Glossary of Insurance Terms
NOTE:
This glossary provides a comprehensive list of some of the most
commonly used terms in the property/casualty, life and health insurance
industries. However, it should not be viewed as all-conclusive.
| A | B | C
| D | E | F |
G | H | I | J
| K | L | M |
N | O | P | R
| S | T | U |
V | W |
A
Accidental Death Benefit
(Auto or Health Insurance):
Provision for payment of a dollar amountusually equal to the
face amount of insuranceif the insured is killed in an accident.
This coverage is available either as a health insurance policy,
or as an auto insurance option with some companies. (Also see Accidental
Death Benefit [Life Insurance].)
Accidental Death Benefit
(Life Insurance):
Provision under a life insurance policy for payment of an additional
amountusually equal to the face amount of insuranceif
the insured is killed in an accident. Popularly known as double
indemnity. (Also see Accidental
Death Benefit [Auto or Health Insurance].)
Accident and Health Insurance:
See Health Insurance.
Act of God (Act of Nature):
Perils that occur naturally such as tornadoes, earthquakes and hurricanes.
Actual Cash Value:
Insurance under which the amount payable is the current replacement
cost of the property new; reduced by an allowance for depreciation,
wear and obsolescence.
Actuary:
A highly specialized mathematician professionally trained in the
risk aspects of insurance, whose functions include the calculations
involved in determining proper insurance rates, evaluating reserves,
and in various aspects of insurance research.
Additional Living Expense:
A property coverage which pays for the increased expense of living
while the insureds residence is being rebuilt or repaired
after damage from an insured peril. Examples are the extra cost
of housing the insureds family in a hotel, dining in restaurants,
etc.
Adjuster:
A person who investigates and settles losses for an insurance carrier
Admitted Company (Carrier):
An insurance company licensed and authorized to do business in a
particular state.
Agent:
Laws of all states require all insurance agents to be licensed by
the state to sell insurance. Agents may be categorized as: (1) An
Exclusive Agent, who is a sales employee or sales representative
of one and only one insurance company or its affiliated group of
insurance companies, and seeks and services business exclusively
for that company or group. (See Direct
Writer.) (2) An Independent Agent, who usually represents two
or more insurance companies or groups in a sales and service capacity
as an independent business person.
Alien Insurance Company:
An insurance company incorporated under the laws of a foreign country.
Allied Lines:
Types of insurance associated with property insurance, which may
include earthquake, sprinkler leakage, and income and extra expense
coverages.
Annual Policy:
Insurance policy written for a term of one year or renewed one year
at a time.
Annual Statement:
A report made by a company at the close of its fiscal year. It is
the primary financial report required by state insurance departments
to be submitted by insurers annually.
Annuitant:
The person during whose life an annuity is payable, usually the
person to receive the annuity.
Annuity:
A contract that provides an income for life, a specified number
of years, or a combination of the two.
Application:
The statement of information that a prospective insured gives when
applying for an insurance policy and that an insurance company uses
to help decide if it will issue the policy and what premium rate
will be charged.
Apportionment:
The dividing of a loss proportionately among two or more insurers
which cover the same loss.
Appraiser:
In insurance, a specialist that evaluates the size and cost of an
object, such as jewelry or art; or the extent of damage based on
a claim. Often works with a claims adjuster.
Appurtenant Structures:
Buildings on the same premises as the main building insured under
a property insurance policy.
Arbitration:
Determination by impartial experts of the value of property or the
extent of damage. Many insurance policies provide for appraisals
where the company and the insured cannot agree on the amount or
the extent of a loss. Arbitration also may be used to resolve liability
and policy-coverage issues in certain situations.
Arson:
The willful and malicious burning of, or attempt to burn any structure
or other property, often with criminal or fraudulent intent.
Assessment:
The extra premium a mutual or reciprocal insurers policyholder
may be required to pay in the event the insurers losses are
greater than anticipated.
Assets:
(1) All of the property owned by a carrier. (2) The items on the
balance sheet of the insurer that show the book value of property
owned. Under state regulations, not all property or other resources
can be admitted on the statement of the insurer. This gives rise
to the term non-admitted assets. (Examples would be
furniture, fixtures, agents debt balances and accounts receivable
that are over 90 days old.)
Assigned Risk Plan (Automobile Insurance Plans):
A mechanism used in some states to insure people who cannot obtain
insurance in the voluntary market. There is one rate level and the
individual policies are assigned to specific companies according
to the percentage of the market they insure.
AssuranceInsurance:
These terms are today generally accepted as synonymous, although
not originally so. The term assurance is used more commonly
in Canada and Great Britain than in the United States.
Assured:
Synonymous with insured. One who has an insurance policy
with an insurance carrier. Insured is preferred.
Audit:
An examination of the books of accounts, vouchers or other records
of a person, corporation, firm or other organization for the purpose
of ascertaining the accuracy or inaccuracy of the record.
Automobile Death Indemnity Coverage:
Provides limited life insurance protection to insured persons specifically
named in the policy in the event of a death that is a direct result
of a vehicle accident. Payment is not contingent upon the establishment
of negligence, but death by an intentional act of the insured is
not covered.
Automobile Disability Income Coverage:
Provides persons specifically named in the policy with the weekly
benefit shown in the policy in the event of continuous total disability
as a direct result of bodily injury, sickness, or infection caused
by an auto accident.
Automobile Insurance (Coverages):
For definitions of specific types available, see following auto
insurance coverages listed alphabetically throughout the GlossaryAutomobile
Death Indemnity Coverage, Automobile Disability Income Coverage,
Automobile Liability Insurance, Automobile Physical Damage Insurance,
Bodily Injury Liability Insurance, Collision Insurance, Comprehensive
Automobile Insurance, Deductible Collision and Deductible Comprehensive
Coverages, Medical Payments Automobile Insurance, Personal Injury
Protection Automobile Insurance (PIP), Property Damage Liability
Insurance, Towing Coverage, Underinsured Motorists Coverage, Uninsured
Motorists Coverage and Uninsured Motorists Property Damage Coverage.
Automobile Liability Insurance:
Protection for the insured against loss arising out of legal liability
when his or her car injures others or damages their property. (Includes
Bodily Injury Liability and Property Damage Liability Coverages.)
Automobile Physical Damage Insurance:
The Collision and Comprehensive coverages in the automobile insurance
policy.
Aviation Insurance:
Coverage against aviation perils, primarily involving operation
of aircraft and characterized by a constant exposure to potential
catastrophe loss. Types of coverages include insurance for damage
to the aircraft or contents, aircraft owners liability insurance
on passenger bodily injury or death, Airport Liability, Hangarkeepers
Liability, and Aviation Products Liability insurance.
B
Bailee:
One who has temporary possession of property belonging to another.
Basic Form:
A package insurance policy providing coverage against a limited
number of specified perils.
Beneficiary:
Any person, institution, trust, etc., named in a life policy to
receive the policy benefits upon the death of the insured.
Binder:
A written or oral contract issued temporarily to place insurance
in force immediately prior to issuance of a new policy or endorsement
of an existing one. A binder is subject to payment of the premium
and provides coverage under the terms of the policy to be issued,
unless otherwise specified.
Blanket Coverage:
A blanket form is one under which property is insured under a single
amount applying to several different pieces of property rather than
a specific amount of insurance on each property.
Block Policy:
An inland marine policy covering all property on or off a merchants
premises, including property of others in the care, custody or control
of the policyholder
Bodily Injury Liability Insurance:
This coverage protects an insured against legal liability for injury
to another person arising from an accident.
Boiler
and Machinery Insurance:
A form of property coverage for loss arising out of the operation
of pressure, mechanical and electrical equipment. It may, among
other things, cover loss to the boiler and machinery itself and
business interruption losses.
Broad Form:
A package policy providing coverage for the same perils covered
in the basic form, plus specified additional perils.
Broker:
A representative of the buyer of property and liability insurance
who deals with either agents or companies in arranging for the coverage
required by the customer. A broker is paid a commission by the company
or its agent.
Burglary:
The loss of property due to theft when there is visible evidence
of forcible entry to the exterior of the building.
Business Income Insurance:
See Business Interruption
Insurance.
Business Interruption
Insurance:
Coverage for loss of earnings in case the policyholders business
is shut down by fire, windstorm, explosion or other insured peril.
Its often added as a rider to a standard business policy and
pays for such expenses as the rebuilding of an accounts receivable
data base, cleaning computers, leasing temporary office space, and
similar losses associated with a disaster.
Buy-Out Policy:
A professional liability policy covering future claims resulting
from incidents which occurred during the period that an expired
claims-made policy was in force.
C
Cancellable Policy:
A policy which may be cancelled by the company at any time by giving
advance notice in compliance with state requirements to the insured
citing the reasons such insurance is being cancelled and refunding
any unearned premium. (Term is not usually applicable to life or
health insurance.)
Cancellation:
The discontinuance of an insurance policy before its normal expiration
date
Capacity:
A measure of the amount of insurance which an insurer is able or
prepared to assume on particular risks.
Capital Stock Insurance Company:
An insurance company which is owned and controlled by stockholders
or investors.
Captive Insurer:
An insurance company set up by a company or group of companies to
insure their own risks or risks common to the group.
Cargo Insurance:
A broad classification of marine insurance providing coverage on
cargo, as opposed to hulls, to protect shippers by sea from loss
or damage to goods for which they would be unlikely to collect from
the carriers themselves. Whether cargoes are insured for a particular
voyage or under open policies which are in the nature of reporting-form
policies depends upon the volume and regularity with which a shipper
uses ocean transit. Cargo insurance also can cover goods transported
by train or truck.
Carrier:
The insurance company or the one who agrees to pay the losses. The
carrier may be organized as a stock or mutual company, a reciprocal
exchange, as an association of underwriters or as a state fund.
Cash Value:
The cash fund which a life policy develops usually after the first
or second year the policy has been in force. It is available when
the policy is surrendered or may be borrowed earlier as a policy
loan.
Casualty Insurance:
Insurance primarily concerned with the legal liability for losses
caused by injury to persons or damage to property of others. Also
includes, among other coverages: automobile, workers compensation,
employers liability, general liability, plate glass, theft
and personal liability. It excludes life, fire and marine insurance
Catastrophe:
A sudden event causing an extraordinary level of loss; most often
associated with natural disasters such as tornadoes, hurricanes,
floods or earthquakes. In insurance, it is applied to an incident
or series of related incidents involving an insured loss in excess
of $5 million.
Catastrophe Reinsurance:
This is a form of insurance written in order to improve the spread
of risk against unknown concentrations of liability subject to one
occurrence. This type of reinsurance reimburses an insurer when
its losses due to a single catastrophe exceed a specified large
amount (the retention).
Cede:
To transfer all or part of a risk written by an insurer (the ceding,
or primary company) to a reinsurer.
Cession:
The unit of insurance passed to the reinsurer by the ceding company.
The unit (cession) may accordingly be the whole or a portion of
(a) single risks, (b) defined type or class of policies or (c) defined
divisions of a policy as agreed.
Chartered Life Underwriter (CLU):
A designation conferred in recognition of the attainment of certain
standards of education and proficiency in the uses of life insurance
to satisfy the financial needs of the insured in light of current
tax and other laws. A Chartered Life Underwriter is normally an
agent or someone responsible for sales or marketing activities.
Chartered Property Casualty Underwriter (CPCU):
A designation conferred in recognition of the attainment of certain
standards of education and proficiency in the art and science of
property and casualty insurance underwriting.
Claim:
A request for payment for a loss which may come under the terms
of an insurance contract. There are two types of claims. A first-party
claim is one made by the policyholder for reimbursement by his or
her company. A third-party claim is one by a person against a policyholder
of another company and the payment, if any, will be made by that
company.
Claim Frequency:
The number of claims occurring under a given coverage divided by
the number of earned exposures for the given coverage. It is usually
expressed as the number of claims paid per 100 of such exposures.
Example: For auto bodily injury (BI), the frequency of 2.50% means
that bodily injury accidents were incurred at the rate of 2-1/2
for every 100 cars insured for BI for one year.
Claim Severity:
The average cost per claim.
Claims-Made Form:
A type of liability policy which covers claims which occur and are
reported while the policy is in effect.
Classification:
The combining of policyholders or properties into groups with the
same general characteristics so that the various groups inherent
differences in exposure to loss can be recognized for rating or
underwriting purposes.
Coinsurance (Health Insurance):
A provision in a medical-expense insurance policy which requires
that the insured person pay part of the expense and the insurance
company will pay the remaining part. (Also see Coinsurance
[Property Insurance].)
Coinsurance (Property Insurance):
A provision in a property insurance policy which requires the insured
to carry insurance equal to a certain specified percentage of the
value of the property for the insured to receive full payment on
a loss up to the amount of the policy. Otherwise, payment would
be only a percentage of the actual loss, that percentage determined
by the amount of insurance carried relative to the amount that is
required to be carried by the policy for full protection up to policy
limits. (Also see Coinsurance [Health Insurance].)
Collision Insurance:
Protection against loss resulting from any damage to the policyholders
car caused by collision with another vehicle or object, or by upset
of the insured car, whether it was the insureds fault or not
(other than his/her own willful act). This does not cover other
peoples property. (See Deductible
Collision.)
Combined Ratio:
The sum of the ratio of losses incurred to premiums earned and the
ratio of commissions and expenses incurred to premiums written.
Combined Single Limit:
A liability coverage limit that combines both bodily injury and
property damage into one aggregate amount.
Commercial Blanket Bond:
A fidelity bond for operators of commercial establishments, etc.
(See Fidelity Bond.)
Commercial Credit
Insurance:
A guarantee to manufacturers, wholesalers and service organizations
that they will be paid for goods shipped or services rendered. It
is a guarantee of that part of their working capital that is represented
by accounts receivable.
Commercial General Liability Policy:
Often referred to as the CGL, this policy provides broad protection
against situations in which a business must defend itself against
lawsuits or pay damages for personal injury or property damage to
third parties
Commercial Insurance (Coverages):
Definitions of many commercial coverages are listed alphabetically
throughout the Glossary. Among these coverages are Aviation Insurance,
Cargo Insurance, Commercial Credit Insurance, Commercial Multiple-Line
Policy, Crop-Hail Insurance, Employers Liability Insurance,
General Liability Insurance, Kidnap and Ransom Insurance, Marine
Insurance, Products Liability Insurance, Professional Liability
Insurance, Public Liability Insurance, Rain Insurance, Surplus Lines,
Title Insurance and Workers Compensation
Commercial Lines:
The various kinds of insurance which are written for businesses.
(Also see Commercial Insurance [Coverages].)
Commercial Multiple-Line Policy:
Package type of policy that includes a wide range of essential property
and liability coverages for businesses
Commission:
A percentage of an insurance premium paid to an agent or broker
for producing and servicing the business
Commissioner of Insurance:
Title of the head of the state insurance department who is responsible
for the enforcement of insurance laws and for promulgating regulations
dealing with the insurance industry
Comparative Negligence:
Under this concept a plaintiff (the person bringing suit) may recover
damages even though guilty of some negligence. His or her recovery,
however, is reduced by the amount or percent of that negligence.
There are various forms of comparative negligence, such as: Pure
Comparative, in which the plaintiff recovers so long as he
or she is not solely at fault; Less Than, in which the
plaintiff recovers so long as his or her negligence is less than
that of the defendant; and Not Greater Than, in which
the plaintiff recovers so long as his or her negligence is not greater
than the defendants
Competitive State Fund:
State-operated workers compensation insurer which competes
with private insurers for employers workers compensation
business in certain states
Comprehensive
Automobile Insurance:
Protection against loss resulting from damage to the insured auto,
commonly referred to as other than collision coverage.
Broad coverage is provided and includes protection from such hazards
as fire, theft, glass damage, wind, hail and malicious mischief.
This is a first-party coverage
Comprehensive Personal Liability Insurance:
Protection for an insured against loss arising out of his or her
legal liability to pay money for damage or injury he or she has
caused to others. This does not include automobile liability, but
includes almost every activity of the insured except personal
injury and his or her business operations. (See Personal
Injury Liability Insurance.)
Compulsory Auto Liability Insurance:
Insurance laws in some states require motorists to carry at least
certain minimum auto liability coverages for bodily injury and property
damage
Concealment:
Normally means the willful withholding of material fact which could
affect an insurers issuance of a policy or processing of a
claim
Conditions:
Provisions of an insurance policy which state the rights and duties
of the insured and insurer
Condominium Insurance:
A policy designed for the special needs of condominium unit owner-occupants
to cover personal property and liability, to complement the insurance
normally purchased by the condominium association for the building,
structures and liability. Additional coverages are offered unit
owners by many insurers
Consequential Loss:
A loss resulting from, but not caused directly by, another insured
loss. A consequential loss (spoilage of meat stored
in a refrigerated building, for example) usually arises out of a
change in temperature resulting from damage to the building (but
not directly to the meat) by a covered peril such as fire. Consequential
Loss coverages are available to protect the insured against
this specific indirect loss
Contingent Liability Insurance:
Covers the insured individual or business in cases of indirect or
contingent liability, where direct liability for an
accident, for example, falls on another, but because of the relationship
between the insured and the other party, the insured might still
be held indirectly liable. (Example: A business being responsible
for the work performed by an independent contractor.)
Contract:
The Law of Contracts specifies four requirements for
the formation of a single contract: (1) parties of legal capacity;
(2) expression of mutual consent of the parties to a promise, or
set of promises; (3) a valid consideration; and (4) the absence
of any statute or other rule declaring such agreement void. An insurance
policy qualifies as a contract under the above definition
Contract Bond:
A bond which guarantees faithful performance of a construction contract
and payment of all material and labor bills related to that contract.
A Performance Bond covers faithful performance only; a Payment Bond
guarantees payment of material and labor expenses
Contractual Liability Insurance:
Provides coverage for claims arising out of liability that has been
assumed by the insured under a written or oral contract
Contributory Negligence:
Carelessness of the injured person that helped cause the accident
in which he or she was injured. Some states bar recovery to the
plaintiff if the plaintiff was contributorily negligent
Coverage:
The scope of the protection provided under a contract of insurance;
any of several risks covered by a policy
Covered/Insured Peril:
The perils of loss you are protected against by an insurance policy.
Examples of perils include fire, lightning, theft, vandalism and
the threat of a lawsuit
Credit Disability
Insurance:
Disability insurance on the borrower, payable to the creditor while
the borrower is disabled, to cover the loan payment (usually small
loans repayable in installments). This insurance is usually issued
through the creditor (a lender or lending agency) and is provided
by an insurance company under a group credit disability policy.
Credit disability insurance also can be purchased by an individual
directly from an insurance company. (Also see Credit
Life Insurance.)
Credit Insurance (Commercial):
See Commercial Credit
Insurance
Credit Life Insurance:
Term life insurance on the life of a borrower, payable to the creditor,
to repay a loan (usually small loans repayable in installments)
in case of death. This insurance is usually issued through the creditor
(a lender or lending agency) and is provided by a life insurance
company under a group credit life insurance policy to insure the
lives of those who borrow from the creditor. Credit life insurance
also can be purchased by an individual directly from a life insurance
company. (Also see Credit
Disability Insurance.)
Crop-Hail Insurance:
Protection against hail damage to growing crops. Coverage is often
afforded under such policies for crop damage due to fire, windstorm,
drought, frost, snow, etc
Customer Service Representative:
The assistant that supports the sales efforts of the sales agent
or producer. Other titles include administrative assistant, agency
underwriter and marketing specialist. CSR is also a designation
for a certified customer service representative
D
Declarations:
That part of the policy describing the named insured, address, effective
date, term of the policy, applicable coverages, the amount of insurance
and the premium
Decreasing Term Life Insurance:
Term insurance, the face value of which decreases each year over
a stated period. Family income and mortgage cancellation are common
types of decreasing term insurance
Deductible:
A provision in an insurance contract stating that the insurer will
pay that amount of any insured loss that is in excess of a specified
amount. The specified amount is the deductible
Deductible Collision and
Deductible Comprehensive Coverages:
Forms of collision or comprehensive auto insurance coverages which
specify that an insurance company will pay the damage less a specified
amount under the particular coverage. For example: For $100 Deductible
Collision Coverage, the company would deduct $100 from the total
damage under the collision coverage and be liable for the amount
in excess of $100. Rates are reduced as the amount of the deductible
is increased
Depreciation:
A decrease in the value of property due to age, wear and tear
Directors and Officers
Liability Insurance:
Coverage for directors and officers of firms or organizations against
liability claims arising out of alleged errors in judgment, breaches
of duty, and wrongful acts related to their organizational activities
Direct Premiums Written:
Property and casualty insurance premiums written (less return premiums),
without any allowance for premiums for assumed or ceded reinsurance
Direct Writer:
An insurer whose distribution mechanism is either the direct selling
system or the exclusive agent system. (See Agent.)
Disability Threshold:
In no-fault insurance states with the disability threshold, it provides
that a victim may not sue in tort unless he/she has been disabled
(defined differently in various state plans) from an accident for
a specific period of time
Dividends:
(1) Policyholder DividendThe return of part of the premium
paid for a policy issued on a participating basis by an insurer.
Any such dividend is dependent upon premiums collected in excess
of losses and expenses for the particular class of business at the
end of the policy period. (2) Stockholder DividendA portion
of the surplus paid to the stockholders of a corporation
Dollar Threshold:
In no-fault auto insurance states with the dollar threshold, it
prevents individuals from suing in tort to recover for pain and
suffering unless their medical expenses exceed a certain dollar
amount
Domestic Insurance Company:
An insurance company organized or domiciled in a given state is
referred to in that state as a domestic carrier
Double Indemnity:
See Accidental Death Benefit
(Life Insurance)
E
Earned Premium:
The part of the total property/casualty policy premium earned by
the insurance company which applies to the expired portion of the
policy period
Employers Liability Insurance:
Provides protection for the employer for those injuries arising
out of and in the course of employment which were not covered under
the workers compensation law
Endorsement:
An additional piece of paper, not a part of the original contract,
which cites certain terms and which becomes a legal part of that
insurance contract. Additions to life insurance contracts are accomplished
through the use of riders, which are similar to endorsements
Environmental Impairment Insurance:
A form of insurance designed to cover losses and liabilities arising
from damages to property by pollution
Equipment Breakdown Insurance:
See Boiler and Machinery Insurance
Errors and Omissions Insurance:
A type of professional liability insurance which indemnifies insured
professionalswho include, but are not limited to, lawyers,
insurance agents and brokers, accountants, real estate agents, appraisers,
abstracters, title insurance agents, architects and engineers, advertising
agents, adjusters, directors and trustees, fiduciaries, travel agents
and data processing firmsfor losses sustained because of their
errors or oversights
Excess Limits:
Coverage against losses in excess of a specified dollar limit
Exclusion:
A provision in an insurance policy which denies coverage for certain
perils, persons, property or location
Expense Ratio:
The ratio of a companys operating expenses to premiums written.
(Expenses include losses and loss adjustment expenses.)
Experience:
The loss record of an insured or of a particular class of coverage
Expiration Date:
The date shown on the declarations page of the policy when coverage
will stop. It may be a specific date or a statement that coverage
is continuous until cancelled
Exposure:
This term in the insurance field may have several meanings: (1)
possibility of loss; (2) a loss potential as measured by type of
construction, area or values; (3) a possibility of a loss being
communicated to an insurance risk from its surroundings; or (4)
a unit of measure of the amount of risk a company assumes (for example,
one car insured for one year)
Extended Coverage Property Insurance:
An extension of the fire insurance policy to protect the insured
against property damage caused by the additional perils of windstorm,
hail, explosion, or riot, civil commotion, aircraft, vehicle and
smoke
F
Face Amount:
See Protection Amount
Facultative Reinsurance:
Reinsurance on an individual policy basis wherein each risk which
an insurance company wishes to reinsure is reviewed by the reinsurer,
which has the faculty or option to accept or decline
all or part of each risk offered to it
FAIR (Fair Access to Insurance Requirements) Plan:
A facility, operating under a government-insurance industry cooperative
program, to make fire insurance and other forms of property insurance
readily available to persons who have difficulty obtaining such
coverage
Family Auto Insurance:
The automobile policy (most common in the industry) which provides
protection for the insured and resident relatives in the same household
Family Plan Insurance:
This is insurance in which the head of the household has one master
policy on his/her life (usually whole life) and term coverage for
wife/husband and children in lesser amounts
Federal Crime Insurance:
Insurance against burglary, larceny and robbery losses offered by
the federal government where the Federal Insurance Administration
has determined that such insurance is not otherwise readily available
Fee For Service (FFS):
Formerly a standard health insurance policy. Now a form of health
insurance that allows the insured to go to any doctor, hospital
or other provider which would bill for each service given, and the
insurer and the patient share in the cost of the services provided
Fidelity Bond:
Protection guaranteed by the surety which reimburses an employer
for losses due to dishonest acts of employees
Financial Responsibility Law:
A state law which may require motorists to furnish evidence, either
before or after involvement in an auto accident (depending on the
individual states law), of ability to pay for damages up to
certain minimum dollar limits. These requirements commonly are met
by carrying auto liability insurance with specified minimum limits
or more
Fire Insurance:
Coverage is provided to protect the insured property from the perils
of fire and lightning
Fleet Policy:
An auto policy covering a number of vehicles owned by a single insured
Floater:
A form of insurance that applies to movable property, whatever its
location, within the territorial limits imposed by the contract.
The coverage floats with the property
Flood Insurance:
Coverage against loss resulting from the flood peril, widely available
under a program developed in 1968 by the private insurance industry
and the federal government
Foreign Insurance Company:
In a given state, an insurer domiciled in another state
Fraud:
Intentional concealment or misrepresentation with the objective
of forcing an insurer to provide a benefit (such as paying a claim)
which otherwise would not be provided
Funded Reserve:
Bookkeeping account of sums set aside periodically by a business
for the purpose of paying for losses as they occur. Usually, the
sums are invested conservatively
G
General Average:
In ocean marine insurance, a concept which provides that, where
a portion of a vessel or cargo is jettisoned to save the entire
venture from peril at sea, the resulting loss is shared by all parties
involved. The owners of property that is saved contribute in proportion
to the interests suffering loss, provided the latter are free of
fault in the danger and the venture ultimately is successful. (Distinct
from Particular Average.)
General Damages:
In auto insurance, typically refers to awards for pain and suffering
General Liability Insurance:
A broad term meaning liability insurance, other than automobile
liability or employers liability, written to cover professional
and commercial risks. In respect to commercial liability, various
available coverages could cover such risks as premises and operations,
contractual liability, products and completed operations
Generally Accepted Accounting Principles (GAAP):
A method of accounting used by insurance companies to produce results
consistent with those of other industries. This is the method of
reporting financial results required by the Securities and Exchange
Commission of all industries under its jurisdiction and by the stock
exchanges
Glass Insurance:
Protection for loss of or damage to glass and its appurtenances
Good Driver Plan:
An auto insurance rating program that reflects the insureds
accident and traffic violation record as a factor in determining
the premium
Grace Period:
The number of days (31 in most cases) a life insurance policy will
remain in force when a payment is overdue
Group Insurance:
Insurance written on a group of people under a single master policy,
issued to their employer or to an association with which they are
affiliated
Guaranteed Cost Insurance:
The life insurance sold by some companies, with all cost factors
guaranteed at the time of issue. Policies of this type usually have
lower premiums than the pre-dividend premiums of comparable participating
policies
Guaranteed Renewable:
A health policy which the company guarantees to renew until the
insured reaches a specified age, usually 65. The company may adjust
rates only on a class of risks, not on any individual
Guaranty Fund:
A fund, derived from assessment against solvent insurance companies,
to absorb losses of claimants against insolvent insurers
H
Hail Insurance:
See Crop-Hail Insurance
Hard Insurance Market:
A condition caused by insurance companies lacking sufficient capital
to accept new business, sometimes causing a sharp rise in pricing
and the diminishing of coverage availability
Hazard:
The presence of a condition that could cause loss or injury to property
or persons. For example, smoking in bed increases the chance for
loss of property and life resulting from fire
Health Insurance:
There are two major types: Disability income insurance pays for
loss of income due to disability; medical expense insurance pays
for hospital, doctor and other medical expenses. Both of these generally
pay for losses arising from sickness or accidents. Some policies,
referred to as accident policies, do not cover sickness
Health Maintenance Organization (HMO):
The oldest form of managed health care. In exchange for a monthly
fee, HMOs offer members a comprehensive range of health services,
usually including preventive medical care
Hold Harmless Agreement:
A contract under which one partys legal liability for damages
is assumed by the other party to the contract
Homeowners Policy:
A package policy for the homeowner that combines named peril
(including theft coverage) protection on contents, coverage on the
dwelling ranging from named peril to physical loss,
additional living expense protection and personal liability insurance
Hull Policy:
An ocean marine or aviation insurance contract covering damage to
or loss of a ship or plane, but not the contents
Hurricane:
A tropical storm with sustained winds of 75 or more miles an hour
that is usually accompanied by rain and abnormally high tides
I
Improvements and Betterments Insurance:
Insurance coverage that protects a tenant or condominium unit owner
against loss as a result of fire, etc., of improvements made by
him/her to the real property in which he/she resides. Some property
policies use the term improvements and additions in
describing the coverage
Incontestable Clause:
The provision of a policy that prevents a life insurance company
from calling the policy invalid after the policy has been in effect
a certain length of time (usually two years)
Indemnity:
In general, means reimbursement for loss, but also is used to mean
a benefit provided by a policy. In health insurance it sometimes
is used to designate an amount paid regardless of actual loss or
expense incurred
Individual Practice Association (IPA):
A type of HMO that contracts with a type of physician entity. Patients
(policyholders) then visit individual doctors at their private offices
Industrial Life Insurance:
A class of life insurance that is usually issued with a protection
amount of less than $1,000 and premiums usually payable weekly or
at most monthly
Inland Marine Insurance:
A broad type of insurance, generally covering articles that may
be transported from one place to another as well as bridges, tunnels
and other instrumentalities of transportation and communication.
It includes goods in transit (generally excepting transoceanic)
as well as numerous floater policies such as personal
effects, personal property, jewelry, furs, fine arts and others
Inspection Report:
A report filed by an investigator employed by the insurance company
or a credit agency, giving general information on the health and
finances of the applicant and the physical condition of the property
(if property is to be insured)
Insurance to Value:
Insurance written in an amount approximating the value of the property
insured
Insured:
A person covered by an insurance policy
Internal Fraud:
An act of deception or strategy used to deceive or cheat an insurer
by an employee, including misrepresentation or concealment
Investment Income:
The income generated by a companys portfolio of investments
(such as bonds, stocks or other financial ventures)
J
Joint Underwriting Association (JUA):
A device used to provide insurance to those who cannot obtain insurance
in the voluntary market. Certain companies issue policies at one
rate level and handle claims, but the ultimate costs are borne by
all companies writing insurance in that state
K
Kidnap and Ransom Insurance:
Written for financial institutions and other corporations, this
insurance covers named employees for individual or aggregate amounts
paid as ransom, with deductibles requiring the insured to participate
in approximately 10% of any loss
L
Lapsed Policy:
A life or health insurance policy terminated as a result of nonpayment
of a premium before the end of the grace period
Legal Expense Insurance:
Insurance to reimburse policyholders for legal fees incurred for
defense from lawsuits involving areas of civil law not covered by
standard liability insurance. Examples include: discrimination,
wrongful discharge, contract disputes and patent disputes
Level Premium Life Insurance:
Insurance for which the cost is distributed evenly over the period
during which premiums are paid. The premium remains the same from
year to year and is more than the actual cost of protection in the
earlier years of the policy and less than the actual cost in the
later years. The excess paid in the early years builds up a reserve
which helps meet the costs in later years
Liabilities:
An insurance companys liabilities consist of its immediate
or contingent policy obligations and unpaid claims, as well as the
usual obligations arising out of doing business such as taxes, payroll,
etc
Liability Insurance:
Provides protection for the insured against loss arising out of
his/her legal liability to third parties
Liability Limits:
The stipulated sum or sums beyond which an insurance company is
not liable to protect the insured
LicenseAgent or Broker:
Certification issued by a states department of insurance that
an individual is qualified to solicit insurance applications in
the state for the period covered
LicenseCompany:
Certification issued by a states department of insurance that
an insurance company is qualified to do business in the state
Life Insurance Cost Indexes:
The measurements used to determine the cost of life insurance protection
Limit:
The maximum amount of benefits that an insurer agrees to pay in
the event of a loss
Line:
A type or kind of insurance
Litigation:
The process of a lawsuit
Loss:
An occurrence that is the basis for submission and/or payment of
a claim. Losses can be covered, limited or excluded from coverage,
depending on the terms of the policy
Loss Control Representative:
Insurance company employees, also called safety engineers, that
perform loss control surveys or inspections, and prepare written
loss control reports that outline their findings
Loss Control Service:
Engineering or inspection service which assists the insured in reducing
its exposure to loss
Loss ExpenseUnallocated:
Salaries and other expenses incurred in connection with the operation
of a claims department of a property and liability insurance carrier
which cannot be charged to individual claims
Loss Exposure:
The possibility that a loss may occur
Loss Ratio:
In property and liability insurance, the percent that losses bear
to premiums for a given period
Loss Reserve:
The estimated liability on an insurers balance sheet for unpaid
insurance claims or losses that have occurred as of a given reporting
date. On an individual claim, the loss reserve is the estimate of
what will ultimately be paid out on that case
M
Malicious Mischief:
The willful or intentional damage to or destruction of anothers
property. Coverage for malicious mischief is usually combined with
the vandalism peril in insurance policies
Malpractice Insurance:
Coverage afforded to a professional practitioner, such as a doctor
or a lawyer, against liability claims for damages resulting from
alleged negligence in the performance of the insureds services
Manual:
A book published by an insurance company, rating association or
bureau, containing its rates, classifications and rules for rating
a policy
Marine Insurance:
See Inland Marine Insurance
and Ocean Marine Insurance
Material Damage:
Insurance against damage to a vehicle or boat itself. It includes
automobile comprehensive, collision, fire and theft. Material damage
and physical damage are terms that are often used interchangeably
Maturity:
The date at which the endowment amount of a life policy becomes
payable
Medical Payments Automobile Insurance:
Coverage in non-no-fault states, which pays medical and hospital
expenses and the expense of funeral services resulting from an automobile
accident, regardless of the liability of the insured. This is a
first-party coverage
Mortgage Insurance:
(1) A basic type of life insurance or disability insurance purchased
for the specific purpose of paying off any mortgage balance outstanding
at death or paying mortgage payments while the insured is disabled.
(2) Private mortgage insurance offers a method of providing
minimum down payment residential mortgages by insuring mortgage
lenders against losses in the event of borrower default
Multi-Peril Policy:
A package policy that provides protection against a number of separate
perils. Multi-peril policies are not necessarily multiple-line policies,
since the combined perils may be all within one insurance line,
such as property. (See Multiple-Line
Policy.)
Multiple-Line Company:
A company that writes a variety of basic or traditional lines of
insurance known as property and casualty (liability) insurance,
such as auto, boat owners, homeowners, commercial, etc
Multiple-Line Policy:
A package policy which combines coverages from both the traditional
property and liability insurance lines
Mutual Insurance Companies:
Insurance companies without capital stock, owned by the policyholders
N
Named Perils:
Coverage in a property policy that provides protection against loss
from only the perils specifically listed in the policy rather than
protection from physical loss. Examples of named perils are fire,
windstorm, theft, smoke, etc
Negligence:
The failure of a person to exercise the care that a prudent person
would exercise under similar circumstances
Net Cost:
This term ordinarily refers to the cost of life insurance after
deducting the policy dividends from the premiums paid. A variant
is the net surrendered cost, which is the premiums minus both dividends
and the cash surrender value at the end of the given period
Net Premiums Written:
Property and casualty gross premiums written less returned premiums,
plus reinsurance assumed premiums less reinsurance ceded premiums
No-Fault Automobile
Insurance:
A form of insurance by which a persons financial losses resulting
from an automobile accident, such as medical and hospital expenses
and loss of income, are paid by his/her own insurance company without
concern for who was at fault. The right to sue may be restricted
in some cases
Non-admitted Company (Carrier):
An insurance company not licensed to do business in the state in
question
Non-Forfeiture Options:
The choices available to an insured as to how the cost value of
a life insurance policy will be receivedas a lump-sum payment,
as extended term insurance, or as reduced paid-up life insurance.
These options guarantee that the cash value will not be forfeited
by the insured
Non-Participating Insurance:
See Guaranteed Cost Insurance
Notice of Loss:
Notification to an insurance company by an insured or claimant that
a loss has occurred. Written notice may be required, although many
companies accept notice by telephone
O
Obligee:
A person, firm, corporation or government agency protected by a
surety bond
Occupational Hazard:
Dangers inherent in an occupation which increase the risk of sickness
or injury
Ocean Marine Insurance:
Coverage on all types of vessels, including liabilities connected
with them, and coverages on their cargoes
Omnibus Clause:
An automobile policy provision that covers persons driving the named
insureds auto with the named insureds permission
Ordinary Life Insurance:
The class of life insurance that usually refers to whole life, term
and endowment insurance
Other Than Collision Coverage:
See Comprehensive
Automobile Insurance
P
Package Policy:
A combination of two or more individual policies or coverages into
a single policy. A homeowners policy, for example, is a package
combining property, liability and theft coverages for the homeowner
Paid Losses:
The actual dollar total that has been paid on incurred losses by
issuing checks or drafts to claimants
Partial Disability:
An impairment that prevents the insured from performing one or more,
but not all, important duties of his/her job
Participating Insurance:
The life insurance, sold by some life companies, on which dividends
may be payable to policy owners. The amount and timing of the dividend
payments are determined by the company board of directors
Particular Average:
In ocean marine insurance, a concept providing that, where a portion
of vessel or cargo is jettisoned to save the entire venture from
peril at sea, the resulting loss is borne entirely by that individual
owning the property that is damaged or sacrificed. No other interests
contribute to payment of the loss. (Distinct from General Average.)
Peril:
The cause of a possible loss, such as fire, windstorm, theft, explosion
or riot
Permanent Insurance:
The type of life insurance that develops cash value and includes
whole life, endowment, universal life and variable life insurance
Persistency:
An insurance term used to refer to the probability of insurance
remaining in force
Personal Articles Floater:
A form of coverage designed to meet the needs for insurance on property
of a movable nature. The coverage usually protects against all physical
loss, subject to special exclusions and conditions. Examples of
property covered include jewelry, furs, silverware and fine arts
Personal Injury Liability
Insurance:
Protects against liability for damages other than physical injury
arising out of false arrest, detention or imprisonment, or malicious
prosecution; libel, slander or defamation of character; invasion
of privacy, wrongful eviction or wrongful entry
Personal Injury Protection Automobile Insurance (PIP):
First-party coverage in no-fault states that usually pays for medical
expenses, loss of income and certain other expenses resulting from
an auto accident. Coverages scope varies widely by state law
so no two states have identical coverages. (See No-Fault
Automobile Insurance.)
Personal Lines:
Types of insurance written for individuals or families, rather than
for businesses
Personal Property:
This type of property is usually movable and easily transportable.
On the other hand, real property generally is considered to be immovable,
such as land and things affixed to it. A rule of thumb definition
for personal property is everything other than real property.
Physical Hazard:
This refers to the material, structural or operational features
of the risk itself, apart from the persons owning or managing it.
Electrical wiring, building construction and type of heating system
are examples of physical hazards
Physical Loss Form:
This property coverage protects against loss from risk of physical
loss to buildings except as limited or excluded in the form
Point of Service (POS) Plan:
An HMO that offers an indemnity-type option. The primary care doctors
in a POS plan make referrals to other providers in the plan. However,
members can refer themselves outside the plan and still get some
coverage as well
Policies-in-Force:
Policies written and recorded on the books of the carrier which
are unexpired as of a given date. Usually applies to property and
liability insurance
Policy:
The name generally used to mean the written contract of insurance
Policyholder:
One who owns an insurance policy. A mortgagee often is issued a
copy of an insurance policy or certificate of insurance at the request
of the insured, but it is not a policyholder
Policyholders Surplus:
The sum an insurance company has remaining after all liabilities
are deducted from all assets. Sums such as paid-in capital and special
voluntary reserves are also included in this term. This surplus
is one form of financial protection to policyholders in the event
a company suffers unexpected or catastrophic losses
Policy Loan:
The borrowing against a life insurance policys cash value
Pool:
An organization of insurers or reinsurers through which particular
types of risks are underwritten with premiums, losses and expenses
shared in agreed ratios
Pre-Existing Condition:
A physical condition that existed prior to the issuance of an insurance
policy
Preferred Provider Organization (PPO):
Health plan through which a sponsoring group negotiates price discounts
with providers in exchange for patients. The sponsor may be an insurer,
employer or third-party administrator
Premises:
The building, other structures and land where the insurance protection
is applicable. It is usually described and defined in the property
and casualty policy
Premium:
The amount of money charged a policyholder for an insurance policy.
(Also see Direct Premiums Written,
Earned Premium, Net
Premiums Written, Unearned Premium.)
Premium Auditor:
A person who examines a liability insurance policyholders
insurance records (sales, payroll, etc.) at the end of the policy
term to determine if the basis for the premium charge has either
increased or decreased. If the audited premium is less than originally
estimated and paid, the policyholder will receive a refund; if greater,
the policyholder will receive a statement for the balance
Principal:
In suretyship, the party whose honesty or performance is guaranteed
Producer:
Any person directly involved in the sale of insurance
Product Liability Insurance:
Protection against financial loss arising out of the legal liability
incurred by a manufacturer, merchant or distributor because of injury
or damage resulting from the use of a covered product
Professional Liability Insurance:
See Directors and Officers Liability
Insurance, Errors and Omissions
Insurance, and Malpractice
Insurance
Proof of Loss:
Documentation presented to the insurance company by the insured
in support of a claim so that the insurer can determine its liability
under the policy
Property Damage Liability Insurance:
Protection against loss from legal liability for damage to the property
of another
Property Insurance:
Provides financial protection against loss or damage to the insureds
property, other than automobile, caused by specified perils, such
as fire, windstorm, hail, explosion, riot, aircraft, motor vehicles,
vandalism, malicious mischief, riot and civil commotion, and smoke.
(See Property Insurance [Coverages].)
Property Insurance (Coverages):
For definitions of specific types available, see following property
insurance coverages and terms listed alphabetically throughout the
GlossaryActual Cash Value,
Additional Living Expense,
Blanket Coverage, Condominium
Insurance, Extended Coverage Property
Insurance, Fire Insurance, Homeowners
Policy, Property Insurance,
Renters Policy, Rents
or Rental Value Coverages, Replacement
Cost Property Coverage, Tenants
Policy and Theft Insurance
Protection Amount:
The face amount of a life insurance policy, or amount of money that
will be paid to a beneficiary upon the death of an insureddepending
upon the policy. This amount will be reduced by the amount of any
outstanding policy loan
Proximate Cause:
The dominating cause of loss or damage; an unbroken chain of events
between the occurrence of an insured peril and damage to property.
As an illustration, weather damage occurring from fire-fighting
activities is covered under the fire policy because fire was the
proximate cause of the loss
Public Liability Insurance:
A broad term meaning insurance to cover professional and commercial
risks against liability exposures other than those involving employees
or arising out of ownership or use of autos or airplanes
R
Rain Insurance:
Insurance protection against loss due to rain, hail, snow or sleet,
which causes cancellation or reduced earnings of an outdoor event
Rate:
A charge per unit in determining insurance premiums
Rating Bureau:
An organization that gathers statistics, makes rates and/or creates
policy forms and provides other services for the property and casualty
insurers affiliated with the bureau
Rating Territory:
In various property and casualty lines, a geographical grouping
within which insureds are likely to share an exposure to similar
risks. Grouping of insureds within a territory helps establish equitable
rates for the territory
Redlining:
An illegal act to refuse to lend money or issue insurance based
only on geographic area
Reinstatement:
The restoration of a lapsed life or health insurance policy to its
original premium-paying statususually after evidence of good
health has been submitted and past-due premiums have been paid
Reinsurance:
An arrangement by which one insurer transfers all or a portion of
its risk under a policy or group of policies to another insurer
(reinsurer). Thus reinsurance is insurance purchased by an insurance
company from another insurer, to reduce risk for the original insurer
Reinsurance Facility:
An alternative mechanism to service those insureds who cannot obtain
insurance in the voluntary market. Premiums and losses for the business
that is ceded to the facility are pooled and all insurers share
according to their proportion of the voluntary market
Renters Policy:
A package type of insurance that includes coverage similar to a
homeowners policy to cover the personal property of a renter or
tenant in a building
Rents or Rental Value Coverages:
Insurance against loss of the rental value of a property; protects
against loss of rents resulting from an insured peril
Replacement Cost Property Coverage:
Insurance under which the amount payable is the current replacement
cost of the property new, rather than the depreciated value. Applies
to the building structures (in most cases) and can apply to contents
in some policies
Reserve:
(1) An amount representing actual or potential liabilities kept
by an insurer to cover obligations to policyholders and third-party
claimants. (2) An amount allocated for a special purpose. Note that
a reserve is usually a liability and not an extra fund. On occasion,
a reserve may be an asset, such as a reserve for taxes not yet due
Residual Market:
A general term describing the total of all consumers who have had
difficulty purchasing insurance through normal channels. Automobile
Insurance Plans, FAIR Plans, Reinsurance Facilities and Joint Underwriting
Associations all service this market
Retention:
The net amount of risk retained by an insurance company for its
own account or that of specified others, and not reinsured
Retrospective Rating:
Rating procedure that allows adjustment of an insureds final
rate on the basis of the insureds own loss experience
Rider:
Additional provision added to a policy by issuance of an amending
document (See Endorsement.)
Risk:
Chance of loss with respect to person, liability or the property
of the insured. Also is used to mean the insured.
Risk Management:
The management of the various risks that might affect a business
firm. Its purpose is to identify potential loss situations and control
or reduce them through insurance, elimination of risk, or improved
or additional safety practices
Robbery:
The loss of property due to theft when a person is threatened with
physical harm or injury
S
Sales Expense:
Compensation of agents, advertising expense and other costs related
to selling insurance policies
Salvage:
Property damaged to the extent that it is not economical to perform
repairs, taken over by an insurer after it has paid a claim, to
reduce its loss by salvaging the remaining value of
the property
Schedule:
A list describing the property or items insured under the policy
and the extent to which they are insured
Self-Insurance:
A form of risk financing through which a firm assumes all or a part
of its own losses. Self-insurers may purchase insurance to cover
excess losses
Soft Market:
A condition where insurance premiums are lowered and the availability
of insurance is high. Opposite of a hard insurance market
Solicitor:
A person authorized by an agent to solicit and receive applications
for insurance
Special Multi-Peril Policy (SMP):
A business policy which combines in one contract the coverages normally
purchased under several policies. Many options and endorsements
are available to tailor it to the policyholders needs
Specified Perils:
See Named Perils
Speculative Risk:
A type of risk with three possible outcomes: gain, loss or no change
Standard Provisions:
Policy provisions required by law
Standard Risk:
A person who according to a companys underwriting standards
is entitled to insurance without extra rating or special restrictions
Statutory Accounting Principles (SAP):
Those principles required by statute that must be followed by an
insurance company when submitting its financial statements to the
various state insurance departments. Such principles differ from
Generally Accepted Accounting Principles (GAAP) in some important
respects. For example, SAP requires that expenses must be recorded
immediately and cannot be deferred to track with premiums as they
are earned and taken into revenue
Statutory Underwriting Profit or Loss:
Earnings or losses as shown by an insurer on its Statutory Income
Statement (convention blank) as required by state insurance departments.
More specifically: (1) the profit or loss realized from insurance
operations as distinct from that realized from investments; (2)
the excess of premiums over losses and expenses (profit), or the
excess of losses and expenses over premiums (loss)
Stock Company:
A company organized and owned by stockholders, as distinguished
from the mutual form of company, which is owned by its policyholders
Stopgap Endorsement:
Provides employer liability coverage for work-related injury arising
out of incidental operations or exposure in the monopolistic fund
states
Subrogation:
A principle of law incorporated in insurance policies that enables
an insurance company, after paying a loss to its insured, to recover
the amount of the loss from another who is legally liable for it
Substandard or Extra Risk:
An individual who, because of health history or physical limitations,
does not measure up to the qualifications of a standard life or
health insurance risk
Surety Bond:
An agreement providing for monetary compensation should there be
a failure to perform specified acts within a stated period. The
surety company, for example, becomes responsible for fulfillment
of a contract if the contractor defaults
Suretyship:
Contractual relationship in which one party (surety) guarantees
another party (obligee) against the default or misperformance of
a third party (principal). (See Fidelity
Bond and Surety Bond.)
Surplus:
A stock companys surplus is the amount by which its admitted
assets exceed its liabilities and capital stock. In both stock and
mutual companies, the term surplus-to-policyholders means the excess
of admitted assets over liabilities
Surplus Lines:
A term originating in property/casualty insurance, used to describe
any risk or part thereof for which insurance is not available through
a company licensed in the applicants state (an admitted
insurer). The business, therefore, is placed with non-admitted
insurers (insurers not licensed in the state) in accordance with
surplus or excess lines provisions of state insurance laws. These
provisions generally allow operations on a relatively unregulated
basis; that is, the non-admitted insurer is not subject to the same
rate or coverage requirements that apply to an admitted insurer
Syndicate:
A group of insurers or underwriters that join to insure certain
property that may be of such value or high hazard or so expensive
to underwrite that it can be covered more safely or efficiently
on a cooperative basis
T
Tenants Policy:
See Renters Policy
Term:
A period of time for which a policy is issued
Term Insurance:
Life insurance protection during a limited number of years but expiring
without value if the insured survives the stated period
Theft Insurance:
Protection for loss of property due to stealing, including burglary,
robbery and larceny
Third Party:
A person who files a liability insurance claim
Threshold:
Used in no-fault auto insurance to remove non-serious cases from
the tort system by establishing a point of threshold
that must be met or exceeded to sue in tort. Of those states and
the District of Columbia that have no-fault auto insurance, many,
including the District of Columbia, have a threshold in their plan.
There are three types of thresholds: the dollar threshold, the disability
threshold and the verbal threshold
Title Insurance:
An insurance contract relating to real estate described in the policy
which protects the insured landowner against loss or damage by reason
of defects, liens or encumbrances in the insured title, if these
faults exist at the date of the policy and are not expressly excluded
from its terms
Tort:
Any wrongful act, damage or injury done willfully, negligently or
in circumstances involving strict liability, but not involving breach
of contract, for which a civil lawsuit can be brought
Total Disability:
Disability that prevents a person from performing (a) any of his/her
occupational duties, or (b) any duties for which he/she is reasonably
qualified. Definitions vary within policies
Towing Coverage:
Insures against charges for towing and road service at the place
of disablement, with a maximum amount stipulated for each occurrence
Treaty Reinsurance:
A general reinsurance agreement between the ceding or primary company
and the reinsurer containing the contractual terms under which a
portion or all of the primary companys business or a particular
class is passed on to the reinsurer
U
Umbrella Liability Policy:
A form of insurance protection against losses in excess of amounts
covered by other liability insurance policies; also protects the
insured in many situations not covered by the usual liability policies.
This policy is available for both personal and commercial lines
coverage
Underinsured Motorists Coverage:
Coverage is intended to cover you and passengers in your car for
losses unpaid because sufficient bodily injury liability limits
are not available from the policy of an at-fault driver. How and
under what circumstances the coverage becomes operative varies in
different states
Underwriter:
An employee of an insurance company who is a selector of risks.
The underwriter is expected to select business that will produce
an average risk of loss no greater than anticipated for the class
of business. In the life insurance industry, underwriter
may also mean an agent or other field representative who is referred
to as a field underwriter.
Underwriting:
The process of selecting risks for insurance and determining in
what amounts and on what terms the insurance company accepts the
risk
Underwriting Profit or Loss:
The profit or loss experienced by a property/casualty insurance
company after deducting from earned premiums the incurred losses
and expenses of doing business, but before provision of federal
income tax. It excludes investment income
Unearned Premium:
The portion of a property/casualty insurance premium that applies
to the unexpired portion of the policy period
Uninsured Motorists Coverage (UM):
Pays the policyholder and passengers in his/her car for losses sustained
by reason of bodily injury, sickness, disease or death caused by
the owner or operator of an uninsured automobile or a hit-and-run
driver
Uninsured Motorists Property Damage Coverage (UMPD):
Provides coverage to a vehicle involved in an accident with an uninsured
motorist. UMPD is similar to collision coverage, and
is not available to those who purchase collision coverage
Universal Life:
A type of permanent life insurance under which the policyowner is
allowed to vary the timing and amount of premium payments, plus
increase or decrease the death benefit (subject to underwriting
for an increase)
V
Valuation:
The process of determining a companys liabilities under its
policy obligations is known as policy valuation. The process of
determining the value of a companys investments is known as
asset valuation. Minimum valuation standards are usually prescribed
by state laws
Valued Policy:
An insurance policy under which the insurance company is obligated
to pay the full amount of the policy written to insure real property
against loss by fire (and, sometimes, other perils) when the property
insured is totally destroyed. Several states have laws that are
known as Valued Policy Laws
Vandalism:
Willful, intentional, often random, destruction or defacement of
private or public property. Insurance against the vandalism peril
is usually combined with the malicious mischief peril
Variable Life Insurance:
A type of permanent life insurance in which the death benefit and
the policy value vary in relation to the investment experience of
a selected fund in which the policy values are invested
Verbal Threshold:
In no-fault auto insurance states with the verbal threshold, victims
are allowed to sue in tort only if their injuries meet certain verbal
descriptions of the types of injuries that should, as a matter of
policy, render one eligible to seek to recover for pain and suffering
in a cause of action in tort
Voluntary Market:
The market where a person seeking insurance obtains it with no help
from the state, through an insurer of his or her own selection
W
Workers Compensation:
A system (established under state laws) under which employers provide
insurance for benefit payments to employees for their work-related
injury, death and disease regardless of fault. Not to be mistaken
as health insurance
Write:
To insure, underwrite or accept an application for insurance.
Sources: Original glossary reprinted, with permission,
Allstate Insurance Company, Northbrook, IL, with all rights. Excerpts
also from Insuring Your Business, by Sean Mooney, Chief Economist,
Director of Research, and Senior Vice President at Guy Carpenter
& Company in New York, and former economist, Insurance Information
Institute; Ensuring Availability: Residual Property Insurance
Plans, Property Insurance Plans Service Office and The Buyers
Guide to Business Insurance, PSI Research.
|