Important Insurance Terms


Actual cash value

The value of lost or damaged property at the time of the loss, less depreciation. With regard to buildings, there is a tendency for the actual cash value to closely parallel the market value of the property.


A person tasked by the insurance company to determine the extent of the firm’s liability for a loss when a claim is submitted.


Agents and brokers put customers in touch with insurance companies, and help customers find the policies that are right for their needs and budget. Agents are licensed by the Insurance Commission.


When buying insurance, customers must fill out an application. Details on the application help the insurance company decide what policy and premium level is right for that customer. It is important to make sure all details on the application are correct or the payout may be affected.

Authorised driver

The people listed on insurance policy as drivers of the insured vehicle.

Authorised/Approved Repair Shops

Insurance companies often have preferred repair shops where they send customers’ vehicles for repairs.



See “Agents/Brokers”

Business interruption

Provides coverage for a loss of earnings if the policyholder’s business is shut down by fire, windstorm, explosion, or other insured event.


Certificate of Cover

A form verifying that a person has a valid insurance policy. Motor insurance policyholders should carry their Certificate of Cover in their vehicle at all times as the police may ask to see it in a routine check.


A demand made by the insured, or the insured’s beneficiary, for payment of the benefits provided by the contract.

Comprehensive policy

Usually associated with motor car insurance, a comprehensive policy covers repair or replacement of your vehicle if it is damaged or lost as a result of theft, accident, vandalism or weather-related damage. It also covers injury and repair or replacement costs of other vehicles and property that are accidentally damaged by your vehicle. Comprehensive cover is generally more expensive than third party cover alone.

Compulsory Third Party Liability

A mandatory insurance for motor vehicle required by the Land Transportation Office. It provides a cover for death or injury caused by a person’s vehicle to another person outside his immediate family. It is generally the cheapest kind of motor car insurance.



This is the amount the insured will be required to contribute before they can make a claim.



Specific circumstances listed in the policy for which the insurer will not provide benefit payments.

Fine Print

A reference to imaginary small type in a policy contract supposedly containing exclusions, reductions, exemptions, and limitations of coverage.

Fortuitous event

Fortuitous events occur as a matter of chance. They are not controlled or influenced by the insured, for example, an accident.


Gross Premium

The net premium plus operating expenses, commissions and other expenses.



A condition that increases the probability or severity of loss.



A principle that says an insured should not collect more from insurance than the amount of loss.

Indirect Loss

A loss that arises out of a direct loss but not caused directly and immediately by that peril.

Incurred Loss Ratio

The percentage of losses incurred to premiums earned.

Insurance Policy

The printed form which serves as the contract between an insurer and an insured.


The party that provides, for a fee, benefits in the event of loss. Your insurance company is your insurer.


In property and liability insurance, the person to whom, or on whose behalf, benefits are payable. If you take out an insurance policy, you are the insured.



Termination of a policy caused by the policyholder’s failure to pay the premium within the time required.


Generally refers to:

* The amount of reduction in the value of an insured’s property caused by an insured event;

* The amount sought through an insured’s claim;

* The amount paid on behalf of an insured under an insurance contract.


Net Loss

The amount of loss sustained by an insurer after taking into account all applicable reinsurance, salvage, and subrogation recoveries.

Net Premium

* The amount of premium minus the agent’s commission;

* The premium necessary to cover only anticipated losses, before loading to cover other expenses.

Notice of Cancellation

Written notice by an insurer of intent to cancel insurance, or written notice by an insured requesting cancellation.


Partial Loss

A loss covered by an insurance policy that does not completely destroy or render worthless the insured property.

Policy term

The period for which an insurance policy provides coverage.


The money an insured person pays to an insurer for insurance cover.

Pro-rata premium

A premium calculated on the exact number of days out of a full year of insurance cover.

Proximate cause

The cause actually responsible for the loss; the one that set in motion the events that led to a loss.



The resumption of coverage under a policy that has been lapsed.


When one insurance company agrees to carry all or part of a risk undertaken by another insurance company.


The continuation of coverage under a policy beyond its original term by the acceptance of a premium for a new policy.



Usually, a policy benefit or claim payment.

Statement of Facts

The Statement of Facts is an important document that helps insurance companies establish the facts in the event of a motor accident. Policyholders are asked to carry a Statement of Facts form in their car at all times. In the event of an accident, they should fill it out, sign it, and have the other driver sign it too. It is not an admission of liability. Statement of Facts forms are available from your insurance company, Idac centres, authorised workshops or the GIA.

Statutory declaration

A legal document required by the law to declare the loss of the certificate of insurance, signed by you and witnessed by a notary public.



The period for which a policy is issued.

Total loss

A total loss refers to the total destruction of a vehicle in an accident or fire or loss as a result of theft. A constructive total loss settlement results from damage that is agreed to be beyond economic repair.



The process by which the insurer decides on what basis it will issue a policy.



A statement made by the applicant for insurance that, if false, provides the basis for voiding of the policy.

One Response to Important Insurance Terms

  1. Gerardo Ty Veloso says:

    Do you have people who can help me to obtain an equitable claim on my two homes devastated by Ondoy, in Provident Village, Marikina City, on Sept. 26, 2009.

    Both homes were insured by Oriental Assurance Corp. for 3 millions each on the structure, and .5 million each on the contents.

    Water reached up to 3 feet high on the second floor of one home, and up to 4 feet high on the second floor of the other home.

    The adjusters employed by Oriental is the Pacific Intern. Adjusters.

    They reached the total amount payable by Oriental to be for both homes in regard to the house and to the contents of each as 610,333.80 pesos, less than 1/7 of the total liability of Oriental.

    I do not accept that settlement because it is way too low.

    Do you have people who can examine their adjustment and tell me whether it is realistic, or intended to benefit the insurer to the detriment of the insured.

    Gerardo Ty Veloso

    tels: 351-8168, 973-0753

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