Liability Insurance Glossary — 12 Key Terms in English

The limit of liability is the maximum amount the insurer will pay for covered losses during the policy period, as stated in the schedule under Article 12 of the Insurance Act of 1936. Any judgment, settlement or diyeh award above this cap remains the insured's personal responsibility under the Civil Liability Act of 1960.

Diyeh is the legally fixed compensation payable for bodily injury or death under the diyat chapter of the Islamic Penal Code, with annual amounts set by the judiciary's official table. Article 30 of the Insurance Act of 1936 obliges the insurer to pay a court-awarded diyeh within the policy limit.

A third party is any person other than the insurer and the insured who suffers bodily, property or moral damage caused by the insured's act or product. Article 30 of the Insurance Act of 1936 directs the insurer to pay the insured's debt to third parties within the insured amount.

Tortious liability in Iranian law covers both direct fault (taqsir), meaning intentional or negligent breach of a legal duty, and tasbib, causing loss indirectly by creating or opening a source of danger. Article 1 of the Civil Liability Act of 1960 makes either form of wrongdoing compensable toward the injured party.

The deductible, called franchise in Iranian policies, is the fixed amount or percentage of each loss that the general conditions leave on the insured; the insurer never pays this share. A higher deductible lowers the premium but increases the insured's out-of-pocket participation in every claim, including losses below the deductible.

An endorsement is a written annex attached to the main policy that alters coverage during its validity: raising the limit of liability, adding or removing insured persons, or changing the declared activity. Under Article 12 of the Insurance Act of 1936 any contract change requires mutual written agreement, which the endorsement documents.

The policyholder is the contracting party who buys the policy and pays the premium, while the insured is the person whose civil liability toward third parties is covered. In liability insurance they may be the same person, or the policyholder may cover the liability of employees and collaborators named in the policy.

The premium is the price of the insurer's undertaking, an essential element of the contract under Article 12 of the Insurance Act of 1936, whose amount and payment terms must appear in the policy. It is rated from the activity's risk, the chosen limit, headcount, deductible and claims history, and is issued upon official quotation.

Claim notification is the insured's duty to inform the insurer in writing of an incident within the period stated in the policy, usually a maximum of five working days. The notice should state the time and place of the event, a description of what happened, the injured party's details and the first documents.

The loss adjuster is the insurance expert who, after notification, examines whether the incident occurred, the degree of the insured's responsibility and the amount of loss within the policy framework. In bodily-injury files the adjuster's report is completed by medical commission opinions or a final court judgment establishing liability and quantum.

The general conditions are the standard policy wordings approved by Central Insurance and attached to every liability policy, framed by Regulation No. 57. They define the coverage, the notification duty, the exclusions such as intentional acts and undeclared activities, the deductible and the dispute procedure, forming the fixed rules of the contract.

The haram months are Rajab, Dhu al-Qa'dah, Dhu al-Hijjah and Muharram, in which the diyeh doubles: under the diyat chapter of the Islamic Penal Code a bodily injury committed in these months is compensated at twice the ordinary amount, which directly affects how high a liability policy's limit should be chosen.