Insurance Terminology: Getting Acquainted with Insurance Terms

Knowing the common insurance terms will help you understand your policy better. Have a look at the insurance terminology that has been listed below.

  • Abandonment Clause
    A provision included in certain property insurance policies, which allows the property owner to ‘give up’ the damaged or lost property, and still claim for a full settlement amount. It is usually allowed if the insured property is lost or damaged beyond repair or if the cost for repair is more than what it’s worth.
  • Accelerated Benefits
    Provision in life insurance policies which allows the policyholder to receive part or full death benefits during his or her lifetime only. Helpful for the policyholders when they have been diagnosed with terminal illness, and when the treatments and costs of living become more important than leaving money for the beneficiary.
  • Accelerated Death Benefits
    It is a benefit provided to life insurance owners where they can receive a significant portion (say 80%) of the death benefits in advance of the insured's death.This can pay for medical bills, or nursing home costs and other commitments so that others are not left with this responsibility.
  • Accident and Health Insurance
    Coverage for accidental injury, accidental death and to bear the associated health expenses.The insured might be rewarded with limited benefits in the form of preventative services, medical expenses, and catastrophic care.
  • Accident Forgiveness
    Special provision allowed by certain insurance companies. Drivers who have their auto insurance with the company for a particular time period (e.g. 5 years) and haven’t been involved in any form of accident usually qualify for this form of program. Consequently, if the driver is at-fault in the next auto accident, the insurer won’t add a surcharge or hike the premium rates for the policy.
  • Account Current
    Yearly or monthly statement issued by an insurer which points out an agent’s performance in the insurance company. The report summarizes the paid premiums, earned commissions, policy cancellations and endorsements of each agent.
  • Accrual Taxation
    A form of federal income taxation wherein a person who holds a life insurance policy gets taxed periodically on certain parts of the cash value accumulation of his policy.
  • Act of God
    Natural catastrophe that can’t be prevented like tidal waves, tornadoes, earthquakes etc. Insurance companies determine whether or not these are to be covered by the policy. Often specific coverage can be included within the regular insurance policies to protect the insured items from the Acts of God.
  • Actual Cash Value
    A common method by which the amount for reimbursement for a loss is determined. It is the cost of replacing an item after loss minus the depreciation value.
  • Actual Total Loss (ATL)
    The loss that arises when the insured property gets so damaged that it cannot be used any further, not even after efforts of recovery or repair. Property may be declared as ATL when it’s totally destroyed, destroyed beyond repair, useless for the purpose that it serves or inexplicably disappears. Insurers give out the maximum settlement amount (according to the policy) during ATL.
  • Actuary
    A business professional, who makes use of mathematics, statistics, and financial theory to evaluate financial risks. Calculates the rates, reserves, dividends and other statistics associated with insurance and develops theories to minimize the cost of risks.
  • Actuarial Age
    The estimated age of an individual, based on mathematical and statistical calculations, which indicates the extent of his or her life. The actuaries determine the life expectancy of an individual by reviewing his/her previous as well as existing medical or health conditions. It helps the insurers in pricing, forecasting and planning according to the risks associated with an insurance applicant or policyholder.
  • Additional Living Expense Insurance
    Separate coverage usually included with a homeowner’s or renter’s insurance policy. Pays for the temporary costs of living to the policyholder, when the insured dwelling is damaged to such an extent that it cannot be used till it’s repaired. For e.g. cost of living in hotel or rented apartment, increase in monthly food bill due to eating out, loss of income if the damaged property was rented etc.
  • Adjustment Provision
    A condition incorporated in life insurance policies which allow the policyholder to change the terms of the insurance contract according to his or her requirements. Adjustments or alterations can be made by increasing or decreasing the policy’s face value, premiums amount, coverage term etc. Life insurance policies with this kind of provision usually cost more than standard coverage.
  • Adjuster
    An insurance professional who evaluates the loss, after an insurance claim is put forward and determines the extent of the insurer’s liability for the same.
  • Admitted Company
    An insurance company which is domiciled in one state, and licensed in each particular state where it conducts business.
  • Admitted Insurance
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  • Affinity Sales
    The sale of insurance policies through professional and business organisations.
  • Against All Risks (AAR)
    Insurance policy that offers broader coverage as compared to the named peril policies. Offers coverage against almost all kinds of risks, losses or damages, though specific exclusions are included as well.
  • Accelerated Benefits
    Provision in life insurance policies which allows the policyholder to receive part or full death benefits during his or her lifetime only. Helpful for the policyholders when they have been diagnosed with terminal illness, and when the treatments and costs of living become more important than leaving money for the beneficiary.
  • Aggregate Limit
    A separate provision that is usually specified in individual insurance contracts. It indicates the maximum value that the insurer agrees to pay as claim amount against a policy (within a specified time period, e,g. annually). Generally applicable for the liability and medical coverage. Multiple claims may be made against a policy, but any sum exceeding the limit will not be paid.
  • Alien Insurance Company
    An insurance company which is formed in a foreign country, and offers insurance protection in a different country. Such companies have to abide by the rules and regulations of both the countries – that of the originating one and of the one where it conducts business.
  • Allied Lines
    Any form of property-casualty insurance that accompanies a standard fire insurance policy. Provides additional coverage for wind and/or water damage, vandalism etc.
  • Alternative Dispute Resolution
    The course of action that the policyholders and insurers take to resolve disputes regarding claim and contractual terms. For e.g. arbitration, mediation, negotiation etc.
  • Amendment
    Alteration or change of terms in an insurance policy. Not an endorsement, since endorsements put in additional coverage, along with an existing policy.
  • Amount at Risk
    The difference between the face value (or death benefit) and the accrued cash value of a permanent life insurance policy. It points out the cost of protection that the insurer provides with the coverage.
  • Ancillary Benefits
    Supplementary health insurance coverage that pays for the expenses which a standard health plan doesn’t cover. For e.g. oral and dental care offered with group health insurance, ambulance transportation, etc.
  • Annuitization
    The switchover from the accumulation or savings phase in an annuity to the payment phase. The account balance is paid out to the annuitant only after that.
  • Annuity
    Annuities are financial contracts sold by the insurance companies to individuals planning for their retirement. An individual can make periodic or lump sum payments for the annuity, and after a certain age or at a pre-determined date, the insurer provides payments to the annuitant at specified intervals.
  • Annuity Certain
    A form of annuity which pays specific benefits to the beneficiary or estate for a pre-determined time period as mentioned in the contract. The payments are made on a regular basis (monthly, quarterly or annually etc.) as specified in the agreement, and continue for the guaranteed period even if the annuitant dies within the term.
  • Appleton Rule
    The legal rule which is only effective in New York and was initiated in the early 1900s by Henry D. Appleton. According to the regulation, any insurance company doing business in New York has to abide by the State Insurance Code, even if it does business in other states.
  • Apportionment
    Proportionate sharing of a common loss by two or more insurers, if they are supposed to provide coverage for it.
  • Approved Health Care Program
    The medical program or facility as approved under a health insurance policy/plan, which covers specific medical conditions and health care costs.
  • Arbitration
    The process by which an insurance company and the insured accept the decision of an impartial third party, and agree for claim settlement.
  • Appraisal
    The process by which the value of a property is determined, either when an insurance policy is bought or when an insured property gets damaged. Appraisals are usually done by neutral experts to have an estimate of the worth, condition and quality of the properties.
  • Arrears
    An insurance policy is said to be in arrears when the premiums are not paid (late/missed) but the policy is still in effect.
  • Arson
    Setting fire to a property on purpose for malicious intentions.
  • Asset Risk
    Evaluation of the risks associated with an asset, involving its default potential value (principal and interest) or rise and fall in market value.
  • Associate In Claims (AIC)
    A course or program that educates the professionals to deal with claims handling. An insurance specialist also earns the same designation after qualifying a test by the Insurance Institute of America (IIA).
  • Associate In Loss Control Management (ALCM)
    Individuals are awarded this professional certificate by the Insurance Institute of America (IIA) upon completion of 5 national examinations. Associates with this form of certification usually deal with the selection and implementation of loss control functions to specific needs of the consumers and insurers. They have know-how about accident prevention, property protection, and industrial and environmental hygiene and other responsibilities involving loss control.
  • Associate In Marine Insurance Management (AMIM)
    An educational program for the insurance professionals which intends to educate them about the intricate details of marine insurance. The associates need to know about ocean and inland marine insurance, fundamentals and legalities of risk management and insurance, insurance company operations etc.
  • Associate In Research And Planning (ARP)
    A form of professional qualification granted by the Insurance Institute of America (IIA) to those individuals who have completed educational program on life and health insurance research and planning.
  • Associate in Risk Management (ARM)
    Educational program designed by the Insurance Institute of America (IIA) which teaches the professionals about fundamentals and practices of risk management.
  • Associate In Underwriting (AU)
    Professional designation awarded by the Insurance Institute of America (IIA) to the underwriters, after they clear three national exams. The program educates the individuals all about the potential risk evaluation for insurance companies.
  • Associate In Underwriting (AU)
    Professional designation awarded by the Insurance Institute of America (IIA) to the underwriters, after they clear three national exams. The program educates the individuals all about the potential risk evaluation for insurance companies.
  • Assume
    Acceptance of a risk by an insurance underwriter or a reinsurer.
  • At fault party
    The party who is held responsible for an accident. He or she has to reimburse the other party for the resultant damages.
  • Attained Age
    Specific age mentioned in individual insurance plans. The named beneficiary becomes eligible to receive benefits or withdraw money, from an insurance policy, retirement plan or other similar plans which take age into account, after he or she reaches that age. In certain cases, the specified age intervals also affect the policy pricing.
  • Auto insurance score
    A number which is calculated by the insurers to determine your eligibility for an auto insurance policy, and how much premium you’re going to pay for the coverage. It is generally based on your driving records and past insurance history including accidents, claims, tickets etc. along with your credit score. Good score indicates low possibility of filing an auto insurance claim, and a poor score means that the insurer has marked you as high risk.
  • Average Severity
    Estimated value of an average sized insurance claim. It’s calculated by dividing the losses by claims count.
  • Bailee
    An individual or entity who holds someone else's property. Examples are dry cleaners, jewelers, repairers.
  • Balance Sheet
    This is an accounting term, used to refer to the financial statement of a company. Balance sheet of an insurance company enlists the assets, liabilities and surplus of the company as on a specific date.
  • Benchmark Surplus
    The additional amount or capital that an insurance company needs to cover the future benefit claims, in case the available cash flow of the company gets disrupted or blocked due to any unforeseen event.
  • Beneficiary
    A person or persons entitled to receive insurance proceeds at the event of death of the insured. This term is usually associated with life insurance.
  • Binder
    It is a proof or contract issued by the insurance company, which only ensures temporary protection, till a formal insurance coverage comes into effect.
  • Blackout Period
    The time period during which the surviving spouse doesn’t receive the Social Security benefits. The survivor benefits are usually paid till the child, who is under care, comes of age i.e. till the child reaches 16 years (or 22 years, if he/she is disabled). Thereafter lies the blackout period when there is gap in the payments. The spouse (or the surviving parent) can again start receiving the benefits from the Social Security when he/she crosses 60 years of age.
  • Blanket Bond
    A form of business insurance coverage which compensates the losses caused by employee dishonesty, theft or mistake. Offers protection to brokerages, investment bankers and other financial institutions against forged checks, counterfeit currency, fraudulent trading, property damage etc.
  • Boat Owners Package Policy
    This policy allows the boat owners to avail a special contract that combines physical damage insurance, medical expense insurance, liability insurance, and other coverages at once.
  • Bond
    A form of long term investment instrument, usually offered by the life insurance companies. Acts as a security option for the bond issuer, who pays the premiums to the insurer at regular intervals or as a lump sum amount. If the issuer of the bond goes default, then the insurer is held liable for the scheduled repayment of the principal and interests to the bondholders.
  • Broker
    Individual who sells insurance and represents the client in his/her insurance transactions. Unlike an insurance agent, a broker searches the market in interest of the client, and doesn’t work as a representative of an insurance company.
  • Broad Evidence Rule
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  • Broad Form Insurance
    Insurance policies which cover numerous risks, even the rare ones
  • Bumbershoot Insurance
    A form of liability insurance coverage that is especially intended to cover the shipyards. Offers protection against collision, salvage, indemnity as well from the marine and non-marine risks.
  • Business Risk Exclusion
    The omissions under a product liability insurance, for which the policy won’t be extending coverage. The insurer will deny compensation for the business risks, if the insured company or business fails to deliver goods or services as promised i.e. if the delivered products don’t meet the level of performance as advertised, represented, or warranted.
  • Carrier
    Refers to the insurance company or the insurer.
  • Cash Surrender Value
    The amount that a policyholder would receive in the event that his or her policy is being voluntarily ended before the date of maturity or if the insured event occurs.
  • Cash Value
    Also known as the policy equity value, the cash value is the amount for which the policy is worth at any given time. It is the value of a cancelled or surrendered policy while you are still alive.
  • Cancellation
    The process of terminating an insurance policy agreement prior to its date of maturity. Flat cancellation refers to the expiry of a policy on its effective date. It appears as if the policy has not been issued yet, no coverage was offered and hence there is no premium left to be paid.
  • Credit Risk
    Risk for the lenders, investors or insurers on due amounts from the borrowers, reinsurers or creditors.
  • Ceding company
    The insurance company which transfers all or part of its risk to a re-insurer.
  • Chartered Property and Casualty Underwriter (CPCU)
    Certified professional who has expertise in insurance, risk management, economics, finance, management, accounting, and law. The American Institute for Property and Liability Underwriters bestows this designation to individuals, after they successfully pass 10 national examinations regarding various phases of property and casualty insurance. Along with that, the individuals also need to have work experience of 3 years in the insurance business or any related area.
  • Claim
    Demand of benefits or payments from an insurance company after any loss or damage, according to the terms of a policy.
  • Clash Reinsurance
    A form of reinsurance which protects the insurers when more than one insured individual claim for respective damages/losses after a single catastrophic event. Insurers need the additional protection to share large risks with other companies.
  • Cleanup Fund
    It is a form of life insurance policy which pays for the final expenses of the insured individual after his or her death. Burial or funeral expenses, mausoleum or cemetery fees, costs of settling financial and property issues etc, are covered with the fund amount.
  • Clean Sheeting
    An act of insurance fraud whereby the policy is bought without disclosing a terminal illness or a pre-existing condition to the insurer. Both the policyholder and the insurance agent are usually involved in this form of fraud.
  • Clear-Space Clause
    Provision included in property insurance policies, which limits the liability of the insurer and ensures protection of the insured property from potential dangers or risks. It specifies that a particular insured property must be at a set distance from other insured or uninsured property, to evade the chance of loss or damages.
  • C.L.U.E. report
    C.L.U.E. is the abbreviated form for Comprehensive Loss Underwriting Exchange. The report provides details about an individual's claim and property damage history.
  • Collision Deductible Waiver
    Insurance coverage which pays for the collision deductible if you're hit by an uninsured driver, or after a hit-and-run accident.
  • Commercial Forgery Policy
    A form of banking liability insurance coverage which compensates in case the insured suffers from losses due to counterfeit checks and check kiting frauds. Mostly required by traders, merchants and business owners. Usually sold by property and casualty insurers.
  • Commercial Lines
    Forms of insurance coverage which offer financial backing to businesses, institutions and organizations against potential risks.
  • Common Carrier Liability
    Liability insurance coverage for individuals or commercial organizations and firms which transports persons or properties in return of payments from the customers. E.g. trucking companies, airlines, bus lines etc.
  • Competitive Estimate
    Refers to the term used by the insurance companies when they ask for multiple car repair estimates following an auto insurance claim. After considering all the estimates, the insurers select the one which charges the lowest.
  • Comparative Negligence
    Legal provision in certain states, which is particularly implemented to determine the claim amount to be paid to parties involved in an accident. The faults or negligence of the parties are weighed up, and the claim amount is set accordingly. The party which is deemed less faulty will be able to receive from his insurance claim than the other party.
  • Co-insurance
    Insurance policy provision by which the insured shares the cost of the covered losses with the insurer, even after paying the deductible. The policyholder thus ends up paying a specified percentage of the total value of property. Usually applicable for health and property insurance policies.
  • Concealment
    The act of holding back information intentionally, knowing that it would affect the issuance or rate of the insurance policy.
  • Concurrent Causation
    Insurance doctrine which states that insurers are supposed to compensate for the damages or losses, if that has been caused by two or more events, with one of them being a covered peril. The policyholder might need to prove that the covered peril was the cause behind the excluded peril and the subsequent losses. This provision is especially applicable to the property and casualty insurance coverage.
  • Conditional Sales Floater
    Coverage which pays back the seller for the damages and losses to the property, if it had been bought on a conditional or installment basis. It only pays the residual amount, which has yet not been paid off by the customer.
  • Condominium
    A form of housing arrangement in which an individual owns a particular unit within a multiple unit building or real estate property. However, the common facilities are jointly used and maintained by the owners of the individual units or an association is appointed for the purpose.
  • Confining Condition
    Unfavorable health condition during which an individual has to remain confined to his or her home or a medical centre like in a hospital, nursing home etc.
  • Consequential Loss
    Losses which are not directly caused by the insured perils, but accompany the insured losses. For e.g. Property, casual or fire insurance policies cover the direct damages to a business. Loss of income or revenue is form of consequential loss, which needs to be covered, and is included as a part of the key coverage.
  • Contingent Beneficiary
    The recipient of the death benefits from an insurance policy, if pre-determined conditions are fulfilled according to the deceased’s will, or if the primary beneficiary dies before the insured.
  • Contributory Negligence
    Legal doctrine applicable in some states, which puts restrictions when claims are filed. If the claimant was found to be even partially at-fault or negligent during an accident, compensation is denied.
  • Convertible Term Insurance
    Type of term life insurance policy which can be converted into a permanent life insurance policy. The conversion is allowed without medical evaluation of the insured’s health condition, and no extra charges are applied for it.
  • Co-pay
    A provision in the health insurance plan whereby the insured has to pay a specified dollar amount each time he accesses a health care or medical service. The rest of the costs is paid by the insurer.
  • Cost-of-Living Adjustment (COLA)
    The automatic adjustments applicable to the Social Security and Supplemental Security incomes, in order to guard the consumers against inflation. COLAs are calculated on the basis of the percentage increase of the consumer price index.
  • Coupon Policy
    A form of life insurance policy which has coupons attached to it. The policyholder receives his/her share of dividends or interest from the policy when the coupons are encashed at the time of premium payments.
  • Credit life insurance
    A form of life insurance policy which is bought to protect a lender (creditor), if the borrower (debtor) passes away without paying off the loan amount fully. The insurance policy acts as a security tool which then compensates the outstanding loan balance. The face value of such a policy decreases with time, as the lender gradually pays off the loan.
  • Death Benefit
    Whenever a person possessing a life insurance policy passes away, his legal heirs are supposed to get a sum of money termed as Death Benefit. This amount does not account for any adjustments towards outstanding policy loans, dividends, paid-up additions, or late premium payments.
  • Debenture
    This may be described as an unsecured debt which is supported by the general credit of the borrower or the issuing corporation. The loan does not necessitate any specific property to be posed as a security.
  • Declaration
    This segment of a property or liability insurance policy depicts the name and address of policyholder, the property which has been insured, its location and features, the policy period, premiums, and other associated information. Hence it is better known as the "declaration page".
  • Declined Risk
    The amount received by the beneficiary, from an annuity or insurance policy, after the death of the insured individual. Also known as ‘death benefit’.
  • Deductible
    This signifies any loss to be shared by the insured. Once the insured pays for his share of the loss, then a certain period of time has to be spent before the effect of a pre-mentioned dollar amount or a fraction of the claim comes into play.
  • Deferred Annuity
    This is an annuity agreement which gathers the premiums at an interest and lets the annuity income benefits commence only after the lapse of more than one annuity period since the date of annuity purchase.
  • Demolition Insurance
    Insurance coverage which covers the costs of a building demolition if the damages are caused by perils like fire or storm. Even compensates the insured for the damages if the building demolition becomes unavoidable due to the zoning requirements or building codes.
  • Demutualization
    The process by which a mutual insurance company, which is owned by its policyholders, gets converted into a publicly traded stock insurance company.
  • Direct Incurred Loss
    Loss or damage to property caused directly by the insured perils.
  • Direct Writer
    Insurance company that doesn't appoint independent agents, but sells insurance policies directly to the public.
  • Ditle
  • Dividend
    The portion of money that is paid to the whole life policyholders, usually at yearly intervals. The amount is returned from the insurer's earnings and is either received as cash or as a discount against the future premium payments.
  • Dread Disease Rider
    Additional insurance coverage purchased along with a life insurance policy. Pays a specific percentage of the death benefits to the insured if he or she is diagnosed with a dreaded (serious) disease, which reduces his or her life-expectancy, like cancer, heart disease etc. Helps to pay for the costs of treatment.
  • Early Warning System
    This system is developed by the insurance regulators to get a fair idea of the insurers financial stability. Depending on their calculations using the financial ratios, the Insurance Regulatory Information System (IRIS) is capable of identifying the insurers who need any regulatory attention.
  • Earned Premium
    A part of premium which can be implemented to that part of the policy period which is already over. The insurance premiums can be paid beforehand , but its not possible for the insurance company to achieve the accumulated amount until the expiry of the policy.
  • Earthquake Insurance
    This is designed to insure a building with all its contents, while it also assumes a large percentage deductible on each of them. Since most of the business policies and the standard homeowners are not contemplating on the Earthquakes, hence the importance of a specific policy or endorsement has become a necessity.
  • Economic Loss
    It can be defined as the accumulated cost in terms of all those factors such as property damage, funeral expenses, wage loss,insurance administration costs, and medical, hospital and legal costs, that are associated with both the insured and uninsured.
  • EIFS
    Acronym for Exterior Insulation Finishing System. It is a type of exterior wall covering for buildings, which has insulation and water proofing advantages. Home insurers may sometimes refuse protection to buildings with EIFS, as the material has been found to be less resistant to fire or other damages.
  • Elimination Period
    It depicts a stretch of time that passes between the duration of disability and the commencement of the disability income insurance coverage where in no benefits are offered. The Elimination Period may last for a few days or up to even a year or more.
  • Employers' Liability Insurance
    Insurance policy that offers additional liability coverage to the employers, in case the workers/employees get affected by disease, fatal accidents or are injured. Coverage is only provided when the issues arise due to employer negligence and/or workplace conditions.
  • Endorsement
    A change in the original insurance policy for addition or removal of coverage. Also known as 'rider'.
  • Entity
    A Person (being) or individual, who will be covered by an insurance policy.
  • Escrow account
    An account which is set up for accumulation of funds, with the intention of paying for mortgage, property taxes or homeowners’ insurance etc. Usually the mortgage companies or lenders make it a requirement for the property owners.
  • Exclusion
    Certain conditions mentioned in an insurance policy, which will not be covered by the insurer. Exclusions vary from one policy to another and depend on respective insurers.
  • Exposure
    The possibility of loss or risks associated with a specific area.
  • Extended Replacement Cost Coverage
    Insurance coverage which pays a certain sum more than the limit of a homeowner's policy, to replace a damaged home. The surplus is intended to protect the homeowners during inflation or from the rising costs of reconstruction.
  • Extra Expense Cover
    Pays for the relocation and associated costs to a business organization, after an accident, so that the offered services aren’t interrupted. Usually accompanies a business insurance policy to provide for the immediate financial requirements, while the business property is being repaired or replaced after damage from a covered cause of loss.
  • Face amount
    The total sum of money that the beneficiary is entitled to receive after death of the insured, or the amount that the insured can obtain on maturity of the policy. Usually mentioned on the front page, i.e. on the 'face', of the policy documents.
  • Family Income Rider
    An add-on to a life insurance policy which provides financial assistance to the beneficiary on a monthly basis for a specified term period, after the death of the insured. The amount of money is usually arranged as an income replacement option and is equivalent to the insured’s monthly income.
  • Federal Emergency Management Agency (FEMA)
    Agency of the United States Department of Homeland Security which deals with Disaster mitigation, response, preparedness or planning, recovery and education.
  • Federal Funds
    The balance amounts that the depository institutions borrow amongst themselves are just a kind of reserve balance known as the Federal Funds. Many other depository bodies and federal agencies are also involved in this process of lending each other.
  • Federal Insurance Administration (FIA)
    The FIA is a federal agency which is in command of the National Flood Insurance Program. But it is not aimed at controlling the insurance industry.
  • Federal Reserve Board
    A body comprising of seven members, who are in charge of the banking system and responsible for establishing rules that regulate the banking industry and the holding companies associated to banks. It also plays a leading role towards managing the U.S. monetary system and credit management.
  • Fidelity Bond
    This is a form of coverage which is offered to the policy holders to help them meet their losses resulting out of fraudulent acts committed by its employees who are con artists. This bond is beneficial towards protecting the business against those activities of its employees which are detrimental towards its growth and prosperity.
  • Fiduciary Bond
    This is a bond that ensures the responsibilities associated with certain fiduciaries as the executors and trustees. This is a kind of surety bond which is also known as a probate bond.
  • Financial Guarantee Insurance
    An insurance plan which ensures that the policyholder receives compensation for the losses arising out of a financial transaction. Acts like a surety bond or guarantee for the investors or lenders, which protects against the ups and downs in the market, reduction in interest rates or in case borrowers fail to make payments.
  • First dollar coverage
    A special kind of insurance coverage whereby insurers pay for the entire value of the loss, or up to the maximum limits of a specific policy. Policy holders don’t need to contribute any money as deductibles or copayments.
  • First-Loss Policy
    Form of property insurance policy that offers only partial coverage. It only covers the estimated loss and thus, doesn’t pay the full value of the damaged, destroyed or stolen property. Suits those events where the likelihood of total loss is less, and the average clause doesn’t apply.
  • Flexible Premium
    An arrangement by which the premium payment for some types of life insurance policies and annuities can be altered. That means the policy owner or the contract owner can modify the premium amount and the frequency at which it's paid, though the variations shouldn't overrule the legal and contractual specifications.
  • Floater
    Additional insurance coverage for those valuables which are frequently moved from place to place, for e.g. jewelries, furs, stage equipments etc. Usually covers a single asset and so, multiple policies have to be bought along with a regular insurance policy, to cover different items.
  • Free Look Provision
    The period of time that is allowed to a life insurance policy holder, immediately after the policy gets issued. The time period remains usually between 10 and 30 days, and depends on the state laws, insurer and policy terms. The policy owner can choose to cancel the coverage within the specified time period, and collect a full refund on the initial premium amount.
  • Gap Insurance
    The Gap Insurance accounts for the cash value which is determined by the difference between a car actual cash worth in the event it gets damaged or stolen and the amount which the insured owes the hiring company. This is a form of insurance mostly associated with the leased cars.
  • Gatekeeper
    The basic requirement that an individual have to meet to qualify for long term insurance plans. In the health insurance industry, ‘gatekeeper’ refers to the physician who is authorized to manage the insured patient’s treatments and medical care.
  • Generally Accepted Accounting Principles (GAAP)
    These are a set of guidelines illustrating the various rules and practices of accounting laid down by the American Institute of Public Accountants. This is also done with a view to report business achievements and mistakes.
  • Generic Auto Parts
    These are cheaper auto parts which have still retained their original value after an auto crash. These auto parts are not offered by the car manufacturers and are considered by the insurers to be at par with the identical parts produced by the original equipment manufacturer(OEM).
  • Glass Insurance
    This is coverage towards any glass breakage resulting out of demolishing factors like fire, war etc. Such types of insurance are offered for a variety of options like the windows, structural glass, mirrors, leaded glass etc. inclusive or exclusive of a deductible.
  • Goods in transit insurance
    A type of insurance policy which provides coverage to goods or properties, while it is being moved from place to place or stored during a journey. It pays for the damages and losses that may happen during supply or delivery of the properties, and even covers theft or loss that arises from undue delays in delivery. The transit may be done within the country by road, rail and even through inland or coastal waters. International transit is however covered by a marine insurance.
  • Grace Period
    This period comes once the premium amount becomes due while the policy coverage still remains active. Under such circumstances the insured is naturally expected to pay for such a due.
  • Gross Negligence
    Reckless and careless action disregarding life, limb, and/or property. It is a conscious and deliberate conduct whereby the individuals ignore the regulations, even after knowing that such actions are likely to cause harm or injury to oneself or others.
  • Group Plan
    An insurance plan which covers a group of people, usually professionals, members or employees of an organization.
  • Guaranteed Insurability
    An option which allows the policyholder to purchase additional insurance protection from the insurer or to renew the existing policy only, without any further proof of insurability.
  • Guaranteed renewable
    The type of insurance policy whereby the insurer guarantees coverage as long as the policyholder continues with the regular premiums. Renewals are done after specific time intervals. The rates on the policy or other charges might increase with time, based on the risk factor associated with the insured.
  • Hacker Insurance
    A coverage for the businesses associated with e-commerce, which could be looked upon as a precaution from the losses inflicted by the hackers.
  • Hard Market
    It can be termed as a market for the sellers where the insurance costs are higher and hard to procure.
  • Health Reimbursement Account/Arrangement (HRA)
    Employer funded health plan/arrangements which are also termed as HRA. Such a plan reimburses the employees for their qualified health care expenses, which are not covered by the standard policies. The funds received are tax-free. Since the employer pays for it, he may cancel it anytime.
  • Homeowner's Policy
    This is more of a collective insurance policy where the homeowners may avail a wide range of property and liability coverages relating to any domestic events or events far away.
  • House Year
    A house year is a standard measurement of insurance that covers only one house for a period of 365 days.
  • Hurricane Deductible
    It refers to a certain amount in terms of dollars which gets appended with a homeowner policy just to make sure that the insurer is not subject to any loss as a result of a hurricane. It is sometimes calculated on a percentage basis. This amount varies depending on the scope of risk associated to a particular region. Hence it appears to be different depending on the insurer and the state where it belongs to.
  • Hybrid Car
    A vehicle which is a combination of both the conventional (combustion) engine and a rechargeable mechanism (electric motor and battery). Facilitates fuel economy and reduces pollution. This form of car is more eco-friendly than the traditional vehicles.
  • Identity Theft Insurance
    Coverage for expenses incurred as the result of an identity theft. Can include costs for notarizing fraud affidavits and certified mail, lost income from time taken off from work to meet with law-enforcement personnel or credit agencies, fees for reapplying for loans and attorney's fees to defend against lawsuits and remove criminal or civil judgments.
  • Immediate Annuity
    A product purchased with a lump sum, usually at the time retirement begins or afterwards. Payments begin within about a year. Immediate annuities can be either fixed or variable.
  • Incontestable Clause
    A condition, usually found in life insurance policies, which states that the insurer cannot challenge or contest any claim made against the policy after the contract has been in effect for a specific time period (usually 2 years).
  • Incurred Losses
    Losses occurring within a fixed period, whether or not adjusted or paid during the same period.
  • Indemnify
    Provide financial compensation for losses.
  • Independent Agent
    Agent who is self-employed, is paid on commission, and represents several insurance companies.
  • Individual Plan
    Insurance policy which offers financial protection to a single person or entity.
  • Inflation Protection
    An endorsement that can be added to property or health coverage, and compensates for the rising costs of inflation. Helps the insured individual by increasing the policy limits in respect to the increased cost of goods and services.
  • Irrevocable beneficiary
    The beneficiary assigned in a life insurance policy who is entitled to receive the benefits. Once the beneficiary is made irrevocable, even the policy owner won’t be able to make any changes in the policy or in the compensation, without the consent of that person.
  • Issue Age Policy
    Insurance policy which sets the cost of coverage on the basis of the age of the policyholder, at the time of issue only. The premiums rates however stay fixed for the entire term of coverage. Older individuals, thereby, have to pay more for such policies than younger individuals, since they are considered to be at much greater risk and the costs for treatments are also higher for them.
  • Joint Underwriting Association (JUA)
    This is a group of insurers coming in collaboration to provide coverage for a specific volume of exposure or a certain risk-type that is otherwise not available in the market. This association also shares the profit loss ratio of the program. Homeowners insurance, auto insurance, medical malpractice coverage and several other commercial coverage plans may be provided through such associations.
  • Judgment Rating
    The method used by the insurers or the appointed underwriters to measure the risks and exposure for an insurance applicant. The rates on the policy are set accordingly. Each insurer maintains a set of rules for appropriate evaluation.
  • Junk Bonds
    Corporate bonds that have BB credit ratings or less are called Junk Bonds. Junk bonds are so called because of their high default risks. These are also known as 'high yield bonds' or 'speculative bond' and are mostly taken for speculative reasons. They rate of interest charged in such bonds are normally 3-4% higher than the government issues. Since these bonds are highly subject to market risks and investors may be forced to sell off their bonds when the value goes down, most states have now put limits on the investment made by insurers in such bonds.
  • Joint and Survivor Annuity
    This an annuity that has 2 annuitants who are usually spouses. Here the payments continue till the time anyone of the 2 annuitants are alive.
  • Kidnap/Ransom Insurance
    It is a type of insurance that provides coverage in the event of kidnapping, extortion, ransom demand as well as loss due to financial damages. The basic policy covers loss of income, bank loan interest, medical and psychiatric care. This policy is often taken up by the international corporations in order to cover their employees. Such policies mostly have high deductibles and also exclude specific geographic areas and also sometimes require that the holder of such a policy should not reveal the existence of such a coverage.
  • Key Man Insurance
    A life or health insurance on an individual who is an important entity and whose services are crucial for maintaining the success of a company or business. This individual is someone who must be a key individual of a company whose disability or death could lead to financial loss for the firm.
  • Kit Car
    It is a type of car/automobile which is assembled from a set of parts sold by the manufacturer. The buyer either puts all the parts together on his own or hires a third party to do it. Often, separate components of other vehicles are collected to improve the 'kit'. Also known as 'replica' or 'component' car.
  • L-Share Variable Annuities
    These are types of variable annuity contract that normally has short surrender terms while having higher charges for mortality and expense risks.
  • Laddering
    This is a technique used in investment where the investors are required to purchase multiple financial products at a time that have separate maturity dates.
  • Lapse
    A lapse is a break in the regularity of the payment of insurance premium even by the end of the grace period resulting in the termination of the insurance policy.
  • Law of Large Numbers
    The Law of Large Numbers is a theorem in probability that supports the insurance business. According to this theorem, bigger the number of uninsured people, the more accurate will be the prediction of loss.
  • Legal Insurance
    Insurance plan intended to cover the legal costs associated with an event or occurrence.
  • Level Premium Policies
    These are premiums that remain the same every year that a particular policy is in force. It is the premium paid for a deferred annuity or for a life insurance policy.
  • Liability Insurance
    Insurance for the legal responsibility that the policy holder has towards another person for causing a bodily injury or property damage caused.
  • Libel
    Defamation caused by a published statement in writing, in pictures or in any other form that causes injury to a person’s reputation. Writers, reporters, bloggers etc. need insurance protection for libel.
  • Life Annuity with Period Certain
    A contract guaranteeing the annuitant periodic income payments throughout his lifetime, also guaranteeing to continue payments till a specific period. In the event of the annuitant's death before the term the payments will go to a beneficiary designated in the contract until the term ends.
  • Life Annuity
    A contract that guarantees periodic returns to the annuitant throughout his lifetime. If, after the death of the annuitant, the annuity provides no returns, then it is called a straight life annuity. There are some life annuities that provide income payments either throughout the lifetime of the annuitant or for a specified term or even until a guaranteed amount has been paid.
  • Life Income with Refund Annuity
    This is a type of annuity contract where periodic income payments are received by the annuitant throughout his lifetime. This contract also guarantees that in the event of death of the annuitant before the total payment made matches the amount paid for annuity, a refund will be made.
  • Life Insurance
    An insurance where there is an agreement between the insurer and the insured, where the insurer (insurance company) agrees to pay a certain amount of money in the event of death of the policyholder or to the policy holder after a certain period of time.
  • Limits
    It is the highest amount of coverage that can be paid for a loss listed in the policy.
  • Limited Tort
    The option which restricts the tort rights of the injured party after an accident. The coverage costs are reduced, but the right to receive compensation from the at-fault party for pain and suffering gets eliminated.
  • Line
    It is a kind of insurance. Example, personal lines.
  • Liquidation
    Recognizes the state insurance department or its appointed deputy as liquidator and who can wind up the affairs of an insurance company by settling the pending claims upon the remaining assets of the company. After the order for liquidation is passed, the insurance departments in other states along with the state guaranty funds are notified about the proceedings. Such proceedings are subject to only the individual state's liquidation statutes and not the Federal Bankruptcy Code.
  • Liquidity
    The speed of converting security into cash.
  • Liquor Liability
    Insurance coverage for damage to property or bodily injury by a person intoxicated on liquor served by a policyholder.
  • Lloyd Of London
    Originally a coffee house in London in the 1600s, it is today a market place to sell insurance. This is a place where mini-insurers and underwriting syndicates gather to sell insurance. The underwriters look after the functioning of the syndicates and they decide on the risk factors. The Lloyd's market plays a major role for marine insurance as well as other high risk markets.
  • Lloyds
    It is a corporation that promotes the services of a number of underwriters together. There is no issuance of policies but individual underwriters write the insurance policy with each one taking responsibility for a part of the risks involved. It is found in Texas and has no connection with Lloyd's of London.
  • Loan value
    The maximum amount that can be borrowed against the cash-value of a life insurance policy, at a specific point of time.
  • Long-Term Care Insurance
    This is insurance for those who need care for a life time or a relatively long time. It is applicable for those who are unable to perform their daily activities without help or support, or those who need assistance as a result of a cognitive disease like Alzheimer's. This insurance is available either under an employer-sponsored plan or as an individual plan.
  • Long-Term Disability Income Insurance
    A type of income that provides benefits when an individual is unable to work for a long time due to a disability. It is the type of insurance that provides benefits until an individual is ready o work, dead or has become eligible for pension.
  • Loss
    Loss means the value or quality of a property or a legal liability going down.
  • Loss Adjustement Expenses
    The amount of money that the insurer pays to investigate a particular claim and settle it. This also includes the money paid to defend a lawsuit.
  • Loss Costs
    This is a certain portion from the insurance rate that is used in adjusting and covering claims. The rates that the insurance companies determine are typically after they have estimated any future loss costs and after addition of expenses, contingencies and profit amounts.
  • Loss Of Use
    The condition in home owners insurance or renters insurance that allows the insurance holder to get coverage for the cost of shifting and livelihood in a temporary home while their home is being rebuilt after a disaster.
  • Loss Ratio
    It is the ratio between the total claims that paid to the policy holder along with the adjustment and the total amount of premiums paid by the insured.
  • Loss Reserves
    The reserve or estimate that the company is ready to pay for claims. This amount may be timely adjusted.
  • Malpractice Insurance
    Coverage for lawyers, physicians and other specialists for professional liability. Provides coverage for lawsuits arising out of negligence or any other error that has harmed the client.
  • Managed Care
    It is a type of health insurance plan that is in contract with different health care providers who in turn offer health care for individuals at a reduced cost. There is a rule to be followed which is made by the providers and how much the plan will provide for an individual depends on the rules set by the network.
  • Manual
    A book that highlights the rate, classifications and underwriting rules of an insurance or bonding company or a rating association or a bureau.
  • Marine Insurance
    Offers protection for goods in transit as well as the commercial vehicle transporting them through water over land. It generally applies to ocean marine and seldom to inland marine. Perils covered include damage to a ship's hull and cargo, collision, sinking, fire, piracy, capsizing, jettisoning cargo. Wear and tear, war, mold and dampness are excluded.
  • Maturity Date
    It is the date on which the insurer pays the face amount of the endowment policy to the policy holder in endowment insurance, if the owner is still living. For an investing plan, it is the date on which the issuer of the bond must repay the bondholder the borrowed amount.
  • Maximum Indemnity Period
    A separate provision usually available under a business interruption policy or as a part of business income coverage. Accordingly, the insured business can specify a term period, over which he'll receive financial compensation for the loss of income.
  • Mccarran-Ferguson Act
    In 1945 the Congress made a declaration after signing a Federal law that the states would continue regulating the insurance business. This law was the McCarran-Furguson Act which grants the insurance companies a certain freedom from the federal anti-trust legislation.
  • Mediation
    A third party attempting to resolve any conflict that arises between two other groups.
  • Medicaid
    It is a federal government assisted program originated in 1965 where medical assistance is provided for people who are incapable to pay for health care.
  • Medical Payment Insurance
    It is the plan in which the insurance provider agrees to pay the policy holder a certain amount of money for medical or funeral expenses as needed for a bodily injury or death caused by accident. The payments made are independent of faults.
  • Medical Utilization Review
    It is the reviewing of claims for medical treatment by the insurance companies.
  • Medicare
    The Federal government program for senior citizens (65 years old or more) that pays for part of their treatment, hospitalization, doctor's bills, home health care as well as skilled nursing care.
  • Medigap Or Medsup
    It is a supplementary policy for Medicare and supplements benefits provided by federal insurance.
  • MIB, INC
    Formerly known as Medical Information Bureau, this non-profit organization was set to inform the insurers about any impairment that the individual has that is connected to the application for insurance put forth.
  • Mine Subsidence Coverage
    Available only in a few select states, this is an endorsement to home owners policy. It protects against losses caused to a home by the land under it sinking into a mine shaft.
  • Misquote
    A wrong estimate of the insurance costs presented by an insurance company.
  • Misrepresentation
    Falsely representing something. In selling insurance it means a statement that is false or misleading made by a sales agent to promote a product and induce sale.In the underwriting process it means a false or misleading statement made by the applicant that leads the insurance company to avoid the policy.
  • Misstatement of Age or Sex Provision
    This provision shows the way benefits for life insurance, health insurance and annuity policy will be adjusted if information like age and sex are misstated in the application for insurance.
  • Modified Endowment Contract
    An insurance product which acts like an annuity during the lifetime of the policyholder, and forwards death benefits like a life insurance policy when the insured passes away. It allows the policyholder to place lump sum of cash in a single premium life insurance policy.
  • Modified Premium Policies
    A policy where the insurance holder pays a lower premium compared to a similar policy of the same level for a specified period and then pays a higher premium compared to what he would pay in a similar policy of the same level.
  • Money Supply
    It is the total amount of money supplied to the economy. It composes of the circulating currency, savings deposits and checking accounts.
  • Moral Hazard
    It is the chances of a person becoming dishonest during an insurance transaction.
  • Morbidity Rate
    It is the factor on which insurers partly base the health insurance premiums for a proposed age group of insurance holders. It is the rate of occurrence of sickness and injury within a particular group of people.
  • Mortality and Expense Risk Charge
    The fee to cover annuity contract guarantees like death benefits.
  • Mortality Rate
    The percentage rate of occurrence of death among a specified group of people of a particular age group and sometimes even of a particular gender. The premium for life insurance is partly based on the mortality rate for a specific age group.
  • Mortgage Guarantee Insurance
    Also known as private mortgage insurance (PMI), this is a coverage for the mortgage provider in case a mortgage holder defaults a loan.
  • Mortgage Insurance
    It is the insurance policy that provides guaranteed repayment of the mortgage loan in the event of death or maybe any disability of the mortgagor. The more the debt the lesser becomes the coverage as the coverage is in decreasing term insurance.
  • Mortgage-Backed Securities
    The security based on a group of underlying mortgages guaranteed by a government agency for paying a timely principal.
  • Multiple Peril Policy
    It is a policy similar to a homeowner's policy that protects from different perils. It is a mixture of property as well as liability coverage.
  • Municipal Bond Insurance
    It provides coverage for bondholders to get payments when the issuer of bond defaults. Companies with high credit ratings offer such insurance. It is a form of financial guarantee insurance.
  • Municipal Liability Insurance
    It is the insurance for the liability of municipalities.
  • Mutual Holding Company
    It is a hybrid company between pure stock insurance and a mutual insurance company and derives attributes from both of them. The ownership of the company is retained by policyholders and the company owns a major portion of its stock subsidiary.
  • Mutual Insurance Company
    It is a company owned by its policyholders where part of the profits generated is returned as dividend. The remaining fund is used in the event of unexpected losses.
  • Named Peril
    Peril listed in an insurance policy as covered.
  • National Flood Insurance Program
    It is flood insurance that is sold to homeowners as well as business owners under a Federal government-sponsored program.
  • Net Annuity Cost
    The amount of money that equals the value of the periodic installments payable under an annuity contract. It is calculated on a net basis and is in contrast with gross annuity cost.
  • Net Payment Cost Comparison Index
    This is a cost comparison index prepared to make comparisons between one life insurance policy and another considering the time value of money and the measurement of the cost value of a policy for over a period of 10 or 20 years. This total calculation is based on the assumption that the policyholder pays the premiums for the entire period.
  • No-Fault
    Auto coverage for drivers to pay for their own injuries regardless of who was at fault. This coverage varies from one state to another and refers to a liability system confining lawsuits to only serious cases.
  • No-Fault Medical
    Accident coverage included in homeowner's insurance.
  • No-Pay, No-Play
    This plan is developed to prohibit uninsured drivers from claiming for benefits from insured drivers. This plan prohibits uninsured drivers from filing lawsuits for non-economic damages in many states. Some states require the drivers to pay an amount that is equivalent to a large deductible before they can sue for property damage and also another large sum of money before bodily injury claims.
  • Non-Admitted Assets
    Assets not mentioned in the balance sheet of the insurance company. Assets include fixtures, past due accounts receivable, furniture, agents' as well as debt balances.
  • Non-Admitted Insurer
    Insurers who have license in some states but not all. However, these insurers sell coverage that not available with the licensed insurers of the state.
  • Noncancellable and Guaranteed Renewable Policy
    A health insurance policy for individuals that states a specific age (usually 65) for the policyholder until which the insurance company cannot cancel the policy, increase premiums or change any clause in the policy as long as the premiums are being paid within due time.
  • Nonfeasance
    Legal term which indicates inaction, i.e. neglect or failure to act upon something, which should have been done and thus, assigns liability.
  • Nonforfeiture Options
    Different ways that can be used by a contract owner by which he can apply for cash surrender value of an insurance or annuity contract due to any lapse.
  • Notice Of Loss
    A notice in writing given to an insurance company immediately after an accident intimating about any loss that occurs.
  • Nuclear Insurance
    Coverage for the operators of nuclear reactors and other facilities for liability as well as property damage from any nuclear accident. Both private as well as federal government insurance companies are included.
  • Nursing Home Insurance
    Coverage for the nursing home stay of a policy holder. This is a form of long-term care policy.
  • Object
    A thing or asset having material value, which is insured for safety.
  • Occupational Disease
    Illness related to the factors in the workplace.
  • Occurrence Policy
    Coverage for any incident that occurs during the term of the policy even if the claim is filed several years later.
  • Ocean Marine Insurance
    Coverage for all types of vessels in the sea for property damage and loss/damage to cargo. It includes perils like piracy and other liabilities associated with marine life. War is not covered.
  • Open Competition States
    States where the insurance companies can change their rates and do not need any approval prior to the change. However, these changes in rate made by the insurance company can be disapproved by the state commissioner if they do not find it to be reasonable.
  • Operating Expenses
    The expenses borne to maintain business property like insurance, property taxes, rent and utilities. Income tax, depreciation and other financing expenses are excluded.
  • Options
    Contracts that only allows the owner but does not oblige him to buy or sell a property or an asset at a certain date and for a particular price.
  • Ordinance or Law Coverage
    An endorsement to property policy that compensates for the extra cost of reconstruction in compliance with the set laws that originally did not exist when the building was built for the first time.
  • Ordinary Life Insurance
    A normal life insurance policy that remains active for the entire lifetime of the policyholder.
  • Original Age Conversion
    Insurance provision which allows alteration of a term life insurance policy into a permanent life insurance policy. The premium rate is however based on the policyholder’s age when the term life policy was issued.
  • Original Equipment Manufacturer Parts / OEM
    Original auto parts manufacturers. Parts made by the vehicle manufacturers.
  • Other Structure
    Any additional structure located within the premises of the insured property, but is not a part of the main structure or home. It might either be detached by an empty space or attached by a fence or power line etc. Homeowner’s insurance extends coverage for this kind of structures like for tool sheds, garages, cabanas etc.
  • Over-The-Counter (OTC)
    Unlisted or non tradable securities. E.g. the New York Stock Exchange.
  • Own-occupation policy
    Insurance policy which compensates the policyholder when he or she loses the ability to carry out his or her occupation, i.e. the regular job in which he or she is accomplished or trained.
  • Package Policy
    A pack of policies combined to be sold as a single policy. E.g. homeowners and commercial multiple peril insurance.
  • Paid-up Additional Insurance Option
    Option available to a life insurance policyholder to purchase additional insurance policies using the policy dividends. This additional insurance is issued on the same plan as the basic policy.
  • Paid-up Policy
    A policy for which all premiums has been paid but continues to provide benefits.
  • Partial Disability
    Inability to work due to an injury except some work or any other activity.
  • Participating Policy
    Also known as par policy, it is a type that allows the policyholders to receive dividends.
  • Pay-at-the-Pump
    Originally proposed in the 1990s, this system required auto insurance premiums to be paid to the state governments by means of a surcharge per gallon on gasoline.
  • Payout Options
    The options available to the annuity contract owner to distribute the accumulated value of the owner. Options include lump sum distribution method, the fixed period option, the fixed amount option and life annuity option.
  • Pension Benefit Guaranty Corporation
    The independent federal government agency that administers Pension Plan Termination Insurance Program. This plan ensures that the employees receive the due benefits as their pension plans get terminated. There are limits to the benefits that are paid.
  • Pensions
    Program that provides the employees with an income after retirement. Life insurers may hold some of these funds. There has been a shift in the responsibility for funding retirement largely from the employers to the employees since the 1970s.
  • Per Capita Beneficiary Designation
    Designation of the life insurance policy beneficiary in which the benefits are equally distributed amongst the surviving beneficiary/beneficiaries after the policyholder's death.
  • Per Stirpes Beneficiary Designation
    A type of life insurance policy beneficiary designation in which the life insurance benefits are divided among a class of beneficiaries; for example, children of the insured. The living members of the class and the descendants of any deceased members of the class share in the benefits equally. Contrast with per capita beneficiary designation.
  • Peril
    A particular risk or cause of loss like fire, flood, theft or windstorm that is covered by the insurance policy. A named peril policy covers for only those risks mentioned in writing in the policy document. An all-risk policy covers all perils except for those specifically mentioned as excluded in the policy.
  • Period Certain
    The pre-determined time period, mentioned in an annuity certain, for which the benefits are paid to the beneficiary or estate.
  • Personal Articles Floater
    An additional or a separate policy that provides coverage for personal valuables like jewelry or furs.
  • Personal Injury Protection Coverage / PIP
    An auto insurance coverage that compensates for treating injuries suffered by the driver and passengers of the policyholder's car.
  • Personal Lines
    Property or casualty insurance products designed specifically for individuals. These products may be included in homeowners and auto insurance.
  • Point-of-Service Plan
    A policy in health insurance that allows an employee to make a choice between in-network and out-of-network care every time the individual needs medical treatment.
  • Policy
    A written insurance contract that mentions the details of coverage to be provided by the insurance company to its policyholder.
  • Policy Dividend Options
    The various options of receiving policy dividends those are open to the owner of an active insurance policy.
  • Policyholders' Surplus
    It is the remainder of the insurer's liabilities subtracted from the assets. It is a protective financial cushion that protect policyholders in some kind of an unexpected crisis.
  • Political Risk Insurance
    Insurance coverage for any business that has its operations abroad against any financial loss caused by a political turmoil like war or confiscation of property.
  • Pollution Insurance
    Insurance that provides coverage for loss arising from pollution related damages. It is usually written on a claims-made basis.
  • Pooling
    Practice or method whereby a group of insurers or small firms unite together to form an insurance pool. Each member of the pool then shares the risks equally. Helps to ensure better insurance rates and coverage plans.
  • Pre-existing Condition
    A condition for which an individual policyholder has received medical treatment preferably during the 3 months immediately prior to the effective coverage date. Some other health insurance policies may deem this period before the effective coverage date as 2 years.
  • Preferred Provider Organization
    Network of medical provides paid on a fee-for-service basis.Fees,however,may be negotiated and also discounted.
  • Preferred Risk
    An insurance applicant or an insured who is less likely to incur losses than the regular individuals. The insurers allow them coverage at lower rates, since they are considered comparatively safe than the ‘high-risk’ insurance applicants.
  • Preferred Risk Class
    A group of insurance owners who project a lower than average probability of loss. It is in contrast with declined risk class, standard risk class and substandard risk class.
  • Premises
    Specific location of the property (full or a portion) as mentioned in the insurance policy.
  • Premium
    The amount to be paid by the policyholder annually or semiannually on purchase of a policy in order to be able to receive the benefits when required.
  • Premium Financing
    A practice by which the policyholder borrows funds from a third party to cover the costs of premiums. The policyholder can repay the amount back to the lender, gradually in installments, along with accrued interest and fees.
  • Premium Reduction Option
    A choice available to active policyholders where they can use the policy dividends in paying for renewal premiums.
  • Premium Tax
    State tax levied on premiums paid by residents as well as businesses that is collected by the insurance companies.
  • Premiums in Force
    Dividend additions plus face value of life insurance policies outstanding at a given time.
  • Premiums Written
    The total premiums calculated on all policies by an insurer in writing during a particular time period irrespective of the portions earned. Premiums that are written after reinsurance transactions are known as net premiums.
  • Primary Beneficiary
    Also called the first beneficiary it is the individual or party nominated and entitled to receive benefits from a life insurance policy after the death of the policyholder.
  • Primary Company
    The insurance company that is reinsured in case of a reinsurance transaction.
  • Primary Driver
    The principal driver of the vehicle, i.e. the individual who drives the vehicle most frequently.
  • Primary Market
    Market for new securities where the benefits are directly received by the issuer.
  • Prime Rate
    The rate of interest that the banks charge from their creditworthy customers on the basis of their cost of funds and market forces
  • Prior Approval States
    The states in which the insurance providers need to get state approval from regulators prior to any change of rate that they propose to have in their policies.
  • Private Mortgage Insurance
    Mortgage insurance provided by private insurance companies for lenders to protect them if any borrower defaults.
  • Private Placement
    Securities sold directly to investors without being registered with the Securities and Exchange Commission.
  • Product Liability
    A section of Tort Law that helps determine who can file a lawsuit and who may be sued if there has been any damage due to a defective product. There is no uniform federal law that guides manufacturer's liability and the party injured can accuse the manufacturer for any damage without the need to provide any proof of negligence or fault.
  • Product Liability Insurance
    Insurance for manufacturers and distributors to protect them from lawsuits by party/parties who have sustained any bodily injury/property damage as result of using their products.
  • Professional Liability Insurance
    Insurance coverage for professionals for any fault on their parts that cause any injury or damage to clients.
  • Proof of Loss
    Documents produced to an insurance company to show that a loss has occurred.
  • Property/Casualty Insurance
    Coverage for loss of property of the policyholder and legal liability arising from damages caused to a third party or their property. Homeowners insurance and commercial insurance includes this policy.
  • Property/Casualty Insurance Cycle
    An industry business cycle with periodic hard and soft market conditions. These cycles were regular and had 3 year period each of hard and soft markets conditions in the 1950s and 1960s.
  • Pro-Rata Cancellation
    Insurance cancellation method whereby the earned premium is calculated only for the term during which the coverage was provided and the insurer doesn’t penalize the policyholder for mid-term termination. The return premium credit is determined as a proportion of the premium for the unexpired term of insurance policy.
  • Purchasing Group
    A body offering insurance coverage to groups of business involved in similar business and those that are exposed to similar types of risk factors.
  • Pure Endowment
    A life insurance agreement by which the owner of the annuity receives a regular income benefit throughout his lifetime. Payment can be received on a monthly,quarterly, semiannual or annual basis.
  • Pure Life Annuity
    A type of annuity where payments end with the death of the annuitant. These payments may be fixed or variable.
  • Qualified Annuity
    A type of annuity that an individual purchases with pre tax dollars. This is part of a retirement plan gaining benefits from a special tax treatment similar to a 401 (k) plan.
  • Quick assets
    Assets which have high liquidity, i.e. which can be easily converted into cash. For e.g. marketable securities, net receivables, short term treasuries, inventories etc. Quick assets of a company points out its ability to meet urgent financial obligations.
  • Quote
    A rough estimate of the cost of coverage given out by an insurance company.
  • Rate
    The cost of a unit of insurance which may be regulated by the state insurance offices.
  • Rate Regulation
    The state's adopted process to monitor the rate changes of an insurance company either through prior approval or open competition models.
  • Rated Policy
    An insurance policy that is categorized as having more than average chance of loss. This policy usually has special exclusions, a higher than normal premium rate, a reduced face amount or any combination of these.
  • Rating Agencies
    These are the 6 major credit agencies that determine the financial strength and capability of the insurance companies to meet the claims from their clients. The rating agencies include names like: A.M Best Co., Duff & Phelps Inc.; Fitch, Inc.; Moody's Investors Services; Standard & Poor's Corp.; and Weiss Ratings, Inc. They rate an insurance company on the basis of capital adequacy, liquidity, investment, operating capacity, experience, integrity, reinsurance programs and the ability of the management.
  • Real Estate Investments
    Investments owned generally by the life insurance companies that include the commercial mortgage loan as well as real property.
  • Receivables
    Amounts that a business would receive for providing goods or any service.
  • Reciprocal Exchange
    An unincorporated organization that writes insurance policies for its members. Each member assumes a portion of the perils covered.
  • Redlining
    Drawing a red line on a map to distinguish areas that need special treatment. Refusing to issue insurance based only on the location of the applicant is illegal in all states. Denial must always be risk based.
  • Reduced Paid-up Insurance Option
    A non-forfeiture option in life insurance that enables a policyholder with cash values to cease payments. The policyholder can also use the net cash value to purchase paid-up insurance of the same plan in place as the original policy.
  • Reinstatement
    The process by which an insurance policy, which had been terminated earlier, resumes coverage. The reason behind the lapse or cancellation might be non-payment of premiums or anything else. The insured might need to pay penalties or compensations for reinstating the same coverage.
  • Reinsurance
    Insurers insuring a risk again. Multiple insurance companies share in a risk by purchasing policies from other insurance companies in order to restrict the total loss the primary insurer would otherwise experience in case of a disaster. Reinsurers do not pay policyholders their claim but instead they reimburse the primary insurers for claims that their policyholders have made.
  • Relation of Earnings to Insurance Clause
    A clause in few individual disability insurance policies restricting the benefit amount to be paid by the insurance company when the total amount of disability benefits from all insurers exceed the total earnings of the individual.
  • Renewable Term Insurance Policy
    A term life insurance policy that allows the policyholder to continue coverage after the end of a specific existing term without presenting any substantiation for insurability. The premiums in such a case may go higher based on the age of the individual.
  • Rental Value Insurance
    Pays the insured property owner for the loss of rental income in case the building premises become unusable due to damages caused by a covered peril.
  • Renters Insurance
    A type of insurance that provides coverage for damage to an individual's belongings against risks like fire, storm, windstorm, hail theft, vandalism, riots and other dangers. Additional living coverage is also provided under this policy, also known as loss-of-use policy. The additional living coverage is provided if the policyholder needs to move to a different temporary location until his/her dwelling is repaired. The possessions may be covered for their replacement cost or the actual cash value.
  • Replacement Cost
    The amount of money needed to replace a lost or damaged property (personal or dwelling) without deducting the depreciation value and restricted by the maximum dollar value mentioned on the declarations page of the policy.
  • Repurchase Agreement /'REPO'
    An agreement between a buyer and a seller in which the seller agrees and purchases securities at a time and price previously agreed upon.
  • Rescission
    Termination of an insurance policy according to the insurer’s discretion (typically due to intentional misrepresentation or fraud). Upon cancellation, the policyholder usually receives a return of the paid insurance premiums.
  • Reserves
    An estimate made by a company regarding how much it will pay for claims.
  • Residual Disability Benefits
    Disability benefits based on the policyholder's loss of earnings. Benefits are generally payable only if loss of earning is more than 80% when the insured is categorized as totally disabled
  • Residual Disability
    A condition in disability insurance where the policyholder is not fully but only partially disabled and yet unable to function normally like prior to the injury or illness and hence suffers a loss of income. It is also known as partial disability.
  • Retention
    Risks retained by an insurance company which is not reinsured.
  • Retrocession
    Reinsurance purchased by reinsurers to safeguard their financial condition.
  • Return on Equity
    This is net income divided by total equity. Helps measure profitability.
  • Revocable Beneficiary
    In contrast to the irrevocable beneficiary, this beneficiary to a life insurance policy whose right to the policy proceeds can be cancelled or changed by the policy owner anytime before the death of the insured.
  • Rider
    An addition to the original policy that provides additional benefits.
  • Right of Recourse
    Separate provision added as a part of a fiduciary liability policy, used by the insurers to subrogate the insured.
  • RISK
    The probability of a disaster to happen. E.g. a natural calamity, an accident etc.
  • Risk Management
    Managing different risks associated with a business firm or an association. Management includes analyzing any exposure to factors like likelihood of loss and also picking out options that initiate better management of how to minimize loss.
  • Risk Pool
    A form of risk management strategy practiced by the insurers. Insurers join together to form a pool, to ensure increased protection for themselves during catastrophic risks.
  • Risk Retention Groups
    A group of insurance companies together forming a self insurance organization chartered and licensed in at least one state to handle liability insurance.
  • Risk-Based Capital
    The minimum amount of capital required by an insurance company in order to support its business. It is required to set capital requirements based on the degree of risk assumed by the insurer.
  • Rollover
    Relocation of funds from one retirement plan to another or transferring into an IRA. Tax consequences can be avoided with a rollover, since the transfer is done directly and the sum doesn’t pass through the owner’s hands.
  • Salvage
    Damaged property which is taken over by an insurance company, after payment of a claim against it.
  • Scheduled Property
    Personal property or item which needs particular mention in an insurance policy, and is charged separately for the necessary coverage. Such valuables are scheduled or specifically mentioned under a regular policy to ensure that they are fully covered for their loss or damage.
  • Section 1035 Exchange
    Provision in the Internal Revenue Code which permits transfer of a life insurance or annuity policy to a different contract, without setting it off as a taxable event.
  • Severity
    The extent of a loss or the impact of a mishap. Taken into account by the insurer to determine the compensation sum to be paid after a claim.
  • Single Premium Annuity
  • Title
    An investment option that has to be paid at one go, when purchased. The returns can be arranged according to the requirements of the policyholder.
  • Soft market
    Indicates favorable condition in the insurance market for buyers. The existing market conditions offer low rates, high limits, flexible contracts, and high availability of coverage. Usually associated with property and casualty insurance market.
  • Solicitor
    Insurance salesperson who usually works as a licensed employee of a fire and casualty insurance agent or broker. Acts on behalf of the agent and broker, contacts potential clients and carry out other clerical works, but is not authorized to make a deal.
  • Solvency
    The ability of a company to meet its financial obligations like the expenses, dues etc, and provide for long-term growth as well. For an insurance company, it indicates the ability to pay the claims of the policyholders.
  • Spendthrift Trust Clause
    A provision that can be included in certain life insurance policies, by which the policy payouts can be protected from the spendthrift beneficiaries. It is arranged in a way which prevents the creditors of the beneficiary from attaching the beneficiary's interest to settle his dues or debts
  • Stacking
    Method by which an individual can increase the liability limits for his vehicles by adding multiple cars under a single auto insurance policy.
  • State of Domicile
    It is the particular state where an insurance company/insurer is licensed or chartered. The company can thereby conduct its business only within its state of domicile, and has to abide by the specified laws and regulations of that state.
  • Stop loss
    Provision in a policy which limits the loss to be covered by the insurance company. A certain amount is considered as the maximum (100%) to be paid by the insurer, and if the claims exceed the permissible limit, the provision comes into effect. It is intended to stop an insurer's loss at a given point of time.
  • Straight Life Annuity
    The insurance option which pays the annuitant periodically, till his or her death. The annuitant cannot appoint a beneficiary, and after his/her demise, the policy goes null and void.
  • Surrender
    Termination of an insurance policy before its predetermined date of maturity or expiry. If the policy had an accumulated cash value, the insured can expect a return from it after certain deductions.
  • Surrender Charge
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  • Subrogation
    It is the legal right of an insurance company to file a lawsuit, if it had to pay for a damage or loss for which its policy holder was not guilty. The legal process is followed to recover the amount from the other party who was at fault.
  • Subsidence
    Movement of the land surface which might result in damage to property, e.g. caving in or sinking of a land area. Affects the rates charged on insurance policy.
  • Surcharge
    Additional charges that are imposed by an insurer, if the policyholder has increased amount of risks.
  • Survival benefit
    The amount received by the beneficiary, from an annuity or insurance policy, after the death of the insured individual. Also known as ‘death benefit’.
  • Title Insurance
    A form of indemnity insurance which provides protection during legal defects and disputes, regarding the title/ownership or lien of a property. Especially required by the owners or lenders, if their property is under mortgage
  • Tort
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  • Total loss
    The term is usually related with Auto insurance. A damaged vehicle is totaled (deemed to be a total loss) when the cost for its repair is more than its existing value in the market, i.e. the car is totally damaged. Usually the auto insurers only pay the amount required to buy a replacement vehicle. That is because, it costs less than if the car is repaired.
  • UIM coverage
    Under Insured Motorist (UIM) coverage pays the insured if the other motorist involved in the accident is at fault, and his/her insurance is not sufficient to cover the damages. UIM usually pays only for the bodily injuries and in some cases, for property damages as well.
  • UM Coverage
    Uninsured Motorist (UM) coverage pays for the damages to the policyholder, when he or she meets with an accident and the other party hasn't got any insurance.
  • Umbrella insurance
    A policy that provides supplemental liability coverage, in addition to the limits offered by a conventional homeowners or auto insurance policy. It may sometimes offer special liability coverage that is not accessible through the regular policies.
  • Underwriting
    The process by which an insurance company evaluate the risks associated with a potential consumer. The insurance applications are approved or rejected accordingly. The rates and coverage limits for an insurance applicant are also determined through this process.
  • Underwriter
    Specialized insurance experts or insurers who verify the information provided by an insurance applicant. They determine the level of risk that potential clients present before the insurance company, and reject or approve their applications accordingly. An underwriter also determines the rates and coverage limits that is to be allowed to them.
  • Unearned premium
    The part of the policy premium that hasn’t been earned by the company, since the policy hasn’t expired. In case the policy is cancelled before the specific time period, the unearned portion of the premium is returned to the policyholder.
  • Uninsurable Risks
    Certain conditions involve high likelihood of loss, and are not covered by the insurance companies. Insurers have their own set of limitations according to which they deny such risks, or charge exorbitant rates for coverage.
  • Universal Life Insurance
    A form of flexible life insurance coverage which allows the policyholder to review and alter the death benefit, savings element and premiums associated with the policy. It offers the advantage of low cost term life insurance, with guaranteed cash value built-up.
  • Utmost Good Faith
    A phrase used in legal documents or insurance contracts, which requires both the insurer (seller) and the insured (buyer) to be honest with each other while taking part in the transaction. A minimum standard of integrity is to be maintained by both the parties, so that one doesn’t mislead or hold back critical information/clauses from the other.
  • Valued policy
    An insurance policy in which the insurer pays the full value of the policy irrespective of the extent of loss or damage. The full face value is usually determined when the policy is issued, e.g. life insurance.
  • Vandalism
    The act of deliberately destructing someone else’s (public or private) property, often due to malicious intents.
  • Variable Life Insurance
    Form of life insurance policy which allows the policyholder to invest in other portfolios. The face value of the policy keeps on fluctuating depending on the supporting investments. The risk is assumed by the policyholder and not the insurer.
  • VIN
    Abbreviated form of Vehicle Identification Number, it is a 17 digit number which is unique to each car. A car's VIN includes the serial number of the vehicle along with abbreviations for make, model and the year of manufacture. One has to provide the VIN of his car while applying for an auto insurance policy.
  • Viatical Settlement
    An arrangement by which a terminally ill policy holder can sell his or her life insurance policy before the date of maturity.
  • Viator
    Individual who is terminally ill or under life-threatening medical condition, and sells off their policy to pay for the treatments and costs of health care.
  • Void
    Insurance policy contract that has lost its legal validity. Insurers declare a policy to be void when the policyholder is found to be guilty of material misrepresentation or for violation of terms.
  • Voyage policy
    A form of marine insurance policy that generally offers coverage for one trip. Usually ensures protection for the cargo or goods in transit, but not for the vessel/ship.
  • Warranty
    A written assurance by the manufacturer issued to the consumer when he or she purchases a product as a guarantee about the integrity of the product. Warranties also ascertain the responsibility of the manufacturer for the repair or replacement of defective parts or the product.
  • Whole life insurance
    A form of life insurance policy which remains in force as long as the insured lives on. It accumulates cash value with time. The beneficiary receives the benefit after the death of the insured, irrespective of the age when he or she dies. Policyholders usually have to pay a fixed amount as premium for the coverage.
  • Waiting period
    The period of time between the date of an insurance policy purchase and the date from which the coverage comes into effect. The waiting period is specified in the insurance contract only when the policy is bought.
  • Waiver
    The legal document which enables a policyholder to release the other party from any kind of liability, right or privilege. The insurance companies offer this provision to individuals, if they want to decline or surrender a certain type of coverage.
  • Workmanship Exclusion
    An insurance exclusion, usually applicable to liability coverage, by which the insurer can deny paying for damages, if those have been caused due to faulty workmanship.
  • Wrap-up Insurance
    A wrap up policy usually offers insurance protection to the owners or contractors working on large projects. Provides all-inclusive form of liability coverage.
  • Written Exposure
    The combined exposures for all the insurance policies issued by an insurance company during a specific time period.
  • Written Premiums
    The sum total of the premiums received by an insurance company from all the policies issued during a specific time period.
  • Yearly Renewable Term (YRT) insurance
    A type of term life insurance policy which provides coverage for the duration of 1 year. The coverage can be renewed at the end of each year, at new and existing market rates, till the insured reaches a pre-determined age according to the contract. The cost of premiums rise as the insured person ages.
  • Zone Rating
    In case of automobile insurance, the vehicles used for commercial purposes and travel long distances (like trucks and trailers) are zone rated. The zones are marked on the basis of the risks in the area. Separate rating tables are applicable for separate zones.

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