Terms used in Insurance

Terms used in Insurance

i. Nomination

According to Sec 39  of  the  Insurance  Act, 1938, nomination is the process of appointing or nominating a person or persons by the insured, to receive the payment of the policy, in the event of death. The person who is authorized to receive the payment of the policy is called nominee. If the policy matures by expiry of time, the policy amount is payable to the insured himself and not to the nominee.

ii. Surrender Value

The surrender value is the cash value of the policy which is payable to policyholder if he decides to terminate the contract. This surrender value is usually obtained from the paid-up-valuebyapplyingapercentagefactor. This percentage factor will vary according to the plan of assurance, the original term of the policy and the duration elapsed since the commencement of the policy. The surrender value signifies the amount of premiums paid which is returned to the policyholder at the time of surrendering the policy.

iii. Re-Insurance

It is a contract of insurance, in which an insurer enters into a contract with another insurer to insure the whole or a part of risk covered by the first insurer. It happens when an insurance company feels that it cannot bear the entire risk alone by itself. In such case, it transfers a part of the risk to other insurance companies.

iv. Double Insurance

When more than one insurance policy is taken to cover the same subject matter i.e. risk, then it is known as Double Insurance.