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