under an insurance policy for all covered losses during a specified period.
109. All #
Risk Policy: An insurance policy that covers all perils unless specifically excluded.
110. Arbitration Clause #
A provision in an insurance policy that requires disputes to be resolved through arbitration rather than through the court system.
111. Assignment #
The transfer of rights under an insurance policy from one party to another.
112. Binder #
A temporary insurance contract that provides coverage until a formal policy is issued.
113. Captive Insurance Company #
A subsidiary established by a parent company to provide insurance coverage for the parent company's risks.
114. Certificate of Insurance #
A document that verifies the existence of an insurance policy.
115. Claimant #
A person or entity that makes a claim for benefits under an insurance policy.
116. Consequential Loss #
A loss that occurs as a result of a covered peril, such as lost income due to property damage.
117. Declarations Page #
The part of an insurance policy that outlines the basic details of the coverage.
118. Errors and Omissions Insurance #
Professional liability insurance that protects individuals and companies from claims of inadequate work or negligent actions.
119. Excess Insurance #
Insurance that provides coverage above the limits of a primary insurance policy.
120. Fidelity Bond #
Insurance that protects a business from losses due to employee theft or fraud.
121. Floater Policy #
An insurance policy that covers movable property, such as jewelry or fine art, wherever it may be located.
122. Grace Period #
A specified period after the due date of an insurance premium during which the policy remains in force.
123. Hazard #
A condition that increases the likelihood of a loss occurring.
124. Indemnification #
Compensating someone for a loss.
125. Insurable Risk #
A risk that meets the criteria for being considered insurable by an insurance company.
126. Insured Location #
A property or premises covered by an insurance policy.
127. Insurer Insolvency #
When an insurance company is unable to meet its financial obligations.
128. Lapse #
When an insurance policy is terminated due to non-payment of premiums.
129. Loss Adjustment #
Investigating and settling insurance claims.
130. Loss Ratio #
The ratio of losses incurred by an insurance company to the premiums earned.
131. Material Misrepresentation #
A false statement made by an applicant for insurance that would have affected the insurer's decision to issue the policy.
132. Misrepresentation #
Providing false information to an insurance company.
133. Moral Hazard #
The tendency of people to take risks because they are protected from the consequences.
134. Negligence #
The failure to exercise the care that a reasonably prudent person would under similar circumstances.
135. Occurrence Policy #
An insurance policy that covers claims that occur during the policy period.
136. Peril #
A specific event that causes a loss.
137. Policy Term #
The period during which an insurance policy is in effect.