Insurance is a contract. Here one party the Insurance Company called "Insurer undertakes to indemnify specified losses suffered by the other party called "Insured" for a special consideration called "Premium". The term of the Insurance contract is called "Insurance Policy Some Important terms used in Insurance Business:- 1. Insurance Policy: It is the document issued by the insurance company containing terms of the insurance contract. It specifies the losses that are covered by the Policies and also the maximum amount that can be paid out in the event of a loss/death. This is called Policy Amount. 2. Premium: The payment made by the insured to the insurance Company in consideration of the contract of Insurance. The premium is generally paid annually. In some cases it may be i29 paid at shorter intervals. A point to be noted is the premium amount has to be paid "front end" i.e. before the commencement of the insurance cover/policy. 3. Claims: A claim occurs when a policy fall due for payment. In Life Insurance arises on death or on maturity of policy. In case of General Insurance, the claim arises only when the loss occurs. While calculating the claim outstanding at the end, the claim intimated as well as the claim intimated and accepted both are considered. The adjustment entry required for this will be as follows: Claims account Dr. To Claims intimated and accepted but not paid account To Claims intimated but not accepted and paid account At the commencement of the next period a reverse entry is passed, so that when these claims intimated are paid, they may not influence the daims account of next year. However, if company rejects any claim, such amount should be transferred to the insurance fund account and not to the claims account. Illustration 1 From the following, you are required to calculate the loss on account of claim to be shown in the revenue account for the year ending 31st December, 2011: Claim intimated in the Claim admitted in the Claim paid in the year year year 2010 2011 15,000 2011 2011 2012 10,000 2009 2010 2010 5.000 2009 2010 2011 12,000 2012 8,000 2011 2011 2011 1.02.000 Claim on account of Re-insurance was 725,000 2010 2011 2012