A commutation agreement is an agreement between an insurer and a policyholder to cancel a life insurance policy and pay the policyholder a lump sum of cash. The insurer agrees to pay the policyholder an amount that is less than the face value of the policy.
What is facultative reinsurance?
Facultative reinsurance is a type of reinsurance that is purchased on a per-risk basis. This means that the insurer and the reinsurer share the risk associated with a particular policyholder. The insurer cedes a portion of the risk to the reinsurer, and in return, the reinsurer agrees to pay a portion of any claims that are filed under the policy.
Facultative reinsurance can be used to transfer all or part of the risk associated with a particular policy. For example, an insurer might purchase facultative reinsurance to cover the risk of a large claim being filed under a homeowner's policy. Or, an insurer might purchase facultative reinsurance to cover the risk of a large number of claims being filed in a particular geographic area.
Facultative reinsurance is typically more expensive than other types of reinsurance because it is more risky for the reinsurer. The reinsurer is taking on the risk of a particular policyholder, rather than spreading that risk across a large pool of policyholders.
What is a reinsurance contract called?
A reinsurance contract, also known as a cession, is an agreement between an insurer and a reinsurer whereby the insurer cedes a portion of the risk covered under an insurance policy to the reinsurer. The reinsurer agrees to accept this risk in exchange for a premium.
What are the terminology used in insurance? There are numerous terms used in insurance, and the specific terminology depends on the type of insurance being discussed. In general, insurance terms can be divided into four categories: policy terms, coverages, exclusions, and riders.
Policy terms are the basic features of an insurance policy, such as the named insured, the policy period, the premium, and the deductible. Coverages are the types of losses that are covered by the policy. Exclusions are the types of losses that are not covered by the policy. Riders are optional provisions that can be added to a policy for an additional premium.
Some common policy terms used in property and casualty insurance include:
Named Insured: The person or entity who is insured under the policy.
Policy Period: The length of time for which the policy is in force.
Premium: The price of the insurance policy.
Deductible: The amount of money that the insured must pay out-of-pocket before the insurance company will pay a claim.
Some common coverages found in property and casualty insurance policies include:
Property Coverage: Coverage for damage to or loss of property.
Liability Coverage: Coverage for damages that the insured is legally liable for.
Medical Payment Coverage: Coverage for medical expenses incurred by the insured or their passengers as a result of an accident.
Some common exclusions found in property and casualty insurance policies include:
Intentional Acts: Coverage does not apply to damages that were intentionally caused by the insured.
War: Coverage does not apply to damages that were caused by war or by an act of war.
Nuclear Hazard: Coverage does not apply to damages that were caused by a nuclear accident.
Some common riders that can be added to property and casualty insurance policies include:
Homeowners Policy: A policy that provides coverage for a home and its contents.
What are assumptions in actuarial?
In actuarial science, assumptions are made about future events in order to calculate insurance premiums and policy payouts. These assumptions are based on historical data and trends, and they help actuaries predict how likely it is that a certain event will occur.
Some of the most common assumptions made in actuarial science include the following:
- that future events will follow the same pattern as past events
- that people will live for a certain number of years (the life expectancy assumption)
- that people will continue to work until a certain age (the retirement age assumption)
- that inflation will occur at a certain rate
- that interest rates will remain stable
Who indemnifies whom?
Indemnity is a legal principle whereby one party agrees to compensate another party for losses incurred as a result of some specified event or course of action. In the corporate context, indemnity provisions are often found in contracts between a company and another party, such as a vendor, supplier, or customer. Indemnity clauses typically state that the indemnifying party will reimburse the other party for any losses incurred as a result of the indemnifying party's negligence or other specified actions.