A
Accident: An unexpected event, unforeseen and unintended.
Accidental Death and Dismemberment insurance (AD&D): A form of life insurance that provides payment if death or dismemberment of the insured results from accident.
Administrator (executor): The person appointed by a court to settle an estate, sometimes called an executor.
Actual Cash Value (ACV): The cost to replace an item of property at the time of loss, less an allowance for depreciation. Often used to determine amount of reimbursement for a loss (Replacement Cost minus Depreciation).
Additional Insured: A person, firm, or corporation other than the Named Insured on a policy, or a lender named in a mortgage clause, who is protected against loss by the terms of the policy.
Additional Living Expenses: A coverage designed to reimburse the insured for an increase in living expenses necessitated by loss to the dwelling. This Indirect Loss must be the result of Direct Loss by a covered Peril.
Adjuster: Represents the insurance company and acts for the company in working on agreements as to the amount of a loss and the liability of the company.
Admitted Company: A company that meets the state insurance department’s standards and is authorized by the Director to do business in the state.
Agent: An individual appointed by an insurance company to solicit, negotiate, effect, or countersign insurance contracts on its behalf
Aggregate Limit (Combined Limit): A type of policy limit found in Liability policies that limits coverage to a specified total amount for all losses occurring within the policy period.
Alien Company: An insurer organized and domiciled in a country other than the United States.
All Risk Insurance (All Peril): Insurance protecting the insured from loss arising from any Peril other than those specifically excluded by name. This contrasts with Named Peril Insurance, which names the Peril or Perils insured against.
Annuitant: The person receiving the annuity.
Annuity: 1) An amount of money payable yearly or, at other regular intervals. 2) An agreement by an insurer to make periodic payments that continue for a specified period.
Application: A questionnaire that is filled out by an agent and the prospect seeking insurance. The form contains rating and underwriting information. The applicant is expected to make representations by answering questions to the best of his knowledge (truthfully).
Applicant: The person making application to the insurance company for a policy.
Application: A form on which the prospective insured states facts requested by the insurer and on the basis of which the insurer decides whether or not to accept the risk
Appraisal: If the insured and insurer cannot agree on the amount of loss, either may demand an appraisal.
Assignee: The person to whom policy rights are assigned by the policy owner.
Assignment: Transfer of rights in a policy to other than the policy owner.
Assigned Risk (The auto insurance “plan”): There are some applicants that underwriters do not care to insure, but because of state law or otherwise, must be provided protection. To become authorized, a Casualty company must agree to participate in the Assigned Risk Pool and take its turn providing Auto insurance to high-risk drivers.
Attained Age: The current age of the insured
Audit: A survey of the financial records of the insured conducted to determine exposures, limits, etc., which are needed to calculate the premium.
Authorized Company: An insurer permitted to sell insurance within a state.
B
Binders (conditional receipts): Binders are given in writing and are deemed to include all usual terms of the policy for which it was given plus endorsements. Life or Disability insurance utilizes conditional receipts instead of binders.
Bodily Injury (BI): Usually defined to include bodily harm, sickness, disease, including required care, loss of services and resulting death.
Bond: An obligation of the insurance company to protect one against financial loss caused by the acts of others.
Broker: One who represents an insured in the solicitation, negotiation, or procurement of contracts of insurance, and who may render services incidental to, those functions. Brokers may also be licensed as agents.
Burglary: As it is defined in Crime insurance policies, the unlawful taking of property by forced entry into the premises, or exit from the premises, while the premises are closed for business.
Business Insurance: Life or Health or Disability insurance written to cover business situations such as key person, sole proprietor, partnership, corporations, etc.
Business Owners Policy (BOP): A commercial package policy designed for certain types of small businesses, combining Property and Liability coverages. Very similar to a Commercial Package Policy (CPP).
C
Cancelable: An insurance contract that may be terminated by the insurance company or insured at any time. Virtually every form of insurance is Cancelable except Life insurance and those Health policies designated as Guaranteed Renewable or Non-cancelable and Guaranteed Renewable.
Cancellation (termination): Termination of contract of insurance in force by voluntary act of the insurance company or insured.
Cash Surrender Value (cash value): The value in a policy that is the legal property of the policy owner, and that may be expected by him should he surrender it for cash.
Certificate: A statement or evidence that a policy has been written and stating the coverages in general.
Claim: A demand for payment under the insurance policy.
Classification: The grouping of persons for the purpose of determining an underwriting or rating group into which a particular risk must be placed
Coinsurance (participation): I) In Property insurance, a clause under which the insured shares in losses to the extent that he is under insured at the time of the loss. 2) In Health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion.
Collateral Assignment: Assignment of part of the proceeds of an insurance policy to a bank as collateral to settle the loan balance that may exist at the insured’s death.
Concealment: The withholding of facts by an applicant for insurance that materially affects an insurance risk or loss.
Conditional Receipt: Provides that if premium accompanies an application, coverage shall be in force from the date of application (whether the policy has yet been issued or not) provided the insurance company would have issued the coverage on the basis of facts as revealed by the application and other usual sources of underwriting information.
Conditionally Renewable: A contract of Health insurance that provides that the insured may renew the contract to a stated date or an advanced age, subject to the right of the insurer to decline renewal only under conditions defined in the contract.
Conditions: The part of an insurance contract setting out the responsibilities of both the Insured and the Insurer.
Consideration: The exchange of value on which a contract is based. In Life and Health insurance, the Consideration is the premium and the statements in the application.
Contingent Beneficiary (Secondary Beneficiary): Person or persons named to receive benefits if the Primary Beneficiary is not alive.
Contract: A legal agreement between two parties for consideration, such as an insurance policy.
Convertible Term Insurance: A Term policy that can be converted to a permanent type of coverage without proof of insurability.
Corridor Deductible: A Major Medical deductible that applies between benefits paid by the Basic plan and the start of the Major Medical benefits.
Cancellation: Termination of contract of insurance in force by voluntary act of the insurance company or insured, effected in accordance with provisions in the contract or by mutual agreement.
Casualty Insurance: A type of insurance that is primarily concerned with losses caused by injury to persons and legal liability imposed upon the insured for such injury or damage to property of others.
Coinsurance: 1) In Property insurance, a clause under which the insured shares in losses to the extent that she is underinsured at the time of the loss. 2) In Health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion. In Health insurance, the preferred term is “Percentage Participation.”
Commercial Package Policy (CPP): A multi peril, multiline policy that provides a broad spectrum of Property and Casualty coverages for businesses. (Can Include: Marine, Boiler and Machinery, Glass, Crime, Business Auto or Farm coverages)
Comparative Negligence: Doctrine that a defendant is liable only for the amount of damages allocated to that defendant in direct proportion to the defendant’s percentage of fault (if not 51% or more at fault, defendant is not held liable).
Comprehensive Personal Liability: Nonbusiness Liability exposure of individuals who are insured under this policy. The most common Personal Liability exposures arise out of the residence premises and activities of individuals and family members. Comprehensive Personal Liability coverage first became available as a separate policy. Eventually it was incorporated into Homeowners policies.
Compulsory Insurance: Any form of insurance which is required by law. In many states, for example, automobile bodily injury liability insurance is compulsory for all owners of automobiles.
Concealment: The withholding of a material fact from the insurance company. May void the insurance policy.
Conditions: The portion of an insurance contract that sets forth the rights and duties of the insured and the insurance company.
Consequential Loss: Indirect losses that occur as a “consequence” of a direct loss. (Includes time-element coverages)
Consideration: A characteristic of a legal contract: the thing of value exchanged for the performance promised in the contract. In insurance, the applicant’s answers and the policy premium paid constitute the consideration.
Contingent Business Income: A Time-Element coverage that protects the insured against Indirect Loss that results because of a Direct Loss to a supplier, buyer or leader location.
Contingent Liability (Vicarious Liability): Liability that an insured person or business incurs because of the actions of others (family or emploees).
Contract: A legal agreement between two parties promising a certain performance in exchange for a certain consideration.
Contractual Liability: Provides coverage against liability arising out of an insured’s contractual obligations.
Countersignature: The signature of a licensed agent, which must appear on the policy to validate the contract.
Custodian: In Crime insurance, a custodian is the insured or a regular employee or partner of the insured who has care or control of property within the premises. (Not including watchmen, porters or janitors)
D
Death Benefit: The policy proceeds to be paid upon the death of the insured.
Deductible: Dollars or percentage of expense that will not be reimbursed by the insurer.
Decreasing Term Insurance: Term insurance whose amount of coverage starts out at the full amount, then gradually decreases until the expiration date of the policy.
Deferred Annuity: An Annuity on which payments to the annuitant are delayed until a specified future date.
Direct Writer: An insurance company that sells its policies through licensed producers who represent the insurer exclusively, rather than through independent local producers, who represent several insurance companies.
Disability Income Insurance: A form of Health insurance that provides periodic payments to replace income, actually or presumptively lost, when the insured is unable to work as a result of sickness or injury.
Dividend: The return of part of the premium paid for a Participating policy.
Dividend Options: Ways an insured may receive policy dividends.
Domestic Insurance Company: An insurance company formed under the laws of the state in which the insurance is written.
Double Indemnity: Payment of twice the basic benefit in the event of loss resulting from specified cause or under specific circumstances.
Debris Removal: A coverage provided in many Property contracts that reimburses the insured for expenses involved in removing debris produced by a loss from a Peril insured against.
Declarations Page (Dec Sheet): A portion of the insurance contract that contains information such as the name and address of the insured, the property insured, its location and description, the policy period, the amount of insurance coverage, applicable premiums, and supplemental representations by the insured.
Deductible: Usually, a dollar amount the insured must pay on each loss to which the deductible applies. The insurance company pays the remainder of each covered loss up to the policy limits.
Depreciation: Decrease in the value of property over a period of time due to use, wear and tear, and obsolescence.
Direct Loss: Loss that is a direct result of a Peril, such as fire.
Direct Writer: An insurance company that sells its policies through licensed agents who represent the insurer exclusively, rather than through independent local agents, who represent several insurance companies.
Dividend: The return of part of the premium paid for a participating policy.
Domestic Insurance Company: An insurance company formed under the laws of the state in which the insurance is written.
E
Earned Premium: That portion of the premium for which policy protection has already been given during the now-expired portion of the policy term.
Effective Date: The date on which an insurance policy or bond goes into effect and from which protection is furnished.
Eligibility Period: The period following the Probationary Period during which the employee is eligible to obtain non-medical coverage under the Group Life plan.
Endorsement (Rider): A form attached to an insurance contract changing part of the contract.
Endowment Policy: A permanent life policy for which premiums are paid for a limited number of years. If the insured is alive at the end of this premium-paying period, she receives the face amount of the policy. If the insured dies before maturity of the policy, the beneficiary receives the proceeds. Maturity occurs prior to age 100.
Exclusions: Causes, conditions, or property listed in the policy that are not covered and for which no benefits are payable.
Earned Premium: That portion of the premium for which policy protection has already been given during the now-expired portion of the policy term.
Effective Date: The date on which an insurance policy or bond goes into effect and from which protection is furnished.
Employers Liability Coverage: Coverage provided under a Workers’ Compensation policy to cover the employer’s liability arising out of employees’ work related injuries.
Endorsement: A document, agreed to by both parties, that is attached to the policy and modifies or changes the original policy in some way.
Errors And Omissions (E&O): A Professional Liability coverage that protects the insured against liability for committing an error or omission in performance of professional duties.
Exclusions: Causes, conditions, or property listed in the policy that are not covered and for which no benefits are payable.
Expediting Expenses: A Boiler and Machinery coverage that covers the cost of temporary repairs and the cost of speeding up permanent repairs. (Examples: overtime, express transportation charges.)
Experience: The loss record of an insured, a class of coverage, or an insurance company.
Extended Coverage Endorsement (ECE): A specific endorsement, attached to a standard Fire policy, usually providing coverage for windstorm, hail, explosion, riot, civil commotion, aircraft, vehicular damage, volcanic eruption and smoke damage.
Extra Expense Insurance: A Time-Element coverage for additional expenses incurred by the insured business to continue operations following a Direct Loss by a Peril insured against.
F
Face Amount (coverage): The amount indicated on the face of the policy that will be paid at death or when the policy matures.
Fiduciary: A person who occupies a position of special trust and confidence (for example, in handling or supervising the affairs or funds of another).
Foreign Company: An insurer organized under laws of a state other than the one in which the insurance is written.
Fraud (misrepresentation): An intentional misrepresentation made by a person with intent to gain advantage, and relied upon by a second party that suffers a loss.
Fidelity Bond: A class of bonds that guarantees an employee’s honest discharge of duty.
Fiduciary: A person who occupies a position of special trust and confidence. For example, one handling or supervising the affairs or funds of another.
Financial Responsibility Laws: State laws that require owners or operators of autos to provide evidence that they have the funds to pay for automobile losses for which they might become liable. Insurance is the usual method for providing this evidence to the state.
Fire: Combustion, sufficient to produce a spark, flame, or glow, that is hostile (not in a place where it is intended to be). A friendly fire is one in your fireplace.
Fire Insurance: I) Contract that indemnifies an insured for loss caused by the destruction of the insured property resulting from fire. 2) The field of insurance that provides policies on the insured property for a variety of Perils, including Fire.
Floater Policy: Protection that follows moveable property, covering it wherever it may be, rather than applying only at a fixed location, such as a Personal Articles Floater (PAF).
Flood Insurance: Insurance designed to reimburse property owners for loss due to flood or to flood related erosion. Administered through the Federal Insurance Administration, but marketed through independent agents. ‘
Fraud: A false statement intended to deceive the insurer and induce it to part with something of value or to surrender a legal right. (This may void a policy)
G
Garage Policy: A policy that provides coverage for garage businesses (dealers, service stations, garages, parking lots, etc.). Includes coverage for Liability, Physical Damage, and Garagekeepers Losses arising out of owned, non owned, and hired autos.
Garagekeepers Liability: A coverage that is part of the Garage policy. Covers a garage risk’s Legal Liability for customers’ autos in the care, custody, or control of the garage. At the insured’s option, can also apply without regard to fault, for an additional premium.
General Agent (GA): An individual appointed by an insurer to administer its business in a given territory. A GA is responsible for building the agency and service force. Compensation is on a commission basis, although there may be additional expense allowances.
Grace Period: A period of time after premium. due date during which a policy remains in force without penalty, even though the premium due has not been paid.
Group Life Insurance: Life insurance that a person is eligible to purchase through membership in a group. The group may not be formed just to buy insurance.
Guaranteed Renewable: A contract that gives the insured the right to continue in force by the timely payment of premiums for a substantial period of time as set forth in the contract. During that period of time, the insurer has no right to make any change in any provision of the contract other than a change in the premium rate for all insureds in the same class.
H
Hazard: Any factor tending to make a policy owner a less-desirable risk for the insuring company. May be Physical or Moral (health, occupation, dangerous sports, criminality, immorality).
Health Insurance: Broadly, coverages to provide benefits upon the occurrence of disabling sickness or accident, or accidental death or dismemberment, or loss of income due to disability.
Health Maintenance Organization (HMO): An organization of health providers. Each member pays a premium for which he receives medical care when desired. The emphasis is on preventative medicine as an alternative to traditional employee benefit plans. Employers of more than 25 persons are required to offer this alternative to employees, if an HMO is located in the area, but not if the cost exceeds that of present employee health plans.
Hospital Expense or Income Policy: A policy that pays a stated amount per week or month while the insured is hospitalized, without reference to expenses actually incurred. It might be viewed as a Disability Income policy with disability defined as hospitalization. Pays in addition to other policies.
Hospitalization Expense Policy: A policy that covers daily hospital Room and Board charges and also covers Miscellaneous Hospital Expenses (such as X-rays). It also often covers Emergency Treatment charges and many times will also include a Surgical benefit. A basic plan.
Hired and Non-Owned Auto Liability: Provides coverage to an employer for liability arising out of an employee’s use of his own auto in the employer’s business. May be included under a Business Auto Policy of added to’ a Commercial General Liability.
Hazard: Anything that increases the seriousness of a loss or increases the likelihood that a loss will occur (risk) due to a Peril. (For example: improperly stored combustible materials, worn tires, intentional abuse to insured property, unsafe structural changes)
Hold-Harmless Agreement: A contractual arrangement whereby one party assumes the Liability inherent in a situation, thereby relieving the other party of responsibility. (For example, a typical lease may provide that the lessee must “hold harmless” the lessor for any liability from accidents arising out of the premises)
Hull Insurance: In Ocean Marine and Aviation insurance, insurance against physical damage to plane or ship.
I
Immediate Annuity: A lump-sum Annuity on which the income payments to the annuitant are to begin at once.
Incontestable Clause: Provides that after the policy has been in force a certain length of time, the company can no longer contest it or void it, except for nonpayment of premiums. The time period is usually two years.
Indemnify: To restore the victim of a loss, in whole or in part, by payment, repair, or replacement.
Indemnity: Insurance is designed to restore the policyholder to the same financial condition enjoyed prior to a loss. The intent is to cover the amount of the actual loss only and to avoid paying amounts that allow an insured to profit from a loss situation.
Individual Contract: A contract of Health insurance made with an individual that covers her and, in certain instances, specified members of the household. In general, any insurance policy except Group or Blanket.
Insurability: Acceptability of an applicant for insurance to the insurance company.
Insurable Interest: An interest in the life of an individual by which there will be a loss if the insured dies. The interest may be based on either an emotional or economic factor. Must exist at the time of application, not necessarily at the time of loss.
Insurance: A contract or device for the transfer of pure risk to an insurer, who agrees, for a consideration, to indemnify or pay a specified amount for losses suffered by the insured.
Insurance Age: An age upon which current premium rates may be established. It is commonly based on age at last birthday, age next birthday, or age at nearest birthday.
Insurance Policy: A contract, a legal document, which establishes the terms of agreement between the insurer and insured.
Insured: The party to an insurance arrangement to whom, or on behalf of whom, the insurance company agrees to indemnify for losses, provide benefits, or render service. In Prepaid Hospital Service plans, the insured is called the subscriber.
Insurer: The insurance company assuming risk and agreeing to pay claims or provide services.
Insuring Clause: The clause in a policy that specifies in brief the contract’s intent and benefits.
Irrevocable Beneficiary: Cannot be changed without named beneficiary’s consent.
Imports And Exports: A category of the Inland and Ocean Marine Nationwide Definition, which is made up of risks eligible for Marine insurance.
Improvements and Betterments: Additions or changes made by an insured to a building that may or may not be owned by him. Cost arising from these changes may enhance values and thereby require special insurance consideration.
Indemnity: Insurance is designed to restore the policyholder to the same financial condition enjoyed prior to a loss. The intent is to cover the amount of the actual loss only and to avoid paying amounts that allow someone to profit from a loss situation.
Indirect Loss: Loss that is a result or consequence of a Direct Loss.
Inherent Vice: A condition or defect that exists within property from the beginning. A tendency of the property itself. (An example of inherent vice is the tendency of milk to sour) Insurance policies usually exclude inherent vice.
Inland Marine Insurance: A form of insurance originally designed as an extension of Marine coverage to insure transportation of goods over land. Today, it covers, in addition to goods in transit, a variety of portable property.
Insurability: Acceptability of an applicant for insurance to the insurance company.
Insurance: A social device that protects people against certain types of financial losses by transferring cure risk from individuals to a group. Insurance involves the pooling of a large number of individual risks. Funds to cover individual losses are raised by collecting small amounts of money (premiums) from a broad base of buyers.
Insurance Policy: A contract, a legal document, which establishes the terms of agreement between the insurer and insured.
Insured: The party to an insurance arrangement to whom, or on behalf of whom, the insurance the company agrees to indemnify for losses, provide benefits, or render service.
Insurer: The insurance company assuming risk and agreeing to pay claims or provide services.
Insuring Agreement: The section of an insurance policy that states which losses will be indemnified, what property is covered, which perils are insured against.
J
Joint Life and Survivorship Annuity: Payments are made to two annuitants with the survivor continuing to receive payments after the first annuitant dies.
Joint Life Annuity: Payments continue to two annuitants for only as long as both live.
K
Key Person Insurance: Life or Health insurance on important employees whose absence would cause the employer financial loss. The insurance is usually owned by or payable to the employer.
L
Lapse: Termination of a policy because of failure to pay the premium.
Level Term Insurance (Regular Term): The amount of insurance protection in the Term policy remains constant during the policy period.
Lifetime Income Option: A Settlement option that provides for payments during the entire life of the payee. There are four methods:
Straight Life Income – The payee receives a specified income for life, with no refunds upon death.
Life Income Certain – The payee receives installments for life with a second payee receiving the payments if the first dies before the end of the time specified in the Certain Period.
Joint and Survivor Life Income – Two payees are recipients of the income for the life of the first. The surviving payee then receives a lesser amount.
Life Insurance: Insurance paying a specified amount on the death of the insured, to his estate or to a beneficiary.
Limited Pay Life: A Permanent life-insurance policy on which premiums are paid for a specified number of years or to a specified age of the insured. Protection continues for the entire life of the insured. Policy maturity does not occur until age 100, even though the policy is “paid up” earlier.
Loan Value: That amount of Cash Value reposing in a policy that may be borrowed by the insured.
Long-Term Disability: 1) A disability having a duration longer than a short-term disability, the exact duration being variable and a matter of reference; commonly, anything longer than 90 days. 2) A form of Group Disability insurance paying benefits for more than the customary 13 to 26 weeks; commonly, benefits of five years’ duration or more, but again depending on teluus of reference.
Loss: An unpredictable reduction in the quality, quantity, or value of something. For example, bodily injury, disease, property damage, physical disappearance of property, incurred expenses, death, etc.
Loss Ratio: The percentage of losses to premiums – usually losses incurred to premiums earned. Lump Sum: Proceeds of a policy taken all at once. A single amount.
Liability: Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary (money-related) sense.
Liability Insurance: Insures the individual for financial losses that may arise out of the person’s responsibilities to others imposed by law or contract.
Limits of Liability: The maximum amount of money the insurance company will pay for a particular loss, or for loss during a period of time.
Lloyd’s Association (Surplus Lines): A voluntary association of individuals, or groups of individuals, who agree to share in insurance contracts. Each individual or “syndicate” is individually responsible for the amounts of insurance it writes. (E&S)
Loss: An unpredictable reduction in the quality, quantity, or value of something. (For example: bodily injury, disease, property damage, physical disappearance of property, incurred expenses, death, etc)
Loss Ratio: The percentage of losses to premiums, usually losses incurred to premiums earned.
M
Major Medical (health insurance): A form of Health insurance that combines the coverage of Major Medical and Basic Medical Expense contracts into one broad contract that provides coverage for almost all types of medical expense usually subject to a Deductible
Major Medical Insurance: A type of Health insurance that provides benefits for most types of medical expenses incurred up to a high limit, subject to a deductible. Such contracts may contain a Percentage Participation clause (sometimes called the Coinsurance clause). A Major Medical policy pays expenses both in and out of the hospital.
Material Misrepresentation: A misrepresentation that would have been important or essential to the underwriter’s decision to issue the policy.
Maturity: A Life policy is mature when the face amount is payable. Whole Life matures at age 100.
Medicaid: A medical-benefits program administered by states and subsidized by the federal government. Under this plan, various medical expenses will be paid to those who qualify, regardless of age, subject to an income/asset test.
Medicare Benefits: Benefits provided by a federal program as part of the Social Security program. It applies to persons over 65 years of age and certain disabled beneficiaries under the Social Security program.
Medical Examination: Examination by a physician on behalf of an applicant for insurance or in substantiation of a claim.
Misrepresentation: The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverages, benefits, privileges or estimated future dividends of any policy.
Mode Premium: Premium paid according to the Mode of Payment selected by the policy owner, that is, monthly, quarterly, semi-annually, or annually.
Mortgage Insurance Policy: In Life and Health insurance, a policy from which the benefits are intended to pay off the balance due on a mortgage or meet the payments on a mortgage as they fall due upon or after the death or disability of the insured.
Mutual Insurance Company (Insurer): An incorporated insurance company whose governing body is elected by the policyholders. The policyholders share in the success of the company through possible receipt of dividends.
Malpractice Insurance: A form of Professional Liability insurance used to insure professionals including physicians, dentists, and druggists against their Liability for professional misconduct or lack of ordinary skill.
Marine Insurance: A form of insurance primarily designed to cover property in transport over land or sea.
Material Fact: A fact that, had the company known it, would have caused it to decline the risk or include entirely different provisions than those currently included.
Misrepresentation: The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverages, benefits, privileges, or estimated future dividends of any policy.
Moral Hazard: The hazard that is created by a dishonest individual who would be willing to create a loss situation on purpose just to collect from the insurance company.
Mortgagee Rights: Rights granted to a mortgagee (lender), under a property contract issued to a mortgagor, by virtue of the mortgagee’s financial interest in the property.
Mutual Insurance Company (Insurer): An incorporated insurance company, without capital stock, whose governing body is elected by the policyholders. The policyholders own the company and they might share in the success of the company through dividends.
Mysterious Disappearance: Vanishing of property with no known explanation.
N
Non-cancelable: A contract of Health insurance that the insured has a right to continue in force by payment of premiums, as set forth in the contract, for a substantial period of time, and that the insurer has no right to change any provision’ of the contract.
Noncontributory: Any plan or program of insurance (usually Group) for which the employer pays the entire premium and the employee contributes no part of the premium. 100% participation is required.
Non-forfeiture Option: A legal provision whereby the policy owner may take the accumulated values in a policy as I) Paid-Up Permanent insurance for a lesser amount; 2) Extended Term insurance, or 3) LumpSum Payment of cash value, less any unpaid premiums or outstanding loans.
Non-medical: Insurance issued without a medical exam.
Nonparticipating: Insurance that does not pay policy dividends. Sometimes called a Non-Par policy.
Nonprofit Insurance Companies: Companies organized under special state laws to supply medicalexpense insurance, usually on a Service basis. “Blue plans” are a historical example.
Nonresident Producer: A producer licensed in a state in which he is not a resident.
Named Insured: Any person, firm, or corporation, or any member thereof, designated by name as insured in a policy.
National Flood Insurance Program: The federal government’s program to provide Flood insurance at subsidized rates.
Negligence: Failure to use that degree of care that an ordinary person of-reasonable prudence would use under the same given circumstances. Negligence may be constituted by acts of either omission or commission or both.
No-Fault Insurance: A form of Automobile insurance mandated by law in many states whereby an insurance company reimburses its insured for auto losses, regardless of fault, and without resort to subrogation.
Non-owners Insurance: Protection for the policyholder against claims for bodily injury and property damage liability caused by his/her employees or others using autos not owned or hired by the insured while conducting business. A Named Nonowner policy protects an individual who drives only borrowed or rented cars.
Non-resident Agent: An agent licensed in a state in which she is not a resident.
O
Other Insurance: The existence of another contract covering the same interest and perils. Outpatient: A patient who is not a bed patient in the hospital in which she receives treatment.
Obligee: In bonds, the party to whom the principal makes the promise, and for whose protection the bond is being written.
Occupancy: Type and character of the use of property in question.
Other Insurance: The existence of another contract covering the same interest and Perils. Sometimes called Pro-Rata Liability, because the insurers pay claims according to the proportion of premiums paid to each. (Remember, you can’t collect in total more than you lost.)
Owners And Contractors Protective Liability: Part of a Commercial General Liability policy that protects an owner or general contractor against liability arising out of the acts of contractors or subcontractors. It is also known as Independent Contractors Liability coverage.
Other Insurance: The existence of another contract covering the same interest and perils. Outpatient: A patient who is not a bed patient in the hospital in which she receives treatment.
P
Paid-Up: Life insurance on which all premiums have been paid but has not yet matured by death or endowment.
Partial Disability: A condition in which, as a result of injury or sickness, the insured cannot perform one or more of the duties of his occupation but can perform some. Follows a period of Total Disability.
Permanent and Total Disability: Total Disability from which the insured does not recover. When used as a definition of disability in a policy, “Permanent” is presumed after a stated period of time.
Permanent Insurance: Life insurance with some type of cash-value accumulation.
Policy: The written contract effecting insurance or the certificate thereof by whatever name called, and papers attached thereto and made a part thereof.
Policy Dividends: The Policy owners’ share of a company’s divisible surplus.
Policy owner: The person who has the right to exercise the privileges and rights in the policy contract. Also called policyholder.
Policy Loan: A loan taken by the policyholder from the insurer using the insurance cash value as collateral. May be deferred up to six months.
Pre-existing Condition: A condition of health or physical condition that existed before the policy was issued..
Premium: 1) Consideration for the insurance. 2) Periodic payment made to keep a policy in force.
Primary Beneficiary: Named beneficiary first to receive proceeds or benefits, if living, when proceeds or benefits are due.
Probationary Period: A period of time between the effective date of a Health policy and the date coverage begins for certain pre-existing conditions.
Proceeds: Amount payable by a policy, usually used in reference to the face amount of a Life policy payable at death of the insured.
Proof of Loss: A formal statement by the insured to the insurance company regarding a loss. The purpose is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy.
Pro Rata Cancellation: The termination of a contract with premium charge being adjusted in proportion to the exact time the protection has been in force.
Protection: Tenn used interchangeably with the word “coverage” to denote insurance provided under the terms of a policy.
Pair and Set Clause: A clause found in various Property insurance contracts that states that when part of a set is damaged or destroyed, the insured is not entitled to reimbursement for the entire set. Policies provide various methods for determining the amount of reimbursement. Fine Arts floaters do not contain this clause.
Partial Loss: A loss that does not either 1) completely destroy or render worthless the insured property, or 2) exhaust the insurance applying thereto.
Performance Bond: A Surety Bond that guarantees a job will be completed by the contractor according to contract specifications.
Peril: Cause of a potential loss. An insurance policy
may name the perils insured against, or it may be an All-Risk form: one that insures against all Perils not specifically excluded in the policy.
Personal Articles Floater: Personal Inland Marine insurance that provides All-Risk coverage on nine optional classes of personal property: jewelry, furs, cameras, musical instruments, silverware, golf equipment, fine arts, stamp collections and coin collections.
Personal Auto Policy: Easy-to-read auto policy that provides broad coverage for both owned and non owned autos that are used, maintained, and/or operated by the insured and family.
Personal Injury Coverage: Liability coverage for third-party claims for damages that are other than physical, such as libel, slander, false arrest, wrongful eviction, invasion of privacy, etc.
Personal Lines: Insurance coverages intended to protect individuals and their families.
Personal Property Floater: Personal Inland Marine floater that provides All-Risk coverage on unscheduled personal property.
Personal Yacht Insurance: A form of Ocean Marine insurance available to individuals who own large boats. Provides both Hull and Protection and Indemnity insurance.
Physical Damage: In Auto insurance, damage or loss to the insured’s own autos or autos in the insured’s care, custody, or control.
Physical Hazard: The material, structural, or operational features of the risk itself, apart from the morale or moral hazards of persons owning or managing it.
Policy: The written contract or certificate effecting insurance, including papers attached to and made a part of it.
Premium: 1) Consideration for the insurance. 2) Periodic payment made to keep a policy in force. Principal: In Bonds, the party who promises to do (or not to do) a specific thing. 330
Private Passenger Autos: Ordinary cars, station wagons and jeeps, utility autos (pickups, panel trucks, and delivery vans not used commercially), and utility trailers designed to be pulled by a private passenger auto:
Products And Completed Operations: A form of General Liability insurance that covers a company against liability arising out of its products (a manufacturer) or its completed operations (a contractor or architect).
Professional Liability: Liability arising out of the rendering or failure to render services of a professional nature.
Proof of Loss: A formal statement by the insured to the insurance company regarding a loss. The purpose is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy.
Property Damage: A type of loss covered under many Liability contracts. Includes the insured’s liability for damage to property of others or loss of use of other’s property.
Property Insurance: Insurance that indemnifies a person with an interest in property for its loss.
Pro-Rata Cancellation: The termination of a contract with premium charge being adjusted in proportion to the exact time the protection has been in force. All unearned premium is returned to the insured.
Pro-Rata Liability Clause: Clause in a Fire Policy that provides a method of sharing loss when more than one policy is applicable. Each company covers no more than its share. Also known as the Other insurance Clause.
R
Rate: The per-unit cost of insurance. Life insurance is rated based on units of $1,000.
Rated: A policy issued with an extra premium charge because of physical or moral impairment. A surcharge.
Rated-Up Policy: A policy issued to an applicant that reflects a higher rate, due to the presence of a greater risk, in the eyes of the underwriter. Rated-up policies often result from substandard health cases revealed in a medical examination.
Rebating: Any practice that involves the covert return of money or other value, in excess of $2.00, to an applicant in order to induce a sale; it is considered an illegal act.
Reduced Paid-Up Insurance Option: A Nonforfeiture option under which the insured uses the cash value of his present policy to purchase a single-premium Whole Life policy, at attained-age rates, for a reduced face amount, to age 100.
Reimbursement: Payment of an amount of money related to the amount of the loss to or on behalf of the insured upon the occurrence of a defined loss.
Reinstatement Clause: Provides the conditions under which a lapsed policy may be reinstated, if approved by the insurance company.
Reinsurance: Agreement between insurance companies under which one accepts all or part of the risk of loss of the other.
Renewable Term: Term insurance that can be renewed without proof of the insured’s insurability.
Renewal: The continuation in full force and effect of a policy that is about to expire.
Representations: Facts that the applicant represents as true and accurate to the best of his knowledge and belief.
Reserve: The amount that, when increased by future premiums on outstanding policies and interest on those premiums, will enable the company to meet the future Death claims that will arise because of those contracts of insurance.
Rider: A form attached to a policy that modifies the conditions of the policy by expanding or decreasing its benefits or excluding certain conditions from coverage.
Risk: The uncertainty of loss that exists whenever more than one outcome is possible. In the area of Life insurance, death is certain, but time of death is uncertain.
Risk Selection: The process of selecting insureds’with a normal life expectancy.
Rebating: Giving or offering a benefit other than those specified in the policy, to induce a customer to buy insurance.
Removal: Process of removing property for the purpose of preserving it from a Peril insured against. Property contracts provide coverage for loss to property during removal. (For example, during a fire, you remove your furniture from your dwelling, exposing it to other risks.)
Renewal: The continuation in full force and effect of a policy that is about to expire.
Rental Value: An indirect Property coverage available under the Dwelling and Homeowners policies, also available with certain Commercial contracts, that reimburses the insured for rents lost when rented property,is damaged by a Peril insured against.
Replacement Cost: The cost of replacing property without deduction for depreciation.
Representations: Facts that the applicant represents as true and accurate to the best of her knowledge and belief.
Retention Limit: In an Umbrella Liability policy, the amount the insured must pay for a loss not covered by an underlying policy, before the Umbrella will begin to cover losses.
Risk: The uncertainty of loss that exists whenever more than one outcome is possible. (In the area of Life insurance, death is certain, but time of death is uncertain.)
Robbery: In Crime insurance, the forcible and felonious taking of property by violence or threat of violence from a messenger or custodian.
S
Schedule: A list of specified amounts payable for, usually, surgical procedures, dismemberment treatments, ancillary expenses, or the like in Health policies.
Settlement Option: A method of receiving life-insurance proceeds other than in a lump sum.
Single-Premium Annuity: An Annuity purchased with one lump-sum payment.
Single-Premium Policy: A policy on which the entire premium. is paid in one payment.
Solicitor: A person who finds insurance prospects for a producer.
Standard Risk: A person entitled to life-insurance protection without extra rating or special restrictions.
Stated Amount: Relating to an agreement to pay a specified amount of money to or on behalf of the insured upon the occurrence of a defused loss. For example, the principal sum on an AD&D policy.
Stock Insurance Company: An incorporated insurance company with capital divided into shares and owned by the shareholders.
Substandard Risk (Rated Risk): A risk not acceptable at standard rates.
Suicide Clause: States that if the insured commits suicide within a specified period of time, the policy will be voided. Paid premiums are usually refunded. The time limit is generally two years, but only one year in Colorado.
Safe Burglary Policy: A Crime insurance policy that is designed to cover burglary of property from a safe or the felonious removal of the entire safe from the premises.
Salvage: Property taken over by an insurance company to reduce its loss. The company may dispose of salvage property as it wishes, but on request and proper reimbursement, may return it to the insured.
Short Rate: A percentage penalty charged on insurance, canceled by the insured, before the end of the policy period. Return premium is calculated on a Short-Rate basis, meaning the insurance company keeps a portion of the unearned premium to cover expenses.
Stated-Value Policy: Insurance contract written to insure item of property for a specific amount of insurance. Used in insuring hard-to-value items, such as fine arts.
Stock Insurance Company: An incorporated insurance company with capital divided into shares and owned by the shareholders. Profits are shared by the stockholders. Policyholders are NOT entitled to share in company profits.
Subrogation: The transfer to the insurance company of the insured’s right to collect for damages. After paying a claim, the company stands in the place of the insured in suing the negligent party, thus preventing the insured from collecting twice.
Surety: The party (often the insurance company) that agrees to be responsible for loss which may result if the principal does not keep his promise.
Surety Bond: A bond that guarantees that someone will perform faithfully whatever he or she agrees to do or that someone will make an agreed upon payment to another party. Note that in a Surety Bond, there are three parties: the Principal, who has agreed to perform the obligation; the obligee, for whose benefit the Bond is written, and the Surety, the insurer that provides the bond in consideration for the premium paid.
T
Term Insurance: Life insurance that normally does not have cash accumulation and is issued to remain in force for a specified period of time, following which it is subject to renewal or termination.
Time Limit on Certain Defenses: A Uniform Provision on Health Insurance policies specifying that after a given number of years (usually two) no statements (except fraudulent misstatements) made in the application shall be used to deny a claim or void the policy and that no claim shall be denied or reduced on the ground that a disease or physical condition not excluded at time of issue existed prior to effective date.
Total Disability: A degree of disability from injury or sickness that prevents the insured from performing duties for remuneration or profit. The definition in any given case depends on the wording in a covering policy.
Theft: Any act of stealing. Theft includes larceny, burglary, and robbery.
Time-Element Coverage: Provides protection for Indirect Loss that occurs when, following a Direct property loss, there is a time lapse before the property can be used again. IncludesBusiness Income, Contingent Business Income, and Extra Expense.
Trip Transit Policy: An Inland Marine transportation policy, similar to the Annual Transit policy, but designed to cover a specific shipment.
U
Unauthorized Company: An insurer not permitted to sell insurance within a state, except for Surplus Lines or Reinsurance.
Underwriter: 1) A person trained in evaluating risks and determining the rates and coverages that will be used for them. 2) A producer, especially a life-insurance producer, who might qualify as a “Field Underwriter.” In theory, the producer is supposed to do some underwriting before submitting the case to the home office underwriter; in effect, to make a decision on the basis of known facts on whether or not the risk is sound and to report all facts known to him or her that might affect the risk.
Underwriting: The process of evaluating a risk for the purpose of issuing insurance coverage on it.
Unearned Premium: That portion of an advance premium payment that has not yet been used for coverage written. Thus, in the case of an annual premium, at the end of the first month of the premium period, 11 months of the premium would still be “unearned.”
Uniform Simultaneous Death Act: A uniform law adopted by most states providing that if the Primary Beneficiary and the insured die in the same accident and there is no proof that the beneficiary outlived the insured, the proceeds are paid as if the Primary Beneficiary died first.
Underinsured Motorist Coverage (UIM): Coverage on an Auto policy that stacks coverage for an insured onto inadequate coverage of an individual who negligently caused injury to that insured.
Umbrella Liability Policy: Provides broad coverage for an insured’s liability over and above liability covered by underlying contracts or retention limits.
Underwriting: The process of evaluating a risk for the purpose of issuing insurance coverage on it.
Uninsured Motorist Coverage (UM): Automobile Coverage designed to provide Bodily Injury protection for the insured should she be involved in an accident in which the driver at fault has no insurance to cover the loss.
Unoccupancy: The absence of person, return expected. Property coverage on a building is sometimes restricted when there are long periods of vacancy, but not unoccupancy.
V
Variable Annuity: An Annuity contract in which the amount of the periodic benefits varies, usually in relation to security market values, a cost-of-living index, or some other variable factor in contrast to a Fixed or Guaranteed Return Annuity.
Vacancy: The absence of people and personal property from a building, not expected to return. Property coverage is often restricted when there are long periods of vacancy, especially for the Perils of Vandalism and Glass Breakage.
Vandalism And Malicious Mischief (VMM): Protects property against damage caused by vandals. May be added by Endorsement to the DP-I Basic Form; included coverage in many other Property forms.
W
Whole Life: A Life policy that runs for the insured’s whole life – that is, until death or the ultimate age on the mortality table being used (usually age 100). Absolute Liability: Liability that arises from an extremely dangerous situation. Absolute Liability is often found in cases involving explosives. Also known as “strict” liability. For example, you are absolutely liable if you keep a wild animal as a pet.
Warranty: 1) A statement that is guaranteed to be true in all respects. Statements on insurance applications are, in the absence of fraud, not warranties, but representations (statements true to the best of the applicant’s knowledge). 2) A sworn statement by the insured attesting to the presence of certain safeguards, such as a sprinkler or burglar alarm system. Breach of this type of warranty may void coverage.
Workers’ Compensation Insurance: Insurance that covers an employer’s obligations under Workers’ Compensation laws, which make the employer responsible for stated damages in the event of a work related injury or illness. Workers’ Compensation coverage also includes separate coverage for Employers Liability.