Glossary

Insurance Glossary

Key terms99 used in the insurance brokerage profession, explained simply. Whether you’re preparing for the AFA certification or just need a definition, look up a term below.

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3rd pillar: Individual and voluntary pension provision supplementing the AVS and LPP. It is divided into Pillar 3a (bound, with tax advantages) and Pillar 3b (unrestricted).
Annuity: A benefit paid periodically (monthly) for life, as opposed to a lump-sum payment. It provides a regular income but the amount is often fixed.
APG (compensation for loss of earnings): A first-pillar scheme providing income replacement during military service, civil defence service, and maternity and paternity/parental leave.
AVS (Old Age and Survivors’ Insurance): Compulsory first pillar providing a minimum standard of living in retirement, in the event of death (survivors’ pensions) and for orphans. Funded on a pay-as-you-go basis (contributions shared equally between employee and employer).
Beneficiary: The person designated to receive the insurance benefit (lump-sum death benefit, annuity). The order of beneficiaries is governed by statutory rules, some of which may be amended by a clause.
Capital: A one-off payment of the pension savings or life insurance benefit, leaving the policyholder to manage the sum, with the associated flexibility and risk.
Conversion rate (LPP): Percentage used to calculate the annual pension based on the retirement savings balance. The statutory minimum rate for the mandatory portion is 6.8 per cent.
Coordinated salary: Proportion of salary actually covered by compulsory LPP insurance: AHV salary minus the coordination deduction. This forms the basis for calculating contributions and benefits.
Coordination deduction: Amount deducted from the AHV salary to avoid double coverage under the first pillar: CHF 26,460 in 2026 (7/8 of the maximum AHV pension).
DI (Disability Insurance): First-pillar social insurance, which provides pensions and reintegration support in the event of long-term incapacity to work due to illness, accident or disability.
EPL (Home Ownership Incentive Scheme): Early use of pension savings (2nd or 3rd pillar) to purchase one’s main residence, either through an early withdrawal or by pledging the savings as security.
Exemption from premiums: Supplementary cover under a life insurance policy: in the event of incapacity to earn an income, the insurer takes over the payment of premiums, thereby maintaining the policy at no cost to the policyholder.
Free passage: Transfer of 2nd pillar savings when changing employers. If the money cannot be transferred to a new pension fund, it is placed in a vested benefits account or policy.
Joint life insurance: A policy combining savings and life cover: pays out a lump sum at maturity if the insured person is still alive, or to the beneficiaries if they have died before then.
LPP (occupational pension scheme): Mandatory 2nd pillar scheme for employees from the entry threshold (CHF 22,680 per year in 2026). Operates on a funded basis: each person saves towards their own retirement provisions.
LPP buy-out: Voluntary contribution to the pension scheme to make up a pension shortfall. Deductible from taxable income, subject to certain conditions and lock-in periods.
LPP entry threshold: Minimum annual salary above which membership of the LPP becomes compulsory: CHF 22,680 in 2026.
Old-age pension: Capital accumulates in an insured person’s LPP account: annual contributions (a percentage of the coordinated salary, which increases with age) plus interest.
Pillar 3a (linked pension scheme): Tax-efficient pension savings scheme, locked in until retirement (except in cases provided for by law). Deductible limit for 2026: CHF 7,258 with a pension fund, 20 per cent of income (up to a maximum of CHF 36,288) without a pension fund.
Pillar 3b (voluntary pension scheme): Unlinked pension savings: flexible access, free choice of beneficiaries, no general tax relief (treatment varies by canton and product).
Supplementary pension scheme: The portion of the LPP exceeding the legal minimum (high salaries, extended benefits). Its terms and conditions, in particular the conversion rate, are set more freely by the pension fund.
Surrender value: The amount the policyholder can recover if they cancel a life insurance policy with a savings component before the end of the term. This is always less than the premiums paid at the start of the policy.
Term life insurance (pure risk): Life insurance that pays out a lump sum only if the insured person dies during the term of the policy, with no savings component or surrender value.
Three-pillar system: The structure of the Swiss pension system: 1st pillar (AVS/AI, state-funded), 2nd pillar (LPP, occupational), 3rd pillar (private). Combined objective: to maintain one’s standard of living in retirement.

Alternative models under the LAMal: Basic insurance packages offering reduced premiums in exchange for a structured care pathway: GP, HMO (health centre), telemedicine or a designated pharmacy.
Franchise: The annual portion of healthcare costs that the insured person pays before any cover is provided under the LAMal. Minimum standard excess for 2026: CHF 300; higher excess options (up to CHF 2,500) reduce the premium.
IJM / sickness-related loss of earnings insurance: Daily allowances to compensate for loss of earnings in the event of incapacity for work due to illness. Often taken out by the employer (group policy), governed by the LCA or the LAMal.
LAA (accident insurance): Compulsory insurance covering employees’ work-related and non-work-related accidents (medical care, compensation, pensions). This is distinct from the LAMal, which primarily covers illness.
LAMal (compulsory health insurance): Compulsory basic health insurance for anyone resident in Switzerland. The benefits and list of treatments are the same across all insurers; only the premium varies.
LCA (Insurance Contracts Act): The legal framework for voluntary private insurance, including supplementary health insurance. Unlike under the LAMal, the insurer may select the risks and refuse an applicant.
Reserves (LCA): Exclusion, whether temporary or permanent, of pre-existing conditions which the insurer specifies in the supplementary policy at the time of enrolment, based on the health questionnaire.
Share: A 10 per cent contribution towards LAMal costs above the excess, capped at CHF 700 per year for an adult (CHF 350 for a child).
Supplementary insurance: Optional cover governed by the LCA (private/semi-private rooms, alternative medicine, dental care, cover abroad) in addition to the LAMal, with risk selection.
Waiting period (qualifying period): The initial period of the contract during which certain benefits are not yet payable; this is common in loss of earnings cover and in supplementary insurance policies under the LCA.

Building insurance (property insurance): Covers the building itself (structure, walls, fixed installations) against fire and natural disasters. This is separate from home contents insurance, which covers the contents.
Burglary (break-in): Theft committed by forcibly breaking into a locked premises. This is covered under the basic household insurance policy, unlike simple theft outside the home.
Coverage shortfall (gap in cover): The difference between the loss suffered and the compensation paid, due to a missing cover, an exclusion or an insufficient sum insured. The risk therefore remains with the insured.
Deterioration: The reduction in the value of an asset due to its age and wear and tear. It is deducted from the replacement value to arrive at the market value.
Fire: Basic risks covered by property insurance: damage caused by fire, smoke, lightning and explosions. Often covered alongside natural disasters.
Home contents insurance (household contents): Covers the contents of your home (furniture, clothing, electronics, etc.) against fire, natural disasters, water damage and theft. Often taken out in conjunction with personal liability cover.
Household inventory: All the household’s personal property, which forms the basis for the household insurance policy. The sum insured must reflect its value to avoid underinsurance.
Insurance for SMEs (businesses): Insurance solutions for small and medium-sized enterprises, including, in particular, public liability cover, property cover, business interruption cover and professional legal protection.
Legal expenses insurance: Covers the costs associated with a legal dispute (solicitors’ fees, court costs, expert reports) and provides legal advice. Available in motor, personal and business cover.
Natural events: Risk covering damage caused by natural forces: storms, hail, high water, flooding, avalanches, landslides and rockfalls.
Operating loss: Insurance cover that compensates for the loss of earnings suffered by a business whose operations are interrupted as a result of a covered incident (fire, water damage, etc.).
Over-insurance: A situation where the sum insured exceeds the actual value of the property. The insurer never pays out more than the actual loss: the excess premium is paid for nothing.
Property insurance: A non-life insurance sector covering damage to the insured’s property (household contents, vehicles, buildings), as opposed to third-party liability insurance, which covers damage caused to others.
Proportional rule: Procedure applied in the event of underinsurance: the compensation is reduced in proportion to the ratio of the sum insured to the actual value of the property.
Replacement value: The amount required to replace a destroyed, damaged or stolen item with an equivalent new item, without any deduction for wear and tear.
Risk: A future and uncertain event against which one takes out insurance. Insurability presupposes a risk (which is neither certain, nor has it already occurred, nor is it voluntary).
Sinister: Occurrence of the insured risk giving rise to a claim (fire, theft, water damage, accident, etc.).
Subrogation: A mechanism whereby the insurer who has compensated the insured person steps into the insured person’s shoes in order to seek recourse against the third party liable for the damage.
Sum insured: The maximum amount specified in the policy that the insurer undertakes to pay. It serves as the basis for calculating the premium and sets a ceiling on the compensation payable.
Theft: Coverage for the loss of or damage to property caused by theft. A distinction is made between burglary and simple theft, the latter often being available as an optional extra.
Underinsurance: A situation where the sum insured is less than the actual value of the property. In the event of a claim, the compensation is reduced proportionally (proportional rule).
Water damage: Cover for damage caused by water (burst pipes, backflow, leaks from plumbing systems). This is distinct from flooding resulting from natural events.
Wealth insurance: Non-life insurance that protects the insured’s assets against financial loss (third-party liability, legal expenses, credit insurance), without being directly linked to any specific physical asset.

Appeal: A claim brought by the insurer or the victim to recover from the liable third party the sums paid out following an insured event.
Personal liability insurance: Insurance that covers damage caused unintentionally by an individual to third parties (people or property). It compensates the victim, not the policyholder themselves.
Professional Indemnity Insurance: Covers damage caused to third parties in the course of professional or business activities. This is distinct from personal liability insurance.
Third-party liability (TPL): The legal obligation to compensate others for damage caused; third-party liability insurance covers claims made by third parties against the insured.

Adjusted market value: An add-on that spreads the vehicle’s depreciation over several years, providing compensation in the event of a total loss that exceeds the vehicle’s current market value.
Comprehensive motor insurance: Includes all the cover provided under partial comprehensive cover and adds cover for collision damage to the insured vehicle, including where the driver is at fault.
Market value (current value): The market value of an item at the time of the loss, i.e. the replacement value less depreciation. Comprehensive insurance compensation is, in principle, paid at market value.
Motor vehicle liability insurance: Compulsory insurance in Switzerland covering damage caused to third parties by a motor vehicle. A requirement for putting the vehicle on the road.
Partial comprehensive insurance: Motor insurance that covers damage to your own vehicle caused by theft, natural disasters, fire, glass breakage and collisions with animals. It does not cover collisions caused by the driver’s fault.
Total loss: A claim where the cost of repair exceeds the value of the property, or where the property is destroyed or stolen. The compensation is calculated on the basis of the value (replacement or market value) rather than the cost of repair.

Amendment: A contractual document that amends or supplements an existing policy (change to cover, premium or address) without taking out a new one.
Bonus: An amount paid periodically by the policyholder to maintain cover. Under the LAMal, this depends on age, canton, excess and model, but never on state of health.
Co-insurance / Reinsurance: Co-insurance: the sharing of a single risk amongst several insurers. Reinsurance: insurance taken out by an insurer to cover all or part of the risks it bears.
Entitled person / beneficiary: The person designated to receive the insurance benefit (for example, the lump sum from a life insurance policy in the event of death).
Exclusion: A risk or circumstance expressly excluded from cover under the contract. No compensation is payable if the claim falls within the scope of an exclusion.
General Terms and Conditions (GTC): Standardised clauses drawn up in advance by the insurer which govern all policies for a particular product, supplemented by the special conditions.
Insurance policy: A document that formalises the insurance contract and sets out its terms and conditions (parties, cover, premium, benefits).
Insurance proposal: An offer to enter into a contract, completed by the applicant, on the basis of which the insurer assesses the risk before accepting the application.
Insured person: A person or entity exposed to the risk and for whom the cover is provided; not necessarily the policyholder.
Over-insurance / under-insurance: The sum insured exceeds (over) or is less than (under) the actual value of the property; under-insurance results in a reduced payout (proportional rule).
Policyholder: The person who takes out the policy and pays the premium. This may be different from the insured person (the person covered) and the beneficiary (the person who receives the benefit).
Right of withdrawal: The policyholder’s right to revoke their offer or acceptance in writing within 14 days; introduced by the amendment to the Insurance Contracts Act, which came into force on 1 January 2022.
Termination: An act by which a party terminates the contract with future effect, in accordance with the procedures and time limits laid down by law or the policy (for example, on the expiry date or following a claim).

Cicero: A sector-specific accreditation scheme and register of intermediaries’ qualifications managed by the VBV; it requires 60 continuing professional development credits every two years, and will feed into the sectoral register from 2026.
Continuing professional development: Requirement to undertake regular training to maintain one’s skills; the minimum standards set out in the revised LSA have been in force since 1 October 2024, with a transitional period running until the end of 2025.
Duty of care and loyalty: The intermediary’s duty to act with due care and in the client’s best interests, in particular by avoiding and disclosing conflicts of interest.
Duty to provide information: The legal obligation on the part of the intermediary and the insurer to inform the customer (identity, whether or not they are affiliated, economic links, data processing) prior to the conclusion of the contract, as reinforced by the revised Insurance Act.
FINMA: Federal Financial Market Supervisory Authority; supervises insurance companies and maintains the register of independent intermediaries.
LAA: Federal Act on Accident Insurance: a social insurance scheme covering occupational and non-occupational accidents and occupational diseases affecting employees.
LAMal: Federal Health Insurance Act: governs compulsory health insurance (social health insurance), which is distinct from supplementary cover governed by the Insurance Contract Act.
LCA: Federal Act on Insurance Contracts: governs the contractual relationship between private insurers and policyholders (private insurance), as amended with effect from 1 January 2022.
LPP: Federal Act on Occupational Old-Age, Survivors’ and Disability Pension Provision: the second pillar of the Swiss pension system.
LSA: Federal Act on Insurance Supervision: regulates insurance companies and intermediaries; the revised version came into force on 1 January 2024.
Register of Intermediaries: A public register maintained by FINMA listing authorised independent intermediaries; distinct from the sector-specific register managed by the VBV.
Related intermediate: An intermediary acting on behalf of one or more insurance companies with which they have a relationship of dependency; since 2024, they are no longer required to be registered with FINMA.
Reluctance: Inaccurate statement or omission of a material fact at the time of taking out the policy (health questionnaire). This may entitle the insurer to cancel the policy and refuse to pay the benefit.
Unaffiliated intermediary (broker): An intermediary who maintains a relationship of loyalty with the policyholder and acts in their best interests; the only category required to be registered with FINMA since 1 January 2024.
VBV / AFA: Association for Vocational Training in Insurance (VBV), an industry body that defines and organises training and examinations, including the AFA certification for insurance intermediaries.

Increased risk: A change made during the term of the contract which increases the likelihood or severity of a claim; under the Insurance Contracts Act, this may release the insurer from liability or justify an adjustment to the premium.
Limitation period: Lapse of the right to take legal action due to the passage of time; claims arising from an insurance contract are subject to a limitation period of five years following the amendment to the Insurance Act of 2022 (previously two years).
Obligation to report: The proposer’s duty to disclose to the insurer, in response to its written enquiries, all facts relevant to the assessment of the risk (section 4 of the Insurance Contracts Act).
Reluctance: Omission or misrepresentation of a material fact in respect of which the insurer has made enquiries; this entitles the insurer to terminate the contract (Sections 4 to 6 of the Insurance Contracts Act).

This glossary is designed to help you prepare for the AFA certification. To find out more, take a look at our training modules or visit the guide.

Insurance Glossary

Life and pension 24

Health and illness 10

Property and asset insurance 23

Liability 4

Vehicle 6

Insurance contract 13

Regulatory framework and supervision 15

Legal concepts 4