Common Insurance Terminologies
Overview
Insurance has a private language. A trader says the fire destroyed goods worth two million naira; the insurer replies with words like average, excess, salvage and material fact, and suddenly the cheque is for a different figure. None of it is trickery. Each of those words is a precise technical term, and using the wrong one, in an examination or at a claims desk, changes the meaning completely.
This lesson gives you that language, but not as a list to memorise. You will learn the core terms grouped into the four families they belong to: the words that measure and limit a claim, the words about honesty when the contract begins, the words for the documents themselves, and the words for how the market accepts and prices a risk. Learn each term beside its family and you will never confuse an excess with a franchise, or a warranty with a representation, again.
Objectives
- Define the common terms used in insurance practice and use each correctly in context
- Explain the terms relating to cover, including sum insured, excess, franchise and average
- Explain the terms relating to claims, including salvage, ex gratia payment and abandonment
- Explain the terms relating to the market, including underwriting, premium, endorsement and warranty
- Use the correct technical term when describing a given insurance situation
Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Common Insurance Terminologies. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- A voluntary payment made by an insurer in respect of a loss for which it is not technically liable under the policy is called: A. A franchise B. An ex gratia payment C. A rebate D. An excess Answer: B
- The written document used to alter the terms of a policy that is already in force is the: A. Proposal form B. Cover note C. Endorsement D. Certificate Answer: C
- A policy is subject to a franchise of 60,000 naira. A loss of 50,000 naira occurs. How much will the insurer pay? A. 50,000 naira B. 10,000 naira C. 60,000 naira D. Nothing Answer: D
- Which of the following terms belongs to the principle of utmost good faith? A. Salvage B. Material fact C. Franchise D. Reinstatement Answer: B
- A car insured for 1,200,000 naira is a total loss. The insurer pays the claim in full and later sells the wreck for 200,000 naira. The insurer's net cost is: A. 1,400,000 naira B. 1,200,000 naira C. 1,000,000 naira D. 200,000 naira Answer: C
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Past Questions
Wondering what past questions for this topic looks like? Here are a number of questions about Common Insurance Terminologies from previous years
Question 1 Report
Explain the following terms as used in insurance business:
(a) Surrender value
(b) Days of grace
(c) Ex-gratia payment
(d) Endorsement
(e) Disclosure.
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