Insurance Basics (Glossary)

“A promise of money help when something bad happens” = Insurance

A contract where you pay a premium and the insurer may pay for covered losses subject to policy terms.

“Chance that something harmful happens and costs money” = Risk

Combination of hazard, exposure and vulnerability — not just the event itself.

“How much you pay for insurance” = Premium

The price of cover for a policy period.

“How much money should the insurer pay if something happens?” = Sum Insured

Maximum amount the insurer may pay for covered claims under the policy.

“Life cover payout amount” = Sum Assured

Benefit amount under a life policy as defined in the contract.

“Amount you pay first before insurance kicks in” = Deductible

Portion of loss you bear before the insurer pays.

“You share a % of the hospital bill” = Co-payment

Percentage of claim cost paid by you as per policy.

“Time before some covers start” = Waiting Period

Period after policy start when certain benefits are not payable.

“What the policy will not pay for” = Exclusion

Situations or losses specifically not covered.

“How long the policy lasts” = Policy Period

Start and end dates of cover.

“Who should receive the money if you die?” = Nominee

Person named to receive life policy benefits as per applicable law and policy.

“The person protected” = Insured

Person or entity whose risk is covered.

“Who bought / owns the policy” = Policyholder

Person or entity that owns the contract with the insurer.

“The insurance company” = Insurer

Company that provides the cover.

“Asking the insurer to pay after a loss” = Claim

Request for benefit under the policy after an insured event.

“How the insurer decides to accept you” = Underwriting

Risk assessment used to accept, modify or price cover.

“You must have a real financial stake” = Insurable Interest

Legal/financial interest required to buy certain covers.

“Insurance restores loss, not profit” = Indemnity

Principle of compensating actual loss up to policy limits.

“Insurance for insurance companies” = Reinsurance

Risk transfer from insurers to reinsurers.

“The dangerous thing (flood, fire…)” = Hazard

Source of potential harm.

“What can be damaged (house, crop…)” = Exposure

People, property or activities subject to hazard.

“How badly you can be hurt if it hits” = Vulnerability

Susceptibility to loss given a hazard.

“Very large sudden disaster” = Catastrophe (CAT)

Severe event causing widespread loss.

“Disaster from nature” = Natural Catastrophe

Catastrophe driven by natural perils such as flood or cyclone.

“Disaster from human activity” = Man-made Catastrophe

Large losses from human causes (e.g. certain industrial accidents).

“Likely worst realistic loss” = Probable Maximum Loss (PML)

Estimate of large but plausible loss used in risk analysis.

“Absolute worst-case loss” = Maximum Possible Loss (MPL)

Upper-bound loss estimate under extreme assumptions.

“Loss from one event” = Event Loss

Aggregate loss attributed to a single occurrence.

“Losses added up over time” = Aggregate Loss

Sum of losses over a period or portfolio.

“How often a big event is expected” = Return Period

Average time between events of a given severity.

“Backup cover for huge disasters” = Catastrophe Reinsurance

Reinsurance specialised for catastrophe losses.

“Investors help pay disaster risk” = Catastrophe Bonds

Securities that transfer certain catastrophe risks to capital markets.

“Pays when a number is hit, not after full loss survey” = Parametric Insurance

Pays when a measurable parameter reaches a threshold, subject to product terms — not automatic for every disaster.

Educational only — not an insurance solicitation or advice to buy a product. Coverage always depends on policy wording, exclusions, limits, deductibles and eligibility. Figures labelled illustrative are estimates, not quotes. Affiliate or partner links, if any, will be disclosed.