Defined benefit insurance
A plan under which a fixed sum of money, based on a pre-estimated amount of loss, is paid on the happening of a covered event, used where the exact loss is difficult to ascertain or too small to be worth ascertaining.
This one is not written up yet
The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.
Written up from the same chapter
- Beneficial nomineeA life insurance nominee who is a parent, spouse or child of the policyholder — entitled to keep the claim money in their own right instead of holding it in trust for the legal heirs.
- Co-payA fixed percentage of every admitted claim that the insured pays out of pocket — a proportional share of the loss, applied after any deductible, in exchange for a lower premium.
- DeductibleThe portion of a claim the insured bears before the insurer pays anything — a fixed rupee threshold that lowers the premium and keeps small claims out of the system.
- Insurable interestThe requirement that the person seeking insurance would suffer a monetary loss if the subject matter were lost or destroyed — the test that separates insurance from a wager.
- InsuranceThe risk-management approach that pays an explicit upfront premium to remove the downside while keeping the upside — which in derivatives means buying an option rather than selling a future.
- No claim bonusThe benefit of a lower premium in later years for each claim-free year — in motor insurance a discount of up to 50% on the own-damage premium after five claim-free years.
Where this is taught
Free preparation for NISM Series X-BRelated terms
- Personal accident insuranceA policy paying a defined sum where the insured sustains bodily injury solely and directly from an accident caused by external, violent and visible means — covering three grades of disablement.
- Insurable interestThe requirement that the person seeking insurance would suffer a monetary loss if the subject matter were lost or destroyed — the test that separates insurance from a wager.
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