Proximate Cause Insurance

Proximate Cause Insurance

Proximate Cause Insurance is a Latin word used to express imminent or immediate cause which is responsible for the loss and/or damage and/or destruction to property and not the remote cause. It is one of the important doctrines or principles of insurance. Probabilities measure the likelihood that things will happen.

Measuring Insurance

They might be applied to measuring the likelihood of death at a certain age, a fire, earthquake, motor accident,acro-plane crash, or any number of risks. The likelihood is measured on a scale. Where it is absolutely certain to occur, the probability of it occurring is one.

A pure risk holds out the prospect of a loss or no loss. The outcome can only be unfavorable to us. Driving a motor vehicle represents an example of pure risk. Every time one takes out the vehicle on the road, one runs a risk; there is the uncertainty of loss.

Pure risk

One may damage (1) One’s vehicle, (2) Injure, (3) Cause death,(4) Damage to third-party property. A pure endowment contract provides a sum assured at the end of a fixed term. Provided the policyholder is then alive.

Quota Share Reinsurance Treaty

It is a proportional treaty more suitable in the formative stage of a company to provide. Maximum reinsurance protection gives strength and stability amidst rapid growth. The pricing factor upon which the insurance buyer’s premium is based.

Insurance Policy

An insurance policy issued at a higher than the standard premium rate to cover extra risk. For example when the insured has impaired health or a hazardous occupation. A practice whereby a portion of the agent’s commission. Value is given to the prospective insured as an inducement for the prospect to buy insurance from him or her.

Prospective Insured

This submission of a matter in dispute to an arbitrator for his award. A reserve is money set aside by the insurer, for the policyholder, to pay the policyholder’s benefits and where appropriate, future expenses.

Proximate Reversionary Bonus

If the company declares a reversionary bonus of the sum insured then it is not actually paying out any money in cash right now. It is merely promising that the amount of money paid on claim or maturity will be greater than was previously the case.

So cash flows are unchanged until the moment when the policies in question terminate,i.e. when the claims are paid out. The primary insurer gets the risk covered with the re-insurer for the same reason the original insured got. Re-insurance in simple terms means “Insurance of Insurance”. One of the main aspects of insurance is to spread risk.

Risk Beyond

Serves as a conduit to spread risk beyond national boundaries. Re-insurance serves the insurance business in many ways namely; (1) Spreading risk, (2) Increasing retention capacity, (3) Increasing financial solvency/strength, (4) Providing protection against natural calamity or Acts of God. Re-insurance is the backbone of insurance.

Reinstatement Condition

The restoration of a lapsed life or health insurance policy to its original premium is usually after evidence of good health has been submitted and the past-due premium has been paid. It is a condition stated in a property insurance policy, especially in a fire policy whereby the insurer agrees to reinstate or rebuild the building in the same condition before the loss and/or damage and/or destruction of the building due to an insured peril.

Expiry of Insurance

A notice issued by an insurer of the forthcoming expiry of insurance, containing a request for payment of the premium necessary for its continuation.The cost of replacing property without a reduction for depreciation.

By this method of determining value, damages for a claim would be the amount needed to replace the property using new materials. The amount of liability retained by the ceding company.


Retrocession in simple terms is the “Reinsurance of reinsurance”. For example, a reinsurer may accept 50% of the risk from a primary or original insurer by way of reinsurance and may decide to part 25% of their share of the risk with another reinsurer by way of retrocession.

Supplementary plan

A plan can be attached to a basic insurance plan such as a whole life and endowment plan at an extra premium. It provides additional benefits and protection at a low cost. As per one Oxford dictionary, the risk is defined as the possibility of meeting danger or suffering from the person or thing representing a risk of the source.

That is, this implies some form of uncertainty about an outcome in any situation. Risk assessment means the evaluation of risk Prior to accepting risk.

Risk Assessment

For example, the risk assessment shall include the following aspects (1) High Risk, (2) Medium Risk, and (3) Low Risk. The process by which a company decides how its premium rates for life insurance should differ according to the risk characteristics of the individual insured (e.g., age, occupation, health condition, etc).

Proximate Risk Management

Risk Management as the name suggests the subject that deals with the management of risk. This Management and insurance go hand in hand. Risk Management provides tools and techniques which may be used to (1) Improve (2) Eliminate (3) Reduce or minimize risk.

Standard Premium Rate

An insurance policy issued at a higher than the standard premium rate to cover extra risk. For example when the insured has impaired health or a hazardous occupation. This is a specialized class of insurance business underwritten by a select group of insurers.

This insurance provides protection for the property of the insured damaged and/or destroyed by the act of violence, or sabotage by terrorists. This is generally expensive insurance and carries a higher deductible.

Sale of Goods Act 1979

Two of the most important sections of this act are sections 13 and 14. If the buyer orders product “X” but instead receives product “Y”, this is a breach of section 13 of the act which deals with the description of goods. Section 13 deals with sales by description and states that there is an implied condition that the goods will conform to their description. In other words, the buyer will receive what the seller promised.

Catastrophic Peril

It is a natural catastrophic peril when an earthquake in the sea bed generates Tsunamis. Tidal waves play havoc when they reach the shores and destroy the property. Pleasure resorts, hotels, and multi Storied buildings. Surveyed before shipment. Goods are examined before they are loaded onboard the vessel.


This term is usually used to describe the fitness of a sea-going vessel. It is a condition under all marine insurances including marine cargo and marine hull insurance requiring. All sea-going vessels should be inspected and properly maintained in order for them.

Marine Venture

To be eligible to undertake a marine venture or journey. Recovery made by an insurance company by the sale of property which has been taken but over from the insured as a part of loss settlement. Salvage or salvage charges are the rewards payable to a third party who independently of the contract, renders services to save maritime property in peril.


So,The process of identifying and classifying the degree of risk represented by proposed insurance.Size or intensity of a loss. It is one of the criteria used in calculating premium rates. Certificate issued by port & customs stating short receipt of goods of delivery from the carton.

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