Terms used in insurance business

1. Premium: The money paid regularly by the insured.
2. Policy: The written contract that outlines the coverage.
3. Claim: The request made by the insured for payment after a loss.
4. Coverage: The specific risks or events protected by the insurance.
5. Beneficiary: The person who receives the benefits if the insured event occurs.

Uncertainty: This refers to a situation where the outcome of an event is unknown or unpredictable. In insurance, uncertainty is the reason people seek protection against future losses.

Loss: A loss is the damage or financial harm suffered by the insured due to an event covered by the insurance policy (e.g., fire, accident, theft).

Risk: Risk is the possibility of a negative event happening. In insurance, it represents the chance of a loss occurring and comes in different forms:

1. Pure risks: Only two outcomes — loss or no loss (e.g., fire).
2. Speculative risks: May result in a gain or a loss (e.g., investing in stocks).
3. Fundamental risks: Affect many people (e.g., inflation, floods).
4. Particular risks: Affect individuals (e.g., car accident).
5. Enterprise risks: Affect businesses (e.g., cyber-attacks).

Insured: The person or business that purchases insurance and is protected under the insurance policy.

Insurer: The insurance company that provides coverage and agrees to compensate the insured in case of loss.

Insurance premium: The amount the insured pays to the insurer regularly in exchange for coverage.

Risk pooling: A practice where insurers combine resources from many people to cover the losses of a few among them.

Peril: The specific cause of a loss (e.g., fire, theft, flood).

Hazard: A condition that increases the chance of loss (e.g., poor electrical wiring may increase the chance of a fire).

Sum insured: The value of the insured asset declared in the contract. This is the maximum amount the insurer will pay for a loss.

Reinsurance: A process where insurance companies buy insurance from other insurers to manage large risks.

Co-insurance: When multiple insurance companies share the risk of insuring a high-value item together.

Moral hazard: When the insured becomes careless because they know they are protected (e.g., not locking a door because the property is insured).

Adverse selection: When high-risk individuals are more likely to buy insurance, possibly without the insurer knowing their true risk level.

Actuaries: Professionals who analyze statistics to calculate risks and determine insurance prices.

Adjuster (or claim examiner): A person who investigates insurance claims to determine how much the insurer should pay.

Deductible: The portion of the loss that the insured must pay before the insurer pays the rest.