Glossary of Testable Insurance Licensing Exam Terms

When you get into the testing center you will be amazed at how much of the exam is "definitional". Quite often if you know what the word means, the question is very entry level. But if you don't know what the word means you will be flat out guessing on an easy question!

--Matt Williams CLU, ChFC, CFP©

Before a candidate for licensure can successsfully pass the pre-license exam, they must have a mastery of the vocabulary that will be used on the state licensing test. This glossary contains insurance terms and definitions that are commonly used in the insurance industry. The definitions in this glossary were developed by LATITUDE Insurance & Securities Test Prep to help you pass your insurance licensing exam on the first try and GET THE LICENSE!

These definitions represent the State insurance exam's use of the term. Some words and/or phrases may be defined differently by other entities, or used in a context such that the definition shown may not be applicable. When using this glossary to supplement your insurance license exam studies, be advised that this glossary contains both Life & Health and Property & Casualty testable insurance concepts.

General Insurance terms that are testable on all insurance pre-licensing exams are in Black.

Life & Health terms are in Green.

Property & Casualty terms are in Blue.

So, If you are studying for the L&H insurance exam focus on the Black and Green entries; if it is a P&C insurance license you are preparing for, do your best to memorize the Black and Blue definitions.

(Click on the letter to view terms beginning with that alphabet.)

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z | 0-9

A

Abandonment - A condition which states that the insured may not abandon damaged property to the insurance company.

Absolute Assignment - Assignment by a policy owner of all control and ownership rights of an insurance policy.

Absolute Liability - A type of liability imposed by law on those participating in certain activities that are considered hazardous. A person involved in such operations may be held liable for damages to another, even though the individual was not negligent.

Accelerated Benefits - Provision in life insurance policies that allow the life insurance policy’s death benefits to be used while the insured is still living (insured must be terminally ill).

Acceptance - When the offer (application) is accepted, an agreement is reached.

Accident - An unexpected event or circumstance without deliberate intent.

Accident Insurance - Insurance for unforeseen bodily injury.

Accident Only - An insurance contract that provides coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by or necessitated as a result of accident or specified kinds of accident.

Accidental Bodily Injury - Bodily injury resulting from an accident.

Accidental Death & Dismemberment (AD&D) - (1) A type of health insurance policy. (2) A provision or rider attached to a life or disability income policy that pays either a specified amount if the insured dies, loses his/her sight, or loses a limb as the result of an accident.

Accidental Means - An unforeseen and unexpected cause of an accident that results in an injury. The cause of the action and the result must be unintentional or there will be no coverage.

Accumulation Stage - The period during which the owner of a deferred annuity makes payments to build up assets.

Activities of Daily Living (ADLs) - Everyday living functions and activities performed by individuals without assistance. These functions include walking, transferring, bathing, dressing, continence, and eating.

Actual Cash Value (ACV) - Payment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation

Actuarial Report - A document or other presentation, prepared as a formal means of conveying to the state regulatory authority and the Board of Directors, or its equivalent, the actuary's professional conclusions and recommendations, of recording and communicating the methods and procedures, of assuring that the parties addressed are aware of the significance of the actuary's opinion or findings and that documents the analysis underlying the opinion. (In Life and Health) this document would be called an "Actuarial Memorandum."

Actuary - An insurance professional skilled in the analysis, evaluation, and management ofstatistical information. Evaluates insurance firms’ reserves, determines rates and rating methods, and determines other business and financial risks.

Additional Coverages - Additional coverages provided by Section II of the homeowner’s policy including legal expenses, first aid expenses incurred by an insured, damage to the property of others, etc.

Additional Living Expenses - Extra charges covered by homeowners policies over and above the policyholder's customary living expenses. They may be paid when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.

Adhesion - Insurance policies are contracts of adhesion because the terms are written by the insurer and the insured simply "adheres." For this reason, vague or ambiguous provisions are often interpreted by courts in favor of the insured.

Adjustable Premium - The agreed right of an insurance company to modify the insured's premium payments under certain conditions.

Adjuster - A person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.

Admission - Hospital inpatient care for any medical condition.

Admitted Assets - Insurer assets which can be valued and included on the balance sheet to determine financial viability of the company.

Admitted (Authorized) Company - An insurance company authorized and licensed to do business in a given state.

Advance Premiums - Occur when a policy has been processed, and the premium has been paid prior to the effective date. These are a liability to the company and not included in written premium or the unearned premium reserve.

Adverse Selection - The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all.

Advisory Organization - A group supported by member companies whose function is to gather loss statistics and publish trended loss costs.

Affiliate - A person or entity that directly, or indirectly, through one or more other persons or entities, controls, is controlled by or is under common control with the insurer.

Age Limits - This involves minimum or maximum age limits for insuring of new applicants or for renewing policies.

Agent - Producers may function as agents, representing the insurance company. Agents are appointed by the insurer through a written agreement (contract) which outlines the agent’s authority to represent the insurer.

Agreed Amount Endorsement - An endorsement that substitutes a dollar amount for a percentage of other coverage.

Aggregate Limit - The maximum dollar amount that can be collected from a policy, for anydisability or period of disability.

Aircraft Coverage - Coverage for aircraft (hull) and their contents; aircraft owners' and aircraft manufacturers liability to passengers, airports and other third parties.

Aleatory - A contract in which the number of dollars to be given up by each party is not equal. Insurance contracts are aleatory because 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 organized and domiciled in a country other than the United States. The company must conform to state regulatory standards to legally sell insurance products in that state.

All-Risk - Also known as open peril, this type of policy covers a broad range of losses. The policy covers risks not explicitly excluded in the policy contract.

Ambulatory Services - Health services provided to members who are not confined to a health care institution. Ambulatory services are often referred to as "outpatient" services.

Annual Renewable Term - Term life insurance that may be renewed annually without evidence of insurability until some stated age.

Annuitant - The person(s) who receives the payment from an annuity contract.

Annuitization - The conversion of the account balance of an annuity contract to income payments.

Annuity - A life insurance product that pays periodic income benefits for a specific period of time or over the course of the annuitant’s lifetime.

Annuity Beneficiary - In certain types of annuities, a person who receives annuity contract payments if the annuity owner or annuitant dies while payments are still due.

Annuity Contract Owner - The person or entity that purchases an annuity and has all rights to the contract. Usually, but not always, the annuitant.

Annuity Death Benefits - The guarantee that if an annuity contract owner dies before annuitization, the beneficiary will receive the greater of the current cash value or the cost basis.

Annuity Issuer - The insurance company that issues the annuity.

Annuity Prospectus - Legal document providing detailed information about variable annuity contracts.

Apparent Authority - Authority of an agent that is created when the agent oversteps express or implied authority, and when inaction by the insurer does nothing to counter the public impression that such authority exists.

Appraisal - A survey to determine a property’s insurable value, or the amount of a loss.

Arbitration - A binding dispute resolution tactic whereby a conciliator with no interest in the outcome intercedes.

Arson - The deliberate setting of a fire.

Assessed Value - Estimated value for real or personal property established by a taxing entity.

Asset - Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. An asset has three essential characteristics: It embodies a probable future benefit that involves a capacity, singly or in combination with other assets, to contribute directly or indirectly to future net cash inflows; A particular entity can obtain the benefit and control others' access to it; and The transaction or other event-giving rise to the entity's right to or control of the benefit has already occurred.

Asset Risk - In the risk-based capital formula, risk assigned to the company's assets.

Assigned Risk Plan - A governmental pool established to write business declined by carriers in the standard insurance market.

Assignment - The transfer of a legal right of interest in an insurance contract to another person.

Assisted Living Care - A policy or rider that provides coverage only while a policyholder is confined to an assisted living facility and meets the policy requirements for coverage.

Authorized Company - See Admitted Company.

Auto Liability - Coverage that protects against financial loss because of legal liability for motor vehicle related injuries (bodily injury and medical payments) or damage to the property of others caused by accidents arising out of ownership, maintenance or use of a motor vehicle (including recreational vehicles such as motor homes). Commercial is defined as all motor vehicle policies that include vehicles that are used primarily in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit. No Fault is defined by the state concerned.

Auto Physical Damage - Motor vehicle insurance coverage (including collision, vandalism, fire and theft) that insures against material damage to the insured's vehicle. Commercial is defined as all motor vehicle policies that include vehicles that are used in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit.

Automatic Premium Loan Provision (APL) - In life insurance-an optional provision that allows the insurer to use, automatically, whatever portion of the cash value is needed to pay premiums not paid by the end of the grace period.

Automobile Liability Insurance - Coverage for bodily injury and property damage incurred through ownership or operation of a vehicle.

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B

Bailee - A person who received temporary custody of goods or property belonging to others.

Beneficiary - (1) A person who may become eligible to receive, or is receiving, benefits under an insurance plan other than as an insured. (2) Any person enrolled in Medicare.

Benefits (Medical & Hospital Expenses) - Total expenditures for health care services paid to or on behalf of a member.

Binder (Binding Receipt) - A temporary policy. A receipt that provides that if the premium accompanies the application, the coverage is in force from the date of application (whether the policy has yet been issued or not)

Blanket Bond - A bond that covers all employees. A type of fidelity bond.

Blanket Form - Provides insurance protection for property in various locations or different types of exposures at a single location.

Boatowners/Personal Watercraft - Covers damage to pleasure boats, motors, trailers, boating equipment and personal watercraft as well as bodily injury and property damage liability to others.

Bodily Injury - Physical injury including sickness or disease to a person.

Boiler & Machinery or Equipment Breakdown & Machinery - coverage for the failure of boilers, machinery and other electrical equipment. Benefits include (1) property of the insured, which has been directly damaged by the accident; (2) costs of temporary repairs and expediting expenses; and (3) liability for damage to the property of others. Coverage also includes inspection of the equipment.

Bond - A form of suretyship. Bonds of various types guarantee a payment or a reimbursement for financial losses resulting from dishonesty, failure to perform and other acts.

Broker - An insurance producer, licensed by the state, who represents various insureds, and who is permitted to place general insurance coverages with any insurance company authorized to transact business in the state in which he/she is licensed.

Builders' Risk Policies - Typically written on a reporting or completed value form, this coverage insures against loss to buildings in the course of construction. The coverage also includes machinery and equipment used in the course of construction and to materials incidental to construction.

Burglary - An individual or an intruder who steals property from a premises and leaves evidence or signs of forced entry at the location.

Business Auto - Coverage for motor vehicles, other than those in the garage business, engaged in commerce. Business auto filings include singularly or in any combination coverage such as the following: Auto Liability, PIP, MP, Uninsured Motorist and/or Underinsured Motorists (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.

Business Interruption/Business Income Coverage - Loss of income as a result of property damage to a business facility.

Business Overhead Expense Insurance - A type of business disability income insurance designed to pay for continuing overhead while an owner is disabled.

Business Owners Policy (BOP) - Business insurance typically for property, liability and business interruption coverage.

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C

Calendar Year Deductible - In health insurance-the amount that must be paid by the insured during a calendar year before the insurer becomes responsible for further loss costs.

Cancellable Policy - A policy that may be terminated either by the insured or the insurance company by notification to the other party in accordance with the terms of the policy.

Cancellation - Short rate cancellation is utilized when an insured decides to cancel an insurance contract and pro-rata is used when an insurer cancels the contract.

Capital Sum - This is an amount payable under accidental death and dismemberment coverage. It would be the amount payable for accidental loss of 1 limb.

Capital and Surplus - A company's assets minus its liabilities.

Capital and Surplus Requirement - Statutory requirement ordering companies to maintain their capital and surplus at an amount equal to or in excess of a specified amount to help assure the solvency of the company by providing a financial cushion against expected loss or misjudgments and generally measured as a company's admitted assets minus its liabilities, determined on a statutory accounting basis.

Capitation - A compensation plan used in connection with some managed care contracts where a physician or other medical provider is paid a flat amount, usually on a monthly basis, for each subscriber who has elected to use that physician or medical provider. Capitated payments are sometimes expressed in terms of a "per member/per month" payment. The capitated provider is generally responsible, under the conditions of the contract, for delivering or arranging for the delivery of all contracted health services required by the covered person.

Captive Agent - An individual who sells or services insurance contracts for a specific insurer or fleet of insurers.

Casualty Insurance - A form of liability insurance providing coverage for negligent acts and omissions such as workers compensation, errors and omissions, fidelity, crime, glass, boiler, and various malpractice coverages.

Catastrophic Loss - A large magnitude loss with little ability to forecast.

Cause of Loss - Form used to determine what perils will be covered.

Ceded Premium - Amount of premium (fees) used to purchase reinsurance.

Ceding Company - An insurance company that transfers risk by purchasing reinsurance.

Centers for Medicare & Medicaid Services (CMS) - U.S. governmental agency responsible for the licensing of federally qualified HMOs. This was formerly the Health Care Financing Administration.

Change in Valuation Basis - A change in the interest rate, mortality assumption or reserving method or other factors affecting the reserve computation of policies in force.

Chartered Life Underwriter (CLU) - A professional designation awarded by the American College to persons in the life insurance field who pass a series of exams in insurance, investment, taxation, employee benefit plans, estate planning, accounting, management, and economics.

Chartered Property Casualty Underwriter (CPCU) - A professional designation awarded by the American Institute of Property and Casualty Underwriters to persons in the property and liability insurance field who pass a series of exams in insurance, risk management, economics, finance, management, accounting, and law. Designates must also have at least three years experience in the insurance business or related field.

Claim - A request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.

Claims Adjustment Expenses - Costs expected to be incurred in connection with the adjustment and recording of accident and health, auto medical and workers' compensation claims.

Claims Made Form - A type of liability insurance form that only pays if the both event that causes (triggers)the claim and the actual claim are submitted to the insurance company during the policy term.

Class Rating - A method of determining rates for all applicants within a given set of characteristics such as personal demographic and geographic location.

Coinsurance - A percentage of each claim above the deductible paid by the policyholder. For a 20 percent health insurance coinsurance clause, the policyholder pays for the deductible plus 20 percent of his covered losses.

Collateral Assignment - Assignment of a life insurance policy as security for a loan or debt, with the creditor to receive the proceeds or cash values to the extent of the interest assigned.

Collision Coverage - A type of auto insurance that covers physical damage occurring when the insured auto strikes another auto or stationary object. It may also include upset or overturn of the insured auto.

Commercial Auto - Coverage for motor vehicles owned by a business engaged in commerce that protects the insured against financial loss because of legal liability for motor vehicle related injuries, or damage to the property of others caused by accidents arising out of the ownership, maintenance, use, or care-custody & control of a motor vehicle. This includes Commercial Auto Combinations of Business Auto, Garage, Truckers and/or Other Commercial Auto.

Commercial Earthquake - Earthquake property coverage for commercial ventures.

Commercial Farm and Ranch - A commercial package policy for farming and ranching risks that includes both property and liability coverage. Coverage includes barns, stables, other farm structures and farm inland marine, such as mobile equipment and livestock.

Commercial Flood - Separate flood insurance policy sold to commercial ventures.

Commercial General Liability (CGL) - Flexible & broad commercial liability coverage with two major sub-lines: premises/operations sub-line and products/completed operations sub-line.

Commercial Package Policy - Provides a broad package of property and liability coverages for commercial ventures other than those provided insurance through a business owners policy.

Commercial Property - Property insurance coverage sold to commercial ventures.

Commission - A percentage of premium paid to agents by insurance companies for the sale of policies.

Commingling - An illegal practice that occurs when a producer mixes the insureds funds with his/her own or with the insurers funds.

Common Carrier - A company or concern engaged in the transportation of goods or persons for a fee.

Common Disaster Provision - A provision that can be included in a life insurance contract providing that the primary beneficiary must outlive the insured for a specified period of time in order to receive the proceeds.

Competent Party - Most entities in a contract are deemed competent except minors, those under the influence of alcohol or narcotics, and mentally incompetent individuals.

Completed Operations Liability - Policies covering the liability of contractors, plumbers, electricians, repair shops, and similar firms to persons who have incurred bodily injury or property damage from defective work or operations completed or abandoned by or for the insured, away from the insured's premises.

Comprehensive (Hospital and Medical) - Line of business providing for medical coverages; includes hospital, surgical, major medical coverages; does not include Medicare Supplement, administrative services (ASC) contracts, administrative services only (ASO) contracts, federal employees health benefit plans (FEHBP), medical only programs, Medicare and Medicaid programs, vision only and dental only business.

Comprehensive General Liability (CGL) - Coverage of all business liabilities unless specifically excluded in the policy contract.

Comprehensive Personal Liability - Comprehensive liability coverage for exposures arising out of the residence premises and activities of individuals and family members. (Non-business liability exposure protection for individuals.)

Comprehensive/Major Medical - A policy designed to give the protection offered by both a basic and a major medical policy.

Compulsory Auto Coverage - The minimum amount of auto liability insurance that meets a state law. Financial responsibility laws in every state require all automobile drivers to show proof, after an accident, of their ability to pay damages up to the state minimum. In compulsory liability states this proof, which is usually in the form of an insurance policy, is required before you can legally drive a car. Compulsory Coverage rules also apply to workers comp.

Compulsory Health Insurance - A plan of insurance under the supervision of a state or the Federal Government that requires protection for medical, hospital, surgical, and/or disability benefits.

Concealment - Neither party may conceal facts that would have affected the creation of the contract.

Concurrent Causation - Property loss incurred from two or more perils in which only one loss is covered but both are paid by the insurer due to simultaneous incident.

Conditional Receipt - A receipt that provides that if the premium accompanies the application, the coverage is in force from the date of application (whether the policy has yet been issued or not), provided the insurer would have issued the coverage on the basis of facts as revealed by the application and other usual sources of underwriting information.

Conditions - Requirements specified in the insurance contract that must be upheld by the insured to qualify for indemnification.

Condo Form - Homeowners insurance sold to condominium owners occupying the described property.

Confining Disability - Requires confinement of the insured in a hospital, or in a sanitarium to be entitled to collect disability income benefits.

Consideration - The exchange of values on which a contract is based. In insurance, the consideration offered by the insured is the premium. The consideration offered by the insurer is the promise to pay in accordance with the terms of the contract.

Contestable Clause - A provision in an insurance policy setting forth the conditions under which, or the period of time (2 years) during which the insurer may contest or void the policy. After that time has lapsed, the policy cannot be contested.

Construction and Alteration Liability - Covering the liability of an insured to persons who have incurred bodily injury or property damage from alterations involving demolition, new construction or change in size of a structure on the insured's premises.

Contingency Reserves - Required by some jurisdictions as a hedge against adverse experience from operations, particularly adverse claim experience.

Contingent Beneficiary - A secondary beneficiary designated to receive the proceeds of a policy if the primary beneficiary predeceases the insured, or dies in a common accident.

Contingent Liability - The liability of an insured to persons who have incurred bodily injury or property damage from work done by an independent contractor hired by the insured to perform work that was illegal, inherently dangerous, or directly supervised by the insured.

Continuation of Care Requirement - Statutory or contractual provision requiring providers to deliver care to an enrollee for some period following the date of a Health Plan Company's insolvency.

Contract Reserves - Reserves set up when, due to the gross premium structure, the future benefits exceed the future net premium. Contract reserves are in addition to claim and premium reserves.

Contractual Liability - Liability coverage of an insured who has assumed the legal liability of another party by written or oral contract. Includes a contractual liability policy providing coverage for all obligations and liabilities incurred by a service contract provider under the terms of service contracts issued by the provider.

Contributory Negligence - When an injured person contributes to their own injuries or damage, they won’t be able to recover from the other involved, at-fault party.

Controlled Business - The act of obtaining an insurance license to write coverage on the producer’s own life, and/or on the lives the producer’s relatives and business associates.

Conversion Privilege - The right granted the insured to change his/her coverage from a group policy to individual policy. If a member of a group has a qualifying event he/she is given an opportunity to secure an individual policy within a specified period thereafter, regardless of whether or not he/she is in good health at that time.

Convertible Term Insurance Policy - An insurance policy that can be converted into permanent insurance without a medical assessment. The insurer is required to renew the policy regardless of the health of the insured subject to policy conditions.

Coordination of Benefits (COB) - The method of determining which company pays as primary insurer and which company pays as secondary or excess insurer when a working couple or their dependants have a claim covered by more than one insurance contract.

Co-Payment (Co-pay) - A cost sharing mechanism in group insurance plans where the insured pays a specified dollar amount of incurred medical expenses and the insurer pays the remainder.

Corrective Order - Commissioner's directive of action to be completed by an insurer.

Cost of Living Adjustment (COLA) Rider - A rider that may be attached to policies adjusting the benefits based upon a formula tied to inflationary trends.

Coverage Forms - "Types" of insurance. The main forms are Standard Form (provides named peril coverage) and Special Form (coverage on an open perils basis).

Covered Employment (For Workers’ Comp) - The majority of worker’s compensation laws cover most of all employment situations. However there are three types of employment commonly exempted: farming, part-time employees and domestic servants.

Credit Default - Coverage purchased by manufacturers, merchants, educational institutions, or other providers of goods and services extending credit, for indemnification of losses or damages resulting from the nonpayment of debts owed to them for goods or services provided in the normal course of their business.

Credit Disability - Makes monthly loan/credit transaction payments to the creditor upon the disablement of an insured debtor.

Credit Involuntary Unemployment - Credit insurance that provides a monthly or lump sum benefit during an unpaid leave of absence from employment resulting from specified causes, such as layoff, business closure, strike, illness of a close relative and adoption or birth of a child. This insurance is sometimes referred to as Credit Family Leave.

Credit Life Insurance - Policy assigning creditor as beneficiary for insurance on a debtor thereby remitting balance of payment to creditor upon death of debtor.

Credit Risk - Part of the risk-based capital formula that addresses the collectability of a company's receivables and the risk of losing a provider or intermediary that has received advance capitation payments.

Creditor-Placed Auto - Single interest or dual interest credit insurance that is purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss to property that would either impair a creditor's interest or adversely affect the value of collateral on automobiles, boats, or other vehicles.

Creditor-Placed Home - Single interest or dual interest credit insurance purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss to property that would either impair a creditor's interest or adversely affect the value of collateral on homes, mobile homes, and other real estate.

Crime Insurance - Term referring to property coverages for the perils of burglary, theft and robbery, forgery or counterfeiting, fraud, kidnap and ransom, and off-premises exposure.

Custodial Care - Care that is primarily for meeting personal needs such as help in the activities of daily living.

Custodian - An employee or other person who has possession of an insured’s property on premise.

Crop Insurance - Protection against damage to growing crops from hail, fire, or lightning provided by the private market. By contrast, multiple peril crop insurance covers a wider range of yield-reducing conditions, such as drought and insect infestation, and is subsidized by the federal government.

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D

Date of Issue - Date when an insurance company issues a policy.

Declarations - Policy statements regarding the applicant and property covered such as demographic and occupational information, property specifications and expected mileage per year .

Decreasing Term Insurance - Term insurance for which the initial amount gradually decreases until the expiration date of the policy, at which time it reaches zero.

Deductible - The amount of loss or expense that must be paid by the insured before benefitsbecome payable. The insurance company pays benefits only for the loss in excess of the amount specified in the deductible provision. There are various types of deductible provisions.

Defamation - Under insurance law an unfair trade practice involving false, maliciously critical or derogatory statements intended to injure a person engaged in the insurance business.

Deferred Annuity - An annuity on which payments to the annuitant are delayed until a specified future date.

Deferred Compensation Plan - A nonqualified arrangement in which compensation is deferred until the employee retires.

Defined Benefit Plan - A qualified retirement plan that offers predetermined benefits to plan participants.

Defined Contribution Plan - A qualified retirement plan that is based on contributions to the plan.

Demutualization - Conversion of a mutual insurance company to a capital stock company.

Dental Insurance - Policies providing only dental treatment benefits such as routine dental examinations, preventive dental work, and dental procedures needed to treat tooth decay and diseases of the teeth and jaw.

Dental Only - Line of business providing dental only coverage; coverage can be on a stand-alone basis or as a rider to a medical policy. If the coverage is as a rider, deductibles or out-of-pocket limits must be set separately from the medical coverage. Does not include self-insured business as well as FEHBP or Medicare and Medicaid programs.

Difference In Conditions (DIC) Insurance - special form of open-peril coverage written in conjunction with basic fire coverage and designed to provide protection against losses not reimbursed under the standard fire forms. Examples are flood and earthquake coverage.

Direct Incurred Loss - Loss whereby the proximate cause is equivalent to the insured peril.

Direct Loss - Damage to covered real or personal property caused by a covered peril.

Direct Response - Method of selling insurance directly to the insured through an insurance company’s own employees, through the mail, or via the Internet. This is in lieu of using captive or exclusive agents.

Direct Writer - An insurance company that sells policies to the insured through salaried representatives or exclusive agents only; reinsurance companies that deal directly with ceding companies instead of using brokers.

Directors & Officers Liability - Liability coverage protecting directors or officers of a corporation from liability arising out of the performance of their professional duties on behalf of the corporation.

Disability - A physical condition that makes an insured incapable of performing one or more duties of his/her occupation, or, in the case of total disability, that prevents him/her from performing any other type of work for remuneration.

Disability Income - A policy designed to compensate insured individuals for a portion of the income they lose because of a disabling injury or illness.

Disability Income - Long-Term - Policies that provide a weekly or monthly income benefit for more than five years for individual coverage and more than one year for group coverage for full or partial disability arising from accident and/or sickness.

Disability Income - Short-Term - Policies that provide a weekly or monthly income benefit for up to five years for individual coverage and up to one year for group coverage for full or partial disability arising from accident and/or sickness.

Discovery Period - Condition found in commercial crime forms which provides the amount of time following the termination of the policy during which losses that occurred during the policy period but discovered after the termination will be covered.

Discrimination - Making or permitting unfair discrimination between individuals regarding insurance, rates charged or any other conditions of a contract is prohibited.

Dismemberment - Loss of arm or leg by severance above the wrist or ankle. It also includes the total and permanent loss of sight.

Dividend - A refund of a portion of the premium paid by the insured from insurer surplus.

Domestic Insurer - An insurance company that is domiciled and licensed in the state in which it sells insurance.

Double Indemnity - A clause for the payment of twice the regular benefit if an insured dies under certain specified circumstances (usually as the result of an accidental injury).

Dual Interest - Insurance that protects the creditor's and the debtor's interest in the collateral securing the debtor's credit transaction. "Dual Interest" includes insurance commonly referred to as "Limited Dual Interest."

Dual Limits - Separate limits are provided for various perils is several forms of liability insurance.

Duties Following Loss - A term of property/casualty policies that describes the insured’s responsibilities after a loss.

Duty Owed - The obligation to exercise reasonable care. Duty owed is an element of establishing negligence.

Dwelling Policy - A basic, broad or special form of monoline coverage composed of dwelling fire and/or allied lines, with no personal liability insurance.

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E

Earned Income - Gross salary, wages, commissions, fees, etc., derived from active employment. This does not include non-earned income, such as income from investments, rents, annuities, insurance policies, etc.

Earned Premium - Portion of insured's prepaid premium allocated to the insurance company's loss experience, expenses, and profit year-to-date.

Earthquake - Property coverages for losses resulting from a sudden trembling or shaking of the earth, including that caused by volcanic eruption. Excluded are losses resulting from fire, explosion, flood or tidal wave following the covered event.

Economic Loss - A reduction in economic value.

EDP Policies - coverage to protect against losses arising out of damage to or destruction of electronic data processing equipment and its software.

Effective Date - Date at which an insurance policy goes into force.

Elevators and Escalators Liability - Liability coverage for bodily injury or property damage arising from the use of elevators or escalators operated, maintained or controlled by the insured.

Elimination Period - A period of time after the inception of a disability during which benefits are not payable (commonly referred to as the waiting period). An elimination period must be satisfied for each separate disability occurring.

Embezzlement - A fraudulent act involving taking property or money from the one who has been entrusted with such property.

Emergency Program - A primary level of protection given to a resident of a community who is new to the flood insurance program.

Employee Benefit Liability - Liability protection for an employer for claims arising from provisions in an employee benefit insurance plan provided for the economic and social welfare of employees. Examples of items covered are pension plans, group life insurance, group health insurance, group disability income insurance, and accidental death and dismemberment.

Employee Dishonesty Coverage - Covers direct losses and damage to businesses resulting from the dishonest acts of employees.

Employee Retirement Income Security Act of 1974 (ERISA) - A federal statute governing standards for private pension plans, including vesting requirements, funding mechanisms, and plan design.

Employers Liability - Employers' liability coverage for the legal liability of employers arising out of injuries to employees. This code should be used when coverage is issued as an endorsement, or as part of a statutory workers' compensation policy.

Employment Practices Liability Coverage - Liability insurance for employers providing coverage for wrongful termination, discrimination, or sexual harassment of the insured's current or former employees.

Encumbrance - Outstanding mortgages or other debt related to real estate and any unpaid accrued acquisition or construction costs.

Endorsement - An amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.

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.

Environmental Pollution Liability - Liability coverage of an insured to persons who have incurred bodily injury or property damage from acids, fumes, smoke, toxic chemicals, waste materials or other pollutants.

Equity Indexed Annuity - A fixed annuity that earns interest or provides benefits that are linked to an external reference or equity index, subject to a minimum guarantee.

Errors and Omissions Liability | Professional Liability other than Medical - liability coverage of a professional or quasi professional insured to persons who have incurred bodily injury or property damage, or who have sustained any loss from omissions arising from the performance of services for others, errors in judgment, breaches of duty, or negligent or wrongful acts in business conduct.

Estoppel - The legal principle that holds that anyone whose words or actions have caused a waiver of a right or privilege cannot later reclaim the waived right or privilege if a third party has relied on it.

Executor - A person named in a will to settle an estate.

Excess and Surplus Lines - The name given to insurance for which there is no market or insurance available through authorized carriers in the state where the risk arises or is located.

Excess liability - Excess liability insurance is designed to provide excess limits of coverage above the limits of applicable underlying coverage.

Exceptions - See Exclusions

Exclusions - Provisions in the policy that eliminate coverage for specified losses or causes of loss.

Expense Ratio - Percentage of premium income used to attain and service policies. Derived by subtracting related expenses from incurred losses and dividing by written premiums.

Experience Rating - Rating system where each group is rated entirely on the basis of its own expected claims in the coming period, with retrospective adjustments for prior periods. This method is prohibited under the conditions for federal qualification.

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.

Exposure - Risk of possible loss.

Express Authority - Authority of an agent that is specifically granted by the insurer in the agency contract or agreement.

Extended Coverages - Windstorm, Hail, Aircraft damage, Riot or civil commotion, Vehicle damage, Volcanic eruption (but not earthquake), Explosion (does not have to be internal), Smoke damage

Extended Reporting Periods (Tails) - If a claim is made after the policy expires (but within certain periods) the claim will be paid. The purpose of ERPs is to lengthen the claim submission period but not the policy term.

Extended Term Option - In life insurance, a Nonforfeiture option under which the insured uses the policy’s cash value accumulation to purchase term insurance in an amount equal to the original policy face amount.

Extra Expense Insurance - A type of property insurance for extraordinary expenses related to business interruption such as a back-up generator in case of power failure.

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F

Face Amount - The value of a life insurance policy to be provided upon maturity date or death.

Facultative Reinsurance - Reinsurance for a specific policy for which terms can be negotiated by the original insurer and reinsurer.

Fair Credit Reporting Act - Federal laws that allow consumers who are denied insurance because of information contained in a credit report to be notified and allowed to obtain the information used in the report from the reporting agency.

FAIR Plan - Fair Access to Insurance Requirements - State pools designed to provide insurance to property owners who are unable to obtain property insurance through conventional means.

Fair Value - The amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale. Quoted market prices in active markets are the best evidence of fair value and shall be used as the basis for the measurement, if available. If a quoted market price is available, the fair value is the product of the number of trading units times market price.

Family Income Policy - A policy that pays an income up to some future date designated in the policy to the beneficiary after the death of the insured. The period of payment is measured from the date of the inception of the contract, and at the end of the income period the face amount of the policy is paid to the beneficiary. If the insured lives beyond the income period, only the face amount is payable in the event of the insured’s death.

Family Maintenance Policy - A policy that pays an income to the beneficiary starting after the death of the insured and continuing for a stated period of time. At the end of the income period, the face amount of the policy is paid to the beneficiary.

Farmowners Insurance - Farmowners insurance sold for personal, family or household purposes. This package policy is similar to a homeowners policy, in that it has been developed for farms and ranches and includes both property and liability coverage for personal and business losses. Coverage includes farm dwellings and their contents, barns, stables, other farm structures and farm inland marine, such as mobile equipment and livestock.

Federal Flood Insurance Program - Coverage for qualifying residents and businesses in flood prone regions through the National Flood Insurance Act, a federally subsidized flood insurance program enacted in 1968.

FEMA - Federal Emergency Management Agency - An independent agency, tasked with responding to, planning for, mitigating and recovery efforts of natural disasters.

Fidelity Bond - A bond covering an employer's loss resulting from an employee's dishonest act (e.g., loss of cash, securities, valuables, etc.).

Fiduciary - A person holding the funds or property of another in a position of trust, and who is obligated to act in a prudent and ethical manner. Examples are attorney, bank trustee, or executor of an estate.

Fiduciary Bond - A type of surety bond, sometimes called a probate bond, which is required of certain fiduciaries, such as executors and trustees, that guarantees the performance of their responsibilities.

File-And-Use States - States where insurers must file rate changes with their regulators, but don’t have to wait for approval to put them into effect.

Financial Guaranty - A surety bond, insurance policy, or an indemnity contract (when issued by an insurer), or similar guaranty types under which loss is payable upon proof of occurrence of financial loss to an insured claimant, obligee or indemnitee as a result of failure to perform a financial obligation or any other permissible product that is defined as or determined to be financial guaranty insurance.

Fire - Coverage protecting the insured against the loss to real or personal property from damage caused by the peril of fire or lightning, including business interruption, loss of rents, etc.

Fire Legal Liability - Coverage for property loss liability as the result of separate negligent acts and/or omissions of the insured that allows a spreading fire to cause bodily injury or property damage of others. An example is a tenant who, while occupying another party's property, through negligence causes fire damage to the property.

Fixed Annuity - An annuity that guarantees a specific rate of return. In the case of a deferred annuity, a minimum rate of interest is guaranteed during the savings phase. During the payment phase, a fixed amount of income, paid on a regular schedule, is guaranteed.

Fixed Period Option - A settlement option under which the beneficiary receives a regular income for a specified period of time.

Flexible Premium Annuity - An annuity that allows the contract owner the option of whether to pay the annuity premiums following the establishment of the annuity.

Floater - Attached to a homeowners policy, a floater insures movable property, covering losses wherever they may occur.

Flood - Coverage protecting the insured against loss or damage to real or personal property from flood. (Note: If coverage for flood is offered as an additional peril on a property insurance policy, file it under the applicable property insurance filing code.)

Foreign Insurer - An insurance company selling policies in a state other than the state in which they are incorporated or domiciled.

Fraternal Insurance - A form of group coverage or disability insurance available to members of a fraternal organization.

Fraud - Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid, or lying or misrepresentation by the insurance company managers, employees, agents, and brokers for financial gain.

Free-Look Period - A period of up to one month during which the purchaser of an annuity can cancel the contract with no penalty. Rules vary by state.

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G

Gap Insurance - An automobile insurance option, available in some states, that covers the difference between a car’s actual cash value when it is stolen or wrecked and the amount the insured owes the finance company. Typically used for leased cars.

Garagekeepers’ Liability - A type of bailee coverage available to automobile repair shops, service stations and parking lots or storage garages.

Gatekeeper System - Under a Health Maintenance Organization (HMO) arrangement, a system requiring members of the HMO to select a primary care physician who in turn provides or authorizes all care for that particular member.

General Account - An investment portfolio used by the insurer for investment of premiums and cash values of fixed products. This portfolio generally consists of safe, conservative, guaranteed investments, such as real estate and mortgages.

General Average - The proportionate sharing of the loss when cargo (or a portion of it) is thrown overboard to save other property or the ship from a covered peril, the loss will be apportioned among all the owners of the property on the ship.

Grace Period - A period of time after the premium due date during which a policy remains in force without penalty even though the premium due has not been paid. Commonly 30 or 31 days in life insurance policies and 7, 10, or 31 days in various health insurance policies.

Goodwill - The difference between the cost of acquiring the entity and the reporting entity's share of the book value of the acquired entity.

Gramm-Leach Bliley Act (GLBA) - Act, repealing Glass-Steagal Act of 1933, allows consolidation of commercial banks, investment institutions and insurance companies. Established a framework of responsibilities of federal and state regulators for these financial industries. It permits financial services companies to merge and engage in a variety of new business activities, including insurance, while attempting to address the regulatory issues raised by such combinations.

Gross Premium - The net premium for insurance plus commissions, operating and miscellaneous commissions. For life insurance, this is the premium including dividends.

Group Accident and Health - Coverage written on a group basis (e.g., employees of a single employer and their dependents) that pays scheduled benefits or medical expenses caused by disease, accidental injury or accidental death. Excludes amounts attributable to uninsured accidents and health plans and the uninsured portion of partially insured accident and health plans.

Group Health - Health insurance issued to employers, associations, trusts, or other groups covering employees or members and/or their dependents, to whom a certificate of coverage may be provided.

Group Credit Life - Contracts sold in connection with loan/credit transactions or other credit transactions, which do not exceed a stated duration and/or amount and provide insurance protection against death.

Guaranteed Death Benefit - Basic death benefits guaranteed under life insurance and variable annuity contracts.

Guaranteed Insurability Rider (APB) - A rider that guarantees the insured can purchase more insurance at specified ages without proof of insurability.

Guaranteed Renewable - The option of renewal to a specified age, or for a lifetime, vested solely in the insured. However, the insurance company has the right to increase the premiums applicable to an entire class of policyholders.

Guaranty Fund - Funding mechanism employed by states to provide funds to cover policyholder obligations of insolvent reporting entities.

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H

Hazard - Circumstance which tends to increase the probability or severity of a loss.

Health (Disability) Insurance - A broad term covering the various forms of insurance relating to the health ofpersons. It includes such coverages as accident, sickness, disability, and hospital and medical expenses. This term is often used in lieu of Sickness and Accident Insurance.

Health Maintenance Organization (HMO) - An organization that provides health services to individuals known as subscribers. The HMO generally contracts with a group of doctors and other medical practitioners to provide services at agreed upon costs, prepaid on behalf of the members. Subscribers must rely exclusively on the HMO for all their medical needs in order to qualify for payment.

Hold-Harmless Agreement - A risk transfer mechanism whereby one party assumes the liability of another party by contract.

Homeowners Insurance - A package policy combining real and personal property coverage with personal liability coverage. Coverage applicable to the dwelling, appurtenant structures, unscheduled personal property and additional living expense are typical. Includes mobile homes at a fixed location.

Hospital Benefits - Benefits payable for charges incurred while the insured is confined to, or treated in, a hospital--as defined in the policy. Also, Medicare Part A is sometimes referred to as "Hospital Benefits".

Hospital Confinement Coverage - Coverage that provides a pre-determined, fixed benefit or daily indemnity for contingencies based on a stay at a hospital or intensive care facility.

Hull Insurance - Coverage for damage to a vessel or aircraft and affixed items.

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I

Immediate Annuity - A type of annuity purchased with a lump sum, usually at retirement. Payments begin in the next payment period; can be fixed or variable.

Implied Authority - Authority of an agent that the public may reasonably believe the agent to have. If the authority to collect and remit premiums is not expressly granted in the agency contract, but the agent does so on a regular basis and the insurer accepts, the agent has implied authority to do so.

Implied Warranty - Warranty made as part of an ocean marine contract without any expression on the part of the parties involved.

Incontestability Provision - A life insurance and annuity provision limiting the time within which the insurer has the legal right to void the contract on grounds of material misrepresentation in the policy application.

Incurred But Not Reported (IBNR) - (Pure IBNR) claims that have occurred but the insurer has not been notified of them at the reporting date. Estimates are established to book these claims. May include losses that have been reported to the reporting entity but have not yet been entered into the claims system or bulk provisions. Bulk provisions are reserves included with other IBNR reserves to reflect deficiencies in known case reserves.

Indemnity, Principle of - A general legal principle related to insurance that holds that the individual recovering under an insurance policy should be restored to the approximate financial position he or she was in prior to the loss. Legal principle limiting compensation for damages be equivalent to the losses incurred.

Independent Adjuster - Freelance contractor paid a fee for adjusting losses on behalf of companies.

Independent Agent - A representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.

Independent Contractor - An individual who is not employed for a company but instead works for themselves providing goods or services to clients for a fee.

Index Annuity - An interest bearing fixed annuity tied to an equity index, such as the Dow Jones Industrial Average or S & P 500.

Indirect Loss - Loss that is the result or consequence of a direct loss. Also called consequential Loss.

Individual Health - Health insurance where the policy is issued to an individual covering the individual and/or their dependents in the individual market. This includes conversions from group policies.

Industrial Life - Industrial life insurance, also called "debit" insurance, is insurance under which premiums are paid monthly or more often, the face amount of the policy does not exceed a stated amount, and the words "industrial policy" are printed in prominent type on the face of the policy.

Inland Marine - Coverage for property that may be in transit, held by a bailee, at a fixed location, a movable good that is often at different locations (e.g., off road constructions equipment), or scheduled property (e.g., Homeowners Personal Property Floater) including items such as live animals, property with antique or collector's value, etc. This line also includes instrumentalities of transportation and communication, such as bridges, tunnels, piers, wharves, docks, pipelines, power and phone lines, and radio and television towers.

Inpatient - A person who is admitted to a hospital as a resident case.

Insolvency - Insurer’s inability to pay debts.

Insurable Interest - A right or relationship in regard to the subject matter of the insured contract such that the insured can suffer a financial loss from damage, loss or destruction to it. (Bickelhaupt and Magee )

Insurable Risk - Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable. The insurance company also must be able to come up with a reasonable price for the insurance.

Insurance - An economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.

Insurance Holding Company System - Consists of two or more affiliated persons, one or more of which is an insurer.

Insurance to Value - Amount of insurance purchased vs. the actual replacement cost of the insured property expressed as a ratio.

Insured - Party(ies) covered by an insurance policy.

Insurer - An insurer or reinsurer authorized to write property and/or casualty insurance under the laws of any state.

Insuring Clause - The provision of an insurance policy containing the insurance company’s promise. It established the obligation of the company to provide the insurance coverage as stated in the policy.

Internet Liability Insurance/Cyber Insurance - coverage for cyber commerce including copyright infringement, libel, and violation of privacy.

Irrevocable Beneficiary - A life insurance policy beneficiary who has a vested interest in the policy proceeds even during the insured's lifetime because the policy owner has the right to change the beneficiary designation only after obtaining the beneficiary's consent.

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J

Jettison - A voluntary action to rid a ship of cargo to prevent further damage or loss to the hull. Jettison is a covered peril in ocean marine policies.

Jewelers Block Coverage Form - Commercial inland marine form for jewelers. Covers the insured’s stock in trade and the property of others while it is on or off the premises.

Joint and Last Survivor Annuity - Retirement plan that continues to payout so long as at least one, of two or more, annuitants is alive.

Joint-Life Annuity - An annuity contract that ceases upon the death of the first of two or more annuitants.

Jumping Juvenile - Juvenile insurance on which the face amount increases by a multiple, usually five, of the original face amount when the insured reaches age 21.

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K

Key-Person Insurance - Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss.

Kidnap/Ransom Insurance - Coverage for ransom or extortion costs and related expenses.

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L

Lapse - Termination of a policy due to failure to pay the required renewal premium.

Larceny - A theft loss which occurs during a period of time when access was granted to the stolen property.

Law of Averages - A mathematical rule stating that as the number of exposure units increases, the closer the actual results will approach the predicted results of an event.

Law Of Large Numbers - The theory of probability on which the business of insurance is based. Simply put, this mathematical premise says that the larger the group of units insured, such as sport-utility vehicles, the more accurate the predictions of loss will be.

Legal Purpose - A contract/policy must be drawn for a legal purpose and not against public policy.

Level Premium Insurance - Life insurance policy for which the cost is equally distributed over the term of the premium period, remaining constant throughout.

Liability - A certain or probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or to provide services to other entities in the future as a result of a past transactions(s) or event(s). three essential characteristics: a) It embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand; b) The duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice; and c) The transaction or other event obligating the entity has already happened.

Life Settlements - A contract or agreement in which a policyholder agrees to sell or transfer ownership in all or part of a life insurance policy to a third party for compensation that is less than the expected death benefit of a policy.

Lifetime Disability Benefit - A provision in some disability income policies to recoup lost wages for the term of disability or remainder of insured's life in case of permanent disability.

Limited Benefit - Policies that provide coverage for vision, prescription drug, and/or any other single service plan or program. Also include short-term care policies that provide coverage for less than one year for medical and other services provided in a setting other than an acute care unit of the hospital.

Limited Payment Life Insurance - A form of whole-life insurance with a pre-defined number of premiums to be paid.

Limited Policies - Health insurance coverage for a certain ailment, such as cancer.

Limits - Maximum value to be derived from a policy.

Line of Business - Classification of business written by insurers.

Liquor Liability - Coverage for the liability of an entity involved in the retail or wholesale sales of alcoholic beverages, or the serving of alcoholic beverages, to persons who have incurred bodily injury or property damage arising from an intoxicated person.

Living benefits rider - A rider attached to a life insurance policy providing long term care for the terminally ill.

Lloyd's of London - Association offering membership in various syndicates of wealthy individuals organized for the purpose of writing insurance for a particular hazard.

Long-Term Care - Policies that provide coverage for not less than one year for diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services provided in a setting other than an acute care unit of a hospital, including policies that provide benefits for cognitive impairment or loss of functional capacity. This includes policies providing only nursing home care, home health care, community based care, or any combination. The policy does not include coverage provided under comprehensive/major medical policies, Medicare Advantage, or for accelerated heath benefit-type products.

Long-Term Disability Income Insurance - policy providing monthly income payments for insureds who become disabled for an extensive length of time, typically two years or longer.

Loss - Physical damage to property or bodily injury, Including loss of use or loss of income.

Loss Frequency - Incidence of claims on a policy during a premium period.

Loss of Income - A workers comp benefit accommodating an employee who becomes disabled from a cause rising out of their employment. Weekly cash benefits will be paid for loss of income beginning after a waiting period had been satisfied.

Loss of Use Insurance - Policy providing protection against loss of use due to damage or destruction of property.

Loss Payable Clause - Coverage for third party mortgagee in case of default on insured property, secured by a loan, that has been lost or damaged.

Loss Ratio - The percentage of incurred losses to earned premiums.

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M

Major Medical - Policies especially designed to help offset the medical expenses resulting from catastrophic illnesses or injuries. Generally, they provide benefit payments of 80% of all types of medical expense above a certain amount first paid by the insured, and up to the maximum limit of liability provided by the policy.

Malingering - Prolonging a disability in order to collect greater insurance benefits.

Malpractice - Alleged misconduct or negligence in a professional act resulting in loss or injury.

Managed Care - System of health care delivery that attempts to influence the utilization, quality, and cost of services provided.

Mandated benefits - Insurance required by state or federal law.

Manufacturers Output Policies - Provides broad form coverage of personal property of an insured manufacturer including raw material, goods in process, finished goods and goods shipped to customers.

Marine Insurance - Coverage for goods in transit, and for the commercial vehicles that transport them, on water and over land. The term may apply to inland marine but more generally applies to ocean marine insurance.

Market Value - Fair value or the price that could be derived from current sale of an asset.

Market-Value Adjusted Annuity - An annuity whose accumulated value is subject to a market value adjustment on surrender. The market value adjustment may be positive or negative depending onthe movement of interest rates since the inception of the contract.

McCarran-Ferguson Act - Federal law signed in 1945 in which Congress declared that states would continue to regulate the insurance business. Grants insurers a limited exemption from federal antitrust legislation.

Mechanical Breakdown Insurance - Premiums attributable to policies covering repair or replacement service, or indemnification for that service, for the operational or structural failure of property due to defects in materials or workmanship, or normal wear and tear. (May cover motor vehicles, mobile equipment, boats, appliances, electronics, residual structures, etc.)

Mediation - Nonbinding procedure in which a third party attempts to resolve a conflict between two other parties.

Medicaid - Policies issued in association with the Federal/State entitlement program created by Title XIX of the Social Security Act of 1965 that pays for medical assistance for certain individuals and families with low incomes and resources.

Medical Information Bureau (MIB) - An organization formed and supported by insurers and serving as a database of medical information reported to it by members and used by members as source of underwriting information.

Medical Malpractice - Insurance coverage protecting a licensed health care provider or health care facility against legal liability resulting from the death or injury of any person due to the insured's misconduct, negligence, or incompetence, in rendering or failure to render professional services.

Medical Payments - Pays for reasonable medical expenses incurred by a covered person for bodily injury.

Medicare - A state assistance program, passed under Title XVIII of the Social Security Amendments of 1965, to provide hospital and medical expense insurance to those over 65 years of age.

Medicare Advantage Plan - An HMO, PPO, or Private Fee-For Service Plan that contracts with Medicare Advantage Prescription Drug Plan also includes drug benefits. The plan may provide extra coverage such as vision, hearing, dental, and/or health and wellness programs. Medicare pays a fixed amount for insured's care every month to the companies offering Medicare Advantage plans.

Medicare Part D - Stand-Alone - Stand-alone Part D coverage written through individual contracts; stand-alone Part D coverage written through group contracts and certificates; and Part D coverage written on employer groups where the reporting entity is responsible for reporting claims to the Centers for Medicare & Medicaid Services (CMS).

Medicare Supplement - Insurance coverage sold on an individual or group basis to help fill the "gaps" in the protections granted by the federal Medicare program. This is strictly supplemental coverage and cannot duplicate any benefits provided by Medicare. It is structured to pay part or all of Medicare's deductibles and co-payments. It may also cover some services and expenses not covered by Medicare. Also known as Medigap" insurance.

Medigap - Supplementary private health insurance products to Medicare insurance benefits.

Merchant Marine - Endorsement used with the Workers Compensation and Employers Liability policy that covers the additional benefits required by federal law for maritime workers injured while working on navigable waters or shore site areas.

Messenger - A person conveying money securities or other property from one location to another on behalf of an insured.

Misrepresentation - On the part of an insurer or its agent, falsely representing the terms, benefits, or privileges of a policy. On the part of an applicant, falsely representing the health or other condition of the proposed insured.

Mobile Homes - Homeowners - Homeowners insurance sold to owners occupying the described mobile home.

Mobile Homes under Transport - Hoverage for mobile homes while under transport for personal or commercial use.

Modified Endowment Contract - An insurance policy will fail to meet the seven pay test if the amount paid in premiums during the first seven contract years exceeds the sum of the seven level annual premiums required to pay up the policy. If too much money was “invested” in a whole life policy in the first seven years, it becomes a modified endowment contract (MEC) and looses its tax advantages.

Moral Hazard - Personality characteristics that increase probability of losses. For example not taking proper care to protect insured property because the insured knows the insurance company will replace it if it is damaged or stolen.

Morale Hazard - Negligence or disregard on the part of the insured which could lead to probable loss.

Morbidity - The frequency or severity of disease or illness within a subset of the population.

Morbidity Risk - The potential for a person to experience illness, injury, or other physical or psychological impairment, whether temporary or permanent. Morbidity risk excludes the potential for an individual's death, but includes the potential for an illness or injury that results in death.

Morbidity Table - A statistical record of the rate of illness among the defined age groups.

Mortality Table - Chart that shows the death rates of a particular population at each age displayed as the number of deaths per thousand.

Mortgage Insurance - A form of life insurance coverage payable to a third party lender/mortgagee upon the death of the insured/mortgagor for loss of loan payments.

Mortgagee Clause - Grants to a mortgagee under a Property contract issued to a mortgager by virtue of the mortgagee’s financial interest in the property.

Motor Carrier Act of 1980 - Trucking operators must file proof of pollution liability insurance. Other financial responsibility requirements were imposed of ―for hire‖ and private transporters of certain hazardous cargoes in interstate or intrastate commerce.

Municipal Liability - A type of protection involving commercial risk to a city or town. Typically covers doctors and nurses employed in a municipal department of health for malpractice liability arising out of such employment.

Mutual Insurance Company - A privately held insurer owned by its policyholders, operated as a non-profit that may or may not be incorporated.

Mysterious Disappearance - An article is known to have disappeared but it is impossible to determine how such disappearance occurred.

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N

Named Insured - The individual defined as the insured in the policy contract.

Named Peril Coverage - Insurance for losses explicitly defined in the policy contract.

National Association of Insurance Commissioners (NAIC) - The U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate their regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally. NAIC members, together with the central resources of the NAIC, form the national system of state-based insurance regulation in the U.S.

Negligence - Failure to exercise reasonable consideration resulting in loss or damage to oneself or others.

Net Premiums Earned - Premiums on property/casualty or health policies that will not have to be returned to the policyholder if the policy is cancelled.

NFIP - National Flood Insurance Program - Flood insurance and floodplain management for personal and business property administered under the National Flood Act of 1968. Encourages participation by private insurers through a flood insurance pool .

Nonadmitted Insurer - Insurance company not licensed to do business within a given state.

Noncancellable - A policy that an insurance company is not permitted to terminate or amend during its term (except for non-payment of a premium).

Nonconfining Disability - An illness that prevents the insured from working, but that does not confine him/her to a hospital, or a sanitarium.

Noncontributory - A general term used to designate any plan of insurance (usually group) for which the employer pays the entire premium and the employee contributes no part of the premium.

Nonforfeiture Option - A legal provision whereby the life insurance policy owner may take the accumulated values in a policy as paid-up insurance for a lesser amount; extended term insurance; or lump-sum payment of cash value, less any unpaid premiums or outstanding loans.

Non-occupational - A policy which insures a person only against off-the-job accidents or sickness.

Nonowned - An auto driven by the insured that he/she does not rightfully own.

Nonqualified Plan - A retirement plan, which may be discriminatory, which need not be filed with the IRS, and does not provide a current tax deduction for contributions.

Notice Of Loss - A written notice required by insurance companies within 20 days of an accidental injury or other loss. Part of the standard provisions defining a policyholder's responsibilities after a loss.

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O

Obligee - The party reimbursed by the surety if the principal fails to perform.

Occupational Disease - Abnormal condition or illness caused by factors associated with the workplace. Like occupational injuries, this is covered by workers compensation policies.

Occurrence - An accident , including injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected or intended from the standpoint of the insured.

Occurrence Limit - Maximum amount payable by the insurer for any one occurrence.

Ocean Marine - Coverage for ocean and inland water transportation exposures; goods or cargoes; ships or hulls; earnings; and liability.

Offer - The terms of a contract proposed by one party to another. In insurance, submitting an application to the company is usually considered an offer.

Officer - A president, vice-president, treasurer, actuary, secretary, controller and any other person who performs for the company functions corresponding to those performed by the foregoing officers.

One-Year Term - A dividend option under which the insured requests that the insurer purchase 1-year term insurance with the dividend.

Open Enrollment Period - 1) With group insurance, this is a period during which employees can elect to enter a group plan, usually without providing evidence of insurability. (2) With Medicare, people who choose not to enroll in Part B during their initial enrollment period, may do in subsequent years from January 1st through March 31st.

Optionally Renewable Policies - Policies that are renewable at the option of the insurance company.

Ordinance or Law - Endorsement to a property policy, including homeowners, that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built.

Other Insurance Clause - A provision found in many life and health insurance policies, stating the disposition of claims when any other insurance contract covers the same events as the policy in which the provision is contained.

Other States Coverage - With auto insurance when an insured is in another state besides state of residency, the insurance coverage becomes at least equal to the state minimum limits of the state traveling through.

Other than Collision Coverage - See Comprehensive Coverage

Outpatient - One who receives care at a clinic or hospital without being confined to that institution as a resident patient.

Overhead Expense Insurance - Insurance that covers such things as rent, utilities, and employee salaries when a business owner becomes disabled. The insurance benefit is generally not a fixed amount, but pays the amount of expenses actually incurred.

Owner Occupied - Homeowners insurance sold to owners occupying the described property.

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P

Package Policy - Two or more distinct policies combined into a single contract.

Paid-Up Additions - A dividend option under which the policy owner uses policy dividends as a single premium to buy additional life insurance.

Pair or Set - This condition states that in the event of a loss to an item that is part of a pair or set, the insurance company is not obligated to pay the value of the entire set. The insurer may either repair or replace part of the set or pay the difference between the value of the property before the loss and value of remaining property.

Partial Disability - An illness or injury that prevents an insured from working full time. Usually pays 50% of the total disability benefit.

Participating - Insurance that pays policy dividends.

Payor Rider - A rider to a juvenile life policy providing that if the payor dies or becomes disabled before the insured juvenile reaches a certain age, the company waives the premiums and keeps the policy in full force.

Per Capita (Latin: by heads) - Applied to beneficiaries, it refers to division of policy proceeds among the surviving beneficiaries.

Per Stirpes (Latin: by roots) - Applied to beneficiaries, it refers to division of policy proceeds among surviving beneficiaries with a full share to the heirs of any deceased beneficiary.

Peril - A specific risk or cause of loss covered by an insurance policy, such as death,cancer or disability.

Perils of the Sea - Causes of loss a ship is exposed to during ocean travel. Common perils insured against include perils of the sea such as damage caused by waves, sinking, stranding on reefs or rocks, collision, lightning damage, fire damage, theft by pirates, jettison and barratry.

Permanent Life Insurance - Policy that remains active for the life of the insured.

Personal Articles Floater - A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.

Personal Auto Policy - Coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or husband and wife.

Personal GAP Insurance - Credit insurance that insures the excess of the outstanding indebtedness over the primary property insurance benefits in the event of a total loss to a collateral asset.

Personal Injury Liability - Liability coverage for those who have been discriminated against, falsely arrested, illegally detained, libeled, maliciously prosecuted, slandered, suffered from identity theft, mental anguish or alienation of affections, or have had their right of privacy violated.

Personal Lines - Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies.

Personal Property - Single interest or dual interest credit insurance (where collateral is not a motor vehicle, mobile home, or real estate) that covers perils to goods purchased or used as collateral and that concerns a creditor's interest in the purchased goods or pledged collateral either in whole or in part; or covers perils to goods purchased in connection with an open-end credit transaction.

Physical Hazard - Physical hazards include factors such as a person's weight, medical history, and occupation.

Policy - A written contract ratifying the legality of an insurance agreement.

Policy Dividend - A refund of part of the premium on a participating life insurance policy. Amount of payment is determined by subtracting the actual premium expense from the premium charged. The payment can be taken as cash, applied to a purchase an increment of paid-up insurance, left on deposit with the insurance company or applied to purchase term insurance for one year.

Policy Forms - Various policy forms are available. They vary according to the perils covered and the limits provided. Each policy form offers a different level of protection.

Policy Period - Time period during which insurance coverage is in effect.

Pollution - Environmental contamination.

Powers and Duties - The Commissioner, Director or Superintendent holds the power of subpoena, power to examine insurance companies, also includes but is not limited to: regulates companies for solvency, collects fees and issues (regulates) insurance licenses; may delegate examining duties by appointing examiners; conducts hearings due to complaints; regulates premium rates.

Pre-existing Condition - An injury occurring, sickness contracted, or physical condition that existed prior to the issuance of a health policy.

Preferred Provider Organization (PPO) - Arrangement, insured or uninsured, where contracts are established by Health Plan Companies (typically, commercial insurers, and, in some circumstances, by self-insured employers) with health care providers. The Health Plans involved will often designate these contracted providers as "preferred" and will provide an incentive, usually in the form of lower deductibles or co-payments, to encourage covered individuals to use these providers. Members are allowed benefits for non-participating provider services on an indemnity basis with significant copayments and providers are often, but not always, paid on a discounted fee for service basis.

Preferred Risk - Insured, or applicant for insurance, who presents likelihood of risk lower than that of the standard applicant.

Premature Distribution - A distribution from an IRA or qualified retirement plan that is taken before the recipient is age 59 ½.

Premises - The particular location of the property or a portion of it as designated in an insurance policy.

Premises and Operations - Policies covering the liability of an insured to persons who have incurred bodily injury or property damage on an insured's premises during normal operations or routine maintenance, or from an insured's business operations either on or off of the insured's premises.

Premium - Money charged for the insurance coverage reflecting expectation of loss.

Premiums Earned - The portion of premium for which the policy protection or coverage has already been given during the now-expired portion of the policy term.

Premiums Net - The amount calculated on the basis of the interest and mortality table used to calculate the reporting entity's statutory policy reserves.

Primary Beneficiary - The beneficiary named first to receive proceeds or benefits of a policy that provides death benefits.

Primary Care Physician (Gatekeeper) - In a Health Maintenance Organization (HMO) gatekeeper system, the physician selected to provide or authorize all care for a particular subscriber of the HMO.

Primary Insurance - Coverage that takes precedence when more than one policy covers the same loss.

Principal - In bonding, the party who has a duty to perform.

Principal Sum - The amount payable in one sum in event of accidental death and, in some cases, accidental dismemberment. When a contract provides benefits for both accidental death and accidental dismemberment, each dismemberment benefit is equal to the principal sum or some fraction thereof.

Private Passenger Auto (PPA) - Filings that include singularly or in any combination coverage such as the following: Auto Liability, Personal Injury Protection (PIP), Medical Payments (MP), Uninsured/Underinsured (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.

Probationary Period - A specified number of days after the date of the issuance of the policy, during which coverage is not afforded for sickness. Sickness protection does not become effective until after the end of such probationary period. This is a one time event, whereas an elimination period may occur upon each separate disability.

Product Liability - A tort law that determines who may sue and who may be sued for damages when a defective product injures someone. The injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault.

Product Liability Insurance - Insurance coverage protecting the manufacturer, distributor, seller, or lessor of a product against legal liability resulting from a defective condition causing personal injury, or damage, to any individual or entity, associated with the use of the product.

Producer - An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Professional Liability - Coverage available to pay for liability arising out of the performance of professional or business related duties, with coverage being tailored to the needs of the specific profession. Examples include abstracters, accountants, insurance adjusters, architects, engineers, insurance agents and brokers, lawyers, real estate agents, stockbrokers.

Proof of Loss - Documents showing the insurance company that a loss occurred.

Property - Coverage protecting the insured against loss or damage to real or personal property from a variety of perils, including but not limited to fire, lightening, business interruption, loss of rents, glass breakage, tornado, windstorm, hail, water damage, explosion, riot, civil commotion, rain, or damage from aircraft or vehicles.

Pro-rata Cancellation - When a policy is canceled midterm, unearned premiums must be refunded to the policy owner. A pro-rata refund is due if the insurer cancels.

Pro-rata (proportional) Reinsurance - Portion of the losses and premium reinsurer shares with the ceding entity.

Protection and Indemnity (P&I) Insurance - A broad form of marine legal liability insurance coverage.

Provisions - Contingencies outlined in an insurance policy.

Proximate Cause - Event covered under insured's policy agreement.

Public Adjuster - Independent claims adjuster representing policyholders instead of insurance companies.

Pure (Straight) - An annuity payout option where payments end when the annuitant dies. Payments may be fixed or variable.

Pure Risk - Circumstance including possibility of loss or no loss but no possibility of gain.

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Q

Qualified Plan - A retirement plan that has been filed and approved by the IRS, which does not discriminate as to participation, and where the contributor (usually the employer) receives a tax deduction for plan contributions, and investment income is tax-deferred until withdrawn.

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R

Rate - Value of insured losses expressed as a cost per unit of insurance.

Reasonable Repairs - In the event of a loss, the insured is permitted and obligated to take action towards preventing, limiting and/or reducing the loss.

Rebate - A portion of the commission returned or anything else of value given an insured as an inducement to buy. The payment of policy dividends, retroactive rate adjustments, and reduced premiums that reflect the savings of direct payment to an agent or home office are not usually considered to be rebates. In most cases rebates are illegal, both for the producer or insurer to give a rebate and for an insured to receive one.

Recurrent Disability Clause - A provision that specifies a period of time during which the recurrence of a condition is considered a continuation of a prior disability.

Reciprocal Insurer - Reciprocal insurers are unincorporated groups of people providing insurance for one another through individual indemnity agreements.

Reciprocation Agreement - An agreement between two states whereby producers of each state can sell insurance in the other state.

Reduced Paid-Up Insurance - A nonforfeiture option under which the insured uses the cash value of the present policy to purchase a single-premium insurance policy at attained age rates for a reduced face amount.

Reduction of Benefits - Automatic reduction in coverage under certain specified condition (i.e., after the insured has reached age 60).

Regular Program (NFIP) - Becomes effective once a flood insurance rate map is prepared that divides the community into specific zones to determine the probability of flooding in each area and the community agrees to adopt more stringent flood control and land use measures.

Rehabilitation - Designed to assist an injured worker to return to gainful employment as quickly as possible. Benefits include physical and occupational therapy and treatment at a rehabilitation or vocational training to learn another job if necessary.

Reinsurance - A transaction between a primary insurer and another licensed (re) insurer where the reinsurer agrees to cover all or part of the losses and/or loss adjustment expenses of the primary insurer. The assumption is in exchange for a premium. Indemnification is on a proportional or non-proportional basis.

Reinsurer - Company assuming reinsurance risk.

Relation of Earnings to Insurance - A provision in the policy that permits the insurance company to reduce the monthly income disability benefits payable if the insured's total income from benefits exceeds either his/her current monthly earnings or his/her average monthly earnings during the 2 year period immediately preceding the disability.

Removal - The attempt to save threatened property by removing it from endangered area.

Renewable Term Insurance - Insurance that is renewable for a limited number of successive terms by the policyholder and is not contingent upon medical examination.

Renters Insurance - Liability coverage for contents within a renter's residence. Coverage does not include the structure but does include any affixed items provided or changed by the renter.

Replacement Cost - The cost of replacing property without a reduction for depreciation due to normal wear and tear.

Reporting Form - Forms written with reporting requirements for changing values, used when its difficult to provide the insurance company with an accurate statement of values because of fluctuations from month to month.

Representations - On an application, facts that the applicant represents as true and accurate to the best of his/her knowledge and belief.

Required Policy Provisions - See Standard Provisions.

Rescission - The termination of an insurance contract by the insurer when material misrepresentation has occurred.

Reserve - A portion of the premium retained to pay future claims

Residence - The domicile location of a member as shown by his or her determination as a resident.

Residual Disability - In disability income insurance, a concept that has sometimes replaced partial disability in terms of determining what benefit will be paid. Uses a formula that requires the insured’s earnings to have dropped a certain percentage from prior to disability levels.

Retention - A mechanism of internal fund allocation for loss exposure used in place of or as a supplement to risk transfer to an insurance company.

Retrospective Rating - The process of determining the cost of an insurance policy based on the actual loss experience determined as an adjustment to the initial premium payment.

Revocable Beneficiary - The beneficiary in a life insurance policy in which the owner reserves the right to revoke or change the beneficiary.

Rider - A legal document amending a policy. Additional benefits or a reduction in benefits are often incorporated in policies by an endorsement (rider). A waiver for a health impairment may also be affected by a rider.

Risk - Uncertainty concerning the possibility of loss by a peril for which insurance is pursued.

Risk Management - Management of the varied risks to which a business firm or association might be subject. It includes analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize loss.

Robbery - The dishonest taking or stealing of property from an individual in possession of that property. Involves a face-to-face confrontation.

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S

Salvage - A concept which allows the insurer to take title to the damaged property andrecoup some of the money paid resulting from a covered peril if a total loss paid. The insurer has salvage rights once a loss payment has been made.

Schedule - See Surgical Schedule

Schedule Bond - A type of Fidelity Bond. The bond is available by a name schedule, which list a number of persons by name, or a position schedule, which lists the positions to be bonded and the number of people in each position.

Scheduled Personal Property - This endorsement allows an insured to individually list pieces of property that possess a higher value than is covered by the basic policy.

Self-Insure - Where permitted by state law, persons who can provide satisfactory proof of financial ability may assume their own workers’ compensation or auto liability risk, and may self-insure.

Separate Account - Segregated funds held and invested independently of other assets by an insurer for the purpose of a group retirement fund.

Service Area - The geographical area in which a service organization provide services, and in which subscribers to the service organization reside.

Settlement Options - The various methods for the payment of the proceeds or values of a life insurance policy that may be selected.

Short-term Disability - A company standard defining a period of time employees are eligible for short-term disability coverage, typically for 2 years or less.

Simplified Employee Pension (SEP) Plan - A SEP is an IRA established and maintained by the employee, but to which the employer may contribute, with high contribution limits and immediate vesting.

Single Limits - Various types of liability policies may be written on a single limit basis. This offers one single limit of protection under one contract.

Single Premium Annuity - An annuity that is paid in full upon purchase.

Specified/Dread Disease - Policies that provide benefits only for the diagnosis and/or treatment of a specifically named disease or diseases. Benefits can be paid as expense incurred, per diem or as a principal sum.

Specified Perils (Named Peril Policy) - Insurance policy that provides coverage only against perils specifically noted in the contract.

Speculative Risk - Uncertainty as to whether a gain or loss will occur. An example would be a business enterprise where there is a chance that the business will make money or lose it. Speculative risks are not insurable.

Spendthrift Clause - A clause that may be written into a life policy providing that a beneficiary or creditor cannot subject the proceeds or payments received under the settlement option to transfer, commutation, or encumbrance, or to any legal action taken by the creditors against the beneficiary.

Staff Model HMO - An HMO where physicians are employed and all premiums are paid to the HMO, which then compensates the physicians on a salary and bonus arrangement.

Standard Provisions - Certain provisions that must be included in any health policy (specified for the first time in 1912 by the Insurance Law of the State of New York). Originally, there were 15 Mandatory Provisions and 8 Optional Provisions. In 1950, these were replaced by new Uniform Provisions of which there are 12 Mandatory Provisions and 11 Optional Provisions. Subsequently, the 1950 provisions were adopted by most other states.

Standard Risk - A person who, according to a company's underwriting standards, is considered a normal risk and insurable at standard rates. High or low risk candidates may qualify for extra or discounted rates based on their deviation from the standard.

State of Domicile - The state where a company's home office is located.

Stated Value - Property and Casualty policies may be written on a Stated Value basis. The insured tells the company the value of the item and insurance is written for that amount.

Stock Insurance Company - Business owned by stockholders.

Stop Loss/Excess Loss - Individual or group policies providing coverage to a health plan, a self-insured employer plan, or a medical provider providing coverage to insure against the risk that any one claim or an entire plan's losses will exceed a specified dollar amount.

Strict Liability - See Absolute liability

Subrogation - Situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.

Subrogation Clause - Section of insurance policies giving an insurer the right to take legal action against a third party responsible for a loss to an insured for which a claim has been paid.

Substandard Risk - Risks deemed undesirable due to medical condition or hazardous occupation requiring the use of a waiver, a special policy form, or a higher premium charge.

Suicide Clause - In a life insurance policy, a clause that states that if the insured’s death is the result of intentionally self inflicted injuries within a specified period of time, the policy will be voided. Paid premiums are usually refunded. The time limit is generally 2 years.

Supplemental Tail (Maxi Tail) - Extends the 60 day tail period indefinitely.

Supplementary Payments - Provides coverage for the cost of bail bonds up to $250, premiums to appeal and release of attachment bonds, interest on judgments, loss of earnings and other reasonable claim settlement expenses occurred at the insurance company’s request.

Surgical Schedule - A list of cash allowances that are payable for various types of surgery, with the respective maximum payable based upon the severity of the operations.

Surety - The company issuing a bond. Guarantees the performance by the principal.

Surety Bond - Guarantees the performance of a duty. It obligates the surety to hold itself responsible for the performance of a duty by the principal. Includes contract bonds, judicial bonds, public office bonds and license and permit bonds.

Surplus Lines - The name given to insurance for which there is no market or insurance available through authorized carriers in the state where the risk arises or is located.

Survivor Benefits - Payable in the event of an employee’s death due to a work related injury or illness and includes a fixed burial allowance and possibly weekly indemnity payments to the surviving spouse and children.

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T

Tails - See Extended Reporting Periods

Tenants - Homeowners insurance sold to tenants occupying the described property.

Term - Period of time for which policy is in effect.

Term Insurance - Life insurance payable only if death of insured occurs within a specified time, such as 5 or 10 years, or before a specified age.

Theft - The dishonest taking of property without the owner’s consent.

Third Party - Person other than the insured or insurer who has incurred losses or is entitled to receive payment due to acts or omissions of the insured.

Third-Party Administrator - Outside group that performs clerical functions for an insurance company, self insured group or Service Provider.

Time Limit on Certain Defenses - A required Uniform Provision that prohibits an insurance company from contesting the validity of the policy, or from denying a claim for disability commencing after 2 years from the date of issuance on the ground that the applicant had made misstatements in the application. This is the accident and health equivalent of life insurance's "Incontestable Clause".

Time of Payment of Claims Provision -A health insurance provision that requires that claims be paid immediately on receipt of proofs of loss.

Tort - Involves the failure use proper care which results in bodily injury to another person or in damage to the property of others.

Total Disability - A degree of disability from injury or sickness that prevents the insured from returning to work. Actual wording of definitions vary by policy.

Total Loss - The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.

Transit - Transporting from one location to another. Transportation policies are also referred to as transit insurance.

Travel Accident Insurance - Provides benefits for accidental injury while traveling, usually on a common carrier. A type of limited policy.

Truckers Form - Limited special purposes policy that provides liability and physical damage insurance for owners and operators of trucks while engaged in business.

Twisting - Inducing or seeking to induce a policy owner by misrepresentation to terminate an existing policy and buy a new policy, to the detriment of the insured.

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U

Umbrella Policy - Common type of excess liability insurance. Provides additional limits, with a combines blanket single limit, over other existing liability cover areas such as Commercial General Liability and the liability sections of the homeowners and auto policies.

Unauthorized Insurer - An insurer not licensed to sell insurance within a state. Also, Excess/Surplus lines brokers and Reinsurers do not need a certificate of authority and may be referred to as "unauthorized".

Underinsured Motorist Coverage - Policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover total dollar amount of losses. Compensation for the injured party is equal to the difference between the losses incurred and the liability covered by the motorist at fault.

Underwriter - Person who identifies, examines and classifies the degree of risk represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate.

Underwriting - The process by which an insurance company examines risk and determines whether the insurer will accept the risk or not, classifies those accepted and determines the appropriate rate for coverage provided.

Unearned Premium - Amount of premium for which payment has been made by the policyholder but coverage has not yet been provided.

Unfair Practices - No person shall engage in trade practice which is defined under state law as an unfair method of competition or an unfair or deceptive act or practice in the business of insurance.

Uniform Policy Provisions - See Standard Provisions.

Unilateral Contract - A contract such as an insurance policy in which only one party to the contract, the insurer, makes any enforceable promise. The insured does not make a promise but pays a premium, which constitutes the insured’s part of the consideration.

Uninsured Motorist Coverage - Will pay compensatory damages that an insured is entitled to collect (from his own policy) if he suffers bodily injury as a result of being struck by another driver who does not have auto liability insurance.

Universal Life Insurance - Adjustable life insurance under which premiums and coverage are adjustable, company expenses are not specifically disclosed to the insured but a financial report is provided to policyholder's annually.

Unoccupied - Insured premises is at least partially furnished and there may be intent for the tenant to return.

Unscheduled Property - Not listed or specifically identified personal property owned or used by an insured.

Usual, Customary, and Reasonable (UCR) - In health plans, the charges made by medical practitioners that are acceptable in a particular geographical area. Many policies include the UCR wording to keep pace of inflation and avoid revising scheduled amounts as costs of medical care change, most prevalent in dental policies.

Utmost Good Faith - Acting in fairness and equity with a sincere belief that the act is not unlawful or harmful to others. The insurance contract requires that each party is entitled to rely on the representations of the other without attempts to conceal or deceive.

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V

Vacant - Insured premises is empty or unfurnished and there is no intent to return to the property by the insured.

Valued Policy - An insurance contract for which the value is agreed upon in advance and is not related to the amount of the insured loss.

Vandalism - The malicious and often random destruction of another person’s property.

Variable Annuity - An annuity contract under which the premium payments are used to purchase stock and the value of each unit is relative to the value of the investment portfolio.

Variable Contract - Contracts such as variable annuities or variable life insurance that contain an element of risk for the investor, depending on the performance of the separate account backing the contract. Generally, these contracts are products of insurers but regulated by both state insurance departments and the federal government.

Variable Life Insurance - Life insurance whose face value and/or duration varies depending upon the value of underlying securities.

Variable Universal Life - Combines the flexible premium features of universal life with the component of variable life in which excess credited to the cash value of the account depends on investment results of separate accounts. The policyholder selects the accounts into which the premium payments are to be made.

Viatical Settlements - Contracts or agreements in which a buyer agrees to purchase all or a part of a life insurance policy.

Vision - Limited benefit expense policies. Provides benefits for eye care and eye care accessories. Generally provides a stated dollar amount per annual eye examination. Benefits often include a stated dollar amount for glasses and contacts. May include surgical benefits for injury or sickness associated with the eye.

Void - A policy contract that for some reason specified in the policy becomes free of all legal effect. One example under which a policy could be voided is when information a policyholder provided is proven untrue.

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W

Waiting (Elimination) Period - The period of time between the beginning of insured's disability and the commencement of the period for which benefits are payable

Waiver - An agreement that waives the liability of the insurance company for certain disabilities or injuries ordinarily covered in the policy.

Waiver of Premium - A provision included in some policies that exempts the insured from the payment of premiums after he has become totally disabled.

Warranty - A statement made on an application for insurance that is warranted to be true in all respects. If untrue in any respect, even though the untruth may not have been known to the person giving the warranty, the contract may be voided whether or not the untruth or inexactness is material to the risk. Statements on life and health insurance applications are, in the absence of any evidence of fraud, representations rather than warranties. Contrast with Representations.

Watchman - One who watches over an insured’s property.

Watercraft Endorsement - This coverage may be attached to a homeowners contract by endorsement to provide for outboard motors over 25 horsepower, inboard motors, and sailboats over 26 feet in length.

Whole Life Insurance - Life insurance that may be kept in force for the duration of a person's life and pays a benefit upon the person's death. Premiums are made for same time period.

Workers' Compensation - Insurance that covers an employer's liability for injuries, disability or death to persons in their employment, without regard to fault, as prescribed by state or federal workers' compensation laws and other statutes.

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X

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Y

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Z

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0-9

1035 Exchange - A nontaxable exchange of life insurance policies or annuities, as provided under section 1035 of the Internal Revenue Code.

401(k) Plan - An employer-sponsored retirement plan funded by employee contributions, which may or may not be matched by the employer. Federal laws allow employees to invest pre-tax dollars, up to a stated maximum each year.

403(b) Plan - A 403(b) is a defined contribution plan that may be established by a public school, state university, or nonprofit service organization. While they play by the same rules, these plans are not technically qualified plans.

457 Plan - 457 plans are defined contribution plans available to state and local government employees. Other than who is eligible to establish the plan, 457 plans work the same as a 401(k) plan. Also, 457 plans are not corporate retirement plans, therefore not regulated by ERISA rules. While they play by the same rules, these plans are not technically qualified plans.

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