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General Insurance Glossary


An event or occurrence which is unforeseen and unintended.

Accidental Bodily Injury
Injury to the body as the result of an accident.

Accident Insurance
Insurance cover of the loss of any limbs or eyes, etc. in the event of an accident. It also generally covers compensation to the policyholder’s dependents in the event of death.

Accord and Satisfaction
When one party has discharged its obligations under a contract, it may elect to release the other party from its obligations. When this is done in return for a new consideration, the release is known as accord and satisfaction.

Act of God
Event caused by nature that is so unpredictable as to be unavoidable, for example, the timing and location of earthquakes or floods. Acts of God are normally insured against as a matter of course.

A person professionally trained in the technical aspects of pensions, insurance and related fields. The actuary estimates how much money must be contributed to an insurance pension fund in order to provide future funds.

Actual Total Loss
Insured item that has been lost or completely destroyed. The full insured value is payable by the insurer.

Additional Insured
An assured party specifically named under an insurance policy that is not automatically included as an insured under the policy of another, but whom the named insured’s policy provides a certain degree of protection. (e.g. bankers or financial institutions)

Adjuster (US: adjustor)
Person who calculates losses in insurance claims, also called a loss adjuster.

Carriage of goods by sea.

An insurance company representativelicensed by the IRDA negotiates or effects contracts of insurance, and provides service to the policyholder for the insurer.

All-Risks Policy
Insurance policy that covers personal possessions against loss or damage, usually anywhere in the country. All-risks policies are frequently extended to cover possessions in other parts of the world, and are therefore often used to insure small moveable items. Despite the term “all-risks”, there is usually some important exclusion.

A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to responsibility for or extent of a loss.

The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent.

Legal transfer of a property, right or obligation from one party to another.

Insurance that provides for an event that will certainly happen (such as death), as opposed to an event that may happen. There are many types of assurance policies such as endowment assurance, life assurance, and so on.

Person who receives the proceeds of an assurance policy when the policy matures or the person assured dies.

Average Adjuster
Person who calculates the loss: how much money is to be paid on an insurance claim.

Average Clause (Condition of average)
In marine and commercial insurance and some fire insurance policies, a clause in the policy that stipulates certain items shall be subject to average if there is underinsurance.



Person to whom goods are entrusted for safe keeping.

Act of placing goods into the care (but not possession) of someone else. The person who places the goods is the bailor and must be the rightful owner. The bailee is the person who receives the goods.

Person who leaves goods with somebody (the bailee) for safe keeping.

Involvement of banks in the traditional insurance market.

Barranty of the Master
An action of the master of the ship which violates the trust given to him provided such action is not taken in connivance with the shipowner.

Bill of Lading
Document detailing the transfer of goods from a (foreign) supplier to a buyer. It may be used as a document of title.

The Baltic and International Maritime Council (BIMCO) is based in Copenhagen and has been in operation since 1905. It is a group of ship owners, brokers, agents, clubs and others interested in carriage by sea and unites them in promoting proper shipping practices and in opposing objectionable and unfair import charges, claims, etc.

Blanket Insurance
A policy designed to provide coverage under a single limit for two or more items (e.g. building and/or contents), two or more locations, or a combination of items and/or locations.

A primitive form of ship mortgage, whereby the master, while away from the ship’s home port, by signing a “bottomry bond”, borrowed money on the credit of the vessel to pay for goods or services needed to preserve the ship or complete the voyage. The creditor’s security was extinguished, however, if the ship was lost or destroyed.

Break Bulk
Carriage of goods other than by container.

A marketing specialist who represents buyers of insurance and who deals with companies in arranging for the coverage required by the customer. He should be a license holder, issued by IRDA.

Breaking and entering into other person’s property with felonious intent.

Business Interruption Insurance (BI insurance)
Insurance that provides compensation for the policy holder if his or her business activities are interrupted by a mishap such as a fire. The amount insured covers loss of net profits, fixed costs and any additional expenses incurred. The policy is subject to a material damage warranty, i.e. a claim for matching damage must have been paid for the BI cover to be effected. It is also known as consequential loss insurance.



The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.

Captive Insurance Company
A companyowned solely or in large part by one or more non-insurance entities for the primary purpose of providing insurance coverage to the owner or owners.

Cargo Insurance
It is a type of Transit insurance designed to protect the shipper of the goods against financial loss if the goods are damaged or lost.

Cash against Document (CAD)
Method of payment for goods for export, whereby the documentation for a shipment is sent to an agent or bank at the destination. These are passed to the consignee, who makes the payment. The consignee is free to take delivery of the shipment when it arrives.

Catastrophe Cover
Type of reinsurance on an excess of loss basis to protect against an accumulation of losses arising from one event.

Catastrophe Risk
In insurance, an exceptional loss for example, resulting from a flood or earthquake.

Caveat Emptor
Latin for “buyer beware”. In legal terms this maxim means that a buyer of goods should use his or her own common sense, and that the law is not prepared to aid someone who buys goods foolishly.

Certificate of Insurance
A statement of coverage issued to an individual It is a proof of insurance. Generally, it is issued for Motor and Marine insurances.

Certificate of Motor Insurance
Document that confirms the existence of a valid motor insurance policy. It must state the name of the policyholder, the registration number of the vehicle, dates of commencement and expiry of the insurance, the person or persons insured to drive the vehicle, and any limitations on use. The form should be as per Motor Vehicles Act,1 988.

Amount of the insurance ceded to a reinsurer by the original insuring company in a reinsurance operation.

Request for payment to an insurance company in respect of loss or damage covered by an insurance policy, usually submitted by filling in a claim form.

Claims-Made Policy
Insurance policy in which the insurer must meet only claims made during the time cover is provided (irrespective of when the loss occurred).

Method of sharing insurance risk between several insurers. The policyholder will deal as a lead insurer who issues documents and collects premiums. The policy will detail the shares held by each company.

Commercial Lines
Insurance of business, organizations, institutions, governmental agencies and other commercial establishments.

The part of an insurance premium paid by the insurer to an agent or broker for his services in procuring and servicing the insurance.

Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.

Provisions inserted in an insurance contract that qualify or place limitations on the insurer’s promise to perform.

Consequential Loss
Financial loss occurring as the consequence of some other loss. Often called an indirect loss. Consequential loss or damage is indirect loss or damage caused by a covered peril such as fire.

In some forms of contract, the agreement is made binding by the payment of a sum of money from one party to the other. Such a payment is known as a consideration. The term is also used informally to mean any form of payment.

Shipment of goods sent to someone for example, an agent, usually so that he or she may sell them for the consignor.

A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document called the policy.

Contractual Liability
Legal Liability of another party that the business firm agrees to assume by a written or oral contract. It is common in construction and other agreements (written and oral) for one party to assume the liability of another. This is sometimes referred to as a hold harmless agreement. The extent to which one holds another harmless varies from contract to contract, job to job and so on.

Contractor’s All Risks
Type of insurance that provides compensation to a contractor in the event of damage to construction works from a wide range of perils.

Contra Proferentem Rule
Nickname for the following Latin maxim: verba chartarum fortuis accipiuntur contra proferentem – meaning the words of the contract are construed more strictly against the person drafting them. In effect, the contra proferentum rule meas that if a contract is ambiguous, it will be construed in a way that is the least advantageous to the party that drew up the contract.

It is a term insurance in which a risk has been insured twice over, and each insurance company shares the costs of a claim payment.

Contributory Negligence
Lack of care in looking after something that reduces the value of damages or an insurance payment in the event of a claim being made.

Cover Note
Document issued by an insurance company giving cover for a short time, often one month, while a complete policy (and, possibly, an insurance certificate) is drawn up and issued.

Cross Liability Endorsement
In the event of claim by one insured for which another insured covered by the same policy may be held liable, this endorsement covers the insured against whom the claim is made in the same manner as if separate policies had been issued. However, it does not operate to increase the insurance company’s overall limit of liability.

Method of sharing insurance risk between several insurers. The policyholder will deal as a lead insurer who issues documents and collects premiums. The policy will detail the shares held by each company.


Damaged Arrived value
It refers to the market value of the goods in damaged condition.

Debris Removal Clause
The clause extends insurance coverage to include the cost of debris removal resulting from damage caused by a covered loss up to a specified limit of loss.

An amount which a policyholder agrees to pay, per claim or per accident, towards the total amount of an insured loss.- (Excess)

A decrease in the value of property over a period of time due to wear and tear or adolescence. Depreciation is used to determine the actual cash value of property at time of loss.

Directors’ and Officers’ (D & O) Liability Insurance
Type of insurance that provides a company’s directors and officers with cover against losses incurred through misleading statements or negligence.

Duty of Disclosure
Positive duty to disclose material facts in an insurance proposal.

Dynamic Risk
Any insurance risk resulting from a human decision.


Earned Premium
For an insurance policy, the part of the premium that relates to an expired period of cover.

Electronic Data Interchange (EDI)
Method by which companies or people communicate with their banks, clients and suppliers using computers.

Fraudulent use or taking of another’s property or money which has been entrusted to one’s care.

Errors and Omissions Insurance (E & O insurance)
Insurance that covers liability for errors and omissions, such as incorrect records or accounting.

Estimated Maximum Loss (EML)
Used in fire, explosion and material damage insurance policies, it is an estimate of the monetary loss that could be sustained on a single risk as a result of a single peril, which is considered by the underwriter to be possible.

Legal restrictions on a person’s actions. The law insists that a person must bear liability for previous actions. Estoppel is generally used to prevent a denial of responsibility, for example, the parties to a contract cannot subsequently claim that they were unaware of its conditions.

Sum that a policyholder has (by agreement) to contribute to an insurance claim, for example, on a motor insurance the policyholder may have to pay the first Rs. 500 or Rs. 1000(the excess) on any claim. It may be compulsory or voluntary.

Excess of Loss
In reinsurance, an agreement that requires the reinsurer to bear any loss over a certain stated amount.

Exchange Gain
Profit made by an importer if there is an favorable change in the exchange rate.

Exchange Loss
Loss made by an importer if there is an unfavorable change in the exchange rate.

Expense Ratio
The ratio of a company’s operating expenses including acquisition costs to premiums written or earned.

Extended Reporting Period Endorsement
Added to a claims-made policy of liability insurance to provide the original amount of insurance for a limited period of time.

Exgratia Payment
In insurance, a payment made to settle an issue (such as an insurance claim) but without admitting liability.



Type of reinsurance in which risks are coded on an individual basis. The coding company can choose whether or not to reinsure and the reinsurer can decide to accept or reject the business.

Abbreviation of Fellow of the Institute of Actuaries.

Fidelity Guarantee Insurance
Commercial insurance that covers misappropriation of funds or other wrongdoing by an employee. It is also called fidelity insurance.

Fidelity Policy
A form of protection which reimburses an employer for losses caused by dishonest or fraudulent acts of employees.

A person who holds something in trust for another.

A combustionaccompanied by a flame or glow, which escapes its normal confines to cause damage.

First Loss Insurance
Type of fire insurance or theft insurance in which the full value of the insured item is declared, but a lower sum is insured (at a consequently lower premium).

Fleet Insurance
Motor insurance policy that covers a group of vehicles from one organization.

Fortuitous Loss
Unforeseen and unexpected loss that occurs as a result of chance.

In insurance, a franchise is an agreed figure below which an insurance company does not have to meet a claim. A loss above the franchise figure is paid in full.

In insurance, selling certain products with the intention of passing them on to another company.


General Average
In insurance, a situation in which a loss, resulting from a deliberate act of sacrifice to save other goods, is shared by the insurers concerned (such as the insurer of a vessel and the insurer of its cargo where part of the cargo has been jettisoned – and lost – to save the ship).

Glass Insurance
Protection for loss of or damage to glass and its appurtenances.

Gross Negligence
The intentional failure to perform a manifest duty in reckless disregard of the consequences as affecting the life or property of another.

Group Insurance
Insurance written on a number of people under a single master policy, issued to their employer or to an association with which they are affiliated.


Condition that creates or increases the chance of loss.

Hull Insurance
Insurance of a vessel and its machinery. A policy is generally taken out during construction which covers the ship for the whole of its useful life. Most hull insurances provide cover against accidents caused by the negligence of crew or stevedores.


Implied Warranty
In marine insurance, warranty that a vessel is seaworthy and its voyage lawful (not explicitly written into the contract).

Incurred Losses
Expense account in an insurance company’s income statement reflecting the claims paid during the policy year plus the loss reserves as of the end of the policy year, minus the corresponding reserves as of the beginning of the policy year.

Incurred-But-Not Reported Reserves(IBNR)
Liability account on an insurer’s balance sheet reflecting claims that are expected based upon statistical projections but which have not yet been reported to the insurer.

Compensation to thevictim of a loss, in whole or in part, by payment , repair or replacement.

Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position that existed before the loss.

Insurable Interest
Financial interest, recognized at law, which the insured has in the subject matter of insurance. In some cases, an unlimited insurable interest exists, for example, in one’s own life and the life of a spouse. However, in most cases, insurable interest is limited to the value of the property or goods, or extent of liability.

Insurable Risk
Risk against which insurance cover can be obtained by somebody with an insurable interest in it.

Contract under which the insurer agrees to provide compensation to the insured in the event of a specified occurrence, for example, loss of or damage to property. In return, the insured pays the insurer a premium, usually at fixed intervals. The premium varies according to the insurer’s estimate of the probability that the event insured against will actually take place (a calculation carried out by an actuary).

Person or company that holds an insurance policy (a contract with an insurance company); a policyholder.

Insured Peril
Peril that is specifically stated in an insurance policy as being coverd or included.

Insurance company or other person or company that agrees to indemnify someone against particular risks, usually as defined in an insurance policy and for an insurance premium.

Insuring Agreement
That part of an insurance contract which sets forth the type of loss being covered by the policy and the parties of the insurance contract.

Insuring Clause
The clause in an insurance contract which sets forth the type of loss being covered by the policy and the parties of the insurance contract.

Intangible Assets
They are abstract commodities, which cannot be seen or perceived through the senses, for e.g., goodwill, honesty, integrity, etc.


Hazard covered under a marine cargo policy which is defined as the throwing overboard of cargo to preserve property from loss.

Jeweler’s Block Insurance
Coverage designed to protect the insure’d stock, property left with the insured for repair or other purposes, and the insured’s interest in and legal liability for property on consignment from others in the jewelry trade.

Joint- and – Several Liability
a legal principle that permits the injured party in a tort action to recover the entire amount of compensation due for injuries from any defendant who is able to pay, regardless of the degree of that party’s negligence, once any liability by that defendent has been established.


Key Person Insurance
Insurance to cover the health of an essential employee (a key person) in a company. This form of insurance covers the cost of replacing such personnel at short notice by equally qualified temporary staff and any loss of profits incurred in the meantime.

Knock – for – Knock Agreement
In motor insurance, agreement between a group of insurers that no question of responsibility will be discussed and that each company will pay for damage to its own policyholders’ vehicles, so long as the policyholder is covered for such damage.


The termination or discontinuance of an insurance policy due to non-payment of a premium.

Lapsed Policy
A policy terminated for non-payment of premiums.

The unlawful taking, carrying loading away of another person’s property.

Law of Large Numbers
Concept that the greater the number of exposures, the more closely will actual results approach the probable results expected from an infinite number of exposures.

Any legally enforceable obligation.

Portion of an insurer’s balance sheet which denotes legal obligations of the company, including anticipated future payments of losses covered under policies issued.

Liability Insurance
Insurance designed to protect the policyholders from financial loss due to liability resulting from injuries to other persons or damage to their property.

The right to possession of property until such time that an outstanding liability has been repaid.

Lloyd’s of London
Incorporated association of insurers that specializes in marine insurance. Formally, established by Act of Parliament in 1871, the Corporation developed from a group of 17th – century underwriters who met at Edward Lloyd’s coffee house in London. Lloyd’s supervises about 20,000 individual insurers (“names”) grouped into syndicates, each of which has unlimited liability and accepts a fraction of the risk of business brought to them by one of more than 200 registered brokers. Lloyd’s involvement in marine insurance currently comprises less than half the total business transacted by Lloyd’s underwriters. From 1988 to 1994, Lloyd’s lost over 8 billion pound Sterling and many names went bankrupt. As a result limited liability companies are now allowed to become “corporate names”.

The amount that must be added to the pure premium for expenses, profit and a margin for contingencies.

The occurrence of an event for which insurance pays.

Loss avoidance
A risk management technique whereby a situation or activity may result in a loss for a firm is avoided or abandoned.

Loss control
Any conscious action intended to reduce the frequency, severity, or unpredictability of accident losse.

Loss–of–Profits Insurance
Type of insurance that provides cover against loss of trade and profits resulting from some disaster such as a fire. In the latter case the policy would typically pay a business the equivalent of the expected net profits lost while repair work and restocking were carried out, plus salaries, rates and rent due in that period. Fire damage itself will probably be covered by a separate fire insurance. A loss-of-profits policy is sometimes also called a business-interruption policy.

Loss Payable Clause
Means of protecting a mortgagee’s interest in property by directing the insurer to make a loss payment to the mortgagee in the event of a loss.

Loss Prevention
Any measure which reduces the probability or frequency of a particular loss but does not eliminate completely all possibility of that loss.

Loss Ratio
In insurance, the value of all claims expressed as a percentage of total premium for a period. The figure is used as a guide to the profitability of the business when considering rates.

Loss Reserve
The amount set up as the estimated cost of a claim.


Marine Insurance
Insurance of ships and their cargoes which provides indemnity for property loss, damage and injury to third parties. Marine losses arise in four areas:
Hull – damage to or loss of vessel.
Cargo – goods that have been sold and are being shipped to the buyer.
Freight – the cost of transporting cargo.
Liability – damage or injury to third parties.

A personunder the ageof 18, who cannot legally conduct certain transactions or purchase certain goods.

A false, incorrect, improper, or incomplete statement of a material fact, made in the application for an insurance policy.

Moral Hazard
Hazard arising from any nonphysical, personal characteristic of a risk that increases the possibility of loss or may intensify the severity of loss, for instance, bad habits, low integrity, poor financial standing.

Mutual Insurance Company
An insurance company in which ownership and control is vested in the policyholders and a portion of surplus earnings may return to policyholders in the form of dividends.


Named Perils
Coverage in a property policy that provides protection against loss from only perils specifically listed in the policy.

Failure to use the care that a reasonable and prudent person would have used under the same or similar circumstances.


Occupational Hazard
Occupations which expose the insured to greater than normal physical danger by the very nature of the work in which the insured is engaged and the varying periods of absence from occupation, due to the disability, that can be expected.

An accident, including continuous or repeated exposure to substantially the same general, harmful conditions, that results in bodily injury or property damage during the period of an insurance policy.

Overriding Commission
In reinsurance, commission paid to the ceding company which is more than the acquisition cost to allow for additional expenses.


Package Policy
A combination of two or more individual policies or coverages in a single policy e.g. Motor Package Policy, Householders Package, Shopkeepers Policy, Office Package Insurance etc.

P & I Clubs
Protection and Indemnity Associations. These are associations of shipowners organized to provide mutual aid for members for liabilities not covered by marine hull policies. Each shipowner contributes to the fund on a tonnage basis but could be called upon to make further contributions if claims in a year are heavy.

In insurance, any event that causes a loss and which may be included or excluded on an insurance policy, for example, an insured peril in a fire policy is fire; an excluded peril is war.

Peril of Nature
In insurance, a class of peril that includes earthquake, flood, hailstones, storm, thunderbolt and subsidence; such perils are usually covered by property insurance.

Peril of the Sea
All perils which are unique of transportation and which could not be prevented by reasonable efforts, including sinking of the vessel, standing, heavy weather, lightening, collision with other vessels or submerged objects and damage by sea water when caused by an insured peril.

Personal Lines
Those types of insurance such as auto or home insurance, for individuals or families rather than for business or organizations.

Physical Damage
Damage to or lossof the auto resulting from collision, fire, theft or other perils.

The legal document issued by an insurance company to a policyholder, which outlines the conditions and terms of the insurance, also called the policy contract or the contract.

A person who pays a premium to an insurance company in exchange for the insurance protection provided by a policy of insurance.

Pollution Liability
Exposure to lawsuits for injury or cleanup costs that result from pollution damage.

An organization of insurers or reinsurers through which particular types of risk are underwritten and premiums, losses and expenses are shared in agreed upon amounts.

The right to transfer pension rights and credits when a worker changes jobs.

The sum paid by a policyholder to keep an insurance policy in force.

The court supervised process of validating or establishing a distribution for assets of a deceased including the payment of outstanding obligations.

Product Liability
Legal liability incurred by a manufacturer, merchant, or distributor because of injury or damage resulting from the use of its product.

Product Liability Insurance
Coverage designed to provide protection against financial loss arising out of the legal liability incurred by a manufacturer, merchant, or distributor because of injury or damage resulting from the use of covered product.

Proof of Loss
Documentary evidence required by an insurer to prove a valid claim exists. It usually consists of a claim form completed by the insured, and for health insurance claims by the insured’s attending physician. For medical expense insurance itemized bills must also be included.

Form filled in by a person wanting to take out insurance. Inaccuracies or omissions (accidental or deliberate) in a proposal may invalidate any insurance policy issued.

Individual or company offering or seeking insurance.

Proximate Cause
In insurance, the immediate effective cause of an insured loss. It was defined in the case of Pawsey v. Scottish Union & National as “the active efficient cause which sets in motion a train of events, which brings about a result, without the intervension of any force, started and working actively from a new and independent source”.

Prudent Insurer
Hypothetical insurer who is in possession of all relevant information (material facts) before issuing an insurance policy.

Pure Risk
In insurance, a risk that can result in either a break-even situation, or a loss.


Risk Avoidance
Any action that removes the chance of an adverse outcome happening.

Risk Control
In insurance, measures adopted to minimize the effect of an insurable risk, either before or after a loss occurs.

Risk Reduction
Measures that could reduce the chance of losses occurring or the size of such losses.
Risk retention insurance: Policy of bearing a risk because it would cost more to insure against it than the loss itself.

Risk Retention Insurance
Policy of bearing a risk because it would cost more to insure against it than the loss itself.

The payment of the expenses actually incurred as a result of an accident or sickness, but not to exceed any amounts specified in the policy.

The resumption of coverage under a policy which has lapsed.

Transfer of an insurance (or part of the risk covered) from one insurance company to another for a premium, not necessarily with the knowledge of the policyholder.

Continuance of coverage under a policy beyond its original term by the insurer’s acceptance of the premium for a new policy term.

The substitution of health insurance coverage from one policy contract to another.

The net amount of risk retained by an insurance company for its account or that of specified others, and not reinsured.

The chance of loss.

Risk Control
Any conscious action intended to reduce the frequency, severity, or predictability of accidental loses.

The taking of property from a person by force or threat of violence.


Rescuing people or property from a flood, fire, shipwreck or other disaster. A person who salvages goods may be paid compensation by their owners or insurers. The ownership of some salvaged goods can be a contentious issue.

Sight Bill
Bill of exchange payable on presentation i.e. on sight.

Document produced by a broker when insurance business is placed at Lloyd’s of London. It includes such details as the name of the insured, the starting date and period of insurance, the property insured and the period of cover, the premium and commission payable, and any special conditions or limitations.

Sound Arrived value
It refers to the market value of the goods in sound condition.

Type of insurance or reinsurance that covers a whole account over a period of time. No payment is made until the accumulated losses in the year exceed the stop-loss level.

Right of an insurer, having indemnified the insured, to avail himself or herself of any rights and remedies of the insured, for example, salvage.

Sum Insured
Limit of an insurance company’s liability under a particular insurance policy.

In reinsurance, it is the amount by which the sum insured exceeds the ceding office’s retention.

Surplus Treaty
Reinsurance agreement whereby all risks that exceed a pre-determined amount are reinsured.

Person whose job is to examine buildings, etc. and report on their condition, often employed by an insurance company (for buildings insurance) or a mortgage provider.


In insurance, it is a collective agreement by members to calculate and charge the same premium for a given risk or type of insurance.

Third Party
Person mentioned in a contract but not a party to the contract. Third-party insurance, for example, gives the insured cover against claims made by a third party (who is not named in the policy and not a party to it).

Third Party Liability
Liability arising to a party, who is not party to the contract i.e. other than the insured or the insurer. Thisparty/person is called the third party and the liability to him/her arising under law or contract is called third party liability.

Total Loss
In marine insurance, the loss of ship at sea or the total destruction of a ship and/or its cargo.

Through Bill of Lading
A bill of lading providing for the carriage of goods by water, from their point of origin to their final destination, either by successive ocean carriers or by more than one mode of transportation.

Theory of Probability
This theory enables the insurance company to predict potential losses based on a study of the insured’s previous loss experiences.


Person or institution that agrees to take up a proportion of the risk of something, for example, an underwriter may take up the shares of an issue that are not taken up by the public, in return for a commission (known as an underwriting commission). For the issuer, the underwriter represents the guarantee that the whole issue will be subscribed.

Process of assessing proposals/risks for insurance.

Undischarged Insolvent
The person who has declared insolvency but not paid off his creditors nor has entered into any scheme of settlement with them. He is incapable of entering into any contract.

Unexpired Risk Reserves
Fund that an insurance company sets up to cover a shortfall in an insurance company’s unearned premium reserve.

Unvalued Policy
Insurance policy that has a sum insured against each item of property, but not acknowledged by the insurer as true values. In the event of a claim, the insured must prove the actual value of the item.

Utmost Good Faith
Phrase referring to contracts of insurance in which both parties must disclose all the facts that may influence the other’s decision to enter into the contract, whether they are asked to do so or not. If either party has not acted in the utmost good faith, then the contract may become void.


Valued Policy
Insurance policy that has values assigned to insured items, the values being agreed by the insurer. In the event of a claim for total loss, that is the sum paid without the need for further negotiation.

Void Contract
Contract that was drawn up on the basis of what turns out to be misunderstandings on both sides. Such a contract is deemed in law never to have existed.


In insurance, it is an undertaking by an insured person that something will, or will not, be done; for example, that an alarm system will be maintained and switched on. Breach of warranty allows an insurer to repudiate claim.

Waybill (Sea waybill)
A waybill is a non-negotiable receipt issued after receipt of the goods by the carrier.It is clearly marked “non-negotiable”. It is usually employed in the container trade for normal shipments with consent of the shipper who does not insist on being issued a negotiable bill of lading. It is not a document of title, so that delivery of the goods shipped is made, not by presentation of a document, but by the consignee nominated on the waybill identifying himself. Only one original waybill is usually issued to the shipper. Although it is not a document of title, it is a contract of carriage.

Wear and Tear
Popular and legal term for depreciation. Wear and tear is the decrease in value of an item due to deterioration through normal use rather than through accident or negligence.

Work in Progress
In accounting, the value of goods currently under manufacture or services being supplied, but not completed at the end of the accounting period.


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