Insurance Glossary – Understanding Common Insurance Terms

Bailee

An individual or entity who holds property of another. Examples are dry cleaners, jewelers, repairers.

Bailee Insurance

Coverage designed to protect for loss or damage to property of customers regardless of a bailee‘s legal liability. Bailee Insurance is inland marine coverage on property entrusted to the insured for storage, repair, or servicing. It is typically purchased by businesses such as dry cleaners, jewelers, repairers, furriers, etc.

Balance Billing

The practice of a healthcare provider billing you for an outstanding balance after your insurance company has paid its portion of the bill.

Barratry of the Master

An action of the master of a ship which violates the trust given to him, provided such action is not taken in connivance with the shipowner. Hazard covered in the marine cargo policy.

Basic Form

See Dwelling Property (1).

Basis

An amount attributed to an asset for income tax purposes; used to determine gain or loss on sale or transfer; used to determine the value of a gift (except donations to charities, which generally are recorded at the current value of the asset at the time the gift is made).

Beneficiary

The person or entity designated or provided for by an insurance policy‘s terms to receive any benefitsprovided by the policy or plan upon the death of the insured.

Benefit Period

A period of time, typically one to three years, during which major medical benefits are paid after the deductible is satisfied. When the benefit period ends, the insured must then satisfy a new deductible in order to establish a new benefit period.

Benefits

The amount payable by the insurance company to a claimant, assignee or beneficiary under each coverage.

Binder

A written or oral contract issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately. A binder is subject to receipt of the premium and all the terms of the policy to be issued. It is a legal agreement that serves to effect insurance coverage for a specified period of time until the actual insurance policy can be issued.

Binding Receipt

A receipt given for a premium payment accompanying the application for insurance. If the policy is approved, this binds the company to make the policy effective from the date of the receipt.

Biosimilar Biological Products

A biological product that has no clinically meaningful difference from an existing FDA-approved product.

Blackout Period

The period during which Social Security benefits are not paid to a surviving spouse; between the time the youngest child reaches age sixteen and the widow’s sixtieth birthday.

Blanket Contract

A contract of health insurance affording benefits, such as accidental death and dismemberment, for all of a class of persons not individually identified. It is used for such groups as athletic teams, campers, travel policy for employees, etc.

Blanket Insurance

A policy designed to provide coverage under a single limit for two or more items (e.g., building and/or contents), two or more locations, or a combination of items and/or locations

Blanket Medical Expense

A provision which entitles the insured to collect up to a maximum established in the policy for all hospital and medical expenses incurred, without any limitations on individual types of medical expenses.

Block Policy

A form of inland marine insurance designed to cover loss to the property of a merchant, wholesaler, or manufacturer including: property of others in the insured‘s care, custody, or control, property on consignment and property sold but not delivered. Common block policies are jeweler’s block and furrier’s block policies.

Blue Cross

An independent, nonprofit membership corporation providing protection on a service basis against the cost of hospital care in a limited geographical area.

Blue Shield

An independent, non-profit membership corporation providing protection on a service basis against the cost of surgical and medical care in a limited geographical area.

Boat Owners Package Policy

A special package policy for boat owners that combines physical damage insurance, medical expense insurance, liability insurance, and other coverages in one contract.

Bodily Injury Liability (BI)

When you are found legally culpable for a car accident, BI coverage pays for the costs associated with injuries to the other people involved. BI also provides coverage for a legal defense if you are sued.  

Boiler and Machinery Insurance

Coverage for loss arising out of the operation of pressure, mechanical, and electrical equipment. It covers loss of the boiler and machinery itself, damage to other property, and business interruption losses.

Bond

(1) A certificate issued by a government or corporation as evidence of a debt. The issuer of the bond promises to pay the bondholder a specified amount of interest for a specified period and to repay the loan on the expiration (maturity) date. (2) A certificate or policy issued by an insurance company guaranteeing performance, fidelity or surety.

Bondholder

A bondholder is the owner of a bond. This can be, and frequently is, different from the person/corporation that purchased the bond. The bondholder is entitled to the proceeds of the bond: in investment terms, principal and interest; in insurance terms, the value the bond supports. For example, a surety bond holder would be entitled to the value that is guaranteed by the surety bond.

Book of Business

The number, size and type of accounts (policyholders) that an agent services, and upon which he earns commissions.

Branch Office System

Type of marketing system under which branch offices are established in various areas. Salaried branch managers, who are employees of the company, are responsible for hiring and training new agents.

Break in Service

A calendar year, plan year or other consecutive 12-month period designated by the plan during which a plan participant does not complete more than 500 hours of service.

Broad Form Property Coverage Including Completed Operations

Broad Form Property Insurance is a coverage extension to the general contractor.  Broad form policies are usually preferable, even though they cost more, because they cover so much. Without Completed Operations coverage, the normal Comprehensive General Liability policy will not cover “completed operations” claims (i.e., claims rising out of work performed on behalf of the insured by subcontractors).

Broadcasters Liability Insurance

The legal liabilities of a broadcaster are numerous and vary from the use of incorrect news stories, libel and slander, invasion of privacy, copyright infringement, and unauthorized use of plot, characters, or music. Broadcasters’ Liability Insurance covers these exposures, as well as defense costs in contesting suits or claims. Employees are covered as insureds while acting within the scope of their duties as such.

Broadened Named Insured

Regarding liability coverages, these coverages will automatically apply to “… any affiliated, associated, allied or subsidiary company or entity (including subsidiaries thereof), now held or hereinafter acquired or constituted…”

Broker

A marketing specialist who represents buyers of property and liability insurance and who deals with either agents or companies in arranging for the coverage required by the customer.

Bronze Health Plan

Bronze plans are a category of coverage offered in the Health Insurance Marketplace. Bronze plans typically carry the lowest monthly premiums and must cover certain services.

Builder’s Risk Insurance

Builders risk Insurance provides coverage to insure building contractors for damage to property under construction. The completed value form requires a 100% coinsurance because insurance value purchased must equal the completed value of the structure. The reporting form type of coverage allows coverage to be carried according to the stage of completion of the structure. Perils insured against are fire, lightning, vandalism, malicious mischief, the types of risks common to a builder’s site.  Smoke, sprinkler leakage, water damage, windstorm, and hail are also usually covered.

Burglary

Breaking and entering into another person’s property with felonious intent.

Burglary and Theft Insurance

Coverage against property losses due to burglary, robbery, or larceny.

Business Income Insurance

A standard element of commercial property insurance providing coverage against loss of operating income due to fire, explosion, or other insured perils. Generally takes the limited form of business interruption insurance, but can be broadened through the addition of indirect loss, consequential loss, extra expense, and other coverages.

Business Insurance

A policy which primarily provides coverage of benefits to a business as contrasted to an individual. It is issued to indemnify a business for the loss of services of a key employee or a partner who becomes disabled.

Business Interruption Insurance

Business Interruption insurance, covers the loss of earnings as a result of damage or loss of business property. Reimbursement for salaries, taxes, rents, and other expenses, even net profits that would have been earned during the period of interruption can be included.

Business Life Insurance

Life insurance purchased by a business enterprise on the life of a member of the firm. It is often bought by partnerships to protect the surviving partners against loss caused by the death of a partner, or by a corporation to reimburse it for loss caused by the death of a key employee.

Business Owner’s Policy

Business insurance that combines protection from liability and property risks in one package. Typically purchased by small to medium sized businesses.

Business Personal Property

Moveable property owned by your business. Typically includes office supplies, machinery, computers, furniture and everything else excluding the building.

Buy-Sell Agreement

An agreement made by the owners of a business to purchase the share of a disabled or deceased owner. The value of each owner’s share of the business and the exact terms of the buying-and-selling process are established before death or the beginning of disability.

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Cafeteria Plan

Generic term for an employee benefit plan that allows employees to select among the various group life, medical expense, disability, dental, and other plans that best meet their specific needs. Also called flexible benefit plans.

Calendar-Year Deductible

Amount payable by an insured during a calendar year before a group or individual health insurance policybegins to pay for medical expenses.

Cancelable

A contract of health insurance that may be canceled during the policy term by the insurer or insured.

Cancellation

The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.

Capacity

(1) The amount of capital available to an insurance company or to the industry as a whole for underwritinggeneral insurance coverage or coverage for specific perils. (2) The amount of insurance a company or the industry are able to write, due to limitations on or availability of capital.

Capital Gain

Profit realized on the sale of securities. An unrealized capital gain is an increase in the value of securities that have not been sold.

Capital Retention Approach

A method used to estimate the amount of life insurance to own. Under this method, the insurance proceeds are retained and are not liquidated.

Capitation

A method of payment for health services in which a physician or hospital is paid a fixed, per capita amount for each person served regardless of the actual number of services provided to each person.

Captive Insurance Company

A company owned solely or in large part by one or more non-insurance entities for the primary purpose of providing insurance coverage to the owner or owners. The company’s stock is controlled by one interest or a group of related interests so as to provide coverage for their business operations. A Captive Insurance Company may be a nonadmitted, nonresident, or foreign insurer. Sometimes it may provide reinsurance to a self-insured or a domestic company. See also Association Captive.

Career Average Formula

A pension plan formula that bases retirement benefits on earnings during all years of service to the employer.

Cargo Insurance

Type of ocean marine insurance designed to protect the shipper of the goods against financial loss if the goods are damaged or lost.

Cash Surrender Value

The amount available in cash upon voluntary termination of a policy by its owner before it becomes payable by death or maturity.

Casualty Insurance

Insurance concerned with the insured‘s legal liability for injuries to others or damage to other persons’ property; also encompasses such forms of insurance as plate glass, burglary, robbery and workers’ compensation.

Catastrophe

Event which causes a loss of extraordinary magnitude, such as a hurricane or tornado.

Catastrophic Health Plan

A high-end deductible health plan sod in the Marketplace. To qualify you must be under 30 years of age, or receive a ‘hardship exemption;’ essentially, recognition that you cannot afford health care coverage.

Causes-of-Loss Form

Form added to commercial property insurance policy that indicates the causes of loss that are covered. There are four causes-of-loss forms: basic, broad, special, and earthquake.

Cede

To transfer all or part of a risk written by an insurer (the ceding, or primary company) to a reinsurer.

Centers for Medicare and Medicaid Services

A federal agency within the Department of Health and Human Services (HHS) that governs Medicare, Medicaid and the Children’s Health Insurance Program (CHIP).

Certificate of Insurance

A statement of coverage issued to an individual insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.

Certified Financial Planner

Professional who has attained a high degree of technical competency in financial planning and has passed a series of professional examinations by the College of Financial Planning.

Certified Insurance Counselor

Professional in property and liability insurance who has passed a series of examinations by the Society of Certified Insurance Counselors.

Cession

Amount of the insurance ceded to a reinsurer by the original insuring company in a reinsurance operation.

CFP

See Certified Financial Planner.

CGL Policy

See Commercial General Liability Policy.

Change of Occupation Clause

Provision in a health insurance policy stipulating that if the insured changes to a more hazardous occupation, the benefits are reduced based on the amount of benefits the premium would have purchased for the more hazardous occupation.

Chartered Financial Consultant

An individual who has attained a high degree of technical competency in the fields of financial planning, investments, and life and health insurance and has passed ten professional examinations administered by The American College.

Chartered Life Underwriter

An individual who has attained a high degree of technical competency in the fields of life and health insurance and who is expected to abide by a code of ethics. Must have minimum of three years of experience in life or health insurance sales and have passed ten professional examinations administered by The American College.

Chartered Property and Casualty Underwriter

Professional who has attained a high degree of technical competency in property and liability insuranceand has passed ten professional examinations administered by the American Institute for Property and Liability Underwriters.

ChFC

See Chartered Financial Consultant.

Children’s Health Insurance Program (CHIP)

CHIP provides low or no-cost coverage to eligible children.

Choice No-Fault

Allows auto insureds the choice of remaining under the tort system or choosing no-fault at a reduced premium.

Chronic Disease Management (CDM)

CDM programs are proactive, integrated approaches focused on managing the needs and illnesses of a defined population of patients.

CIC

See Certified Insurance Counselor.

Claim

A request for payment of a loss which may come under the terms of an insurance contract.

Claims Adjustor

Person who settles claims: an agent, company adjustor, independent adjustor, adjustment bureau, or public adjustor.

Claims-Made Form

Claims-Made liability insurance, is different that Occurrence Form coverage. In a claims made policy, only those claims brought against the insured during the policy period and are reported during the policy period are covered.  In an Occurrence form policy, the claims brought against the insured or insurance company are based on the insurance that was in-force at the time of the accident or event.  A claims made policy can begin to look more like an occurrence form policy if the insured has been with the same insurance carrier for many years and has purchased “prior acts coverage”, similarly that same insured should purchase an “extended reporting or tail cover” to cover exposures known as incidents when the policy is in-force but do not develop into claims until after the policy is expired.

Claims-Made Policy

A liability insurance policy under which coverage applies to claims filed during the policy period.

Class Rating

Rate-making method in which similar insureds are placed in the same underwriting class and each is charged the same rate. Also called manual rating.

CLU

See Chartered Life Underwriter.

COB

See Coordination of Benefits.

COBRA

Consolidated Omnibus Budget Reconciliation Act. Contains provisions giving certain former employees, retirees, spouses and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available in specific instances. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer formerly paid a part of the premium. It is ordinarily less expensive, though, than individual health coverage.

Coinsurance

(1) A provision under which an insured who carries less than the stipulated percentage of insurance to value, will receive a loss payment that is limited to the same ratio which the amount of insurance bears to the amount required; (2) a policy provision frequently found in medical insurance, by which the insured person and the insurer share the covered losses under a policy in a specified ratio, i.e., 80 percent by the insurer and 20 percent by the insured.

Collateral Source Rule

A legal rule, which states that the defendant cannot introduce any evidence that shows the injured party has received compensation from other collateral sources.

Collision Insurance

Protection against loss resulting from any damage to the policyholder‘s car caused by collision with another vehicle or object, or by upset of the insured car, whether it was the insured’s fault or not.

Combined Ratio

Basically, a measure of the relationship between dollars spent for claims and expenses and premium dollars taken in; more specifically, the sum of the ratio of losses incurred to premiums earned and the ratio of commissions and expenses incurred to premiums written. A ratio above 100 means that for every premium dollar taken in, more than a dollar went for losses, expenses, and commissions.

Commercial Auto Insurance

Vehicle insurance for cars owned by your business.

Commercial Crime Insurance

Protects businesses from the loss of money, securities or inventory resulting from risks such as theft, embezzlement, forgery or alteration of checks, robbery, counterfeit currency and documents, disappearance and destruction of money, securities and documents, employee dishonesty, safe burglary, computer fraud, wire transfer, audit and investigation expense. Click here to shop for Commercial Crime Insurance at einsure.com!

Commercial General Liability Policy

Commercial liability policy drafted by the Insurance Services Office containing two coverage forms: an occurrence form and a claims-made form. Click here to shop for a Commercial General Liability Policy at einsure.com!

Commercial Lines

Insurance for businesses, organizations, institutions, governmental agencies, and other commercial establishments.

Commercial Multiple Peril Policy

A package of insurance that includes a wide range of essential coverages for the commercial establishment.

Commercial Package Policy

A commercial policy that can be designed to meet the specific insurance needs of business firms. Propertyand liability coverage forms are combined to form a single policy. Click here to shop for a Commercial Package Policy at einsure.com.

Commission

The part of an insurance premium paid by the insurer to an agent or broker for his services in procuring and servicing the insurance.

Commissioner

A state officer who administers the state’s insurance laws and regulations. In some states, this regulator is called the director or superintendent of insurance.

Common Stock

Securities that represent an ownership interest in a corporation.

Community Property

A special ownership form requiring that one-half of all property earned by a husband or wife during marriage belongs to each. Community property laws do not generally apply to property acquired by gift, by will, or by descent.

Community Rating

A concept which requires health insurance providers to provide healthcare policies within a given territory at the same price regardless of medical underwriting and health status.

Company Adjustor

Claims adjustor who is a salaried employee representing only one company.

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.

Completed Operations

Completed Operations  is insurance that cover’s a contractor’s liability for accidents arising out of jobs, projects or operations that were completed by the contractor.

Comprehensive Automobile Insurance

Coverage designed to provide protection against loss resulting from damage to the insured auto, other than loss by collision or upset. Click here to shop for Comprehensive Automobile Insurance at einsure.com!

Comprehensive Coverage

Comprehensive Coverage pays for the repair/replacement of your covered vehicle for those damages outside of a collision; for example, theft, vandalism or even hitting an animal.

Comprehensive General Liability Insurance

Under this form of insurance and regarding a covered occurrence, the company will pay all sums the insured becomes legally obligated to pay as damages due to bodily injury (Coverage A) or propertydamage (Coverage B). Click here to shop for Comprehensive General Liability Insurance at einsure.com!

Comprehensive Major Medical Insurance

A policy designed to give the protection offered by both a basic and a major medical health insurancepolicy. It is characterized by a low deductible amount, a coinsurance feature, and high maximum benefits. Click here to shop for Comprehensive Major Medical Insurance at einsure.com!

Comprehensive Medical Expense Insurance

A form of health insurance that provides, in one policy, protection for both basic hospital expense and major medical expense coverages. The major medical part of a comprehensive policy is characterized by a deductible amount, coinsurance, and high maximum benefits. Click here to shop for Comprehensive Medical Expense Insurance at einsure.com!

Comprehensive Personal Liability Insurance

Protection against loss arising out of legal liability to pay money for damage or injury to others for which the insured is responsible. It does not include automobile or business operation liabilities.

Compulsory Auto Liability Insurance

Insurance laws in some states require motorists to carry at least certain minimum auto coverages. This is called compulsory insurance.

Compulsory Insurance

Any form of insurance which is required by law.

Compulsory Insurance Law

Law protecting accident victims against irresponsible motorists by requiring owners and operators of automobiles to carry certain amounts of liability insurance in order to license the vehicle and drive legally within the state.

Computer Extra Expense Insurance

Coverage designed to provide protection if computer or EDP equipment is damaged or destroyed by fire or any other insured peril. In such an event it would probably be necessary to incur certain extra expenses to continue business operations.

Concealment

Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.

Concurrent Causation

Legal doctrine that states when a property loss is due to two causes, one that is excluded and one that is covered, the policy provides coverage.

Conditional Receipt

A receipt given for premium payments accompanying an application for insurance. If the application is approved as applied for, the coverage is effective as of the date of the prepayment or the date on which the last of the underwriting requirements, such as a medical examination, has been fulfilled.

Conditionally Renewable

Continuance provision of a health insurance policy under which the company cannot cancel the policy during its term but can refuse to renew under certain conditions stated in the contract.

Conditions

Provisions inserted in an insurance contract that qualify or place limitations on the insurer‘s promise to perform.

Confining Sickness

An illness that confines an insured person to his home or to a hospital.

Consequential Loss

Consequential loss or damage coverage — as distinguished from direct loss or damage — is indirect loss or damage resulting from that event caused by or covered under a covered peril, such as fire or windstorm.  Where windstorm is a covered peril, if a tree is blown down and cuts electricity to a home, the food in the refrigerator would have coverage for consequential loss.

Conservation

The attempt by the insurer to prevent the lapse of a policy.

Consideration

One of the elements for a binding contract. Consideration for an insurance policy is acceptance by the insurance company of the payment of the premium and the statement made by the prospective policyholder in the application, balanced by the insurance company’s promise to provide benefits in the case of loss.

Consideration Clause

The clause that stipulates the basis on which the company issues the insurance contract. In health policies, the consideration is usually the statements in the application and the payment of premium.

Contents Broad Form

See Homeowners Policy.

Contestable Period

An initial period—generally the first two years that the policy is in force—during which the insurance company has the right to cancel a policy based on any false statements made by the insured.

Contingent Annuity Option

An option under which an employee may elect to receive, under certain conditions, a reduced amount of annuity with the same income, or a specified fraction, to be paid after his death to another person designated as his contingent annuitant, for that person’s lifetime. The contingent annuitant is usually the husband or the wife. See Joint-and-Survivor Annuity.

Contingent Beneficiary

The person or persons designated to receive the benefits of a policy or plan if the primary beneficiary dies while the insured is living.

Contingent Liability

Liability arising out of work done by independent contractors for a firm. A firm may be liable for the work done by an independent contractor if the activity is illegal, the situation does not permit delegation of authority, or the work is inherently dangerous.

Contingent Owner

The person to succeed as owner of a life insurance policy if the original owner dies.

Contract

A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document called the policy.

Contract Holder

The group, entity or person to whom a group annuity contract is issued.

Contract of Indemnity

Insurance that only restores the insured back to their original financial position, after a loss occurs. The insured cannot gain from the restoration.

Contractors Liability Insurance

Contractor’s Liability Insurance provides coverage for liability exposures that result from manufacturing and/or contracting operations in process. For example, the contractor, off-premises, (away from the office), operations at a construction site. Independent contractors, damage to property by explosion, collapse, and underground property damage are excluded.

Contractual Liability

Legal liability of another party that the business firm agrees to assume by a written or oral contract. It is common in construction and other agreements (written or oral) for one party to assume the liability of another. This is sometimes referred to as a hold harmless agreement. The extent to which one holds another harmless varies from contract to contract, job-to-job, etc.

Contribution by Equal Shares

Type of other-insurance provision often found in liability insurance contracts that requires each company to share equally in the loss until the share of each insurer equals the lowest limit of liability under any policy or until the full amount of loss is paid.

Contributory

A group insurance plan issued to an employer under which both the employer and employee contribute to the cost of the plan. Seventy-five percent of the eligible employees must be insured. Compare Noncontributory.

Contributory Negligence

Negligence of the damaged person that helped to cause the accident. Some states bar recovery to the plaintiff if the plaintiff was contributorily negligent to any extent. Others apply comparative negligence.

Conversion Privilege

The right given to an insured person to change insurance without evidence of medical insurability, usually to an individual policy upon termination of coverage under a group contract.

Convertible Bond

A bond that offers the holder the privilege of converting the bond into a specified number of shares of stock.

Convertible Term Insurance

Term insurance that can be exchanged, at the option of the policyholder and without evidence of insurability, for another plan of insurance.

Coordination of Benefits

The mechanism used in group health insurance to designate the order in which the multiple carriers are to pay benefits and to prevent duplicate payments.

Copayment

A fixed amount you pay, established by your insurance provider for the sharing of the cost of certain services you receive under your insurance plan.

Corridor Deductible

Major medical plan deductible that excludes benefits provided by a basic plan if both a basic and a supplemental group major medical expense policy are in force.

Cost Basis

An amount attributed to an asset for income tax purposes; used to determine gain or loss on sale or transfer; used to determine the value of a gift.

Cost Containment

The controller reduction of inefficiencies in the consumption, allocation, or production of health care services that contribute to higher than necessary costs.

Cost-of-Living Rider

Benefit that can be added to a life insurance policy under which the policyowner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability.

Cost Sharing

Often considered ‘out-of-pocket costs,’ cost sharing is the portion of healthcare costs you pay that are not covered by your insurance.

Cost Sharing Reduction (CSR)

Subsidies paid under the Patient Protection and Affordable Care Act that help lower your out-of-pocket costs and deductibles.

Coverage

The scope of protection provided under a contract of insurance; any of several risks covered by a policy.

Coverage for Damage to Your Auto

That part of the personal auto policy insuring payment for damage or theft of the insured automobile. This optional coverage can be used to insure both collision and other-than-collision losses. Click here to shop for Personal Auto Insurance at einsure.com!

Covered

A person covered by a pension plan is one who has fulfilled the eligibility requirements in the plan, for whom benefits have accrued, or are accruing, or who is receiving benefits under the plan.

Covered Expenses

Hospital, medical, and miscellaneous health care expenses incurred by the insured that entitle him/her to a payment of benefits under a health insurance policy. Found most often in connection with major medical plans, the term defines, by either description, reasonableness, or necessity to specify the type and amount of expense that will be considered in the calculation of benefits.

Covered Participant

A person covered by a pension plan is one who has fulfilled the eligibility requirements in the plan, for whom benefits have accrued, or are accruing, or who is receiving benefits under the plan.

CPCU

See Chartered Property and Casualty Underwriter.

CPP

See Commercial Package Policy.

Credibility

A statistical measure of the degree to which past results make good forecasts of future results.

Credibility Factor

The weight given to an individual insured‘s past experience in computing premiums for future coverage.

Credit Health Insurance

A form of health insurance on a borrower, usually under an installment purchase agreement. The benefitscover the obligations of the borrower and are payable to the creditor.

Credit Insurance

A guarantee to manufacturers, wholesalers, and service organizations that they will be paid for goods shipped or services rendered. Applies to that part of working capital which is represented by accounts receivable.

Credit Life Insurance

Term life insurance issued through a lender or lending agency to cover payment of a loan, installment purchase, or other obligation, in case of death.

Creditable Coverage

Health benefit plans that meet a minimum set of qualifications; includes group, student and individual health plans, as well as government-backed plans.

Crop Hail Insurance

Coverage designed to provide financial protection against damage to growing crops as a result of hail or certain other named perils.

Cross Liability Endorsement

In the event of claim by one insured for which another insured covered by the same policy may be held liable, this endorsement covers the insured against whom the claim is made in the same manner as if separate policies had been issued. However, it does not operate to increase the insurance company‘s overall limit of liability.

Cross Purchase Agreement

Specifies the terms for the surviving partners or shareholders to buy a deceased’s share of the business’s ownership.

CSR

See Customer Service Representative.

Current Assumption Whole Life Insurance

Nonparticipating whole life policy in which the cash values are based on the insurer‘s current mortality, investment, and expense experience. An accumulation account is credited with a current interest rate that changes over time. Also called interest-sensitive whole life insurance.

Currently Insured

Status of a covered person under the Old-age, Survivors, and Insurance (OASDI) program who has at least six quarters of coverage out of the last thirteen quarters, ending with the quarter of death, disability, or entitlement to retirement benefits.

Customer Service Representative

Customer Service Representatives support the work of insurance agents with a variety of tasks that must be done within a company or agency to deliver services to and handle requests from clients.

Cyber Liability Insurance

Insurance coverage for your business’ liability regarding any data breaches involving sensitive customer information.

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D&O Insurance

See Directors’ and Officers’ Liability Insurance.

Damage to Property of Others

Coverage for an insured who damages another’s property. Payment is made despite the lack of legal liability. Coverage is included in Section II of the homeowners policy.

Death Benefit

A payment made to a designated beneficiary upon the death of the employee annuitant.

Debenture

A bond that is backed only by the general credit of the issuing corporation. No specific property is pledged as security behind the loan.

Debit Insurance

See Industrial Life Insurance.

Debris Removal Clause

This clause extends insurance coverage to include the cost of debris removal resulting from damage caused by a covered loss up to a specified limit of loss. The clause is an additional property insurancecoverage.

Declarations

Statements in an insurance contract that provide information about the property or life to be insured. Used for underwriting and rating purposes and identification of the property or life to be insured.

Declination

The insurer‘s refusal to insure an individual after evaluation of the application for insurance and any other pertinent factors.

Decreasing Term Life Insurance

Term Life Insurance is designed to provide a fixed death benefit that is available for premium paid during a given term. Decreasing Term Life Insurance is similar, except that the of the policy limit decreases, while the premium is generally flat. This type of insurance is useful for guaranteeing mortgage payments and other credit balances that decrease by a fixed amount over time.

Deductible

An amount that a policyholder agrees to pay, per claim or per accident, toward the total amount of an insured loss.

Defendant

The party that is being sued in a lawsuit.

Deferred Annuity

An annuity providing for the income payments to begin at some specified future date. Click here to shop for Deferred Annuities at einsure.com!

Deferred Compensation

Arrangements by which compensation to employees for past or current services is postponed until some future date.

Deferred Group Annuity

A type of group annuity providing for the purchase each year of a paid-up deferred annuity for each member of the group, the total amount received by the member at retirement being the sum of these deferred annuities.

Defined Benefit Plan

A pension plan stating either (1) the benefits to be received by employees after retirement or (2) the method of determining such benefits. The employer’s contributions under such a plan are actuarially determined.

Defined Contribution Plan

A plan under which the contribution rate is fixed and benefits to be received by employees after retirement depend to some extent upon the contributions and their earnings.

Dental Insurance

Individual or group plan that helps pay costs of normal dental care as well as damage to teeth from an accident. Click here to shop for Dental Insurance at einsure.com!

Department of Health and Human Services (HHS)

HHS is a department of the federal government that protects the health of all Americans and provides essential human services.

Dependency Period

Period of time following the readjustment period during which the surviving spouse’s children are under eighteen and therefore dependent of the parent.

Dependent Benefits

Insurance extended to your spouse and dependent children.

Dependent Coverage

Social Security benefits available to the spouse or children of a Social Security beneficiary.

Deposit Administration Group Annuity

A type of group annuity providing for the accumulation of contributions in an undivided fund out of which annuities are purchased as the individual members of the group retire.

Deposit Premium

The money paid by a prospective policyholder when an application is made for an insurance policy. It is usually equal, at least, to the first month’s estimated premium and is applied toward the actual premium when billed.

Deposit Term Insurance

A form of term insurance, not really involving a “deposit,” in which the first-year premium is larger than subsequent premiums. Typically, a partial endowment is paid at the end of the term period. In many cases the partial endowment can be applied toward the purchase of a new term policy, or, perhaps, a whole lifepolicy. Click here to shop for Term Life Insurance at einsure.com!

Depreciation

A decrease in the value of property over a period of time due to wear and tear or obsolescence. Depreciation is used to determine the actual cash value of property at time of loss.

Diagnosis-Related Groups

System that reimburses health care providers fixed amounts for all care given in connection with standard diagnostic categories.

DIC Insurance

See Difference-in-Conditions Insurance.

Difference-in-Conditions Insurance

Difference-in-Conditions Insurance policies insure against losses not usually covered by Fire and Business Interruption polices like those caused by flood, earthquake, landslide and other unusual accidental occurrences.

Digital Assets

Digitally stored information, or online accounts owned by an individual or business.

Direct Loss

Financial loss that results directly from an insured peril.

Direct Placement

Sale of an entire issue of bonds or stock by the issuer to one or a few large institutional customers such as an insurance company without trying to market the issue publicly.

Direct Premiums Written

Property and casualty insurance premiums written (less return premiums), without any allowance for premiums for assumed or ceded reinsurance.

Direct Response System

A marketing method where insurance is sold without the services of an agent. Potential customers are solicited by advertising in the mail, newspapers, magazines, television, radio, and other media.

Direct Writer

The industry term for a company that uses its own sales employees to write its policies. Sometimes refers to companies that contract with exclusive agents.

Directors’ and Officers’ Liability Insurance

Covers the exposure of corporate managers to claims from shareholders, government agencies, and employees, and others alleging mismanagement. Click here to shop for Directors’ & Officers’ Liability Insurance at einsure.com!

Disability

A physical or a mental impairment that substantially limits one or more major life activities of an individual. It may be partial or total. See Partial Disability; Total Disability.

Disability Benefit

(1) Periodic payments, usually monthly, payable to participants under some retirement plans, if such participants are eligible for the benefits and become totally and permanently disabled prior to the normal retirement date. (2) A feature added to some life insurance policies providing for waiver of premium, and sometimes payment of monthly income, if the policyholder becomes totally and permanently disabled.

Disability Income Insurance

A form of health insurance that provides periodic payments to replace income when an insured person is unable to work as a result of illness, injury, or disease.

Disability Insured

Status of an individual who is insured for disability benefits under the Old-Age, Survivors, and Disability Insurance (OASDI) program. The covered person must be fully insured and have at least twenty quarters of coverage out of the last forty, ending with the quarter in which the disability occurs. Fewer quarters are required for persons under age thirty.

Disappearing Deductible

Deductible in an insurance contract that provides for a decreasing deductible amount as the size of the loss increases, so that small claims are not paid but large losses are paid in full.

Dishonesty Bond

See Fidelity Bond.

Dismemberment

Loss of body members (limbs), or use thereof, or loss of sight due to injury.

Dismemberment Insurance

A form of health insurance that provides payment in case of loss by bodily injury of one or more body members (such as hands or feet) or the sight of one or both eyes.

Disposable Personal Income

Personal income less personal tax and basic nontax payments. It is the income available to people for discretionary spending and saving.

Dividend

(1) A return of part of the premium on participating insurance to reflect the difference between the premium charged and the combination of actual mortality, expense and investment experience. Such premiums are calculated to provide some margin over the anticipated cost of the insurance protection. (2) In capital stock companies, a share of the profits distributed to stockholders.

Dividend Addition

An amount of paid-up insurance purchased with a policy dividend and added to the face amount of the policy.

Dollar Threshold

No-fault auto insurance states with the dollar threshold prevent individuals from suing in tort to recover for pain and suffering unless their medical expenses exceed a certain dollar amount.

Domestic Insurer

An insurance company is a domestic company in the state in which it is incorporated. See also Foreign Insurer, Alien Insurer.

Domestic Partnership

A couple who form a union, who desire to share an exclusive life together, and are of the same sex. See also Insurance Considerations for Domestic Partners.

Donor

The person making a gift.

Donut Hole (Medicare Coverage Gap)

Coverage gap that begins once you and your drug plan have spent a certain amount of money on covered drugs, now you must pay out-of-pocket.

Double Indemnity

A policy provision usually associated with death, which doubles payment of a designated benefit when certain kinds of accidents occur.

Dramshop Law

Law that imputes negligence to the owner of a business that sells liquor in the case that an intoxicated customer causes injury or property damage to another person. Usually excluded from general liabilitypolicies.

Dread Disease Insurance

Insurance providing an unallocated benefit, subject to a maximum amount, for expenses incurred in connection with the treatment of specified diseases, such as cancer, poliomyelitis, encephalitis and spinal meningitis.

DRG

See Diagnosis-Related Groups.

Driver Education Credit

Student discount or reduction in premium amount for which young drivers become eligible on completion of a driver education course.

Duplication of Benefits

Overlapping or identical coverage of the same insured under two or more health plans, usually the result of contracts of different insurance companies, service organizations, or pre-payment plans; also known as multiple coverage.

Durable Medical Equipment (DME)

DME includes items such as canes, crutches, walkers, kidney machines, nebulizers, ventilators and several other healthcare equipment.

Dwelling Property

Dwelling insurance is a type of insurance policy used to provide coverage to only a dwelling. It is essentially a very stripped down homeowners policy, where the land and any personal property on the land or in the home is not covered, just the dwelling.

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Early Retirement

Retirement of a participant prior to the normal retirement date, usually with a reduced amount of annuity. Early retirement is generally allowed at any time during a period of 5 to 10 years preceding the normal retirement date.

Early and Periodic Screening, Diagnostic, and Treatment (EPSDT)

EPSDT benefits provide comprehensive and preventive healthcare services for children who are enrolled in Medicaid.

Earned Income

Employment income derived from salary, wages, commissions, or fees.

Earned Premium

The portion of a premium that is the property of an insurance company, based on the expired portion of the policy period. For example, an insurance company is considered to have earned 75 percent of an annual premium after a period of nine months of an annual policy has elapsed.

Earnings Test

Determination of the amount of Social Security benefits payable to a beneficiary after adjusting for earnings.

Economic Loss

The estimated total cost, both insured and uninsured, of mishaps (such as motor vehicle accidents, work accidents, and fires); includes such factors as property damage, funeral expenses, wage loss, insuranceadministration costs, and medical, hospital and legal costs.

Economic Policy

Special type of participating whole life insurance in which the dividends are used to buy term insuranceor paid-up additions equal to the difference between the face amount of the policy and some guaranteed amount.

Effective Date

The date on which the insurance under a policy begins.

Elements of a Negligent Act

Four elements an injured person must show to prove negligence: existence of a legal duty to use reasonable care, failure to perform that duty, damages or injury to the claimant, and proximate cause relationship between the negligent act and the infliction of damages.

Eligibility Date

The date on which an individual member of a specified group becomes eligible to apply for insurance under a group life or health insurance plan.

Eligibility Period

A specified length of time, such as one month, following the eligibility date, during which an individual member of a particular group will remain eligible to apply for insurance under a group life or health insurance policy without evidence of insurability.

Eligibility Requirements

For retirement plans, (1) the conditions which an employee must satisfy to participate in a retirement plan, for instance completion of 1 to 3 years of service with the employer, the attainment of a specified age, such as 25, or (2) conditions which an employee must satisfy to obtain a retirement benefit, such as the completion of 15 years of service and the attainment of age 65.

Eligible Employees

Those members of a group who have met the eligibility requirements under a group life or health insurance plan.

Elimination Period

A period of time between the period of disability and the start of disability income insurance benefits, during which no benefits are payable. The elimination period may be as short as a few days or as long as one year or more. See Waiting Period.

Embezzlement

Fraudulent use or taking off another’s property or money which has been entrusted to one’s care.

Emergency Medical Condition

Medical Condition that involves symptoms of such severity, that if immediate medical attention isn’t provided, it could be reasonably assumed the individual will lose bodily functions or organs.

Emergency Medical Transportation

Ambulance services for an Emergency Medical Condition.

Employee Benefit Plan Insurance

Coverage designed to protect the employer against claims by employees or former employees resulting from negligent acts or omissions in the administration of the insured‘s employee benefit programs. Coverage is intended to extend to the administration of these plans, including counseling employees, interpreting employee benefit programs, handling records, enrolling, terminating or canceling employees in specified plans on a timely basis, etc.

Employee Benefit Programs

Programs designed to benefit employees, arranged by the employer, which are not paid for primarily or directly by the employee, including for instance group life insurance and group accident and/or health insurance; profit sharing plans; employee stock subscription plans; workers’ compensation; unemployment insurance; social security benefits; disability benefits, etc..

Employee Dishonesty Coverage Form

Commercial crime insurance form drafted by the Insurance Services Office that covers the loss of money, securities, and other covered property because of any dishonest act of a covered employee or employees.

Employee Dishonesty Insurance

See Fidelity Bond.

Employee Retirement Income Security Act

Legislation passed in 1974 applying to most private pension and welfare plans that requires certain minimum standards to protect participating employees.

Employer Shared Responsibility Payment (ESRP)

Healthcare law that requires applicable large employers to offer health care coverage to full-time employees and their dependents.

Employment Practices Liability Insurance

Coverage designed to protect the corporation, directors, officers and employees for claims resulting from wrongful termination, discrimination, sexual harassment, wrongful discipline and failure to employ or promote. Click here to shop for Employment Practices Liability Insurance at einsure.com!

Employment Stock Ownership Plan

A defined contribution pension plan which is designed to invest primarily in securities of the employer, such as common stock and debentures.

Endorsement

An additional piece of paper, not a part of the original contract, that cites certain terms and that, when attached to the original contract, becomes a legal part of that contract. See Rider.

Endowment

Life insurance payable to the policyholder if living, on the maturity date stated in the policy, or to a beneficiary if the insured dies prior to that date.

Enrolled Actuary

A person who performs actuarial service for a plan and who is enrolled with the Federal Joint Board for the Enrollment of Actuaries.

Enrollment Card

A document signed by an employee as notice of his/her desire to participate in the benefits of a group insurance plan.

Entire Contract Clause

Provision in life insurance policies stating that the policy and attached application constitute the entire contract between the parties.

Entity Purchase Agreement

The terms for the business to buy back a deceased’s share of the business’s ownership.

Environmental Damage

The injurious presence in or on land, the atmosphere, or any water course or body of water of solid, liquid, gaseous, or thermal contaminants, irritants, or pollutants.

Environmental Impairment Liability Insurance

Coverage designed to cover losses and liabilities arising from damage to property by pollution.

EPLI

See Employment Practices Liability Insurance.

EPO

See Exclusive Provider Organization.

Equities

Investments in the form of ownership of property, usually common stocks, as distinguished from fixed income bearing securities, such as bonds or mortgages.

Equity in the Unearned Premium Reserve

Amount by which an unearned premium reserve is overstated because it is established on the basis of gross premium rather than net premium.

ERISA

See Employee Retirement Income Security Act.

Errors and Omissions Insurance

Also called Professional Liability Insurance. Coverage designed to protect an insured against loss due to a claim of some negligent act, error, or omission by the insured. Click here to shop for Errors and Omissions Insurance at einsure.com!

ESOP

See Employment Stock Ownership Plan.

Essential Health Benefits (EHB)

EHB require that everyone in the small group and individual health insurance market have access to comprehensive coverage that falls into 10 designated categories (Ambulatory patient services, Emergency services, Hospitalization, Maternity and newborn care, Mental health and substance use disorder services, Prescription drugs, Rehabilitative services, Laboratory services, Preventive and wellness services and chronic disease management and Pediatric services, including oral and vision care)

Estate

The assets and liabilities of a person left at death.

Estate Planning

The process of developing a plan to transfer property from one generation to the next, or within a generation (eg., from husband to wife).

Estoppel

Legal doctrine that prevents a person from denying the truth of a previous representation of fact, especially when such representation has been relied on by the one to whom the statement was made.

Evidence of Insurability

Any statement of proof of a person’s physical condition and/or other factual information affecting his/her acceptance for insurance.

Exception

See Exclusion.

Excess and Surplus Insurance

(1) Coverage designed to protect against losses above a certain amount, with losses below that amount usually covered by a regular policy. (2) Insurance for a risk for which coverage is unavailabe in the normal market. Such risks are frequently unusual, e.g., damage to a musician’s hands or the multiple perils of a convention. See also Umbrella Liability and Surplus Lines.

Exclusion

Specific condition or circumstance listed in the policy for which the policy will not provide benefit payments.

Exclusion Ratio

The portion of an annuity payment, considered by tax law to be a return of your initial investment, that is not subject to income tax when received.

Exclusive Agent

An agent who is employed by one and only one insurance company and who solicits business exclusively for that company.

Exclusive Provider Organization

People who belong to an Exclusive Provider Organization must receive their care from affiliated providers; services rendered by unaffiliated providers are not reimbursed. See also Health Maintenance Organization.

Exclusive Remedy Doctrine

Doctrine in workers’ compensation insurance which states that workers’ compensation benefits should be the exclusive or sole source of recovery for workers who have a job-related accident or disease. The doctrine has been eroded by legal decisions.

Exemption Certificate Number (ECN)

A unique number sent to you after you have applied in the Marketplace, to be exempt from the requirement of have qualifying health coverage, and they have granted you a coverage exemption.

Expense Loading

See Loading.

Expense Ratio

The ratio of an insurance company‘s operating expenses including acquisition costs to premiums written or earned.

Experience

A term used to describe the relationship, usually expressed as a percent or ratio, of premium to claims for a plan, coverage, or benefits for a stated time period.

Experience Modification Factor

Used in workers’ compensation rating to reflect the degree to which a particular employer has experiencethat is better or worse that expected for that industry. Weighted by employer’s credibility factor.

Experience Rating

The process of determining the premium rate for a group risk, wholly or partially on the basis of that group’s experience.

Experience Refund

A provision in most group policies for the return of premium to the policyholder because of lower than anticipated claims.

Expiration Date

Date on which your insurance contract ceases to be effective.

Explosion

A violent expansion, with force and noise, generally due to rapid chemical change; term covered under various property/casualty insurance policies.

Exposure

The risk or loss potential an insurance company assumes from its policyholder in exchange for premium.

Exposure Unit

Unit of measurement used in insurance pricing.

Extended Coverage Insurance

Protection for the insured against property damage caused by windstorm, hail, smoke, explosion, riot, riot attending a strike, civil commotion, vehicle and aircraft. This is provided in conjunction with the fireinsurance policy and the various package policies.

Extended Nonowned Coverage

Endorsement that can be added to an automobile liability insurance policy that covers the insured while driving any nonowned automobile on a regular basis.

Extended Reporting Period

An additional period of time after policy expiration during which valid claims will be paid under a claims-made policy of liability insurance

Extended Reporting Period Endorsement

Added to a claims-made policy of liability insurance to provide an additional period of time during which valid claims will be paid.

Extended Term Insurance

A form of insurance available as a nonforfeiture option. It provides the original amount of insurance for a limited period of time. The policy cash value is used to purchase term life insurance for the amount of coverage (or death benefit) under the original life insurance policy, less outstanding loans. The duration of the extended term insurance is based on the cash surrender value at the time of termination and the extended term insurance table provided in the life insurance contract.

Extended Unemployment Insurance Benefits

Additional cash benefits paid by federal-state unemployment insurance programs to workers who are involuntarily unemployed and who have exhausted their regular weekly cash benefits during periods oh high unemployment.

External Review

The process whereby an Independent Review Organization reviews an insurance company’s decision to deny a benefit or pay for service.

Extra Expense Insurance

Type of business interruption insurance that covers the extra expenses incurred to continue operations after a loss has occurred.

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Face Amount

The amount stated on the face of the policy that will be paid in case of death or at the maturity of the policy. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends.

Facility

A pooling mechanism for insureds not able to obtain insurance in the voluntary market. Insurers write and issue policies but cede premium and losses on those policies to a central pool in which all insurers share.

Facility of Payment

A contractual provision that allows the insurer, under stated conditions, to pay insurance benefits of up to $1,000 to a person or persons other than the insured, the designated beneficiary, or the insured’s estate.

Factory Mutual

Mutual insurance company that aims to insure only properties that meet high underwriting standards. Emphasizes loss prevention.

Facultative Reinsurance

A type of reinsurance in which the reinsurer can accept or reject any risk presented by an insurance company seeking reinsurance.

FAIR Plan

A facility, operating under a government-insurance industry cooperative program, to make fire insuranceand other forms of property insurance readily available to persons or in locations that have difficulty obtaining such coverage.

Fair Rental Value

Amount payable to an insured homeowner for loss of rental income due to damage that makes an insured premises uninhabitable.

Family and Medical Leave Act (FMLA)

Federal Law that guarantees certain employees up to 12 weeks of unpaid leave each year, without the threat of losing their jobs.

Family Expense Policy

A policy that insures both the policyholder and his/her immediate dependents (usually spouse and children).

Family Income Policy

Special life insurance policy combining decreasing term and whole life insurance that pays a reduced monthly income (e.g., $10 for each $1,000 of life insurance) if the insured dies within the specified period. The monthly income is paid to the end of the period, at which time the face amount of insurance is paid.

Family Policy

A life insurance policy providing insurance on all or several family members in one contract, generally whole life insurance on the principal breadwinner and small amounts of term insurance on the other spouse and children, including those born after the policy is issued.

Family Purpose Doctrine

Concept that imputes negligence committed by immediate family members while operating a family car to the owner of the car.

Farm Mutual

Local mutual insurance company that insures farm property in a limited geographical area primarily through assessable policies.

Farmowners-Ranchowners Policy

A package policy for a farm or a ranch, providing property and liability coverages against personal and business losses.

Federal Crime Insurance

Insurance against burglary, larceny, and robbery losses offered by the federal government where the Federal Insurance Administration has determined that an insurance availability problem exists.

Federal Crop Insurance

Comprehensive coverage at rates subsidized by the federal government for unavoidable crop losses, including those that result from hail, wind, excessive rain, drought, freezes, plant disease, snow, floods, and earthquake. See also Crop Hail Insurance.

Federal Deposit Insurance Company (FDIC)

Government corporation that provides deposit insurance to U.S. banks.

Federal Flood Insurance

Insurance sold by private insurers with rates subsidized by the federal government to persons who reside in flood zones and whose community joins the program and agrees to establish and enforce flood control and land-use measures.

Federally Qualified Health Center (FQHC)

FQHCs are federally funded, community-based healthcare providers that provide primary care services to underserved areas.

Federal Surety Bond

Type of surety bond required by federal agencies that regulates the actions of business firms. It guarantees that the bonded party will comply with federal standards, pay all taxes or duties accrued, or pay any penalty if the bondholder fails to pay.

Federal-Servant Doctrine

Common law defense blocking an injured employee from collecting workers’ compensation benefits if he or she sustained an injury caused in any way by the negligence of a fellow worker.

Fee for Service

A payment model that unbundles services, so they can be paid separately.

Fidelity Bond

A Fidelity Bond is a form of insurance protection, not to be confused with a surety bond. The fidelity bond covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals.  In a bank for example, it usually insures the bank for losses caused by the dishonest acts of its employees.

Fiduciary

A person who holds something in trust for another.

Fiduciary Liability Insurance

Fiduciary Liability Insurance protects the fiduciaries from mistakes and wrongful acts. It covers claims arising from: (1) a breach of the responsibilities or duties imposed on a fiduciary such as a plan administrator; or (2) a negligent act, error, or omission of the administrator or fiduciary.  Example: directors, and officers of employee welfare plans (group insurance, pension plans, 401k plans) are covered for actual or alleged wrongful acts.

Final Average Formula

A pension plan formula that bases retirement benefits on earnings during the final few years of employment.

Financial Responsibility Law

A state law that may require motorists to furnish evidence, either before or after involvement in an auto accident (depending on the individual state’s 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

A combustion accompanied by a flame or glow, which escapes its normal confines to cause damage.

Fire Insurance

Coverage designed to protect against losses caused by fire and lightning, plus resultant damage caused by smoke and water.

Fire Legal Liability

Liability of a firm or person for fire or explosion damage caused by negligence of and damage to property of others. Coverage is needed for leased or rented property for which the insured could be held legally liable for damage to the property.

First Party Claim

A demand for payment under an insurance policy made by a policyholder reporting an insured event directly to his company.

First Party Coverage

An insurance coverage under which the policyholder collects for losses from the insured‘s own insurer rather than from the insurer of the person who caused an accident.

Fitch Ratings

One of the Big Three credit rating agencies that analyze the financial strength of companies in the insurance industry.  

Fixed Amount Option

Life insurance settlement option in which the policy proceeds are paid out in fixed amounts.

Fixed Annuity

Annuity whose periodic payment is a guaranteed fixed amount. Click here to shop for Fixed Annuities at einsure.com!

Fixed Period Option

Life insurance settlement option in which the policy proceeds are paid out in fixed amounts.

Flat Schedule

A type of schedule in group insurance under which everyone is insured for the same benefits regardless of salary, position, or other circumstances.

Flex-Rating Law

Type of rating law in which prior approval of the rates is required only if the rates exceed a certain percentage above and below the rates previously filed. · Floaters: Insurance policies designed to cover property that can be moved from one location to another for both transportation perils and perils affecting property at a fixed location.

Flexible Benefits Plan

Plans that employees can use to pay for out-of-pocket health or dependent care expenses. Plans include retirement benefits, reimbursement accounts, health insurance and others.

Flexible Premium Annuity

Also known as a Flexible Premium Policy. A life insurance policy or annuity under which the policyholderor contract holder may vary the amounts or timing of premium payments. Click here to shop for Flexible Premium Annuities at einsure.com!

Flexible Premium Policy

See Flexible Premium Annuity.

Flexible Premium Variable Life Insurance

A life insurance policy that combines the premium flexibility feature of universal life insurance with the equity-based benefit feature of variable life insurance. Click here to shop for Flexible Premium Variable Life Insurance at einsure.com!

Flexible Spending Account (FSA)

Also known as a flexible spending arrangement, is an account that you contribute tax-free dollars to, and can use to pay certain out-of-pocket healthcare costs.

Floaters

Insurance policies designed to cover property that can be moved from one location to another for both transportation perils and perils affecting property at a fixed location.

Flood Insurance

Coverage against loss resulting from the flood peril, widely available at low cost under a program developed by the private industry and the federal government.

Foreign Insurer

An insurer is a foreign company in any state other than the one in which it is incorporated. See also Domestic Insurer, Alien Insurer.

Forfeitures

Amounts contributed on behalf of terminated, non-vested participants. In a pension plan, such amounts must be applied to reducing future employer contributions. In a profit-sharing plan, such amounts may be allocated to the accounts of remaining participants.

Forgery Coverage Form

Commercial crime insurance form by the Insurance Services Office that covers loss resulting from the forgery or alteration of checks, drafts, bills of exchange, promissory notes, and similar instruments.

Forgery Insurance

Coverage designed to protect from loss sustained through forgery or alteration of outgoing negotiable instruments made or drawn by or on the accounts of the insured, or made or drawn by one acting as the insured’s agent. This includes loss caused by (1) checks or drafts made or drawn in the insured’s name, payable to a fictitious entity, (2) checks or drafts, including payroll checks, executed through forged endorsements, and (3) alteration of the amount of a check or draft.

Formulary

A list of medicines.

Fortuitous Loss

Unforeseen and unexpected loss that occurs as a result of chance.

Franchise Deductible

Deductible commonly found in marine insurance contracts in which the insurer has no liability if the lossis under a certain amount, but once this amount is exceeded, the entire loss is paid in full.

Franchise Insurance

Insurance under individual contracts issued to the employees of a common employer or the members of an association under an arrangement by which the employer or association agrees to collect the premiums and remit them to the insurer.

Fraternal Insurance

A cooperative type of insurance provided by social organizations for their members.

Fraternal Life Insurance

Life insurance provided by fraternal orders or societies to their members.

Fraternal Society

A social organization that provides insurance for its members.

Fronting Company

A domestic insurance company that provides claims or administrative services to a captive.

Full Coverage

Full Coverage typically refers to an auto policy which has comprehensive, collision, and liability coverage, and every insurance company usually has its own definition for it.

Fully Insured

Insured status of a covered person under the Old-Age, Survivors, and Disability Insurance (OASDI) program if he or she meets certain criteria: forty quarters of coverage or one quarter of coverage for each year after 1950 (or after age twenty-one, if later) up to the year of death, disability or attainment of age sixty-two.

Funded Retirement Plan

A plan under which funds are set aside in advance to provide expected benefits.

Funding Agency

A financial institution or individual that provides for the accumulation or administration of the pensioncontributions that will be used to pay pension benefits.

Funding Instrument

An insurance contract or trust agreement that states the terms under which the funding agency will accumulate, administer, and disburse pension funds.

Future Increase Option

A provision found in some policies that allows the insured to purchase additional disability income insurance at specified future dates regardless of the insured’s physical condition.

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GAAP

See Generally Accepted Accounting Principles. GAAP is important in insurance accounting, because the states, who regulate insurance, use STAT accounting which is more conservative.

General Agency System

Type of life insurance marketing system in which the general agent is an independent businessperson who represents only one insurer, is in charge of a territory, and is responsible for hiring, training, and motivating new agents. This is different from the Independent Agency System where such agents represent a number of companies.

General Average

In ocean marine insurance, a loss incurred for the common good that is shared by all parties to the venture.

General Damages

Damages awarded to an injured person for intangible loss which cannot be measured directly by dollars. Frequently called pain and suffering. General damages are distinguished from special damages which are awarded for actual economic loss, such as medical costs, loss of income, etc.

General Liability Insurance

Coverage that pertains, for the most part, to claims arising out of the insured’s liability for injuries or damage caused by ownership of property, manufacturing operations, contracting operations, sale or distribution of products, and the operation of machinery, as well as professional services. For small businesses, this coverage can be included in the BOP or “Business Owners Policy”.

General Partner Liability Insurance

Coverage designed to protect against claims of loss against a general partner, for failure to properly exercise his fiduciary duty. Also known as General Partners’ Liability and Limited Partnership Reimbursement coverage. A general partner’s management and fiduciary responsibilities to a limited partnership closely parallel the director’s or officer’s to a corporation. Exposure occurs when general partners become the financial managers of a limited partnership. The directors and officers of corporate general partners share this type of exposure.

Generally Accepted Accounting Principles

Principles of accounting and reporting business results developed by the American Institute of Public Accountants. As regards the insurance business, this convention varies from Statutory Accounting (State Mandated Accounting) in a number of key areas; asset valuations, expense recognition, tax treatments are some of the most significant. Generally statutory accounting is more conservative.

Generation Skipping Tax

A transfer tax imposed on gift or inheritance to those at least two generations younger than the person making the transfer

Glass Insurance

Protection for loss of or damage to glass and its appurtenances. Due to the variety of exposures that exist for plate glass windows on store fronts and elsewhere a special insurance product was created.

Gold Health Plan

A type of plan sold in the Marketplace. Gold Plans typically carry higher premiums but have better cost-sharing than Silver and Bronze health plans.

Good Student Discount

Reduction of automobile premium for a young driver at least sixteen who ranks in the upper 20 percent of his or her class, has a B or 3.0 average, or is on the Dean’s list or honor roll. It is based on the premise that good students are better drivers.

Grace Period

A specified period after a premium payment is due, in which the policyholder may make such payment, and during which the protection of the policy continues.

Graded Commission Scale

A commission scale providing for payment of a high first-year commission and lower renewal commissions.

Grandfathered Health Plan

Health plans that were in place before March 23, 2010, when the Affordable Care Act was signed into law. These plans could still offer the coverage they did prior to the ACA.

Gross Estate

All of the assets and liabilities owned at death.

Gross Negligence

the intentional failure to perform a manifest duty in reckless disregard of the consequences as affecting the life or property of another. This is a term of art in the insurance and legal world where damages can be quite severe.

Gross Premium

The premium paid by the policyholder. Gross premium is distinguished from Net premium. Net premium is ususally net of reinsurance costs and policy cancellations and endorsements. Gross premium is the best measure of the size of a policy or an insurance company.

Gross Rate

The sum of the pure premium and a loading element.

Group Annuity

A pension plan providing annuities at retirement to a group of people under a master contract. It is usually issued to an employer for the benefit of employees. The individual members of the group hold certificates as evidence of their annuities.

Group Annuity Contract

A contract issued by a life insurance company that may be used as the funding instrument for benefits to be made in accordance with a pension plan. A single master contract provides that the group of persons participating in the plan will receive annuities during retirement. Individual certificates stating coverage may be issued to members of the group.

Group Contract

A contract of insurance made with an employer or other entity that covers a group of persons identified as individuals by reference to their relationship to the entity.

Group Creditor Life Insurance

Life insurance provided to debtors by a lending institution to provide for the cancellation of any outstanding debt should the borrower die. Normally term insurance limited to the amount of the loan.

Group Insurance

Insurance written on a number of people under a single master policy, issued to their employer or to an association with which they are affiliated.

Group Life Insurance

Life insurance usually without medical examination, on a group of people under a master policy. It is typically issued to an employer for the benefit of employees, or to members of an association, for example a professional membership group. The individual members of the group hold certificates as evidence of their insurance.

Group Ordinary Life Insurance

Group insurance plan providing life insurance for employees. Traditional whole life policy is split into decreasing insurance protection and increasing cash values.

Group Paid-Up Life Insurance

Accumulating units of single premium whole life insurance and decreasing term insurance, which together equal the face amount of the policy. Provided through a group life insurance plan.

Group Permanent Plan

Type of pension plan in which cash value life insurance is issued on a group basis and cash values in each policy are used to pay retirement benefits when a worker retires.

Group Term Life Insurance

Most common form of group life insurance. Yearly renewable term insurance on employees during their working careers.

Group Universal Life Products (GULP)

Universal life insurance plans sold to members of a group, such as individual employees of an employer. There are some differences between GULP plans and individual universal life plans; for instance, GULP expense charges generally are lower than those assessed against individual policies.

Guaranteed Auto Protection (GAP) Insurance

In the event of a total vehicle loss, GAP insurance covers the difference between your net auto insurance payout and your outstanding balance on the vehicle’s retail loan or lease contract.

Guaranteed Insurability Option

See Future Increase Option.

Guaranteed Investment Contract

An investment contract with an insurer in which the insurer guarantees both principal and interest on a pension contribution.

Guaranteed Issue

Situation whereby a healthcare policy is offered to any eligible person regardless of health status.

Guaranteed Purchase Option

Benefit that can be added to a life insurance policy permitting the insured to purchase additional amounts of life insurance at specified times in the future without requiring evidence of insurability.

Guaranteed Renewable

An insurance policy feature that obligates the insurer to continue coverage (renew policy) if your premium is paid.  

Guaranteed Renewable Contract

A provision in an insurance policy that gives the insured the right to continue the policy in force by the timely payment of premiums for a substantial period of time, during which period the insurer is prohibited from making unilaterally any change in any provision of the contract, while the contract is in force, other than a change in the premium rate for classes of policyholders.

Guaranty Fund

A fund, derived from assessments against solvent insurance companies, to absorb losses of claimants against insolvent insurance companies.

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Habilitative/Habilitation Services

Healthcare services that help a person keep, learn or improve skill and functioning for day to day living.

Hard Market

That part of the insurance sales cycle in which competitive pricing is at a minimum as companies charge the premiums necessary to meet their underwriting losses in order to avoid insolvency and boost capacity; usually associated with a sharp decline in capacity. See also Soft Market.

Hardship Exemption

An approved excuse from paying the penalty for not having health insurance.

Hazard

Condition that creates or increases the chance of loss.

Health Insurance

Coverage designed to protect against financial losses resulting from sickness or accidental bodily injury. Health insurance coverages include accident insurance, disability income insurance, medical expense insurance, and accidental death and dismemberment insurance.

Health Insurance Marketplace

Also called exchanges, are organizations in each state whereby people can purchase health insurance.

Health Plan Categories

The four types of health insurance plans that were created under the Patient Protection and Affordable Care Act enacted March 23, 2010, that are based on the percentage of healthcare expenses that will be paid by the respective plan. These plans are often referred to as the ‘metal’ plans; Bronze, Silver, Gold and Platinum.

Health Maintenance Organization

An organization that provides a wide range of comprehensive health care services for a specified group at a fixed periodic payment. The HMO can be contracted with and sponsored by the government, medical schools, hospitals, employers, labor unions, consumer groups, insurance companies, and hospital-medical plans.

Health Reimbursement Account (HRA)

An IRS approved, tax advantaged health benefit that is funded by your employer, that reimburses you for out-of-pocket healthcare expenses.

Health Savings Account (HSA)

A tax advantaged savings account available to people enrolled in high-deductible health plans, whereby the funds in the account can be used towards approved healthcare related expenses, tax free and without penalty.

HIAA

Health Insurance Association of America.

High Deductible Health Plan (HDHP)

A healthcare plan that has a lower premium but much higher deductible than the average healthcare plan and is also required to have a Health Savings Account.

High-Risk Automobile Insurer

Company that specializes in insuring motorists who have poor driving records or have been canceled or refused insurance. Hold-Harmless Clause: Clause written into a contract by which one party agrees to release another party from all legal liability, such as a retailer who agrees to release the manufacturer from legal liability if the product injures someone.

HIPAA

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was the result of efforts by the Clinton Administration and congressional healthcare reform proponents to reform healthcare. The goals and objectives of this legislation are to streamline industry inefficiencies, reduce paperwork, make it easier to detect and prosecute fraud and abuse and enable workers of all professions to change jobs, even if they (or family members) had pre-existing medical conditions.

HIPAA Eligible Individual

People that are guaranteed the right to purchase individual health coverage without pre-existing condition exclusions when they leave group coverage.

HMO

See Health Maintenance Organization.

Home and Community-Based Services (HCBS)

HCBS organizations provide Medicaid clients with he opportunity to receive in home, or community services, rather than in institutions.

Home Service Life Insurance

Industrial life insurance and monthly debit ordinary life insurance contracts that are serviced by agents who call on the policyowners at their homes to collect the premiums. The amount of life insurance per policy generally is larger than $1000.

Homeowner’s Policy

A package of insurance designed to provide homeowners with a broad range of property and liability coverages, pertaining to events at home as well as away from home (although not automobile-related).

Honesty

Moral uprightness – the quality, condition, or characteristic of being fair, just, truthful, and morally upright. Truthfulness – truthfulness, candor, or sincerity, (i.e.: In all honesty, I really didn’t know.)

Hospice

Health care facility providing medical care and support services such as counseling to terminally ill persons.

Hospital Admissions Program

An arrangement to facilitate admission of persons covered by health insurance to hospitals and to assure the prompt payment of applicable insurance benefits to hospitals.

Hospital Expense Insurance

A form of health insurance designed to provide specific benefits for daily hospital room and board and hospital services during hospital confinement. Generally the policy also provides benefits for surgical operations and for in-hospital doctor’s visits, in which case the policy is referred to as a Hospital and Surgical Expense Policy.

Hospital Indemnity

A form of health insurance which provides a stipulated daily, weekly, or monthly indemnity during hospital confinement. The indemnity is payable on an unallocated basis without regard to the actual expense of hospital confinement.

Hospital Medical Insurance

A term used to indicate protection which provides benefits for the cost of any or all of the numerous health care services normally covered under various health care plans.

Hospital Miscellaneous Services

Services other than room and board and general nursing services provided by a hospital during hospital confinement. Included are such items as x- ray examinations, laboratory tests, medicines, surgical dressings, anesthetics (including the administration thereof), and use of operating room.

Hull Insurance

(1) Class of ocean marine insurance that covers physical damage to the ship or vessel insured. Typically written on an “all-risks” basis. (2) Physical damage insurance on aircraft, similar to collision insurance in an automobile policy.

Human Life Value

For purposes of life insurance, the net present value of the family’s share of the deceased breadwinner’s future earnings.

Hurricane

A tropical storm marked by extremely low barometric pressure and circular winds with a velocity of 75 miles an hour or more.

Don’t see an insurance term listed here?  Ask Customer Service for assistance.

IBNR

See Incurred but not Reported.

IIABA

Visit the Independent Insurance Agents & Brokers of America website.

Immediate Annuity

An annuity providing for payment to begin immediately.

Immediate Participation Guarantee (IPG) Plan

Type of pension plan in which all pension contributions are deposited in an unallocated fund and used directly to pay benefits to retirees.

Imputed Negligence

Case in which responsibility for damage can be transferred from the negligent party to another person, such as an employer.

Income Interruption Insurance

See Business Interruption Insurance.

Inconsistency (Data Matching Issue)

Occurs when the information entered in the Marketplace by a consumer does not match the Marketplace’s trusted resources.

Incontestability

A provision in life insurance policies that states that, except for non-payment of premiums and certain other circumstances, the policy shall be incontestable during the lifetime of the insured after the policy has been in force for two years .

Incontestable Clause

An optional clause which may be used in noncancelable or guaranteed renewable health insurance contracts providing that the insurer may not contest the validity of the contract after it has been in force for two (sometimes three) years.

Increased Cost of Construction

Coverage for loss caused by the requirement, under law, to repair damaged buildings. Older buildings often require more expensive material or upgraded electrical or HVAC to become current with building codes. This is often referred to as ‘Building Ordinance Coverage.’

Incurred Losses

Expense account in an insurance company’s Income Statement reflecting the claims paid during the policy year plus the loss reserves as of the end of the policy year, minus the corresponding reserves as of the beginning of the policy year. The difference between the year end and beginning of the year claim reserves is called the increase in reserves and may be added directly to the paid claims to produce the incurred losses.

Incurred-but-not-Reported (IBNR) Reserves

Liability account on an insurer’s balance sheet reflecting claims that are expected based upon statistical projections but which have not yet been reported to the insurer

Indemnification

Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.

Indemnity

Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position that existed before the loss.

Independent Adjustor

Claims adjustor who offers his or her services to insurance companies and is compensated by a fee.

Independent Agency System

Type of property and liability insurance marketing system, sometimes called the American agency system, in which the agent is an independent business person representing several companies. The agency has legal right to income from the expirations and renewal rights to the business, and the agent is compensated by commissions.

Independent Agent

An independent business person who usually represents two or more insurance companies in a sales and service capacity and who is compensated by commissions.

Indeterminate Premium Whole Life Insurance

Nonparticipating whole life policy that permits the insurer to adjust premiums based on anticipated future experience. Initial premiums are guaranteed for a certain period. After the initial guaranteed period expires, the insurer can increase premiums up to some maximum limit.

Indexed Universal Life Insurance

Insurance policy that provides the holder the opportunity to invest in either an equity index or fixed account.

Indirect Loss

See Consequential Loss.

Individual Contract

A contract of health insurance made with an individual called the policyholder or the insured, which normally covers the individual and, in certain instances, members of his family.

Individual Deductible

Amount that an insured and each person of his or her family covered by the policy must pay before the group or individual medical insurance policy begins to pay for medical expenses.

Individual Insurance

Policies which provide protection to the policyholder and/or his/her family. Sometimes called Personal Insurance as distinct from group and blanket insurance.

Individual Policy Pension Trust

A type of pension plan, frequently used for small groups, administered by trustees who are authorized to purchase individual level premium policies or annuity contracts for each member of the plan. The polices usually provide both life insurance and retirement benefits.

Individual Retirement Account (IRA)

An account to which an individual can make annual contributions of 100% of earnings up to $2,000 ($2,250 for a one-income married couple). These contributions are tax deductible for most workers, and income earned in the account is deferred until withdrawn.

Industrial Life Insurance

Life insurance issued in small amounts with premiums payable on a weekly or monthly basis. The premiums are generally collected at the insured’s home each week by an agent of the company. Sometimes referred to as debit insurance.

Inflation-Guard Endorsement

Endorsement added at the insured’s request to a homeowners policy to increase periodically the face amount of insurance of the dwelling and other policy coverages by a specified percentage.

Inheritance Tax

A tax on the estate of a deceased person.

Initial Past Service Liability

The actuarial value (single sum) of the past service benefits as of the effective date of the establishment of a retirement plan, or at the date of the latest adjustment.

Initial Reserve

In life insurance, the reserve at the beginning of any policy year.

Inland Marine Insurance

A form of insurance designed to cover articles in transit as well as bridges, tunnels and other means of transportation and communication. Besides goods in transit (generally excepting ocean cargo), it includes numerous floater policies, such as those covering personal effects, personal property, jewelry, furs, fine arts, and other items.

Inpatient Care

Refers to patients who require admission to a hospital for care.

Insolvent

Having insufficient financial resources (assets) to meet financial obligations (liabilities).

Inspection Report

A report (usually written) of an investigation of an applicant, generally conducted by an independent agency that specializes in insurance investigations. The report covers such matters as occupation, financial status, health history, and moral problems.

Insurability

Acceptability to the company of an applicant for insurance.

Insurable Risk

The conditions that make a risk insurable are (a) the peril insured against must produce a definite loss not under the control of the insured, (b) there must be a large number of homogeneous exposures subject to the same perils, (c) the loss must be calculable and the cost of insuring it must be economically feasible, (d) the peril must be unlikely to affect all insureds simultaneously, and (e) the loss produced by a risk must be definite and have a potential to be financially serious.

Insurance

A arrangement under which individuals, businesses, and other organizations or entities, in exchange for payment of a premium, are guaranteed compensation for losses resulting from certain perils under specified conditions.

Insurance Carrier

See Insurance Company.

Insurance Commissioner

The top insurance regulatory official in a state.

Insurance Company

(1) An organization chartered to operate as an insurer. (2) Any corporation primarily engaged in the business of furnishing insurance protection to individuals or organizations.

Insurance Co-op

Healthcare structures that are owned by the patients it insures.

Insurance Examiner

The representative of a state insurance department assigned to participate in the official audit and examination of the affairs of an insurance company.

Insurance Exchange

Term used to describe a facility that exists in a few states to provide a market for reinsurance and for the insurance of large or unusual domestic and foreign risks that are difficult to insure in the normal markets. Examples are the New York Insurance Exchange, the Insurance Exchange of the Americas, and the Illinois Inurance Exchange.

Insurance Guaranty Funds

State Funds that provide for the payment of unpaid claims of insolvent insurers. Such funds are frequently notional, in that they are commingled as part of a state government’s general funds.

Insurance Services Offices (ISO)

Major rating organization in property and liability insurance that drafts policy forms for personal and commercial lines of insurance and provides rate data on loss costs for property and liability insurance lines.

Insured

A person or organization covered by an insurance policy.

Insured Life

The person on whose life the policy is issued.

Insurer

The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public. See also insurance company.

Insuring Agreement

That part of an insurance contract that states the promises of the insurer.

Insuring Clause

The clause in an insurance contract which sets forth the type of loss being covered by the policy and the parties to the insurance contract.

Integration

A coordination of pension, disability or other benefit with the other sources of income, such as Social Security benefit, through a specific formula designed to ensure reasonable income replacement.. Qualified plans must integrate so that total benefits are non-discriminatory between rank and file employees and owners, officers or highly compensated employees.

Inter Vivos Trust

A trust created while the creator of the trust is living. Also known as a living trust.

Interest

Money paid for the use of money, generally calculated as a percentage per annum.

Interest Option

Life insurance settlement option in which the principal is retained by the insurer and interest is paid periodically.

Interest-Adjusted Method

Method of determining cost to an insured of a life insurance policy that considers the time cost of money by applying an interest factor to each element of cost.

Intestate

Without a will.

Investment Income

Line reported in the Income Statement of a company’s financial statements that states the income generated by a company’s portfolio of investments (such as in bonds, stocks, or other financial ventures).

Investment Only Contract

Type of funding instrument that uses only the investment services of an insurer.

IPG Plan

See Immediate Participation Guarantee Plan.

IRA

See Individual Retirement Account.

Irrevocable Beneficiary

Beneficiary designation allowing no change to be made in the beneficiary of an insurance policy without the beneficiary’s consent.

Irrevocable Trust

A trust in which the creator does not reserve the right to reacquire the trust property.

ISO

See Insurance Services Office.

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Jettison

Hazard covered under a Marine Cargo Insurance policy, defined as the throwing overboard of cargo when done to preserve property from loss. Coverage is not provided under this clause for goods jettisoned because of spoilage, such as foods, plants, hides, etc. (The spoilage may be covered under another clause, or another policy, which can be determined by consulting with your insurance agent). See also Cargo Insurance.

Jeweler’s Block Insurance

Coverage designed to protect the insured’s stock, property left with the insured for repair or other purposes, and the insured’s interest in and legal liability for property on consignment from others in the jewelry trade. The policy is written on a special form. Some of the more prevalent perils covered are fire, open stock burglary, inside and outside holdup, safe burglary, theft, pilferage, kidnapping, shoplifting, window smashing, damage or loss of salesman’s samples in transit, loss in transit by registered mail, water damage, sprinkler leakage, and smoke damage. See also Bailee Insurance.

Joint Life Insurance

Policy that covers two people, typically on a ‘first death’ basis; whereby, a chosen amount is paid to the survivor when the first person dies, if the death occurs within the length of the policy.

Joint Tenants

A form of joint property ownership with right of survivorship, i.e., in which the survivors automatically own the share of a deceased co-owner.

Joint Underwriting Association

A device used to provide insurance to those who cannot obtain insurance in the voluntary market. Certain companies (called carriers) issue policies at one rate and handle claims, but the ultimate costs are borne by all companies writing insurance in that state.

Joint-and-Several Liability

A legal principle that permits the injured party in a tort action to recover the entire amount of compensation due for injuries from any defendant who is able to pay, regardless of the degree of that party’s negligence, once any liability by that defendant has been established.

Joint-and-Survivor Annuity

A contract that provides income periodically, payable during the longer lifetime of two persons. The amount payable may decrease at the death of one or the other. See Contingent Annuity Option.

Judgement

The final statement or ruling, based on the evidence presented in a lawsuit.

Judgment Rating

Rate-making method for which each exposure is individually evaluated and the rate is determined largely by the underwriter’s judgment.

Judicial Bond

Type of surety bond used for court proceedings and guaranteeing that the party bonded will fulfill certain obligations specified by law, for example, fiduciary responsibilities.

Jumbo Risk

A risk involving exceptionally high limits.

Jumping Juvenile Insurance Policy

Life insurance purchased by parents for children under a specified age. Provides permanent life insurance that increases in face value five times at age 21, with no increase in premium.

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Kenney Rule

Concept permitting a property/casualty insurer to write $2 of new net premiums for each $1 of policyholders surplus.

Keogh (HR 10) Account

An account to which a self-employed person can make annual tax deductible contributions and which may be withdrawn without penalty after the age of 59 1/2. Income generated in the account accumulates tax-deferred.

Key-Person Insurance

Insurance designed to protect a business firm against the loss of income resulting from the death or disability of a key employee.

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Labor-Management Relations Act of 1947 (Taft-Hartley Act)

Law which controls conditions under which an employer may pay any money to a representative (eg., union representative) of employees.

Lapse

The termination or discontinuance of an insurance policy due to non-payment of a premium.

Lapsed Policy

(1) A policy terminated for non-payment of premiums. (2) A policy terminated for non-payment occurring before the policy has a cash or other surrender value.

Larceny

The unlawful taking, carrying, leading or riding away of another person’s property.

Last Clear Chance Rule

Statutory modification of the contributory negligence law allowing the claimant endangered by his or her own negligence to recover damages from a defendant if the defendant has a last clear chance to avoid the accident but fails to do so.

Law of Large Numbers

Concept that the greater the number of exposures, the more closely will actual results approach the probable results expected from an infinite number of exposures.

Leasehold Interest Insurance

Coverage designed to protect a tenant in the event his or her lease is terminated. It is a form of time element coverage that serves to provide coverage for the difference between the old rental and a new, likely more expensive rental.

Legal Liability

Lawful obligations required due to civil actions or contract terms.

Legal Reserve

The minimum reserve which a company must keep to meet future claims and obligations as they are calculated under state insurance regulations.

Legal Reserve Life Insurance Company

A life insurance company operating under state insurance laws specifying the minimum basis for the reserves the company must maintain on its policies.

Level Commission Scale

A commission scale providing for payment of commissions at the same rate every year the policy is in force.

Level Premium

A premium that remains unchanged throughout the life of a policy.

Level Premium Life Insurance

Life insurance for which the premium remains the same from year to year. The premium is more than the actual cost of protection during the earlier years of the policy and less than the actual cost in the later years. The building of a reserve is a natural result of level premiums. The overpayments in the early years, together with the interest that is earned, serve to balance out the underpayments of the later years.

Liabilities

Portion of an insurer’s balance sheet which denotes legal obligations of the company, including anticipated future payments of losses covered under policies issued.

Liability

Any legally enforceable obligation.

Liability Insurance

Insurance designed to protect the policyholder from financial loss due to liability resulting from injuries to other persons or damage to their property.

Liability Limits

The sum or sums stipulated in an insurance contract beyond which an insurance company is not liable to protect the insured.

Liability Without Fault

Principle on which workers compensation is based, holding the employer absolutely liable for occupational injuries or disease suffered by workers, regardless of who is at fault.

License and Permit Bond

Type of surety bond guaranteeing that the person bonded will comply with all laws and regulations that govern his or her activities.

Life Annuity

A contract that provides for a series of payments under which payments, once begun, continue throughout the remaining lifetime of the annuitant but not beyond.

Life Annuity With 10 Years Certain

A annuity contract which pays an income for as long as the annuitant lives, but if death occurs within 10 years after the annuity payments begin, payments are continued to a named beneficiary for the remainder of the 10 years.

Life Expectancy

The average number of years of life remaining for a group of persons of a given age according to a particular mortality table.

Life Income Option

Life insurance settlement option in which the policy proceeds are paid during the lifetime of the beneficiary. A certain number of guaranteed payments may also be payable.

Life Insurance

Insurance providing for payment of a specified amount on the insured’s death, either to his or her estate or to a designated beneficiary; or in certain cases to the policyholder at a specified date.

Life Insurance in Force

Amount reported in an insurance company’s financial statements that sets out the sum of the face amounts, plus dividend additions, of life insurance polices outstanding at a given time. Additional amounts payable under accidental death or other special provisions are not included.

Life Insurance Programming

Systematic method of determining the insured’s financial goals, which are translated into specific amounts of life insurance, then periodically reviewed for possible changes.

Lifetime Disability Benefit

A benefit to help replace income lost by an insured person as long as he/she is totally disabled.

Lifetime Limit

A max amount an insurance company will pay for a covered benefit over the course of your enrollment in the plan.

Limited Cost Sharing Plan

Plans available to members of federally-recognized tribes, that must be applied for through the Marketplace.

Limited Payment Life Insurance

Whole life insurance on which premiums are payable for a specified number of years or until death (if death occurs before the end of the specified period).

Limited Policy

An insurance contract which covers only certain specified diseases or accidents.

Liquidation

The process of dissolving a company by selling its assets for cash.

Liquor Liability Insurance

Coverage designed to protect an individual or entity for bodily injury or property damage to another for which an insured may be held liable by reason of causing or contributing to the intoxication of any person; furnishing alcoholic beverages to a person under the legal drinking age or under the influence of alcohol; or violating any statute, ordinance, or regulation relating to the sale, gift, distribution, or use of alcoholic beverages.

Liquor Liability Law

See Dramshop Law.

Living Benefits Rider

A rider that allows insureds who are terminally ill or who suffer from certain catastrophic diseases to collect part of their life insurance benefits before they die, primarily to pay for the care they require.

Living Trust

A trust created while the creator of the trust is living. Also known as an inter vivos trust.

Loading

The amount that must be added to the pure premium for expenses, profit, and a margin for contingencies.

Loan/Lease Payoff Coverage

Loan/Lease Payoff Coverage pays the difference between what you may owe under the terms of your vehicle loan or lease, and what your insurance company has paid for your vehicle in the event your vehicle is stolen or declared a total loss (less your deductible).

Long-Term Care

The continuum of broad-ranged maintenance and health services to the chronically ill, disabled, or retarded. Services may be provided on an inpatient (rehabilitation facility, nursing home, mental hospital), outpatient, or at-home basis.

Long-Term Disability Income Insurance

Insurance issued to an employer (group) or individual to provide a reasonable replacement of a portion of an employee’s earned income lost through serious and prolonged illness or injury during the normal work career. See also Integration.

Loss

The occurrence of the event for which insurance pays.

Loss Avoidance

A risk management technique whereby a situation or activity that may result in a loss for a firm is avoided or abandoned.

Loss Control

Any conscious action (or decision not to act) intended to reduce the frequency, severity, or unpredictability of accidental losses.

Loss Expense Allocated

Handling expenses, such as legal or independent adjuster fees, paid by an insurance company in settling a claim which can be definitely charged to that particular claim.

Loss of Maintenance Fees Insurance

Coverage designed to protect an association (such as a condominium association) against the loss of maintenance fees when occupancies have been interrupted or impaired by the occurrence of any insured peril. This is a form of business interruption insurance for the association. It assures continuous income while a building is untenantable.

Loss Payable Clause

Means of protecting a mortgagee’s interest in property by directing the insurer to make a loss payment to the mortgagee in the event of a loss.

Loss Prevention

Any measure which reduces the probability or frequency of a particular loss but does not eliminate completely all possibility of that loss

Loss Ratio

The percent which losses bear to premiums (either earned or written) for a given period.

Loss Reserve

The amount set up as the estimated cost of a claim. See IBNR Reserve.

Lump-Sum Distribution

Payment within one taxable year of the entire balance payable to an employee from a trust which forms part of a qualified pension or employee annuity plan on account of that person’s death, separation from service or attainment of age 59 1/2.

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Mail Order Insurer

Type of insurance company that sells policies through the mail or other mass media, eliminating need for agents.

Major Medical Expense Insurance

A form of health insurance that provides benefits for most types of medical expense up to a high maximum benefit, such as $250,000 or higher after a substantial deductible, such as $500 or more. Such contracts may contain internal limits and are normally subject to coinsurance.

Major Medical Insurance

Health insurance designed to finance the expense of major illness and injury. Characterized by large benefit maximums ranging up to $250,000 or higher above an initial deductible, which reimburses the major part of all charges for hospital, doctor, private nurses, medical appliances, prescribed out-of-hospital treatment, drugs, and medicines. The insured person pays the remainder.

Malicious Mischief

Deliberate or willful destruction of another person’s property for vicious purposes.

Malingering

The practice of feigning illness or inability to work in order to collect insurance benefits.

Malpractice Insurance

Coverage for a professional practitioner, such as a doctor or a lawyer, against liability claims resulting from alleged malpractice in the performance of professional services.

Managed Care

Health care systems that integrate the financing and delivery of appropriate health care services to covered individuals by arrangements with selected providers to furnish a comprehensive set of health care services.

Manual Rate

The premium rate developed for a group’s insurance coverage from the company’s standard rate tables normally referred to as its rate manual or underwriting manual.

Manuscript Policy

Policy designed for a firm’s specific needs and requirements.

Marine Insurance

A form of insurance primarily concerned with means of transportation and communication, and with goods in transit See Inland Marine Insurance  and Ocean Marine Insurance.

Marital Deduction

A reduction of an estate for estate tax purposes, which is available if the deceased is survived by his or her spouse.

Market Price (or Market Value)

The price at which a security can be bought or sold at any particular time.

Master Policy

A policy that is issued to an employer or trustee, establishing a group insurance plan for designated members of an eligible group.

Material Damage

Automobile insurance designed to provide financial protection against damage to an insured vehicle. It includes automobile comprehensive, collision, fire and theft. Material damage and physical damage are terms that often are used interchangeably.

Maximum Family Benefit

The largest amount in Social Security benefits that will be paid to any family unit.

McCarran-Ferguson Act

Federal law passed in 1945 stating that continued regulation of the insurance industry by the states is in the public interest and that federal antitrust laws apply to insurance only to the extent that the industry is not regulated by state law.

Mediation

Intervention in a dispute in efforts to resolve it. Often referred to as ‘arbitration.’

Medicaid

State programs of public assistance to persons whose income and resources are insufficient to pay for health care. Title XIX of the Federal Social Security Act provides matching federal funds for financing state Medicaid programs, effective January 1, 1966.

Medical Examination

The examination given by a qualified physician to determine to the insurability of an applicant. A medical examination may also be used to determine whether an insured claiming disability is actually disabled.

Medical Expense Insurance

A form of health insurance that provides benefits for expenses incurred for medical care. This form of health insurance provides benefits for expenses of physicians, hospital, nursing, and related health services, and supplies. These benefits may be related to actual expense, specified sums, or services rendered. Such insurance sometimes includes benefits for prevention and diagnosis as well as treatment.

Medical Expense Liability Insurance

A general liability coverage in which the insurer reimburses, without regard to the insured’s liability, the insured and others (as specifically provided in the policy) for medical and funeral expenses incurred by such persons as a result of bodily injury or death sustained by accident under the conditions specified in the policy.

Medical Information Bureau (MIB)

An association of over 500 U.S. and Canadian life insurance companies providing information and database management services to the financial services industry. Organized in 1902, MIB’s core fraud protection services protect insurers, policyholders and applicants from attempts to conceal or omit information material to the sound and equitable underwriting of life, health, disability, and long term care insurance. Fair pricing of insurance products is largely dependent on accurate “risk assessment”, “risk classification”, and “risk selection”. A determination of these factors begins with the assurance of accurate health information supplied on the insurance application concerning the proposed insured. Visit MIB on the Web…

Medical Loss Ratio (MLR)

The percent of premium insurers spend on claims and expenses.

Medical Malpractice

Improper care or treatment by a physician, hospital, or other provider of health care.

Medical Payments Insurance

A coverage, available in various liability insurance policies, in which their insurer agrees to reimburse the insured and others, without regard for the insured’s liability, for medical or funeral expenses incurred as the result of bodily injury or death by accident under specified conditions.

Medical Underwriting

The use of medical and health information to analyze coverage for a potential customer.

Medicare

National health insurance program for people age 65 and older. A program of Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B) protection provided under the Social Security Act.

Medicare Advantage (Part C)

Health insurance that provides coverage within Part C of Medicare, and is based on a monthly fee, instead of a fee-for-service model.

Medicare Part D

Often called Medicare Prescription Drug Benefit, is an optional program intended to help Medicare recipients pay for prescription drugs through premiums.

Medigap

A term sometimes applied to private insurance products that supplement Medicare insurance benefits.

Minimum Benefits

A provision that a minimum amount of annuity will be paid if the regular benefit formula produces less. This minimum is usually payable only if certain service requirements are met at retirement.

Minimum Group

The least number of employees permitted under a state law to effect a group for insurance purposes; the purpose is to maintain some sort of proper division between individual policy insurance and the group forms.

Minimum Premium Plan (MPP)

An arrangement under which an insurance carrier will, for a fee, handle the administration of claims and insure against large claims for a self-insured group.

Miscellaneous Expenses

Expenses in connection with hospital insurance, hospital charges other than room and board, such as X-rays, drugs, laboratory fees, and other ancillary charges. (Sometimes referred to as ancillary charges.)

Miscellaneous Hospital Expense Benefit

A provision in a hospital expense policy providing for the payment of a benefit for expenses for necessary hospital services and supplies during a period of hospital confinement. Expenses commonly covered under this benefit include those for x-ray examinations, laboratory tests, medicines, surgical dressings, anesthetics (including administration thereof), and use of operating room.

Misrepresentation

A false, incorrect, improper, or incomplete statement of a material fact, made in the application for an insurance policy.

Mode of Premium Payment

The frequency with which premiums are paid monthly, quarterly, semiannually, or annually.

Modified Endowment Contract (MEC

A life insurance policy where the premiums paid to it exceed what is allowed under federal tax laws.

Moral Hazard

Hazard arising from any nonphysical, personal characteristic of a risk that increases the possibility of loss or may intensify the severity of loss, for instance, bad habits, low integrity, poor financial standing.

Morbidity

The incidence and severity of sicknesses and accidents in a defined class or classes or persons.

Morbidity Tables

Actuarial statistics showing the frequency and duration of disability.

Mortality

The rate at which members of a group die in a specified period of time. Actual mortality rates are compared to the mortality table.

Mortality Table

A chart showing how many members of a group, starting at a certain age, will be alive at each succeeding age. It is used to calculate the probability of dying in, or surviving through, any period, and for determining the value of an annuity. To be appropriate for a specific group, it should be based on the experience of individuals having common characteristics, including such variables as sex and occupation.

Multi-Employer Plan

A plan maintained according to a collective bargaining agreement, to which more than one employer contributes (eg., multiple school districts). Under ERISA, at the beginning of the plan, no single employer may contribute as much as 50% of the total, and thereafter as much as 75%. An employee may change employers within the group without losing retirement benefits unless a break in service (under the plan) cancels credits earned before the break.

Multi-Peril Policy

A package policy which 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.

Multiple Employer Trust (MET)

A legal trust established by a plan sponsor that brings together a number of small, unrelated employers for the purpose of providing group medical coverage on an insured or self-funded basis.

Mutual Insurance Company

An insurance company in which ownership and control is vested in the policyholders and a portion of surplus earnings may return to policyholders in the form of dividends. No capital stock (e.g.., common stock) exists.

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Named Insured

The person or entity, typically the policyholder, whose interests are protected under the insurance contract.

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. See also Basic Form, Special Risk Insurance.

National Association of Insurance Commissioners (NAIC)

The association of insurance commissioners of various states formed to promote national uniformity in the regulation of insurance.

Negligence

Failure to use the care that a reasonable and prudent person would have used under the same or similar circumstances.

Net Premium

(1) The portion of the premium rate which is designed to cover benefits of the policy, but not expenses, contingencies, or profit. (2)The portion of the premium remitted to the home office by an agent after deduction of the agent’s commission. (3) Net written premium.

Net Present Value

The value today of an asset to be received in the future, either as a single payment or a series of payments (such as an annuity). The value is considered to be different if received at a later date because of the time value of money.

Net Written Premiums

Premium income retained by insurance companies, directly or through reinsurance, after payments made for reinsurance.

No-Fault Automobile Insurance

A form of insurance by which a person’s financial losses resulting from an automobile accident are paid by his or her own insurer regardless of who was at fault.

No-Lapse Guarantee

 An agreement by the insurance company to keep a permanent life insurance policy in force although its value may be zero or negative, if the agreed minimum continuation premium is paid.

Non-Admitted Insurance Company

An insurance company not licensed to do business in a particular state; such a company may sell excess and surplus insurance in the state if admitted insurers decline to write a risk.

Noncancellable

A clause stating that the insured has the right to continue a policy in force by the timely payments of premiums set forth in the contract for some extended period of time specified, during which period the insurer has no right to make unilaterally any change in any provision of the contract while the contract is in force.

Nonconfining Sickness

A sickness that disables the insured person but does not confine him to his home or a hospital.

Noncontributory

A term applied to employee benefit plans under which the employer bears the full cost of the benefits for the employees. Generally, under noncontributory policies one hundred percent of the eligible employees must be insured.

Nondisabling Injury

An injury which may require medical care, but does not result in loss of working time or income.

Nondisabling Injury Benefit

A benefit in some disability income policies providing payment for medical expense due to injury when medical care is necessary but the insured is not totally disabled.

Nonforfeiture Option

One of the choices available in many life insurance policies if the policyholder discontinues premium payments on a policy with a cash value. This, if any, may be taken in cash, as extended term insurance or as reduced paid-up insurance.

Nonmedical Limit

The maximum face value of a policy that a given company will issue without the applicant taking a medical examination.

Nonoccupational Policy

(1) Contract which insures a person against off-the-job accident or sickness. It does not cover disability resulting from injury or sickness covered by Workers’ Compensation. Group accident and sickness policies are frequently non-occupational. (2) One that provides off-the-job coverage only; it does not cover loss resulting from accidents or sickness arising out of or in the course of employment or covered under any workers’ compensation law.

Nonparticipating Insurance

Plan of insurance under which the policy-holder is not entitled to share in the dividend distribution of the company.

Nonparticipating Policy

A life insurance policy, generally issued only by mutual insurance companies, in which the company does not distribute to policyholders any part of its surplus. Premiums for nonparticipating polices are usually initially lower than for comparable participating polices, but premiums can be varied. The current premium reflects anticipated experience that is more favorable than the company is willing to guarantee, and it may be changed from time to time. See also Participating Insurance.

Nonprofit Insurers

Persons organized under special state laws to provide hospital, medical, or dental insurance on a nonprofit basis. The laws exempt them from certain types of taxes.

Nose Coverage

This is the opposite of tail coverage, although it fulfills the same need. Nose coverage most commonly provides prior acts coverage for insureds who are moving from a claims-made coverage form to an occurrence coverage form. It is provided by the replacement policy.

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Obamacare

The Patient Protection and Affordable Care Act, that was signed into law by president Barack Obama on March 23, 2010. Obamacare represents the most significant change in the U.S. healthcare market since Medicare and Medicaid.

Occupational Hazards

Occupations which expose the insured to greater than normal physical danger by the very nature of the work in which the insured is engaged, and the varying periods of absence from the occupation, due to the disability, that can be expected.

Occurrence

An accident, including continuous or repeated exposure to substantially the same general, harmful conditions, that results in bodily injury or property damage during the period of an insurance policy.

Occurrence Policy

A liability insurance policy that covers claims arising out of occurrences that take place during the policy period, regardless of when the claim is filed.

Ocean Marine Insurance

Coverage on all types of vessels, including liabilities connected with them, and on their cargoes.

Open Enrollment Period

Period of time when individuals can purchase healthcare insurance in the Marketplace, and when employees can make changes to their elected healthcare options.

Operating Ratio

The sum of expenses and losses expressed as a percent of earned premium.

Optionally Renewable Contract

A contract of health insurance in which the insurer reserves the right to terminate the coverage at any anniversary or, in some cases, at any premium due date, but does not have the right to terminate coverage between such dates.

Ordinance or Law Insurance

Coverage designed to provide protection against financial loss for (1) the loss of value of an undamaged portion of the existing building which must be demolished and/or removed to conform with municipal ordinance, code, etc. (2) the cost of demolition of the undamaged portions of the building necessitated by the enforcement of building, zoning or land use ordinance or law. (3) any increased expenses incurred to replace the building with one conforming to building laws or ordinances, or to repair the damaged building so that it meets the specifications of current building laws or ordinances.

Ordinary Life Insurance

Life insurance usually issued in amounts of $1,000 or more with premiums payable on an annual, semi-annual, quarterly or monthly basis. Compare Whole Life and Straight Life: The three terms are applied to the type of policy which continues during the whole of the insured’s life and provides for the payment at death of an amount insured.

Other Car Insurance

Coverage designed to protect employees or executives of a company or any other person who is supplied a company vehicle, but who does not own a his or her own vehicle, therefore not having personal automobile coverage. The coverage is generally added by endorsement to the automobile policy of the company that furnishes the automobile, giving protection while the named individual or a member of his family is driving a car borrowed from a third party (other than the vehicle named in the policy).

Over-the-Counter Market

A means of buying and selling securities that are not listed on a stock exchange. Negotiations are carried out by telephone or computer network.

Overhead Expense Insurance

A special form of health insurance designed to help offset overhead expenses such as office rent, utilities, employees’ wages, and auditors’ fees, incurred during total disability. The monthly payments during disability are not a fixed amount of indemnity as on regular disability polices, but the amount of overhead expense actually incurred, or a percentage thereof, up to the limit specified in the policy.

Overhead Insurance

A type of short-term disability income contract that reimburses the insured person for specified, fixed monthly expenses, normal and customary in the operation and conduct of his/her business or office.

Overriding Commission (Overwrite)

A commission paid to general agents or agency managers in addition to the commission paid to the soliciting agent or broker.

Owner’s or Contractor’s Protective Liability Insurance

Coverage designed to provide for payment on behalf of the insured all damages the insured becomes legally obligated to pay due to bodily injury or property damage caused by an occurrence rising from (1) operations performed for the named insured by independent contractors, (2) acts or omissions of the named insured in connection with his/her general supervision of such operations. This does not include maintenance and repair at premises owned by or rented to the named insured, or structural alterations at such premises that do not involve changing the size of or moving buildings or other structures.

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Package Policy

A combination of two or more individual polices or coverages into a single policy. A homeowners policy, for example, is a package combining property, liability and theft coverages for the homeowner.

Paid-Up Insurance

(1) Insurance on which all required premiums have been paid. (2) The reduced paid-up insurance available as a nonforfeiture option.

Paramedical Examination

Physical examination of an applicant by a trained person other than a physician.

Partial Disability

The result of an illness or injury which prevents an insured from performing one or more of the functions of his/her regular job. See also Disability.

Partial Disability Benefits

A benefit sometimes found in disability income policies providing for the payment of reduced monthly income in the event the insured cannot work full time and/or is prevented from performing one or more important daily duties pertaining to his occupation.

Participating Insurance

Life insurance under which an insurance company agrees to distribute to policyholders the part of its surplus which its Board of Directors determines is not needed at the end of the business year. Such a distribution serves to reduce the premium the policyholder had paid. See also: Policy Dividend; Nonparticipating Policy.

Patient Protection and Affordable Care Act

Also known as the Affordable Care Act, ACA, or Obamacare, is a law enacted on March 23, 2010, that governs healthcare coverage in the U.S.

Pension Benefit Guaranty Corporation (PBGC)

The Federal body responsible for administering a retirement insurance programs, under ERISA.

Pension Benefits

A series of payments to be provided to past employees in accordance with the rules of pension plan of a company or other organization.

Pension Plan

A plan established and maintained by an employer, group of employers, union or any combination, primarily to provide for the payment of definitely determinable benefits to participants after retirement.

Pension Trust Liability Insurance

See Fiduciary Liability Insurance.

Percentage Participation

A provision in a health insurance contract that the insurer and insured will share covered losses in agreed proportions. Also see Coinsurance.

Performance Bond

Bond issued by a surety or insurance company to guarantee performance under or in conjunction with a contract.

Peril

The cause of a possible loss, such as fire, windstorm, theft, explosion, or riot, covered in an insurance policy.

Perils of the Sea

All perils which are unique to transportation and which could not be prevented by reasonable efforts, including sinking of the vessel, stranding, heavy weather, lightning, collision with other vessels or submerged objects (such as Titanic’s iceberg), and damage by sea water when caused by an insured peril.

Permanent Life Insurance

A phrase used to cover any form of life insurance except term; generally accrues cash value, such as whole life or endowment.

Persistency

A term used to refer to the length of time insurance remains continuously in force.

Personal Articles Floater

A form of coverage designed to meet the needs for insurance on moveable property. The coverage usually protects against all physical loss, subject to specific exclusions and conditions. Examples of property that can be covered include jewelry, furs, silverware, fine arts.

Personal Injury Liability Insurance

Coverage designed to protect against false arrest, detention or imprisonment, or malicious prosecution; libel, slander, defamation, or violation of right of privacy; and wrongful entry, eviction, or other invasion of right of private occupancy.

Personal Injury Protection (PIP)

First-party no-fault coverage in an automobile insurance policy in which an insurer pays, within the specified limits, the wage loss, medical, hospital and funeral expenses of the insured.

Personal Lines

Those types of insurance, such as auto or home insurance, for individuals or families rather than for businesses or organizations.

Personal Representative

A person appointed through the will of a deceased or by a court to settle the estate of one who dies.

Physical Damage

Damage to or loss of the auto resulting from collision, fire, theft or other perils.

Physician’s Expense Insurance

Coverage which provides benefits toward the cost of such services as doctor’s fees for nonsurgical care in the hospital, at home or in a physician’s office, and X-rays or laboratory tests performed outside the hospital. (Also called Regular Medical Expense Insurance.)

Plan Administrator

The person or persons controlling the money or property contributed to a pension, health or other plan, usually designated in the plan agreement.

Plaintiff

Person who brings a case or complaint against another in the court of law.

Plate Glass Insurance

Coverage designed to provide special protection, except for the perils of war, nuclear reaction, and fire. (Fire is covered under the building policy.) This coverage is for full replacement cost and covers the expense of repairing frames, installing temporary plates, or boarding up openings of plate glass windows.

Platinum Health Plan

An ACA Plan designed to yield the lowest out-of-pocket expenses among the four metal plans, but usually carries the highest premium.

Point-of-Service Plans

Often known as open-ended HMOs or PPOs, these plans permit insureds to choose providers outside the plan yet are designed to encourage the use of network providers.

Policy

The legal document issued by an insurance company to a policyholder, which outlines the conditions and terms of the insurance; also called the policy contract or the contract.

Policy Dividend

A refund of part of the premium on a participating life insurance policy reflecting the difference between the premium charged and actual experience.

Policy Loan

A loan made by a life insurance company from its general funds to a policyholder on the security of the cash value of a policy.

Policy Reserves

The measure of the funds that a life insurance company holds specifically for fulfillment of its policy obligations. Reserves are required by law to be so calculated that, together with future premium payments and anticipated interest earnings, they will enable the company to pay all future claims. Compare Reserve.

Policy Term

That period for which an insurance policy provides coverage.

Policyholder

A person who pays a premium to an insurance company in exchange for the insurance protection provided by a policy of insurance.

Policyholders’ Surplus

Sum left after liabilities are deducted from assets. Sums such as paid-in capital and special voluntary reserves are included in this term. This surplus is an additional financial protection to policyholders in the event a company suffers unexpected or catastrophic losses.

Pollution Legal Liability Insurance

Coverage designed to protect for (1) all sums the insured is legally obligated to pay as a result of emission, discharge, release, or escape of any contaminants, irritants, or pollutants into or on land, the atmosphere, or any water course or body of water, provided this results in environmental damage; (2) to reimburse reasonable and necessary cleanup costs incurred in the discharge of a legal obligation validly imposed through governmental action, provided such expense is incurred because of environmental damage, and (3) for defense of any claim or suit that is the subject of this insurance.

Pollution Liability

Exposure to lawsuits for injury or cleanup costs that result from pollution damage.

Pool

An organization of insurers or reinsurers through which particular types of risk are underwritten and premiums, losses and expenses are shared in agreed-upon amounts.

Portability

The right to transfer pension rights and credits when a worker changes jobs.

Preadmission Certification

Process in which a health care professional evaluates an attending physician’s request for a patient’s admission to a hospital by using established medical criteria.

Pre-existing Condition

A physical and/or mental condition of an insured which first manifested itself prior to the issuance of his/her policy or which existed prior to issuance and for which treatment was received.

Preferred Provider Organization (PPO)

An arrangement whereby a third-party payer contracts with a group of medical care providers who furnish services at lower than usual fees in return for prompt payment and a certain volume of patients.

Preferred Stock

Evidence of ownership which entitles the holders to receive dividends from the corporation before the common stockholders, but after bondholders, and which usually also provides a claim prior to common holders to corporate assets if the corporation is dissolved.

Premium

The sum paid by a policyholder to keep an insurance policy in force.

Premium Finance

Payment terms that allow the insured to pay part of the premium when coverage takes effect and pay the rest during the policy period.

Premium Loan

A loan, sometimes made by a third party, made for the purpose of paying premiums to the insurer.

Premium Tax

A tax, imposed by each state, on the premium income of insurers doing business in the state.

Premium Tax Credit

A refundable tax credit available to those households that have obtained healthcare coverage in the Marketplace.

Prepaid Group Practice Plan

A plan under which specified health services are rendered by participating physicians to an enrolled group of persons, with a fixed periodic payment in advance made by or on behalf of each person or family. If a health insurance carrier is involved, a contract to pay in advance for the full range of health services to which the insured is entitled under the terms of the health insurance contract. Such a plan is one form of Health Maintenance Organization (HMO).

Primary Insurance

Insurance that pays compensation for a loss ahead of any other insurance coverages the policyholder may have.

Primary Residence

Your primary residence, is your main residence, where you typically live. You can only have one primary residence.

Primary Use

Primary use refers to how you typically use your vehicle; for example, driving to work or school.

Primary Driver

The individual that drives your car most often.

Principal Sum

The amount payable, under life and health insurance policies, in one sum in the event of accidental death and in, some cases, accidental dismemberment. When a contract provides benefits for both accidental death and accidental dismemberment, each dismemberment benefit is an amount equal to the principal sum or some fraction thereof.

Probate

The court-supervised process of validating or establishing a distribution for assets of a deceased including the payment of outstanding obligations.

Probate Estate

That portion of the assets and liabilities whose distribution is supervised by the courts in the probate process.

Probationary Period

A period from the policy date to a specified time, usually 15 to 30 days, during which no sickness coverage is effective. It is designed to eliminate a sickness actually contracted before the policy went into effect.

Product Liability

Legal liability incurred by a manufacturer, merchant, or distributor because of injury or damage resulting from the use of its product.

Product Liability Insurance

Coverage designed to provide 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 Errors and Omissions Insurance.

Professional Review Organization (PRO)

An organization in which practicing physicians assume responsibility for reviewing the propriety and quality of health care services provided under Medicare and Medicaid.

Proof of Loss

Documentary evidence required by an insurer to prove a valid claim exists. It usually consists of a claim form completed by the insured, and for health insurance claims by the insured’s attending physician. For medical expense insurance itemized bills must also be included.

Property

Something that has value and is owned by a person or business.

Property Damage Coverage

An agreement by an insurance carrier to protect an insured against legal liability for damage by an insured automobile to the property of another.

Property Insurance

Insurance providing financial protection against the loss of, or damage to, real and personal property caused by such perils as fire, theft, windstorm, hail, explosion, riot, aircraft, motor vehicles, vandalism, malicious mischief, riot and civil commotion, and smoke. Available on Special and All-risk forms, depending on the property being insured.

Property Management Errors and Omissions Insurance

Coverage designed to pay on behalf of the insured all sums he/she becomes legally obligated to pay by reason of any act, error, or omission rising out of services rendered or that were failed to render. Such services include arranging for property maintenance, renting or leasing, construction, alteration, land development, etc. Coverage also provides for defense of any claim or suit that is the subject of this insurance.

Proration

The adjustment of benefits paid because of a mistake in the amount of the premiums paid or the existence of other insurance covering the same accident or disability.

Prospective Payment

An advancement of payment for health care charges that are likely to occur.

Prototype Plan

A standardized life insurance plan, approved and qualified as to its concept by the Internal Revenue Service, which is made available by companies, banks and mutual funds for employers’ use.

Provision

A clause, sentence or paragraph of an insurance contract that describes or explains a feature, benefit, condition, requirement, etc. of the insurance protection afforded by the contract.

Proximate Cause

(1) The principal cause of loss or damage; (2) An unbroken chain of events between an event and damage.

Punitive Damages

A court-awarded amount that exceeds the economic losses and general damages of a defendant and is intended solely to punish the plaintiff.

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Qualification Period

The period during which the insured must be totally disabled before becoming eligible for residual disability benefits.

Qualified Impairment Insurance

A form of substandard or special class insurance, which restricts benefits for the insured person’s particular condition.

Qualified Plan

A plan which the Internal Revenue Service approves as meeting the requirements of Section 401(a) of the 1954 Internal Revenue Code. Such plans receive tax advantages.

Qualified Terminable Interest Property

A category of property, created by the Economic Recovery Tax Act, which by a deceased spouse’s will entitles the surviving spouse to all income from the property for life, with that income payable at least annually, and precludes anyone including the spouse from appointing the property to anyone else during the spouse’s life.

Qualifying Event

Events that trigger changes to your insurance policy due to new life or business circumstances. Under the ACA, these events include loss of health insurance (turning 26), changes in residence, having a baby and several others.

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Rate

The pricing factor upon which the insurance buyer’s premium is based.

Rate Review

In efforts to hold insurers accountable and further transparency, ACA requires that insurance companies that are looking to raise rates substantially, submit their proposed increases to the state or federal government for review, first.

Rated Policy

An insurance policy issued at a higher-than-standard premium rate to cover a higher-than-standard risk; for example, an insured who has impaired health or a hazardous occupation.

Ratemaking

The statistical process by which insurers determine probability of loss and pricing for the basic classes of insurance.

Rating Territory

A geographical grouping in which like hazards tend to equalize and permit the establishment of an equitable rate for the territory.

Reasonable and Customary Charge

A charge for health care which is consistent with the going rate or charge in a certain geographical area for identical or similar services.

Rebating

Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Rebating is illegal.

Recurring Claim Provision

A provision in some health insurance policies which specifies a length of time during which the recurrence of a condition is considered to be a continuation of a previous period of disability or hospital confinement.

Recurring Clause

A provision in some health insurance policies, which specifies a period of time during which the recurrence of a condition is considered a continuation of a prior period of disability or hospital confinement.

Reduced Paid-up Insurance

A form of insurance available as a nonforfeiture option. It provides for continuation of the original insurance plan, but for a reduced amount. The policy cash surrender value is used to purchase whole life insurance. No additional premiums are required to maintain the reduced death benefit amount under this reduced paid up whole life policy.

Regulation

Supervision of business practices by a governmental entity. Regulation of insurance companies is through respective state insurance commissioners.

Rehabilitation

(1) Restoration of a totally disabled person to a meaningful occupation, (2) a provision in some long- term disability policies that provides for continuation of benefits or other financial assistance while a totally disabled insured is retraining or attempting to resume productive employment.

Reimbursement

The payment of the expenses actually incurred as a result of an accident or sickness, but not to exceed any amount specified in the policy.

Reinstatement

The resumption of coverage under a policy which has lapsed.

Reinsurance

The acceptance by one or more insurers, called reinsurers, of a portion of the risk accepted by another insurer who has contracted for the entire coverage. Reinsurance can be treaty or facultative.

Reinsurance Facility

An alternative mechanism to service those insureds that 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. See also Residual Market.

Renewable Term Insurance

Term insurance which can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. The rates increase at each renewal as the age of the insured increases.

Renewal

Continuance of coverage under a policy beyond its original term by the insurer’s acceptance of the premium for a new policy term.

Rent Insurance

A form of business interruption insurance for a landlord, designed to protect building owners against loss of income when rentals have been interrupted or rental value has been impaired by the occurrence of any of the insured perils. It assures continuous income while an insured’s building is untenantable.

Rental Reimbursement Coverage

Often referred to as ‘Rental Car Coverage,’ Rental Reimbursement Coverage is optional coverage that helps pay the cost of a rental car when you have a covered claim under your auto policy.

Renter’s 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.

Replacement

The substitution of health insurance coverage from one policy contract to another.

Replacement Cost

The cost to repair or replace property at construction costs prevailing at time of loss; the cost to repair or rebuild property without considering depreciation. Contrast Actual Cash Value.

Replacement Cost Insurance

Insurance designed to provide coverage on the basis of full replacement cost without deduction for depreciation on any loss sustained, subject to the terms of the co-insurance clause. This coverage applies to both building and contents items as specified on the face of the policy. No deduction is taken for depreciation in arriving at the proper amount of insurance needed to comply with the coinsurance clause.

Replacement Ratio

The percentage of income before retirement that is required to be replaced to maintain the same standard of living after retirement.

Representation

Statements made by an applicant in an insurance application, which he represents as being substantially true to the best of his knowledge and belief, but which are not warranted as exact in every detail.

Rescission

Termination of an insurance contract by the insurer on the grounds of material misstatement on the application for insurance. The action of rescission must take place within the contestable period or Time Limit on Certain Defenses clause set forth in the policy, but takes effect as of the effective date of the policy, thus voiding the contract from its inception.

Reservation of Rights

An arrangement whereby an insurer defends a case without commitment to provide coverage in the event that the facts disclosed during the trial reveal that the occurrence is not covered.

Reserve

(1) An amount representing an insurer’s estimate of its liabilities on future commitments under policies outstanding. (2) An amount allocated for a special purpose.

Residual Disability

A period of partial disability that immediately follows a period of total disability. Benefits for residual disability are paid on a pro-rata basis, depending on the percentage of earnings loss.

Residual Disability Benefits

A provision in an insurance policy that provides benefits in proportion to a reduction of earnings as a result of disability, as opposed to the inability to work full-time.

Residual Market

A source of insurance available to applicants who are unable to obtain insurance through ordinary methods in the voluntary market. See Automobile Insurance Plan, Joint Underwriting Association.

Retention

The net amount of risk retained by an insurance company for its own account or that of specified others, and not reinsured.

Retirement Test

See Earnings Test.

Retrocession

The process by which a reinsurer obtains reinsurance from another company.

Retrospective Date

The first date for which claims will be paid under a claims-made policy of liability insurance.

Retrospective Rating

Rating procedure which allows adjustment of an insured’s final rate on the basis of the insured’s own loss experience.

Revocable Trust

A trust that can be terminated or revoked by its creator.

Rider

A document that modifies an insurance policy. It may increase or decrease benefits, waive a condition or coverage, or in any other way amend the original contract. See Endorsement.

Right of Survivorship

Legal rule which states that at the death of one co-owner of property, that person’s interest in the property automatically passes to the surviving joint tenant or tenants.

Risk

(1) The chance of loss; (2) The insured or property covered by a policy or application.

Risk Classification

The process by which a company decides how its premium rates for life insurance should differ according to the risk characteristics of individuals insured (e.g., age, occupation, sex, state of health) and then applies the resulting rules to individual applications. See also Underwriting.

Risk Control

Any conscious action (or decision not to act) intended to reduce the frequency, severity, or unpredictability of accidental losses.

Risk Retention Group

An alternative form of insurance in which members of a similar profession or business band together to self insure their risks.

Roadside Assistance Coverage

Roadside Assistance Coverage helps you when your car breaks down. Services typically include things such as towing, battery charging, flat tire service or fuel deliver.

Robbery

The taking of property from a person by force or threat of violence.

Rollover

Transfer of IRA or other qualified pension funds from one financial institution to another.

Rollover Individual Retirement Account (IRA)

A retirement investment vehicle that allows you to consolidate your retirement savings from other sources, such as a 401k or 403b into one account.

Roth IRA

A retirement vehicle where contributions are not taxed, given certain commitments are met.

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Sales Cycle

Condition seen in the selling of insurance in which premium prices rise and fall over time in relation to capacity. The sales cycle is generally completed over several of years.

Salvage

Recovery made by an insurance company by the sale of property which has been taken over from the insured as a part of loss settlement.

Salvage Title

A vehicle title which states that the vehicle has been damaged and/or designated a total loss by the insurance company that paid the claim regarding it. State laws govern what vehicles require a Salvage Title.

SAP

See Statutory Accounting Principles.

Scheduled Insurance

An insurance policy amendment or endorsement that specifies items covered, in contrast to blanket coverage, which would cover all items fitting a given description. Auto insurance is the principal scheduled insurance purchased by consumers.

Securities and Exchange Commission (SEC)

An independent agency of the federal government tasked with regulating the U.S. securities industry and overall financial markets.

Self-Administered (Trusteed or Directly Invested) Plan

A plan funded through a fiduciary, generally a bank, but sometimes a group of individuals, which directly invests the accumulated funds. Retirement payments are made from the fund as they fall due.

Self-Administration

The procedure where an employer maintains all records regarding the employees covered under a group insurance plan.

Self-Insurance

A form of risk management through which a firm assumes all or a part of its own losses.

Selling Price Insurance

Coverage which applies to the value of goods which have been damaged or destroyed by an insured peril. The purpose is to assure the profit that would have been incurred through a sale. It defines the insurable value of merchandise which has been sold, but not delivered, at the amount at which it was sold, less any charges not incurred.

Senior Citizen Policies

Contracts insuring persons 65 years of age or more. In most cases, these policies supplement the coverage afforded by the government under the Medicare program. For example, see Medigap.

Separate Account

An asset account established by a life insurance company separate from other funds, used to match specific assets with corresponding liabilities such as pension plans and variable life products. This arrangement permits wider latitude in the choice of investments, particularly in equities.

Service-Type Plans

Plans that provide their benefits in the form of services rendered rather than cash (for example, Blue Cross and Blue Shield).

Settlement

An official agreement meant to resolve a dispute between multiple parties.

Settlement Options

The several ways, other than immediate payment in cash, which a policyholder or beneficiary may choose to have policy benefits paid.

Short-Term Disability Income Insurance

Coverage designed to cover a disabled person as long as he/she remains disabled up to a specified period not exceeding two years.

Sickness Insurance

A form of health insurance providing benefits for loss resulting from illness or disease.

Silver Health Plan

One of the metal plans that is included in the ACA and offered in the Marketplace. This plan typically has lower out-of-pocket costs than Bronze, but higher out-of-pockets costs than Gold and Platinum.

Single Premium Deferred Annuity (SPDA)

Retirement vehicle that allows you to make one lump sum premium payment, in exchange for a stream of income payments during retirement.

Skip Person

A beneficiary who is at least two generations younger than the person making the transfer.

Small Business Health Options Program (SHOP)

Program that helps businesses with between 1-50 full-time employees obtain health coverage.

Social Security Freeze

A long-term disability policy provision which establishes that the subtraction from benefits paid by Social Security will not be changed regardless of subsequent changes in the Social Security law.

Social Security Option

An option available in some annuity contracts under which the employee may elect that monthly payments of an annuity before a specified age (62 or 65) be increased, and that payments thereafter be decreased to produce, as nearly as practical, level total annual payments, including Social Security benefits when they become due.

Soft Market

That part of the insurance sales cycle in which competition is at a maximum as insurance companies use their excess capacity to sell more policies at lower prices. See also Hard Market.

Special Damages

Compensation awarded for actual economic losses, such as medical expenses and lost wages. See also General Damages.

Special Enrollment Period

Under ACA regulations, you typically are only able to sign up for healthcare coverage or make changes to your plan during Open Enrollment Period. However, if you’ve experienced a Qualifying Event, you qualify for a Special Enrollment Period, whereby you can sign up or make changes to your plan.

Special Risk Insurance

Coverage designed to provide financial protection against risks or hazards of a special or unusual nature.

Split Funding

The use of two or more funding agencies for the same pension plan. An arrangement whereby a portion of the contributions to the pension plan are paid to a life insurance company and the remainder of the contributions invested through a corporate trustee, primarily in equities.

Spouse’s Benefit

Payments to the surviving spouse of a deceased employee, usually in the form of a series of payments upon meeting certain requirements and usually terminating with the survivor’s remarriage or death.

SR-22

Sometimes referred to as a ‘Financial Responsibility Filing,’ is a liability document required by most DMV offices for insurance policies considered ‘high risk’ (individuals convicted of certain traffic violations).

Standard Insurance

Life insurance written on the basis of regular morbidity underwriting assumptions used by an insurance company and issued at normal rates.

Standard Markets

Insurance companies for which the majority of people or organizations qualify. See also Domestic Insurer.

Standard Provisions

A set of provisions set forth in laws that prescribed certain rights and obligations of both the insured and the company under personal health insurance policies. These were originally introduced in 1912 and have now been replaced by the Uniform Provisions.

Standard & Poor’s (S&P)

A financial services company that produces research and analysis as it relates to the financial soundness of corporations.

Standard Risk

A person who, according to a company’s underwriting standards, is entitled to purchase insurance protection without extra rating or special restrictions.

State Disability Plan

A plan for accident and sickness, or disability insurance required by state legislation of those employers doing business in that particular state.

State Continuation Coverage

State law, similar to Cobra, that allows employees of smaller firms (typically under 20 employees) to continue their group healthcare plan for up to nine months after losing coverage due to loss of their job, or a reduction of hours.

State Fund

A fund set up by a state government to provide a specific line or lines of insurance.

State Health Insurance Assistance Program (SHIP)

Organization that provides Medicare beneficiaries with free information and counseling services.

State Insurance Department

A department of a state government whose duty is to regulate the business of insurance and give the public information on insurance. See also Insurance Commissioner.

State-of-the-Art Defense

An argument used in product liability cases that the technology needed to avoid the loss in a particular case did not exist at the time of the product’s manufacture.

Statutory Accounting

Special accounting practices for insurance companies required by state law, prescribing a greater level of detail than required by GAAP and designed to provide greater protection for the public against potential insolvency of these essential institutions.

Statutory Accounting Principles

Rules of financial computation and presentation required by statute which must be followed by an insurance company when submitting its financial statements to state insurance departments. Such principles differ from Generally Accepted Accounting Principles.

Statutory Underwriting Profit or Loss

Premiums earned less losses and expenses, as calculated under Statutory Accounting Principles..

Step-Rate Premium

A rating structure in which the premiums increase periodically at pre-determined times such as policy years or attained ages.

Step-Up In Basis

An increase in the tax basis of property to the value claimed in the taxable estate of a decedent.

Stock Company

An insurance company organized and owned by stockholders, as distinguished from the mutual form of company which is owned by its policyholders.

Stock Exchange

An organization that provides a facility for buyers and sellers of listed securities to come together to make trades in those securities.

Stock Insurance Company

A company in which the legal ownership and control is vested in the stockholders.

Stock Life Insurance Company

A life insurance company owned by stockholders who elect a board to direct the company’s management. Stock companies, in general, issue nonparticipating insurance, but may also issue participating insurance.

Stock Redemption Plan

an entity purchase form of buy-sell agreement within a corporation that involves the corporation buying back shares from a departing owner.

Stockholder

A person who owns shares of stock in a corporation.

Straight Life Insurance

Whole life insurance on which premiums are payable for life.

Strict Liability

Liability for damages even though fault or negligence cannot be proven.

Subrogation

Process by which one insurance company seeks reimbursement from another company or person for a claim it has already paid.

Substandard (Impaired) Risk

A risk that cannot meet the normal requirements of a standard insurance policy. Protection is provided in consideration of a waiver, a special policy form, or a higher premium charge.

Substandard Insurance

Insurance issued with an extra premium or special restriction to those persons who do not qualify for insurance at standard rates.

Supplementary Contract

An agreement between a life insurance company and a policyholder or beneficiary by which the company retains the cash sum payable under an insurance policy and makes payments in accordance with the settlement option chosen.

Surety Bond

An agreement providing for monetary compensation in the event of 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.

Surgical Expense Insurance

Health insurance, which provide benefits toward the physician’s or surgeon’s operating fees. Benefits may consist of scheduled amounts for each surgical procedure.

Surgical Schedule

A list of maximum amounts payable by the policy for various types of surgery, with the amount based on the severity or complexity of the operation.

Surplus

The net worth of a company, equal to the amount by which assets exceed liabilities.

Surplus Lines

(1) A risk or a part of a risk for which there is no standard insurance market available. (2) Insurance written by non-admitted insurance companies.

Survivorship Life Insurance

Policy that covers two individuals and pays out to a beneficiary, only when both covered individuals have passed.

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Table of Multiples

The life expectancy figures provided by the Internal Revenue Service to be used in calculating the exclusion ratio for life contingent annuities after June 30, 1986. Separate tables provide the figures for joint and last survivor annuities, annuities that contain a refund or minimum payment guarantee, and for annuities that pay quarterly, semiannually, or annually.

Tail Coverage

Coverage for claims made after a claims-made policy has terminated; the extended reporting or discovery period. See Nose Coverage.

Tax Basis

The cost from which your profits or losses are calculated for income tax purposes.

Taxable Estate

The value upon which estate taxes are calculated by the federal government.

Temporary Life Annuity

An annuity payable while the annuitant lives but not beyond a specified period, such as five years. No payments are to be made after the end of the stipulated temporary period or the death of the annuitant.

Ten Day Free Look

A notice on the first page of health insurance policies that the insured has ten days in which to examine the policy and return it for a refund of premium if he is not satisfied with the policy.

Tenants in Common

A form of joint property ownership in which the owners may have unequal shares and which does not involve a right of survivorship. See also Joint Tenants

Term Life Insurance

Life insurance payable to a beneficiary only when an insured dies within a specified period. The coverage expires without value if the insured survives the stated period.

Territorial Rating

A geographical grouping whereby similar hazards permit insurance companies to establish an equitable rate for the territory regarding certain coverages.

Testamentary Trust

A trust created through the will of its creator.

Theft, Disappearance and Destruction of Money and Securities Ins

Coverage designed to provide protection against financial loss for loss of money and securities resulting directly from theft (any act of stealing), disappearance and destruction. Coverage applies while the money and securities are on the insured’s premises, while in the custody of the insured or the insured’s messenger while conducting business at the bank, and while off the insured’s premises in the custody of the insured or the insured’s messenger.

Third Party

The claimant under a liability policy. So called because the person making the claim is not one of the two parties, insured and insurer, to the insurance contract.

Third Party Claim

A demand made by a third party against a policyholder of an insurer and any payment that will be made by that company.

Third-Party Over Suit

A lawsuit where a third party tries to recover damages assessed against that party by bringing suit against his or her employer.

Threshold

The point, measured in money, time or other ways, beyond which tort liability can be established. Until that point is reached, reparations must be paid within the provisions of the no-fault plan, with no recourse to the courts.

Time Element Insurance

Coverage designed to provide insurance for a covered incident resulting in loss of use of property for a period of time. For example: Business Interruption and Extra Expense insurance.

Time Limit

The period of time during which a notice of claim or proof of loss must be filed.

Time Limit on Certain Defenses

The 2-year or 3-year time period in health insurance policies after which the insurer cannot deny a claim or void a policy because of pre-existing conditions or misstatements on the application.

Time Value of Money

The income that can be gained over time by holding money, such as interest income or dividends.

Tornado

A whirling wind over land, accompanied by a funnel-shaped cloud. It is usually very violent and destructive in a narrow path, often for many miles.

Tort

A civil wrong, other than a breach of contract, for which a court of law will afford legal relief, e.g. harming another by an act of negligence in driving an auto.

Tortfeasor

Someone who commits a tort.

Total Disability

An illness or injury which prevents an insured person from continuously performing every duty pertaining to his/her occupation or engaging in any other type of work.

Transferability

Any arrangement under which the accumulated benefit credits of a terminating participant, or their actuarial value, are transmitted from one plan to another, or to a central agency.

Transit Insurance

Coverage of the insured’s property while in transit over land from one location to another. Property insurance policies typically provide coverage only at locations identified in the policy. See also Inland Marine Insurance.

Travel Accident Policy

A limited contract covering only accidents while an insured person is traveling, usually on a commercial airline carrier.

Treaty

An agreement between a reinsurer and a ceding insurer setting forth details of the reinsurance arrangement.

TRICARE

Healthcare program that provides health benefits to civilian U.S. military personnel.

Triple Net Lease

Agreement whereby the lessee, in addition to rent, is responsible for ongoing expenses such as property taxes, building insurance and maintenance.

Trust

A legal instrument allowing one party to control property for the benefit of another.

Twisting

The practice of inducing by misrepresentation, or inaccurate or incomplete comparison, a policyholder in one company to lapse, forfeit or surrender his insurance for the purpose of taking out a policy in another company.

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Umbrella Liability

Insures losses in excess of amounts covered by other liability insurance policies; also protects the insured in many situations not covered by the usual liability polices.

UMPD

See Uninsured Motorist Property Damage

Unallocated Benefit

A policy provision providing reimbursement up to a maximum amount for the cost of all extra miscellaneous hospital services, but not specifying how much will be paid for each type of service.

Underwriter

1) a company that receives the premiums and accepts responsibility for the fulfillment of the policy contract; 2) the company employee who decides whether or not the company should assume a particular risk; 3) the agent who sells the policy.

Underwriting

The process of reviewing, selecting, and approving risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk.

Underwriting Profit or Loss

The amount of money which an insurance company gains or loses as a result of its insurance operations. It excludes investment transactions and federal income taxes.

Underwriting Result

See Underwriting Profit or Loss

Unearned Premium

The portion of a premium that a company has collected but has yet to earn because the policy still has unexpired time to run.

Unified Credit

A one-time credit of $192,800, usually applied against Federal Estate Taxes, that is available to every individual’s estate. The credit also can be used for payment of Federal Gift Taxes during that individual’s lifetime.

Uniform Premium

A rating structure in which one premium applies to all insureds, regardless of age, sex, or occupation.

Uniform Provisions

Statutory policy provisions of health insurance policies which specify some of the rights and obligations of the insured and the company. These provisions, with some modifications, are part of the insurance laws of all 50 states and the District of Columbia.

Uninsurable Risk

One not acceptable for insurance due to excessive risk.

Uninsured Motorist Property Damage

Vehicle insurance available in some jurisdictions to physical pay for damage due to uninsured motorists (only)

Uninsured/Underinsured Motorist Coverage

A form of insurance that pays the policy holder and passengers in his/her car for bodily injury caused by the owner or operator of an uninsured or inadequately insured automobile.

Universal Life Insurance

A flexible premium life insurance policy under which the policyholder may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the amount or timing of premium payments. Premiums (less expense charges) are credited to a policy account from which mortality charges are deducted and to which interest is credited at rate which may change from time to time

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Value Based Purchasing Model (VBP)

Model that incentivizes healthcare providers through paying them based on patient outcomes.

Valued Policy Statute that requires insurance companies to pay the full value of a policy to the insured, in the event of a complete loss. This is sometimes referred to as ‘Agreed Amount.’

Variable Annuity

(1) An annuity contract in which the amount of each periodic income payment may fluctuate. The fluctuation may be related to securities market values, a cost of living index, or some other variable factor. (2) An annuity under which the benefit varies according to the investment results of a life insurance company’s separate account (usually invested primarily in common stocks).

Variable Life Insurance

Life insurance under which the benefits relate to the value of assets behind the contract at the time the benefit is paid. The amount of death benefit payable would, under variable life policies that have been proposed, never be less than the initial death benefit payable under the policy.

Vehicle Identification Number (VIN

A unique 17 letter and/or number code given to each on-road vehicle that can be used to identify the make, model and year of a vehicle.

Verbal Threshold

In no-fault auto insurance states with a verbal threshold, victims are allowed to sue in tort only if their injuries meet certain verbal descriptions of the types of injuries that render one eligible to recover for pain and suffering.

Vest

A provision that a pension participant will, after meeting certain requirements, retain a right to all or part of the accrued benefits, even though the employee may leave the job before retirement.

Vested Commissions

Renewal commissions payable to the writing agent or his estate, whether or not he remains with the company.

Viatical Settlement

Payment of a portion of the proceeds from life insurance to an insured who is terminally ill.

Vicarious Liability

The assignment of liability to a person or entity that did not cause the injury or loss but has a legal relationship to the party that was negligent.

Voluntary Market

The market where one seeking insurance obtains insurance in the open market with no help from the state, through an insurer of his or her own selection.

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Waiting Period

The length of time an employee must wait from his/her date of employment or application for coverage, to the date his/her insurance is effective. See Elimination Period.

Waiver

An agreement attached to a policy which exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.

Waiver of Premium

A provision in some policies to relieve the insured of premium payments falling due during a period of continuous total disability that has lasted for a specified length of time, such as three or six months.

Whole Life Insurance

Life insurance payable to a beneficiary at the death of the insured whenever that occurs. Premiums may be payable for a specified number of years (limited payment life) or for life (straight life).

Will

The legal statement of a person’s wishes concerning the disposal of his or her property after death.

Workers’ Compensation

A system established under state law that provides payments, without regard to fault, to employees injured in the course and scope of their employment.

Workers’ Compensation Insurance

Insurance against liability imposed on certain employers to pay benefits and furnish care to employees injured, and to pay benefits to dependents of employees killed in the course of or arising out of their employment.

Written Premiums

The entire amount of premiums due in a year for all polices issued by an insurance company.

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X

No terms found that start with the letter ‘X’…

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Y

No terms found that start with the letter ‘Y’…

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Z

No terms found that start with the letter ‘Z’…

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401(k) Plan

A salary reduction plan that allows employees to contribute a portion of their salaries on a tax-deferred basis. When this type of employee benefit is available to you, you should give it serious consideration. Many employers match contributions that you make to a 401(k) plan. See also Defined Contribution Plan.

403(b) Plan

Also referred to as a Tax -Sheltered Annuity Plan, and similar to the 401(k) Plan, the 403(b) is a retirement plan available to employees of certain tax-exempt organizations (i.e. public schools).

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