Insurance Dictionary
What Means What When It
Comes to
Life, Health, Business,
Home, Auto and
Other Coverages
First edition, third
printing 2008
Copyright © 2002-2008 by
Publishing
Silver
.
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The Silver Lake Editors
Insurance Dictionary
Pages: 486
ISBN: 978-1-56343-749X
The Silver Lake Editors who
have contributed to
this book are Kristin
Loberg, Christina Schlank,
Megan Thorpe and James
Walsh.
Many of the standard
insurance policy forms referenced
in this book are developed
by and remain the
property of the New York-based
Insurance Services
Office (ISO). Standard
policy forms produced by
ISO are updated and modified
regularly. Our references
—either direct or
indirect—to the forms are intended
solely to illustrate issues
common to insurance.
Check with an insurance
company or agent
or broker if you need
current policy information.
Diligent efforts have been
made by Silver Lake Publishing
staff to provide timely and
comprehensive
terms and definitions in
this dictionary. However,
this dictionary is not put
forth as a final authority
on any specific term or
definition. Insurance terminology
is subject to industry-specific
quirks and eccentricities—as
well as a never-ending
development and refinement
process, which may cause
definitions and usages to
change over time.
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© 2008 Silver
© 2008 Silver
A
“A” (or Judgment) Rates. Rates that are not
backed up by loss experience
statistics. They are
based on the judgment of the
underwriter on an
individual risk basis.
A&H, A&S.
Accident and Health Insurance, Accident
and Sickness Insurance. Once commonly
used as generic designations
for the entire field now
called health insurance. See
Health Insurance.
AAI. See Alliance of American
Insurers.
AAIS. See American Association
of Insurance Services.
AB. ACAS. Associate of the
Casualty Actuarial Society.
See Fellow of the Casualty
Actuarial Society.
Abandonment. Relinquishing ownership of
lost or
damaged property by the
insured to the insurance
company so that a total loss
may be claimed. This is
prohibited in most types of
property insurance.
Abandonment Clause or
Condition.
A clause that
prohibits the abandonment of
partially damaged
property to the insurer in
order to claim a total loss.
The company may choose to
acquire damaged property
which can be sold for
salvage and choose to
pay a total loss, but the
insured cannot insist that
the insurer take possession
of any property.
Absolute Assignment. Assignment by a
policyowner
of all control of and rights
in the policy to a
third party.
Absolute Beneficiary. See Irrevocable
Beneficiary.
Absolute Liability. A liability that arises
from extremely
dangerous operations, such
as the use of
explosives (e.g., a
contractor would almost certainly
be liable for damages caused
by vibrations of the
earth following an explosive
detonation). With absolute
liability it is usually not
necessary to establish
that the operation is
dangerous. See also Strict
Liability.
Accelerated Benefits. Riders on life insurance
policies
that allow the policy’s
death benefits to be used
to offset expenses incurred
in a convalescent or nursing
home facility. Any living
benefits paid by the
insurance company reduce the
remaining death
benefit. The government does
not currently consider
accelerated benefits to be
taxable income, and
the policyowner can get
between 50 and 95 percent
of the policy’s face value.
See Living Needs
Benefits.
Accelerated Endowment. A dividend option allowing
dividend accumulations to be
applied to convert
a life insurance policy into
an endowment, or
to shorten the endowment
term.
Accelerated Option. A provision whereby an
insured
may use accumulated policy
dividends and
the cash value of a life
insurance contract to pay up
the policy or to mature it
as an endowment.
Acceptance. Insurance acceptance
occurs when an
applicant for insurance
receives the policy from the
company and, in the case of
general insurance, pays
the premium. In life
insurance, since the initial premium
is often submitted with the
application, issuance
of the policy constitutes
acceptance.
Acceptance of the Risk. Once all the underwriting
information has been
reviewed, an insurance
company makes a decision
about the acceptance of
the risk. Most applicants
are classified as standard
risks. Occasionally, an
applicant for disability income
will be classified as a
substandard risk.
Access. The availability of
medical care to a patient.
This can be determined by
location, transportation,
type of medical services in
the area, etc.
Accident and Health
Insurance (A&H).
An older
name for health insurance.
See Health Insurance.
Accident and Sickness
Insurance (A&S).
An older
name for health insurance.
See Health Insurance.
Accident Frequency. The rate of the occurrence
of
accidents, often expressed
in terms of the number
of accidents over a period
of time. It is one method
used for measuring the
effectiveness of loss prevention
services. Contrast with
Accident Severity.
Accident Insurance. Insurance against loss by
accidental
bodily injury to the
insured.
Accident Only Insurance. Insurance that provides
coverage for injury from
accident, and excludes sickness.
Benefits may be paid for all
or any of the following:
death, disability,
dismemberment or hospital
and medical expenses.
Accident Prevention. See Loss Prevention
Service.
Accident Severity. A measure of the severity
or
seriousness of losses,
rather than the number of losses.
It is measured in terms of
time lost from work rather
than the number of
individual accidents. It is another
way of measuring the
effectiveness of loss prevention
services. Contrast with
Accident Frequency.
Accident Year
Experience.
Measures premiums and
losses relating to accidents
which occurred during
a 12-month period.
Accident. An unintended and
unforeseen event,
which occurs suddenly and at
a definite place, resulting
in bodily injury. An accident
is also any
injury caused by accidental
means—the cause was
accidental versus
intentional. If the cause is accidental,
then benefits are payable.
If it is intentional,
then the claim would be
denied. See also Occurrence
and Accidental Bodily
Injury.
Accidental Bodily
Injury. An
injury to the body
(the result of an accident),
of external origin, unintentional
and unforeseen by the
injured person. Contrast
with Accidental Means.
Accidental Death and
Dismemberment (AD&D).
A policy or a provision in a
disability income policy
which pays either a
specified amount or a multiple
of the weekly disability
benefit if the insured dies,
loses his or her sight, or
loses two limbs as the result
of an accident. A lesser
amount is payable for
the loss of one eye, arm,
leg, hand or foot. Although
technically a health
insurance product, AD&D coverage
is frequently provided as
part of an individual
or group life insurance
contract.
Accidental Death
Benefit. An
extra benefit which
generally equals the face of
the contract or principal
sum, payable in addition to
other benefits in
the event of death as the
result of an accident. See
also Double Indemnity and
Multiple Indemnity.
Accidental Death
Insurance.
A form that provides
payment if the death of the
insured results from an
accident. Often combined
with dismemberment
insurance in a form called
accidental death and dismemberment.
Accidental Means. Unexpected or undesigned
cause of an accidental
bodily injury. The mishap
itself must be accidental,
not just the resulting injury,
(e.g., a person chopping
wood: If the axe
slipped out of his hand and
cut his foot, it would
have been accidental means.
However, if his finger
got in the way of the axe,
it would not have been).
Accommodation Line. Business accepted from an
agent or broker which would
normally be rejected
according to strict
underwriting standards but
which is accepted because of
the overall profitability
of the agent’s or customer’s
other business, (e.g.,
an insurer might accept
coverage on property that
would not normally meet its
underwriting standards,
if the other lines of
insurance which it carries
for the customer were
profitable.
Account Current. A monthly financial
statement
provided to an agent by an
insurer showing premiums
written, cancellations endorsements
and commissions.
Account Premium
Modification Plan.
A rating
plan for fire, property
damage and time element
coverages. The maximum
credit or surcharge is 25
percent, and it is available
to risks which develop a
three-year premium of at
least $5,000.
Accounts Receivable
Insurance.
Insurance against
loss that occurs when an
insured is unable to collect
outstanding accounts because
of damage to or destruction
of the accounts receivable
records by a peril
covered in the policy.
Accredited Service. All service, by an
employee,
recognized under a pension
plan as being allowable
or creditable in calculating
the benefits due.
Accrete. A Medicare term which
means the process
of adding new members to a
health plan.
Accrued Benefit. The amount of retirement benefit
accumulated by a
participating employee.
Accrued Liability. The amount of money needed
to offset accumulated
benefits under a retirement
plan. Accrued liability
equals the difference between
the present value of the
future benefits and the
present value of future
contributions.
Accumulated Actuarial
Benefit.
The sum of benefits
assigned to credited service
before a specified
date, and which is
determined pursuant to the actuarial
valuation method in use.
Accumulated Earnings
Tax. A tax
penalty imposed
on corporate earnings that
are retained by the corporation
for non-business related
needs.
Accumulated Plan
Benefit.
That portion of a retirement
benefit that is attributable
pursuant to the
plan to the participant’s
period of credited service
before a specified date.
Accumulation at
Interest. A
dividend option
where interest is paid on
accumulated dividends
and compounded annually at a
guaranteed minimum
interest rate.
Accumulation Period. The period of time, prior
to retirement, during which
an annuitant is making
payments or investments in
an annuity. Such
payments will accumulate on
a tax deferred basis.
Accumulation Units. These are issued to owners
of variable annuities during
the accumulation period,
as evidence of the
annuitant’s participation in
the separate account.
Accumulation Value. A term used in universal
life
policies to describe the
total of all premiums paid
and interest credited to the
account before deductions
for any expenses, loans or
surrenders.
Accumulations (or
Accumulation Benefits). Percentage
additions to policy benefits
when the contract
is continuously renewed.
Acquired
Immunodeficiency Syndrome (AIDS).
An infectious and incurable
disease, commonly referred
to as AIDS, which is caused
by the human
immunodeficiency virus, or
HIV.
Acquired Locations. Locations acquired after
inception
of the coverage and during
the coverage
period.
Acquisition Cost. Expenses incurred by an
insurer
or reinsurance company that
are directly related to
putting a business on the
books (acquiring a customer),
including clerical work,
medical examiners
fees, inspection costs, etc.
The largest portion of
this cost is usually the
agent’s or sales representative’s
commission or bonus.
Act of God. An event arising out of
natural causes
(with no human intervention)
which could not have
been prevented by reasonable
care or foresight (e.g.,
flood, lightning and
earthquake).
Action. A lawsuit involving the
right of one party
to recover from another
person in a court of law.
Active Malfunction. When a product, instead of
bringing a benefit to the
user, actually damages the
user’s property (e.g., if a
bug killer, which is intended
to protect a crop, damages
the crop instead).
Actively-at-Work. Most group health
insurance
policies state that if an employee
is not actively at
work when the policy goes
into effect, the coverage
will not begin until the
employee does return to
work.
Activities of Daily
Living (ADL).
Everyday living
functions and activities
performed by individuals
without assistance, including
moving about, dressing,
attending to personal
hygiene and eating.
Activities of Daily
Living (ADL) Standards. Standards
used to assess the ability
of a person to live
independently, measured by
the ability to perform
unaided such activities as
eating, bathing, toiletry,
dressing and walking.
Sometimes used to measure
or define eligibility for
long-term care.
Actual Cash Value (ACV). An amount equal to
the replacement cost of lost
or damaged property at
the time of loss, less depreciation.
With regard to
buildings, there is a
tendency for the ACV to closely
parallel the market value of
the property. If there is
a covered loss to the
insured dwelling, the insurance
company will pay either the
depreciated value
of the damaged dwelling at
the time of loss or the
cost of repairing the
property with like construction,
but only up to the policy’s
limit of liability.
ACV also refers to the
maximum limit of auto insurance
coverage. The insurer will
usually only pay
the ACV or the cost to
repair or replace the damaged
or stolen property,
whichever is less. Depreciation
and the condition of the
vehicle are also considered
in determining the ACV. See
also Market
Value.
Actual Charge. The actual amount charged
by a
physician for medical
services rendered.
Actual Total Loss. See Total Loss.
Actuarial. Having to do with
insurance mathematics
or actuaries—people hired by
insurance companies
to create formulas and
tables that calculate the
present value of future
payments and risks related
to those payments.
Actuarial Equivalence. Two different series of
payments
or values are in actuarial
equivalence when
they have an equal actuarial
present value under a
given set of actuarial
assumptions. See Actuarial
Present Value.
Actuarial Experience
Gain or Loss.
The effect on
an actuarial value of
deviations between the past
events that would have
occurred according to the
actuarial assumptions and
those which actually occurred.
Actuarial Present Value. The single amount as of
a given evaluation date that
results from applying
actuarial assumptions to an
amount or series of
amounts payable or
receivable at various times; with
the amount(s) adjusted to
reflect expected changes
from the valuation date to
the date of expected payment
or receipt by reason of
expected salary changes,
cost of living adjustments,
etc.; and adjusted to reflect
the time value of money
(through discounts
for interest) and the
probability of payment (by means
of decrements such as for
death, disability, withdrawal
or retirement) between the
valuation date and the
expected date of payment or
receipt.
Actuarial Valuation
Method. A
procedure, using
actuarial assumptions, for
measuring the expected
value of benefits and
assigning such value to time
periods. Also called
actuarial analysis.
Actuarially Sound. When the amount of money
in a pension fund, and the
current level of contributions
to the fund, are sufficient
to meet the liabilities
that have already accrued
and that are accruing
on a current basis.
Actuary. A specialist trained in
mathematics, statistics
and accounting who is
responsible for rate,
reserve and dividend
calculations as well as other
statistical studies.
Acute Care. Skilled, medically
necessary care provided
by medical and nursing
personnel in order to
restore a person to good
health.
AD&D. See Accidental Death and
Dismemberment
Insurance.
Added Expense. Extra expenses incurred
relative
to a disabling injury or
sickness, including additional
medication, doctor’s bills,
the need for prosthetic
appliances, such as braces,
and possible hospital
bills that are not fully
covered by hospitalization
insurance.
Additional Coverages. Limited amounts of
coverage
for specific types of losses
or expenses that are
provided in addition to the major
coverages (e.g.,
personal liability coverage
provides three kinds of
insurance in addition to the
stated limits of liability:
claim expenses, first aid to
others and damage
to the property of others).
Additional Drug Benefit
List.
Prescription drugs
listed as commonly
prescribed by physicians for
patients’ long-term use.
Subject to review and
change by the health plan
involved. Also called drug
maintenance list.
Additional Indemnity
Riders.
These riders provide
additional amounts of
indemnity for short periods
of time, such as six or 12
months. The primary
purpose of these riders is
to supplement or
coordinate with other
disability benefits, such as
Social Security or group
disability benefits.
Additional Insured. A person other than the
named
insured who is protected
under the terms of the
contract. Usually,
additional insureds are added by
endorsement or referred to
in the wording of the
definition of “insured” in
the policy. See Named
Insured.
Additional Living
Expense Insurance.
A contract
to reimburse the insured for
increased living costs
when loss of property forces
the insured to maintain
temporary residence
elsewhere, including the
costs for a hotel or motel,
for restaurant meals or for
using a laundromat. The term
extra expense insurance
refers to additional
expenses incurred by businesses.
See also Loss of Use.
Additional Living
Expenses.
Any necessary increase
in living expenses—such as
rent for alternative housing
—incurred so that the
household can maintain
its normal standard of living.
Additional Monthly
Benefit (AMB) Rider.
A rider
added to a disability income
policy to provide additional
benefits during the first
year of a claim while
the insured is waiting for
Social Security benefits to
begin. Also used to
complement other disability
income sources, such as
short-term group disability
benefits provided through
the employer. Also
called a Social Security
Rider.
Additional Premium. When endorsements are
added to a policy, there is
almost always an additional
premium (cost) charged. See
Premium.
Additur. A situation where the
court increases a
previous jury award. Compare
to Remittitur.
Adhesion. A characteristic of a
unilateral contract
that is offered on a “take
it or leave it” basis. Most
insurance policies are
contracts of “adhesion,” because
the terms are drawn up by
the insurer and
the insured simply “adheres”
to the policy provisions.
For this reason ambiguous
provisions are often
interpreted by courts in
favor of the insured.
Contrast with Manuscript
Policy.
Adjustable Life. A form of life insurance
that allows
changes on the policy face
amount, the amount
of premium, period of
protection and the length of
the premium payment period.
See also Flexible Premium
Adjustable Life Insurance
Policy.
Adjustable Premium. The right of an insurer to
change the premium rate on
classes of insureds, or
blocks of business at the
time of policy renewal.
Adjusted Community
Rating (ACR).
Community
rating adjusted by factors
specific to a particular
group. Also known as
factored rating.
Adjusted Gross Estate. In the calculation of
federal
estate taxes, it is equal to
the gross estate less
specific deductions.
Adjusted Net Worth. The capital, surplus and
voluntary
reserves of an insurer, plus
an estimated value
for business on the books
and unrealized capital
gains, less the potential
income tax on such gains.
Adjuster. A representative of the
insurer who seeks
to determine the extent of
the firm’s liability for
loss when a claim is
submitted. Same as Claim Representative.
Adjuster, Average. See Average Adjuster.
Adjuster, Independent. See Independent Adjuster.
Adjuster, Public. See Public Adjuster.
Adjustment Bureau. A firm organized to
provide
adjustment services to
insurers not wishing to create
their own claims division.
ADL. See Activities of Daily
Living Standards.
Administration Bond. A bond furnished by the
executor or administrator of
an estate. It guarantees
that the estate will be
settled in accordance with
the terms of the will, or,
if there is no will, in accordance
with the law. It guarantees
the fidelity of the
executor or administrator.
Administrative Services
Only.
Services provided
by an insurer, such as
providing claim forms and
processing claims, when the
insurer is not the party
funding the loss payments.
See also Self Funded
Plan.
Administrator. A person appointed by a
court as a
fiduciary to settle the
financial affairs and the estate
of a deceased person.
Compare to Executor.
Admiralty Liability. All laws relating to
liability
resulting from any kind of
maritime activity. This
includes common law and
statutory law, such as
the Jones’ Act and the
Seamen’s Remedies.
Admiralty Proceeding. A type of proceeding
involving
questions of maritime suit.
Any insurance
claims involving ocean
marine insurance would
generally be settled by an
admiralty court.
Admissions/1,000. The number of hospital
admissions
for each 1,000 members of
the health plan.
Admits. The number of admissions
to a hospital
(including outpatient and
inpatient facilities).
Admitted (or Allowed)
Assets.
Assets whose values
are permitted by state law
to be included in the
annual statement of the
insurer.
Admitted Company. An insurance company
authorized
and licensed to do business
in a given state.
Admitted Liability. Coverage for guests in an
aircraft.
In the event of an accident,
with this coverage
guests can recover without
having to go through
a determination as to
whether or not the insured
was liable. It is written
with a limit per seat in the
aircraft.
Adult Day Care. An optional group program
for
functionally impaired
adults, designed to meet
health, social and
functional needs in a setting away
from home. Available under
LTC insurance.
Advance Funding. Periodically setting aside
a predetermined
sum of money to fund future
retirement
benefits of a pension plan.
Advance Payment. Premiums paid in advance
of
the current policy period,
including the amount
tendered with an application
for life insurance.
Advance Premium. See Deposit Premium.
Adverse Selection. The tendency of poorer
than
average risks to buy and
maintain insurance. Adverse
selection occurs when
insureds select only those
coverages that are most
likely to have losses.
Adverse Underwriting
Decision.
Any decision
involving individually
underwritten coverages resulting
in termination of existing
insurance, declination
of an application or writing
the coverage only
at higher rates. For
property and casualty insurance,
it also includes placing the
coverage with a residual
market mechanism or
unauthorized insurer.
Advertising Injury. Injury arising out of
libel or
slander, violation of the
right to privacy, misappropriation
of advertising ideas or
infringement of copyright,
title or slogan committed in
the course of
advertising goods, products
or services. Contrast
with Personal Injury.
Affiant. The person who executes an
affidavit.
Affidavit. A written or printed
declaration or statement
of fact, made voluntarily
and confirmed by
the oath or affirmation of
the party making it, and
taken before an officer
having authority to administer
such oath.
Affiliated Companies. Insurers linked together
through common stock
ownership or through interlocking
directorates.
Affirmed. When an appellate court
declares that a
judgment, decree or order is
valid and right, and
must stand as rendered in
the lower court.
After Charge. A charge often included in
fire rates
for commercial buildings. It
is usually added for conditions
that can be corrected by an
insured, such as
failure to have the proper
fire extinguishers.
Aftercare. Individualized patient
services required
after hospitalization or
rehabilitation.
Age Change. The date on which a
person’s age, for
insurance purposes, changes.
In most life policies
this is the date midway
between the insured’s natural
birth dates. Health insurers
frequently use the
age of the previous birth
date for rate determinations.
On the date of age change, a
person’s age
may change to that of the
last birth date, the nearer
birth date or the next birth
date, depending upon
the way in which the rating structure
has been established
by that particular insurer.
Age Limits. The ages below which or
above which
an insurer will not write
certain forms of insurance
or above which it will not
continue a policy presently
in force.
Age/Sex Factor. Compares the age and sex
risk of
medical costs of one group
relative to another. An
age/sex factor above 1.00
indicates higher than average
risk of medical costs due to
that factor. Conversely,
a factor below 1.00
indicates a lower than
average risk. This
measurement is used in underwriting.
Age/Sex Rates (ASR). Separate rates are
established
for each grouping of age and
sex categories. Preferred
over single and family
rating because the rates
and premiums automatically
reflect changes in age
and sex content of the
group. Also called table rates.
Agency Company. An insurance company that
produces
business through an agency
network. Contrast
with Direct Writer.
Agency Contract (or
Agreement).
A document
that establishes the legal
relationship between an
agent and an insurer.
Agency Plant. The total force of agents
representing
an insurer.
Agency System. See Independent Agency
System.
Agency. (1) An insurance sales
office which is directed
by a general agent, manager,
independent
agent or company manager.
(2) When one person
acts on behalf of another
person, an agency is created
with the first person being
the agent and the
second person being the
principal. The principal
generally can be held
responsible for acts of its
agents.
Agent. One who solicits,
negotiates or effects contracts
of insurance on behalf of an
insurer. The agent’s
right to exercise various
functions, authority and
obligations, and the
obligations of the insurer to
the agent are subject to the
agency contract with the
insurer, to statutory law
and to common law.
Agent’s Appointment. Official authorization
from
an insurance company
granting an agent the authority
to act as its agent. In most
states, agents
must be appointed by at
least one insurer in addition
to being licensed by the
state.
Agent’s Authority. The authority and power
granted to an agent by the
agency contract. The
agent also has additional
power under the legal concept
of apparent agency. See
Presumption of Agency.
Agent’s Balance. A periodic statement of
the sums
due and owed to an agent
under contract.
Agent’s Commission. What an insurance company
pays its agents for placing
insurance. Commission
is usually a percentage of
the premium for the policy.
See also Commission.
Agent, General. See General Agent.
Agent, Independent. See Independent Agent.
Agent’s License. A certificate of authority
from the
state which permits the
agent to conduct business.
Agent, Policywriting. See Policywriting Agent.
Agent’s Qualification
Laws.
Education, experience
and other requirements
imposed by the state upon
persons desiring to be
licensed as agents.
Agent, Recording. See Recording Agent.
Agent, Special. See Special Agent.
Agent, State. See State Agent.
Aggregate Excess of
Loss Reinsurance.
A form
of excess of loss
reinsurance that indemnifies the
ceding company against the
amount by which its
losses incurred during a
specific period, usually 12
months, exceed either: a
predetermined dollar
amount; or a percentage of
the company’s premiums
(loss ratio) for that
period. Commonly referred
to as stop loss reinsurance
or excess of loss ratio reinsurance.
Aggregate Funding
Method.
Accumulating
money for a pension plan by
actuarially determining
the present value of all
future benefit payments,
deducting whatever funds may
be on hand with
the trustee or insurance
company and distributing
the balance as a cost over
the future.
Aggregate Indemnity. A maximum dollar amount
that may be collected by the
claimant for any disability,
for any period of disability
or under the
policy as a whole.
Aggregate Limit. Usually refers to
liability insurance
and indicates the amount of
coverage that the
insured has under the
contract for a specific period
of time, usually the
contract period, no matter how
many separate accidents may
occur.
Aggregate Products
Liability Limit.
Indicates the
amount of money that the
insurer will pay during
the term of a policy for all
products liability claims
that it covers.
Agreed Amount Clause. Under this clause, the
insured and the insurer
agree that the amount of
insurance carried will
automatically satisfy the coinsurance
clause. This eliminates the
necessity of
determining whether or not
the amount carried is
equal to the stated
percentage of the actual cash
value indicated in the
coinsurance clause.
Agreement. One element of a legal
contract. When
an offer made by one party
has been accepted by
the other, with mutual
understanding by both, an
agreement exists.
AIA. See American Insurance
Association.
AIDS Related Complex
(ARC). A
variety of symptoms
and opportunistic infections
and conditions
which frequently manifest
themselves in patients
suffering from AIDS, or
acquired immunodeficiency
syndrome, which is caused by
the human immunodeficiency
virus.
AIDS. See Acquired
Immunodeficiency Syndrome.
Alcoholic Beverage Control
Laws. See
Dram Shop
Laws.
Alcoholic Beverage
Liability Insurance.
See Dram
Shop Liability Insurance.
Aleatory Contract. A contract in which the
number
of dollars to be given up by
each party is not
equal. Insurance contracts
are of this type, as the
policyholder pays a premium
and may collect nothing
from the insurer or may
collect a great deal more
than the amount of the
premium if a loss occurs.
Alien Insurer. An insurer formed under
the laws
of a country other than the
U.S. A U.S. company
selling in other countries
is also an alien insurer.
Alienated. Property to which an
insured no longer
owns or holds title.
Generally, a public liability
policy covers the insured’s
liability for premises
alienated by him or her.
All or Nothing Rider. A rider to a health
insurance
policy that provides
additional benefits in the
event no benefits are
payable under Social Security.
All Risk Insurance. Special coverage forms.
See
Open Peril. Contrast with
Named Perils.
Alliance of American
Insurers (AAI).
An association
of insurance companies
working together
in the following areas of
common interest: 1) government
affairs affecting insurance;
2) education of
the employees of member
companies; 3) loss prevention;
and 4) other insurance
activities.
Allied Health Personnel. Health personnel who
perform duties which would
otherwise have to be
performed by physicians,
optometrists, dentists,
podiatrists, nurses and
chiropractors. Also called
paramedical personnel.
Allied Lines. Various insurance coverages
for additional
types of losses, and against
loss by additional
perils, which are closely
associated with and usually
sold with fire insurance.
Includes coverage against
loss by perils other than
fire, coverage for sprinkler
leakage damage and business
interruption coverage.
The fire insurance field
consists of coverages
for “fire and allied lines.”
Allocated Benefits. Payments authorized for
specific
purposes with a maximum
specified for each.
In hospital policies, for
instance, there may be scheduled
benefits for X-rays, drugs,
dressings, etc.
Allocated Funds. Qualified plan funds which
are
identified in the name of
specific plan participants.
Allocation Formula. In a profit-sharing trust,
the
formula under which the
employer’s contributions
are credited to the
employees.
Allowable Charge. The lesser of the actual
charge,
the customary charge and the
prevailing charge. It
is the amount on which
Medicare will base its Part
B payment. The Medicare
allowable amount is basically
Medicare’s version of reasonable
and customary
charges (e.g., if a doctor
charges a Medicare patient
$600 for certain services,
Medicare may only
approve a portion of the
benefits.)
Allowable Costs. Charges which qualify as
covered
expenses.
Allowed Assets. See Admitted Assets.
Alternative Delivery
Systems.
Systems which
cover health care costs,
other than on the usual feefor-
service basis. Includes
HMOs, IPAs, PPOs.
Alzheimer’s Disease. A progressive,
irreversible disease
characterized by
degeneration of the brain cells
and severe loss of memory
causing the individual
to become dysfunctional and
dependent upon others
for basic living needs.
Ambiguity. Terms or words in an
insurance policy
which make the meaning
unclear or which can be
interpreted in more than one
way. The general rule
of law is that any ambiguity
in the policy is construed
against the insurer and in
favor of the insured.
This is because the contract
is one of adhesion;
that is, the insured must
adhere to what the
insurer has written. If the
insurer does not make its
contract clear, it is
responsible.
Ambulatory Care. Outpatient treatment that
does
not require hospitalization.
Ambulatory Setting. Surgery centers, clinics
or
other outpatient facilities
which provide health care
on an outpatient basis.
Amendment. A formal document that
corrects or
revises an insurance master
policy. See also Endorsement
and Rider.
with the development of
education and standards
in the actuarial field.
Members may use the
designation MAAA (Member,
American Academy
of Actuaries).
American Agency System. See Independent
Agency System.
American Association of
Insurance Services
(AAIS). An association of
insurance companies performing
various technical functions
for its members
and subscribers. Licensed to
operate in all states,
the District of Columbia and
the Commonwealth
of Puerto Rico, AAIS offers
program services, files
rates, rules and forms on
behalf of member and subscriber
companies, acts as an
official statistical agent
and offers a variety of
professional services for its
member companies.
American College. An educational institution
within the life insurance
business. It confers the
Chartered Life Underwriter
designation and is concerned
with continuing agents’
training and with
research and publication in
areas related to the life
insurance business. It also
sponsors specialty life
insurance courses and offers
a college degree in financial
services. Formerly known as
the American
College of Life Underwriters
(ACLU).
American Council of
Life Insurance, Inc.
An association
made up of several
previously independent
insurance groups that is
concerned with legislative
matters, intercompany
communications and
the exchange of information.
American Experience Table
of Mortality.
A statement
of expected mortality rates
based upon data
accumulated in 1868 from a
large number of insured
persons. Widely used by life
insurers until
the 1950s to establish
rates.
American Institute for
Chartered Property and
Casualty Underwriters,
Inc. An
insurance educational
organization that
establishes insurance standards
and fosters educational
work. Properly qualified
individuals who pass a
series of examinations
given by this body receive
the designation Chartered
Property and Casualty
Underwriter (CPCU).
American Insurance
Association (AIA).
The informational,
educational, technical and
legislative organization
of the capital stock
insurance companies in the
property and liability
fields. See Capital Stock.
American Lloyd’s. See Lloyd’s Association.
American Risk and
Insurance Association.
An
association of insurance
educators and others interested
in insurance study and
research.
Amortization. A method of spreading a
fixed sum,
together with accumulating
interest, over a period
of years.
Amortized Value. The value of bonds
purchased
by an insurance company that
are eligible for amortization.
For example, if a 10-year
bond were purchased
at $50 more than its face
value, that $50
would be “amortized” or
spread over the 10-year
period. Each year the bonds
would be valued at $5
less than the year before.
Amount at Risk. The difference between the
face
amount of a whole life
insurance contract and the
cash value which it has
built up. The net amount at
risk declines throughout the
life of the contract,
while the policy reserve
increases along with the
cash value. It is the amount
the insurer would have
to draw from its own funds
rather than the policy
reserve were the contract to
become a death claim.
Amount Subject. The maximum amount which
underwriters estimate can
possibly be lost under
the most unfavorable
circumstances in any given
loss, such as a fire or
tornado. Contrast with Probable
Maximum Loss.
Ancillary Benefits. Benefits for miscellaneous
hospital
charges.
Ancillary. Additional services (other
than room and
board charges) such as
x-rays, anesthesia, lab work,
etc. Fees charged for
ancillary care such as x-rays
and lab work. This term may
also be used to describe
the charge made by a
pharmacy for prescriptions
which exceed the health
insurance plan’s maximum
allowable cost (MAC).
Anniversary. See Policy Anniversary.
Annual (or Yearly)
Renewable Term (ART).
(1)
term life insurance that may
be renewed annually
without evidence of
insurability until a stated age.
(2) A form of life, and
sometimes health, reinsurance
in which the reinsurer
assumes only the mortality
risk, which is usually
calculated as the face
amount of reinsurance minus
the terminal reserve.
Annual Additions. The total of employer
contributions,
voluntary employee
contributions and forfeited
additions of terminated
participants that equal
the total annual
contribution to a qualified retirement
plan.
Annual Payment Annuity. An annuity which was
purchased by the payment of
annual premiums for
a specified period of time.
Annual Report. The insurer’s published
statement
to its stockholders (or
policyholders in the case of a
mutual insurance company),
reviewing pertinent financial
information about the year’s
activities.
Annual Return/Report
(Form 5500).
A required
annual report reflecting the
pension plan’s operation
for the year; to be
submitted to the IRS and
the DOL.
Annual Statement. A report to the state
insurance
department of the year’s
financial results. Reports
insurer’s income and
expenses as well as its assets
and liabilities.
Annuitant. The person who is covered
by an annuity
and who triggers payments of
a policy. The
owner of the contract may or
may not be the annuitant,
but the annuitant is usually
the intended recipient
of the annuity payments.
Annuity. (1) An amount of money
payable yearly,
or by extension, at other
regular intervals. (2) An
agreement by an insurer to
make periodic payments
that continue during the
lifetime of the annuitant(s)
or for a specified period. Protects
against the risk of
living too long. (Sometimes
referred to as upside
down life insurance. There
are two principal types
of annuities: fixed and
variable.
Annuity Certain. An annuity that pays
income for
a fixed number of years
regardless of whether the
insured lives or dies. If it
pays for life after the certain
period, it is called an
“annuity certain and for
life thereafter.”
Annuity Due. An annuity that pays
benefits at the
beginning of the benefit
period rather than at the
end.
Annuity Option. A method of liquidating
and distributing
an annuity’s principal and
interest so that
it lasts for the lifetime of
the annuitant.
Annuity Payment. See Endowment.
Annuity Period. The period of time,
usually at retirement,
when the annuitant begins to
receive annuity
payments or benefits.
Annuity with Period
Certain. An
annuity that
pays throughout the life of
the insured, but also guarantees
to pay income for a specific
number of years
regardless of whether the
insured lives or dies. If
the insured is living at the
end of the time specified
in the policy, benefits
continue beyond the guaranteed
period until the death of
the insured.
Answer. A statement made by the
defendant and
filed with a court to
respond to a complaint or action
brought against the defendant.
It states why
the defendant should not be
held liable.
Anti-Coercion Law. A provision usually
contained
in a section of the state
code entitled “Unfair Trade
Practices” or a similar
name, declaring the use of
coercion an unfair practice
and, hence, a violation
of the state law.
Anti-Selection. See Adverse Selection.
Apartment Flat. A multi-story building
subdivided
into one-story units, with
each unit usually having
one owner. Residents share a
common entrance.
Commonly bought as a
condominium or cooperative.
App. A trade expression for the
insurance application.
See Application.
Apparent Agency. See Presumption of Agency.
Apparent Authority. Authority of an agent that
is
created when the agent
oversteps actual authority,
and when inaction by the insurer
does nothing to
counter the public
impression that such authority
exists.
Appeal. The right of a party who
has received an
adverse decision to take the
case to a higher court
for review.
Appellant. The person appealing to
the higher
court.
Appellate. Refers to courts that hear
appeals for
review of decisions rendered
by a lower court.
Appellee. The respondent, or the
person against
whom the appellant is making
an appeal.
Application. A form on which the
prospective insured
states facts requested by the
insurer on the
basis of which, together
with information from other
sources, the insurer decides
whether to accept the
risk, modify the coverage
offered or decline the risk.
See App.
Appointment. See Agent’s Appointment.
Apportionment. The method of dividing a
loss
among insurers in the same
proportions as their
participation when two or
more companies cover
the same loss.
Appraisal. An evaluation of property
made to ascertain
either the appropriate
amount of insurance
to write or the amount of
loss to pay. If the parties
involved disagree on the
value of the property or
the amount of loss, either
may ask for an appraisal
of the loss. In this event,
each party selects a competent
and impartial appraiser. The
two appraisers
select an umpire. If they
cannot agree, selection may
be made by a judge of a
court having jurisdiction.
The appraisers state
separately the value of the property
and amount of loss. If they
fail to agree, they
submit their differences to
the umpire. A decision
agreed to by any two is binding.
Approved. The condition which exists
when the
person or object to be
insured meets the underwriting
standards of the insurer.
Approved Charge. Amounts paid under
Medicare
as the maximum fee for a
covered service.
Approved Health Care Facility
or Program.
A
facility or program that is
approved by a health care
plan as described in the
contract.
Approved Pension Plan. A pension plan qualifying
for tax exemptions under
provisions of the Internal
Revenue Code.
Approved Roof. A term used in building
construction
that indicates a roof made
of fire-resistive materials,
such as tile or asphalt
shingles.
Appurtenant Structures. Buildings on the same
premises as the main
building insured under a property
insurance policy. Most
dwelling policies cover
appurtenant structures under
most circumstances.
Arbitration. Negotiation by impartial
persons when
the insured and the
insurance company cannot agree
on settling a claim.
Disagreement might concern
whether an insured is
legally entitled to recover
damages or might concern the
amount of recovery.
Both parties must agree to
arbitration. If so agreed,
each party selects an
arbitrator. The two arbitrators
select a third. Each party
pays the cost of its own
arbitrator and splits the
cost of the third arbitrator.
If they cannot agree within
30 days, either may
request that selection be
made by a judge of a court
having jurisdiction.
Arbitration
Clause/Provision.
The provision in a
property insurance contract
which states that if the
insurer and insured cannot
agree on an appropriate
claim settlement, each will
appoint an appraiser,
and these will select a
neutral umpire. A decision
by any two of the three
prescribes a settlement and
binds both parties to it.
ARC. See AIDS Related Complex.
ARIA. See American Risk and
Insurance Association.
ARM. See Associate in Risk
Management.
Armstrong Investigation. A study authorized by
the New York state
legislature in 1905 which reviewed
the operations and practices
of life insurers
operating in the state.
Numerous changes in policy
forms and investment
practices came from the study
and were eventually
reflected in other state codes.
Arson. The willful and deliberate
burning of property.
ASO. See Administrative
Services Only.
Assailing Thieves. Those other than the crew
using
force or violence to steal a
ship or its cargo.
Such action is an insured
peril under an Ocean
Marine contract.
Assessed Value. The value of real estate
or personal
property as determined by a
governmental
unit, such as a city, for
the purpose of determining
taxes.
Assessment Company,
Society or Insurer.
An insurer
who retains the right to
assess policyholders
additional amounts if
premiums are insufficient for
operations. In some cases,
an assessment insurer may
not charge a stipulated
premium at all but will
merely assess participants
in the plan a pro rata share
of each claim filed plus
expenses.
Asset Share Value. The value of a book of
business
to an insurer, assuming that
the business has
been in force long enough to
show true mortality
rates. This value must be
known by the insurer in
order to make rates and to
sell the business. If assets
share values do not grow
properly, either the rates
have been too low or
expenses too high.
Assets. The items on the balance
sheet of the insurer
which show the book value of
property owned.
Under state regulations, not
all property or other
resources can be admitted in
the statement of the
insurer. See also
Nonadmitted Assets.
Assigned Risk. A risk that is not
ordinarily acceptable
to insurers and that is,
therefore, assigned
to insurers participating in
an assigned risk pool or
plan. Each participating
company agrees to accept
its share of these risks.
Assigned-risk programs are
most often associated with
auto insurance, and apply
to any state-run program
that helps high-risk
property owners find
insurance. See Fair Access to
Insurance Requirements.
Assigned Risk Plan. A cooperative enterprise
that
all insurance companies
doing business in the state
must join. The plan
constructs a policy (again, usually
expensive and limited) for
people whose driving
records or location
disqualify them from standard
coverage. It then forces the
participating insurance
companies to take a number
of assigned
risk policies.
Assignee. A person to whom policy
rights are assigned
in whole or in part by the
original
policyowner.
Assignment. (1) An authorization to
pay Medicare
benefits directly to the
provider. Medicare payments
may be assigned to
participating providers only. (2)
The transfer of the
ownership rights of a life insurance
policy from one person to
another. Also refers
to the document that effects
the transfer. (3) Transfer
by the policyowner of legal
rights or interest in
the policy contract to a
third party. Most policies
cannot be assigned without
the permission of the
insurer.
Assignment of Benefits. A method where the person
receiving the medical
benefits assigns the payment
of those benefits to a
physician or hospital.
Associate in Risk
Management.
A professional designation
granted by the American
Institute for Property
and Casualty Underwriters to
those who have
completed a series of
examinations.
Association. See Pool and Syndicate.
Association Group
Coverage.
Technically, group
insurance issued to an
association rather than to an
employer or a union. If the
association offers a guaranteed-
issue plan, then there is no
medical underwriting,
as all members are
guaranteed a policy.
However, most association
plans require some medical
underwriting, or what is sometimes
referred to
as simplified or progressive
underwriting.
Association of Life
Insurance Counsel.
An organization
of life company attorneys
that seeks to increase
knowledge in areas of the
law affecting life
insurance.
Assume. To accept from another insurer
all or part
of the risk of an insured
loss.
Assumed Interest Rate
(AIR). An
assumed value
assigned to the annuitant’s
account during the annuity
period. It is an estimated
return for the separate
account. Monthly annuity
payments are based
on the AIR in relation to
the actual rate of return
experienced by the separate
account of a variable
annuity.
Assumed Liability. See Contractual Liability.
Assumption Certificate. A statement of coverage
by the reinsurer that
guarantees payment to a party
not in privity with the
reinsurance contract. Same
as cut-through clause.
Assumption. An amount accepted by the
reinsurer.
Assumption of Risk. One of the common law
defenses
available to an individual.
For instance, one
person riding with another
in a vehicle has generally
“assumed the risk” and,
therefore, has no action
against the driver of the
vehicle should an accident
occur. This common law
concept has been
modified by recent case law
and by statute in some
jurisdictions.
Assurance. Same as Insurance.
Assured. Same as Insured.
Assurer. Same as Insurer.
Atomic Energy
Reinsurance.
See Mutual Atomic
Energy Reinsurance Pool.
Attached Structures. The standard homeowners
policy covers not only the
house but also structures
attached to it—such as an
attached garage, breezeway,
patio, etc. This coverage
also extends to building
materials and supplies used
to expand the house,
build a facility like a pool
or make repairs to the
existing structure. This
material is covered in the
event of a fire, etc.
Attachment. A court order allowing one
person to
take something of value
belonging to another into
custody for a particular
purpose. For example: An
insured accidentally drives
his car into the wall of
someone else’s garage. The
garage owner has the
right to attach the insured’s
car (take it into custody)
as a way of guaranteeing
that the insured will
pay for repairing the
damage. An attachment ensures
that something of value is
available to settle
the claim if the individual
is held liable.
Attained Age. The age an insured has
reached on
a given date.
Attending Physician’s
Statement (APS).
A source
of medical information used
when underwriting a
life or health insurance
policy; usually obtained from
the proposed insured’s
doctor. This report provides
detailed information about
an insured’s medical history
or current physical
condition.
Attested Will. A formal will that is
produced (handwritten,
typed, etc.), signed by the
testator and
witnessed.
Attorney-in-Fact. The individual who manages
a
reciprocal insurance
exchange and to whom each
subscriber gives authority
to exchange insurance
on the subscriber’s behalf
with other subscribers.
See also Reciprocal
Insurance Exchange.
Attractive Nuisance. The law states that an
individual
owes no duty of care to a
trespasser upon
that individual’s property.
However, the law states
that a special duty of care
is required of a person
with respect to conditions
that attract children. Attractive
nuisances includes swimming
pools, jungle
gyms, etc.
Audit. A survey of the insured’s
payroll records to
determine the premium that
should be paid for the
coverage furnished. Used in
workers’ compensation
and general liability
policies.
Audit Bureau. A central office or bureau
to which
agents and companies send
certain daily reports and
endorsements for auditing
before transmittal to the
insurer.
Authorization. The amount of insurance an
underwriter
agrees to accept on a risk
of a given class
on specific property. It is
given for the guidance
and information of agents.
Authorized Insurer. An insurer authorized by
the
state to transact business
in that state for specific
types of insurance.
Automatic Cover. Coverage given
automatically
by a policy, usually for a
specified period and limited
amount, to cover increasing
values and newly
acquired and changing
interests.
Automatic Increase in
Insurance Endorsement.
See Inflation Guard
Coverage.
Automatic Premium Loan. A provision in a life
policy authorizing the
insurer to use the loan value
to pay any premiums still
due at the end of the
grace period.
Automatic Reinstatement
Clause. A
stipulation
in a property insurance
policy which states that after
a partial loss covered by
the policy has been paid,
the original limit of the
policy will be automatically
reinstated. Same as Loss
Clause.
Automatic Reinsurance. (1) This form of
reinsurance,
also known as treaty
reinsurance, is one
whereby an insurer must cede
that portion of a risk
that is above the limit
established by contract, and
the reinsurer must accept
all risks ceded to it. (2)
Reinsurance of specified
types of risks which is automatically
ceded and accepted within
the terms of
the contract, called a
treaty, without consideration
of each one individually.
The reinsurance takes effect
as soon as the original
contract is in force. Same
as Obligatory Reinsurance.
Contrast with Facultative
Reinsurance.
Automobile Fleet. Refers to a number of
automobiles
under the same ownership.
For insurance purposes
a fleet usually consists of
five or more self-propelled
units and generally qualifies
for certain
premium reductions and
rating plans.
Automobile Insurance
Plans. A
name used to identify
assigned risk plans. See
Assigned Risk.
Automobile Insurance. Insurance that protects
the
insured against losses
involving automobiles. Different
coverages can be purchased
depending on
the needs and wants of the
insured (e.g., the liability
coverages of bodily injury
liability, property
damage liability and medical
payments, and the
physical damage coverages of
collision and comprehensive).
Automobile Use
Classifications.
An insured’s
needs and the insurance
company’s risk analysis
coincide in the question of
how an insured uses his
vehicles. The insurance
company’s primary rating
factors include use
classifications. These include
“pleasure use,” “business
use,” “farm use” and “driving
to work.” If a car is used
only for pleasure (this
is sometimes called
occasional use), premiums are
lower than if the car is
driven every day to work.
Cars claimed for business
use tend to be more expensive
to insure.
Average Adjuster. One whose primary work is
the
adjusting of ocean marine
losses.
Average Benefit Test. A coverage or
discrimination
test for a qualified plan
that states that at least
50 percent of the lower paid
employees must benefit
from the plan and the
average benefit provided
must be at least 70 percent
of the benefit provided
for the higher-paid
employees.
Average Clause. A clause providing that
similar
items in one location or
several locations that are
insured by a policy shall be
covered in the propor-
tion that the value of each
bears to the value of all.
Also known as the average
distribution clause. See
also Pro Rata Distribution
Clause.
Average Cost Per Claim. The total cost of
administrative
and/or medical services
divided by the number
of units of exposure such as
costs divided by
number of admissions or by
number of outpatient
claims, etc.
Average Earnings Clause. See Relation of Earning
to Insurance Provision.
Average Indexed Monthly
Earnings (AIME).
A
wage indexing formula based
on earnings listed in
the records of the Social
Security Administration;
used to compute Social
Security benefits for retirement,
survivors benefits and
disability income benefits.
Average Length of Stay
(ALOS). The
total number
of patient days divided by
the number of admissions
and discharges during a
specified period
of time. This gives the
average number of days in
the hospital for each person
admitted.
Average Rate. A rate for a policy
established by
multiplying the rate for each
location by the value
at that location and
dividing the sum of the results
by the total value.
Average Weekly Wage. A term generally used in
workers’ compensation laws
that is the basis for determining
weekly benefits under such
laws.
Aviation Accident
Insurance.
Insurance that protects
individuals as passengers or
pilots, usually on
scheduled aircraft, or that
covers the flight travel of
the employees of a company
under a master policy.
Aviation Hazard. The extra hazard of death
or injury
resulting from participation
in aeronautics,
usually as other than a
fare-paying passenger in licensed
aircraft. This generally
requires an extra premium
rating or waiver of certain
benefits or coverage.
Aviation Insurance. Insurance that protects an
insured
against losses connected
with the use of an
airplane. Coverage depends
upon the needs and
desires of the insured and
can include the liability
coverages of bodily injury,
property damage, passenger
bodily injury and medical
payments, as well
as physical damage or hull
coverage. Hull coverage
can be written to provide
either broad or limited
coverage. Coverage can also
be written for airports,
aircraft dealers, airlines
and hangarkeepers’ liability.
Avocation Questionnaire. A form that an insured
must fill out if he or she
is engaged in a hazardous
hobby. Provides more
specific information concerning
the hobby.
Avoidance of Risk. Taking steps to remove a
hazard,
engage in an alternative
activity or otherwise
end a specific exposure. One
of the four major risk
management techniques. See
Risk Management.
© 2008 Silver
© 2008 Silver
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Backdating. A procedure for making the
effective
date of a policy earlier
than the application date.
Often used to make the age
at issue lower than it
actually was in order to get
a lower premium. State
laws often limit (to six
months) the time to which
policies can be backdated.
Bad Faith. Lawsuits or regulatory
complaints relating
to delays or denials usually
allege bad faith
on the part of the insurer.
This is one of the heaviest
clubs a policyholder can
wield to strike back at an
insurance company. One way
an insurance company
can act in bad faith is by
investigating a claim with
an eye toward not providing
coverage.
Bail Bond. A bond that guarantees
that a person
released from legal
confinement will appear as required
in court, or the penalty of
the bond will be
forfeited to the court. In
insurance policies, bail bond
fees are covered under an
auto policy.
Bailee. A person or concern having
possession of
personal property entrusted
to that person by the
owner (e.g., a laundry that
has custody of customers’
clothing for washing or dry
cleaning). Bailees
must exercise the same care
with the property of
others as they would with
their own property.
Bailees Customer
Insurance.
Insurance purchased
by a bailee to protect the
personal property of customers
against loss caused by specific
perils (e.g., a carpet
cleaner who buys coverage to
protect customers
against loss or damage to their
carpets while
in the store’s care.
Bailees Liability
Coverage.
Coverage that meets
the needs of a bailee’s
liability. The bailee’s legal
responsibility is to
exercise care appropriate to the
circumstances of the
bailment. (Most bailees want
to carry enough insurance to
make good any loss to
property in their custody
whether or not they are
legally liable.)
Bailment. The personal property of
one person being
held by another with the
intent of its being
returned to the original
owner (e.g., cars in a garage
for repairs).
Bailor. A person who owns property
that is entrusted
to another (e.g., the owner
of a fur coat who has
entrusted it to a furrier
for storage).
Balance Sheet. A listing of the assets,
liabilities
and surplus of a company or
individual as of a specific
date.
Bank Loan Plan. See Financed Insurance.
Bankers Blanket Bond. Insurance purchased by
banks to pay for losses due
to the dishonesty of employees
as well as losses caused by
people other than
employees due to burglary,
robbery, larceny, theft,
forgery and mysterious
disappearance.
Barratry. A fraudulent breach of
duty on the part
of a master of a ship
causing loss to the owner of the
ship or the owner of the
cargo.
Base Capitation. The total amount which
covers
the cost of health care per
person, minus any mental
health or substance abuse
services, pharmacy and
administrative charges.
Base Premium. See Subject Premium.
Base Rate. The cost of a given unit
of insurance for
each specific type of auto
coverage, such as bodily
injury and property damage
liability. For example,
a base rate might be $300
for $100,000 of liability
coverage. A driver with a
poor driving record must
be charged an increased
amount to reflect the poor
record. This increased amount
is computed by
multiplying the base rate by
a rating factor. See
also Rating Process.
Basic Auto Policy. Once used to insure
commercial
vehicles, motorcycles,
motorscooters and a variety
of substandard risks. This
policy had broad
eligibility rules, but the
scope of coverage was narrower
than modern auto policies.
Most automobile
risks today are insured by
business or personal auto
policies, with appropriate
endorsements.
Basic Coverage Form. A commercial or personal
lines property form that
provides basic coverages.
These forms generally
provide the most limited coverage,
which is surpassed by broad
forms and special
forms.
Basic Extended
Reporting Period.
An automatic
“tail” for reporting claims
after expiration of a
“claims-made” liability policy.
It is provided without
charge and consists of two
parts: a mini-tail
covers claims made within 60
days after the end of
the policy; a midi-tail
covers claims made within
five years after the end of
the policy period arising
out of occurrences reported
not later than 60 days
after the end of the policy.
See also Tail.
Basic Form Rates. Under the latest
commercial
lines program, Basic Form
Rates are arrived at by
adding Group I and Group II
rates together. See
Group I Rates and Group II
Rates.
Basic Hospital Expense
Insurance.
Hospital coverage
providing benefits for room
and board and
miscellaneous hospital
expenses for a specified number
of days during hospital
confinement.
Basic Limit. Usually refers to
liability policies and
indicates the lowest amount
for which a policy can
be written. This amount is
either prescribed by law
or company policy.
Basic Limits of
Liability.
Minimum amounts of
insurance. This usually
refers to bodily injury and
property damage limits that
are either the lowest
amounts which can be written
at the published or
manual rates, the minimum
amount of insurance
an insurer is willing to
underwrite or the minimum
amount of insurance required
by law (e.g., auto insurance
financial responsibility
laws).
Basic Medical Expense Insurance. Basic medical
coverage for doctor visits,
diagnostic x-rays, lab tests
and emergency treatments.
Usually written without
deductibles and coinsurance
provisions, but
benefits are limited to
specified dollar amounts.
Contrast with Major Medical
Insurance.
Basic Premium. A fixed cost charged in a
retrospective
rating plan. It is a
percentage of the standard premium
and gives the insurer the money
needed for
administrative expenses and the agent’s commission
plus an insurance charge. See
also Retrospective
Rating.
Basic Rate. The manual rate from which
discounts
are taken or to which
charges are added to reflect
the individual circumstances
of a risk.
Bed Days/1,000. The number of inpatient
hospital
days per 1,000 members of a
health plan.
Below Market Loan. A demand loan with
interest
paid below the federal rate;
typically, part of an executive
loan program provided by an
employer.
Bench Error. A loss that occurs in the
production
process (e.g., if production
workers mistakenly use
the wrong ingredients in a
chemical formula). Bench
errors are covered by
products insurance.
Beneficiary. A person who may become
eligible to
receive or is receiving
benefits under an insurance
policy other than a
participant. There may be one
or more designated beneficiaries,
including primary
beneficiaries who are
entitled to the proceeds if they
are living, and contingent
beneficiaries who are entitled
to the proceeds if there is
no surviving primary
beneficiary when an insured
dies. See also Irrevocable
Beneficiary, Revocable
Beneficiary, Primary
Beneficiary, Secondary
Beneficiary and Contingent
Beneficiary.
Benefit. The amount paid to a
participant of a retirement
plan or to the participant’s
beneficiary at
retirement, death or
termination of service.
Benefit, Flat Dollar. A monthly benefit given to
all employees regardless of
length of service or standard
of living. (Everyone
receives the same amount.)
Benefit, Flat
Percentage.
A monthly pension benefit
determined by a fixed
percentage of compensation.
Although recognizing the
employee’s standard
of living, it still ignores
length of service.
Benefit Levels. The maximum amount a
person is
entitled to receive for a
particular service or services
under a contract with a
health plan or insurer.
Benefits of Survivorship. See Survivorship Benefits.
Benefit Package. A description of the
services an
insurer or health plan
offers to those covered under
the terms of a health
insurance contract.
Benefit Period (BP). The period during which a
Medicare beneficiary is
eligible for Part A benefits.
A benefit period is 90 days
and begins the day the
patient is admitted to a
hospital and ends when the
individual has not been
hospitalized for a period of
60 consecutive days.
Benefits. The financial
reimbursement and other
services provided to
insureds by insurers under the
terms of an insurance
contract (e.g., the benefits
listed under a life or
health policy or benefits as
prescribed by a workers’
compensation law).
Benefit Stacking. Adding the uninsured
motorists
limits from insurance on
several different cars
to apply to a single claim.
Betterment. See Improvements and
Betterments
Insurance.
BI. (1) Bodily Injury
Liability. (2) Business Interruption
Insurance and Business
Income Coverage
Form. This is what these
letters most often refer to
in the property field.
Bid Bond. A bond filed with a bid
for a construction
or other project that
guarantees that if the
contractor has the low bid
and is awarded the job, the
required performance bond
will be furnished.
Billed Claims. The amounts submitted by a
health
care provider for services
provided to a covered individual.
Binder. An agreement executed by
an agent or insurer
(usually the latter) putting
insurance into force
before the contract is
written or premium is paid.
Not used in life insurance.
See Cover Note.
Binding Receipt. See Conditional Binding
Receipt.
Birth Rate. The number of births
related to the
total population in a given
group during a period
of time. (Usually expressed
as births per 100,000
people in one year.)
Birthday Rule. A method of determining
which
parent’s medical coverage is
primary for dependent
children: the parent whose
birthday falls earliest in
the year usually has the
primary plan.
Blackout Period. The period of time during
which
a surviving spouse no longer
receives survivors
benefits (after the youngest child
is no longer eligible)
and before he or she is
eligible for retirement benefits.
Blanket Bond. A fidelity bond that
covers losses
caused by the dishonesty of
all employees as opposed
to a bond that specifically
identifies only certain
employees to be covered. See
also Blanket Position
Bond and Commercial Blanket
Bond, and
contrast with Name Position
Bond and Name
Schedule Bond.
Blanket Contract. See Blanket Insurance.
Blanket Crime Policy. A policy that once
provided
a package of coverages for
employee dishonesty, loss
of money and securities
inside and outside the premises,
depositor’s forgery, loss of
money orders and
loss due to counterfeit
paper currency. It has been
replaced by modern commercial
crime coverage.
Blanket Fidelity Bond. See Blanket Bond.
Blanket Honesty Bond. See Commercial Blanket
Bond.
Blanket Insurance. (1) Health insurance that
covers
all of a class of persons
not individually identified
in the contract. (2) Property
insurance that covers,
in a single contract, either
multiple types of
property at a single
location or one or more types of
property at multiple
locations.
Blanket Medical Expense. A policy or provision
in a health insurance
contract that pays all medical
costs, including
hospitalization, drugs and treatments,
without limitation on any
item except pos-
sibly for a maximum
aggregate benefit under the
policy. It is often written
with an initial deductible
amount.
Blanket Position Bond. A Blanket Fidelity Bond
where the amount of coverage
applies separately to
each position covered.
Contrast with Commercial
Blanket Bond (offers a
single amount of coverage
for any one loss, regardless
of the number of employees
involved). See also Blanket
Bond.
Blasting and Explosion
Exclusion.
Exclusion of
liability for damages from
blasting or explosions.
An additional rate is
charged.
Block Policy. An open perils (all risk)
policy that
derives its name from the
French term en
bloc meaning
“all together.” It provides
coverage on stock,
property being transported
or in bailment and on
the premises of others.
Blowout and Cratering. Accidents that can arise
from drilling operations.
Generally includes damage
to property above the
surface of the earth arising out
of blowout or cratering of
any well. Usually added
by endorsement for an
additional premium.
Blue Cross. Blue Cross plans are
hospital expense
prepayment plans designed
primarily to provide
benefits for hospitalization
coverage, with certain
restrictions on the type of
accommodations.
Blue Plan. A generic designation for
those companies,
usually writing a service
rather than a reimbursement
contract, who are authorized
to use the
designation Blue Cross or
Blue Shield and the insignia
of either.
Blue Shield. Blue Shield plans are
prepayment plans
offered by service
organizations covering medical
and surgical expenses.
Board Certified. A physician or other
professional
certified as a specialist in
a particular medical area.
Board Eligible. A professional or physician
who is
eligible to become certified
as a specialist.
Bobtailing. Using the truck/tractor
after unloading
the trailer and not driving
for trucking purposes.
Bodily Injury. Coverage for bodily harm,
sickness
or disease. Includes the
costs of required care, loss
of services or death
resulting from an injury.
Bodily Injury Liability
(BI). A
legal liability that
may arise as a result of the
injury or death of another
person. This coverage pays
the other person’s
medical and rehabilitation
expenses and any damages
for which they may sue.
Boiler and Machinery
Coverage.
Insurance against
the sudden and accidental
breakdown of boilers,
machinery, and electrical
equipment. Coverage is
provided on: 1) damage to
the equipment; 2) expediting
expenses; 3) property damage
to the property
of others; 4) supplementary
payments; and 5)
additional objects. Coverage
can be extended to
cover consequential losses
and loss from business
interruption.
Bond. A three-party contract
guaranteeing that if
one person, the principal,
fails to perform as speci-
fied or proves to be
dishonest, the person to whom
the duty is owed, the
obligee, will be financially
protected by the issuer of
the bond, the surety.
Bond, Contract. See Contract Bond.
Bond, Court. See Court Bond.
Bond, Fidelity. See Fidelity Bond.
Bond, Fiduciary. See Fiduciary Bond.
Bond, Forgery. See Forgery Bond.
Bond, Maintenance. See Maintenance Bond.
Bond, Performance. See Contract Bond.
Bond, Permit. See Permit Bond.
Bond, Public Official. See Public Official Bond.
Bond, Surety. See Suretyship.
Book of Business. A total of all insurance
accounts
written by a company or
agent, including: an
insurer’s book of automobile
business; an agent’s
overall book of business; an
agent’s book of business
with each insurer; etc.
Book Value. The value of assets as
shown in the
official accounting records
of the company.
Bordereau. (1) A written report of
individual cessions,
usually detailed to show
such items as reinsurance
premiums or reinsurance losses
with respect
to specific risks. (2) A
memorandum containing
information concerning
documents that accompany
it. Used extensively in
passing reinsurance from one
insurer to another under a
reinsurance agreement
and by property and
liability general agents for
passing information to
various insurers on coverages
written.
Borderline Risk. An insurance prospect of
doubtful
quality from an underwriting
point of view.
Boston Plan. A plan where insurers
agree that they
will not reject property
coverage on residential buildings
in a slum area. Insurers
agree to accept the
coverage until there has
been an inspection and the
owner has had an opportunity
to correct any faults.
Boston was the first city to
originate such a plan.
Other cities have followed,
including New York,
Oakland, Cleveland and
Buffalo.
Bottomry. A contract of insurance by
which a ship
or its cargo is pledged as
collateral for a loan required
to support a maritime
venture. If the ship or
cargo is lost, the loan is
canceled and the borrower
would not have to repay the
loan.
Boycott. A trade practice that
occurs when someone
refuses to have business
dealings with another
until he or she complies
with certain conditions or
concessions.
Branch Manager. An executive who manages a
branch office for an insurer
or an agency. See also
Regional Office.
Branch Office. See Regional Office.
Breach of the Duty to
Act. When a
tortfeasor does
not act in a reasonably
prudent manner toward another.
See Negligence.
Brick Construction. A building with at least
75
percent of the exterior
walls made of some type of
masonry construction (e.g.,
brick, stone or hollow
masonry tile, poured
concrete or reinforced concrete,
or hollow masonry block).
Brick Veneer
Construction.
A building with outside
walls constructed of wood
and a facing of a
single layer of brick.
Brief. A statement—prepared by an
attorney to be
filed with a court—that
highlights the principal
issues of a case.
Broad Form. Policies that provide
insurance for
multiple types of perils
over and above the usual
basic perils, or additional
coverages beyond standard
coverages.
Broad Form Nuclear
Energy Liability Exclusion
Endorsement. A form attached to every
general liability
coverage part that excludes
coverage for any
loss resulting from the hazardous
properties of
nuclear material related to
the operations of a
nuclear facility.
Broad Form Personal
Theft Policy.
Theft coverage
on personal property at
private residences, usually
on an open perils (all risk)
basis. A limited form
of the Broad Form Personal
Theft policy is known
as the Personal Theft
policy.
Broad Form Property
Damage Endorsement.
An
endorsement to a general
liability policy that deletes
the exclusion referring to
property in the care,
custody or control of the
insured and replaces it
with a less restrictive
exclusion.
Broad Form Storekeepers
Insurance.
Coverage
for small storekeepers that
includes several specific
crime perils on the same
basis as a storekeepers burglary
and robbery policy, plus
open perils (all risk)
protection on money and
securities, depositors’ forgery
and a small limit on
employee dishonesty. See
Storekeepers Burglary and
Robbery Insurance.
Broad Theft Coverage
Endorsement.
A form attached
to a dwelling policy that
provides theft coverage
for a named insured who is
an owner occupant.
Provides coverage for loss
by theft, including
attempted theft, and
vandalism and malicious mischief
as a result of theft or
attempted theft.
Broker. One who represents an
insured in the solicitation,
negotiation or procurement
of contracts
of insurance, and who may
render services incidental
to those functions. A broker
may also be an agent
of the insurer for certain
purposes such as delivery
of the policy or collection
of the premium.
Brokerage. (1) The fee or commission
received by
a broker. (2) Insurance
placed by brokers contrasted
with that placed by agents.
Broker of Record. A broker who has been
designated
to handle certain insurance
contracts for the
policyholder.
Brokerage Business. Business offered to an
insurer
by a broker. Also called
excess or surplus business.
Brokerage Department. A department of an insurer
whose purpose is to deal
with brokers in the
placing of insurance.
Broker-Agent. One acting as an agent of
one or
more insurers and as a
broker in dealing with one
or more other insurers.
Builder’s Risk Coverage
Form. A
commercial property
coverage form specifically
designed for buildings
in the course of
construction.
Building Additions and
Alterations.
Coverage for
improvements to a rental
property (apartment or
house) that have not been
reimbursed by the landlord.
Falls under renters
insurance. Also called leasehold
improvement insurance.
Building and Personal
Property Coverage Form.
A commercial property
coverage form designed to
insure most types of
commercial property (buildings,
contents or both). It is the
most frequently
used commercial property
form, and has replaced
the General Property form,
Special Building form,
Special Personal Property
form and others.
Building Code. Municipal or other
governmental
ordinances regulating the
type of construction of
buildings within its
jurisdiction.
Building Code Upgrade
Coverage.
Also known
as ordinance or law
coverage, provides up to
$10,000 of coverage for the
additional costs required
to bring a damaged dwelling
up to current building
code requirements. Without
this coverage, a
policy would pay only the
amount needed to repair
or replace the damaged
dwelling to restore it to the
condition it was in prior to
the loss, and would not
cover any additional costs
due to changes required
by current building codes.
Bullion. Refers to precious metals,
such as gold, in
the form of ingots or bars.
Bumbershoot Policy. A liability policy
(similar to
the umbrella policy) that
includes coverage related
to ocean marine risks.
Includes general liability coverage,
protection and indemnity, as
well as liability
coverage under the
Longshoremen’s and Harbor
Workers’ Act. Collision
coverage can be provided
and general average and
salvage charges can be included.
Provides coverage for
shipyards.
Bureau, Rating. See Rating Bureau.
Burglary. Breaking and entering into
the premises
of another with felonious
intent. Visible marks or
damage at the point of entry
or exit are needed to
confirm the burglary.
Burglary Insurance. Insurance against loss
caused
by burglars. In personal
lines, burglary insurance is
provided by homeowners
policies and theft endorsements
that are added to dwelling
policies. In commercial
lines, a variety of
commercial crime coverage
forms include burglary
insurance.
Burning Cost Ratio. See Pure Loss Cost Ratio.
Burning Ratio. The ratio of losses
suffered to the
amount of insurance in
effect.
Business. (1) Any trade, profession
or occupation.
(2) In property, liability
and health lines, it usually
refers to the volume of
premiums. (3) The face
amount of life insurance
written.
Business Activities. Any agreement, contract,
transaction or other
interaction that advances a
person’s occupation. See
Business Liability.
Business Auto Coverage
Form. The
latest commercial
automobile insurance
coverage form, which
may be written as a monoline
policy or as part of a
commercial package. This
form has largely replaced
the business auto policy.
Business Auto Policy. A policy that provides
liability
and physical damage
coverages on commercial
vehicles. In most
jurisdictions, this has been
replaced by the business
auto coverage form.
Business Income
Coverage Form.
A commercial
property form providing
coverage for “indirect
losses” resulting from
property damage, such as loss
of business income and extra
expenses incurred.
(Replaced earlier business
interruption and extra
expense forms.)
Business Insurance. (1) Insurance for
businesses
or commercial
establishments. (2) Life and health
policies written for
business purposes, such as key
employee, sole
proprietorship, partnership and corporation.
Business Interruption
Insurance.
A time element
coverage that pays for loss
of earnings when operations
are curtailed or suspended
because of property
loss due to an insured
peril. Now referred to as
business income insurance.
See Business Income
Coverage Form.
Business Interruption
Insurance, Contingent.
Coverage for business income
from dependent properties.
See Business Income Coverage
Form and
Dependent Properties.
Business Liability. Liability coverages
provided by
the businessowners liability
coverage form. It includes
liability for bodily injury,
property damage,
personal injury, advertising
injury and fire damage.
Business Overhead
Expense (BOE) Policy.
A disability
income policy which
indemnifies the business
(not the businessowner) for
certain overhead
expenses incurred when the
businessowner is totally
disabled. Often has an
elimination period of
30 to 90 days and a benefit
period of one or two
years.
Business Personal
Property.
Traditionally known
as contents, this includes
furniture, fixtures, equipment,
machinery, merchandise,
materials and any
other personal property
owned by the insured and
used in the insured’s
business.
Business Risk Exclusion. Also known as the
(product)
failure to perform
exclusion. In products insurance,
no coverage is provided for
a product that does
not meet the level of
performance, quality, fitness or
durability warranted or
represented by the insured.
Coverage is provided,
however, if liability results
from a bench error or an
active malfunction.
Businessowner Policies
(BOP). A
package policy
that provides broad property
and liability coverage
in a single contract and is
designed for small and
medium-sized mercantile, office
or apartment risks.
“Buy-Back” Deductible. A deductible that may
be eliminated for an
additional premium in order
to provide “first-dollar”
coverage—coverage that
doesn’t have a deductible.
Buyers Guide. A consumer publication
that describes
the type of coverage
offered, and provides
general information to help
an applicant for life or
health insurance compare
different policies to reach
a decision about whether the
proposed coverage is
appropriate. Also called a
shoppers guide.
Buy-Sell Agreement. (1) An agreement among
part-owners of a business
that says that under stated
conditions (i.e., disability
or death), the person withdrawing
from the business or the
person’s heirs are
legally obligated to sell
their interest to the remaining
part-owners, and the
remaining part-owners are
legally obligated to buy at
a price fixed in the agreement;
(2) a similar agreement
between an owner or
part-owner of a business and
a nonowner, such as a
key employee.
Bypass Trust. Also referred to as the B
trust; a trust
which contains estate assets
that will bypass the surviving
spouse and pass directly to
other family members.
© 2008 Silver
© 2008 Silver
C
Cafeteria Plans. An employee benefit that
provides
a series of flexible health
care benefits from which
an employee may choose,
including a cash only
option.
Calendar Year. January 1 through December
31
of the same year. Many
deductible amount provisions
are on a calendar year basis
under major medical
plans. Also, benefits under
basic hospital surgical
and medical plans are
usually stated as so much
for each calendar year.
Calendar Year
Experience.
Measures the premiums
and losses entered on
accounting records during
the 12-month calendar.
Cancelable. A contract of insurance
that may be
terminated by the insurer or
insured at any time.
Practically every form of
insurance is cancelable,
except life insurance and
those health insurance
policies designated as a
“guaranteed renewable” or
“non-cancelable
and guaranteed renewable.” Some
states also regulate when,
or if, auto policies can be
canceled. See Renewability.
Cancellation. Termination of a contract
of insurance
by voluntary act of the
insurer or insured in accordance
with the provisions in the
contract or by
mutual agreement. In most
states, the reasons for
which an insurance company
is permitted to cancel
a policy are limited—if the
policy has been in effect
for at least 60 days or is a
renewal policy.
Cancellation
Changes Endorsement. An endorsement
that must be attached to
every commercial
property coverage part,
unless it is in conflict with
state law or is replaced by
a special state endorsement
that affects the cancellation
clause of the common
policy conditions.
Cancellation,
Flat. See Flat Cancellation.
Cancellation,
Pro Rata. See Pro Rata Cancellation.
Cancellation,
Short-Rate. See Short Rate Cancellation.
Capacity. The largest amount of
insurance or reinsurance
available from a company. In
a broader sense,
it refers to the largest amount
of insurance or reinsurance
available in the
marketplace.
Capital Stock Insurer. See Stock Insurer.
Capital Stock. The shares of ownership in
a corporation.
Capital Sum. The maximum lump sum
payable in
the event of accidental
death or dismemberment.
See Principal Sum.
Capital Transaction. The sale of a capital
asset, such
as stock, which results in
the transaction being taxed
as ordinary income and not
as a dividend.
Capitation (CAP). A rate paid, usually
monthly, to
a health care provider. In return,
the provider agrees
to deliver the health
services agreed upon to any
covered person.
Captive
Agent. One who sells insurance for
only
one company as opposed to
one who represents several.
See also Exclusive Agency
System.
Captive Insurer. A legally recognized
insurance
company organized and owned
by a corporation or
firm whose purpose is to use
the captive to write its
own insurance at rates lower
than those of other
insurers. Usually, it is a
nonadmitted insurer that
has the right, under special
circumstances, to reinsure
with an admitted insurer.
Care, Custody and
Control.
Most liability insurance
policies exclude coverage
for damage to property
in the care, custody or
control of the insured.
In some cases this type of
coverage can be purchased
through certain forms of
inland marine insurance,
like installation floaters,
and in other cases this exclusion
can be made less restrictive
by adding a
broad form property damage
endorsement.
Cargo Insurance. A policy covering cargo
transported
by a carrier.
Carpenter Cover. See Spread Loss
Reinsurance.
Carrier Replacement. This refers to a situation
where one carrier replaces
one or more carriers.
Carrier. (1) Sometimes refers to
the insurer. The
term “insurer” is preferred
because of the possible
confusion of “carrier” with
transportation. (2) Usually
a commercial insurer
contracted by the Department
of Health and Human Services
to process
Medicare Part B claims
payments. See also Insurer.
Carryover
Provision. In major medical policies,
allowing an insured who has
submitted no claims
during the year to apply any
medical expenses incurred
in the last three months of
the year toward
the new calendar year’s
deductible.
CAS. See Casualty Actuarial
Society.
Case Management. The assessment of a
person’s
long-term care needs and the
appropriate recommendations
for care, monitoring and
follow-up as
to the extent and quality of
services to be provided.
Case Manager. A person, usually an
experienced
professional, who
coordinates the services necessary
under the case management
approach.
Case Mix. The number of cases
requiring different
needs and uses of hospital
resources.
Cash Flow Plans. Premium payment schemes
that
allow an insured to retain a
large part of the premium
and pay it out over a time
period such as a
year.
Cash Flow Underwriting. The use of rating and
premium collection
techniques by insurance companies
to maximize interest
earnings on premiums.
Cash Refund Annuity. An annuity contract which
provides that if at the
death of the annuitant installments
paid out have not totaled
the amount of
the premium paid for the
annuity, the difference
will be paid to a designated
beneficiary in a lump
sum.
Cash
Surrender Value. The amount of cash due
an insured who surrenders
cash value life insurance.
Such surrender, with
consequent termination of all
insurance benefits, is often
called “cashing out” or
“cashing in” a policy. See
Nonforfeiture Values.
Cash Value. (1) See Actual Cash Value.
(2) See
Cash Surrender Value.
Casualty Actuarial
Society (CAS).
A professional
society for actuaries in
areas of insurance work other
than life insurance. This
society grants the designation
of Associate and Fellow of
the Casualty Actuarial
Society (ACAS and FCAS).
Casualty Insurance. Insurance that is
primarily
concerned with the legal
liability for losses caused
by injury to persons or
damage to the property of
others. Includes such
diverse forms as plate glass
insurance, crime insurance,
boiler and machinery
insurance and aviation
insurance. Many casualty
insurers also write surety
bonds. Casualty insurers
write forms of insurance not
considered property
forms. Contrast with
Property Insurance.
Catastrophe Hazard/Loss. The hazard of large loss
by reason of occurrence of a
peril to which a very
large number of insureds are
subject (e.g., widespread
loss due to a hurricane or
tornado).
Catastrophe Models. Models used by insurance
companies as a basis to
estimate homeowner losses.
(The models were originally
developed by Applied
Insurance Research (AIR) of
Boston.)
Catastrophe Policy. An older name for major
medical.
See Major Medical.
Catastrophe
Reinsurance. Excess of loss reinsurance
which, subject to a
specified limit, indemnifies
the ceding company against
an amount of loss
in excess of a specified
amount as the result of an
accumulation of losses
resulting from a catastrophic
event or a series of
catastrophic events.
Caused Accidents. An incident in which an
innocent
victim is made an unwitting
participant in an
actual accident to obtain
insurance money, such as
a sideswiping (law
enforcement people call this scam
swoop and squat”).
Causes of Loss. Under the latest
commercial property,
inland marine and crime
coverage forms, this
term replaces the earlier
term “perils” insured
against.
Causes of Loss Forms. Commercial property forms
stating the perils insured
against, additional coverages
provided, and exclusions
that apply. There are
four causes of loss
forms—basic, broad, special and
earthquake.
Caveat Emptor. Let the buyer beware.
CCRCs. See Continuing Care
Retirement Communities
(CCRCs).
Cease and Desist Order. An order of the state Insurance
Commissioner or of a court
requiring that a company/
person stop engaging in a
particular act or practice,
usually involving insurance
trade practices.
Cede. (1) The act of buying
reinsurance. (2) To transfer
to a reinsurer all or part
of the insurance or reinsurance
written by a ceding company.
Ceding
Company. An insurer that cedes all
or part
of the insurance or
reinsurance it has written to another
insurer. A company that has
placed reinsurance,
distinguished from the
company that accepts
it.
Certificate. See Certificate of
Insurance or Participation.
Certificate of
Authority (COA).
(1) A certificate
issued by the state that
licenses the operation of an
HMO (Health Maintenance
Organization). (2) A certificate
showing the powers that an
insurer grants
to its agents. (3) A
certificate issued by a state department
of insurance showing the
power of an insurer
to write contracts of
insurance in that state.
Certificate of
Convenience.
A temporary license
or permit empowering a
person to act as an agent
even though not fully
licensed according to the law.
Usually this certificate is
granted to an agent who
is studying for a licensing
examination. It may also
be issued to the
administrator or executor of the
estate of an insurance
agent, who must have the
authority of an agent to
settle the estate, or to someone
acting for an agent during a
disability or an
absence such as military
duty.
Certificate of
Insurance.
(1) A statement of the
coverage and general provisions
of a master contract
in group insurance that is
issued to individuals
covered in the group. (2) A
form that verifies
that a policy has been
written and states the coverage
in general, often used as
proof of insurance in
loan transactions and for other
legal requirements.
Certificate
of Need (CON). A certificate issued by
a governmental body,
certifying that the proposed
facility will meet the needs
of those for whom it is
intended. May include
constructing a new health
facility, offering a new or
different health service or
acquiring new medical
equipment.
Certificate of
Reinsurance.
A short-form documentation
of a reinsurance
transaction.
Certiorari. A writ issued by a higher
court to a
lower court asking the lower
court to forward the
record of a particular case
in question.
Cession. The unit of insurance
transferred to a reinsurer
by a ceding company. It also
refers to the
process of ceding insurance
to a reinsurer.
Cestui Que Vie. The person whose life
measures
the duration of a trust,
gift, estate or insurance contract.
In life and health insurance
it is the person on
whose life or health the
policy is written (e.g., the
insured, policyholder or
policyowner).
CGL. See Commercial General
Liability Coverage
Part.
Change Endorsement. When adding an endorsement
after a policy is in effect,
in most cases a
change endorsement must be
issued. The endorsement
lists the policy number and
effective date of
the change, and acts
something like a cover letter,
by providing information
about an endorsement.
Change of Beneficiary. A mandatory provision that
says the policyholder
(usually the insured) has the
right to name or change a
beneficiary. Since a disability
income policy may include an
accidental
death benefit, this
provision is relevant—whether
the policy comes from a
health insurance company
or a life insurance company.
The only time when
this is not the case is if
the beneficiary was designated
as an irrevocable
beneficiary.
Change of Occupation
Provision.
(1) A provision
in a health insurance policy
that allows the insurer
to adjust policy benefits if
the insured has changed
to a more hazardous
occupation. (2) A provision
that provides a method for
handling disability income
claims if the insured has
changed occupations
since the initial
application. This provision allows
the insurer to adjust
benefits or premiums to reflect
the change in occupation. If
this provision is not in
the policy, then no changes
can be made.
Chapter 7. Also called liquidation,
this is the most
common type of bankruptcy
proceeding. It involves
the appointment of a trustee
who collects the nonexempt
property of the debtor,
sells it and then distributes
the proceeds to the creditors.
Charter. (1) To rent or lease a
ship or boat. (2) Usually
the same as articles of
incorporation. This is the
grant of rights from a state
or federal government,
such as the right to
incorporate and transact business.
Chartered Life
Underwriter (CLU).
A designation
granted by the American
College of Life Underwriters
upon successful completion
of a series of
examinations. This is a
popular professional designation
among people who sell life
insurance.
Chartered Property and
Casualty Underwriter
(CPCU). A designation granted by
the American
Institute of Property and
Casualty Underwriters
upon successful completion
of a series of examinations.
Chattel. Personal property items.
Chattel Mortgage. A mortgage where the
collateral
is personal property, rather
than land or buildings.
Chemical Dependency
Services.
The services required
in the treatment and
diagnosis of chemical
dependency, alcoholism and
drug dependency.
Chemical Equivalents. Drugs that contain
identical
amounts of the same
ingredients.
Christian Science
Organization.
A religious organization
that is certified by the
First Church of
Christian Scientists. The
organization may also be
Medicare-certified as a
hospital or skilled nursing
facility.
Churning. An illegal practice where
insurance
agents unnecessarily replace
existing life insurance
for the purpose of earning
additional (higher) first
year commissions.
Civil Commotion. An uprising of a large
number
of people, usually resulting
in damage to property.
Generally describes one of
the extended coverage
perils in the extended
coverage endorsement.
Civilian Health and
Medical Program of the Uniformed
Services (CHAMPUS). Part of the Uniformed
Services Health Benefits
Program that
supplements medical care
available for families of
active, deceased and retired
military personnel.
Claim. A demand made by the
insured, or the
insured’s beneficiary, for
payment of the benefits
provided by the contract.
Claim Expense. The expense of adjusting a
claim,
such as investigation and
attorneys’ fees. It does not
include the cost of the
claim itself. Other expenses
incurred by the company,
such as witness fees and
any trial costs assessed
against the insured are also
covered.
Claim Report. A report filed by an agent
setting
forth the facts of a claim.
Same as loss report.
Claim Representative. See Adjuster.
Claimant. The person making a demand
for payment
of benefits.
Claims Payment
Provision.
A provision that identifies
to whom benefits will be
paid. This, of course,
is the insured person, or
loss payee. It is possible
that policy benefits may be
paid to a third party,
such as a doctor or
hospital, if the insured person
executes a proper assignment
form.
Claims Reserve. Amounts set aside to meet
costs
of claims incurred but not
yet finally settled (e.g., a
workers’ compensation case
where benefits are payable
for several years. At any
given point in time,
the reserve would be the
funds kept based on the
estimate of what the claim
will cost when finally
settled).
Claims Tail. Claims that take place
after the end of
a policy period create an exposure
known as a claims
tail. Coverage is
automatically built into the insuring
agreements of occurrence
forms.
Claims-Made Coverage. A policy providing
liability
coverage only if a written
claim is made during
the policy period or any
applicable extended reporting
period. For example, a claim
made in the
current year could be
charged against the current
policy even if the injury or
loss occurred many years
in the past. If the policy
has a retroactive date, an
occurrence prior to that
date is not covered. Contrast
with Occurrence Coverage.
Class (or
Classification).
A group of insureds having
the same general
characteristics who are
grouped together for rating
purposes. Class rates
apply to dwellings and
apartments, since they usually
have the same general
characteristics and are
exposed to the same perils.
Class Action Suit. A legal device allowing a
group
of individuals with a claim
against a company or an
individual to join together
as plaintiffs in a single
suit.
Class Rate. A rate for risks of
similar hazard. Class
rates, for example, apply to
dwellings.
Classified Insurance. Life or health insurance
on
risks which do not meet the
standards for the regular
manual rate. See also
Substandard.
Clause. A section of a policy
contract or endorsement
dealing with a particular
subject (e.g., a subrogation
clause deals with the rights
of the insurer
in the event of payment of a
loss under the contract).
Cleanup Fund. Policies whose express
purpose is
to pay final expenses of
death.
Clear Space Clause. A clause requiring that
insured
property, such as stacks of
lumber, be stored
at some particular distance
from each other or from
other property.
Clerical Error. A provision in a group
health insurance
policy that provides if
there is an error or
omission in the
administration of a group policy,
the coverage is considered
to be what it would be if
there had been no error or
omission.
Close Corporation. A corporate form of
business
controlled and operated by a small,
close group of
persons such as family
members. The corporation’s
stock is not sold to
outsiders.
Closed Panel. A situation where covered
insureds
must select one primary care
physician—the only
one allowed to refer the
patient to other health care
providers within the plan.
Also called closed access
or gatekeeper model.
CLU. See Chartered Life
Underwriter.
Cluster or Patio Homes. A group of houses similar
in every way to
single-family homes, except that
the residents share
ownership and maintenance of
the land in the
development—often a golf course
or other recreation
facility.
COB. Coordination of Benefits.
See Nonduplication
of Benefits.
COBRA. See Consolidated Omnibus
Budget Reconciliation
Act of 1986.
Codicil. A change or amendment to a
will.
Coding. A method of putting
information into a
numerical form for
statistical use. Most information
on policies is coded and
then put into reports.
Coercion. An unfair trade practice
that occurs when
someone in the insurance
business applies a physical
or mental force to persuade
another to transact
insurance.
Cognitive Impairment. A deficiency in the
ability
to think, perceive, reason
or remember resulting in
loss of the ability to take
care of one’s daily living
needs.
Coinsurance Clause. (1) A provision stating
that
the insured and the insurer
will share all losses covered
by the policy in a
proportion agreed upon in
advance. See also Percentage
Participation. (2) A
clause under which the
insured shares in losses to
the extent that he or she is
underinsured at the time
of loss. The insurer grants
a reduced rate to the insured
providing the insured
carries insurance 80,
90 or 100 percent to value.
If, at the time of loss,
the insured carries less coverage
than required, the
loss must be shared. For
example, if an insured has
a building worth $100,000
and carries an 80 percent
coinsurance clause, it means
that the insured
agrees to carry at least
$80,000 of insurance. If the
insurance carried is just
$60,000, then any loss
under the policy would be paid
for on the basis of
the comparison of $60,000
(amount carried) divided
by $80,000 (amount agreed
upon in advance) times
the amount of the loss.
Thus, in the event of a
$10,000 loss the insured
would only receive 75
percent of a loss or $7,500.
Cold Lead Advertising. An illegal method of
marketing
insurance policies (often
associated with
Medicare supplement
policies) that fails to disclose
in a conspicuous manner the
solicitation of insurance
or other similar coverage,
and that further contact
will be made by an insurance
agent, other producer
or insurer.
Collapse. Literally, to cave in or
give way. Several
court decisions have
interpreted collapse as the “loss
of structural integrity.”
See Blasting and Explosion
Exclusion.
Collateral Assignment. Assignment of a life
insurance
policy or its value as
security for a loan. In the
event of default, the
creditor would receive proceeds
or values only to the extent
of the creditor’s interest.
Collateral Source. A rule allowing a
plaintiff to
recover damages even if the
plaintiff has already recovered
damages from a source other
than the defendant.
Collateral Split Dollar. A split dollar plan in
which
the employee controls the
policy and pledges it as
collateral for a series of
employer loans to pay the
premiums.
Collection
Book. The debit agent’s record
book
showing the amount collected
on each policy, the
week of the collection and
the policy period for
which the premium has been
paid.
Collection Commission. A percentage of premiums
collected that is paid to an
agent as the commission
on collections of debit life
insurance premiums.
Collection Fee. An industrial life
insurance agent’s
fee. Serves as compensation
for making policy premium
collections for which no
commission is paid.
College Retirement
Equities Fund (CREF).
An
organization affiliated with
the Teachers Insurance
Annuity Association that
sells a variable annuity to
college and university personnel.
Collegia. Groups of associations in
ancient Rome
that were influential
historically in the development
of life insurance and
pensions. (The forerunners of
mutual benefit societies or
friendly societies.)
Collision, Convertible. See Convertible Collision
Insurance.
Collision Damage Waiver
(CDW). A
waiver offered
by rental companies (also
called loss damage
waiver) that releases an
insured from responsibility
for damage to the rental
car, provided the insured
complies with the rental
contract terms. CDW often
duplicates coverage an
insured already has.
Collision Insurance. Auto insurance that covers
loss (direct or accidental) to
the insured’s own
vehicle caused by its collision
with another vehicle or
object or its upset. It does
not cover bodily injury
or property damage liability
arising out of the collision.
Collusion. An agreement, usually
secret, between
two or more persons to
defraud or deprive another
or others of their property
or rights.
Combination Annuity. A contract that combines
both the guarantees of a
fixed annuity and the nonguarantees
and investment risk of a
variable annuity.
Combination Business
Interruption Extra Expense
Insurance. A policy with both
business interruption
and extra expense coverages
in a single contract.
See Business Income Coverage
Form.
Combination. An agent, agency or
insurer that sells
both industrial life and
ordinary life policies.
Combination Crime
Coverage Plan.
Under the latest
commercial lines program, two
combination
crime coverage plans are
available. When written
with a separate limits
option, any combination of a
variety of coverages may be
included at different
limits (coverage is similar
to the earlier comprehensive
dishonesty, disappearance and
destruction (3-
D) policy). When written
with a single limit, major
coverages are mandatory,
optional coverages may
be included, but one limit
applies to all coverages
purchased (coverage is
similar to the earlier blanket
crime policy).
Combination Plan. The combining of life
insurance
contracts with a fund called
a side fund or aux-
iliary fund in order to increase
the amount of money
available for a pension or
annuity at some future
date.
Combination Plan
Reinsurance.
Combined reinsurance
that provides that in
consideration of a premium,
which is a fixed percentage
of the ceding
company’s subject premium on
the business covered,
the reinsurer will indemnify
the ceding company
for the amount of loss of
each risk in excess of
a specified retention and
subject to a specified limit
and, after deducting the
excess recoveries on each
risk, the reinsurer will
indemnify the ceding company
against a fixed quota share
percent of all remaining
losses.
Combination Policy. A policy made up of the
contracts
of two or more insurers in
which each provides
a different kind of
insurance. Once used in
auto insurance when state
law limited casualty companies
to the writing of liability
insurance and fire
insurance companies to physical
damage insurance,
combination policies are
rarely written today.
Combined Annuity
Mortality Table.
A mortality
table published in 1928 for
use in determining rates
for group annuities.
Combined Ratio. The sum of an expense
ratio and
a loss ratio. An
underwriting profit occurs when
the combined ratio is under
100 percent and an
underwriting loss occurs
when the combined ratio
is over 100 percent.
Combined Single Limit
(CSL). The
maximum
amount that the insurance
company must pay for
all damages arising out of a
single accident. The
CSL is a single limit of
protection for both bodily
injury and/or property
damage, contrasted with split
limits, where specific
limits apply to bodily injury
and property damage
separately.
Commercial Blanket Bond. A bond that covers
the insured against the
dishonesty of all regular employees.
A single amount of coverage
applies to any
one loss, regardless of the
number of employees involved
in the loss. See also Blanket
Bond, and contrast
with Blanket Position Bond.
Commercial Carrier
Regulations.
Special regulations
that apply to commercial
carriers of both passengers
and cargo because of the
risk of common
carrier accidents. State and
federal laws have created
minimum financial
responsibility requirements
for commercial carriers that
may be met by purchasing
insurance or obtaining a
surety bond guaranteeing
payment in amounts which at
least equal
the minimum limits. In some
cases, full or partial
self-insurance is permitted,
if the carrier provides
the necessary financial data
to demonstrate the ability
to fully or partially
self-insure.
Commercial General
Liability (CGL) Policy. General
liability coverage that is
written as a monoline
policy or as part of a commercial
package. The latest
forms include all sublines,
provide very broad
coverage, and two variations
are available—occurrence
or claims-made coverage.
Commercial Lines. Insurance for businesses,
professionals
and commercial
establishments. See also
Business Insurance. Contrast
with Personal Lines.
Commercial
Package Policy (CPP). A commercial
lines policy that contains
more than one of the
following coverage parts:
commercial property, commercial
general liability, commercial
inland marine,
commercial crime, boiler and
machinery insurance,
commercial auto insurance
and farm coverage. In
the late 1980s, ISO
introduced a modular approach
for constructing commercial
property insurance
policies. Instead of just updating
old policies, ISO
developed a series of
specialized forms, with each
form fulfilling a specific
policy function. The right
combination of forms would
create a complete, custom-
made policy.
Commercial Policy. Policies that do not
guarantee
renewability.
Commercial Property
Coverage.
Property coverage
that is written as a
monoline policy or part of a
commercial package.
Commingling. An illegal practice that
occurs when
an agent mixes personal
funds with the insured’s or
insurer’s funds.
Commission. (1) An allowance made by
the reinsurer
to the original insurer for
part of the original
insurer’s acquisition and
other costs. It may also
include a profit factor. (2)
That portion of the premium
paid to the agent as
compensation for services.
See also First Year
Commission, Renewal Commission,
Level Commission System,
Unlevel Commission
System, Contingent
Commission and
Graded Commission.
Commission of Authority. A document outlining
the powers delegated to an
agent by an insurer.
Commissioner
of Insurance. The head of most state
insurance departments. In
some states, the title Director
or Superintendent of
Insurance is used.
Commissioners’
Disability Table.
A morbidity
table approved by the National
Association of Insurance
Commissioners for use in
setting legal minimums
for disability income
insurance policy reserves.
Commissioners’
Industrial Extended Term Mortality
Table. An industrial mortality
table approved
by the NAIC for evaluation
and computation of
extended term insurance in
industrial policies, where
additional mortality margins
are deemed necessary.
This is a companion table to
the CSI.
Commissioners’ Standard
Industrial Mortality
Table. An industrial mortality
table approved by
the NAIC as a standard for
evaluation and for computation
of nonforfeiture values for
Industrial policies.
Commissioners’ Standard
Ordinary (CSO).
A mortality
table approved by the NAIC
as a standard for
evaluation and for
computation of nonforfeiture
values for ordinary life
policies.
Commissioners’ Values. An annual list of
securities
published by the NAIC. The
values are to be
used in recording security
values on insurance company
balance sheets.
Common Accident. An accident in which two
or
more persons are injured.
Common
Carrier. An individual or
organization
that offers its services to
the public for carrying persons
or property from one place
to another for payment.
A common carrier cannot
refuse to carry goods
for one customer as opposed
to another.
Common Disaster. A situation in which an
insured
and the beneficiary appear
to die simultaneously
with no clear evidence of
who died first.
Common Disaster Clause. A clause sometimes
added to a life insurance
policy that provides a means
for the insurer to
distribute the proceeds of the policy
in the event of a common
disaster.
Common Law. The unwritten law
developed primarily
from judicial case decisions
based on custom
and precedent. It was
developed in England and
constitutes the basis for
the legal systems of most of
the states in the U.S.
Common Law Defenses. Pleas that can defeat an
injured worker’s suit for
injuries against the employer
in the absence of a workers’
compensation
law or employers liability
legislation. The three defenses
are contributory negligence,
assumption of
risk and fellow servant
rule.
Common Law Liability. Responsibility based on
common law for injury or
damage to another’s person
or property that rests on an
individual because
of the person’s actions or
negligence. This is opposed
to liability based on
statutory law.
Common Policy
Conditions.
Under the latest commercial
lines program, a form including
six common conditions
that apply to all coverage parts
attached to a commercial
policy.
Common Policy
Declarations.
A declaration page
that is part of every
commercial policy. It shows
information applicable to
the entire policy (policy
number, insurer, insured,
total premium, forms attached,
etc.). Each individual
coverage part may also
have its own declarations
page.
Common Stock. A security that provides
an ownership
or equity position in a
company. Shareholders
may receive dividends if
declared by the board
of directors.
Community Property. Common or statutory law
that holds that husband and
wife are each entitled
to half of the total
earnings and property of both
parties to the marriage. It
is applicable in Arizona,
California, Idaho,
Louisiana, Nevada, New Mexico,
Texas and Washington state.
Community Rating. Under this rating system,
the
charge for insurance to all
insureds depends on the
medical and hospital costs
in the community or area
to be covered. Individual
characteristics of the
insureds are not considered
at all.
Commutation. The exchange of one thing
for another.
In insurance it is usually
the exchange of installment
benefits for a lump sum.
Commutation Clause. A clause that provides for
estimation, payment and
complete discharge of all
future obligations for reinsurance
loss or losses incurred,
regardless of the continuing
nature of certain
losses. Often found in
Lloyd’s treaties.
Commutation
Rights. The right of a beneficiary
to
receive in one sum the
unpaid payments remaining
under an installment option
that was selected for
the settlement of the
proceeds or values of a life
insurance policy.
Commute. To determine as of a given
date the single
sum that is the equivalent
of a series of sums due at
various future dates, with
allowances for interest that
would have been earned on
the unpaid portion of
the series of payments.
Commuted Value. The amount of a single sum
payment
as determined under the
definition of commute.
Comparative Negligence. In some states the
negligence
of both parties to an
accident is established
in proportion to the degree
of their contribution to
the accident. Several states
have comparative negligence
laws, and each one varies
somewhat from the
others. This is in contrast
to contributory negligence,
which is a general common
law rule. See
Contributory Negligence.
Compensation Related
Loan. A
below market loan
between an employer and
employee.
Compensatory Damages. Compensation for the
loss incurred. These may
include specific damages
(the documentable, actual
expenses incurred by the
injured party, such as
medical bills, wages lost and
property replacement), and
general damages (monetary
awards for more subjective,
less quantifiable
aspects of the loss, such as
pain and suffering or loss
of consortium). However,
this does not include punitive
damages.
Competency. One of the elements that
must be
present in order to have a
legal contract. It relates
to the fitness or ability of
either of the parties to the
contract. See also
Incompetent.
Competitive Medical
Plan (CMP).
Refers to permission
given by the federal
government that allows
an organization to write a
Medicare risk contract.
Competitive State Fund. A fund established by a
state to write workers’
compensation insurance in
competition with private
insurers.
Completed Operations
Insurance.
Insurance issued
particularly to various
types of contractors. It covers a
contractor’s liability for
accidents arising out of jobs
or operations that have been
completed. See Products
and Completed Operations
Insurance.
Completion Bond. A bond issued to a
mortgagee.
It guarantees that the
construction for which the
mortgagor has borrowed money
will be completed
and serve as collateral for
the mortgage upon
completion.
Composite Rate. (1) One rate for all
members of
the group regardless of
their status as single or members
of a family. (2) A single
rate with a single basis
of premium, e.g., payroll or
sales. For this single
rate the insured is covered
for a variety of hazards,
such as premises and
operations, completed operations,
products liability and
automobile. Its primary
value is to make it simpler
for the policy’s premium
to be computed. (AU
Composition Roof. A roof of either asbestos
or asphalt
shingles. Often used in
connection with con-
struction factors used in determining
the rate for
property insurance.
Comprehensive or
Blanket Coverage.
The traditional
name for physical damage coverage
for losses
by fire, theft, vandalism,
falling objects and various
other perils. Personal auto
policies now call this
“other than collision”
coverage. Commercial forms
continue to call it
“comprehensive” coverage.
Comprehensive General
Liability.
A policy covering
a variety of general
liability exposures, including
premises and operations
(OL&T or M&C), completed
operations, products
liability and owners and
contractors protective.
Contractual liability and
broad form coverages may be
added. In most jurisdictions,
the comprehensive general
liability policy
has been replaced by the
newer commercial general
liability (CGL) forms. See
also Commercial General
Liability.
Comprehensive Glass
Insurance Policy.
Protection
against loss by breakage of glass
from almost
any peril. Fire is usually
excluded (it is covered under
any basic property policy),
and war is excluded.
This policy has largely been
replaced by a new commercial
form. See Glass Coverage
Form.
Comprehensive Major
Medical. A
plan of insurance
with a low deductible, high
maximum benefits
and a coinsurance feature.
It is a combination
of basic coverage and major
medical coverage which
has virtually replaced
separate hospital, surgical and
medical policies with each
having its own deductible
requirements. Also see Major
Medical Insurance.
Comprehensive
Personal Liability. Protects individuals
and families from liability
for nearly all types
of accidents caused by them
in their personal lives
as opposed to business
lives. Most commonly provided
by a homeowners policy.
Comprehensive Policy. In automobile and
liability
insurance, this is an open
perils (all risk) coverage
with certain named
exclusions.
Comprehensive “3-D”
Policy. See
Dishonesty, Disappearance
and Destruction Policy.
Compromise and Release
Agreement.
A settlement
practice where an injured
worker agrees to a
compromised liability amount
(usually a lump sum)
in exchange for releasing
the employer from further
liability.
Compulsory Insurance. Any form of insurance
required
by law. For example, some
states have compulsory
automobile insurance laws,
some have compulsory
disability benefits laws,
etc.
Computation Base Years. The total of the
computation
elapsed years less the five
lowest earnings years
for Social Security tax
purposes.
Computation Elapsed
Years. The
total number of
years since 1950 or
attainment of age 21, if later,
up to age 62, during which
Social Security taxes
have been paid.
Computer Fraud. Fraudulent theft or
transfer of
money, securities or other
property resulting from
the use of any computerized
equipment or systems.
Computer
Fraud Coverage Form. A commercial
crime coverage form that
protects against loss of
money, securities and
property other than money
and securities resulting
from computer fraud.
Concealment. The failure to disclose a
material fact.
See Material Fact.
Concurrent Causation. Two or more perils acting
concurrently (at the same
time or in sequence) to
cause a loss.
Concurrent Insurance. Two or more policies with
the same conditions and
coverages that cover the
same interest in the same
property. If an insured
has two or more property
policies, the policies should
be concurrent (similar) or the
property will not be
insured properly in the
event of a loss.
Concurrent Review. A case management
technique
that allows insurers to
monitor an insured’s hospital
stay and to know in advance
if there are any
changes in the expected
period of confinement and
the planned release date.
Conditional Binding
Receipt. A
binding receipt
that provides that if a
premium accompanies an application,
the coverage will be in
force from the date
of application or medical
examination, if any, whichever
is later, provided the
insurer would have issued
the coverage on the basis of
the facts revealed
on the application, medical
examination and other
usual sources of
underwriting information. A life
and health insurance policy
without a conditional
binding receipt is not effective
until it is delivered
to the insured and the
premium is paid.
Conditional
Sales Floater. A policy that covers
property that has been sold
on an installment or
conditional sales basis. It
covers the interest of the
seller.
Conditional Vesting. A form of vesting in a
contributory
pension plan where
entitlement to a vested
benefit is conditional upon
nonwithdrawal of the
participant’s contribution.
See also Vesting.
Conditionally Renewable. A contract that provides
that the insured may renew
it to a stated date or an
advanced age, subject to the
right of the insurer to
decline renewal only under
conditions stated in the
contract.
Conditions. Provisions of an insurance
policy that
state either the rights and
duties of the insured or
the rights and duties of the
insurer. Typical conditions
have to do with such things
as duties in the
event of loss, cancellation
provisions and the right
of the insurer to inspect
the property.
Condominium. Townhouses, manor homes
or—
most often—apartment flats.
Condominium Association
Coverage Form.
A
commercial property form
that covers the joint insurance
needs of members of a condo
association
who collectively own
commercial property.
Condominium Unit Owners
Coverage Form.
A
commercial property form
designed to cover the
individual needs of
commercial (not residential) condominium
unit-owners.
Confining. A form of disability or
sickness that confines
the insured indoors, usually
at home or in a
hospital. Many policies
state that coverage is afforded
only if the insured is
confined.
Consent Order. A disciplinary action in
which the
party at fault (usually an
insurance company or
agent) agrees to discontinue
a particular practice
(usually an unfair trade or
claims practice) through
a written agreement with the
Insurance Department.
Consent orders (also known
as consent decrees) may
or may not involve a fine.
Consequential Loss (or Damage). (1) An indirect
loss arising out of the
policyholder’s inability to use
the property over a period
of time, as opposed to a
direct loss that happens
almost instantaneously.
Business interruption, extra
expense, rents insurance
and leasehold interest are
the most common
coverages under this
category of loss. (2) A loss not
directly caused by a peril
insured against, such as
spoilage of frozen foods
caused by fire damage to
refrigeration equipment. See
also Indirect Loss, and
contrast with Direct Loss.
Conservation. The insurance company’s
efforts to
prevent current policies
from lapsing.
Conservator. Someone appointed to
manage an insurer
deemed by law or court
action to be in danger
of failure.
Consideration. For a contract to be
binding each
party to the contract must
give what is known as
consideration or the
exchange of values on which a
contract is based. In an
insurance contract, the insured
person makes a premium payment
(consideration
now) and promises to comply
with the provisions
of the policy (consideration
future). In return,
the insurance company
promises to pay in accordance
with the terms of the
contract.
Consignee. The person to whom
materials or goods
are delivered for resale.
The consignee pays the owner
after the goods have been
sold.
Consolidated Omnibus
Budget Reconciliation
Act (COBRA) of 1986. Legislation providing for
a
continuation of group health
benefits under the
group plan for a period of
time when benefits would
otherwise terminate. Continuation
rights apply to
enrolled persons and their
dependents in companies
with 20 or more employees.
Coverage may be
continued for up to 18
months if the insured terminates
employment or is no longer
eligible. Coverage
may be continued for up to
36 months in
nearly all other cases, such
as loss of dependent eligibility
because of death of the
enrolled person, divorce
or attainment of the
limiting age.
Consortium. Companionship of a spouse.
If a spouse
is injured through the fault
of another, part of the
damages could include the
value of the spouse’s services
or companionship that was
lost due to the
accident.
Conspiracy. A combination of two or
more persons
that by concerted action
seek to accomplish an unlawful
purpose or to accomplish a
lawful purpose
by unlawful means.
Construction Bond. A bond that protects the
owner
of a building or other
structure under construction
if the contractor cannot
complete the job. If the
contractor defaults, the insurer is
obligated to see
that the work is completed.
Constructive Delivery. Intentionally
relinquishing
control over a policy and
turning it over to someone
acting for the policyowner,
such as when an insurer
mails the policy to its own
agent for delivery to the
insured. Legally, an
insurance policy is considered delivered
when mailed or turned over
to the policyowner
or someone acting on his or
her behalf.
Constructive
Performance.
A situation in which
an act has not actually been
completed but conduct
has gone so far as to show
intent to complete
the act.
Constructive Total Loss. A partial loss of
sufficient
degree to make the cost of
repairing the damaged
property more than the
property is worth (e.g.,
an old automobile might
suffer damage that can be
repaired, but the cost of
repairs would be more than
the actual cash value of the
car).
Consumer Credit
Insurance Association (CCIA).
A trade association for
insurers of credit insurance
in the areas of life and
health.
Consumer Protection Act. A law that protects a
policyholder from the
misconduct, misrepresentation
or “sharp” trade practices
of insurers, brokers
and agents.
Consumer Report. A report ordered on an
insured
or applicant under which
information about the
person’s credit, character,
reputation, personal characteristics
or lifestyle is obtained
primarily through
institutional sources.
Contents. (1) In relation to car
theft, it is the contents
of a vehicle or personal
effects.
Contents Coverage. Coverage for business
personal
property. Includes more than
building contents
because it applies to
property located in or on the
described building, or
within 100 feet of the described
premises while in a vehicle
or out in the
open.
Contents Rate. The fire insurance rate on
the contents
of a building rather than on
the building itself.
Contestable Clause. A provision in a policy
setting
forth the conditions under
which or the period
of time during which the
insurer may contest
or void the policy. After
that time has lapsed, normally
two years, a policy cannot
be contested.
Contingency Reserve. A reserve in an insurer’s
annual
statement, in addition to
the legal requirements,
to provide for unexpected
contingencies or
losses.
Contingency Surplus. See Contingency Reserve.
Contingent Annuitant. A person(s) named to
receive
annuity benefits if the
primary annuitant is
deceased at the time
benefits become payable.
Contingent Annuity. An annuity in which payment
of benefits is contingent
upon the occurrence
of an uncertain event, such
as death of a person not
an annuitant (e.g., an
annuity purchased to pay
benefits to a wife if her
husband dies.)
Contingent
Beneficiary. The person(s) entitled to
receive policy benefits if
the primary beneficiary is
deceased when the benefits
become payable.
Contingent Business
Interruption Insurance.
Coverage for the loss of
earnings of an insured because
of a loss to a business that
is a major supplier
or customer. Also known as
business income from
dependent properties. See
Business Income Coverage
Form and Dependent
Properties.
Contingent (or Profit)
Commission.
An allowance
payable to the ceding
insurer, in addition to the
normal ceding commission,
based on the net profit
derived from a reinsurance
treaty.
Contingent Fund. A reserve to cover
possible liabilities
resulting from an unusual
happening.
Contingent Interest. An interest in personal
property
that is dependent upon a
future event.
Contingent Liability. A liability imposed due to
accidents caused by persons
other than employees
for whose acts an
individual, partnership or corporation
may be responsible. For
example, an insured
who hires an independent
contractor can, in some
cases, be held liable for
negligence.
Contingent Trust. A revocable living trust
that only
becomes operational upon a
specified occurrence or
contingency.
Contingent Vesting. In pensions, a form of
vesting
where entitlement to a
vested interest is conditional
upon circumstances
surrounding the
employee’s termination of service or
conduct after
termination. See also
Vesting.
Continuation. Allows terminated
employees to continue
group health insurance
coverage under certain
conditions.
Continuing Care
Retirement Communities
(CCRCs). Residential communities
that provide residents
with easy access to health
care.
Continuing Education
Requirement.
State-level
requirement that insurance
licensees periodically
complete a minimum number of
hours of insurance-
related education to be
eligible for license renewal.
Continuous Premium
Whole Life Policy.
A whole
life policy that stretches
the premium payments over
the insured’s lifetime (to
age 100). Also known as
straight life. Compare with
Limited Payment Whole
Life and Single Premium
Whole Life.
Contract. (1) An agreement entered
into by two or
more persons under which one
or more of them
agree, for a consideration,
to do or refrain from doing
acts in accordance with the
wishes of the other
party(s). (2) In insurance,
the agreement by which
an insurer agrees, for a
consideration, to provide
benefits, reimburse losses
or provide services for an
insured. (3) An agreement
under which an agency
or agent does business with
an insurer.
Contract Bond. A guarantee of the
faithful performance
of a construction contract
and the payment
of all relevant material and
labor bills. See also Performance
Bond and Payment Bond.
Contract
Carrier. A transportation company
that
carries, for payment, the
goods of certain customers
only, as contrasted with a
common carrier who carries
goods for the public in
general.
Contract of Adhesion. A contract that one party
must accept or reject in toto, without bargaining
over the wording. An
insurance contract, for example,
is developed by the insurer,
and the insured
must accept it as it is.
Contract of Insurance. A contract under which
an insurer agrees to
indemnify an insured for losses,
provide other benefits or
render services to or on
behalf of the insured. It is
often called an insurance
policy, but the policy is
merely evidence of the
agreement.
Contractual (or
Assumed) Liability Insurance.
Protects the insured in the
event of a loss for which
the insured has assumed
liability, express or implied,
under a written contract.
For example, under
most construction agreements
with a municipality,
the contractor agrees to
“hold the municipality
harmless” for any accidents
arising out of the
job. Contractual liability
insurance would thus protect
the contractor from any loss
for which the municipality
would be liable in
connection with the
construction.
Contract Year. The period of time from
the effective
date to the expiration date
of the contract.
Contributing Location. A location upon which the
insured depends as a source
of materials or services.
One type of dependent
properties for which business
income coverage may be
written.
Contribution. (1) The share of a loss
payable by an
insurer when contracts with
two or more insurers
cover the same loss. See
also Apportionment. (2)
The insurer’s share of a
loss under a coinsurance or
similar provision. (3) The
amount of the premium
for group insurance or a
pension plan paid by the
employee.
Contribution Clause. See Coinsurance Clause.
Both
are similar in effect, but
contribution clause is identified
mostly with business
interruption forms.
Contribution Formula. As used under a qualified
profit-sharing trust or
money-purchase plan, the
formula that spells out when
and in what amounts
the employer will make
contributions to the trust.
Contributory. An plan of employee
coverage in
which the employee pays at
least a potion of the
premium.
Contributory Negligence. If an injured party fails
to exercise proper care and
in some way contributes
to his or her injury, the
doctrine of contributory
negligence will probably
negate or defeat the claim,
even though the other party
is also negligent. Contrast
with Comparative Negligence.
Contributory Retirement
Plan. A
plan in which
the participant pays part of
the cost of purchasing
the annuity or building up
the fund from which
benefits are paid.
Control. Authority given to an
agent or broker by
a policyowner to place the
insurance where the agent
or broker sees it.
Control Provision. A policy provision found
most
frequently in juvenile
contracts, providing that ownership
control is to be exercised
for a stated or indefinite
duration by a person other
than the one
whose life is insured.
Controlled
Business. The amount of insurance
countersigned, issued or
sold by a producer covering
the life, property or
interests of that producer,
members of the producer’s
immediate family or the
producer’s employer or
employees. Many states limit
the amount of controlled
business that may be written,
and if the premium or
commissions on controlled
business exceed a given
percentage (usually
50 percent) of all business,
the producer’s license
may be suspended, revoked or
not renewed.
Controlled
Insurance. (1) An insurance account
that
an agent or broker controls
by influencing the
buyer, as contrasted with controlling
it by actual
agreement. See Control and
Control Provision.
Convention (or
Statement) Blank.
The uniform
annual financial statement
required by all U.S. insurance
jurisdictions as prescribed
by the NAIC. It
must be filed annually in an
insurer’s home state
and every state in which it
is licensed to do business.
Nearly all insurance
accounting practices are
geared to it.
Convention Values. Values assigned to
insurers’
assets in the convention blank.
Conversion. (1) Wrongful use of
property by one
in lawful possession of it.
(2) Change of one policy
form to another, usually without
evidence of insurability.
Usually refers to life or
health insurance contracts.
Conversion Fund
(Supplemental).
A fund used
with ordinary life or
limited payment life insurance
to augment the cash value at
retirement to provide
monthly retirement income.
Conversion Privilege. The right of an individual
to convert a group health or
life policy to an individual
policy should the individual
cease to be a
member of the group.
Convertible. A policy that may be
changed to another
form by contractual
provision and without
evidence of insurability.
Most term policies convert
to permanent insurance.
Convertible Collision
Insurance.
Automobile collision
insurance with a deductible
that, after claims
exceeding the deductible
have been paid, converts
to full coverage for all
losses thereafter.
Cooperative. Ownership in the form of a
corporation.
Owners buy a share of stock
in the corporation,
which gives them the
privilege of occupancy.
Cooperatives can be more
restrictive on who moves
in. Taxes are paid on the
building rather than on
each unit.
Cooperative Insurance. Insurance issued by a
mutual
association such as a
fraternal society, an employee
association, an industrial
association or a trade
union.
Coordination of
Benefits (COB).
A group policy
provision that helps
determine the primary carrier
in situations where an insured
is covered by more
than one policy. This
provision prevents an insured
from receiving claims
overpayments. See Non-duplication
of Benefits.
Co-pay. An arrangement where the
covered person
pays a specified amount for
various services and the
health care provider pays
the remainder. The covered
person usually must pay his
or her share when
the service is rendered.
Similar to coinsurance, except
that coinsurance is usually a
percentage of certain
charges where the co-payment is a
dollar amount.
Co-payment(s). See Co-pay.
Co-pay
Provision. Often used with major
medical
policies. This provision
states what percentage of a
claim the company will pay
and what percentage
the insured will pay (e.g., an
80 percent co-pay provision
would provide that the
insurer pay 80 percent
of claims and the insured
pay 20 percent).
Corridor. In universal life
insurance, it is necessary
to maintain a certain level
of pure insurance protection
in excess of the
accumulation value in order to
qualify as life insurance
for income tax purposes.
This portion of the pure
insurance protection is a
corridor.
Corridor Deductible. A major medical provision
that provides for a
deductible, or “corridor,” that
applies after full payment
of basic hospital and medical
expenses up to a stated
amount, and before additional
expenses are shared on a
coinsurance basis.
For example, a policy might
pay 100 percent of the
first $2,000 of expenses, followed
by a $500 corridor
deductible paid by the insured,
followed by a sharing
of additional expenses on
the basis of 80 percent
payable by the insurer and
20 percent payable by the
insured.
Cosmetic Procedures. Procedures that improve
appearance, but are not
medically necessary.
Cost Basis. Money that has already
been taxed; used
in reference to taxation of
investment dollars.
Cost Contract. An agreement between a
provider
and the Health Care
Financing Administration to
provide health services to
covered persons based on
reasonable costs for
service.
Cost of Insurance. The amount a policyowner
pays
to an insurer, minus what he
or she gets back from
the insurer. This expression
is used when determining
the true cost of permanent
forms of life insurance
to a policyowner. It
considers the fact that premiums
are paid in but also that an
actual cash value
is being built up, which is
the portion that the insured
will get back from the
insurance.
Cost of Insurance
Charge.
Another term for the
charge for the pure
insurance protection element of
a life insurance contract.
See Mortality Charge.
Cost of Living Benefit. An optional disability
benefit
where the monthly benefit is
increased annually
after the insured is on
claim for 12 months.
Cost-of-Living Rider. Adjusts policy benefits in
relation to the change in
the economic climate. The
majority of such riders are
tied to changes in the
Consumer Price Index (CPI).
Cost
Sharing. A situation where covered
persons
pay a portion of the health
costs such as deductibles,
coinsurance or co-payment amounts.
Co-Surety. One of a group of sureties
directly participating
in a bond with obligations
joint and several.
Countersignature Law. Refers to state laws requiring
that any insurance contract
in a state be countersigned
by a representative of the
insurer located
in that state.
Countersignature. The signature of a
licensed agent
or representative on a
policy.
Countrywide Rates. For each major division of
the
commercial lines manual, a
section called “countrywide
rates” contains rates and
minimum premiums.
State rates are used for
coverages for which
there are no countrywide
rates, or to modify countrywide
rates.
Countrywide Rules. For each major division of
the
Commercial Lines Manual, a
section called “Countrywide
Rules” contains rules and
rating factors
applicable to coverages in
that division.
Coupon Policy. A life insurance policy,
usually 20-
pay life or some other
limited payment period, with
attached coupons that may be
cashed in for a specified
amount at the time of the
payment of each
annual premium.
Court Bond. Any bond required of a
litigant to
enable him or her to pursue
a remedy in court.
Cover. (1) A contract of
insurance. (2) To effect insurance,
that is, to “cover” an
insured, for instance,
for automobile insurance
effective as of a given time.
(3) To include within the
coverage of a contract of
insurance. For example, one
could “cover” additional
buildings under a property
insurance contract.
Cover Note. Similar to a binder, but
binders are
usually issued by companies
and delivered to
agents. A cover note is
usually written by an agent,
and it informs the insured
that coverage is in effect.
See also Binder. In
reinsurance, a cover note is a
statement issued by an
intermediary or broker indicating
that coverage has been
effected.
Coverage. The scope of protection
provided by an
insurance policy. The policy
spells out many agreements,
but perhaps most important, it
specifies the
type of losses that will be
reimbursed by the insurance
company.
Coverage Part. Any one of the individual
commercial
coverage parts that may be
attached to a
commercial policy. Under the
latest commercial lines
program, a coverage part may
be issued as a monoline
policy or may be combined
with others as part of a
package policy.
Coverage Trigger. A mechanism that
determines
whether a policy covers a
particular claim for loss.
For example, the difference
between the coverage
triggers of liability
“occurrence” forms and “claims
made” forms is that loss
must occur during the
policy period in the first
case and the claim must be
made during the policy
period in the second case.
Covered
Expenses. Health care expenses
incurred
by an insured or covered
person that qualify for
reimbursement under the
terms of a policy contract.
Covered Loss. Illness, injury, death,
property loss,
legal liability, or any
other situation or loss that is
covered under a policy.
Covered Person. An insured person under a
contract
of insurance.
CPCU. See Chartered Property and
Casualty Underwriter.
Crash Coverage. Optional coverage under an
aviation
policy that provides
coverage for damage to an
airplane caused by a crash,
and is usually referred to
as Hull coverage or physical
damage coverage.
Crash Involvement Rate. The rate of accidents per
million vehicle miles
traveled. This rate is based on
various age groups.
Credentialing. Approving a provider based
on certain
criteria to provide or participate
in a health
plan.
Credit Card Forgery
Insurance.
Protects the insured
against losses caused by
forgery in the use of
credit cards or the
alteration of them or of any other
written instruments
connected with them.
Credit Carried Forward. The transfer of credit or
profit from one accounting
period to another under
a spread loss or other form
of long-term reinsurance.
Credit
Carryover. Each year an employer is
allowed
to contribute 15 percent of
payroll towards a profit-sharing
plan and deduct it from
taxable income. If
the contribution is less
than 15 percent in a particular
year, the unused percentage
can be made up
in succeeding years.
However, deductible contributions
are limited to a total
amount not greater
than 25 percent of the
participants’ payroll: 15 percent
for the current year’s
contribution plus 10 percent
for credit carryover.
Credit Health Insurance. A group disability income
insurance contract whereby a
creditor is protected
in the event of the total disability
of a debtor.
The policy pays benefits
equal to the monthly installment
of the debtor.
Credit Insurance. Insurance on a debtor in
favor
of a creditor to pay off the
balance due on a loan in
the event of the death or
disability of the debtor.
Liability insurance for
abnormal loss from bad debts.
The coverage is limited to
the total amount of indebtedness.
Credit Life Insurance. A group life insurance
contract
whereby a creditor is
protected in the event of
death of the insured prior
to the indebtedness being
paid in full.
Credit Report. A confidential report made
by an
independent individual or
organization that has
investigated the reputation
and record of an applicant
for insurance. See Consumer
Report.
Creditor. The person to whom a debt is
owed. See
also Debtor.
CREF. See College Retirement
Equities Fund.
Crime. A public wrong, a
violation of criminal law.
See also Tort.
Criticism. A correction suggested by
a rating or
auditing bureau to an
insurer.
Cromie Rule. A method or guide used to
apportion
losses under policies which
are nonconcurrent,
that is, not identical as to
coverage provided.
Crop Insurance. Protection against damage
to
growing crops by such perils
as hail, windstorm
and fire. Traditionally,
crop-hail coverage was the
most common coverage sold.
In recent years, premiums
for broad multi-peril crop
insurance (MPCI)
have exceeded those for
crop-hail business.
Cross Purchase. Business life insurance
where each
party to a mutual agreement
(usually to buy out a
disabled or deceased
co-owner) insures each of the
other parties.
Cross Purchase
Agreement.
A binding buy-sell
agreement usually used with
a partnership where
each partner agrees to
purchase the business interest
of a deceased or disabled
partner.
Crude Death (or
Mortality) Rate.
The ratio of total
deaths to total population
during any given period.
See also Mortality Rate.
Crummey Privilege. The annual withdrawal
privilege
offered by a trust to trust
beneficiaries in order
for the trust property to
remain qualified for the
gift tax exclusion.
CSI
1961. See Commissioner’s Standard
Industrial
Mortality Table, 1961.
CSO. See Commissioners’
Standard Ordinary.
Cumulative Liability. (1) The liability of a
surety
bonding company for the
accumulation of loss under
its own bond and under a
bond that it replaced
before a loss under the
replaced bond was discovered.
(2) The accumulation of the
liability of a reinsurer
that has been assumed under
several policies
from several ceding
companies covering different
lines of insurance, all of
which are involved in a
common event or disaster.
Current Disbursement. The funding and
disbursement
of pension benefits as they
become due. Also
known as “pay-as-you-go.” In
the long run, this is
the most costly method of funding
pension plans.
Current Future Service. The amount of pension
payable for each year of
future participation in the
pension plan.
Current Guarantee. A guaranteed interest that
reflects
current interest rates and
is guaranteed at the
beginning of each calendar
year. The policy also
has a minimum guaranteed
interest rate (3 or 4
percent) that is paid even
if the current rate falls
below the policy’s
guaranteed rate.
Current Ratio. The ratio of current
assets to current
liabilities. Bond
underwriters like this ratio to
be 2 to 1 on the balance
sheets of contractors for
whom they are considering
contract bonds.
Current
Service Benefit. The portion of a
participant’s pension
benefit that relates to credited
service in a contemporary
period, usually 12
months.
Current Service Cost. The cost in a pension plan
to make provision for
annuity credits earned by employees
in the current year.
Current Value. The fair market value of a
security
or other property as determined
by the trustees or a
named beneficiary, according
to the terms of the
plan.
Currently Insured
Status. A
provision of old age,
survivors, disability and
health insurance. The requirements
for being “currently
insured” are less than
those for being “fully
insured,” and the former entitles
a worker’s dependents to
survivor benefits in the
event of the worker’s death.
See Fully Insured.
Custodial Care. Care that is provided for
the purpose
of meeting personal needs,
such as walking,
bathing, dressing, eating
and other essential activities
of daily living. Also known
as personal care. It
may be administered by
licensed practical nurses,
by non-medical personal,
such as volunteer workers,
therapists and, in some
cases, other family members.
The most common type of
long-term care, it
can be provided in a variety
of settings—ranging
from a nursing home to the
patient’s own home.
See also Activities of Daily
Living.
Custodian. Under commercial crime
insurance coverages,
the named insured or any of
the insured’s
partners or employees while
having care and custody
of insured property inside the
insured’s premises,
but it does not include any
person while acting
as a watchperson or a
janitor.
Custom House Bonds. Bonds required by U.S.
customs
in connection with the
payment of duties or
the production of bills of
lading.
Customary Charge. Used to determine Medicare
benefit amounts, the average
fee charged for a particular
medical service in the
geographical area in
the preceding year. See also
Allowable Charge and
Prevailing Charge.
Cut Rate. A term used when insurance
companies
charge premiums below a
normal or average rate.
Cut-Off. The termination provision
of a reinsurance
contract stating that the
reinsurer shall not be
liable for loss as a result
of occurrences taking place
after the date of
termination.
Cut-Through Clause. See Assumption
Certificate.
© 2008 Silver
© 2008 Silver
D
D&B. See Dun and Bradstreet,
Inc.
DA. See Deposit
Administration.
Daily Reports (DR). (1) An abbreviated
statement
of pertinent policy
information with copies for the
insurer, the agent and
others. It is usually the top
page of a policy. (2)
Monthly reports compiled on
the last day of each month
must show actual values
at the end of each day
during the month.
Damages. The amount required to pay
for a loss.
When someone is held liable
for injury or property
damage to another, that
person must compensate
the injured parties. See
also Compensatory Damages
and Punitive Damages.
Damage to Property of
Others.
Damage caused
by an insured person to the
property of others.
Damage to Your Auto
Coverage.
Physical damage
coverage provided under an
auto policy. The
insurance company will “pay for
direct and accidental
loss to a covered auto, or
any non-owned
auto, including its
equipment, minus any applicable
deductible.” Includes
collision and other than
collision coverage.
Data Processing
Coverage.
Protection for loss due
to the breakdown of data
processing system, including
coverage for the additional
expense of putting
the system back into
operation.
Date
of Issue. The date (stated in a
policy) as the
date the contract was issued
by the insurer. This is
not necessarily the
effective date of the policy.
Date of Service. The date that the health
service
was provided.
DBL. See Disability Benefits
Law.
Death Benefit. The amount stated in a
policy as
payable upon the death of
the person whose life is
being insured (cesti que vie). See Principal Sum.
Death Benefit Only
(DBO) Plan.
A plan that defers
part of an employee’s salary
and pays upon the
contingency of death.
Death Rate. See Mortality Rate.
Debit. (1) The amount of premium
charged or debited
to an agent to be collected.
(2) The book of
business represented by such
premiums. (3) The
territory where most of the
insureds are located. (4)
The total number of
individual or home service
insureds assigned to a given
agent for collection of
weekly or monthly premiums
and for servicing,
commonly referred to as
“people in my debit.”
Debit Agent. An agent who works on the
debit
system.
Debit Life Insurance. See Industrial Life
Insurance.
Debit System. The system of collecting
insurance
premiums weekly or monthly
by an agent.
Debris
Removal Clause. A provision included in
a property policy that
provides indemnification for
expenditures incurred in the
removal of debris produced
by the occurrence of an
insured peril. These
costs are included in the
claim amount as long as
there is sufficient coverage
to pay for the damaged
property plus debris
removal. If combined loss exceeds
the policy limit, then an
additional amount
of coverage equal to 5
percent of the limit of liability
is made available for debris
removal.
Debtor. One who owes a legal
obligation or money
to another. See also
Creditor.
Debts and Restrictions. Mortgages, liens and other
encumbrances on real estate
property, including
margin loans on capital
investments and liquidation
costs or penalties on accessible
pension funds.
Decedent. The deceased.
Declaration. (1) A term used in
insurance other
than life or health to
denote that portion of the
contract that lists such
information as the name and
address of the insured, the
property insured, its location
and description, the policy
period, the
amount of insurance
coverage, applicable premiums
and supplemental
representations by the insured.
(2) A formal written
statement in which an
individual avows under oath
certain facts as personally
known to him or her
specifying of the facts
constituting the plaintiff’s
cause of action against
the defendant.
Declarations Page. Typically the first page
of an
insurance application. This
page includes specific
details relating to
coverage: the names of the people
covered by the policy; the dates
it’s in effect; and
the vehicles, boats, etc.
covered. Also included are
details on everything from
policy limits and premiums
due to any specific
additions or exclusions based
on personal circumstances.
Also called the declarations
sheet, dec sheet or dec
page.
Declination. Rejection of an
application for insurance
by the insurer.
Decreasing Term. Life insurance that
provides a
death benefit that declines
throughout the term of
the contract, reaching zero
at the end of the term.
Decreasing Term
Insurance.
Term life insurance
where the death benefit
decreases but the premium
remains level for the policy
term. See also Increasing
Term Insurance, Level Term
Insurance and Term
Insurance.
Deductible. The portion of an insured
loss to be
borne by the insured before
the insurance company
takes over. Higher
deductibles reduce the insurance
company’s exposure. Small
losses that do not exceed
the deductible do not
require a claim settlement,
and large losses that exceed
the deductible
result in a smaller
settlement.
Deductible Carryover
Credit.
During the last
three months of a calendar
year, charges incurred
for health services can be
used to satisfy the deductible
for the following calendar
year. These credits
may be applied whether or
not the prior calendar
year’s deductible had been
met.
Deductible,
Calendar Year. A deductible that
specifies that one
deductible needs to be satisfied
for a calendar year
regardless of the number of claims.
Deductible Clause. A contract provision that
sets
forth the deductible.
Deductible,
Disappearing.
See Disappearing Deductible.
Deductible, Franchise. See Franchise Deductible.
Deductible, Per Cause. A deductible that must
be satisfied for each
separate claim.
“Deep Pockets”
Liability.
The legal doctrine of
joint-and-several liability
under which recovery can
be sought from any of
several codefendants based
on ability to pay, rather
than the degree of negligence.
If A and B are jointly
liable for an injury; A
was 90 percent negligent and
B was 10 percent
negligent, but A has no
assets; the claimant is permitted
to reach into the “deep
pockets” of B for the
full amount of the award
against A and B.
Defamation. (1) An unfair trade
practice involving
false, maliciously critical
or derogatory statements
intended to injure a person
engaged in the
insurance business. (2) Any
derogatory statement
that injures a person’s
business or reputation. Defamation
can be written (libel) or
spoken (slander).
See also Libel or Slander.
Defendant. The person being sued in a
court action.
Defense
Costs. An important part of
liability insurance
coverage. In some cases, the
cost of defense
is as much as, or more than,
the amount ultimately
awarded as damages.
Defensive Insurance. Pays the legal costs of
defending
against legal charges. Some
defensive policies
also cover damages incurred
as a result of infringement
or other specific
activities.
Deferred Annuity. An annuity contract that
provides
for the initiation of
payments at some designated
future date in contrast to
one in which payment
begins immediately on
purchase.
Deferred Compensation. A qualified or
non-qualified
plan that allows a key
person to defer receipt of
current income in accordance
with a written agreement
with the employer. Deferral
is usually until
death, disability or
retirement.
Deferred Compensation
Administrator.
A company
that provides services under
a deferred compensation
plan. Services include
administration of
self-insured plans,
compensation planning, salary
surveys, retirement
planning, etc.
Deferred Group Annuity. A group annuity contract
providing for the purchase each year
of a paid-up
deferred annuity for each
person covered in the
group. The total amount of
the annuity payments
starts at a deferred date,
usually retirement, and is
the sum of the individual
paid-up annuities.
Deferred Premium. The unpaid and yet undue
premiums on life insurance,
paid on other than an
annual premium basis.
Deferred
Vesting. A form of vesting where
rights
to vested benefits are
acquired by a participant commencing
upon a fulfillment of
specified requirements,
usually, reaching a certain
age or number of
years of service/membership.
See also Vesting.
Deficiency Reserve. A supplemental reserve
that
life insurers are required
to show in their balance
sheet if the gross premium
charged on a class of
insureds is less than the
net level premium reserve
or modified reserve.
Deficit. Any excess of debits over
credits at the end
of a given accounting
period.
Deficit Carried Forward. The transfer of a debit
balance from one accounting
period to another.
Defined Benefit Pension
Plan. A
qualified retirement
plan where the employer
makes contributions
on behalf of all eligible
employees in order to provide
a specific retirement
benefit. The amount of
the contribution is not
specifically defined, but the
amount of the retirement
benefit is defined.
Defined Contribution Pension
Plan. A
type of pension
plan under which
contributions are fixed as
flat amounts or flat
percentages of an employee’s
salary. Benefits consist of
whatever amounts the accumulated
contributions will produce.
Definitions Page. The page of an insurance
policy
that identifies who is
covered, when and where coverage
applies and what is covered
(e.g., vehicles,
property, etc.).
Deflation. An economic period
characterized by
falling prices, high
unemployment and a generally
sluggish or slow economy.
DEFRA. Deficit Reduction Act of
1984.
Degree of Care. A duty owed to others that
depends
on circumstances. Persons
who invite others
on their premises, invite
children on their premises
and sell what might be
considered inherently dangerous
products are all required to
take different
degrees of care to prevent
harm to others.
Degree of Risk. The amount of uncertainty
that
exists in a given situation.
For instance, if heads is
chosen in a coin toss, the
degree of risk present is
50 percent, since there is a
50 percent chance any
coin toss will come up
tails. See also Law of Large
Number, Odds and
Probability.
Delay Clause. (1) A contract provision
that excludes
liability as a result of
damage or loss of market arising
out of delayed voyages. (2)
A contract provision
permitting the insurer to
defer granting a loan
on the sole security of the
policy for any other purpose
than paying premiums on the
policy for a stated
interval of time, usually
six months.
Delayed Payment Clause. In life insurance, a
clause
deferring payment to the
beneficiary for a specified
period after the death of
the insured with proceeds
to be paid to contingent
beneficiaries or the estate
if the primary beneficiary
does not survive the delay.
It is one method of handling
common-disaster
situations, such as the
death of the insured and the
primary beneficiary
occurring in the same accident.
The clause usually states
that the beneficiary has to
survive the death of the insured by
a certain period
of time in order to collect.
Delivered Business. Contracts issued by an
insurer
and delivered to an insured
but not yet paid for.
See also Examined Business,
Paid Business and
Written Business.
Delivery. The actual placing of a life
or health insurance
policy in the hands of an
insured.
Demand Loan. Any loan with an
indefinite maturity.
Demolition Clause. A provision that excludes
liability
for costs incurred in
demolishing undamaged
property, often necessitated
by building ordinances
requiring that structures
must be demolished
after a certain degree of
damage has been sustained.
Demolition Cost
Endorsement.
Provides coverage
for the cost of demolishing
any undamaged part of
the building and the cost of
clearing the site if a
covered building is damaged
or destroyed by a covered
peril. A specific amount of
insurance must be
purchased, and covered costs
will be paid up to but
not exceeding the amount
stated on the form.
Demolition Insurance. Coverage for the cost of
demolition excluded by a
demolition clause. It may
be endorsed to property
insurance for an additional
premium. See also Demolition
Clause.
Demurrer. A formal statement in a
court action
which states that even if
the other party’s facts are
true, there is no cause of action.
Dental
Insurance. A group health insurance
contract
that provides payment for
certain enumerated
dental services.
Dental Plan. Any contractual
arrangement for dental
services provided or
arranged for on a prepaid or
postpaid individual or group
service basis.
Dental Plan
Organization (DPO).
A direct provider
of dental services
compensated on a prepaid
or postpaid basis to
individuals or groups. An arrangement
for providing dental
services indirectly
through independent contractors or
on a fee-for-service
basis is not a DPO. A DPO is
an arrangement
for providing dental
services through an agreement
with providers or by
employing dentists.
Dental Plan,
Supplemental.
An arrangement
where a dentist or group of
dentists agree to relieve
patients of paying any patient
charges or co-payments
associated with dental
insurance or other dental coverage
for a predetermined fee. The
term also refers
to an arrangement that
covers less than 50 percent
of an enrollee’s dental
expenses, regardless of whether
the enrollee has other
coverage.
Department of Health
and Human Services.
A
federal department whose
responsibility is primarily
dealing with social service
functions, such as
administration and
supervision of the Medicare program.
Dependent. An individual who depends
on another
for support and maintenance.
Dependent Care Plan. An employee benefit
whereby the employee is
reimbursed for dependent
care expenses or an actual day
care program provided
by the employer on business
premises.
Dependent Coverage. Insurance coverage on the
head of a family that
extends to his or her dependents,
including only the lawful
spouse and unmarried
children (step, foster and
adopted) who are
not yet employed on a
full-time basis.
Dependent Life
Insurance.
A life insurance benefit
that is part of a group life
insurance contract
and provides death
protection to the eligible dependents
of a covered employee.
Dependent Properties. Properties that an insured
business does not own, operate
or control, but upon
which the insured’s income
depends. Examples include
major suppliers or
customers. Also known as
“contingent” properties.
Deposit. The contributions or
payments made to a
fund by the employer; or,
sometimes by both the
employer and employee if
there are employee contributions
in the plan.
Deposit Administration
(DA). A
group annuity
providing for the
accumulation of contributions in
an undivided fund out of
which annuities are purchased
for each covered person in the
group for retirement
purposes.
Deposit Administration
Group Annuity.
A group
contract providing a deposit
fund prior to retirement,
with annuities bought from
the fund at retirement.
Deposit
(or Provisional) Premium.
The premium
paid at the inception of a
contract that provides for
future premium adjustments.
It is based on an estimate
of what the final premium
will be. See also
Basic Premium.
Deposition. A sworn statement of a
witness or other
party in a judicial
proceeding, usually conducted
in an oral question and
answer format where attendance
is compelled.
Depositor’s Forgery
Insurance.
Protection against
the forgery or alteration of
things such as checks,
drafts and promissory notes
purported to have been
written by the insured. It
is issued to individuals,
firms and corporations, but
not to banks or building
and loan associations. It
can be written to cover
incoming items, but this is
seldom done.
Depository Bond. A form of bond that
guarantees
to the government that its
deposits with banks will
not be subject to loss.
Depreciation. A decrease in the value of
any type
of tangible property over a
period of time resulting
from use, wear and tear or
obsolescence.
Designated Mental Health
Provider.
The organization
hired by a health plan to
provide mental
health and substance abuse
services.
Detoxification. The process an individual
goes
through when withdrawing
from alcohol. Usually
is done under guidance of
medical personnel.
Deviated Rate. Companies that adhere to
rates promulgated
by a bureau sometimes offer
lower rates
than those recommended in
certain areas. The company
is said to have “deviated”
from the bureau
rate for that area.
Deviation. (1) Voluntary departure,
not brought
about by necessity and not
resulting from reasonable
cause, from the customary,
usual course between
the port of shipment and the
port of destination;
or certain fundamental
breaches of the carrier’s
obligations under the
contract of carriage. There
are conditions where
deviation is excused, such as
when it is reasonably
necessary for the safety of the
ship and cargo or for
humanitarian reasons, such as
rescuing another ship in
distress. (2) A rate that
varies from the manual rate.
Deviation Clause. An ocean marine clause
providing
coverage in the event of a
deviation en route
beyond the insured’s
control.
Devise. A gift of real property in
accordance with a
valid will.
Diagnosis. The process of identifying
a disease.
Diagnosis Related
Groups (DRGs).
A method of
classifying inpatient
hospital services. It is used as a
method of determining
financing to reimburse various
providers for services
performed.
DIC. See Difference in Conditions.
Difference in
Conditions (DIC).
A separate contract
that expands or supplements
insurance on property
written on a named perils
basis so as to cover
on an open perils (all risk)
basis, subject to certain
exclusions.
Direct Damage Form. A form that covers actual
damage, directly resulting
from a covered peril, to
covered property.
Direct Loss (or Damage). A loss that is a direct
consequence of a particular
peril. Fire damage to a
refrigerator constitutes a
direct loss. Spoiling of food
in the refrigerator as a
result of the fire damage is
an indirect loss. Contrast
with Indirect Loss and
Consequential Loss.
Direct Repair Programs. Plans that insurance
companies began offering in
the late 1980s that
allow owners to choose a
body shop recommended
by the insurance firm. The
owner also can go to a
shop not on the list.
Direct Selling System. A distribution system
where
an insurer deals directly
with its insureds through
its own employees. This definition
applies typically
to property and liability
insurance business. Included
are mail-order insurance and
the sale of insurance
from vending machines at
airport booths
and elsewhere. Contrast with
Independent Agency
System.
Direct Writer. (1) The insurer that
negotiates with
the insured as distinguished
from the reinsurer. (2)
An insurer whose
distribution mechanism is either
the direct selling system or
the exclusive agency
system.
Direct Written Premium. The premiums collected,
without any allowance for
premiums ceded to
reinsurers.
Directed
Verdict. A verdict for the defendant
based
on the court’s decision that
the plaintiff’s case has
not been proven.
Director of Insurance. A title used in some
states
for the head of the
department of insurance. See
also Commissioner of
Insurance.
Directors and Officers
Liability Insurance.
Insurance
that protects directors and
officers from liability
claims arising out of
alleged errors in judgment,
breaches of duty, and
wrongful acts related
to their organizational
activities.
Disability. A condition that curtails
to a lesser or
greater degree a person’s
ability to carry on normal
pursuits. A disability may
be partial or total, and
temporary or permanent.
Disability Benefit. The benefit payable under
a disability
income policy or a provision
of some other
policy, such as a life
insurance contract.
Disability Benefits Law. A state law requiring an
employer to provide
disability benefits to covered
employees for non-occupational
injuries, in contrast
to workers’ compensation,
which pays for occupational
injuries. These laws are
currently in effect in
New York, New Jersey, Rhode
Island, California
and Hawaii.
Disability Income
Insurance.
Also called loss of
time insurance, this health
insurance provides periodic
payments to replace income,
actually or presumptively
lost, when the insured is
unable to work
as a result of sickness or
injury.
Disability Insurance
Training Council, Inc.
The
educational arm of the
National Association of
Health Underwriters, the
health insurance agents’
professional society. It
encourages agent educational
projects by local health
associations, conducts university
seminars in advanced health
underwriting
areas and conducts annual
seminars for home office
executives in sociological
social insurance and demographic
trends that may affect
future application
of policy forms and health
insurance.
Disability Insured. A Social Security insured
status
required to satisfy
eligibility for disability income
benefits. The status is
based on having paid
Social Security taxes in 20
of the 40 calendar quarters
ending with the quarter in
which a disability
claim is submitted.
Disability, Long-Term. See Long-Term Disability.
Disability Pension. A pension paid to a
disabled
worker prior to the time of
normal retirement.
Disability, Permanent
Partial.
See Permanent Partial
Disability.
Disability, Permanent
Total. See
Permanent Total
Disability.
Disability, Short-Term. See Short-Term Disability.
Disability, Temporary
Partial.
See Temporary Partial
Disability.
Disability,
Temporary Total. See Temporary Total
Disability.
Disappearing Deductible. A deductible that
gradually disappears as the
loss gets larger. If the
deductible is $50, the
insurer will pay 111 percent
of the loss that is in
excess of $50. The deductible
on losses between $50 and
$500 is gradually reduced
by this system, and if the
loss reaches $500,
the full amount is covered.
Discharge Planning. Determining what the
patient’s medical needs will
be after discharge from
a hospital or other
inpatient treatment facility.
Disclosure
Authorization Form.
A form authorizing
the disclosure of personal
information obtained
in connection with an
insurance transaction.
Insurers must give
applicants advance notice of their
information practices. Among
other things, the
form must state the kind of
information collected
and to whom information may
be disclosed.
Discount. The difference between an
amount due
at a future date and its
present value at a specified
rate of interest.
Discounted (Commuted)
Value Table.
A table
showing the discounted or
present value, for several
interest rates, of dollars
payable at various times
in the future.
Discovery Cover. A reinsurance treaty
covering
losses that are discovered
during the term of the
treaty regardless of when
they were sustained.
Discovery
Period. The period of time allowed
an
insured who has canceled a
bond to discover and
report to the previous
surety a loss that occurred
during the term of that
bond. Losses so reported
are paid by the original
surety even though another
surety is on the risk at the
time of the discovery.
The usual discovery period
is one year.
Discrimination. Refusal of an insurer to
provide
comparable insurance or use
comparable rates for
certain individuals or
groups with basic characteristics
the same as those to whom
the coverage or
rates are offered. This is
prohibited by law.
Dishonesty,
Disappearance and Destruction
Policy (“3-D” Policy). A once-popular commercial
crime insurance form used to
protect money
and securities against loss
by employee dishonesty,
robbery, depositor’s forgery
and other causes of loss.
The 3-D policy was replaced
by modern commercial
crime coverage forms. See
Combination Crime
Coverage Plan.
Dismemberment. The loss of, or loss of
use of,
specified parts of the body resulting
from accidental
bodily injury.
Dismemberment Benefit. The benefits payable for
various types of
dismemberment. See also AD&D
and Dismemberment and
Multiple Indemnity.
Dissent. This occurs when one or
more judges disagrees
with the majority decision.
Distribution Clause. See Pro Rata Distribution
Clause.
Divided
Cover. The placing of insurance on
a given
subject or object with more
than one insurer.
Dividend Accumulation. An option in a life
insurance
policy that allows the
policyholder to leave
any premium dividends with
the insurer to accumulate
at compound interest.
Dividend Additions. An option whereby the
insured
can leave dividends with the
insurer, and each
dividend is used to buy a single
premium life insurance
policy for whatever amount
it will purchase.
Also called paid-up
additions.
Dividend Option. Alternative ways in which
insureds under participating
life policies may elect
to receive their
policyholder dividends.
Dividend. (1) The return of part of
the premium
paid for a policy issued on
a participating basis by
either a mutual or stock
insurer. (2) A portion of
the surplus paid to a
corporation’s stockholders.
Divisible Contract
Clause. A
clause providing that
a violation of the
conditions of the policy at one
insured location will not
void coverage at other locations.
DOC. See Drive-Other-Car
Endorsement.
Domestic. See Residence Employee.
Domestic Insurer (or
Company).
An insurer
formed under the laws of the
state where the insurance
is written.
Donee. The recipient of a gift.
Donor. The individual who gives a
gift.
Double Dipping. Collecting money twice in
an
accident (e.g., from the
at-fault driver and an insured’s
no-fault policy, or from a
personal health policy and
an employer’s workers’ comp
insurance).
Double Indemnity. Payment of twice the basic
benefit
in the event of loss
resulting from specified
causes or under specified
circumstances. For example,
a life insurance contract
may provide for twice
the basic benefit if death
is due to accident. Accident
policies may provide double
indemnity coverage
for death due to an elevator
accident. See also
Multiple Indemnity.
Double Protection. A form of life insurance
combining
whole life and an equivalent
amount of term,
with the term expiring at a
stated future date, usually
at 65 years of age. For
example, an individual
may purchase $50,000 worth
of life insurance protection,
$25,000 of it being term
insurance and
the other $25,000 whole
life. The provision would
state that the $25,000 of
term insurance ceases
when the insured reaches age
65.
Dram Shop Laws. Liquor liability laws that
provide
that a person serving
someone who is intoxicated
or contributing to the
intoxication of another
may be liable for injury or
damage caused by the
intoxicated person.
Dram Shop Liability
Insurance.
Insurance that
protects the owners of an
establishment in which
alcoholic beverages are sold
against liability arising
out of accidents caused by
intoxicated customers
who have been served/sold
alcoholic beverages.
“D” Ratio. A factor used in workers’
compensation
experience rating plans. It
is the ratio of smaller
losses (those under $2,000),
plus the discounted
value of large losses, as
compared to the total losses
that are expected of an
insured in a particular type
of business.
Dread (or Specified)
Disease Policy.
Coverage,
usually with a high maximum
limit, for all types of
medical expenses arising out
of diseases named in
the contract. Common
diseases covered are poliomyelitis,
diphtheria, multiple
sclerosis, spinal meningitis
and tetanus. Cancer is
sometimes covered or
may be added by a rider.
Drive-In Claim Service. A facility maintained by
an automobile insurer in
which the extent of damage
to a claimant’s automobile
can be determined
and, in many cases, a
settlement made.
Drive-Other-Car
Endorsement (DOC).
A coverage
that may be added to an auto
that protects the
individuals named in the
endorsement while they
are driving cars not owned
by the individuals and
not named in the policy.
Drop Down Coverages. Coverages provided by a
personal umbrella that are
not provided by underlying
liability policies,
including: personal injury
coverage; regularly
furnished autos; contractual liability;
and damage to property of
others.
Drug
Formulary. A schedule of prescription
drugs
approved for coverage under
a plan and dispensed
through participating
pharmacies.
Drug Price Review (DPR). A procedure used to
determine drug price
maximums. It involves determining
wholesale drug prices based
on the American
Druggist Blue Book.
Drug Utilization Review
(DUR). A
method for
evaluating or reviewing the
use of drugs to determine
the appropriateness of the
drug therapy and
whether it will be paid for
by insurance.
Druggists Liability
Insurance.
A contract that protects
a druggist in case of a suit
arising out of filling
prescriptions, missed
delivery of drugs and other
operations normal to a
drugstore.
Dual Choice. The federal requirement
that employers
having 25 or more employees
who are within
the service area of a
federally qualified HMO, who
are paying at least minimum
wage and offer a health
plan to their employees,
must offer HMO coverage
as well as an indemnity
plan.
Dual Life Stock Company. A stock life insurer
issuing
both participating and
nonparticipating
policy contracts.
Dun and Bradstreet,
Inc. (D&B).
A corporation
that furnishes insurance
companies with financial
reports to assist them in
the underwriting of prospective
policyholders.
Duplicate Coverage
Inquiry (DCI).
A request to
determine whether or not
other coverage exists.
Used to apply the
coordination of benefits provisions
where two or more insurance
companies are
involved.
Duplication of Benefits. Identical or overlapping
coverage exists between two
or more insurance companies
or service organizations.
Duties After a Loss. A clause that specifies
what a
person must do in order to
recover for losses covered
by the policy. Most
insurance companies have
no duty to provide coverage
unless there has been
full compliance with the
following duties: The insurer
must be notified promptly of
how, when and
where the accident or loss
happened. Notice should
also include the names and
addresses of any injured
persons or witnesses.
Duty to Defend. The insurance company has
the
right and the option to
investigate and settle any
lawsuit and claim. In the
same process, it also accepts
a duty to defend an insured
person in any
related lawsuit or
claim—whether the insured is
guilty or liable.
Dwelling Coverage/Forms. A policy form designed
specifically to cover a
dwelling building and the
personal property in it plus
other additional coverages.
Coverage applies to the
dwelling, attached
structures and materials and
supplies on or adjacent
to the residence premises
for use in the construction,
alteration or repair of the
dwelling or other
structures.
Dynamo Clause. See Electrical Exemption
Clause.
© 2008 Silver
© 2008 Silver
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Earned Income. The money individuals earn
as a
result of working at some
job or occupation for
which they are paid a
salary. Insurance companies
base this number on an
insured’s salary and other
earned income. An insurer
typically asks for some
kind of proof of income—like
an IRS W-2 form or
other tax document.
Earned Premium. The amount of the premium
that
has been “used up” during
the term of a policy (i.e.,
if a one-year policy has
been in effect six months,
half of the total premium
has been earned.)
Earnings Figure. An indexed or adjusted
figure,
that changes annually due to
increases in wages.
Thus, in most years, the
earnings figure will be higher
than the year before—and,
consequently, the requirements
for a quarter of coverage
are higher.
Earnings Insurance. A form of gross earnings
business
interruption insurance that
lacks a coinsurance
clause. Designed for small
risks, the maximum amount
of loss an insured can
collect in any 30-day period
is established when the
policy is written.
Earth Movement. A peril including
landslide, mudflow,
earth sinking, rising or
shifting and earthquake.
Usually excluded on
homeowners’ and commercial
property policies. If direct
loss by fire, explosion
or breakage of glass, storm
door or storm
window follow earth
movement, the policies cover
the additional loss, and
that loss only.
Earthquake
Insurance. Insurance covering damage
caused by an earthquake.
Homeowners insurance
does not automatically cover
losses caused by
an earthquake—but earthquake
coverage for the
residence, other structures
and personal property
may be attached by
endorsement. Several earthquake-
prone states—most notably
California—require
insurance companies that
write homeowners
coverage to also write
earthquake coverage.
Easement. An interest in land owned
by another that
entitles its easement holder
to specific uses.
EC. See Extended Coverage.
Economic Risk. A risk experienced by
those who
invest in securities
identified as the uncertainty of
the economy.
Educational Assistance
Plan. An
employee benefit
whereby certain educational
expenses incurred
by the employee are
reimbursed on a tax-favorable
basis by the employer.
Educational Fund. A fund that provides money
for a child’s education should
the breadwinner of
the family die.
Effective Date. The start date of an
insurance
policy, or the date on which
the protection of an
insurance policy or bond
goes into effect.
Elective Benefits. Lump sum payments that the
insured may choose in lieu of
periodic payments for
certain injuries, such as
fractures and dislocations.
Elective
Deferral Plan. A qualified plan (401(k)
or tax sheltered annuity)
whereby participants voluntarily
elect to defer amounts of compensation
for
placement in a retirement
plan on a tax favorable
basis.
Elective Indemnities. See Elective Benefits.
Electrical (or
Electrical Apparatus) Exemption
Clause. A clause providing that
damage to electrical
appliances caused by artificially
generated electrical
currents is recoverable only
if fire ensues and
then only for the damage
caused by the fire.
Electronic Data
Processing (EDP) Coverage. Insurance
that covers computer
equipment, data systems,
information storage media
and expenses or
income loss related to EDP
losses.
Elevator Collision
Coverage.
Coverage for damage
caused by collision of an
elevator without regard
to fault. Includes damage to
personal property,
the building and the
elevator itself. Liability
coverage is usually provided
automatically by business
liability policies.
Eligibility. Particular people,
vehicles and situations
are eligible for coverage
under a policy for a number
of different reasons. The
conditions of eligibility
are sprinkled throughout the
policy and the
manual rules that govern how
and when a policy
may be written.
Eligibility Date. The date that a person is
eligible
for benefits.
Eligibility
Period. (1) The period of time
during
which potential members of a
group life or health
program may enroll without
providing evidence of
insurability. (2) The period
of time under a Major
Medical policy during which
reimbursable expenses
may be accrued.
Eligibility
Requirements.
Requirements imposed
for eligibility for
coverage, usually in a group insurance
or pension plan.
Eligible Dependent. A dependent of an insured
person who is eligible for
coverage according to the
requirements set forth in
the contract.
Eligible Employee. An employee who is
eligible
based on the requirements as
indicated in the group
contract.
Eligible Expenses. Expenses as defined in the
health
plan as being eligible for
coverage, including specified
health services fees or
“customary and reasonable
charges.”
Eligible Person. Similar to eligible
employee except
it could cover people who
are not employees of
a specified employer ( e.g.,
members of an association,
union, etc.)
Elimination Period. A loosely used term,
sometimes
designating the probationary
period, but
most often designating the
waiting period in a
health insurance policy. See
also Probationary Period
and Waiting Period.
Embezzlement. Fraudulent use of money or
property
that has been entrusted to
one’s care.
Emergency
Accident Benefit. A group medical
benefit that reimburses the
insured for expenses incurred
for emergency treatment of
accidents.
Emergency. An injury or disease that
occurs suddenly
and requires treatment
within 24 hours.
Emergency Fund. A fund that provides money
for
the emergency expenses of a
deceased’s family prior
to the final settlement of
the estate.
Emergi-Center. See Freestanding Emergency
Medical
Services Center.
Emotional Distress. See Mental Distress.
Employee Benefit
Program.
Benefits offered to
employees, covering such
contingencies as medical
expenses, disability,
retirement and death, usually
paid for wholly or in part
by the employer. These
benefits are usually
insured.
Employee Certificate of
Insurance.
Evidence of
participation in a group insurance
plan, consisting
of a brief summary of plan
benefits. The employee
receives this certificate
rather than the actual insurance
policy.
Employee Contribution. (1) The employee’s share
of the premium costs. (2)
Deduction from
employee’s pay to apply
toward the cost of a retirement
plan.
Employee Dishonesty. Any dishonest act by an
employee that contributes to
a loss for the employer.
Fidelity bonds usually
protect against such losses.
Employee
Dishonesty Coverage Form.
A commercial
crime coverage form, which
is actually a
fidelity bond, providing
coverage for losses resulting
from employee dishonesty. It
covers losses of
money, securities and
property other than money
and securities.
Employee Pension
Benefit Plan or Pension Plan.
Any program established and
maintained by an employer
or an employee organization
that provides
retirement benefits to
employees or deferred income
until employment is
terminated.
Employee Retirement
Income Security Act of
1974 (ERISA). An act that prescribes
federal standards
for funding, participation,
vesting, termination,
disclosure, fiduciary
responsibility and tax
treatment of private pension
plans. ERISA also applies
to retirement plans and to
“employee welfare
benefit plans” (any plan of
group medical, surgical,
hospital or other health
care benefits and group accident,
sickness and disability
benefit plans).
Employee Stock
Ownership Plan (ESOP).
A qualified
employee plan that provides
eligible employees
with part ownership in the
corporation for which
they work. Stock is issued
and held in trust for the
benefit of the employees.
Employee Welfare
Benefit Plan.
Any program established
or maintained by an employer
or an employee
organization to provide
medical, surgical,
or hospital care or benefits
in the event of sickness,
accident, disability, death
or unemployment.
Employees’ Trust. One way for a pension or
profit-sharing
plan to be financed and
given effect.
Employer
Contribution. The portion of the cost of
a health insurance plan
borne by the employer.
Employers Liability
Coverage.
Provides coverage
against the common law
liability of an employer
for injuries to employees as
distinguished from the
liability imposed by a
workers’ compensation law.
Employers liability applies
in situations where a
worker does not come under
these laws.
Employers Nonownership
Liability Insurance.
Protects the employer for
liability arising from the
use by employees of their own
cars on company
business.
Employment Benefit Plan. Any plan that is both
an employee welfare plan and
an employee pension
plan.
Encounter. Each time a person meets
with a health
care provider to receive
services.
Encumbrance. A claim on property, such as
a mortgage,
a lien for work and
materials or a right of
dower. The interest of the
property owner is reduced
by the amount of the
encumbrance.
Endorsement. A written or printed form
attached
to the policy that alters
provisions of the contract.
Endorsements and riders
serve as addenda—adding
coverage or conditions to
standard insurance
contracts.
Endorsement Extending
Period of Indemnity.
An
endorsement attached to
business interruption policies
that extends coverage to the
period during
which a business has
reopened for business but has
not reached the level of
business activity that existed
prior to the business
interruption loss.
Endorsement Split
Dollar. A split
dollar plan in
which the employer owns and
controls a life policy
on the life of an employee.
The employee’s rights to
certain policy benefits are
protected by an employer
endorsement.
Endowment Insurance. Life insurance where the
face amount is payable to
the insured at the end of
the contract period or to a
beneficiary if the insured
dies before that (e.g., an
insured purchasing an endowment
payable at age 65. Upon
reaching that
age, the proceeds would be
payable to the insured.
If the insured dies prior to
that age, the proceeds
would be payable to the
designated beneficiary as a
life insurance benefit).
Engineer (Loss
Prevention Engineer or Safety
Consultant). The employee of an
insurance company
who has the responsibility
of loss prevention
and who assists in the
securing of underwriting and
rating information.
Enrollee. An eligible individual
enrolled in a health
plan—does not include an
eligible dependent.
Enrolling Unit. An organization (such as
an employer)
that contracts for
participation in a health
insurance plan.
Enrollment. The total number of
enrollees in a
health plan. Also refers to
the process of enrolling
people in a health plan.
Enrollment
Period. The amount of time an
employee
has to sign up for a
contributory health plan.
Entire Contract Clause. A provision in an
insurance
contract stating that the
entire agreement between
the insured and the insurer
is contained in
the contract, including the application
if it is attached,
declarations, insuring
agreements, exclusions,
conditions and endorsements.
Entity Agreement. A buy-sell agreement
usually
used with a partnership in
which the partnership
agrees to purchase the
interest of a deceased or disabled
partner.
Entrustment. When an insured person
rents or
lends property to a
non-insured person.
Entry Age. The age when an employee
satisfies all
the age, service and other
eligibility requirements
for participation in a
pension plan.
Entry Date into Claims-Made. Initial effective date
of a “claims-made” liability
policy. It determines the
extent of maturity for rating
purposes. If claims-made
coverage is interrupted and
reestablished, or
if a retroactive date is
changed on renewal, the entry
date will change.
Environmental
Restoration.
Restitution for the
loss, damage or destruction
of natural resources arising
out of the accidental
discharge or escape of any
commodity transported by a
motor carrier, including
the cost of removal and
measures to minimize
damage to human health, the
natural environment,
fish, shellfish and
wildlife. Federal regulations re-
quire common carriers of
hazardous materials to
maintain minimum liability
coverages for BI, PD
and environmental
restoration.
Equifax. One of three major credit
reporting companies.
Equipment Floater. A form covering various
types
of equipment (e.g.,
construction equipment, against
specified perils or
occasionally on an all-risk basis
subject to exclusions).
Equity. The money value of an
insurance company
that is over and above its
liabilities. Liabilities include
almost all of its reserves.
ERISA. See Employee Retirement
Income Security
Act.
ERISA Liability. Liability imposed by law
upon
officers or other employees
operating in a fiduciary
capacity for the proper
handling of pension funds
and other employee benefits.
It is excluded from
most general liability
policies. See Employee Retirement
Income Security Act (ERISA).
Errors and Omissions
Clause. A
clause usually
found in an obligatory
reinsurance treaty that provides
that if an error or an
omission takes place in
describing a risk that falls
within the automatic reinsurance
coverage of the treaty, it
shall not invalidate
the liability of the reinsurer
for the risk.
Errors and Omissions
Insurance.
(1) Insurance
that indemnifies an insured
for a loss sustained because
of an error/oversight on his
or her part (e.g.,
an insurer purchases this
coverage to protect itself
against losses from such
things as failing to issue a
policy). (2) Coverage for
losses resulting from financial
institutions failing to
effect coverage.
Estate Plan. A plan for the disposition
of one’s property
at death, including the
handling of property
in the event of the
incompetency or total disability
of the estate owner. A will
is part of an estate plan.
Estate Planning. The process of
accumulation, conservation,
distribution and
administration of an estate
in order to minimize the
impact of taxation
and estate shrinkage.
Estate Tax. A tax payable to the
federal government.
The amount is based on the
value of the estate
of the decedent.
Estimated Premium. A provisional premium that
is adjusted at the end of
the year (e.g., in workers’
comp insurance an estimated
premium is based on
estimated payrolls for the
coming year. At the end
of the year, final payrolls
are determined and the
final premium is computed).
Estoppel. The legal principle
whereby a person loses
the right to deny that a
certain condition exists by
virtue of having acted in
such a way as to persuade
others that the condition
does exist (e.g., if an insurer
allows an insured to violate
a condition of the
policy, the insurer cannot
at a later date void the
policy because the condition
was violated. The insurer
has acted in such a way as
to lead the insured
to believe that the
violation did not void the coverage).
Evidence
Clause. A clause that requires the
insured
to cooperate in the
investigation of a claim by producing
records and submitting to
examinations.
This helps the adjuster
establish the validity of a
claim. In a health policy,
this clause requires the
insured to submit to
physical examinations.
Evidence of Coverage. See Certificate of
Insurance.
Evidence of
Insurability.
Any information concerning
health status required to
satisfy underwriting
standards, such as a medical
examination or
physician’s statement.
Ex Gratia Payment. Latin for “from favor.” A
payment
by an insurer to an insured
for which there is
no liability under the
contract. In some cases, an
insurer may feel there has
been a mistake or a misunderstanding,
and may pay a claim even
though
it does not appear to be
liable.
Examination. An examination of an
insurance company
by the state insurance department.
Examiner. (1) An employee assigned
by the state
insurance department to
audit insurers’ records.
(2) A physician appointed by
the medical director
of a life or health insurer
to examine applicants.
Excepted Period. See Probationary Period.
Exception. A provision in an
insurance policy that
eliminates coverage. See
also Exclusion.
Excess
Coverage/Insurance. Coverage in excess
of one or more primary
coverages that does not pay
a loss until the loss amount
exceeds a certain sum.
If an accident is covered by
more than one policy,
the second policy is said to
be excess.
Excess Interest. Interest credited to an
insured’s
contract in excess of the
amount guaranteed by the
terms of the contract.
Excess Limit. (1) That limit provided in
a policy
that is in excess of the
basic limit. See Basic Limit.
(2) A limit provided in a
separate policy with another
insurer that is in excess of
the limit provided
in the basic policy.
Excess Line Broker. A person licensed to place
insurance
not available in his or her
state through insurers
not licensed to do business
in the state. A person
licensed to deal with non-admitted
insurers.
Excess Loss Premium
Factor.
Used in connection
with retrospective rating
plans, this factor compensates
the insurer for the fact
that the insured has
elected to limit the effects
of any one large loss under
the retrospective rating
formula (e.g., the insured
elects a loss limitation of
$50,000, which mean
that would be the maximum
amount of any one
loss that would go into the
retrospective calculation).
Excess of Loss Ratio
Reinsurance.
See Aggregate
Excess of Loss Reinsurance.
Excess of Loss
Reinsurance.
(1) Reinsurance
which, subject to a
specified limit, indemnifies the
ceding company against the amount
of loss in
excess of the specified retention.
It includes various
types of reinsurance, such
as catastrophe, per risk,
per account and aggregate
excess of loss. Contrast
with Pro Rata Reinsurance. (2)
Reinsurance which
indemnifies the ceding
company for that portion of
the loss resulting from a
single occurrence, however
defined, that exceeds a
predetermined amount,
which is referred to as a
first loss retention or deductible.
Excess Per Risk Reinsurance. A form of excess of
loss reinsurance which,
subject to a specified limit,
indemnifies the ceding
company against the amount
of loss in excess of a
specified retention with respect
to each risk involved in
each occurrence.
Excess Plan. A retirement plan designed
around
the benefits of Social
Security.
Excluded Period. See Probationary Period.
Exclusion. A contractual provision in
an insurance
policy that denies coverage
for certain perils, persons,
property or locations. Most
exclusions exist
simply to remove coverage
for above-average risks
which are not anticipated in
average rates and premiums.
In some cases, the coverage
is available for
an additional charge. Common
policy exclusions
include: war and acts of
war, self-inflicted injury
and aviation. Other
exclusions limit the insurer’s
exposure to events that may
have been caused intentionally
or events that dramatically
increase the
chance of loss. See also
Exception.
Exclusion Ratio. The relationship or ratio
of the
total investment in the
contract (cost basis) to the
total expected return from
an annuity (calculated
based on average life expectancy
tables); used to calculate
the percentage of each
annuity payment which
is considered to be a return
of cost basis.
Exclusive Agency System. An insurance distribution
system that allows agents to
sell and service
insurance contracts that
limit representation to one
insurer and reserve to the
insurer the ownership,
use and control of policy records
and expiration date.
See also Captive Agent and
Direct Writer, and contrast
with Independent Agency
System.
Exclusive Provider
Organization (EPO).
A preferred
provider organization where
individual members
use particular preferred
providers rather than
choosing from a variety of
preferred providers. In
an EPO, a primary physician
monitors care and
makes referrals to a network
of providers.
Exculpatory. The portion of a contract
or agreement
that relieves one party to
the agreement of
the consequences of his or
her own acts.
Executor. The person or entity
specified by will
who is responsible for the
probating of an individual’s
will and the settlement of
an estate.
Exemplary Damages. See Punitive Damages.
Exhibitions Insurance. A policy for people who
display their products
through public exhibitions.
Usually written on an
all-risk basis with certain
specified exclusions.
Expectation of Life. The average number of
years
of life remaining for persons
of a given age according
to a particular mortality
table. Also called life
expectancy.
Expected Claims. Estimated claims for a
person/
group for a contract year
based on actuarial data.
Expected Morbidity. The expected incidence of
sickness or injury within a
given group during a
given period of time as
shown on a morbidity table.
Expected Mortality. The expected incidence of
death within a given group
during a given period
of time as shown on a
mortality table.
Expediting Expenses. Expenses incurred in order
to speed up repair or
replacement to reduce the
amount of loss by a peril
covered in a policy. Most
commonly used in connection
with business interruption
and boiler and machinery
insurance. Expediting
expenses are generally
covered if they reduce
the amount of the loss that
the insurer would otherwise
have to pay.
Expense. (1) The cost of conducting
an insurance
operation aside from the
amount paid for losses. (2)
A policy’s share of the
company’s operating costs,
fees for medical
examinations and inspection reports,
underwriting, printing
costs, commissions, advertising,
agency expenses, premium
taxes, salaries,
rent, etc. Such costs are
important in determining
dividends and premium rates.
Expense Allowance. A compensation paid to an
insurance agent in excess of
prescribed commissions.
Expense
Constant. A flat charge added to the
premium
of small accounts where the
premium is so
low that the cost of issuing
and servicing the policy
cannot be recovered. Most
often used with workers’
compensation policies.
Expense Guarantee. One of the guarantees of
all
annuities; that is, the
guarantee that expenses, the
cost of doing business, will
not increase or exceed a
certain percentage of the
annuity contributions.
Expense Incurred Basis. Some long-term care
policies
are issued on an expense
incurred basis, which
means the contracts
reimburse a proportion of the
actual expenses incurred.
These benefits function
much like some forms of
hospital and medical insurance
because the insurance pays
only a percentage
of the costs (usually 50 to
80 percent), and the
insured is responsible for
the remainder—a requirement
known as coinsurance.
Expense Incurred. See Incurred Expense.
Expense Loading. The amount added to the
rate
during the ratemaking
process to cover expenses.
Expense Ratio. The percentage of the
premium
dollar devoted to paying the
expenses of an insurer,
other than losses.
Expense Reimbursement
Allowance.
See Expense
Allowance.
Expense Reserve. A liability for incurred
but unpaid
expenses.
Experian. One of three major credit
reporting companies.
Experience. (1) The loss record of an
insured, an
agent, a territory, a type
of insurance written, etc.
(2) A statistical
compilation relating losses to premiums.
Experience Modification. The increase or decrease
in premiums resulting from
the application of an
experience rating plan,
usually expressed as a percentage.
See Experience Rating.
Experience, Policy Year. See Policy Year
Experience.
Experience Rating. A method of adjusting the
premium
for a risk based on past
loss experience for
that risk compared to loss
experience for an average
risk. See also Prospective
Rating and Retrospective
Rating.
Experience Refund. In life reinsurance, a
predetermined
percentage of the net
reinsurance profit
that the reinsurer returns
to the ceding company as
a form of profit sharing at
year’s end.
Experienced Mortality
or Morbidity.
The actual
mortality or morbidity
experienced in a group of
insureds as compared to the
expected mortality or
morbidity.
Experimental or
Unproven Procedures.
Any
health care services,
supplies, procedures, therapies
or devices that the health
plan determines regarding
coverage for a particular
case to be either (1)
not proven by scientific
evidence to be effective, or
(2) not
accepted by health care professionals as being
effective.
Expiration Card. A way of recording the
date that
a policy terminates. It
reminds the agent or sales
representative of a policy
coming up for renewal.
Expiration Date. The date indicated as the
end of
the coverage period. If a
policy is not renewed by
this date, premiums and
coverage are terminated.
However, expiration is not
absolute—it does not
affect payments for loss of
use. If a loss occurs just
before the expiration date
and continues for two
months after this date, the
loss is fully covered.
Expiration File. A record kept by agents or
insurers
of the dates that policies
they have written or
are servicing expire.
Expiration Notice. Notification to the
insured of
the impending termination of
the insurance contract.
Expiry. The termination of a term
life insurance
policy at the end of its
period of coverage.
Explanation of Benefits
(EOB). The
statement sent
to a participant in a health
plan listing services,
amounts paid by the plan and
total amount billed
to the patient.
Explanation of Medicare
Benefits. A
notice which
is sent to the Medicare
patient providing information
about how the claim is to be
paid.
Explosion, Collapse and
Underground Damage
(XCU). See XCU.
Explosion Insurance. Insurance against loss of
property due to explosion
but not including explosion
of steam boilers, pipes and
certain pressure instruments.
Most commonly written as
part of the
extended coverage
endorsement.
Exports. Materials and goods
shipped to other countries.
Exposure. (1) The state of being
subject to the possibility
of loss. (2) The extent of
risk as measured by
payroll, gate receipts, area
or other standards. (3)
The possibility of loss to a
risk being caused by its
surroundings. This is used
in property insurance
rating. (4) Surroundings
producing a loss to the
insured property. (An
example of definitions (3) and
(4): an insured building
suffering loss because a
dynamite factory next to it
exploded.)
Exposure Units. (1) Individuals or
property which
may be subject to loss or
damage on which a monetary
value may be placed. When
these exposure
units have similar
characteristics they meet the requirement
of insurability as
homogeneous exposure
units. (2) Also refers to
the premium base, in the
sense that the exposure
units times the rate equals
the premium (e.g., in
workers’ compensation, each
$100 of payroll is an
exposure unit.)
Express Authority. Authority of an agent that
is
specifically granted by the
insurer in the agency
contract or agreement.
Extended
Care Facility. A facility such as a
nursing
home that is licensed to
provide 24-hour nursing
care in accordance with
state and local laws.
Three levels of care may be
provided—skilled, intermediate,
custodial or any
combination.
Extended Coverage (EC). A common extension of
property insurance beyond
coverage for fire and
lightning that includes
coverage for loss by the perils
of windstorm, hail,
explosion, riot and riot attending
a strike, aircraft damage,
vehicle damage and
smoke damage. At one time EC
was added by endorsement.
In recent years it has been
included on
many forms as either an
optional coverage or as part
of the minimum coverages
provided.
Extended Death Benefit. A group policy provision
that pays the life benefit
when: 1) the insured
is totally and continuously
disabled at the time the
policyholder stops paying
premium until the
insured’s death; and 2) the
insured dies within one
year of the date the premium
payments stopped, or
prior to age 65.
Extended Non-Owner
Liability.
An endorsement
attached to a personal auto
policy to provide broader
liability coverage only for
specifically named individuals.
When attached, it covers
non-owned autos
furnished for the regular
use of an insured, use of
vehicles to carry persons or
property for a fee and
broader coverage for
business use of vehicles.
Extended Period of
Indemnity.
A business income
coverage that continues
coverage for income losses
for a period of time after
operations have resumed.
Extended
Reporting Period (ERP).
A period allowing
claims after expiration of a
“claims-made”
liability policy. Also known
as a “tail.” See also Basic
ERP, Supplemental ERP, Mini
Tail, Midi Tail,
Maxi Tail.
Extended Term Insurance. A provision in most
policies that provides the
option of continuing the
existing amount of insurance
as term insurance for
as long a period of time as
the contract’s cash value
will purchase. This is one
of the nonforfeiture options
available to the insured in case
a premium is
not paid within the grace
period. See also Nonforfeiture
Values.
Extended Wait. A form of reinsurance
whereby after
the ceding insurer has paid
monthly benefits to
the claimant for a given
number of months under a
disability insurance contract,
further benefits are
paid by the reinsurer.
Extension of Benefits. A condition that allows
coverage to continue beyond
the expiration date of
the policy in the case of
employees who are not actively
at work or dependents who
are hospitalized
on that date. The extension
applies only if the employee
or dependent is disabled as
of that date and
continues only until the
employee returns to work
or the dependent leaves the
hospital.
Extortion. The surrender of property
away from an
insured’s premises as a
result of a threat to do bodily
harm to an insured, employee
or to a relative or
invitee of either, who is or
allegedly is being held
captive.
Extortion
Coverage Form. A commercial crime
coverage form that protects
against loss of money,
securities and property
other than money and securities,
resulting from extortion.
Extra Expense Coverage
Form. A
commercial
property form designed to
cover extra expenses incurred
by a business so it can
remain in operation
following a property loss.
See Extra Expense Insurance.
Extra Expense Insurance. A form that provides
reimbursement for the extra
expenses reasonably
incurred to continue the
operation of a business
when the described property
has been damaged by
a peril covered by the
contract. It is normally used
by businesses where
continuity of operation, regardless
of cost, is a necessity as,
for example, any business
that would permanently lose
customers if there
were any suspension of
operations.
Extra Percentage Tables. Mortality or morbidity
tables showing the extra
premium for certain impaired
health conditions. Usually
this premium is
shown as a percentage of the
standard premium. A
form of substandard rating.
Extra Premium. An added premium charge
for extra
hazardous exposures that is
levied because the
normal rate does not take
these into account.
Extra Premium Removal. Removal of an extra
premium
when the cause for it ceases
to exist.
Extraordinary Medical
Benefits.
This coverage
pays when an insured’s
medical and rehabilitation
expenses exceed the limits in his or
her policy. It
provides $1 million of
coverage.
© 2008 Silver
© 2008 Silver
F
Face. The first page of a life insurance
policy.
Face Amount. The amount of insurance
provided
by the terms of an insurance
contract, usually found
on the face of the policy.
In a life insurance policy,
the death benefit.
Facility-of-Payment
Clause. A
contract provision
found in industrial life
policies that permits the insurer
to pay a portion of the
proceeds of the policy
to any relative or person
who has possession of the
policy and who appears
equitably entitled to such
payment. This provision
facilitates payment when
doubt exists as to who the
beneficiary is and to save
legal expenses in the
settling of an estate.
Factored Rating. See Adjusted Community
Rating.
Factory Mutuals. Member insurers of the
Factory
Mutual System, a group of
mutual coinsurers formed
to provide member insurers
with insurance and
engineering services.
Facultative Certificate
of Reinsurance.
A document
formalizing a facultative
reinsurance policy.
Facultative (or
Specific) Reinsurance.
Reinsurance
by offer and acceptance of
individual risks,
wherein the reinsurer
retains the “faculty” to accept
or reject each risk offered by
the ceding company.
Contrast with Treaty
Reinsurance.
Fair Access to
Insurance Requirements (FAIR
Plans). State run pools that offer
insurance to those
in high-risk areas who cannot
obtain insurance
through normal channels.
Includes coverages for
fire and allied perils, with
considerably high limits,
after inspection of the
premises. By law, any insurer
that buys riot reinsurance
must participate in a
HUD-approved FAIR plan. See
also Assigned-Risk.
Fair Credit Reporting
Act. Public
Law 91-508
requires that an applicant
be advised if a consumer
report is requested and told
the scope of the possible
investigation. Should the
request for insurance
be declined because of
information in the report,
the applicant must be given
the name and
address of the reporting
agency.
FAIR Plan. See Fair Access to
Insurance Requirements.
Fair Rental Value
Coverage.
Insurance that pays
the loss of rental value,
minus expenses which do
not continue, when property
rented to others or
held for rental is damaged
by a covered peril. Fair
rental value coverage
applies only when the residence
insured is the principal
residence.
Fallen Building Clause. A provision in property
policies specifying that if
a material part of an insured
building collapses from
causes other than fire
or explosion, the fire
coverage becomes void.
False
Arrest Claims. Damage to a person’s reputation
when a suspected wrongdoer
has been arrested
without proper cause. False
detention or imprisonment
restrict a person’s freedom
of movement, and
can also lead to a claim for
damages.
Family Automobile
Policy. A
package policy that
provides protection against
legal liability for bodily
injury and property damage
to others, injury to the
insured and other occupants
of the vehicle and damage
to the vehicle itself. It
has largely been replaced
by the modern personal auto
policy.
Family Dependent. A person entitled to
coverage
because he or she is: 1) the
enrollee’s spouse; 2) a
single dependent child of
either the enrollee or the
enrollee’s spouse (including
stepchildren or legally
adopted children); or 3) a
resident of the enrollee’s
home.
Family Expense Policy. Coverage for medical
expenses
of all members of a family.
Family Income Policy. A policy that pays an
income
up to some future date
designated in the
policy to the beneficiary
after the death of the insured.
The period of payment is
measured from the
date of inception, and at
the end of the income period
the face amount of the
policy is paid to the
beneficiary. If the insured
lives beyond the income
period, only the face amount
is payable in the event
of the insured’s death.
Family Maintenance
Policy. A
policy that pays an
income to the beneficiary
starting after the death of
the insured and continuing
for a stated period of
time. At the end of the income
period, the face amount
of the policy is paid to the
beneficiary.
Family Maximum Benefit. A benefit that is
approximately
20 percent greater than the
benefit equal to
the primary insurance amount
(PIA).
Family Members. Persons who reside in the
same
household as the insured and
are related to a named
insured by blood, marriage
or adoption, or are wards
or foster children. Family
members also include a
student temporarily living
away at school.
Family Policy. A policy typically
consisting of whole
life insurance for the head
of the household with
smaller amounts of term
insurance on other family
members.
Family Protection
Endorsement.
See Uninsured
Motorists Endorsement.
Farm Coverage Part. A coverage part available
under the commercial package
policy. Coverages may
be included for farm
property, agricultural equipment,
livestock and farm
liability.
Farm Liability Coverage
Form. A
commercial liability
form attached to a farm
coverage part to provide
coverage for bodily injury,
property damage,
personal injury, advertising
injury and medical payments
for farm exposures.
Farm Personal Property. Scheduled or unscheduled
classes of farm property
that are covered by
the farm property coverage
form, including grain,
feed, supplies, livestock,
farm machines and farm
vehicles. Contrast with Household
Personal Property.
Farm Property Coverage
Form. A
farm coverage
form that covers residential
dwellings, other private
structures, household
personal property, farm
personal property and other
farm structures.
Farmers Comprehensive
Personal Liability.
Similar
to the comprehensive
personal liability policy
but adapted to cover farm
hazards, such as damage
caused by grazing animals.
Farmowners-Ranchowners
Policy. A
package
policy providing property
coverage on farm dwelling
buildings and contents, as
well as barns, stables
and other farm outbuildings.
Liability coverage is
also included. It is similar
to a homeowners policy
adapted to cover farm
properties.
FAS. See Free Along Side.
FASB. See Financial Accounting
Standards Board.
Faultiness. Faulty planning,
construction or maintenance
that causes a loss. The
standard homeowners
policy will most likely not
cover these losses.
FC&S. See
Free-of-Capture-and-Seizure Clause.
FC&S Bulletins. Fire, Casualty and Surety
Bulletins.
A service, published by the
National Underwriter
Company, explaining
coverages, forms, underwriting
and rating procedures for
the various property,
casualty and surety lines of
insurance.
FCAS. See Fellow of the Casualty
Actuarial Society.
FCII. Fellow of the Chartered
Insurance Institute,
whose designation is gained
by the completion of
examinations and other
requisites.
FDIC. See Federal Deposit
Insurance Corporation.
Federal Crime Insurance
Program. A
federally
administered program where
pooling companies
write crime insurance for
those unable to secure it
in the open market.
Available for residential and
commercial risks in various
states.
Federal Crop Insurance
Corporation.
An agency
within the U.S. Department
of Agriculture that
provides insurance on
growing crops.
Federal Deposit
Insurance Corporation (FDIC).
An agency of the federal
government that insures
bank deposits up to a stated
maximum.
Federal Emergency
Management Agency
(FEMA). A government agency that
provides disaster
relief during emergencies,
such as floods, fire,
earthquakes, etc.
Federal Employees
Compensation Act.
Provides
workers’ compensation
benefits to civilian federal
government employees. The
government administers
and operates the system, as
well as provides the
benefits; no private
insurance is involved.
Federal Employers
Liability Act (FELA).
Passed
by Congress in 1908 before
there were workers’
compensation statutes and benefits, this
Act covers
railroad workers only. It
puts injured workers in a
favorable position in terms
of liability claims, allowing
them to sue the employer for
negligence.
Because railroad workers and
their unions were unwilling
to trade their favorable
positions for statutory
benefits, they remain exempt
from compensation
laws in many states. Cases
are decided on the
issue of employer liability.
Federal Estate Tax. A federal tax imposed on
the
deceased’s estate that
includes the total assets comprising
a person’s estate at death.
Federal Insurance
Administration.
A government
office, part of HUD, that
oversees FAIR plans, federal
crime plans and the flood
program.
Federal Insurance
Contributions Act (FICA). See
FICA.
Federal Officials Bond. Reimburses the government
for loss resulting from the
dishonest acts of its
employees or their lack of
faithful performance.
Federal Qualification. Approval of any HMO made
by the Health Care Financing
Administration after
conducting an evaluation of
methods of doing business,
documents, contracts
facilities and systems.
Fee Maximum. The maximum amount
available
to a provider for specific
health care services under
a contract.
Fee Schedule. A list of maximum fees for
providers
who are on a fee-for-service
basis.
Fee
Simple. Complete ownership of
property with
the unconditional right to
dispose of it. Compare
with Joint Tenancy and
Tenancy in Common.
Fee-for-Service
Equivalency.
The difference between
the amount a provider
receives from a reimbursement
system, such as capitation
(a flat charge
per month, for instance),
compared to fee-for-service
reimbursement.
Fee-for-Service
Reimbursement.
A health care system
where physicians and other
providers receive
payment based on their
billed charge for each service
provided.
FEGLI. Federal Employees Group
Life Insurance.
Fellow of the Casualty
Actuarial Society (FCAS).
A designation gained by the
completion of a series
of examinations and other
requirements.
Fellow of the Society
of Actuaries (FSA).
A designation
which is gained by the
completion of a
series of examinations, as
well as other experience
requirements.
Fellow Servant Rule. A common law defense used
by employers before the
passage of compensation
laws. It held that if an
employee was injured due to
the carelessness of a fellow
employee, the right of
action was against the
fellow worker and not against
the employer. Gradually, the
class of “fellow servants”
was narrowed, to exclude
managers and supervisors
—the negligence of a “boss”
would no
longer release the employer.
Fellow, Life Management
Institute (FLMI).
See
Life Office Management
Association.
FEMA. See Federal Emergency
Management
Agency.
FICA. Federal Insurance
Contributions Act. A law
imposing a payroll tax to assist
in funding Social
Security benefits.
Fictitious Groups. Groups formed primarily
for the
purpose of buying insurance.
Under law, such
groups may not be
underwritten.
Fidelity Bond. Reimburses employers for
loss due
to the dishonest acts of a covered
employee.
Fiduciary. A person holding the funds
or property
of another in a position of
trust, and who is obligated
to act in a prudent and
ethical manner (e.g.,
an attorney, bank trustee,
the executor of an estate,
etc.).
Fiduciary Bond. A bond guaranteeing the
faithful
performance of a fiduciary.
Field. (1) See Field Force. (2) A
type or line of insurance
(e.g., life insurance). (3)
An area or territory
covered by an agent, agency
or insurer.
Field Force. The agents and supervisory
personnel
of insurers who operate away
from the home office
in the branch offices and
general agencies of the
company.
Field Representative. See Special Agent.
Field
Underwriting. The initial screening of
prospective
buyers of health insurance,
performed by
sales personnel “in the
field.” May also include quoting
of premium rates.
File-and-Use Rating
Laws. State
laws pertaining
to insurance rates which
permit insurers to adopt
new rates without the prior
approval of the insurance
department. Usually,
insurers submit new rates
along with supporting
statistical evidence, but this
is not necessary in all
cases.
Financed Insurance. Payment of insurance
premiums,
in whole or in part, with
funds derived from
borrowing, usually from the
cash value of the policy.
Also known as minimum
deposit insurance.
Financed Premium. Paying insurance premiums
with
funds borrowed outside the
contract itself.
Financial Accounting
Standards Board (FASB).
A non-governmental group
that sets standards for
generally accepted
accounting principles.
Financial Guarantee
Bond. A
guarantee that others
will pay sums of money due
(e.g., a sales tax
bond guarantees the state
that the merchant will
pay sales taxes on time and
in full).
Financial Responsibility
Clause. A
clause that says
a policy conforms to the
financial responsibility laws
of any state in which the
insured is operating the
insured vehicle.
Financial
Responsibility Law/Requirements. Laws
that mandate that the
insured furnish evidence of
ability to pay for losses,
which most often takes the
form of an insurance policy with
certain minimum
limits of coverage.
Financial Statement. The disclosure of the
financial
results of a firm’s
operations, including the balance
sheet, profit and loss
statement and associated
information.
Fine Arts Floater. Covers fine arts, such as
antiques,
leaded glass and other works
of art, usually on an
open perils (all risk)
basis.
Fine Print. A reference to imaginary
small type in
a policy contract that
contains exclusions, reductions,
exemptions and limitations
of coverage. Most
state laws specify the
minimum type size that can
be used in a policy, and
provide that exclusions cannot
be printed in type smaller
than that used for
the benefits.
Fire. Combustion that is rapid
enough to produce
a flame or glow. Property
insurance only covers “hostile”
fires, or those that have
escaped their intended
limits or were not started
intentionally. Fires in their
proper contained area are
called “friendly fires” and
are not covered under most
basic property insurance
policies.
Fire Damage Limit. A general liability limit
that
applies only to the coverage
for fire legal liability.
Fire Department Service
Clause. A provision
in a
fire insurance policy that
indemnifies the insured
for charges incurred due to
action by a fire department
to save the insured’s
property.
Fire
Legal Liability. Protects the insured against
liability incurred when the
insured’s negligent actions
result in the destruction of
property that is in
the insured’s care, custody
or control.
Fire Maps. A visual record of the
distribution of
fire insurance written by
all reporting insurers placed
on sectional maps. The maps
show the distribution
of the covered properties in
a given area and make
it possible to avoid
catastrophic losses.
Fire Mark. An insignia, generally
metal, once placed
on buildings insured by the
insurer represented by
the mark. Since insurers had
their own fire brigades,
they had to check the mark
on a building to determine
whether they should
extinguish the fire.
Fire Marshal. A public official
responsible for the
prevention and investigation
of fires. This service is
usually financed by a tax on
the premiums of property
insurers.
Fire Resistive
Construction.
A building with exterior
walls, floors and roof
constructed of masonry
or other fire-resistive
materials.
Fire Wall. A structure (wall)
designed to seal off
fires within a building.
Fireproof. Buildings that cannot be
damaged by
fire. However, the term is a
misnomer, since no
building is completely
undamageable by fire, and
it is gradually being
replaced by the words “fire
resistive.”
First Aid to Others. An insured is authorized
by
the insurance company to
incur expenses for first
aid to an injured third party
when there is bodily
injury covered by the
policy. Expenses for first aid
to an insured person are not
covered.
First Loss Insurance. (1) An insurance policy
that
pays a loss before others
covering the same risk. (2)
A contract written in such
an amount as to cover
only an insured’s expected
loss during the policy
period with no other
insurance in existence.
First Loss Retention
(or Deductible).
See Excess
of Loss Reinsurance.
“First” Named Insured. The first person named
as an insured on a
commercial policy. These forms
require an insurer to notify
the first named insured
rather than notifying all
named insureds.
First Offer Plan. A provision in a buy-sell
agreement
specifying that an offer to
sell common stock
must first be made to
current stockholders.
First Party. In terms of liability,
this means the
insurance policyholder is at
fault in an accident.
First party liabilities—or,
damage an insured does
to himself and his own
property—are relatively easy
for insurance companies to
calculate and control.
See also Third Party.
First Party Insurance. Coverage for the insured’s
own property or person.
Contrast with Third Party
Insurance.
First Surplus
Reinsurance.
The first amount allocated
to reinsurance in excess of
the original insurer’s
net retention. See also
Surplus Reinsurance and
Lines.
First
Surplus Treaty. A contract whereby the
reinsurer
shares the risk with the
ceding company on a
pro rata basis. The
reinsurer pays a proportion of
each loss.
First Year. Refers to various matters
during the first
year a policy is in force,
such as first year premiums
and first year claims.
First Year Commission. The commission paid to
an insurance agent on the
first year’s premium as
compensation for a newly
sold policy.
Fiscal Intermediary. A commercial insurer
contracted
by the Department of Health
and Human Services to
process and administer Part
A Medicare claims.
501(c)(9) Trust. A voluntary employee
beneficiary
association. This is used by
some companies to administer
benefits.
Five Year Income
Averaging.
A tax device for
lump sum distributions from
a qualified plan that
enables the individual to
pay a lesser amount of
income tax on the
distribution.
Fixed-Amount
Installments.
A settlement option
that pays a fixed, periodic
(annual, semiannual, quarterly,
monthly) benefit of a
predetermined amount
until the proceeds (principal)
and interest are exhausted.
Also called the amount
option and the principal
and interest to exhaustion
option.
Fixed Annuity. An annuity that provides
the annuitant
with a fixed payment during
the period of
the annuity. Fixed annuity
payments are considered
part of the insurance
company’s general ac-
count assets (the conservative
investment portfolio,
not the stock market
portfolio).
Fixed Base Liability. The liability coverage
needed
by fixed base operators,
i.e., those who operate
commercial enterprises and
operate out of one airport
(e.g., aircraft dealers,
charterers and instructors).
Fixed Benefit
Retirement Plan.
A plan providing
retirement benefits only on
a fixed amount or at a
fixed percentage—such as 1
percent of monthly salary
times the number of years of
credited employment;
or 25 percent of the
employee’s average pay
over the last few years
prior to retirement.
Fixed Benefit. A benefit with a dollar
amount that
does not vary.
Fixed Dollar Annuity. Guarantees a fixed,
minimum
dollar payout during each
payout period.
Fixed-Period
Installment Option.
A settlement
option whereby the proceeds
are guaranteed to be
paid in equal installments
for a specified period of
time. Proceeds are retained
by the insurance company
and paid in equal
installments over a specified
period of months or years.
Payments are comprised
of both principal and
interest. The payments
also are established without
regard to the length of
life of the primary beneficiary.
If the beneficiary dies,
payments are continued to a
second beneficiary.
Also called installments
certain or time option. (LI)
Fixed Period Option. An option for paying the
proceeds of a life insurance
policy to beneficiaries
whereby the insured chooses
the dollar amount of
the benefit payment. This
fixed amount is paid
periodically until the entire proceeds
are exhausted.
Interest, at a minimum
guaranteed rate, is added
to the proceeds annually.
Flat. Without interest or
service charges. See also
Flat Cancellation.
Flat
Cancellation. A policy that is canceled
on its
effective date. Usually
under a flat cancellation no
premium charge is made.
Flat Commission. A standard scale
commission paid
to agents regardless of the
type of exposure or type
of policy. Contrast with
Graded Commission.
Flat Deductible. A deductible which is not
one of
the disappearing or
franchise type. A specific amount
deducted from each loss or
claim.
Flat Maternity Benefit. A stipulated benefit in a
hospital reimbursement
policy that is paid for maternity
confinement, regardless of
the actual cost of
the confinement.
Flat Rate. A reinsurance premium rate
based on
the entire premium income
received by the ceding
company from business ceded
to the reinsurer, as
distinguished from a rate
applicable only to the
excess limits premium.
Fleet (or Group) of
Companies.
A number of insurance
organizations under common
ownership
and often common management.
Fleet Policy. An insurance contract that
applies to
a number of vehicles.
Usually five or more self-propelled
vehicles constitute a fleet.
Flesch Test. A method for determining
the degree
of ease or difficulty for
reading material. This method
counts not only the number of
words in a sentence,
but also the number of
syllables in each word. It has
come into popular use
because of state laws requiring
that contracts of insurance
be easily understandable
by someone at the eighth
grade level.
Flexible Benefit Plan. A program that allows
employees
to tailor benefits to meet
their own specific
needs.
Flexible Premium
Adjustable Life Insurance Policy.
Another term for universal
life policies.
Flexible Premium
Annuity. An
annuity that allows
the contract holder to vary
the amount of the
premium payment, or stop
payments and resume
payments at will. A flexible
premium annuity is
used to fund IRA and Keogh
retirement plans because
it allows the amount of
premium to change
as wages change.
Flexible Premium Policy. A life insurance policy
that allows the policyholder
to vary the amount or
timing of premium payments.
Flexible Premium
Variable Life.
A whole life contract
and a security that features
flexible premium
payments, non-guaranteed cash values
and either a
minimum guaranteed death
benefit or no guaranteed
death benefit. Policy values
are dependent on
the performance of a
separate account.
Flexible Spending
Account (FSA).
A salary reduction
cafeteria plan whereby
employee funds are used
to provide various types of
health care benefits.
FLMI. Fellow of the Life
Management Institute. See
Life Office Management
Association.
Floater. An endorsement that
applies to movable
property, whatever its
location, if it is within the
territorial limits imposed
by the contract. Coverage
“floats” with the property.
Flood. A general and temporary
condition of partial
or complete inundation of
normally dry land areas
from: overflow of
inland/tidal waters; unusual accumulation
and runoff of surface waters
from any source;
or abnormal, flood-related
erosion and undermining
of shorelines. Flood also
means inundation from
mud flows caused by
accumulations of water on or
under the ground, as long as
the mud flow and not a
landslide is the proximate
cause of loss.
Flood Insurance. Reimburses property owners
for
loss due to the defined
peril of flood. Often sold in
connection with a government
insurance plan.
Floor Plan Insurance. Coverage for merchandise
held for sale by a retailer
that has been used as collateral
for a loan. The lending
institution, in effect,
is insuring its collateral
the merchandise “on the
floor” of the retailer.
FOB. See Free On Board.
Following Form. A fire or other form
written exactly
under the same terms and
coverages as other
insurance on the same
property.
Foreign Insurer. An insurer domiciled in a
state
other than the one in which
the insured’s insurance
is written.
Forfeitures. Non-vested remainders in
pension
plans left by terminated employees.
Forfeitures must
be used to reduce employer
contributions in subsequent
years. In profit-sharing
plans, forfeitures may
be allocated among remaining
participants.
Forgery. The false and fraudulent
making or altering
of a written instrument.
Forgery Bond. See Depositor’s Forgery
Insurance.
Forgery or Alteration
Coverage Form.
A commercial
crime coverage form that
protects the insured
against losses resulting
from forgery or alteration
of outgoing checks, drafts,
promissory notes
and similar instruments
drawn against the insured’s
accounts.
Form. (1) An insurance policy,
sometimes called a
form, is the written
statement of a contract of insurance.
(2) An insurance document
which, when attached
to a policy, makes it
complete (e.g., a standard
fire policy would have to
have a business interruption
form attached to it to make
up a business
interruption policy. (3) Any
rider or endorsement,
such as a deductible
endorsement form.
Formal Plan. A retirement plan set
forth in writing
whereby contractual and legally
enforceable
rights pass on to the
participating employees.
Formula. How the amount of pension
to be received,
or contribution to be made
under a retirement
plan is determined.
Formulary. See Drug Formulary.
Fortuitous
Event. See Accident.
Foundation Exclusion
Clause. A
provision in a fire
insurance policy which
provides that the value of
the foundation is not to be
included when determining
the value of property at the
time of a loss.
Foundering. A term that refers to a
ship that is
sinking.
401(h) Trust. Governed by IRS Codes,
these accounts
have limited use for
tax-free funding of post
retirement benefits. An
employer’s 401(h) contribution
is limited to no more than
25 percent of
total contributions to all
retiree benefits, including
pension benefits. Since the
health liabilities for most
employers are so large, a
401(h) could provide only
incidental funding.
401(k) Plan. A qualified elective
deferral plan where
employee contributions are
made by means of a salary
reduction agreement, with or
without matching
employer contributions.
403(b). A section of the Internal
Revenue Code authorizing
tax sheltered annuities as
qualified pension
plans for employees of
nonprofit organizations.
FPA. See Free of Particular
Average.
Fractional Premium. A proportionate amount of
the annual premium, such as
semiannual, quarterly,
etc.
Frame. A type of construction. A
frame building is
primarily made with wood
frames and joists.
Franchise Clause. See Franchise Deductible.
Franchise Deductible. A deductible that
originated
with marine insurance. It
states that no claim is
payable unless it exceeds a
stated amount or a stated
percentage of the amount of
insurance. Once the
claim exceeds that amount or
percentage, the entire
amount of the claim is
payable.
Franchise Insurance. A plan for covering groups
of persons with individual
policies having uniform
provisions, although they
may differ in benefits.
Individual contracts are
issued to each person with
individual underwriting. It
is usually applied to
groups too small to qualify
for true group coverage,
and the solicitation of
cases usually takes place
among a workforce with
employer consent. In life
insurance, it is sometimes
called wholesale insurance.
Contrast with True Group
Insurance.
Fraternal Insurance. Insurance offered to a
special
group of people, namely,
members of a lodge or a
fraternal order. It may be
written on an assessment
basis or on a legal reserve
basis.
Fraud. Deceit, trickery or misrepresentation
with
the intent to induce another
to part with something
of value or surrender a
legal right.
Fraudulent Delivery. In connection with
transportation
floaters, when a shipper
surrenders goods to
someone posing as an agent
for the carrier, it is held
that the goods did not come
into the custody of the
carrier. If the carrier
delivers goods to someone
posing as an agent for the
receiver, it is held that no
valid delivery is made, and
the carrier is liable for
the loss.
Free Alongside (FAS). A marine shipping
agreement
which requires the seller to
place the goods
alongside a named vessel or
a designated dock. The
seller is responsible for
insuring goods up to the
time they are alongside.
Free Look Period. A period of time (usually
10,
20 or 30 days) during which
a policyholder may
examine a newly issued
individual policy of life or
health insurance, and
surrender it in exchange for a
full refund of premium if
not satisfied for any reason.
Free of Particular
Average (FPA).
A contract provision
that excuses the insurer
from liability for losses
below a certain percentage
or fixed amount. Similar
to a deductible.
Free on Board (FOB). The term has special
significance
in marine insurance, where
it is vital to
determine when title passes
from the seller to the
buyer. If the materials are
shipped FOB point of
destination, the seller is
liable for damage caused
during the course of
transportation. If the material
is shipped FOB point of
departure, then the buyer
becomes liable for it.
Free-of-Capture-and-Seizure
Clause. An
insurance
contract provision that
excludes losses due to
war, capture and seizure.
Free-Standing Emergency
Medical Service Center.
A facility whose primary
purpose is to provide
care for emergency medical
conditions. Also called
emergi-center or
surgi-center.
Free-Standing
Outpatient Surgical Center. A facility
that only provides
outpatient surgical services.
Also called surgi-center.
Freight. A charge for the
transportation of goods.
Frequency. The number of times a
service is provided
over a given time period.
Friendly Fire. See Fire.
Fringe Benefits. See Employee Benefit
Program.
Fronting. When the ceding company
retains a very
small part of a risk and reinsures
the large majority
of it with one or more
reinsurers.
FSA. See Fellow of the Society
of Actuaries.
Full Coverage. Insurance that provides
for the payment
of all insured losses in
full. For example, some
health insurance policies provide
for full coverage
without a deductible,
participation or a coinsurance
clause.
Full Preliminary Term
Reserve Valuation.
A
method for determining
reserves on life insurance
contracts, whereby no
reserve is required for the
first year of a contract’s
life, with an appropriate
adjustment in subsequent
years’ reserves to make
up the difference. This
method of valuation makes
it possible for an insured to
have more funds available
for the high first-year
expenses incurred in the
writing of life insurance.
Full Reporting Clause. A clause that requires an
insured to report values
periodically. The clause provides
for a penalty to the insured
if true values are
not reported.
Fully Insured Plan. A qualified plan whereby
contributions
are made to an insurer and
benefits and
plan administration are
provided by the insurance
company in behalf of plan
participants.
Fully Insured Status. A provision of OASDHI that
sets forth the qualifications
for eligibility for retirement
benefits under the Social
Security system. For
most people, this means
having worked 40 calendar
quarters (usually 10 years)
at covered employment,
though there are some
exceptions. Contrast
with Currently Insured
Status. See also Social Security
Disability Income Benefits.
Fully Paid Policy. A limited payment life
insurance
contract on which all
required payments have
been made. For instance, a
20-pay life policy would
be fully paid after the
insured has paid premiums
for 20 years.
Functional Valuation
Endorsements.
Endorsements
that allow property to be
replaced with less
costly property that is
functionally equivalent to
the damaged or destroyed
property; that is, similar
property that performs the
same function when replacement
with identical property is
impossible or
unnecessary.
Fund. (1) Money and investments
held in trust in
order to pay pension
benefits. (2) To accumulate
money necessary to pay
pension benefits; to pay
into the fund each year
enough to cover the pension
plan’s obligations for that
year.
Funded. Having sufficient funds to
meet future liabilities.
Often used with a pension
plan’s outstanding
claims account.
Funded Deferred
Compensation Plan.
A compensation
plan in which the employer
actually sets aside
a sum of money or other
assets into an account or
trust as security for the
employer’s promise to deliver
the deferred benefits at a
later date. The employee
usually is named as the
beneficiary of this trust, cash
or property. This plan ties
the employee to the company
and the employer except for
retirement, death
or disability. If the
employee leaves for any other reason,
the deferred amounts are
forfeited.
Funding, Advance. See Advance Funding.
Predetermined
sums set aside to provide
for the payment
of future retirement
benefits.
Funding, Disbursement. Also known as the “pay-as-
you-go” method, this type of
funding requires
no funds to be set aside to
provide retirement benefits.
All benefits paid to retired
employees are paid
from the company’s gross
income and are deducted
as a normal business
expense.
Funding, Terminal. See Terminal Funding.
Funding
that requires no funds to be
set aside for retirement
benefits, however, as each
employee retires,
an immediate lifetime
annuity is purchased for him
or her.
Funding
Level. The dollar amount required
to
purchase a particular
medical care program. Usually
measured by the premium rate
for an insured program,
or an amount assessed for
expected claim loss
and related fees under a
self-funded program.
Funding Medium/Funding
Vehicle.
The arrangement
through which funding
methods operate (e.g.,
trust agreement; custodial
account; deposit administration
contract; or group annuity
contract).
Funding Method. (1) The agreed means by
which
an employer pays for health
coverage. (2) How
money is accumulated for
future payment of pension
benefits.
Funeral Benefit. Coverage under an auto
policy that
pays if the insured or a family
member dies in an
auto accident.
Fur and Jewelry Floater. Usually an open perils
(all
risk) form that applies to
the furs and jewelry scheduled
in the policy whatever their
location.
Furriers Customers
Insurance.
An inland marine
form purchased by a furrier
to protect furs in storage
belonging to customers.
Future Increase Option
(FIO). An
option that allows
the insured to increase
disability income benefits
at predetermined times,
specified in the policy,
without evidence of
insurability. Normally, the rider
is not available past age
40, although some insurers
may offer it up to age 50.
Future Interest. Generally means the future
interest
and enjoyment of personal
property provided
for an individual by means of a
gift.
© 2008 Silver
© 2008 Silver
G
GA. See General Agent.
GAAP. See Generally Accepted
Accounting Principles.
GAB. See General Adjustment
Bureau, Inc.
Gain and Loss Exhibit. The portion of the
convention
blank that represents an
analysis of gains, losses
and surplus during an accounting
period.
Gambling. A situation where there is
a chance of
either loss or gain. It is
the opposite of insurance,
which either eliminates or
reduces risk of loss.
GAMC. See General Agents and
Managers Conference.
Garage Coverage Form. A commercial auto
insurance
coverage form used to insure
automobile
dealers, repair shops,
service stations and garage
risks. Garage liability,
garagekeepers coverage and
physical damage coverages
may be included.
Garage Keepers Legal
Liability Insurance.
Coverage
that protects a garage
keeper against liability
for damage to vehicles in
the keeper’s care, custody
or control caused by
specific perils.
Garage Liability
Insurance.
Protects garage owners
or automobile dealers for
liabilities arising out
of their business operations.
Gatekeeper
Model. Under this model of HMO and
PPO organizations, the
primary care physician (the
gatekeeper) is the initial
contact for the patient for
medical care and for
referrals. Also called a closed
access or closed panel.
Gender Rule. A method of determining
which
parent’s medical coverage
will be primary for dependent
children; the father’s
coverage is often considered
primary and pays first.
General Account. An investment portfolio
used
by the insurer for investment
of premium income.
This portfolio generally
consists of safe, conservative,
guaranteed investments, such
as real estate and
mortgages.
General Adjustment
Bureau, Inc. (GAB).
An independent
company that adjusts claims
of all types
for insurance companies. GAB
also provides training
programs for adjusters.
General Agency System. The marketing of life
insurance
through general agents.
General Agent (GA). An individual appointed by
a life or health insurer to
administer its business in
a given territory. General
agents are responsible for
building their own agency
and service force and are
compensated on a commission
basis, with possibly
some additional expense
allowances.
General Agents and
Managers Conference
(GAMC). An association of
insurance general agents
and managers affiliated with
the National Association
of Life Underwriters.
General Aggregate Limit. A commercial general
liability limit that applies
to all damages paid for
bodily injury, property
damage, personal injury,
advertising injury and
medical expenses, except
damages included in the
products-completed operations
hazard.
General Agreement. A brief statement stating
that
all of the remaining
provisions of the contract (the
policy terms) apply. The reason
that the general
agreement is so brief is
that each coverage section contains
a much more detailed
insuring agreement.
General and Insurance
Expense.
See General Operating
Expense.
General Average. A partial loss incurred to
save
the total venture from
destruction. Any such losses
are prorated among all
parties to the venture, including
the parties whose interests
first suffered such
loss (e.g., throwing cargo
overboard in order to save
a ship from a particular
peril).
General Cover Form. An older term for
reporting
form policy. See Reporting
Form.
General Exclusions. Exclusions that eliminate
coverage
for war risks, nuclear
risks, floods and other
types of water damage.
General Liability
Insurance.
A form of insurance
designed to protect owners
and operators of businesses
from a wide variety of
liability exposures,
including liability arising
out of accidents resulting
from the premises or the
operations of an insured,
products sold by the
insured, operations completed
by the insured and
contractual liability.
General LTC Rider. A long-term care rider
that is
attached to a life insurance
policy but stands alone
or is independent of the
life policy. Any LTC benefits
paid do not reduce life insurance
benefits.
General Operating
Expense.
The expense of an
insurer other than
commissions and taxes. Also called
general and insurance
expense.
General Partnership. A business enterprise
owned
and operated by two or more
persons for the purpose
of generating business
income and profits.
General Power of
Appointment.
A donee is given
the authority to pass on a
property interest to whomever
he or she pleases.
General Property Form. A form that covers the
property of commercial risks
from whatever perils
are specified in the
contract.
Generally Accepted
Accounting Principles
(GAAP). These principles have
substantial authoritative
support for use in the
insurance business. They
are intended to produce
financial results consistent
with those of other industries
and to assure consistency
in financial reporting.
Contrast with Statutory
Accounting Principles.
Generation Skipping
Transfer. A
transfer of property
due to death or by gift, to
a person who is two
or more generations below
the grantor.
Generic Drug. A drug that is exactly the
same as a
brand name drug and that is
allowed to be produced
after the brand name drug’s
patent has expired.
It is also called a “generic
equivalent.”
Generic
Equivalence. See Generic Drug.
Geographical Limitation. A contractual provision
that specifically names
geographical areas outside
of which the insurance is
not effective. Also called
territorial limitation.
GI Insurance. See United States
Government Life
Insurance.
Gift. A sale, exchange or
transfer of property without
adequate consideration.
Gift Tax. Federal and state tax on
gifts made by
one person to another.
Glass Coverage Form. A commercial property form
that insures plate glass,
lettering, frames and ornamentation.
It replaced earlier
commercial glass insurance
forms.
Good Driver Discount. A system that entitles
good
drivers (as defined by
driving safety record, number
of miles driven annually,
number of years driving
experience, etc.) to
discounts on auto insurance
rates and premiums. See also
Safe Driver Plan.
Good Student Discount. A discount granted to
students with high
scholastic ratings. This discount
offered offers up to as much
as 25 percent off premiums.
Goodwill. An intangible business
asset. The value
of a business that is built
up through the reputation
of the business concern and
its owners.
Governing
Classification. The classification assigned
to the operations of an
insured that carries
the largest amount of
payroll. If a company has several
different operations in one
plant, the one that
employs most workers will
usually be ruled the
governing classification.
Grace Period. A prescribed period,
usually 30 to
31 days from the premium due
date, when an insurance
contract is in force and the
premium may
be paid. The grace period
simply allows the policyholder
additional time to pay a
premium after the
due date.
Graded Commission. A compensation scale for
agents that provides for
varying commission rates
depending upon the class,
type or volume of insurance
written. Contrast with Flat
Commission.
Graded Death Benefits. A provision in life
insurance
contracts for death benefits
that, in the early
years of the contract, are
less than the face amount
of the policy but that
increase with the passage of
time. Most commonly found in
juvenile policies issued
at or near age zero.
Graded Premium. A modified life insurance
policy
for which the initial
premium is low, and then increases
over a period of time
(usually five years),
after which it becomes a
level premium.
Grading Schedule for
Cities and Towns.
A schedule
prepared by the National
Board of Fire Underwriters
to determine which of ten
grades to assign
to a city for fire rating
purposes, based on such factors
of fire protection as water
supply.
Graduated
Life Table. A mortality table in which
the experience has been
smoothed out by formula.
See also Experience.
Grantee. The buyer of real estate.
Grantor. The seller of real estate.
Grantor Retained
Annuity Trust (GRAT).
A trust
in which the grantor
substitutes retention of a right
to payment of a fixed income
in exchange for a fixed
period of time.
Grantor Retained
Interest Trust (GRIT).
An irrevocable
trust whereby the grantor of
the trust
property (e.g., a personal
residence) receives an income
for a fixed period of time.
Grantor Retained
Unitrust Trust (GRUT).
A trust
in which a grantor
substitutes retention of a right
to a fixed percentage of the
trust value in exchange
for a fixed period of time.
Grievance Procedure. A procedure that allows a
member of a health plan or a
provider of benefits to
express complaints and seek
remedies.
Gross Earnings. An accounting term that is
arrived
at by subtracting the cost
of goods sold from
the total sales. Traditionally,
the term was used primarily
in business interruption
insurance to determine
how much insurance a
policyholder should
carry. The latest business
income insurance forms
have dropped this term.
Gross Earnings Form. A form once used widely in
business interruption
insurance. Coverage was writ-
ten on either the gross
earnings form or the earnings
form. Business income
coverage forms no longer
refer to gross earnings.
Gross Line. The total limit accepted
by an insurer
on an individual risk,
including the amount to be
reinsured.
Gross Negligence. Willful and wanton
negligence
or misconduct. See also
Negligence.
Gross Premium. (1) The premium for
participating
life insurance. If an
insured elects to use dividends
to pay premiums, this
becomes the net premium
when dividends are
subtracted from it. Contrast
with net premium. (2) The
net premium plus
operating expenses,
commissions and other expenses.
Ground Coverage. Similar to collision and
comprehensive
coverage in an automobile
policy. This
insurance covers a plane’s
hull from specific perils
when the plane is on the
ground. There are different
forms of ground coverage:
“Not in Flight” covers
the plane on the ground only
but includes taxiing.
“Not in Motion” covers the
plane on the
ground and not in motion.
Group. Coverage of a number of
individuals under
one contract. The most
common group is employees
of the same employer.
Group Annuity. A retirement plan for a
group of
persons (usually employees of
a single employer)
funded by a single annuity
contract which is written
on a group basis.
Group
Certificate. The document provided to
each
member of a group plan that
shows the benefits
provided under the group
contract issued to the
employer or other insured.
Group Contract. A contract of insurance
made with
an employer or other entity
that covers a group of
persons identified by
reference to their relationship
to the entity buying the
contract. Generally covers
employees of a common
employer, members of a
trade association or
trusteeship, members of a welfare
or employee benefit
association, members of a
labor union or members of a
professional or other
association not formed only
for the purpose of obtaining
insurance.
Group Credit Insurance. Insurance on the life or
health of debtors of a
creditor, payable for reduction
or extinguishment of the
debts in case of the
disability or death of the
debtor.
Group Deposit
Administration Contract. A funding
contract for a qualified
plan whereby contributions
are accounted for on an
unallocated basis for
the benefit of all plan
participants.
Group Disability
Benefits.
Coverage for a group
of individuals for loss of
compensation due to accident
or sickness. These
work-related benefits are
available from a qualified
plan, a salary continuation
plan, employee stock plans,
workers’ compensation,
etc. Group disability
benefits are of short
duration—a year or less—and
cover only a percentage
of lost income.
Group Health Insurance. The same as group life
insurance but with the
application to health insurance
coverages. See Group Life
Insurance.
Group I Rates. Under the latest
commercial lines
program, this term replaces
the term “fire rates” for
property coverages.
Group II Rates. Under the latest
commercial lines
program, this term replaces
the term “extended coverage
rates” for property
coverages.
Group Life Insurance. Life insurance provided
for
members of a group. It is
most often issued to a
group of employees but may
be issued to any group
provided it is not formed
for the purpose of buying
insurance. The cost is lower
than for individual policies
because administrative
expenses per life are decreased,
there are certain tax
advantages and measures
taken against adverse
selection are effective.
See also franchise
insurance, true group and master
policy.
Group Model HMO. A health plan where a
group
of physicians is reimbursed
for services they provide
at a negotiated rate. The
HMO also contracts
with hospitals for the care
of the patients of the
physicians who belong to the
group.
Group of Companies. See Fleet of Companies.
Group Ordinary Life
Insurance.
Level premium
ordinary life insurance
issued on a group basis.
Group Permanent
Insurance.
(1) A form of life
insurance whereby members of
a group are provided
one of several plans of
permanent life insurance on
a group basis instead of the
more usual plan of term
life insurance. (2) A
retirement plan that combines life
insurance with retirement
benefits. It uses the level
premium method under a group
contract.
Group Property and
Liability Insurance.
The
same as group life insurance
but applied to property
and liability coverages. See
Group Life Insurance.
Group Renewable Term
Insurance.
Yearly renewable
term insurance on a group
basis; often called
group life insurance.
Group Retirement Income
Insurance.
Level premium
retirement income insurance
issued on a
group basis.
Guaranteed Cash Value. In whole life insurance,
the policy’s cash value
increases over the life of the
policy until at the
insured’s age 100 the cash value
is equal to the policy’s
face amount.
Guaranteed Continuable. See Guaranteed Renewable.
Guaranteed Cost. A premium charged on a prospective
basis, fixed or adjustable,
or on a specified
rating basis, but never on
the basis of loss experience.
In other words, the cost is
guaranteed to the
extent that it will not be
adjusted based on the loss
experience of the insured
during the period of coverage.
Guaranteed Insurability. An option in life and
health insurance contracts
that permits the insured
to buy additional prescribed
amounts of insurance
at prescribed future time intervals
without evidence
of insurability.
Guaranteed Interest. Interest that is
guaranteed
to be paid on a fixed
annuity investment contract.
There are two types of
guaranteed interest: current
and minimum.
Guaranteed Period. Also known as a period certain,
this means that payments of
a life insurance
policy to the beneficiaries
will be guaranteed for a
specified period of time.
Guaranteed Renewable. A contract that the
insured
has the right to continue in
force by the timely
payment of premiums for a
substantial period of
time as set forth in the
contract. During that period
of time, the insurer has no
right to make any
change in any provision of
the contract other than
a change in the premium rate
for all insureds in the
same class. Contrast with Non-cancelable,
from
which Guaranteed Renewable
should be distinguished.
Guaranteed Replacement
Cost. The
surest way to
arrange full coverage. This
policy pays up to 50
percent more than the face
value of the policy to
rebuild a home. (A few
companies offer unlimited
coverage.)
Guaranteed Standard
Issue (GSI).
An underwriting
term used to describe the
fact that a group insurance
contract was issued without
reference to any
medical underwriting. All
group participants are
covered regardless of health
history.
Guarantor. One who guarantees or
promises to back
up another’s actions or
debts. It is used in surety
bonds, usually the surety
company is the guarantor.
Guaranty Funds. Funds created by state law
from
contributions by insurers
operating in the state
which are used to make good
any unpaid claims or
otherwise to make money
available to insolvent companies.
Each state has a different
plan. See Insurance
Guaranty Act.
Guardian. A person appointed by the
court to take
care of affairs of another
(e.g., a guardian to take
care of the affairs of a
minor or a mentally incompetent).
Guertin Laws. The valuation and
nonforfeiture laws
which have been standard in
all states since 1947,
named for Alfred Guertin, then
actuary of the New
Jersey Insurance Department
and head of the NAIC
committee which developed
the model bill for these
laws. See also Nonforfeiture
Values.
Guest Law. Some states have
legislation that restricts
the rights of a guest to
collect from the driver
of an automobile he is
riding in on the grounds of
ordinary negligence. Usually
such cases require proof
of willful and wanton
negligence on the part of the
driver before the guest can
collect. See also Assumption
of Risk.
Guest Property Coverage. Commercial crime coverage
for hotels, motels, inns and
other lodging facilities
to protect the property of
guests against loss
or damage. Includes coverage
for guests’ property
while it is in a safe
deposit box on the insured’s
premises, or for an insured’s legal
liability for loss
or damage to guests’
property while in the insured’s
premises or in the insured’s
possession.
Guideline Premium. A universal life insurance
term
used to describe the maximum
premium that may
be paid while still
qualifying as life insurance under
the federal Internal Revenue
Code.
Guiding Principles. Rules established by major
property and liability trade
associations for the adjustment
of losses, particularly with
respect to how
losses should be apportioned
between insurance
companies under certain
circumstances.
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Hail Insurance. Insurance against loss of
crops
caused by hail.
Hangarkeepers Legal
Liability Insurance.
Protection
against liability for damage
or injury to others
arising out of the
ownership, maintenance or
use of the premises for an
aircraft hanger.
Hazard. A specific situation that
increases the probability
of the occurrence of loss
arising from a peril,
or that influences the
extent of the loss (e.g., slippery
floors, unsanitary
conditions, shingled roofs,
congested traffic, unguarded
premises, uninspected
boilers, etc.).
Hazard, Legal. See Legal Hazard.
Hazard, Moral. See Moral Hazard.
Hazard, Morale. See Morale Hazard.
Hazard, Physical. See Physical Hazard.
Hazardous Avocation. A pricing factor related to
occupational risk. Includes
such hobbies as skin diving,
scuba diving, sky diving and
auto racing. Insurance
companies ask insureds to
inform them of
any such high-risk hobbies
when considering applications
for disability income.
HCFA. See Health Care Financing
Administration.
HCFA
1500. A form used by providers of
health
services to bill their fees
to health carriers. It was
developed by the government agency
known as the
Health Care Financing
Administration.
Head Office. See Home Office. The term
“head
office” is primarily used in
British insurance operations,
whereas “home office” is
used for American
operations.
Health Benefits Package. The coverages offered
by a health plan to an
individual or group.
Health Care Financing
Administration (HCFA).
Part of the Department of
Health and Human Services,
responsible for
administration of the Medicare
and Medicaid programs. The
HCFA establishes
standards for medical
providers which must be complied
with if the provider is to
meet certification
requirements.
Health History. A form used by
underwriters to
assist in evaluating groups
or individuals to determine
whether they are acceptable
risks.
Health Insurance. Insurance against loss by
sickness
or bodily injury. The
generic form for those
forms of insurance that
provide lump sum or periodic
payments in the event of
loss occasioned by
bodily injury, sickness or
disease and medical expense.
The term health insurance
replaces such
terms as accident insurance,
sickness insurance,
medical expense insurance,
accidental death insurance
and dismemberment insurance.
The form is
sometimes called accident
and health, accident and
sickness, accident or disability
income insurance.
Health Insurance
Association of
(HIAA). An association supported
by life and health
insurers to provide the
research, public relations,
education and legislative
base for the promotion of
voluntary private health
insurance.
Health Maintenance
Organization (HMO).
A prepaid
medical service plan that
provides services to
plan members. Medical
providers contract with the
HMO to provide medical
services to plan members.
Members must use contracted
providers. The emphasis
is on preventive medicine,
and it is an alternative
to employee benefit plans.
Employers of more
than 25 persons are required
to offer the alternative
of HMO to employees, but not
if the cost exceeds
that of present employee
benefit plans.
Health Plan. Any plan that covers
health care services
such as HMOs, insured plans,
preferred provider
organizations, etc.
Health Service
Agreement (HSA).
An agreement
between employer and the
health plan that outlines
a description of benefits,
enrollment procedures,
eligibility standards, etc.
Health Services. Benefits covered under a
health
contract.
Hearsay. Testimony based on what
someone else
has said or told a witness.
HHS. The U.S. Department of
Health and Human
Services, which administers the
OASDHI, Medicare
and Public Assistance
programs.
HIAA. See Health Insurance
Association of
America.
High Pressure Tactics. An illegal method of
marketing
insurance policies (often
associated with
Medicare supplement
policies) employing tactics
that induce the purchase or
recommend the purchase
of coverage through force,
fright, explicit or
implied threat or undue
pressure.
Highly Protected Risk
(HPR).
Property risks
which meet the standards
required for lower rates.
Risks of this type are usually
protected by sprinklers
and have better-than-average
construction and
occupancy. It is often used
in connection with the
factory mutuals, factory
insurance association and
improved risk mutuals.
HIQA. Health Insurance Quality
Award. An award
granted annually by the
International Association
of Health Underwriters or
the National Association
of Life Underwriters for
high persistency of health
insurance policies written
by agents. See also Persistency.
Hired Automobile. Autos the insured leases,
hires,
rents or borrows, but not
autos owned by employees
or members of their
households.
HIV. See Human Immunodeficiency
Virus.
HMO. See Health Maintenance
Organization.
HO-1 The Basic
Homeowners Form.
Covers the
dwelling, other structures
on premises and personal
property against 11 named
perils—mostly having
to do with fire and water
damage.
HO-2 The
Broad Homeowners Form.
Insures the
dwelling, other structures
and personal property
against loss by all basic
form perils plus six additional
perils.
HO-3 The Special
Homeowners Form.
Insures
personal property against
loss by the same broad
form perils included on HO-2
and insures the dwelling
and other structures against
“risk of direct physical
loss” except to the extent
that exclusions and
limitations apply. HO-3 has
a number of exclusions.
Also called the all-risk
form.
HO-4 Tenant Broad Form. This policy and HO-6
both insure personal
property against all of the perils
found on the broad form.
Also called the renters
form.
HO-6 Condo Unit Owner
Form. Provides
coverage
for stated perils and also
applies to the limited
dwelling coverage for
alterations and other owned
building items.
HO-8 Modified
Homeowners Form.
Special coverage
for older homes.
Hold Harmless Agreement. A contractual arrangement
whereby one party assumes
the liability inherent
in a situation, thereby
relieving the other
party of responsibility.
Typically found in contracts
like leases, sidetrack
agreements and easements
(e.g., a typical lease may
provide that the lessee must
“hold harmless” the lessor
for any liability from accidents
arising out of the
premises). The effect: the
lessee must provide a
defense for the lessor, and if
any judgment is rendered
against the lessor, the
lessee would have to pay.
Hold-Up. A form of robbery. See
Robbery.
Holographic Will. A valid will that is
completely
handwritten and signed by
the testator.
Home Health Agency. A certified facility
approved
by a health plan to provide
services under contract.
Home Health Care. Care received at home as
part-time
skilled nursing care, speech
therapy, physical
or occupational therapy,
part-time services of home
health aides or help from
homemakers or
choreworkers.
Home Health Services. Health care services
provided
by a licensed home health
agency in the
patient’s home. It is a
covered expense under Part A
of Medicare.
Home Office. Generally the corporate
headquarters
of insurers and the location
where the chief officers
of the organization are
housed.
Home Office Life
Underwriters Association. An
organization offering a
course of study for home
office life underwriters.
Home Service Insurance. A variation in the
industrial
life concept, home service
life insurance policies
are usually modest in size,
ranging from
$10,000 to $15,000 in face
value, and are typically
sold on a monthly debit plan
(automatic bank
draft) or payments by mail.
Homeowners Insurance
Policy. A
property and
liability insurance contract
that provides insurance
against any of the property and
liability perils to
which a homeowner or renter
is exposed. It covers
the average residential and
personal exposures that
most individuals and
families encounter.
Honesty Clause. See Full Reporting Clause.
Honorable Undertaking. Reinsurance contracts
state that: “This agreement
is considered by the parties
hereto as an honorable
undertaking, the purpose
of which is not to be
defeated by a strict or
narrow interaction of the
language thereof.”
Hospice. An organization that
provides pain relief,
symptom management and
supportive services
for the terminally ill and
their families. Hospice care
is covered under Part A of
Medicare.
Hospice Care. An optional benefit
available under
LTC insurance.
Hospital Affiliation. A contract whereby one or
more hospitals agrees to
provide benefits to members
of a specific health plan.
Hospital Alliances. A group of hospitals that
work
together to share common
services and reduce health
costs. By grouping together,
they are better able to
compete with other alliances
or chains.
Hospital Benefits. Benefits payable for
hospital
room and board, plus
miscellaneous charges resulting
from hospitalization.
Hospital Confinement
Rider. An
optional disability
income rider that waives the
elimination period
when an insured is
hospitalized as an inpatient.
Hospital
Expense Insurance. See Hospitalization
Insurance.
Hospital Income
Insurance.
Insurance that provides
a stated weekly or monthly
payment while
the insured is hospitalized,
regardless of expenses
incurred and regardless of
whether or not other insurance
is in force. The insured can
use the weekly
or monthly benefit as he
chooses, for hospital or
other expenses.
Hospital Indemnity. Coverage that pays based
on
daily, weekly or monthly
limits regardless of the
amount of actual hospital
expenses.
Hospital Insurance. Also identified as Part A
of
Medicare, this provides
inpatient hospital care,
skilled nursing care home
health and hospice care
subject to a benefit period
deductible and
co-payments for certain services.
Hospital Tax. A Social Security tax of
1.45 percent
on an unlimited amount of
income, paid by
both the employee and
employer to prepay for Part
A of Medicare.
Hospitalization Expense
Policy. A
policy that covers
daily hospital room and
board charges and also
covers miscellaneous hospital
expenses (such as x-ray,
etc.). It often covers
emergency treatment
charges or includes a
surgical benefit.
Hospitalization
Insurance.
Insurance that provides
reimbursement within
contractual limits for hospital
and specific related
expenses arising from hospitalization
caused by injury or
sickness.
Host Liability. Liability for the damages
a guest
caused after an insured allowed
him to consume
alcohol—and engage in
various other activities—
and then leave. Some states
have laws that mandate
a host’s liability, much
like a restaurateur’s or a
bartender’s liability. In at
least 21 states, statutory
liability extends to
noncommercial servers. In 10
other states, similar
liability has been established
by common law.
Hostile Fire. See Fire.
House Confinement. A provision in some health
insurance contracts that
requires an insured to be
confined to the house in order
to be eligible for
benefits. This provision is
most commonly found
in policies providing loss
of income benefits.
Household Personal
Property.
Household goods,
furniture and personal
belongings of residents of a
farm dwelling. The Farm
Property Coverage Form
uses the term “household” to
distinguish it from
the separate coverage for
“farm” property. Contrast
with Farm Personal Property.
Housekeeping. The general care,
cleanliness and
maintenance of an insured’s
property. It is an important
underwriting consideration
in many forms
of insurance, such as
workers’ compensation and
property.
HPR. See Highly Protected Risk.
HR-10 Plan. See Keogh Act Plan.
HR-10. A
qualified retirement plan for the self-employed.
Also known as a Keogh Plan.
HUD. United States Department of
Housing and
Urban Development.
Hull Policy. A contract that provides
indemnification
for damage sustained to or
loss of an insured
vessel or airplane.
Hull Syndicates. A group of companies that
agree
to share or prorate
insurance on oceangoing vessels
or aircraft. Coverage on the
ship or plane itself is
called hull insurance.
Human Immunodeficiency
Virus. The
virus,
known as HIV, which causes
acquired immunodeficiency
syndrome, an infectious and
incurable disease
commonly referred to as
AIDS.
Human Life Value. A method of determining
life
insurance needs by
considering a person’s income,
expenses, remaining years of
earning capacity and
depreciation in the value of the dollar
over time.
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IASA. Insurance Accounting
Statistical Association.
IASS. Insurance Accounting and
Statistical Society.
IBNR. See Incurred But Not
Reported.
ICA. International Claim
Association.
ICC. Interstate Commerce
Commission.
ICEDS. Insurance Company
Education Directors
Society.
ICPI. Insurance Crime Prevention
Institute.
Identification Card. A card given to an insured
that identifies him or her
as being eligible for benefits.
Identification of
Benefits. A
provision that says
the cost of putting a
disabled insured in touch with
and in the care of relatives
will be reimbursed, usually
up to a maximum amount.
“If” Clauses. Clauses that terminate
coverage “if”
certain conditions are
created or discovered (e.g.,
the concealment or
misrepresentation provision,
which states that if this is
discovered, the coverage
is void). Contrast with
“While” Clauses.
IHOU. Institute of Home Office
Underwriters.
IIA. See Insurance Institute of
America, Inc.
IIAA. See Independent Insurance
Agents of
America.
IIC. Independent Insurance
Conference or Insurance
Institute of Canada.
III. See Insurance Information
Institute.
IIS. See International
Insurance Seminars, Inc.
Illegal Occupation
Provision.
A health insurance
policy provision that voids
liability if the loss results
from the insured’s
committing or attempting
to commit a felony or from
the insured’s engaging
in an illegal occupation.
Illness. A loss sustained due to
sickness or disease
usually due to an organic
cause.
Immature Policies. Claims-made coverage that
has
not been in effect, on an uninterrupted
basis, for at
least five years. For rating
purposes, a discount applies
to manual rates for immature
policies.
Immediate Annuity. An annuity that commences
payment to the annuitant at
the end of the first
prescribed payment period.
If an insured buys an
immediate annuity with
monthly payments, he will
start receiving benefits at
the end of the first month
after the purchase.
Immediate Vesting. A term used in pension or
retirement
plans, indicating that an
employee’s right
to benefits begin as soon as
he enters the plan. See
also Vesting.
Impaired Insurer. An insurer that is in
financial
difficulty to the point
where its ability to meet financial
obligations or regulatory
requirements is in
question.
Impaired Property. Tangible property that
cannot
be used or has become less
useful because it
incorporates the insured’s
product or work, which
is defective or inadequate,
or because the insured
has failed to fulfill a
contractual obligation.
Impaired Risk. A risk, or subject of insurance,
with
insurable qualifications
below the standard of risks on
which the premium for the
coverage was based (e.g., a
life insurance prospect with
heart disease). See also
Substandard Risk and
Standard Risk.
Impairment of Capital. When the surplus account
of a stock insurer has been
exhausted such that it
must invade the capital
account (amounts contributed
by stockholders) to meet
liabilities. Some jurisdictions
allow a percentage invasion
of capital;
some do not.
Impeach. Evidence that tends to detract
from the
credibility of the witness.
Implied Authority. Authority of an agent that
the
public may reasonably
believe the agent has. If the
authority to collect and
remit premiums is not expressly
granted in the agency
contract, but the agent
does so on a regular basis
and the insurer accepts,
the agent has implied
authority to do so.
Implied
Coinsurance. After determining
rebuilding
costs, an insured must
determine how much
insurance he needs. If an
insured is insured for less
than 80 percent, the
insurance company makes two
estimates and pays the
larger. This significant risk
is called implied
coinsurance.
Implied Seaworthiness. The assumption that a sea
vessel, its equipment and
its crew are in good condition
and prepared to make the
voyage.
Implied Warranty. In certain cases the law
says that
one has given a warranty to
another even though
the warranty is not in
writing (e.g., in sales, a seller
implies that the product is
fit for the purpose it
purports to serve).
Import. Goods or services
purchased from another
country and brought into
one’s own country.
Improvements and
Betterments.
Additions or
changes made by a lessee at
his own cost to a building
that he occupies, which
enhance its value. These
become part of the realty
and require special insurance
consideration.
Imputed. When actions of one party,
usually the
agent, are deemed to be
actions of the other party,
usually the principal.
In Kind. An expression relating to
the insurer’s
right in many property
contracts to replace damaged
objects with new or
equivalent (in kind) material,
rather than to pay a cash
benefit.
In-Area Services. Services provided within
the authorized
service area as designated
by a plan.
Incentive Stock Option
(ISO) Plans.
A stock plan
whereby executives are
granted options to purchase
company stock without
incurring a tax liability.
Inchmaree Clause. Reimburses an insured in
the
event of a loss due to the
negligence of the master
or crew of a vessel.
Incidental Locations. Locations other than those
described, reported and
acquired, where the value
of insured property is
$25,000 or less.
Incidents of Ownership. Various rights that may
be exercised under the
policy contract by the
policyowner, including: 1)
the right to cash in the
policy; 2) to receive a loan
on the cash value of the
policy; and 3) to change the
beneficiary.
Income Continuation
Benefit.
See Lost Wages.
Income Loss. Coverage for the amount of
an
insured’s take-home pay when
injuries from an accident
keep him from working.
Income Policy. A life insurance contract
that provides
income on a monthly basis
instead of a lump
sum.
Incompetent. A person who cannot manage
his or
her own affairs. Children and
legally insane people
are often considered
incompetent.
Incontestable Clause. A clause that states an
insured’s statements in his
application cannot be
contested by the insurer
after the policy has been in
effect for a given time (two
or three years). For example,
in life policies, if an
insured lied about the
condition of his health at the time
the policy was
taken out, that lie could
not be used to contest payment
under the policy if death
occurred after the time
limit stated in the
incontestable clause.
Increased Cost of
Construction Insurance. Covers
the additional cost of
reconstructing a damaged
or destroyed building where
ordinances require rebuilding
with more expensive
materials, services or
techniques.
Increased Hazard. Property insurance
policies suspend
coverage when the hazard in
a risk goes beyond
that contemplated when the
policy was written
(e.g., if an insured
commences manufacturing
dynamite in his home, the
hazard is extremely increased,
and coverage could be denied
by the insurer
if there were a loss).
Increasing Premium Term. Term life insurance
that provides a growing
amount of insurance.
Increasing Term
Insurance.
A term life insurance
policy where the death
benefit increases but the
premium remains level for
the policy term. See also
Decreasing Term Insurance,
Level Term Insurance
and Term Insurance.
Incurred But Not
Reported.
Losses that have occurred
during a stated period,
usually a calendar
year, but have not yet been
reported to the insurer
as of the date under
consideration (e.g., insurance
company statements prepared
after the end of the
calendar year would have to
include an estimate of
losses that occurred during
that year but have not
yet been reported).
Incurred
Expense. Expenses not yet paid.
Includes
paid expenses in some
accounting systems.
Incurred Loss Ratio. The percentage of losses
incurred
to premiums earned.
Incurred Losses. The losses occurring
within a
fixed period, whether or not
adjusted or paid during
the same period (e.g., in
workers’ compensation
claims, losses occur during
a given policy period
but benefits may continue
for many years. The
estimated value of the total
claim would be an incurred
loss for the policy period
during which the
loss occurred).
Indemnification. Payment in money or
replacement
of the property. Stolen
property may be returned
and payment made for any
damage, or the
company may keep the property
and pay an agreed
or appraised amount in
money.
Indemnify. To restore the victim of a
loss to the
same position as before the
loss occurred, either by
payment, repair or
replacement.
Indemnitor. An entity/person who
enters an agreement
with a surety to hold the
surety harmless from
loss incurred as a result of
issuing a contract bond
to an applicant who falls
just short of acceptability.
If the principal defaults,
the indemnitor, rather than
the surety, assumes the
obligation.
Indemnity Basis. Most long-term care
policies are
issued on an indemnity
basis, which means the contracts
provide a daily maximum
benefit, such as
$100 per day, for each day
of confinement in a nursing
home or other long-term care
facility. If the
policy also includes benefits for
home care, the daily
limit for home care expenses
typically is 50 percent
of the daily nursing home
benefit amount.
Indemnity Bond. A bond that indemnifies an
obligee
against loss that may arise
as the result of failure
to perform on the part of
the principal.
Independent Adjuster. Adjusters who work as
independent contractors,
hiring out to insurance
companies, etc., for the
investigation and settlement
of claims. They represent
the interests of insurance
companies. Contrast with
Public Adjuster.
Independent Agency
System. An
insurance distribution
system within which
independent contractors,
known as agents, sell and
service property
liability insurance solely
on a commission or fee basis
under contract with one or
more insurers that recognize
the agent’s ownership use,
and control of
policy records and
expiration data.
Independent Agent. An agent operating as an
independent
contractor under the
independent
agency system. They sell
policies from several companies
for a commission, attempting
to find the lowest
price available.
Independent Contractor. One who agrees to perform
according to a contract and
who is not an
employee.
Independent Contractors
Insurance.
See Owners
and Contractors Protective
Liability Policy.
Independent Insurance
Agents of America
(IIAA). An association of
independent insurance
agents historically known to
represent stock insurance
companies more than mutual
companies. Members
are also members of their state
associations.
Index Bureau Experience. A measure of losses
relating
to claims reported through a
claim office during
a 12-month period.
Indexing Year. The second year prior to
attainment
of age 62, death or
disability, whichever occurs
first, used to adjust wages
to allow for inflation
when calculating Social
Security benefits.
Indigent. The state of being with no
assets at risk.
Indirect Loss (or
Damage).
Loss resulting from a peril
but not caused directly and
immediately by that
peril (e.g., loss of
property due to fire is a direct loss,
while the loss of rental
income due to the fire would
be an indirect loss). See
also Consequential Loss.
Individual Account Plan. A defined contribution
plan
or profit sharing plan that
provides an individual
account for each participant
and whose benefits are
based solely upon the amount
contributed to a
participant’s account and
any income, expenses, gains
and losses, as well as
forfeitures that may be allocated
to the remaining
participant’s account.
Individual Contract. A contract made with an
individual
that covers that individual
and perhaps
specified members of his
family for benefits as described
in the policy.
Individual Contract
Pension Trust.
A pension plan
under which a trust holds title
to individual insurance
or annuity contracts for
employees covered by
the plan.
Individual Life
Insurance.
(1) A life insurance contract
that covers usually one
insured. (2) The term
used to distinguish this
type of life insurance from
group life insurance.
Individual Practice
Association (IPA) Model
HMO. An individual practice
association contracted
to provide health care
services. The IPAs contract
with individual physicians or
groups of physicians
for their services.
Individual Retirement
Account (IRA).
A qualified
retirement plan established
by ERISA for anyone
under age 70 1/2 with earned
income, allowing
them to set aside up to
$2,000 per year on a tax
favorable basis for retirement
purposes.
Individual Risk Premium
Modification Rating
Plan. A plan that modifies the
premium on large package
policies by considering such
factors as reduced
expenses for handling costs
(expense modification) and
special characteristics of
the risk not contemplated
by the basic rate (risk
modification).
Industrial Life
Insurance.
One of the major classes
of insurance. It is
generally sold in amounts of less
than $1,000 by agents who
service insureds on debits.
Premiums are collected
weekly or monthly at
the address of the insured.
See also Debit.
Industrial Risk
Insurers. A
consortium of major
stock property and casualty
insurers that write large,
highly protected risks.
Inevitable
Accident. See Accident.
Inflation Factor. A premium loading to
provide
for future increases in
medical costs and loss payments
resulting from inflation.
Inflation Guard
Coverage.
Coverage that provides
for automatic periodic
increases in the amount of
insurance on buildings to
keep an appropriate “limit
to value” considering the
effect of inflation on building
replacement costs. An
endorsement is usually
used to add this coverage to
a homeowners policy.
On the latest commercial
property forms, inflation
guard coverage is an option
that may be activated
by an entry in the
declarations.
Inflation Protection. Provisions in a health
insurance
policy that increase benefit
levels to account
for anticipated increases in
the cost of services.
Inflation. An economic period
characterized by rising
prices, low unemployment, an
expanding
economy and erosion of
consumer’s purchasing
power due to the higher cost
of living.
In-Force Business. Life or health insurance
for
which premiums are being
paid or for which premiums
have been fully paid. It
refers to the total face
amount of a life insurer’s
portfolio of business. In
health insurance it refers
to the total premium volume
of an insurer’s portfolio of
business.
Informal Plan. A retirement system
whereby the
employer has no legal
obligation and the employee
has no legal rights. These
plans have no standard of
benefits to be paid, and
have no special method of
funding.
Inherent
Explosion. An explosion caused by a
condition
existing in and natural to
an insured’s premises
(e.g., a dust explosion in a
grain elevator).
Inherent Vice. A fault in property that
leads to its
self-destruction. Insurance
contracts usually exclude
such damage.
Initial Eligibility
Period. The
time period during
which prospective members
can apply for coverage
without providing evidence
of insurability.
Initial Premium. An amount paid at the
inception
of an insurance contract,
usually subject to adjustment
at the end of the policy
period.
Injunction. A court order intended to
prevent a
person from doing something.
Inland Marine Insurance. A branch of the insurance
business that developed from
the insuring of
shipments not involving
ocean voyages. These forms
borrowed their language from
fire, ocean marine,
theft and other contracts.
Exposures eligible for this
protection are described in
the nationwide definition
of marine insurance and
include bridges, tunnels,
jewelry and furs.
Innkeepers Legal
Liability.
Coverage for motel and
hotel operators, protecting
them against the legal
liability they have for the
safekeeping of the property
of guests. The policy
usually has a limit per guest
and an aggregate limit per
policy year.
Innocent Spouse
Doctrine.
This doctrine holds
that, if one spouse is not involved
in and unaware
of activity in which the other
spouse has engaged and
which nullifies an insurance
contract, the innocent
spouse must remain insured.
Some policies state specifically
that any misconduct of an insured
bars recovery
by any other insured. Courts
frequently back
up the insurance companies
in these disputes.
In-Patient. A patient admitted to a
hospital or other
similar medical facility as
a resident patient.
Inside Limits. Limits placed on hospital
expense
benefits, which modify
benefits from the overall
maximums listed in the
policy. An inside limit when
applied to room and board,
limits the benefit to
not only a maximum amount
payable, but also limits
the number of days the
benefit is paid.
Insolvency Clause. A clause that holds a
reinsurer
liable for its share of a
loss assumed under a treaty
even though the primary
insurer has become insolvent.
See also Strike-Through
Clause.
Insolvency Funds. See Guarantee Funds.
Insolvent. When a person’s or business’s
liabilities
exceed their assets.
Insolvent Insurer. An insurer that is unable
to
meet its financial
obligations.
Inspection. Independent checking on
facts about
an applicant, policyholder
or claimant, usually by a
commercial inspection
agency.
Inspection Bureau. An organization created by
property and liability
insurers to investigate exposures
and to establish rates.
Inspection
Report. A summary of the physical,
financial and moral
attributes of an insured or an
applicant for insurance on
the insured’s property.
Such reports are prepared by
inspection bureaus,
specialized organizations
and insurers.
Installment Refund
Annuity. An
annuity that
promises to continue the
periodic payments after
the death of the annuitant,
until the combined benefits
paid to the annuitant and to
the beneficiary have
equaled the purchase price
of the annuity.
Installment Refund
Option. An
annuity option
that provides for continued
payments after the death
of the annuitant until the total
benefits paid have
equaled the purchase price of the
annuity.
Installment Sales
Floater.
See Conditional Sales
Floater.
Installment Settlement. Payment of the proceeds
of a life insurance policy
or its cash value in installments
rather than in a lump sum.
The term refers
to any one of the options in
a life insurance policy
that has this result.
Installments Certain. A settlement option that
guarantees to pay proceeds
in equal installments
for a specified period of
time.
Institute of Life
Insurance. Formerly
an agency
responsible for building the
image of life insurance
through a variety of
programs. It is now a division
of the American Council of
Life Insurance.
Institutional Property. Property eligible for
special
treatment under package policies, often
properties
occupied by sanitariums and
educational, religious,
charitable, government and
non-profit organizations.
Insurability. Acceptability to the
insurer of an applicant
for insurance.
Insurable Interest. Any interest a person has
in a
possible subject of
insurance, such as a car or home,
of such a nature that a
certain happening might
cause that person financial
loss. This condition provides
that the company will not
pay an amount
greater than the insured’s interest
in the property
or the amount of coverage
under the policy. If an
insured loss occurs—but the
company denies the
claim because the insured
hasn’t complied with some
condition or
requirement—payment would still be
made up to its insurable
interest. This usually means
the balance of whatever an
insured owes on the property,
be it a mortgage or an auto
loan.
Insurable Net Worth. The sum of the equity
value
an insured has in his house
and other property, major
personal possessions like
jewelry or collectibles
and any savings or liquid
investments he has.
Insurable Risk. A risk that meets most of
the following
requisites: 1) The loss must
be capable of
being defined; 2) It must be
accidental; 3) It must
be large enough to cause a
hardship to the insured;
4) It must belong to a
homogeneous group of risks
large enough to make losses
predictable; 5) It must
not be subject to the same
loss at the same time as a
large number of other risks;
6) The insurance company
must be able to determine a
reasonable cost
for the insurance; and 7)
The insurance company
must be able to calculate
the chance of loss.
Insurance. A formal social device for
reducing risk
by transferring the risks of
several individual entities
to an insurer. The insurer
agrees, for a consideration,
to assume, to a specified
extent, the losses
suffered by the insured.
Insurance Carrier. See Insurer.
Insurance Commissioner. Head of a state’s
insurance
regulatory agency. Some
states use the title of
Director or Superintendent.
Insurance Company
Education Directors Society
(ICEDS). An organization of
insurance company
educators whose primary
purposes are to promote
insurance education and
exchange information
on the subject.
Insurance Company. See Insurer.
Insurance Department. A governmental bureau
in each state and the
federal government in Canada
charged with the
administration of insurance laws,
including the licensing of
agents and insurers and
their regulation and
examination. In some jurisdictions
the department is a division
of another state
department or bureau.
Insurance Examiner. The representative of a
state
insurance department
assigned to participate in the
official audit and
examination of an insurer.
Insurance Guaranty Act. The legislation enacted
in many states providing for
guaranty funds for the
policyholders of insolvent
insurers. See Guaranty
Funds.
Insurance
Hall of Fame. An institution honoring
those who have made
outstanding contributions to
insurance thought and practice.
Selections are made
on an international basis.
Insurance in Force. (1) The face amounts of
contracts
still to be paid out to
insureds. (2) The annual
premium payable on current
contracts of insurance.
Insurance Information
Institute (III).
The agency
of the property and
liability business designed to
deal with the public
relations programs of various
segments of the business.
Insurance Institute of
America, Inc. (IIA).
An
organization that develops
programs and conducts
national examinations in
general insurance, risk management,
management, adjusting,
underwriting,
auditing and loss control.
Insurance Policy. The form that serves as
the contract
between an insurer and an
insured. It sets forth
the rights and duties of parties
to the contract.
Insurance Regulatory
Examiners Society (IRES).
An organization made up of
the state regulatory
examiners who conduct
financial and market conduct
examinations of insurers,
and whose purpose
it is to foster educational
programs, cooperation and
support between state
examiners.
Insurance Regulatory
Information System
(IRIS). Information and
early-warning system used
by the National Association
of Insurance Commissioners
to keep track of the
financial soundness of
insurers.
Insurance
Services Office (ISO). An organization
of the property and
liability insurance business designed
to gather statistics,
promulgate rates and
develop policy forms.
Insurance to Value. Insurance written in an
amount approximating the
value of the property
insured.
Insured. The party to an insurance
arrangement
whom the insurer agrees to
indemnify for losses,
provide benefits for or
render services to. See also
Named Insured.
Insured Contract. A definition that shapes
the extent
of contractual liability
coverage by describing
the types of insured
contracts. On modern liability
forms, “insured contract”
includes leases of premises,
sidetrack agreements,
elevator maintenance agreements,
easement agreements and
other agreements
related to the insured’s
business.
Insured Location. A sweeping definition that
frequently
applies to liability
coverages. It includes
all of the following: the
residence premises; that
part of any other premises,
other structures and
grounds, used by the named
insured as a residence
that is either shown in the
declarations or acquired
during the policy period;
any premises used by the
named insured in connection
with the residence
premises or a newly-acquired
premises; any part of
a non-owned premises where
an insured temporarily
resides; vacant land owned
by or rented to an insured
(but not farm land);
individual or family cemetery
plots or burial vaults of
any insured; and any
part of a premises
occasionally rented to any insured
for other than business use.
Insured, Named. See Named Insured.
Insured Plan. A retirement plan under
which some
kind of benefits are
guaranteed by an insurance carrier.
It does not imply that there
is an element of
life insurance connected
with the plan.
Insured Status. In addition to meeting the
eligibility
requirements of an employee
and paying Social
Security taxes, eligibility
for Social Security benefits
is determined by insured
status. Insured status
is based on an insured’s
quarters of coverage for Social
Security tax purposes. There
are basically three
forms of insured status,
which determine eligibility
for certain OASDHI benefits:
fully insured; currently
insured; and disability
insured.
Insurer. The party to an insurance
arrangement
who agrees to indemnify for
losses, provide pecuniary
benefits or render services.
The term is preferred
over carrier and company
since it is a functional
word applicable without
ambiguity to all types of
individuals or organizations
performing the insurance
function.
Insuring Agreement (or
Clause).
That portion of
an insurance contract which
defines the scope or
extent of the policy’s
benefits (i.e., the perils insured
against, the persons and/or
property covered, their
locations and the period of
the contract).
Intangible Damages. Damages awarded for such
things as pain and suffering
following an accident
(e.g., when an insured
damages another car, his liability
might be limited to the
value of the vehicle.
But if he injures a person
in that car, causing a permanent
disability or pain and suffering,
which prevents the person
from working, courts can award millions
in damages.
Integrated LTC Rider. An LTC rider that is added
to a life insurance policy
whereby LTC benefits paid
will reduce the policy’s
benefits. LTC benefits are
dependent on the life
insurance benefits available.
Integrated Plan. A pension plan that builds
benefits
according to an approved
Treasury Department
formula.
Intellectual Property. A company’s most valuable
assets—copyrights, patents,
trademarks, trade secrets
and brand names.
Intentional Injury. An injury resulting from
an act
intended to inflict injury.
In an accident insurance
contract, this type of
injury is not covered (because
it is not an accident). In
general, intentional injuries
inflicted on the insured are
covered (assuming
no collusion).
Intentional Loss. Damage caused
intentionally by
an insured person. Most policies
exclude coverage
for this type of loss.
Intentional Torts. May involve infringement
of
property and privacy rights
(e.g., trespassing). Property
rights also can be violated
by nuisance-type
activities, which interrupt
the property owner’s ability
to use the property. Other
intentional torts involve
personal injury, which
include (besides the
traditional bodily injury)
damage to reputation through
untrue statements, be it
libel or slander.
Inter Vivos Transfer. Transfer of all or a
portion of
the assets of a person’s
estate while that person is still
alive. Contrast with
Testamentary Transfer.
Inter Vivos Trust. A trust created to take
effect
during the lifetime of the
grantor. Contrast with
Testamentary Trust.
Interest. In the calculation of
premium, it is the
rate of return on the
company’s investment of premium
dollars over the lifetime of
the policy. Insurance
company investment
experience will affect life
insurance cost.
Interest Adjusted Cost. A method of determining
the cost of life insurance,
taking into account the
interest that might have
been earned on premium
money if it had been
invested rather than put into
premiums.
Interest Only Option. An option for paying the
proceeds
of a life insurance policy to
beneficiaries in
which the insurance company
holds the entire proceeds
and makes period payments of
the earned interest
only. The interest rate may
be flexible but a minimum
rate of interest is usually
guaranteed.
Interest, Post-Judgment. Money the plaintiff
would have earned if the
favorable judgment had
been paid at the time of the
first judgment, before
the appeal.
Interest, Pre-Judgment. Money the plaintiff would
have earned if the favorable
judgment had been paid
at the time of injury or damage,
before trial.
Interest
Rate Risk. A risk faced by investors
who
invest in bonds
characterized by an individual being
locked into a lower interest
rate when interest
rates are generally
increasing in the economy.
Interest Sensitive
Provision.
Provisions in variable
and flexible premium
policies that guarantee
certain interest earnings
plus an additional interest
percentage should the
current interest rate rise above
a specified percentage.
Interinsurance Exchange. See Reciprocal Insurance
Exchange.
Interline Endorsement. Commercial endorsements
that apply, or could apply,
to more than one coverage
part of a package policy.
These were developed
to reduce redundancy.
Intermediary. A reinsurance broker who
negotiates
contracts of reinsurance on
behalf of the insured.
These transactions normally
take place with those
reinsurers who recognize
brokers and pay them commissions
on reinsurance premiums
ceded.
Intermediate Care. Medically supervised
health
care for those who do not
require the degree of care
and supervision provided by
hospitals or skilled
nursing homes, but who need
daily medical care
and other assistance.
Intermediate Care
Facility. A
facility licensed by
the state, which provides nursing
care to persons
who do not require the
degree of care that a hospital
or skilled nursing facility
provides.
Intermediate
Disability. See Temporary Partial
Disability
and Permanent Partial
Disability.
Intermediate Report. A claim report on the
condition
of a continuing disability.
Internal Explosion. Explosion occurring in a
dwelling
or other covered structure,
excluding breakage
of water pipes or loss by
explosion of steam boilers
or steam pipes. Provides
coverage for an explosion
where a fire doesn’t ensue.
International
Association of Health Underwriters.
An association of agents and
related personnel
on the health insurance
business.
International Insurance
Seminars, Inc. (IIS).
An
institution that promotes
worldwide exchanges of
ideas and techniques among
people, including academicians
and insurance practitioners.
Interrogatories. A procedure for gaining
evidence
which involves one party
submitting questions to
the other party in order to
gather facts and information
to prepare for a trial.
Interstate Carrier. A transportation company
that
does business across state
lines.
Interstate Commerce
Commission Endorsement.
An endorsement required on
all policies issued to
interstate motor carriers who
haul goods for hire. It
guarantees that all losses
to cargo will be paid by
the insurer, up to specified
minimum limits, regardless
of the perils specified in a
policy. The common
carrier, however, agrees to
repay the insurer
for any loss that is not covered
by the policy.
Intervening
Cause. A possible defense against
negligence.
Negligence may be avoided or
reduced if
it can be shown that an
intervening cause broke
the uninterrupted chain of
events required to establish
a proximate cause. Contrast
with Proximate
Cause.
Intestate. Dying without a will thus
permitting
the probate court to appoint
an administrator to
settle the estate.
Intoxicants and
Narcotics Provision.
A health
insurance provision that
voids liability if the loss
results from the insured’s
being intoxicated or under
the influence of any
narcotic unless administered
on the advice of a
physician.
Intrastate Carrier. A transportation company
whose
business is confined to one
state.
Invalidity. Sickness.
Invasion of Privacy. The publicizing of
another’s
private affairs for which
there is no legitimate public
purpose, or the invasion
into another’s private
activities that causes shame
or humiliation to that
person.
Investigative Consumer
Report. A
report ordered
on an insured or applicant
under which information
about the person’s
character, reputation or
lifestyle is obtained
through personal interviews with
the person’s neighbors,
friends, associates or acquaintances.
Contrast with Consumer
Report.
Investment Company Act
of 1940. A
federal law
that regulates the
organization and activities of
investment companies and requires the
registration of
investment companies with the
government.
Investment Income. The return received by
insurers
from their investment
portfolios, including
interest, dividends and
realized capital gains on
stocks. Realized capital
gains means the profit realized
on stocks that have actually
been sold for more
than their purchase price.
Investment Manager. A fiduciary (other than a
trustee or a plan’s named
fiduciary) who manages,
acquires or disposes of a
pension plan’s assets.
Investment Reserve. An item in the balance
sheet
of an insurance company that
represents a setting
aside of assets to
compensate for a possible reduction
in the market value of
securities owned by the
company.
Invitee. One who has been expressly
or implicitly
invited onto the premises of
another (e.g., customers
entering a store).
Involuntary
Unemployment Insurance. Coverage
for consumer credit
repayment obligations when
an insured is involuntarily
unemployed due to individual
or mass layoff, general
strike, termination
by employer, unionized labor
dispute and lockout.
Usually sold to borrowers
under a master group
policy issued to a creditor
(bank, association or other
financial institution). Also
called job loss insurance.
Can be classified as either
property/casualty or life/
health insurance.
IRA. See Individual Retirement
Accounts.
IRIS. See Insurance Regulatory
Information System.
Iron Safe Clause. A provision in a property
insurance
policy that requires the
insured to keep records
in a safe when they are not
used.
Irrevocable Beneficiary. A beneficiary designation
that cannot be changed
without the beneficiary’s
consent. See Change of
Beneficiary.
Irrevocable Trust. A trust instrument that
cannot
be revoked by the person who
created it. Contrast
with Revocable Trust.
ISO. See Insurance Services
Office.
Issue and Participation
Limits. A
question on an
application for insurance
that requires an insured
to indicate the name of the
insurer and particulars
regarding the additional
coverage. Any other coverage
will cause the amount
requested to be limited
to the insurer’s
underwriting limits.
Issued Business. Contracts actually written
by an
insurer and paid for but not
yet delivered to or accepted
by the insured.
Item. (1) A term used to
identify a statement in a
policy as to what is
insured. In a fire policy one
might refer to the contents
item, meaning the coverage
in the policy which applies
to the contents.
(2) An individual entry,
such as a piece of jewelry,
listed with its description
and valuation on a schedule
by a policy showing items
covered.
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Jettison. The act of throwing
overboard part of a
vessel’s cargo or hull in
hopes of saving the ship
from sinking.
Jewelers Block
Insurance.
An open perils (all risk)
insurance contract that
provides jewelers with coverage
on most types of losses to
which they are exposed.
It covers both owned
property and property
in their care, custody and
control.
Jewelry Floater. An all-risk policy
covering listed
jewelry. Usually each item
is described and insured
for a specific amount.
Joint and Several
Liability.
A legal doctrine permitting
recovery from any of several
codefendants
based on ability to pay,
rather than the degree of
negligence. See “Deep
Pockets” Liability.
Joint and Survivorship
Annuity. An
annuity payable
to the named annuitants
during the period of
their joint lives, which
continue to the survivor when
the first annuitant dies.
Joint and Survivorship
Option. An
option in a
life insurance contract that
permits the cash value
of the policy to be paid out
as a joint and survivorship
annuity. Under this option,
two beneficiaries
receive the proceeds of a
life insurance policy. When
the first beneficiary dies,
the second beneficiary (if
he or she is still living)
continues to receive the proceeds
of the policy, in
installments, for his or her
lifetime (or for a specified
period). See also Joint
and Survivorship Annuity.
Joint Annuity. An annuity that is paid to
the two
named persons until the
first one dies, at which
time the annuity ceases.
Joint Committee on
Interpretation and Complaint.
A committee formed to rule
on what types
of insurance can come within
the standard definition
of marine insurance. See
Nationwide Definition
of Marine Insurance.
Joint Control. Control of the handling of
an estate
by both the surety (bonding
company) and the fiduciary
(administrator, executor,
etc.). Funds are
kept in joint accounts, and
disbursements made only
with both signatures.
Joint Insurance. Insurance written on two
or more
persons with benefits usually
payable upon the first
death.
Joint Insured. One whose life is insured
by a joint
insurance contract. See
Joint Insurance.
Joint Liability. Liability that rests upon
more than
one person or corporate
entity.
Joint Life and
Survivorship Annuity.
A contract
that provides income to two
or more people and
continues so long as any one
of them survives.
Joint Life Annuity. This policy pays a benefit
that
continues throughout the
joint lifetime of two
people but terminates at the
first death.
Joint
Life Insurance. See Joint Insurance.
Joint Ownership
Coverage.
An endorsement attached
to a standard personal auto
policy that insures
vehicles normally ineligible
under the standard
ownership rules.
Joint Tenancy. Ownership of property
shared
equally by two or more
parties under which the
survivor assumes complete
ownership. Compare with
Fee Simple and Tenants in
Common.
Joint Underwriting
Association (JUA).
An unincorporated
association of insurance
companies
formed to provide a particular
type of insurance to
the public. Those who insure
with a JUA pay assessments
in addition to their
premiums, which provide
monies for the operation of
the association.
They usually set their own
rate levels and use whatever
coverage forms are deemed proper,
subject to
approval by state
authorities.
Joint Venture. An expression applied most
often
to construction ventures
where several contractors
agree to combine together on
a construction project
rather than act as separate
contractors. Under the
joint venture agreement,
they share profits and losses
in some agreed-upon
proportion.
Joint-Survivor Option. An annuity option that
provides for a guaranteed
income to the annuitant
and upon death of the
annuitant, a continued income
to the annuitant’s survivor.
Joisted Masonry
Construction.
A building that
has exterior walls
constructed of masonry materials,
such as adobe, brick, concrete,
gypsum block, hollow
concrete block, stone, tile, or
other similar materials,
and a roof and floor
constructed of combustible
materials. A floor that
rests directly on the
ground is an exception and
may be disregarded.
Jones Act. A federal act that
provides for the covering
of ships’ crews under
workers’ compensation
plans.
JUA. See Joint Underwriting
Association.
Judgment or Decree. The formal decision by a
judge or court.
Judgment Rates. See “A” Rates.
Judicial Bond. A bond required in civil
and criminal
court actions.
Jumping Juvenile. A popular name for a life insurance
contract written on the life
of a child, usually
in units of $1,000. When the
child reaches a prescribed
age, generally 21, the face
of the policy is
increased automatically
without the imposition of
either an additional premium
charge or a medical
examination. Hence the term
“jumping” juvenile.
Jurisdiction. Authority of the court to
decide cases
of a particular type or in a
particular area.
Juvenile Insurance. Life insurance written on
a
child.
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K
Keogh Act (HR-10) Plan. A plan under the Self-
Employed Individual’s Tax
Retirement Act that
permits a self-employed
individual to establish a
formal retirement plan and
to obtain tax advantages
similar to those available
in qualified corporate
pension plans.
Key Employee Insurance. (1) Insurance on the life
or health of a key employee,
the loss of whose services
would cause an employer
financial loss. The
policy is owned by and
payable to the employer. (2)
In health insurance the term
is also used to designate
salary continuation insurance
or a medical benefit
plan payable to the key
employee, with the employer
paying all or part of the
premium.
Kidnapping Coverage. Insurance against the
hazard
of a person being seized
outside the insured
premises and forced to
return and open the premises
of a safe, or to give
information that enables
the criminal to do so. This
has frequently been one
of the perils covered under
a package crime policy.
See also Extortion Coverage
Form.
Kidnap-Ransom Insurance. This insurance is written
primarily for financial
institutions and covers
named employees for
individual or aggregate
amounts paid as ransom, with
a deductible requiring
the insured to participate
in about 10 percent
of any loss. There are few
markets for this coverage
and no standardization of
rates. See also Extortion
Coverage
Form.
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Labor and Material Bond. See Payment Bond.
Lag Coverage. See Endorsement Extending
Period
of Indemnity.
Land Contract. An instrument used in
connection
with the sale of real estate.
It differs from a mortgage
in that title to the land
remains with the seller
until the buyer has
completed the payments, though
possession rests with the
buyer. This contract is the
instrument that conveys the
deed of land from one
person to another upon full
payment of the stated
purchase price.
Landlords Protective
Liability. Coverage
provided
to the owner of property who
leases the entire premises
to another.
Lapse. Termination of a policy
because of failure to
pay the premium.
Lapse Ratio. The ratio of the number of
life insurance
contracts lapsed within a
given period to the
number in force at the
beginning of that period.
Lapsed Policy. A policy allowed to expire
because
of nonpayment of premiums.
Larceny. The unlawful taking of a
person’s personal
property without his consent
and with intent to
deprive him of ownership or
use. It is a broader
term than burglary or robbery,
largely synonymous
with theft.
Large Claim Pooling. A system designed to help
stabilize premium fluctuations
in smaller groups.
Large claims (those over a
stated amount) are charged
to a pool contributed to by
many small groups who
belong and share in that
pool. The smaller the
group, the lower the pooling
level. Larger groups
will have a larger pooling
level.
Laser Beam Endorsement. An endorsement to a
“claims made” liability form
used to exclude specific
accidents, products, work or
locations.
Last Clear Chance. A doctrine that liability
may
attach to a person who,
immediately before an accident,
had a last clear chance to
avoid it and did not.
Last In, First Out. See LIFO.
Latent Defect. A defect not immediately
apparent.
Law of Large Numbers
(LLN). This
law states that
the larger the number of
exposures considered, the
more closely the losses reported
will match the underlying
probability of loss. Under
the LLN, the
insurer knows from
experience approximately how
many policies will suffer a
loss and how severe most
of those losses will be.
While actual experience may
differ from expectation,
pooling a large number of
policies allows the company
to be fairly accurate
with its prediction. The
simplest example of this
law is the flipping of a
coin. The more times the
coin is flipped, the closer
it will come to actually
reaching the underlying probability
of 50 percent
heads and 50 percent tails.
See also Degree of Risk,
Odds and Probability.
Leader Location. A location that attracts
customers
to the insured’s business.
One of the four types
of dependent properties for
which business income
coverage may be written.
Lease. Contract whereby the
property owner/user
(lessor) agrees to let
another party (lessee) use the
property for a consideration
(money or rent).
Leasehold. An agreement that gives a
person the
right to use and occupy
property.
Leasehold Interest
Coverage Form.
Commercial
property coverage form that
insures an insured
tenant’s interest in a
favorable lease under which
the rent paid is less than
the rental value of alternative
premises. It pays the
difference between rent
paid and the rental value
for the remainder of the
lease if the lease is
canceled because of property damage
caused by a peril insured
against.
Leasehold Interest
Insurance.
A form of property
insurance that provides
protection against the loss
of a favorable lease should
it be terminated as a result
of damage to the property by
a peril covered
by the contract. A leasehold
value is determined by
finding the difference
between the rental value of
the property at current
rates and the rent payable
under the terms of the
lease. This amount is multiplied
times the remaining term of
the lease.
Leasing Companies. Lessors in a similar
position
to lending companies, in that
they have an insurable
interest in autos they have leased
to their customers.
Since the leasing company
remains the legal
owner of the leased vehicle,
it is possible for
that company to become
legally liable for injury or
damage involving the leased
vehicle. For these reasons,
leasing companies usually
require that they
be included as additional
insureds on the policies
of people leasing vehicles.
Ledger Cost. The net cost of a life
insurance contract,
calculated by subtracting
the cash value of
the contract at the end of a
given year from the
premiums paid, less all
dividends.
Legacy. A gift of personal
property in accordance
with the provisions of a
will.
Legal Expense Insurance. Group coverage that
provides members with legal
services paid for on a
schedule basis. Similar to dental
insurance.
Legal Hazard. Increased likelihood that
a loss will
occur because of court
actions.
Legal Liability. Liability under the law as
opposed
to liability arising from
contracts or agreements. It
is most often used to refer
to a person’s liability if
he should negligently injure
another party.
Legal Reserve. The minimum reserves
required to
be established for a life
insurance contract under
the laws of the jurisdiction
within which an insurer
operates.
Legal Reserve Life
Insurance Company.
A life
insurer that maintains the
reserves required by the
jurisdiction within which it
operates.
Legend
Drug. A drug that has on its
label “Caution:
Federal law prohibits
dispensing without a
prescription.”
Legislated Coverages. Coverages provided through
programs legislated by
federal or state law (e.g., FAIR
Plans, the Flood Insurance
Program and assigned
risk pools).
Legislative Risk. A risk faced by investors
whereby
changes in tax laws can
result in adverse effects on
the individual’s investment
results.
Length of Stay (LOS). The total number of days a
participant stays in a
facility such as a hospital.
Lessee. The person to whom a lease
is granted. Commonly
called the “tenant.”
Lessee’s Safe Deposit
Box Coverage Form.
Commercial
crime coverage that protects
against loss of
property other than money
while it is in the insured’s
safe deposit box inside a
depository premises.
Lessor. The person granting a
lease. Also known as
the “landlord.”
Level Annual Premium
Funding Method.
A
method of accumulating money
for payment of future
pensions under which the
level annual charge
is payable each year until
retirement so that the
benefit is fully funded.
Level Commission System. A system of commissions
in which the first year and
all renewal commissions
are the same percentage of
the premium.
Level
Death Benefit Option. Under universal life
insurance, the level death
benefit option provides
the greater of: 1) the face
amount of the policy at
the time of death; or 2) a
stipulated percentage of
the accumulation value.
Level Premium Insurance. Insurance with premiums
that remain the same
throughout the life of
the contract. Most whole
life insurance works this
way. The amount of a level
premium is higher than
needed for the protection
afforded in the early years
of the contract but less
than needed in the later
years. It levels off the
cost of insurance so as not to
have it increase each year
until it becomes too expensive.
See also Net Level Premium.
Level Term Insurance. (1) A term life insurance
policy where the death
benefit and premium remain
level for the policy term.
See also Decreasing
Term Insurance, Increasing
Term Insurance and Term
Insurance. (2) A term policy
where the face value
remains the same from the
effective date until the
expiration date. See also
Term Insurance.
Liabilities. Money owed or expected to
be owed.
Insurance company financial
statements, for instance,
show assets and liabilities.
Liability. See Legal Liability.
Liability Insurance. Insurance that pays and
renders
service on behalf of an
insured for loss arising
out of his responsibility to
others imposed by law
or assumed by contract.
Liability Limit. The maximum amount the
liability
insurance company pays for any
one occurrence
(an
accident or an exposure to substantially the same
conditions over a period of
time which causes an
injury). This limit is the
same regardless of the number
of insureds, claims made or
persons injured. See
Per Person Limit.
Liable. Being legally responsible
for damages suffered
by a third party.
Libel. (1) The defaming of
another by writings, pictures
or other publication
injurious to the person’s
reputation. See also
Defamation and Slander. (2) In
maritime law it means legal
action brought against
the owner of another ship.
Libel Insurance. A form of liability
insurance that
protects the insured against
legal liability for libelous
statements he may write.
Liberalization Clause. A clause in property
insurance
contracts that provides: if
policy or endorsement
forms are broadened by
legislation or rulings
from rating authorities and
no additional premium
is required (e.g., if it
drops a policy exclusion), then
all existing similar
policies are assumed to include
the broadened coverage. This
eliminates the need
of the insurance company to
endorse all existing
policies when coverage is
expanded without a
change in premium.
License. A certification of
authority for an agent or
insurer to operate, given by
the appropriate jurisdiction.
License and Permit
Bonds.
Bonds often required
by jurisdictions to be
posted by persons performing
certain services, such as
security dealers and
plumbers. It provides
indemnification in the event
that the licensee fails to
conform to pertinent regulations
of the jurisdiction.
Licensee. (1) One who is licensed.
(2) A person who
uses or enters the property
of another for his own
interests. The owner of the
property must use ordinary
care not to injure a
licensee (e.g., a person using
another’s land for a
shortcut, as long as he had the
permission of the owner).
See Degree of Care.
Lien. A claim against property,
which then serves
as security for the payment
of that claim.
Lien Plan. (1) A plan for issuing
coverage on substandard
risks under which a standard
premium is
paid; less than the full
face amount of the policy is
payable if death occurs
within a certain period of
years. These are rarely used
and are illegal in some
states. (2) A plan under
which an impairment of
the insurer’s assets if
offset by pro rata liens against
policies to be deducted from
the face amount when
paid as a claim.
Life Annuity. A contract providing a
stated income
for life, payable annually
or more frequently. (AN)
Life Conservation. The administration of
efforts
to preserve human life
through research, legislation
and appeals to society.
Life Estate. Ownership of land for an
individual’s
lifetime.
Life Expectancy. The average number of
years remaining
for a person of a given age
to live as referenced
on a mortality or annuity
table.
Life
Expectancy Term Insurance.
Term life insurance
that provides protection for
a person’s “expectation
of life.” This becomes the
term of the policy,
as opposed to ordinary term
policies that are for a
given number of years or to
a stated age, such as
65.
Life Income Option. An option for paying the
proceeds
of a life insurance policy
to beneficiaries under
which equal installments are
paid as long as the
beneficiary lives, even if
the principal has been exhausted.
Proceeds are retained by the
insurer and
paid in equal installments
(monthly, quarterly, semiannually
or annually). However, this
option provides
no refund when the
beneficiary dies—even if
only one installment has
been paid. It is frequently
elected as the form of
payment for a death benefit
to a surviving spouse, or
for payment of cash values
to an insured who lives to
retirement age.
Life Income with Period
Certain Option.
Guaranteed
payments for a specified
period of time.
Under this option, the
benefits are guaranteed for a
certain period (usually
five, 10 or 20 years). If the
beneficiary dies before the
end of the period, benefits
will continue to be paid to
another person for
the remainder of the period.
If the original recipient
lives beyond the period
certain, the benefit payments
continue for as long as he
lives.
Life Insurance
(Generic).
A contractual system of
risk sharing under which
contributions are accumulated
and redistributed to meet
the economic consequences
of the uncertain duration of
life.
Life Insurance,
Ordinary.
See Ordinary Life Policy.
Life Insurance (Narrow). An agreement that
guarantees
the payment of a stated
amount of monetary
benefits upon the death of
the insured, or under
other circumstances
specified in the contract, such
as total disability.
Life Insurance Cost
Surrender Index.
The guaranteed
cash surrender value of a
life insurance policy
is often required to be
calculated into an index for
presentation to prospective
life insurance buyers.
Such an index determines the
guaranteed cash surrender
value, if any, available at
the end of the 10th and
20th policy years according
to the accumulation of
the annual cash dividends at
5 percent interest compounded
annually to the end of a
selected period, if
the policy is a
participating policy.
Life Insurance,
Straight.
See Ordinary Life Policy.
Life Insurance Trust. A type of life insurance
policy
where a trust company is
named as the beneficiary
and distributes the proceeds
of the policy under
the terms of the trust
agreement.
Life Insurance, Whole
Life. See
Whole Life Insurance.
Life Insurers
Conference.
An organization that
provides for the exchange of
information on management
problems among the member
insurers.
Life Office Management
Association (LOMA).
An
organization serving a large
proportion of the life
insurance business by
providing educational programs
relating to administrative
and technical procedures
within the industry. It
confers the designation
of Fellow, Life Management
Institute (FLMI)
upon those who complete a
prescribed course of
study.
Life Paid Up at Age. A form of limited payment
life insurance that provides
protection for the whole
of life but with payment of
premiums to stop at a
particular age, thus paying
up the policy. A common
form would be Life Paid Up
at Age 65.
Life Underwriter. Usually, a life insurance
agent.
It can be more narrowly
defined as a risk appraiser.
See also Risk Appraiser.
Life Underwriting
Training Council (LUTC). An
organization that prepares
and administers training
programs for life insurance
agents.
Life with Period Certain. An annuity option that
provides a lifetime income
to the annuitant plus an
extra guarantee of income
for a specified period of
time such as 5 or 10 years.
The period certain provides
income to the annuitant or
the annuitant’s
survivor.
Lifetime Benefit. An optional benefit that
provides
lifetime disability income
benefits—usually if the
disability commences prior
to a certain age. Otherwise,
benefits may be restricted.
Lifetime Policy. (1) A policy guaranteed
renewable
or non-cancelable to age 65 or
some later date. (2) A
policy paying disability
benefits for life.
LIFO. Last in, first out. A
method of keeping inventory
records for accounting
purposes where the
last item purchased is the
first item used.
Limit,
Aggregate. See Aggregate Limit.
Limit, Basic. See Basic Limit.
Limit, Excess. See Excess Limit.
Limit of Liability. The maximum amount of
insurance
or upper limit that the
insurance company is legally
obligated to pay if a
covered loss occurs.
Limit of Liability Rule. A prescribed procedure for
allocating property
insurance losses among insurers
that provide protection on a
given piece of property.
It is called the “pro rata
liability rule” in a standard
fire policy.
Limit, Standard. See Basic Limit.
Limitations. Exceptions to coverage and
limitations
of coverage in an insurance
contract (e.g., a limit of
liability in an auto policy,
policies covering only certain
described vehicles or, in
the case of general liability
insurance, certain described
premises).
Limited Agent. An agent authorized to
transact
only a limited form of
insurance, such as travel, accident
or credit insurance. In many
states, limited
agents are exempt from
licensing examination
and education requirements.
Limited Health
Insurance.
Special policies that
provide limited coverage for
specific injuries or illnesses,
such as travel-accident,
hospital income and
specified disease coverage.
Limited Partnership. An association of two or
more
persons who operate and
manage a business for
profit; at least one the partners
does not work in
the business but does have
some management voice
and financial investment.
The limited partner has
limited liability.
Limited Payment Life. A life insurance contract
providing protection for the
whole of life with premiums
paid for an indicated number
of years. See
also Life Paid Up At Age.
Limited Payment Whole
Life. A
whole life policy
that allows the policyholder
to pay the entire premium
in a shorter period of time
(such as a 20 year
period or to age 65).
Compare with Continuous
Premium Whole Life and
Single Premium Whole
Life.
Limited Policies. (1) Health insurance
contracts,
such as those offered by
newspapers to their customers,
with low limits and somewhat
restricted
forms. (2) Policies paid
only upon the occurrence of
certain contingencies, such
as cancer, in contrast to
policies covering all
contingencies other than those
excluded.
Limited Pollution
Liability Coverage Form. Commercial
form providing pollution
liability coverage
on a “claims made” basis,
but not providing any
coverage for clean-up costs.
Limited Theft Coverage
Endorsement.
This form
may be attached to a
dwelling policy to provide
theft coverage for a named
insured who is not an
owner occupant.
Limits. (1) Ages below or above
which the insurer
will not issue a policy or
above which it will not
continue a policy presently in
force. (2) The maximum
benefit payable for a given
situation or occurrence
(e.g., a limit of $50,000 on
the contents of a
home, or a $40,000 per
accident limit for property
damage liability). See also
Limit of Liability.
LIMRA International. An organization that,
through research, seeks
solutions to the problems
of administering the agency
costs of a life insurer.
Line. A colloquial term with
several meanings. It
may describe a particular
type of insurance, such as
the liability “line,” or the
various types of insurance
written for a property owner
(e.g., carrying all “lines”
of the XYZ Company). It also
describes the amount
of insurance on a given
property (e.g., a $250,000
“line” on buildings of the
XYZ Company).
Line Card. A record kept by a
property insurer of
the insurance sold to an
insured.
Line of Business. The general classification
of business
as utilized in the insurance
industry (e.g., fire,
allied lines and
homeowners).
Lines. The amount a reinsurer
accepts, usually in
multiples of a net
retention, under a surplus policy.
If a policy specifies a
retention of $10,000, and a
risk is written for $50,000,
4 lines ($40,000) would
be reinsured. See also
Surplus Reinsurance.
Line Sheet. A schedule showing the
limits of liability
to be written by an insurer
for different classes
of risks. It is also used by
a ceding company to define
the limits of liability it
will assume on various
exposures.
Line
Slip. A document that describes a
risk to be insured.
Underwriters subscribe to it
by indicating what
percentage of the risk they
are willing to take.
Liquidated Damages. Damages that are agreed to
either by the court or by
the parties to a suit or
action. These damages are
often negotiated or calculated
to represent a present value
of monies that
would otherwise be paid in
the future.
Liquidation of Insurer. Action undertaken by a
state insurance department
to dissolve an impaired
or insolvent insurer that
cannot be restored to sound
financial standing.
Liquidity. The ability of an insurer
to convert its
assets into cash to pay
claims if necessary.
Liquor Control Laws. See Dram Shop Laws.
Liquor Liability
Insurance.
See Dram Shop Liability
Insurance.
Litigant. One who is engaged in a
lawsuit.
Litigation. Settling disputes about
coverage or the
amount of a claim in court.
Litigation Bond. See Court Bond.
Livery Use. Use of a vehicle for hire
to carry persons.
This is usually excluded in
automobile insurance
contracts unless otherwise
stated.
Livestock Coverage Form. A commercial property
form that may be attached to
a farm coverage
part to insure livestock. This
form replaced various
inland marine forms that were
commonly used to
insure farm property and
livestock.
Livestock Insurance. A named perils contract
that
provides a prescribed lump sum
payment to an insured
upon the death of any animal
covered by the
policy.
Livestock Mortality
Insurance.
The equivalent of
life insurance for
livestock.
Livestock Transit
Insurance.
Insurance against accidents
causing death or crippling
on shipments of
livestock while in transit
by rail, truck or other similar
means of transportation.
Living Benefits Rider. A rider attached to a life
insurance policy that
provides LTC benefits or benefits
for the terminally ill. The
benefits provided
are derived from the
available life insurance benefits.
Living Need Benefits. A combination of life
insurance
and long-term care insurance
that allows
life insurance benefits to
generate long-term care
benefits. Up to a certain
percentage of the life insurance
policy’s death benefit may
be used in advance
to offset nursing home or
medical expenses,
reducing the face amount of
the life policy.
Living Needs Clause. A clause that combines
life
insurance and LTC benefits,
drawing on the life insurance
benefits to generate LTC benefits.
Also
called an accelerated
benefit.
Living Trust. A trust created by a
person during
his lifetime. Also called an inter vivos
trust.
Lloyd’s. Generally refers to Lloyd’s
of London, England,
an institution where
individual underwriters
accept or reject the risks
offered to them. The
Lloyd’s Corporation provides
the support facility for
their activities.
Lloyd’s Association. A group of individuals who
band together to assume
risks are sometimes called
a Lloyd’s association. They
are organized along the
same lines as, though not
connected with, Lloyd’s
of London. Each person is
responsible only for the
share of the risk that he
assumes. There are a limited
number of these associations
in the U.S.
Lloyd’s Broker. A person who has the
authority to
negotiate insurance
contracts with the underwriters
on the floor at Lloyd’s. See
also Lloyd’s.
Lloyd’s Syndicate. A consortium of individual
Lloyd’s underwriters.
Usually one person acts for
the syndicate in accepting
or rejecting risks.
Lloyd’s Underwriter. An individual who
underwrites
risks through the facility
of Lloyd’s of London.
These individuals are liable
only for their own
assumptions of risk and not
those assumed by others
in the same syndicate or in
the overall Lloyd’s
organization.
Loading. The amount added to the
pure insurance
cost to cover the operations
cost of an insurer, the
possibility that losses will
be greater than statistically
expected and fluctuating
interest rates on the
insurer’s investments. The
“pure” insurance cost is
that portion of the premium
estimated to be necessary
for losses.
Loan
Value. A term that refers to the
amount of
money an insured can borrow
using the cash value
of his life insurance policy
as security.
Local Agent. An agent representing
companies in
a sales and service capacity
as an independent contractor
on a commission basis. A
local agent usually
has a small territory, and
agent powers are limited
by contract.
LOMA. See Life Office Management
Association.
Longshoremen’s and
Harbor Workers’ Act.
A federal
act that stipulates
compensation levels for injured
longshoremen and harbor
workers.
Long-Term Care (LTC). Care provided for persons
with chronic diseases or
disabilities.
Long-Term Care (LTC)
Insurance.
A policy that
reimburses daily health and
social service expenses
incurred when an insured is
confined to a convalescent
or nursing home facility.
Often marketed as a
rider to a life insurance
policy, this coverage pays
for the care of persons with
chronic diseases or disabilities,
and may include a wide range
of health
and social services provided
under the supervision
of medical professionals.
Long-Term Care Facility. Usually a state licensed
facility that provides
skilled nursing services, intermediate
care and custodial care.
Long-Term Care Riders. In recent years, some
insurers
have begun to offer
long-term care coverage
in the form of riders attached
to life insurance policies
or annuity contracts—and even
in connection with
some other policy forms,
such as disability income insurance.
Life insurance LTC riders
provide benefits
very similar to those found
in LTC policies.
Long-Term Disability
Insurance.
A group/individual
policy that provides
coverage for longer than
a short term, often until
the insured reaches age 65
in the case of illness and
for life in the case of accident.
See also Short-Term
Disability Insurance.
Loss. (1) The amount of
reduction in the value of
an insured’s property caused
by an insured peril.
(2) The amount sought
through an insured’s claim.
(3) The amount paid on
behalf of an insured under
an insurance contract.
Loss Adjustment Expense. The cost of adjusting
losses, excluding the amount
of the loss itself.
Loss and Expense Data. Insurance rates are based
on broad averages of loss
and expense data and include
components for expected
losses and expenses.
Individual companies have
generally been permitted
to deviate from published
rates based on individual
company differences in
experience and expense
factors.
Loss Assessment Charge. An insured’s share of a
loss
assessment for property
damage or liability, which is
charged by a corporation or
association of property
owners. Homeowners policies
provide some coverage
for loss assessments charged
against the insured
as owner or tenant of a
residence.
Loss Clause. See Automatic
Reinstatement Clause.
Loss
Constant. A flat amount included in
the premium
for small workers’
compensation policies, for
dwellings in some
jurisdictions and for some prescribed
inland marine insurance
lines. The loss constant
offsets the
greater-than-average loss experience
that most small risks have
when compared to all
other risks in a given
classification.
Loss Control. Any combination of actions
taken
to reduce the frequency or
severity of losses (e.g., installing
locks, burglar alarms or
sprinklers).
Loss Conversion Factor. A factor applied to the
losses in the formula to
give the insurer the funds
needed to handle the investigation
of claims (used
in a retrospective rating
plan).
Loss Cost Multiplier. A multiplier insurers use
to
account for individual
company expenses, underwriting
profit and contingencies, in
order to arrive
at final rates.
Loss Costs. In 1989, ISO began a
transition from
providing advisory base
rates to providing only prospective
loss costs, made up of
claims payments and
loss adjustment expenses.
Each insurer develops its
own rating factors to
reflect its own underwriting
expense and profit/contingencies.
Loss Development. The difference between the
amount of losses initially
estimated by the insurer
and the amount reported in
an evaluation at a later
date.
Loss Development Factor. This was a development
under retrospective rating
plans to consider
the effect of inflation on
losses that take a long time
to settle. It gives the
insurer additional money to
allow for the subsequent
development of losses and
to reimburse for claims that
are late in being reported.
See also IBNR.
Loss Expectancy. An underwriter’s estimate
of the
maximum loss suffered on an
exposure being considered,
with focus on the expected
level of loss prevention
activities on the part of
the insured.
Loss Frequency. The number of times a loss
occurs
over a specific period of
time.
Loss Limitation. Another term used in
retrospective
rating formulas, designed to
limit the effect of
catastrophic losses that
would otherwise be considered
in full when figuring the
final retrospective
premium.
Loss Loading. A factor applied to the
pure loss cost to
produce a reinsurance rate
or premium.
Loss of Future Earnings. Claims that seek money
for income that might have
been earned in the future.
People hurt while in someone
else’s car, or their
own car and even the
families of people killed in car
accidents often make these
claims. In most cases,
courts allow coverage for
lost wages only during a
period of recuperation from
injuries suffered in an
accident. It is not an indefinite
benefit.
Loss of Income
Insurance.
Insurance paying loss
of income benefits.
Loss of Market. The inability to sell a
product to
prospective buyers. This is
considered a normal
business risk and not
covered except in some cases
such as meats, where spoilage
can result in loss of
market. However, if spoilage
is the result of a storm
at sea or a derailing,
coverage can be purchased for
an additional premium.
Loss of Time Insurance. See Loss of Income
Insurance.
Loss of Use Insurance. Coverage for the loss of
use of property if it cannot
be used because of a
peril covered by the policy.
If a covered loss makes
the residence premises
uninhabitable, this covers—
at the insured’s
option—either additional living expenses
related to maintaining the
normal standard
of living of the household
or the fair rental value of
the part of the residence
where the insured lives. (If
a part of a residence rented
to others is uninhabitable,
coverage is offered for loss
of fair rental value.)
See Additional Living
Expenses.
Loss Payable Clause. A provision in property
insurance
contracts authorizing
payment to persons
other than the insured to
the extent that they have
an insurable interest in the
property. This clause
may be used when there is a
lien or loan on the
property, and it protects
the lender.
Loss Payee. The party to whom money or
insurance
proceeds is to be paid in
the event of loss, such
as the lienholder on an
automobile or the mortgagee
on real property.
Loss Payment. A condition that specifies
the rights
and obligations of the
insurance company after a
covered loss occurs. The
insurer has the option of
paying the value of lost or
damaged property, paying
the cost of repairing or
replacing lost or damaged
property or of repairing, rebuilding
or replacing
property with property of
like kind and quality.
It may also take possession
of any part of the
property at an agreed or
appraised value. An insurer
must give notice of its
intent within 30 days
after receiving a sworn
statement of loss.
Loss Prevention
Engineer.
See Engineer.
Loss Prevention Service. Engineering and inspection
by an insurance company or
independent organization
with the aim of removing or
reducing dangerous
conditions in order to
prevent losses.
Loss Ratio. The losses divided by the
premiums
paid. The numerator (losses)
can be losses incurred
or losses paid, and the
denominator (premium) can
be earned premiums or
written premiums, depending
on how the loss ratio is
going to be used.
Loss Report. See Claim Report.
Loss Reserve. The estimated liability
for unpaid
insurance claims or losses
that have occurred as of a
given evaluation date,
including losses incurred but
not reported (IBNR), losses
due but not yet paid and
amount not yet due. The
above refers to a loss reserve
in an insurer’s financial
statement. As to individual
claims, the loss reserve is
the estimate of what
will ultimately be paid out
on that case.
Loss Severity. The amount of a loss
expressed in
financial terms.
Losses Incurred. The total losses, whether
paid or
not, sustained by an insurer
in a given period.
Losses
Outstanding. A summary statement
prepared
by property, life and
liability insurers showing
claims not yet settled.
Losses Paid. A summary of claims paid.
Loss-of-Income Benefits. Benefits paid for
inability
to work for remuneration
because of disability resulting
from accidental bodily
injury or sickness. The loss
of income may be real or
presumptive.
Lost Instrument Bond. When the owner of a stock
certificate loses it, the
insurer of the certificate will not
issue a duplicate until the
owner furnishes an indemnity
bond guaranteeing that if he
finds the original he
will give it to the surety
company.
Lost Policy Release. A statement signed by an
insured
releasing the insurer from
all liability for a
lost or mislaid contract of
insurance (usually signed
after a replacement policy
has been issued).
Lost-or-Not-Lost Clause. (1) A provision in an
ocean marine contract that
assures coverage whether
the property is in existence
at the time the contract
is written or has been
destroyed. (2) Coverage of a
ship at sea “afloat or
sunk.”
LTC. See Long Term Care
insurance.
Lump Sum. A method for paying the
proceeds of a
life insurance policy
whereby the beneficiary receives
the entire proceeds of a
policy at once rather than
in installments.
LUTC. See Life Underwriting
Training Council.
© 2008 Silver
© 2008 Silver
M
M&C. See Manufacturers and
Contractors Liability
Insurance.
Machinery Breakdown
Insurance.
See Boiler and
Machinery Insurance.
Maintenance Bond. A bond guaranteeing
against
defects in workmanship or
materials for a stated time
after the acceptance of
completed work.
Maintenance, Care and
Wages. An
admiralty law
provision for coverage for
injured seamen. Maintenance
refers to providing food,
shelter and rehabilitation.
Care refers to the medical
treatment necessary
for recovery. Wages, of
course, refers to the usual
seaman’s wages, which must
be paid even during
an illness or after an
accident.
Major Hospitalization
Policy. The
same as major
medical insurance, except
that it applies to expenses
incurred only when the
insured is hospitalized. See
also Major Medical
Insurance.
Major Medical Insurance. Health insurance that
provides benefits up to a
high limit for most medical
expenses incurred, subject
to a large deductible.
Such contracts may contain
limits on specific types
of charges, like room and
board, and a percentage
participation clause sometimes
called a coinsurance
clause. These policies
usually pay covered expenses
whether an individual is in
or out of the hospital.
Malicious
Mischief. Purposely damaging the
rights
or property of another. See
also V&MM.
Malinger. To feign a disability in
order to continue collecting
benefits longer than
actually necessary.
Maloney Act. A 1938 amendment to the
Securities
Exchange Act of 1934. The
Maloney Act established
the National Association of
Security Dealers
(NASD) as a self regulatory organization
(SRO) for
those involved in the sale
of securities.
Malpractice. Professional misconduct or
lack of ordinary
skill in a professional act
which renders the
practitioner liable for
damages.
Malpractice Insurance. Insurance on a
professional
practitioner that: 1)
defends suits instituted against
the insured professional for
malpractice; or 2) pays
any damages set by a court,
subject to policy limits.
Managed Care. A system of health care
that delivers
quality, cost effective
health care through monitoring
and recommending utilization
of services and
cost of services.
Managed Health Care
Plan. A
plan that involves
financing, managing and
delivery of health care. Typically,
it involves a group of
providers who share the
financial risk of the plan
or who have an incentive
to deliver cost effective
and quality service.
Management Expense. A charge deducted in a
contingent
commission formula to cover
the reinsurer’s
overhead expenses.
Manager. Head of an agency that is
operated as a
branch office, as opposed to
being operated as a
general agency. The manager
is a salaried employee,
usually with an incentive
bonus based on the
agency’s volume.
Mandated Benefits. Benefits required by state
or
federal law.
Mandated Providers. Providers of medical care
whose services must be
included by state or federal
law.
Mandatory Arbitration. See Arbitration.
Mandatory Provisions. All disability policies
contain
a group of mandatory
provisions required by
all states in any life or
health insurance contract. In
addition, there are some
provisions that are common
to most disability income
policies.
Mandatory Retirement. A provision in a pension
plan
stating that the member must
retire at a specific age
even if he or she does not
wish to do so.
Mandatory Valuation
Reserve. A
reserve required
by state law to offset any
declines in the valuation
of securities listed as
admitted assets.
Manor House. A four-unit building (two
units downstairs,
two upstairs) with one entrance
and a four-car
garage. Commonly bought as a
condo.
Manual. A book giving rates,
classifications and
underwriting rules for a
line of insurance (e.g., the
Automobile Manual gives such
information for automobile
insurance).
Manual
Excess. The premium for an amount
of
insurance in excess of the
basic limit of liability.
This premium is determined
by referring to a table
of rate factors which are
multiplied by the manual
rate in order to arrive at a
premium for the higher
limit selected.
Manual Rates. (1) The published rate for
some unit
of insurance. (2) Rates
based on average claims data
for a large number of
groups. These rates are then
adjusted for specific groups
based on that group’s
characteristics, such as the
type of industry, changes
in benefits from the
standard, etc.
Manufacturers and
Contractors Liability Insurance
(M&C). Premises and operations
liability insurance
that covers manufacturing or
contracting
risks. The basis of premiums
for this coverage is the
payroll.
Manufacturers Output Policy. Coverage for the
personal property of a
manufacturer on an open
perils (all risk) basis.
Coverage is usually restricted
to property away from the
premises.
Manufacturer’s Selling
Price Clause.
Values unsold
finished goods at the price
at which they could
have been sold at the time
of a loss.
Manufacturing Location. A location that
manufactures
products for delivery to the
insured’s customers
under a sales contract. One
of the four types
of dependent properties for
which business income
coverage may be written.
Manuscript Endorsement. Any endorsement not
promulgated on a standard
ISO form, changing any
conditions, agreements, exclusions or
warranties of
the insurance contract.
Manuscript Policy. A policy written for specific
coverages
or conditions not provided
in a standard
policy. It is often prepared
by a large brokerage house
for a large account and must
conform to state laws.
Map. A geographical map used by
a property insurance
underwriter to locate the
area and character
of a risk. Maps also track
the number of insureds in
a particular area so that an
insurer does not subject
itself to a possible
catastrophic loss.
Map Clerk. A junior underwriter who
enters such
essential data as policy
numbers, amounts of coverage,
and property covered on maps
to determine its
liability or exposure in a
given area.
Marine Definition. See Nationwide Definition
of
Marine Insurance.
Marine Insurance. Insurance primarily
concerned
with means of transportation
and goods in transit.
Marine used alone refers to
ocean transportation,
and inland marine refers to
transportation and goods
in transit by land. See also
Inland Marine Insurance
and Ocean Marine Insurance.
Marital Deduction. An unlimited amount of
qualifying
property that can be passed
or transferred upon
the death of one spouse to
the surviving spouse.
Marital Deduction Trust. An arrangement whereby
the surviving spouse is
provided with full use of
the family’s wealth while minimizing
the impact of
federal estate taxes.
Market Assistance Plan
(MAP). A
plan promulgated
by the Department of
Insurance to assist buyers
in obtaining certain types
of insurance when
they are limited in
availability.
Market Conduct. Compliance with state laws
regulating
the sales and marketing,
underwriting and
issuance of insurance
products. Proper market conduct
means conducting insurance
business fairly and
responsibly.
Market Conduct
Examination.
When state insurance
department investigators
examine the business
practices and operations of
an insurer and its
agents in order to determine
their authority to conduct
insurance business in the
state.
Market Risk. A risk experienced by
those who invest
in securities; the risk of
possible loss of investment
since there are no
guarantees associated with
such investments.
Market Value. The price for which
something
would sell, especially the
value of certain types of
assets, such as stocks and
bonds. It is based on what
they would sell for under
current market conditions.
See also Actual Cash Value.
Market Value Clause. A provision in certain
property
insurance forms that
obligates an insurer to
pay the established market
price of destroyed or
damaged stock rather than
its cost to the insured,
as is usually provided in
the standard fire policy.
Coverage is only available
to manufacturers with
finished products, not to
wholesalers or retailers.
Marketing
Representative.
See Special Agent.
Masonry Noncombustible
Construction.
A building
with exterior walls
constructed of masonry materials,
such as adobe, brick,
concrete, gypsum block,
hollow concrete block,
stone, tile, etc., with floors
and roof constructed of
metal or other noncombustible
materials.
Mass Merchandising. A technique whereby a
group
of people, usually employees
or members of a union
or trade association, insure
with one company. Premiums
are collected and remitted
to the insurer in
a lump sum.
Master Contract. In group insurance, the
master
contract is given to the
employer. Individuals insured
under the plan receive
certificates to evidence
their coverage under the
plan.
Master Deed or Bylaws. A document that creates
a common property (i.e.,
condominiums, etc.) and
its association. It defines
homeowners’ undivided
shares in the common
property, membership and
voting rights in the
association and covenants and
restrictions on the use of
units and common property.
It also defines the
governing regulations dealing
with routine operational, administrative
and
management matters of the
property.
Master Policy. (1) The policy contract
issued to an
employer or other entity
authorized by state law for
a group insurance plan. See
also Certificate of Insurance.
(2) A property insurance
policy issued to
an insured who can issue
certificates of coverage to
cover the property of
others.
Master. The captain of a ship.
Master-Servant Rule. A rule that says all
employers
are obligated to protect the
public from the acts
of their employees. Courts
hold employers liable
for torts committed by
employees in the course of
their employment.
Material Fact. A fact that is so
important that its
disclosure would change the
decision of an insurance
company, either with respect
to writing coverage,
settling a loss or
determining a premium. Usually,
the misrepresentation of a
material fact voids a
policy.
Mature. A policy matures when its
face amount
becomes payable. This could
occur upon the death
of the insured, or in some
forms of insurance such
as endowments, as of a
specified date.
Mature Policies. Uninterrupted claims-made
coverage
continuously in effect for
at least five years,
and no longer eligible for
rating credits given on
immature policies.
Maturity Date. The date that the face amount
of a
life insurance policy
becomes payable by reason of
death or endowment.
Maturity Value. The amount payable to a
living
insured at the end of an
endowment period or to
the owner of a whole life
policy if he lives past a
certain age.
Maxi
Tail or Full Tail. Unlimited extended
reporting
period allowing for claims
to be made after expiration
of a “claims-made” liability
policy. See also
Supplemental Extended
Reporting Period.
Maximum Allowable Costs
(MAC) List.
A list of
prescriptions that bases
reimbursement on the cost
of the generic product.
Maximum Disability
Policy. Non-cancelable
disability
income insurance that limits
an insurer’s liability
for any one claim but not
the aggregate amount
of all claims. For one claim
there is a maximum
amount payable, but there
could be any number of
separate claims for
different disabilities.
Maximum Foreseeable
Loss. See
Amount Subject.
Maximum Out-of-Pocket
Costs. The
most a member
will pay for co-payments,
coinsurance, deductibles,
etc.
Maximum Possible Loss. See Amount Subject.
Maximum Retrospective
Premium.
The most an
insured is required to pay
under a retrospective rating
plan, regardless of the
amount of losses incurred.
See Retrospective Rating.
McCarran-Ferguson Act. See Public Law 15.
MDO. See Monthly Debit
Ordinary.
MDRT. See Million Dollar Round
Table.
Mediation. An informal means of
settling a dispute
that involves a third-party
mediator who meets
both parties to the dispute
and encourages them to
agree on a settlement.
Medicaid. A medical benefits program
administered
by states and subsidized by
the federal government.
Under this plan, various
medical expenses are paid
to those who qualify. Also
called Title XIX Benefits.
Medical Application. An application consisting
of
information gained from a
physical exam performed
by a doctor instead of a
simple medical profile.
Medical Benefits. Coverage that pays
reasonable
medical expenses incurred by
an insured, members
of the insured’s family and
passengers for bodily
injuries sustained while
riding in the insured’s car.
It pays medical bills for an
insured and others covered
on the policy, regardless of
who was at fault. Coverage
also applies while riding in
another vehicle or
if injured as a pedestrian
by a vehicle.
Medical Care Insurance. See Medical Expense
Insurance.
Medical Examination. The examination of an
applicant
for insurance or a claimant
by a physician who
acts in the capacity of the
insurer’s agent.
Medical Examiner. The physician who examines
an applicant or claimant on
behalf of the insurer
and as an agent of the
insurer.
Medical Expense
Insurance.
Health insurance that
provides benefits for
medical, surgical and hospital
expenses. This term is used to
include coverage
under the terms
hospital-surgical expense insurance
and medical care insurance.
Medical Expense
Reimbursement Plan (MERP).
A plan which provides for
corporate reimbursement
of specific health care
expenses to employees.
Medical Information
Bureau (MIB).
A data pool
service that stores coded
information on the health
histories of persons who
have applied for insurance
from subscribing companies
in the past. Most life
and health insurers
subscribe to this bureau to get
more complete underwriting
information.
Medical Loss Ratio. Total health benefits
divided
by total premium.
Medical Payments
Insurance.
A form of optional
coverage under automobile
and other public liability
policies that provides for
the payment of medical
and similar expenses without
regard for liability.
See Medical Benefits, also
Personal Injury Protection.
Medical Profile. Record of an insured’s
past medical
history and current physical
condition. Most disability
insurance companies request
this information.
They also will ask an insured
to take a physical
exam (usually at the
company’s expense).
Medical Savings Account
(MSA). An
employer-funded
account linked to a high
deductible medical
indemnity plan. Usually, the
employer raises the
plan deductible (usually by
300 to 400 percent)
and in turn returns a
portion of the premium savings
to employees as
contributions to the medical
savings account. Employees can use
the contributions
to pay for health care
expenses throughout
the year, and at the end of
the year may withdraw
whatever remains in the
account as cash.
Medical Supplies. Any items that are
essential in
carrying out the treatment
of a patient’s illness or
injury.
Medically Necessary. A service or treatment
that
is absolutely necessary in
treating a patient and
which could adversely affect
the patient’s condition
if it were omitted.
Medicare. The federal government
plan for paying
certain hospital and medical
expenses for persons
qualifying under the plan,
usually those over 65.
The hospital benefits are
Part A, and the medical
expense portion is Part B.
Part A is compulsory social
insurance; Part B is
voluntary government-subsidized,
government-operated
insurance.
Medicare Beneficiary. Anyone entitled to
Medicare
benefits based on the
designation by the Social
Security Administration.
Medicare Select Policy. A Medicare supplement
policy or certificate that
contains restricted network
provisions conditioning the
payment of benefits on
the use of network
providers.
Medicare Supplement
Insurance.
Insurance coverage
sold on an individual or
group basis that helps
to fill the gaps in the
protection provided by the
Medicare program. Medicare
supplements cannot
duplicate any benefits
provided by Medicare, but
may pay part or all of
Medicare’s deductibles and
co-payments, and may cover some
services and expenses
not covered by Medicare.
Member. (1) An employee who is
qualified for coverage
under a pension plan. Also
called a “participant.”
(2) Anyone covered under a
health plan (enrollee
or eligible dependent).
Member Certificate. Another term for
certificate
of coverage.
Member Month. The total number of
participants
who are members for each
month.
Members Per Year. The total number of member
months divided by 12.
Mental (or Emotional)
Distress.
Usually not covered
if a claimant was a
bystander to an accident,
but covered if he was
physically involved.
Mental Health Provider. Individuals who are
qualified
to provide mental health services
in accordance
with the state or federal
law which applies. Includes
psychiatrists, social
workers and psychologists.
Mental Health Services
and Supplies.
Items required
for treatment of mental
illness, including
substance abuse and
alcoholism.
Mercantile Open Stock
Policy. A
crime insurance
form used by retail
establishments to cover merchandise,
furniture and equipment
after hours while
the insured business is
closed. It covered losses by
burglary or robbery of a
watchperson. It has been
replaced by modern
commercial crime coverage
forms.
Mercantile
Risk. A retail or wholesale risk
as contrasted
with a service risk,
manufacturing risk or a
habitational risk.
Mercantile Robbery and
Safe Burglary Policy.
A
crime insurance form used by
retail establishments to
insure money and securities.
It has been replaced
by modern commercial crime
coverage forms.
Merchant Marine Act. Also known as the Jones
Act. A law that permits an
injured seaman to sue
his employer for damages and
to have a jury trial.
Insurance is provided under
the employers liability
section of a standard
workers’ comp policy, but when
the exposure exists the
insurance company usually
requires attachment of the maritime
coverage endorsement,
which actually limits the
insurance and
adds a few exclusions to the
policy.
Merit Rating. A rating plan used in
several forms
of insurance but most
commonly in personal auto.
It is a method whereby the
insured’s premium varies
up or down depending on the
insured’s own
past loss record.
MERP. See Medical Expense
Reimbursement Plan.
Messenger. Under commercial crime
insurance
coverages, the named insured
or any of the insured’s
partners or employees while
having care and custody
of property outside the
insured’s premises.
Messenger Robbery
Insurance.
Coverage on
money and other property in
the possession of persons
who are away from the
premises (e.g., an employee
taking a deposit to the
bank).
MIB. See Medical Information
Bureau.
Midi Tail. Automatic five-year
extended reporting
period allowing for the
making of claims after expiration
of a “claims-made” liability
policy, but only
applies to claims arising
from occurrences that were
reported no later than 60
days after the end of the
policy. See also Extended
Reporting Period.
Mill (or Slow-Burning)
Construction.
Construction
meeting certain high
specifications and standards.
Factories and warehouses,
constructed to
meet these specifications qualify
for reduced fire
insurance rates.
Million Dollar Round
Table (MDRT).
An association
of life insurance agents who
qualify by selling
$1 million worth or more of
life insurance coverage.
The policies must meet
certain qualification
standards, and applicants
must be members of the
National Association of Life
Underwriters.
Mini Tail. Automatic 60-day extended
reporting
period allowing for the
making of claims after expiration
of a “claims-made” liability
policy. See also
Extended Reporting Period.
Minimum Amount Policy. A life insurance policy
that is sold only with a
minimum face amount. It
can have a lower rate than
other inexpensive coverages
because certain insurance
company expenses,
like those of policy
writing, do not increase proportionately
with the face amount of the
policy sold.
Minimum Compensation
Level. The
amount of
compensation an employee
must earn before being
eligible to participate in a pension
or profit sharing
plan.
Minimum Deposit
Insurance.
See Financed Insurance
and Minimum Deposit Policy.
Minimum Deposit Policy. A cash value life
insurance
policy having a first-year
loan value that is
available to borrow against
immediately upon payment
of the first-year premium.
Minimum Guarantee. Guaranteed interest that
is
the predetermined lowest
rate.
Minimum Premium. (1) The smallest amount of
premium for which an insurer
will issue coverage
under a given policy. (2) A
cost plus arrangement
whereby the employer pays the
insurer only a portion
of the premium which is to
be used for administration
costs. The remainder is
placed in a “bank
account” which is then used
by the insurer to pay
claims.
Minimum Rate. A rate for low hazard
risks.
Minimum Retained Limit. The greater of the
deductible
shown in the Declarations or
the actual
amount of underlying
insurance available to the
insured.
Minimum Retrospective
Premium.
Used in a retrospective
rating plan, the lowest
amount the insured
can pay under the plan,
regardless of the losses
incurred.
Miscellaneous Benefits. Benefits provided by a
group medical policy that
cover most inpatient
medical expenses except room and
board charges
and surgical fees.
Miscellaneous Dwelling
Endorsement.
An endorsement
attached to an insured’s
policy that modifies
some of the policy
provisions, particularly provisions
concerning the amount of
insurance and the
premium.
Miscellaneous
Endorsements.
Endorsements that
increase coverage limits for
specified property, limit
coverage for specified
property or portions of the
premises and exclude
coverage for specified persons,
premises or types of
property.
Miscellaneous Expenses. Ancillary expenses,
usually
hospital charges other than
daily room and
board (e.g., x-rays, drugs
and lab fees). The total
amount of such charges that
are reimbursed is limited
in most basic
hospitalization policies.
Miscellaneous Type
Vehicle Endorsement.
An endorsement
that insures types of
vehicles that are
not normally eligible for
personal auto coverage
under a standard policy—like
cars not designed for
road travel and recreational
vehicles. The endorsement
changes the policy
definition of the covered
auto to include
miscellaneous type vehicles, and states
the type of miscellaneous
vehicle in the schedule or
Declarations. Also covers
any miscellaneous type
vehicle acquired during the
policy period.
Misrepresentation. The use of oral or written
statements
that do not truly reflect
the facts either by an
insured on an application
for insurance or by an
insurer concerning the terms
or benefits of an insurance
policy. These situations
usually involve is-
sues—like reasonable reliance and
bad faith refusal to
pay, and can be grounds for nullification
of the
policy—or damages in excess
of policy limits.
Misstatement of Age. (1) Providing the wrong
age
on an application for life
and health insurance or
for a beneficiary who is to
receive benefits on a basis
involving his or her life
contingency. (2) A provision
in most life and health
policies setting forth
the action to be taken if a
misstatement of age is
discovered after the policy
is issued. This is one of
the uniform provisions for
individual health insurance
policies.
Mixed Insurer (or
Company).
An insurance company
that splits ownership among
stockholders and
policyowners. The term also
indicates an insurer issuing
both life and health
insurance policies. It is
often erroneously used to
describe an insurer offering
both participating (dividend
paying) and nonparticipating
plans.
MLIRB. Multi-Line Insurance
Rating Bureau.
Mobile Agricultural
Machinery and Equipment
Coverage Form. A commercial property form
specifically
designed to insure farm
machinery and
equipment when it is the
only exposure, or when
the coverage must be written
separately. Similar coverage
may also be included in the
farm property
coverage form.
Mobile Equipment. Land vehicles, including
attached
machinery and apparatus,
whether or not
self-propelled, and: 1) not subject
to motor vehicle
registration; 2) used
exclusively on the insured’s
premises; 3) principally for
use off public roads; or
4) designed
or maintained to provide mobility for
permanently attached
equipment such as cranes,
loaders, pumps, generators
or welding equipment.
Mobile Home
Endorsement/Policy.
A homeowners
policy written on a mobile
home that is permanently
situated. Alters certain
policy provisions as necessary
to provide mobile home
coverage. Mobile
homes may also be covered
with separate, standalone
insurance policies designed
particularly for
that use.
Mode of Premium Payment. The method of premium
payment (mode) elected by
the policyowner.
Modes generally available
are monthly, quarterly,
semiannually and annually.
Model Year. The auto manufacturer’s
model year.
Auto manufacturers usually
start selling their new
models in the fall of the
previous year—for example,
1994 models are often
introduced in the fall of
1993. It is the model year
and not the year of purchase
that appears in the
Declarations.
Modified. (1) Under a modified
coinsurance provision
in life reinsurance, the
ceding insurer retains
and maintains the entire
reserve, with the annual
increase in reserve being
transferred to the ceding
insurer by the reinsurer at
the end of the year. (2)
Under preliminary term
insurance, a modified reserving
system permits at least
part, if not all, of
the first year’s net premium
on a life insurance policy
to be used to meet
first-year acquisition costs and
claim expenses and requires
that part of the renewal
loading be added to the
policy reserve accumulation.
(3) Any premium that is
altered from the regular
premium for similar life policies,
such as the premium
for a modified life policy.
Modified Adjusted Gross
Income. A
worker’s adjusted
gross income plus tax exempt
interest received
during a tax year.
Modified Community
Rating. A
method of determining
rates for medical services
based on data from
a given geographic area.
Modified Endowment
Contract.
An endowment
contract where the amount
payable upon survival
of the endowment period is
greater than the face
amount and the amount
payable at death is the
greater of the face amount
or cash value. Modified
endowment contracts are subject
to taxation and
subsequent penalties.
Modified
Fee-for-Service.
A situation where reimbursement
is made based on the actual
fees subject
to maximums for each
procedure.
Modified Fire-Resistive
Construction.
A building
with exterior walls, floors and
roof constructed
of masonry or fire-resistive
materials.
Modified Life Policy. An ordinary life contract
under
which the premiums are
modified so as to be
lower than normal for the
first three to five years
and higher than normal after
that. A special case: a
level term policy, under
which no part of the premium
goes towards savings, that
automatically converts
to a whole life policy at a
designated time.
Money and Securities
Broad Form.
A once popular
crime insurance form used by
businesses to protect
money and securities against many
types of losses
that has been replaced by modern
commercial
crime coverage forms. See
Theft, Disappearance
and Destruction Coverage
Form.
Money Purchase Plan. A pension or retirement
plan. A plan where a
specified amount of money is
used periodically to
purchase an annuity for each
employee covered by the
plan. The total of these
annuities is then paid to
the employee at retirement.
Money-Purchase Benefit
Formula. A
pension plan
under which contributions of
both the employer
and the employee are fixed
as flat amounts or flat
percentages of the
employee’s salary. See Defined
Contribution Pension Plan.
Monoline Policy. Any insurance coverage
written
as a single line policy.
Contrast with Multiple Line
or Package Policy.
Monopolistic State Fund. The state-operated company
in those states having laws
that require all
businesses to buy workers’
compensation insurance
from the state. Private
insurers cannot compete in
these states.
Monthly Administration
Fee. In
universal life insurance,
an administrative fee is
charged each month
to cover administrative
expenses.
Monthly Debit Ordinary
(MDO).
Ordinary insurance
policies whose premiums are
collected at the
door monthly in the same
fashion as industrial policies.
Moral
Hazard. A condition of morals or
habits that
increases the probability of
loss from a peril (e.g.,
an individual who previously
burned his or her
own property to collect the
insurance). Some insurance
professionals use the terms
moral and
morale hazard
interchangeably. See Morale Hazard.
Morale Hazard. Hazard arising out of an
insured’s
indifference to loss because
of the existence of insurance
(e.g., the attitude, “It’s
insured, so why
worry.”) If an insurer
concludes that a person poses
a morale hazard risk, it may
add a surcharge to
the disability premium
or—more likely—will
decline the application. See
Moral Hazard.
Morbidity. The relative incidence of
disease.
Morbidity Rate. The ratio of the incidence
of sickness
to the number of well
persons in a given
group of people over a given
period of time. It
may be the incidence of the
number of new cases
in the given time or the total
number of cases of
a given disease or disorder.
Morbidity Table. A table showing the
incidence of
sickness at specified ages
in the same fashion that a
mortality table shows the
incidence of death at specified
ages.
Mortality Charge. The charge for the element
of
pure insurance protection in
a life insurance
policy.
Mortality Cost. A factor considered in
life insurance
premium rates. Insurers have
an idea of the
probability that any person will die at
any particular
age; this is the information
shown on a
mortality table. The pure
mortality cost is the
face amount of the policy
multiplied by the probability
that it will have to be paid
out as a claim.
Mortality, Experienced. See Experienced Mortality.
Mortality Guarantee. The provision that
guarantees
an annuitant income for life
regardless of
changes in the mortality of
the population.
Mortality Rate. The number of deaths in a
group
of people, usually expressed
as deaths per thousand.
It can be the rate for the
total population, called
the crude mortality rate, or
it can be refined by
factors such as age
groupings or causes of deaths.
Same as Death Rate.
Mortality Savings. The remainder, if any,
after subtracting
experienced mortality from
expected mortality.
Mortality Table. A table showing the
incidence
of death at specified ages.
It shows the number
of persons in each age group
that die, expressed
in terms of deaths per
thousand, and based on
the deaths in a population
of a million persons.
Insurance companies use
these tables to determine
the life expectancy of
insureds and possible
insureds.
Mortgage. Interest in real property
conveyed to
mortgagee as security for
the loan of money by the
mortgagee to the mortgagor, often the
money being
used by the mortgagor for the
purchase of the
real property from its
seller (also known as a purchase
money mortgage).
Mortgage (or Mortgagee)
Clause. A
provision attached
to a fire or other direct
damage policy that
covers mortgaged property,
specifying that the loss
reimbursement shall be paid
to the mortgagee as
the mortgagee’s interest may
appear, that the
mortgagee’s rights of
recovery shall not be defeated by
any act or neglect of the
insured, and giving the
mortgagee other rights,
privileges and duties.
Mortgagee. The creditor to whom a
mortgage is
given and who lends money on
the security of the
value of the property
mortgaged.
Mortgage Holders Errors
and Omissions Coverage
Form. A commercial property form
that protects
the interests of mortgage
holders from losses
resulting from errors and
omissions.
Mortgage Insurance. In life and health
insurance,
a policy covering a
mortgagor. The benefits are usually
intended (1) to pay off the
balance due on a mortgage
upon the death of the
insured, or (2) to meet
the payments on a mortgage
as they fall due in the
case of the insured’s death
or disability. Also called
Mortgage Redemption
Insurance.
Mortgagor. The debtor who receives
money and in
turn grants a mortgage on
his or her property as
security for a loan.
Mortgage Redemption
Insurance.
(1) See Mortgage
Insurance. (2) A monthly
reducing term policy
used for mortgage insurance.
Motor
Carrier Act of 1980. The act requires minimum
liability coverage for
carriers of certain hazardous
substances. In addition to
the direct injury
and damage that can be
caused by a collision involving
a commercial carrier,
hazardous substances
pose a special threat.
Motor Truck Cargo
Policy (Carrier’s Form). Indemnifies
truckers, for loss or damage
resulting from
legal liability as a carrier
while transporting the property
of others. It does not
insure against any loss for
which the trucker is not
legally liable. Statutory
law requires a trucker to
carry a minimum amount
of coverage.
Motor Truck Cargo
Policy (Owner’s Form).
Insures
the owner of a truck against
loss to his or her
own property while being
transported. It pays for
the loss or damage of cargo
for the perils insured
against, regardless of the
legal liability.
Motor Vehicle Record
(MVR).
Record of a driver’s
accidents and/or traffic
violations.
MPIC. Multiple Peril Insurance
Conference.
Multi-Disciplinary. Treatment which involves
care
provided by a wide range of
specialists.
Multiemployer Plan. A plan to which more than
one employer contributes, or
a plan mandated by a
collective bargaining
agreement.
Multi-Peril Crop
Insurance (MPCI).
Crop insurance
usually providing coverage
against crop losses
by adverse weather (hail,
wind, etc.), fire, flood, insects,
etc.
Multi-Peril
Policies. Policies that cover a
number
of perils, such as fire,
burglary and liability, in a
single contract.
Multiple Employer Trust
(MET). A trust
consisting
of multiple small employers
in the same industry,
that is formed for the
purpose of purchasing
group health insurance or
establishing a self-funded
plan at a lower cost than
any available to the employers
individually.
Multiple Employer Welfare
Arrangements
(MEWA). Employer funds and trusts
providing
health care benefits to
individuals.
Multiple Funding. Providing retirement
benefits
through the use of a
separate fund in addition to
insurance cash values.
Multiple Indemnity. A provision that some or
all
of the benefits under a
policy will be increased by a
stated multiple, such as 100
or 200 percent, in the
event that a peril occurs in
a specified way (e.g.,
double indemnity on life
insurance for accidental
death).
Multiple Line Law. A law passed by states
that allows
an insurance company to
write both property
and casualty insurance.
Prior to these laws, it was
common for a state to allow
some companies to write
only property insurance and
other companies to write
only casualty insurance, depending
on which type
of insurance the company
applied for in its license.
Multiple Line Policy. A policy that includes
several
different coverages such as property,
liability and
crime. Any
personal or commercial package policy.
Multiple Location
Policy.
Protection of property
in more than one location that
is owned or controlled
by one person.
Multiple Location
Rating Plan.
See Premium and
Dispersion Credit Plan.
Multiple Option Plan. Under this plan, employees
can optionally choose from
an HMO, PPO or a major
medical plan.
Multiple Protection
Insurance.
A combination of
term and whole life
insurance that pays some multiple
of the face during the
period of the term policy,
becoming a regular whole
life policy after the term
policy expires. The multiple
protection period is
thus the period during which
both the term and
the whole life coverages are
in effect.
Mutual Atomic Energy
Reinsurance Pool.
A
group of mutual insurance
companies that reinsure
liability policies written
on private nuclear energy
reactors. Most insurers
exclude this coverage. See
also Radioactive
Contamination Insurance.
Mutual Benefit
Association.
An organization offering
benefits to members on a
plan under which
no fixed premiums are paid
in advance but assessments
are levied on members to
meet specific losses
as they occur. See also
Assessment Company, Society
or Insurer.
Mutual Fund. An investment company that
raises
money by selling its own stock
to the public. It
then invests the proceeds in
other securities and
the value of its own stock
fluctuates with its experience
with the securities in its
portfolio. Mutual funds
are of two types: 1)
open-end, in which capitalization
is not fixed and more shares
may be sold at any
time; and 2) closed-end, in
which capitalization is
fixed and only the number of
shares originally authorized
may be sold.
Mutual Insurer. An incorporated insurer
without
incorporated capital owned
by its policyholders.
Although mutual insurers do
distribute their earnings
to their policyholders in
the form of dividends,
the term should not be used
in a sense that makes
it synonymous with
participating. In most jurisdictions,
a mutual insurer is free to issue
nonparticipating
insurance if it chooses and
a stock insurer
is free to issue
participating insurance. Contrast
with Stock Insurer.
Mutual Insurer Policy. Insurance issued by a
mutual
insurer.
Mutual Investment Trust. See Mutual Fund.
Mutualization. The process of converting
a stock
insurer to a mutual insurer,
accomplished by having
the insurer buy stock and
retire it.
MVRs. See Motor Vehicle Record.
Mysterious
Disappearance.
A disappearance of
property that cannot be
explained. Crime insurance
policies use this term to
give very broad coverage as
opposed to policies which
narrow definitions to specific
perils such as robbery and
burglary.
© 2008 Silver
© 2008 Silver
N
NAIB. See National Association
of Insurance Brokers,
Inc.
NAIC. See National Association
of Insurance Commissioners.
NAII. See National Association
of Independent Insurers.
NAIW. National Association of
Insurance Women.
NALC. See National Association
of Life Companies.
Name Position Bond. A fidelity bond that
covers
losses caused by the
dishonesty of employees holding
positions specifically named
in the bond. Contrast
with Name Schedule Bond and
Blanket Bond.
Name Schedule Bond. A fidelity bond that
covers
losses caused by the
dishonesty of employees specifically
named in the bond. Contrast
with Name
Position and Blanket Bond.
Named Insured. Any person, firm,
corporation or
any member thereof,
specifically designated by name
as the insured(s) in a
policy. Others may be protected
as insureds even though
their names do not
appear on the policy (e.g.,
automobile policies
where, under the definition
of insured, protection
is extended to cover other
drivers using the car with
the permission of the named
insured).
Named Non-Owner Policy. An automobile policy
issued to someone who does not
own a vehicle, but
who drives borrowed or
rented autos.
Named Perils. Perils specifically
covered on property
insured. Contrast with Open
Perils (All Risk)
Insurance.
NAMIC. See National Association
Of Mutual Insurance
Companies.
NAPIA. National Association of
Professional Insurance
Agents.
NASD. See National Association
of Securities Dealers.
National Association of
Independent Insurers
(NAII). An association comprised
of fire, casualty
and surety insurers that do
not belong to large rating
bureaus. It distributes
considerable information
about legislation and
litigation.
National Association of
Insurance Brokers, Inc.
(NAIB). A voluntary association of
insurance brokers
that exchange information
and make recommendations
to state legislatures.
National Association of
Insurance Commissioners
(NAIC). An association of state
insurance commissioners
formed for the purpose of
exchanging
information and for
developing uniformity in the
regulatory practices of the
states through drafting
model legislation and regulations.
The NAIC has
no official power to enforce
compliance with its recommendations.
National Association of
Life Companies (NALC).
A voluntary association of
smaller and newer companies
for exchange of information
and ideas.
National Association of
Life Underwriters
(NALU). An association of life
insurance agents,
the activities of which
center on the welfare and
education of agents and
legislation affecting agents.
National Association of
Mutual Insurance Companies
(NAMIC). A voluntary intercompany
organization
of mutual property and
liability insurers
formed for the exchange of
information and discussion.
National Association of
Securities Dealers
(NASD). A voluntary association of
brokers and
securities dealers handling
over-the-counter securities.
It serves a quasi-official
function in the regulation
of licensing and also acts
as a bureau that formulates
rates, rating plans and
policy wording for
about half of the states.
Many other states subscribe
to the various services it
provides. It is supported by
the insurance companies that
belong to it.
National Auto Theft
Bureau. An
organization engaged
in the prevention and
reduction of motor
vehicle fire and theft
losses.
National Council on
Compensation Insurance
(NCCI). An association of insurers
selling compensation
coverage and operating as a
rating organization.
NCCI collects statistics,
develops rates and
policy forms and makes state
filings for its members.
National Crop Insurance
Association.
A sister organization
to the Crop Hail Insurance
Actuarial Association
(CHIAA). In 1989, these two
organizations
were consolidated to become
National Crop
Insurance Services (NCIS).
National Crop Insurance
Services (NCIS).
A voluntary,
nonprofit organization made
up of more
than 140 member companies
that compiles research
and statistics in order to
develop crop insurance rates
and forms.
National Drug Code
(NDC). A system
for identifying
drugs.
National Flood
Insurance Program (NFIP). Federal
program providing flood
insurance for fixed
property. Under a “dual”
program, coverage may
be written directly by the
NFIP or by private carriers
who may be reimbursed by the
NFIP.
National Fraternal
Congress of America.
A federation
of fraternal benefit
societies.
National Health
Insurance.
Any system of socialized
insurance benefits covering
all or nearly all of
the citizens of a country,
established by its federal
law, administered by its
federal government and
supported or subsidized by
taxation.
National Insurance
Association, Inc. An
intercompany
association of insurers
formed to exchange
information and ideas on
common problems unique
to the black community.
National
Safety Council. A nonprofit organization
chartered by Congress in
1913 to disseminate safety
education material. It is
made up of approximately
12,000 industry members
nationwide.
National Service Life
Insurance (NSLI).
Life insurance
made available by the
federal government
for members of the United
States armed forces from
1940 to 1951.
Nationwide Definition
of Marine Insurance.
A
statement recommended by the
National Association
of Insurance Commissioners
indicating the
types of insurance written
under ocean or inland
marine policies. Most states
use this definition, subject
to some individual
exceptions. See also Ocean
Marine and Inland Marine
Insurance.
Natural Death. Death by means other than
accident
or homicide.
Natural Premium. The pure mortality cost of
life
insurance for one year at
any given age. See also
Pure Premium.
NCCI. See National Council on
Compensation Insurance.
Negligence. Failure to use that degree
of care which
an ordinary person of
reasonable prudence would
use under the given or
similar circumstances. A
person may be negligent by
acts of omission or commission
or both. In order for
negligence to exist,
four elements must be
present: 1) duty to act; 2)
breach of the duty to act;
3) occurrence of injury or
damage; and 4) negligence as
the proximate cause
of the injury or damage. If
any of these elements is
absent, negligence does not exist,
and the tortfeasor
will not be held liable due
to negligence.
Negligence, Comparative. See Comparative
Negligence.
Negligence,
Contributory.
See Contributory Negligence.
Negligence, Gross. See Gross Negligence.
Negligence, Presumed. See Res Ipsa Loquitur.
Net Amount at Risk. The differences between
the
face amount of a policy and
the reserve or cash value
that has been built up under
that policy.
Net Cost. Premiums paid minus cash
value and
any policy dividends paid as
of the date the calculation
is being made. In the life
business, it is common
to draw up net cost
comparisons at the end of
10 and 20 years.
Net Increase. The increase in the total
amount of
business an insurer has to
force over a given period
of time. It is figured as
the total of new policies
issued plus those renewed
less policies lapsed and
canceled.
Net Interest Earned. The average interest
earned
by an insurer on its
investments after investment
expense but before federal
income taxes.
Net Level Premium. The pure mortality cost of
a
life insurance policy from its
inception to its maturity
date, divided by the number
of years the policy
is to be in force. See Level
Premium Insurance.
Net
Level Premium Reserve. The reserve needed
by an insurer to cover net
level policies that are in
their later years. Loosely
speaking, the level premium
system of paying for a
long-term life or health
policy involves overpayment
in the early years and
underpayment in the later
years.
Net Line. The amount of coverage
retained by the
ceding company on an
individual risk in a surplus
reinsurance treaty. It also
refers to the maximum
amount of loss on a
particular risk to which an insurer
will expose itself without
reinsurance. See also
Lines and Retention.
Net Loss. The amount of loss sustained
by an insurer
after giving effect to all
applicable reinsurance,
salvage and subrogation
recoveries.
Net Premium. (1) The amount of premium
minus
the agent’s commission. (2)
The premium necessary
to cover only anticipated
losses, before covering
other expenses. (3) The
original premium minus
dividends paid or
anticipated in participating
life insurance when the
insured elects to use dividends
toward payment of the
premiums. Contrast
with Gross Premium.
Net Quick Assets. The difference between
allowable
current assets and
changeable current liabilities.
This figure is referred to
as the working capital.
A contractor must have
adequate working capital
in order to be bonded.
Net Rate. (1) See Net Premium for
the definition
applicable to participating life
insurance policies.
(2) In a nonparticipating
policy, the book rate.
Net
Retained Line. See Net Line.
Net Retention. The amount of insurance
that a
ceding company keeps for its
own account and does
not reinsure.
Net Worth. The amount by which assets
exceed
liabilities. It is of
concern to bond indemnifiers in
determining the size of a
job a contractor can handle.
Network Model HMO. Under this model, an
HMO contracts with several
physician groups. Physicians
may share in savings, but
may provide care
for other than HMO members.
New for Old. Replacing old damaged
parts or
equipment with new ones
rather than repairing
them.
New York Standard Fire
Policy (SFP).
The basic
fire insurance contract that
was used in nearly every
state. It provided coverage
against loss by fire,
lightning and removal, and
established policy
provisions that became the
foundation for property
insurance contracts. EC and
VMM coverage
could be added by
endorsement. In recent years,
the standard fire policy has
become obsolete, except
in a few states where its
use is still required by
law.
Newly Acquired Autos. Any automobile purchased
after the effective date but
before the end of
the term of an automobile
policy. Newly acquired
autos receive some automatic
coverage but the insured
must notify the insurance
company of the
acquisition within 30 days.
Newspaper
Policy. A form of limited health
insurance
often sold by newspapers to
build or conserve
circulation.
NFIA. National Flood Insurers
Association.
NFPA. National Fire Protection
Association.
No Benefit to Bailee. A provision in an inland
marine form that states that
any insurance a person
has on property in the
possession of a bailee will
not be for the direct or
indirect benefit of any carrier
or other bailee for hire. A
bailee is someone
who has been entrusted with
someone else’s property,
usually for the purpose of
service, repair or
storage (e.g., dry cleaners,
television repair shops,
garages and public parking
lots).
NOC. Not Otherwise Classified.
A term used in
the classification section
of liability or workers’ comp
rating manuals. If a listing
is followed by an NOC,
it means to use this
classification if an insured cannot
be classified more specifically.
No-Fault Insurance. Many states have passed
laws
permitting the individual
automobile accident victim
to collect directly from his
or her own insurance
company for medical and
hospital expenses regardless
of who was at fault in the
accident.
Nominal Damages. A small amount of money
awarded to a plaintiff to
verify his or her legal rights,
even though no actual
damages have been proven.
Non-admitted
Assets. Assets that do not qualify
under state law for
insurance statement purposes
(e.g., furniture, fixtures, agents’ debit
balances and
accounts receivable that are
over 90 days old).
Non-admitted
Insurer. An insurer not licensed to
do business in the
jurisdiction in question. Also
called unauthorized or
unlicensed insurer.
Non-admitted
Reinsurance. Reinsurance for which
no credit is given in a
ceding company’s annual
statement because the
reinsurer is not licensed or
authorized to transact that
particular line of business
in the jurisdiction in
question.
Nonassessable Policy. A policy for which the
policyowner pays a set
premium. No additional premiums
or amounts can be assessed.
These are issued
primarily by stock insurers,
but are also issued
by mutual insurers who
qualify to do so by meeting
certain standards under
state laws.
Nonassignable. A policy that cannot be
assigned
to a third party. Most
policies are nonassignable unless
approval is given by the
insurer.
Non-cancelable
(“Non-Can”) Contract. A contract
of health insurance that the
insured has a right to
continue in force by payment
of premiums, as set
forth in the contract, for a
substantial period of time,
also as set forth in the
contract. During that period,
the insurer has no right to
make any change to the
contract. The NAIC recommends
that the term
“non-cancelable” not be used to designate any form
that is not renewable to at
least age 50 or for at least
five years if issued after
age 44. Note that this is in
contrast to guaranteed
renewable, on which the
premium may be increased by classes.
The premium
for non-cancelable policies
must remain as stated in
the policy at the time of
issue. Contrast with Guaranteed
Renewable.
Nonconcurrency. When a number of insurance
policies intended to cover
the same property against
the same hazards are not
identical as to the extent
of coverage. Nonconcurrency
usually results in an
insured not being fully
covered for a loss. Modern
forms have minimized this
problem.
Nonconfining Sickness. Sickness that does not
confine the insured indoors.
Noncontributory
Retirement Plan.
A retirement
plan funded entirely by the
employer.
Noncontributory. A plan, usually group, for
which
the employer pays the entire
premium and the employee
contributes no part of the
premium.
Noncupative Will. An oral will given in the
presence
of witnesses usually at the
time when the testator
is very near death.
Non-Disabling Injury. An injury that does not
qualify the insured for
total or partial disability benefits.
Disability income policies
may contain a provision
for a small benefit in the
case of such an injury,
including medical costs of
up to 25 to 50 percent of
one month’s disability
benefit payment.
Non-Disabling Injury
Rider. An
optional disability
income policy rider that
does not pay a disability
benefit but rather provides
for the payment of
medical expenses incurred
due to injury that does
not result in total
disability.
Nonduplication
of Benefits. A provision in some
health policies specifying
that benefits will not be
paid for amounts reimbursed
by others. In group insurance,
it is called coordination of
benefits.
Non-Earned Income. Group disability income
insurance,
interest income, dividends,
rental income,
deferred compensation and
residual commissions,
royalties and other
miscellaneous income.
Nonforfeitable Benefit. A benefit payable under
a pension plan that
unconditionally belongs to a
participant of the plan.
Nonforfeiture
Provisions.
Protects the contract
holder from total forfeiture
or loss of benefits if he
stops making the required
periodic payments and
surrender charges, or
penalties for cashing in the
annuity before the pay out
period.
Nonforfeiture Values. Those values in a life
insurance
policy that by law the
policyowner cannot forfeit
even if he ceases to pay the
premiums. These
benefits are the cash
surrender value, the loan value,
the paid-up insurance value
and the extended term
insurance value. The insured
may choose one of these
nonforfeiture options, but
even if he fails to do so,
the one specified in the
contract for such a case automatically
goes into effect.
Noninsurable Risk. A risk that cannot be
measured
actuarially or in which the
chance of loss is so
high that insurance cannot
be written against it.
Noninsurance. Making no financial
preparation for
meeting losses.
Nonmedical
(Non-Med) Contract. Life or health
insurance underwritten on
the basis of an insured’s
statement of health with no
medical examination
required.
Non-occupational
Insurance. See Unemployment
Compensation Disability
Insurance.
Non-Occupational Policy. A policy or provision
of a policy which excludes
accidents occurring on
the job, when such employment
is covered by workers’
compensation. Policies make
these distinctions
because occupational
disabilities normally are covered
through workers’
compensation or similar
statutory plans. Most often,
group disability income
contracts will specify occupational
or non-occupational
coverage. See Occupational
Coverage.
Nonowned Auto. (1) Any auto, pickup, van
or
trailer that is operated by
or in the custody of, but
is not owned by or furnished
for the regular use of,
the named insured or a family
member (includes
temporary substitute
vehicles—borrowed or rented).
(2) Any autos not owned,
leased, hired or borrowed
that are used in connection
with the business.
Non-participating
(Non-Par) Contracts. Insurance
contracts on which no policy
dividends are paid
because there is no
contractual provision for the
policyowner to participate
in the surplus. Contrast
with Participating.
Non-Participating
Physician.
One who is not approved
by Medicare for direct
payment and may
charge more for services.
See Participating Physician.
Non-participating
Provider. (1) A provider who
has not signed a contract
with a health plan. (2) A
medical or health care
provider who is not certified
to participate in the Medicare
program.
Non-participating
Provider Indemnity Benefits.
Coverage where services
provided by nonparticipating
providers are reimbursed
under an indemnity
basis.
Non-profit
Insurers. Insurers organized under
special
state laws, usually
exempting them from some
taxes imposed on regular
insurers, to supply medical
expense reimbursement
insurance, usually on a service
basis (e.g., “Blue Cross and
Blue Shield).
Non-proportional
Reinsurance. See Aggregate Excess
of Loss Reinsurance.
Non-Qualified Plan. A benefit plan, such as a
retirement
plan, that may be
discriminatory, need not
be filed with the IRS and
does not provide a current
tax deduction for
contributions. The employer
can choose which employees
will participate in this
program; any investment
income on contributions
made to the plan is not
tax-deferred (for the employer);
the employer does not enjoy
a current
tax deduction on
contributions; and the plan must
be in writing and
communicated to the
employee(s). See Qualified
Deferred Compensation
Plan.
Nonrenewal/Cancelation. Termination of insurance
coverage at an expiration or
anniversary date.
This action may be taken by
an insurer who refuses
to renew, or by an insured
who rejects a renewal
offer.
Nonresident
Agent. An agent licensed in a
state
in which he does not live.
Nonvalued Policy. A policy that is not
valued; that
is, when the policy is
written, the amount to be
paid in the event of a loss
is not stated. Most property
policies are nonvalued.
Noon Clause. A provision that says
insurance coverage
starts at noon, standard
time, at the location
of the insured’s property.
Most property policies have
been changed so that the
effective time is 12:01
a.m., thus the noon clause
is rare.
“Normal” Retirement. Retirement at an age
specified
by the pension plan as being
the standard age
for retirement. See
Mandatory Retirement.
Normal Retirement
Benefit. An
employee’s early
retirement benefit from a
plan, or the benefit payable
at the time of his or her normal
retirement age,
whichever is greater. The
value of the benefits are
determined without regard to
medical and/or disability
benefits.
Not Otherwise
Classified.
See NOC.
Not Taken. Policies applied for and
issued but rejected
by the proposed owner and not
paid for.
Notice
of Cancellation. Written notice by an
insurer
of intent to cancel
insurance, or written notice
by an insured requesting cancellation.
Notice of Claim. Also known as notice of
loss.
Notice to an insurer that a
loss has occurred. This is
a condition of most
policies, and it is frequently
required within a given time and in
a particular
manner. Typically an insured
has 20 days to notify
the insurer of a claim.
Notification may take the
form of a written communication
or a telephone
call to the insurance
company or agent. If an insured
is seriously injured and
unable to notify the
insurer within 20 days
(e.g., due to being in a
coma), then notification may
occur later.
Notice of Loss. Notice to an insurer that
a loss has
occurred. Notice of loss is
a condition of most policies,
and it is frequently
required within a given
time and in a particular
manner.
Notice to Company. Written notice to an
insurer
of the occurrence of an
event.
NPD. No Payroll Division.
NSLI. See National Service Life
Insurance.
Nuclear Energy
Contamination.
See Mutual
Atomic Energy Reinsurance
Pool and Radioactive
Contamination Insurance.
Nuisance Value. An amount that an
insurance company
pays to settle a claim not
because it is a valid
claim but because the
company considers it worth
that amount to dispose of
it.
Numerical Rating. An underwriting method of
determining
the extra rate to be charged
for a substandard
insured. “Standard” is rated
100. Various
impairments are assigned various
numerical values.
The sum of 100 plus the
values of the ratings of the
impairments indicates the
table to use in determining
the rate of the policy.
Nurse Fees. A provision in a medical
expense reimbursement
policy calling for
reimbursement for
the fees of nurses other
than those employed by the
hospital.
Nursing Home. A licensed facility that
provides
general nursing care to
those who are chronically ill
or unable to take care of
necessary daily living needs.
Also
called a long-term care facility.
© 2008 Silver
© 2008 Silver
O
OAA. Old Age Assistance, a form
of public assistance.
See Public Assistance.
OASDHI. See Old Age, Survivors,
Disability and
Health Insurance.
Object. In boiler and machinery
insurance, the
name of the vessel insured;
the object of insurance.
Obligatory Reinsurance. See Automatic Reinsurance.
Obligee. Broadly, anyone in whose
favor an obligation
runs. This term is used most
frequently in surety
bonds where it refers to the
person, firm or corporation
protected by the bond. The
obligee under a
bond is similar to the
insured under an insurance
policy. In the case of a
construction bond, the person
for whom the building is
being built is the
obligee.
Obligor. Commonly called the
principal. One
bound by an obligation. In
the case of a construction
bond, the contractor is the
principal.
OBRA. See Omnibus Budget
Reconciliation Act.
Occasional Use. See Automobile Use
Classifications.
Occupancy. The type or character of
use of the property
in question. The type of
occupancy has a bearing
on its desirability and also
effects the rate for
the policy.
Occupational Accident. An accident arising out
of or occurring in the
course of one’s employment
and caused by hazards
inherent in or related to it.
Occupational
Classification.
A critical underwriting
factor for disability
insurance. Most insurance
companies group jobs
according to the degree of
injury risk they pose. These
groups are typically
identified as classes 1, 2,
3 and 4 (or A, B, C and
D). Class 1 occupations are
the least hazardous and
class 4 occupations are the
most hazardous. Other
forms of income
insurance—particularly workers’
comp—also use occupational
classifications.
Occupational Coverage. 24-hour-a-day disability
income protection. The
insured person is covered
under the terms of the
policy whether the sickness
or injury occurs on the job
or off the job. Some
policies may be identified
as non-occupational. Usually,
individual policies provide
occupational coverage
in combination with workers’
comp benefits.
See Non-Occupational
Coverage.
Occupational Disease. Impairment of health
caused by continued exposure
to conditions inherent
in an occupation or a
disease caused by or resulting
from the nature of an
employment. State compensation
laws cover this type of
loss.
Occupational
Hazard. A condition in an
occupation
that increases the risk of
accident, sickness or
death.
Occupational Manual. A book listing
occupational
classifications for various
types of work.
Occupational Safety and
Health Act (OSHA).
A
federal statute that
establishes safety and health standards
on a nationwide basis. The
Act is enforced by
Labor Department safety
inspectors and also provides
for the recordkeeping of
statistics relevant to
work injuries and illnesses.
Occupying. Includes most situations
involving any
injury as a result of the
use or maintenance of an
automobile, including
entering or alighting from
or getting on or off a vehicle.
This includes such
things as jumping from the
bed of a pickup truck
and injuring an ankle or
slipping off a curb while
getting into an automobile.
Occurrence. An event that results in
an insured
loss. In some lines of
insurance, such as liability, it
is distinguished from
accident in that the loss does
not have to be sudden and
fortuitous and can result
from continuous or repeated
exposure that results
in bodily injury or property
damage neither expected
nor intended by the insured.
A situation must be
deemed an occurrence before
insurance applies.
Occurrence Coverage. A policy form providing
liability coverage only for
injury or damage that
occurs during the policy
period, regardless of when
the claim is actually made
(e.g., a claim made in
the current policy year
could be charged against a
prior policy period, or may not
be covered, if it
arises from an occurrence
prior to the effective date).
Contrast with Claims-Made
Coverage.
Ocean Marine Insurance. A general term used to
indicate all types of
insurance associated with coverage
on vessels and their
cargoes.
Odds. The probable frequency of
incidence of a
given occurrence in a
statistical sample. It is expressed
as a ratio to the probable
number of
non-occurrences or as a decimal fraction of
the total
occurrences. For example, a
probability of .25 equals
odds of three to one
against. A probability of .75
equals odds of three to one
for. See also Probability,
Law of Large Numbers and
Degree of Risk.
Off Premises. A clause in a property
insurance contract
extending coverage away from
the premises
listed in the policy.
Coverage away from the premises
is usually restricted to a
percentage of the
total coverage on the
premises (e.g., 10 percent).
Offer. The terms of a contract
proposed by one party
to another. In property and
casualty insurance, submitting
an application to the
company is usually
considered an offer. In life
insurance, the application
plus the initial premium
constitutes an offer.
Offeree. One to whom an offer is
made.
Offeror. One who makes an offer.
Office Burglary and
Robbery Policy.
A special
policy designed for offices.
It usually consists of several
crime coverages on office
equipment and supplies
which are purchased as a
package. There is
relatively low limit for
each coverage and very little
flexibility in that the
policyholder must buy the
complete package.
Office Visit. Services provided in the
physician’s
office.
Officers and Directors
Liability Insurance.
A type
of insurance that protects
the officers and directors
of a corporation against
damages resulting from
negligent or wrongful acts
that may harm the corporation
or its stockholders.
Offset Rider. A rider in a health
insurance policy
designed to reduce the
benefit by a portion of the
Social Security benefits
received.
OL&T. See Owners, Landlords and
Tenants Liability
Insurance.
Old Age, Survivors,
Disability and Health Insurance.
The system of social
insurance benefits for
the aged, surviving
dependents and disabled workers
set up by the Social
Security Act of 1935, plus
amendments and additions.
See also Social Insurance
and Social Security.
Old Line. A term generally applied
to related insurers
operating on a legal reserve
basis. The term
seems to have come into use
at the time of the competition
between newly acquired or
formed insurers
and older insurers to
indicate the fact that the
related companies were
“newcomers.”
Omnibus
Budget Reconciliation Act.
A federal
law that extends the minimum
COBRA continuation
of group health care
coverage from 18 to 29
months for qualified
beneficiaries who are disabled
at the time of
qualification.
Omnibus Clause. An agreement in most auto
liability
policies and some others
that, by its definition
of insured, extends the
protection of the policy
to others within the
definition without the necessity
of specifically naming them
in the policy (e.g.,
a policy covering the named
insured and “those residing
with him or her”).
Omnibus Risk. A structure housing a
number of
tenants engaged in a variety
of businesses.
Open Access. Allows a participant to
see another
participating provider
without a referral. Also called
Open Panel.
Open Cover. A reinsurance facility
under which
risks of a specified
category are declared and insured.
Open Debit. A life and health
insurance debit (territory)
currently without an agent.
Open End Investment
Company. An
investment
company managed by
professional investment advisors
who invest in stocks and
bonds on behalf of
shareholders. Also known as
a mutual fund.
Open Enrollment Period. A period during which
members can elect to come
under an alternate plan,
usually without providing
evidence of insurability.
Open Panel. See Open Access.
Open Perils. Insurance against loss of
or damage
to property arising from any
cause except those that
are specifically excluded.
See All-Risk Insurance.
Contrast with Named Perils.
Open Policy. An insurance contract where
the terms
of the policy are not fixed
at the inception nor is an
expiration date specified,
but limits of liability are
set forth for the protection
it offers. No deposit premium
is required, but monthly
reports are made
and sent with premiums due at
that time, and certificates
of insurance are issued to
indicate the property
covered. Commonly used to
cover goods in
transit.
Open Rating. A system whereby a state
allows an
insurer to use rates without
prior approval.
Open Stock Burglary
Policy. See
Mercantile Open
Stock Burglary Coverage.
Option. A choice of methods of
receiving policy
dividends, nonforfeiture
values, death benefits or
cash values.
Optional Benefits. See Elective Benefits.
Optional Modes of
Settlement.
The different options
from which the beneficiary
can choose to receive
the proceeds from a life
insurance policy.
Optional Policy
Benefits.
Benefits beyond the basic
disability benefits. Their
inclusion most often is
dependent on an insured’s
needs and ability to pay
the extra premium for these
options. The options
that appeal to most people
include: future increase
options, cost of living
rider and lifetime accident
and sickness benefit. See
Elective Benefits.
Optionally Renewable. A contract of health
insurance
where an insurer reserves
the unrestricted right
to terminate coverage at any
anniversary or, in some
cases, at any premium due
date. It may not do so in
between.
Ordinance or Law
Coverage.
Coverage for the additional
loss caused by the
enforcement of laws that
regulate building repair or
construction. This coverage
is added by endorsements and
includes debris
removal expenses.
Ordinary Agency. A life insurance agency
handling
only ordinary life. See also
Ordinary Life
Policy.
Ordinary Construction. A building with floors on
wood joists, in which the
interior finish usually conceals
space where fire can spread,
and which has
little protection of stair
shafts.
Ordinary Life Pension
Trust. A
pension plan
funded by means of a trust
that provides death benefits
through the purchase of
ordinary or whole life
insurance contracts for
covered employees. The trust
pays the insurance premium
until the employee
reaches retirement age, and
accumulates the additional
sums necessary to purchase
the retirement
benefits, using the paid-up
value of the life insurance
policies.
Ordinary
Life Policy. A whole life policy that
pays
premiums continuously as
long as the insured lives.
Same as Straight Life
Policy. See also Whole Life
Insurance.
Ordinary Living
Expenses.
Typical expenses such
as groceries, regular
evenings out or ordinary utility
bills.
Ordinary Payroll. A business interruption
term that
means the entire payroll
expense for all the employees
of an insured except
officers, executives, department
managers, employees under
contract and other
important employees. This
payroll can be excluded
or limited from business
interruption forms, reducing
the amount of insurance and
insured is required
to carry.
Ordinary Register. The record book in a
combination
insurer or agency containing
data on the ordinary
policies in an agent’s
account.
OSHA. See Occupational Safety
and Health Act.
Other Insurance Clause. A provision found in almost
every insurance policy
except life and sometimes
health stating what is to be
done in case any
other contract of insurance
embraces the same property
and/or hazards. See also
Nonduplication of
Benefits and Apportionment.
Other Insurance. The existence of other
contracts
covering the same interest
and perils. See also Concurrent
Insurance.
Other
Structures. Structures, such as a
garage or
storage shed, that are
separated from an insured
dwelling by a clear space, or
are connected only by
a fence or utility line.
Dwelling and homeowners
policies provide coverage
for other structures. This
coverage is sometimes called
“appurtenant structures”
coverage.
Other than Collision
Coverage. A
broad category
of coverage that includes
many types of loss. The
standard policy clearly
spells out the losses that are
not collision losses:
missiles, falling objects, theft,
explosion, earthquake,
windstorm, hail, water, flood,
malicious mischief,
vandalism, riot, civil commotion,
contact with a bird or
animal. Historically, this
has been known as
comprehensive coverage.
Outage Insurance. Coverage against loss of
earnings
due to the failure of
machinery to operate because
of an insured peril causing
damage to the premises.
Similar to Extra Expense
Insurance.
Outcomes Measurement. A method of keeping
track of a patient’s
treatment and the responses to
that treatment.
Outline of Coverage. A document presented to
applicants for life or
health insurance that provides
a brief description of proposed
coverages, premiums,
benefits, limitations and
exclusions. It is a
summary only and encourages
the applicant to read
the actual policy or
certificate carefully. The outline
may also include various
disclosures, and inform
the applicant of certain rights,
such as the right to
a “free look”—the right to
return the policy and
receive a full refund of
premium within a stipulated
time period if not
satisfied.
Out-of-Area
(OOA). Treatment given to a member
outside of the normal area.
Out-of-Pocket Costs. The amount a covered
person
must pay out of his or her
own pocket (e.g., for
coinsurance, deductibles,
etc.).
Out-of-Pocket Limit. The maximum coinsurance
an individual is required to
pay, after which the
insurer pays 100 percent of
covered expenses up to
the policy limit.
Out-of-State Coverage. This means that if an
insured
drives into a state where
no-fault benefits or
other types of coverage are
required, the policy will
automatically provide the
minimum amounts and
types of coverage. Most
personal auto policies restrict
the policy territory to the
United States, its
territories and possessions,
Puerto Rico and Canada.
If an insured travels
outside his home state, the policy
will adjust to these laws by
automatically increasing
the liability limits to
conform to that state’s
laws with respect to a
nonresident driving in the
state.
Outpatient. A patient who is not a bed
patient in
the hospital where he or she
is receiving treatment.
Outstanding Premiums. Premiums due but not
yet collected.
Overage Insurance. Health insurance issued at
ages
above the usual
limit—generally 65.
Overhead Expense
Insurance.
Coverage for such
things as rent, utilities
and employee salaries when
a business owner becomes
disabled. The insurance
benefit is generally not a
fixed amount, but pays
the amount of expenses
actually incurred.
Overinsured. The condition that exists
when an
insured has purchased
coverage for more than the
actual cash value or
replacement cost of a subject of
insurance. It is also
describes a situation where so
much insurance is in force
as to constitute a moral
or morale hazard, such as
having so much disability
income insurance in force
that it becomes profitable
to be disabled.
Overlapping Insurance. Coverage from two or more
policies or insurers that
duplicates coverage of certain