Common Insurance Terminologies

Akọwa Nkọwa

Meaning of the terms as used in insurance business:

1. Surrender value: This is the cash sum that a life assurance company pays to a policyholder who chooses to terminate (surrender) his policy before it matures. It represents the accumulated value of premiums paid, less the insurer's charges and expenses, and is available only on policies that have run long enough to acquire a value.
2. Days of grace: This is the extra period, usually fifteen or thirty days, allowed by the insurer after the premium due date within which the policyholder may still pay the renewal premium without the policy lapsing. Cover continues during this period.
3. Ex-gratia payment: This is a payment made by the insurer to the insured out of goodwill, and not because the insurer is legally liable under the policy. The insurer pays as a favour, without admitting liability, often to preserve goodwill.
4. Endorsement: This is a written amendment or clause attached to a policy to alter its original terms, for example to add or remove an item, change the sum insured or correct the details of the insured. It becomes part of the contract.
5. Disclosure: This is the duty, under the principle of utmost good faith, of the proposer to reveal to the insurer all material facts that would influence the insurer's decision to accept the risk or fix the premium, whether asked for or not.