In the Insurance Essentials article series, Axco defines key insurance terms to clarify understanding of the global insurance market and to aid the professional development of those wishing to join or learn more about the industry.

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Here are some key insurance terms and their definitions:

# a b c d e f g h i j k l m N O P Q r s t u v w x y z


Named perils

1. Those perils that are declared in an insurance policy as specifically covered by that policy. Insurers are liable for losses caused by perils that have been named as covered under the terms of the insurance policy. Compare to: excluded perils. Compare to: unnamed perils.

2. A form of property insurance that covers only loss or damage caused by a peril that is declared in an insurance policy as specifically covered by that policy. This form of cover contrasts with all risks insurance, which covers any loss or damage arising from any cause or peril that is not specifically excluded under the terms of the insurance policy. Compare to: all risks.



Occurrence is a term used to describe an event that gives rise to an insured loss. An 'occurrence' may denote a single event, such as an accident, or repeated or prolonged exposure to the same (harmful) conditions, or a series of (harmful) events occurring within a set time period. Occurrences are events that trigger liability policies written on a losses-occurring basis (as opposed to a claims-made basis).

Online banking

See internet banking

Open perils

See all risks


Particular average

See average, particular

Personal lines

Refers to those classes, or "lines", of insurance business that encompass insurance products bought by individual members of the general public for their personal needs. Personal insurances include householder/homeowner, private motor, private medical, personal accident and sickness covers. Compare to: commercial lines.

Premium rate

A rate that an insurer uses to calculate the actual premium amount payable by the insured for cover. It is usually established by the insurer and may be determined by class or, for large, complex and unique risks, by individual risk factors. Rates vary according to the sum insured or limit of liability, as well as the degree of risk and extent of the cover, and include provision for the insurer's own expenses and profits. Rates are not necessarily determined by individual insurers; certain classes of business in different markets may be subject to tariff rating, whereby the rate is pre-set, for example through regulation or market agreement.


The party in an agency agreement that authorises the agent to act on its behalf in entering into and concluding a contract with a third party. In insurance, the principal is typically an insurer or reinsurer and the third party the insured; the agent may be a broker or another type of insurance intermediary.

Product liability insurance (PL)

Cover for legal liability arising from bodily injury or property damage sustained by third parties caused by products produced, repaired, supplied or sold by the insured. Cover includes costs and damages payments and is often subject to a specified annual aggregate limit of liability. The business is written on a losses-occurring basis (often in conjunction with public liability) and therefore the insurer is liable only for injury or property damage sustained during the period of insurance for which it is on cover.

Product recall insurance

Cover for the costs of recalling faulty (or suspected faulty) products so as to prevent any bodily injury or property damage to consumers (and therefore any potential product liability claims). Product recall insurance covers the costs of publicity, transport and storage, among other things.

Professional indemnity insurance (PI)

See professional liability insurance

Professional liability insurance (PL)

Insurance cover purchased by professionals to protect themselves against legal liability to pay damages and costs to third parties who have suffered economic loss as a result of the insured's error, omission, or breach of professional duty. Professional liability is usually written on a claims-made basis and claims may be subject to an annual aggregate limit of liability. In many markets the cover may be compulsory for specified categories of professional, either in law or as a prerequisite to membership of a professional body; likewise, there may be minimum specified amounts of cover that professionals are required to purchase. Those categories of professional usually required to buy professional liability insurance include accountants, architects, auditors, doctors, engineers, insurance brokers and solicitors.

Public loss assessor

See loss assessor

Punitive damages

Damages awarded by a court in a liability case that are intended to punish the defendant rather than compensate the other party to the case. For this reason, punitive damages, or "exemplary damages" as they are sometimes known, exceed the amount needed to make good the loss suffered by the party who has suffered injury, loss or damage. Some policies, particularly marine liability covers, contain exclusions in respect of this type of damages.


Qard hassan

Qard hassan is the provision of an interest-free loan from the takaful entity founders/shareholders to the members (policyholders) of a takaful or Islamic insurance fund. A qard hassan arrangement would be put in place where a takaful account produces deficits that may imperil the solvency and security of the takaful company. It is designed to redress deficits and reinstate the company's viability.

In some countries there are no specific limits to the amount of the qard hassan, but in others there are legislative limits, such as replenishment of funds (if required) up to the amount of the initial paid-up capital of the company. Although the qard hassan is interest-free, its capital sum is subject to ultimate repayment by the collective contributing members to the takaful founders/shareholders. In the absence of specific legislative regulations, the terms of this repayment are open to agreement between the founders/shareholders and the contributing members. Related terms: takaful.


The monetary amount payable by way of indemnity.