Insurance Glossary
Insurance Glossary
Welcome to the Mark Price Insurance glossary. As a locally owned and operated insurance provider, we strive to keep our customers informed. Our comprehensive glossary offers clear, concise definitions of insurance terms, ensuring you have the knowledge you need to make informed decisions about your coverage.
401(k) Plan
A salary reduction plan that allows employees to contribute a portion of their salaries on a tax-deferred basis. See also: Defined Contribution Plan.
Absolute Liability
Liability for damages even though fault or negligence cannot be proven.
Accident and Health Insurance
A type of coverage that pays benefits, sometimes including reimbursement for loss of income, in case of sickness, accidental injury, or accidental death.
Accident Insurance
A form of Health Insurance against loss by accidental bodily injury.
Accidental Bodily Injury
Injury to the body as the result of an accident.
Accidental Death Benefit
A benefit in addition to the face amount of a Life Insurance Policy, payable if the Insured dies as the result of an accident. Sometimes referred to as double indemnity.
Accounting
The process of recording, summarizing, and allocating all items of income and expense of the company and analyzing, verifying, and reporting the results.
Accumulation period
(1) The time between the first premium payment and the first benefit payout under a deferred annuity; (2) A specified period of time, such as 90 days, during which the insured person must incur eligible medical expenses at least equal to the deductible amount in order to establish a benefit period under a Major Medical Expense or Comprehensive Medical Expense Policy.
Accumulation units
The mechanism used to account for the Insured's deposits in a variable annuity contract during the premium paying period. The number of units purchased depends upon the current valuation of a unit in dollars.
Acquisition Costs
The insurer's cost of putting new business in force, including the agent's commission, the cost of clerical work, fees for medical examinations and inspection reports, sales promotion expense, etc.
Activities of Daily Living
A list of activities, normally including mobility, dressing, bathing, toileting, transferring and eating which are used to assess degree of impairment and determine eligibility for some types of insurance benefits.
Acts of War, Confiscation, Detainment, Revolution (Free of Capture, Seizure Clause)
Exclusion in most Marine Cargo Policies, which states that coverage is not provided when due to capture, seizure, arrest, detainment, confiscation, preemption, requisition or nationalization, whether in time of peace or war. This clause also excludes from coverage loss due to hostilities or warlike operations (including atom bombs), embargoes or other interferences with the free flow of trade. Coverage for these hazards can be obtained through the Cargo War Risk Policy. See also: Marine Cargo Insurance
Actual Cash Value (ACV)
The replacement cost of property damaged or destroyed at the time of loss, with deduction for depreciation. Actual cash value cannot exceed the applicable limit of liability shown in the declarations of the policy, nor the amount it would cost to repair or replace such property with material of like kind and quality within a reasonable amount of time after a loss.
Actuarial Cost Method
One of several systems for determining either the contributions to be made under a retirement plan, or level of benefits when the contributions are fixed. In addition to forecasts of mortality, interest and expenses, some of the methods involve estimates of future labor turnover, salary scales and retirement rates.
Actuarial Equivalent
If the present values of two series of payments are equal, taking into account a given interest rate and mortality according to a given table, the two series are said to be actuarially equivalent on this basis. For example, a lifetime monthly benefit of $67.60 beginning at age 60 (on a given set of actuarial assumptions) can be said to be the actuarial equivalent of $100 a month beginning at age 65. The actual benefit amounts are different but the present value of the two benefits, considering mortality and interest, is the same.
Actuarially Fair
The price for insurance which exactly represents the expected losses.
Additional Insured
An assured party specifically named under an insurance policy that is not automatically included as an Insured under the policy of another, but for whom the named Insured's policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named Insured's impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named Insured to do so (e.g., customers or owners of property leased by the named Insured).
Additional named insured
(1) An individual or entity, other than the first named insured, identified as an Insured in the policy declarations or an addendum to the policy declarations. (2) An individual or entity who is added to a policy with the status of named Insured after the policy is written. Such an individual or entity would have the same rights and responsibilities as an individual or entity named as an Insured in the policy declarations (other than those rights and responsibilities reserved to the first named Insured). In this sense the term can be contrasted with additional insured, an individual or entity added to a policy as an insured but not as a named Insured. The term additional named insured has not acquired a uniformly agreed-upon meaning within the insurance industry, and use of the term in the two different senses defined above often produces confusion in requests for additional insured status between contracting parties.
Adjustable Life Insurance
A type of insurance that allows the policyholder to change the plan of insurance, raise or lower the face amount of the policy, increase or decrease the premium and lengthen or shorten the protection period.
Adjusted gross estate
Approximately the net worth of a deceased's estate--the beginning point for the computation of estate taxes. In addition to the deceased's assets while alive, the value will also generally include the proceeds of life insurance.
Adjustment Bureau
Organization for adjusting insurance claims that is supported by insurers using the bureau's services.
Administrative Services Only (AS0) Plan
An arrangement under which an insurance carrier or an independent organization will, for a fee, handle the administration of claims, benefits and other administrative functions for a self-insured group.
Advance Funding
Pension-funding method in which the employer systematically and periodically sets aside funds prior to the employee's retirement.
Advance Premium Mutual
Mutual insurance company owned by the policyowners that does not issue assessable policies but charges premiums expected to be sufficient to pay all claims and expenses.
Adverse Selection
The tendency of persons who present a poorer-than-average risk to apply for, or continue, insurance to a greater extent than do persons with average or better-than-average expectations of loss.
Advertising Injury
Injury rising out of an offense committed in the course of your advertising activities, if such injury rises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition or infringement of copyright, title or slogan. [MORE]
Age Limits
Stipulated minimum and maximum ages below and above which the company will not accept applications or may not renew policies.
Aggregate Deductible
Deductible in some Property and Health Insurance contracts in which all covered losses during a year are added together and the insurer pays only when the aggregate deductible amount is exceeded.
Aggregate Indemnity
The maximum dollar amount that may be collected for any disability or period of disability under the policy.
Aggregate Limit
(1) A limit in an insurance policy stipulating the most it will pay for all covered losses sustained during a specified period of time, usually one year. Aggregate limits are commonly included in Liability Policies. While not often used in Property Insurance, aggregates are sometimes included with respect to certain catastrophic exposures, e.g., earthquake and flood. (2) The dollar amount of reinsurance coverage during one specified period, usually 12 months, for all reinsurance losses sustained under a treaty during such period.
Agreed Amount Endorsement
An endorsement to a policy made by the insurance company wherein it waives the coinsurance clause on the specified property. As long as this endorsement is in effect, there would be no coinsurance penalty at the time of a claim. By combining an Agreed Amount Endorsement with a Replacement Cost Endorsement you can obtain an unusually high quality of insurance coverage.
Alien Insurer
An insurance company domiciled in another country. Contrast Foreign Insurer.
Alienated Premises Exclusion
An exclusion that eliminates coverage for property damage liability to premises sold by an entity. For example, a person owns a lot and builds a house on it. After the house is completed and sold, a subcontractor's faulty wiring causes the house to burn. The buyer, or his/her insurance company, sues for the cost of repairing or rebuilding the house. There is no coverage for this exposure under standard liability policies.
All-risks Policy
Coverage by an insurance contract that promises to cover all losses except those losses specifically excluded in the policy. To be covered for damage or loss under a 'basic' contract, the damage or loss must be caused by a peril that is 'named' or listed in the contract. Consequently, if damage or loss is caused by a peril that is not named, there is no coverage. In an All-Risk Policy, coverage is provided unless specifically excluded. The contract's exclusions must be considered in determining coverage. See also: Named Perils, Special Risk Insurance.
Allied Lines
A term for forms of Property Insurance allied with fire insurance, covering such perils as windstorm, hail, explosion, and riot.
Allocated Benefits
Benefits for which the maximum amount payable for specific services is itemized in the contract.
Alternate Delivery Systems
Health services provided in other than an in-patient, acute-care hospital. Examples include skilled and intermediary nursing facilities, hospice programs, and home health care. Alternate delivery systems are designed to provide needed services in a more cost-effective manner.
Ambulatory Care
Medical services that are provided on an outpatient (non-hospitalized) basis. Services may include diagnosis, treatment, and rehabilitation.
Amendment
A formal document changing the provisions of an insurance policy signed jointly by the insurance company officer and the policy holder or his authorized representative.
Amortization
Paying an interest-bearing liability by gradual reduction through a series of installments, as opposed to one lump-sum payment.
Annual Statement
The annual report, as of December 31, of an insurer to a state insurance department, showing assets and liabilities, receipts and disbursements, and other financial data, presented according to Statutory Accounting Principles.
Annuitant
The person during whose life an annuity is payable, usually the person to receive the annuity.
Annuity Certain
A contract that provides an income for a specified number of years, regardless of life or death.
Annuity Consideration
The payment, or one of the regular periodic payments, an annuitant makes for an annuity.
Anti-selection
The tendency of persons who present a poorer-than-average risk to apply for, or continue, insurance to a greater extent than do persons with average or better-than-average expectations of loss.
Arbitration
A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to responsibility for or extent of a loss.
Assailing Thieves
Hazard generally covered under a marine cargo policy, which includes loss due to thievery when accompanied by violence, but does not include petty thievery. See also; Marine Cargo Insurance.
Assessment Association
An insurer that does not charge a fixed premium for insurance, but rather assesses its members periodically to pay its losses. Assessment insurers usually collect an advance premium which is estimated to cover losses and expenses, but reserve the right to make additional assessments whenever the premium collected is insufficient.
Assessment Mutual
Mutual insurance company that has the right to assess policy owners for losses and expenses.
Assigned Risk
See Automobile Insurance Plan.
Association Captive
Type of captive insurer owned by members of a sponsoring organization or group, such as a trade association.
Association Group
A group formed from members of a trade or a professional association for group insurance under one master Health Insurance contract.
Association Group Plan
Health Insurance plans designed for members of a professional association or trade association. Members may be protected under a group Health Insurance Policy or by individual franchise policies.
Assumption of Risk Doctrine
Defense against a negligence claim that bars recovery for damages if a person understands and recognizes the danger inherent in a particular activity or occupation.
Attractive Nuisance
Condition that can attract and injure children. Owners or occupants of land on which such a condition exists are liable for injuries to children.
Audit, Insurance
Sometimes factors that enter into determining appropriate premiums for insurance coverage can't be known in advance; therefore, accurate premiums for the coverage provided can't be billed by the insurance carrier. This often is true in the case of Worker's Compensation and Product Liability Insurance, where such things as payroll and sales can't be determined ahead of time. An audit serves as an examination of the Insured's records after the fact to adjust the initial premium billed to reflect the actual coverage.
Automatic Premium Loan
Cash borrowed from a Life Insurance policy's cash value to pay an overdue premium after the grace period for paying the premium has expired.
Automatic Reinsurance
An agreement that the insurer must cede and the reinsurer must accept all risks within certain explicitly defined limits. The reinsurer undertakes in advance to grant reinsurance to the extent specified in the agreement in every case where the ceding company accepts the application and retains its own limit. See also: Treaty Reinsurance.
Automobile Insurance Plan
One of several types of shared market mechanisms where persons who are unable to obtain such insurance in the voluntary market are assigned to a particular company, usually at a higher rate than the voluntary market. Formerly called Assigned Risk. Compare Automobile Reinsurance Facility, Residual Market.
Automobile Liability Insurance
Coverage designed to provide protection for the Insured against financial loss because of legal liability for car-related injuries to others or damage to their property.
Automobile Physical Damage Insurance
Coverage to pay for damage to or loss of an insured automobile resulting from collision, fire, theft, or other perils.
Automobile Reinsurance Facility
One of several types of shared market mechanisms used to make Automobile Insurance available to persons who are unable to obtain such insurance in the regular market.
Automobile Shared Market
A program in which all automobile insurers in each state and the District of Columbia participate to make coverage available to car owners who are unable to obtain Auto Insurance in the voluntary market. Except in Maryland, which operates a state-funded mechanism whose losses are subsidized by private insurers, each state uses one of three systems (an automobile insurance plan, a joint underwriting association, or a reinsurance facility) to guarantee the availability of Automobile Insurance.
Average Indexed Monthly Earnings (AIME)
Under the OASDI program, the person's actual earnings are indexed to determine his or her primary insurance amount (PIA).
Aviation Insurance
Aircraft Insurance including coverage of aircraft or their contents, the owner's liability, and Accident Insurance on the passengers.
Avoidance
see Loss Avoidance.
Bailee Insurance
Coverage designed to protect for loss or damage to property of customers regardless of a bailee's legal liability. Bailee Insurance is Inland Marine Coverage on property entrusted to the Insured for storage, repair, or servicing. It is typically purchased by businesses such as dry cleaners, jewelers, repairers, furriers, etc.
Barratry of the Master
An action of the master of a ship which violates the trust given to him, provided such action is not taken in connivance with the ship owner. Hazard covered in the Marine Cargo Policy.
Basic Form
see Dwelling Property 1.
Beneficiary
The person or entity designated or provided for by an insurance policy's terms to receive any benefits provided by the policy or plan upon the death of the Insured.
Benefit Period
The insurer's cost of putting new business in force, including the agent's commission, the cost of clerical work, fees for medical examinations and inspection reports, sales promotion expense, etc.efit period ends, the Insured must then satisfy a new deductible in order to establish a new benefit period.
Binding Receipt
A receipt given for a premium payment accompanying the application for insurance. If the policy is approved, this binds the company to make the policy effective from the date of the receipt.
Blackout Period
The period during which Social Security benefits are not paid to a surviving spouse--between the time the youngest child reaches age sixteen and the widow's sixtieth birthday.
Blanket Contract
A contract of health insurance affording benefits, such as accidental death and dismemberment, for all of a class of persons not individually identified. It is used for such groups as athletic teams, campers, travel policy for employees, etc.
Blanket Insurance
A policy designed to provide coverage under a single limit for two or more items (e.g., building and/or contents), two or more locations, or a combination of items and/or locations
Blanket Medical Expense
A provision which entitles the insured person to collect up to a maximum established in the policy for all hospital and medical expenses incurred, without any limitations on individual types of medical expenses.
Block Policy
A form of Inland Marine Insurance designed to cover loss to the property of a merchant, wholesaler, or manufacturer including: property of others in the Insured's care, custody, or control, property on consignment, and property sold but not delivered. Common block policies are jeweler's block and furrier's block policies.
Blue Cross
An independent, nonprofit membership corporation providing protection on a service basis against the cost of hospital care in a limited geographical area.
Blue Shield
An independent, non-profit membership corporation providing protection on a service basis against the cost of surgical and medical care in a limited geographical area.
Boat Owners Package Policy
A special package policy for boat owners that combines physical damage insurance, medical expense insurance, liability insurance, and other coverages in one contract.
Boiler and Machinery Insurance
Coverage for loss arising out of the operation of pressure, mechanical, and electrical equipment. It covers loss of the boiler and machinery itself, damage to other property, and business interruption losses.
Book of Business
the number, size and type of accounts (policyholders) that an agent services, and upon which he earns commissions.
Branch Office System
Type of marketing system under which branch offices are established in various areas. Salaried branch managers, who are employees of the company, are responsible for hiring and training new agents.
Break in Service
A calendar year, plan year or other consecutive 12-month period designated by the plan during which a plan participant does not complete more than 500 hours of service.
Broad Form Property Coverage including Completed Operations
A coverage extension that is of great value to the general contractor as respects completed operations property damage liability claims. Without it, the normal Comprehensive General Liability policy will not respond for completed operations claims (i.e., claims rising out of work performed on behalf of the Insured by subcontractors). With this coverage extension, this exposure is covered. Additional broadening coverage features are also included, but none as important as the above to the general contractor. See also: Dwelling Property, Homeowners Policy.
Broadcasters Liability Insurance
The legal liabilities of a broadcaster are numerous and vary from the use of incorrect news stories, libel and slander, invasion of privacy, copyright infringement, and unauthorized use of plot, characters, or music. Broadcasters' Liability Insurance covers these exposures, as well as defense costs in contesting suits or claims. Employees are covered as Insureds while acting within the scope of their duties as such.
Broadened Named Insured
regarding liability coverages, these coverages will automatically apply to '. . . any affiliated, associated, allied or subsidiary company or entity (including subsidiaries thereof), now held or hereinafter acquired or constituted . . .'
Builders Risk Insurance
Indemnifies for loss of or damage to a building under construction. Insurance is normally written for a specified amount on the building and applies only in the course of construction. Coverage customarily includes fire and extended coverage and vandalism and malicious mischief. Builders Risk Coverage can be extended to a special form as well. The Builders Risk Policy also may include coverage for items in transit to the construction site (up to a certain percentage of value) and items stored at the site.
Burglary
Breaking and entering into another person's property with felonious intent.
Burglary and Theft Insurance
Coverage against property losses due to burglary, robbery, or larceny.
Business Insurance
A policy which primarily provides coverage of benefits to a business as contrasted to an individual. It is issued to indemnify a business for the loss of services of a key employee or a partner who becomes disabled.
Business Interruption Insurance
Coverage designed to provide protection for a business owner against losses resulting from a temporary shutdown because of fire or other insured peril. The insurance provides reimbursement for lost net profits and necessary continuing expenses. This form of insurance provides loss of income coverage (i.e., disability income) for your business by replacing your operating income during the period when damage to the premises or other property prevents income from being earned.
Business Life Insurance
Life Insurance purchased by a business enterprise on the life of a member of the firm. It is often bought by partnerships to protect the surviving partners against loss caused by the death of a partner, or by a corporation to reimburse it for loss caused by the death of a key employee.
Buy-Sell Agreement
An agreement made by the owners of a business to purchase the share of a disabled or deceased owner. The value of each owner's share of the business and the exact terms of the buying-and-selling process are established before death or the beginning of disability.
Cafeteria Plan
Generic term for an employee benefit plan that allows employees to select among the various group life, medical expense, disability, dental, and other plans that best meet their specific needs. Also called flexible benefit plans.
Calendar-year Deductible
Amount payable by an Insured during a calendar year before a group or individual Health Insurance Policy begins to pay for medical expenses.
Capacity
(1) The amount of capital available to an insurance company or to the industry as a whole for underwriting general insurance coverage or coverage for specific perils. (2) The amount of insurance a company or the industry are able to write, due to limitations on or availability of capital.
Capital Gain
Profit realized on the sale of securities. An unrealized capital gain is an increase in the value of securities that have not been sold.
Capital Retention Approach
A method used to estimate the amount of Life Insurance to own. Under this method, the insurance proceeds are retained and are not liquidated.
Capitation
A method of payment for health services in which a physician or hospital is paid a fixed, per capita amount for each person served regardless of the actual number of services provided to each person.
Captive Insurance Company
A company owned solely or in large part by one or more non- insurance entities for the primary purpose of providing insurance coverage to the owner or owners. The company's stock is controlled by one interest or a group of related interests so as to provide coverage for their business operations. A captive insurance company may be a non-admitted, nonresident, or foreign insurer. Sometimes it may provide reinsurance to a self-insured or a domestic company.
Captive Insurer
Insurance company established and owned by a parent firm in order to insure its loss exposures while reducing premium costs, providing easier access to a reinsurer, and perhaps easing tax burdens. See also Association Captive.
Career Average Formula
A pension plan formula that bases retirement benefits on earnings during all years of service to the employer.
Cargo Insurance
Type of Ocean Marine Insurance designed to protect the shipper of the goods against financial loss if the goods are damaged or lost.
Cash Surrender Value
The amount available in cash upon voluntary termination of a policy by its owner before it becomes payable by death or maturity.
Casualty Insurance
Insurance concerned with the Insured's legal liability for injuries to others or damage to other persons' property; also encompasses such forms of insurance as plate glass, burglary, robbery and workers' compensation.
Causes-of-loss Form
Form added to Commercial Property Insurance policy that indicates the causes of loss that are covered. There are four causes-of-loss forms: basic, broad, special, and earthquake.
Certificate of Insurance
A statement of coverage issued to an individual Insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.
Certified Financial Planner (CFP)
Professional who has attained a high degree of technical competency in financial planning and has passed a series of professional examinations by the College of Financial Planning.
Certified Insurance Counselor (CIC)
Professional in Property and Liability Insurance who has passed a series of examinations by the Society of Certified Insurance Counselors.
Change of Occupation Clause
Provision in a Health Insurance policy stipulating that if the Insured changes to a more hazardous occupation, the benefits are reduced based on the amount of benefits the premium would have purchased for the more hazardous occupation.
Chartered Financial Consultant (ChFC)
An individual who has attained a high degree of technical competency in the fields of financial planning, investments, and Life and Health Insurance and has passed ten professional examinations administered by The American College.
Chartered Life Underwriter (CLU)
An individual who has attained a high degree of technical competency in the fields of Life and Health Insurance and who is expected to abide by a code of ethics. Must have minimum of three years of experience in Life or Health Insurance sales and have passed ten professional examinations administered by The American College.
Chartered Property and Casualty Underwriter (CPCU)
Professional who has attained a high degree of technical competency in Property and Liability Insurance and has passed ten professional examinations administered by the American Institute for Property and Liability Underwriters.
Choice No-Fault
Allows auto insureds the choice of remaining under the tort system or choosing no-fault at a reduced premium.
Claim-Made Policy
A Liability Insurance Policy under which coverage applies to claims filed during the policy period.
Claims Adjustor
Person who settles claims: an agent, company adjustor, independent adjustor, adjustment bureau, or public adjustor.
Class Rating
Rate-making method in which similar Insureds are placed in the same underwriting class and each is charged the same rate. Also called manual rating.
Collateral Source Rule
A legal rule, which states that the defendant cannot introduce any evidence that shows the injured party has received compensation from other collateral sources.
Collision Insurance
Protection against loss resulting from any damage to the policyholder's car caused by collision with another vehicle or object, or by upset of the insured car, whether it was the Insured's fault or not.
Combined Ratio
Basically, a measure of the relationship between dollars spent for claims and expenses and premium dollars taken in; more specifically, the sum of the ratio of losses incurred to premiums earned and the ratio of commissions and expenses incurred to premiums written. A ratio above 100 means that for every premium dollar taken in, more than a dollar went for losses, expenses, and commissions.
Commercial General Liability Policy (CGL)
Commercial Liability Policy drafted by the Insurance Services Office containing two coverage forms-an occurrence form and a claims-made form.
Commercial Lines
Insurance for businesses, organizations, institutions, governmental agencies, and other commercial establishments.
Commercial Multiple Peril Policy
A package of insurance that includes a wide range of essential coverages for the commercial establishment.
Commercial Package Policy (CPP)
A commercial policy that can be designed to meet the specific insurance needs of business firms. Property and Liability Coverage forms are combined to form a single policy.
Common Stock
Securities that represent an ownership interest in a corporation.
Community Property
A special ownership form requiring that one-half of all property earned by a husband or wife during marriage belongs to each. Community property laws do not generally apply to property acquired by gift, by will, or by descent.
Company Adjustor
Claims adjustor who is a salaried employee representing only one company.
Comparative Negligence
Under this concept a plaintiff (the person bringing suit) may recover damages even though guilty of some negligence. His or her recovery, however, is reduced by the amount or percent of that negligence.
Completed Operations
Liability arising out of faulty work performed away from the premises after the work or operations are completed. Applicable to contractors, plumbers, electricians, repair shops, and similar firms. This form of liability insurance provides coverage for bodily injury and property damage rising from completed or abandoned operations, provided the incident occurs away from premises owned or rented by the insured. Operations are deemed completed at the earliest of: (1) when all operations to be performed by or on behalf of the Insured under contract have been completed; (2) when all operations to be performed by or on behalf of the Insured at the site of the operations have been completed; (3) when the portion of work out of which injury or damage rises has been put to its intended use by a party other than the contractor or subcontractor.
Comprehensive Automobile Insurance
Coverage designed to provide protection against loss resulting from damage to the insured auto, other than loss by collision or upset.
Comprehensive General Liability Insurance
Under this form of insurance and regarding a covered occurrence, the company will pay all sums the Insured becomes legally obligated to pay as damages due to bodily injury (Coverage A) or property damage (Coverage B).
Comprehensive Major Medical Insurance
A policy designed to give the protection offered by both a basic and a major medical Health Insurance Policy. It is characterized by a low deductible amount, a coinsurance feature, and high maximum benefits.
Comprehensive Medical Expense Insurance
A form of Health Insurance which provides, in one policy, protection for both basic hospital expense and major medical expense coverages. The major medical part of a comprehensive policy is characterized by a deductible amount, coinsurance, and high maximum benefits.
Comprehensive Personal Liability Insurance
Protection against loss arising out of legal liability to pay money for damage or injury to others for which the Insured is responsible. It does not include automobile or business operation liabilities.
Compulsory Auto Liability Insurance
Insurance laws in some states require motorists to carry at least certain minimum auto coverages. This is called compulsory insurance.
Compulsory Insurance
Any form of insurance which is required by law.
Compulsory Insurance Law
Law protecting accident victims against irresponsible motorists by requiring owners and operators of automobiles to carry certain amounts of liability insurance in order to license the vehicle and drive legally within the state.
Computer Extra Expense Insurance
Coverage designed to provide protection if computer or EDP equipment is damaged or destroyed by fire or any other insured peril. In such an event it would probably be necessary to incur certain extra expenses to continue business operations.
Concealment
Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.
Concurrent Causation
Legal doctrine that states when a property loss is due to two causes, one that is excluded and one that is covered, the policy provides coverage.
Conditional Receipt
A receipt given for premium payments accompanying an application for insurance. If the application is approved as applied for, the coverage is effective as of the date of the prepayment or the date on which the last of the underwriting requirements, such as a medical examination, has been fulfilled.
Conditionally Renewable
Continuance provision of a Health Insurance Policy under which the company cannot cancel the policy during its term but can refuse to renew under certain conditions stated in the contract.
Confining Sickness
An illness that confines an Insured person to his home or to a hospital.
Consequential Loss
Financial loss occurring as the consequence of some other loss, often called an indirect loss. Consequential loss or damage is indirect loss or damage resulting from loss or damage caused by a covered peril, such as fire or windstorm. In the case of loss caused where windstorm is a covered peril, if a tree is blown down and cuts electricity used to power a freezer and the food in the freezer spoils, if the insurance policy extends coverage for consequential loss or damage then the food spoilage would be a covered loss. Business Interruption Insurance, extends consequential loss or damage coverage for such items as extra expenses, rental value, profits and commissions, etc.
Conservation
The attempt by the insurer to prevent the lapse of a policy.
Consideration
One of the elements for a binding contract. Consideration for an insurance policy is acceptance by the insurance company of the payment of the premium and the statement made by the prospective policyholder in the application, balanced by the insurance company's promise to provide benefits in the case of loss.
Consideration Clause
The clause that stipulates the basis on which the company issues the insurance contract. In Health Policies, the consideration is usually the statements in the application and the payment of premium.
Contents Broad Form
See Homeowners policy.
Contingent Annuity Option
An option under which an employee may elect to receive, under certain conditions, a reduced amount of annuity with the same income, or a specified fraction, to be paid after his death to another person designated as his contingent annuitant, for that person's lifetime. The contingent annuitant is usually the husband or the wife. See also: Joint and Survivor Annuity.
Contingent Beneficiary
The person or persons designated to receive the benefits of a policy or plan if the primary beneficiary dies while the Insured is living.
Contingent Owner
The person to succeed as owner of a Life Insurance Policy if the original owner dies.
Contract Holder
The group, entity or person to whom a group annuity contract is issued.
Contractors Liability Insurance
Coverage designed to provide protection for: (1) Premises/Operations. The premises portion provides for payment on the Insured's behalf of all sums he or she becomes liable to pay, resulting from bodily injury and/or property damage caused by an insured peril and rising out of the ownership, maintenance, or use of premises and operations in progress. The operations portion covers operations in progress and is intended for situations where your principal business operations are performed away from your premises. (2) Completed Operations. This portion of Liability Insurance provides for possible liability for bodily injury and/or property damage after work is complete and the Insured has left the job site.
Contractual Liability
Legal liability of another party that the business firm agrees to assume by a written or oral contract. It is common in construction and other agreements (written or oral) for one party to assume the liability of another. This is sometimes referred to as a hold harmless agreement. The extent to which one holds another harmless varies from contract to contract, job to job, etc.
Contribution by Equal Shares
Type of other-insurance provision often found in Liability Insurance contracts that requires each company to share equally in the loss until the share of each insurer equals the lowest limit of liability under any policy or until the full amount of loss is paid.
Contributory Negligence
Negligence of the damaged person that helped to cause the accident. Some states bar recovery to the plaintiff if the plaintiff was contributorily negligent to any extent. Others apply comparative negligence.
Conversion Privilege
The right given to an insured person to change insurance without evidence of medical insurability, usually to an individual policy upon termination of coverage under a group contract.
Convertible Bond
A bond that offers the holder the privilege of converting the bond into a specified number of shares of stock.
Convertible Term Insurance
Term Insurance which can be exchanged, at the option of the policyholder and without evidence of insurability, for another plan of insurance.
Coordination of Benefits (COB)
The mechanism used in group Health Insurance to designate the order in which the multiple carriers are to pay benefits and to prevent duplicate payments.
Corridor Deductible
Major medical plan deductible that excludes benefits provided by a basic plan if both a basic and a supplemental group major Medical Expense Policy are in force.
Cost Basis
An amount attributed to an asset for income tax purposes; used to determine gain or loss on sale or transfer; used to determine the value of a gift
Cost Containment
The controller reduction of inefficiencies in the consumption, allocation, or production of health care services that contribute to higher than necessary costs.
Cost-of-Living Rider
Benefit that can be added to a Life Insurance Policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability.
Coverage for Damage to Your Auto
That part of the personal Auto Policy insuring payment for damage or theft of the insured automobile. This optional coverage can be used to insure both collision and other-than-collision losses.
Covered
A person covered by a pension plan is one who has fulfilled the eligibility requirements in the plan, for whom benefits have accrued, or are accruing, or who is receiving benefits under the plan.
Covered Expenses
Hospital, medical, and miscellaneous health care expenses incurred by the Insured that entitle him/her to a payment of benefits under a Health Insurance Policy. Found most often in connection with major medical plans, the term defines, by either description, reasonableness, or necessity to specify the type and amount of expense which will be considered in the calculation of benefits.
Covered Participant
A person covered by a pension plan is one who has fulfilled the eligibility requirements in the plan, for whom benefits have accrued, or are accruing, or who is receiving benefits under the plan.
Credibility
A statistical measure of the degree to which past results make good forecasts of future results.
Credibility Factor
The weight given to an individual Insured's past experience in computing premiums for future coverage.
Credit Health Insurance
A form of Health Insurance on a borrower, usually under an installment purchase agreement. The benefits cover the obligations of the borrower and are payable to the creditor.
Credit Insurance
A guarantee to manufacturers, wholesalers, and service organizations that they will be paid for goods shipped or services rendered. Applies to that part of working capital which is represented by accounts receivable.
Credit Life Insurance
Term Life Insurance issued through a lender or lending agency to cover payment of a loan, installment purchase, or other obligation, in case of death.
Crop Hail Insurance
Coverage designed to provide financial protection against damage to growing crops as a result of hail or certain other named perils.
Cross Liability Endorsement
In the event of claim by one Insured for which another Insured covered by the same policy may be held liable, this endorsement covers the Insured against whom the claim is made in the same manner as if separate policies had been issued. However, it does not operate to increase the insurance company's overall limit of liability.
Cross Purchase Agreement
Specifies the terms for the surviving partners or shareholders to buy a deceased's share of the business's ownership.
Current Assumption Whole Life Insurance
Nonparticipating Whole Life Policy in which the cash values are based on the Insurer's current mortality, investment, and expense experience. An accumulation account is credited with a current interest rate that changes over time. Also called interest-sensitive Whole Life Insurance.
Currently Insured
Status of a covered person under the Old-age, Survivors, and Disability Insurance (OASDI) program who has at least six quarters of coverage out of the last thirteen quarters, ending with the quarter of death, disability, or entitlement to retirement benefits.
Damage to Property of Others
Coverage for an Insured who damages another's property. Payment is made despite the lack of legal liability. Coverage is included in Section II of the Homeowners Policy.
Death Benefit
A payment made to a designated beneficiary upon the death of the employee annuitant.
Debenture
A bond that is backed only by the general credit of the issuing corporation. No specific property is pledged as security behind the loan.
Debit Insurance
See Industrial Life Insurance.
Debris Removal Clause
This clause extends insurance coverage to include the cost of debris removal resulting from damage caused by a covered loss up to a specified limit of loss. The clause is an additional Property Insurance coverage.
Declarations
Statements in an insurance contract that provide information about the property or life to be insured and used for underwriting and rating purposes and identification of the property or life to be insured.
Deductible
An amount which a policyholder agrees to pay, per claim or per accident, toward the total amount of an insured loss.
Deferred Annuity
An annuity providing for the income payments to begin at some specified future date.
Deferred Compensation
Arrangements by which compensation to employees for past or current services is postponed until some future date.
Deferred Group Annuity
A type of group annuity providing for the purchase each year of a paid-up deferred annuity for each member of the group, the total amount received by the member at retirement being the sum of these deferred annuities.
Defined Benefit Plan
A pension plan stating either (1) the benefits to be received by employees after retirement or (2) the method of determining such benefits. The employer's contributions under such a plan are actuarially determined.
Defined Contribution Plan
A plan under which the contribution rate is fixed and benefits to be received by employees after retirement depend to some extent upon the contributions and their earnings.
Dental Insurance
Individual or group plan that helps pay costs of normal dental care as well as damage to teeth from an accident.
Dependency Period
Period of time following the readjustment period during which the surviving spouse's children are under eighteen and therefore dependent of the parent.
Dependent Benefits
Social Security benefits available to the spouse or children of a Social Security beneficiary.
Deposit Administration Group Annuity
A type of group annuity providing for the accumulation of contributions in an undivided fund out of which annuities are purchased as the individual members of the group retire.
Deposit Premium
The money paid by a prospective policy holder when an application is made for an insurance policy. It is usually equal, at least, to the first month's estimate premium and is applied toward the actual premium when billed.
Deposit Term Insurance
A form of Term Insurance, not really involving a deposit, in which the first-year premium is larger than subsequent premiums. Typically, a partial endowment is paid at the end of the term period. In many cases the partial endowment can be applied toward the purchase of a new Term Policy, or, perhaps, a Whole Life Policy.
Depreciation
A decrease in the value of property over a period of time due to wear and tear or obsolescence. Depreciation is used to determine the actual cash value of property at time of loss. See also: Actual Cash Value
Diagnosis-Related Groups (DRGs)
System that reimburses health care providers fixed amounts for all care given in connection with standard diagnostic categories.
Dictionary of Insurance Terms
Please select one of the terms below to receive an explanation.
Difference in Conditions Insurance (DIC)
All-Risks Policy that covers other perils not insured by basic Property Insurance contracts, supplemental to and excluding the coverage provided by underlying contracts. DIC insurance provides coverage designed to close specific gaps in standard insurance policies and is usually available only for larger industrial or commercial risks. It allows coverage to be customized to extend to such exposures as water damage, flood, collapse, earthquake, landslide, etc., according to the Insured's needs. DIC coverage may be provided by means of a separate insurance policy or it may be added by endorsement to the basic policy.
Direct Loss
Financial loss that results directly from an insured peril.
Direct Placement
Sale of an entire issue of bonds or stock by the issuer to one or a few large institutional customers such as an insurance company without trying to market the issue publicly.
Direct Premiums Written
Property and Casualty Insurance premiums written (less return premiums) without any allowance for premiums for assumed or ceded reinsurance.
Direct Response System
A marketing method where insurance is sold without the services of an agent. Potential customers are solicited by advertising in the mail, newspapers, magazines, television, radio and other media.
Direct Writer
The industry term for a company which uses its own sales employees to write its policies. Sometimes refers to companies which contract with exclusive agents.
Directors' and Officers' Liability
The exposure of corporate managers to claims from shareholders, government agencies, and employees, and others alleging mismanagement.
Disability Benefit
A feature added to some life insurance policies providing for waiver of premium, and sometimes payment of monthly income, if the policy holder becomes totally and permanently disabled.
Disability Income Insurance
A form of Health Insurance that provides periodic payments to replace income when an insured person is unable to work as a result of illness, injury, or disease.
Disability Insurance
Disability Insurance can produce a reliable source of tax-free income should you become temporarily or permanently disabled. This benefit is available as a personal product and as a group product.
Jim Quinlan is a Registered Representative of and offering securities through Foresters Equity Services, Inc
Member FINRA, SIPC
6640 Lusk Boulevard, Suite A202, San Diego, CA, 92121 800.350.9885
Disability Insured
Status of an individual who is insured for disability benefits under the Old-Age, Survivors, and Disability Insurance (OASDI) program. The covered person must be fully insured and have at least twenty quarters of coverage out of the last forty, ending with the quarter in which the disability occurs. Fewer quarters are required for persons under age thirty.
Disappearing Deductible
Deductible in an insurance contract that provides for a decreasing deductible amount as the size of the loss increases, so that small claims are not paid but large losses are paid in full.
Dismemberment
Loss of body members (limbs), or use thereof, or loss of sight due to injury.
Dismemberment Insurance
A form of Health Insurance that provides payment in case of loss by bodily injury of one or more body members (such as hands or feet) or the sight of one or both eyes.
Disposable Personal Income
Personal income less personal tax and basic non-tax payments. It is the income available to people for discretionary spending and saving.
Dividend
(1) A return of part of the premium on participating insurance to reflect he difference between the premium charged and the combination of actual mortality, expense and investment experience. Such premiums are calculated to provide some margin over the anticipated cost of the insurance protection. (2) In capital stock companies, a share of the profits distributed to stockholders.
Dividend Addition
An amount of paid-up insurance purchased with a policy dividend and added to the face amount of the policy.
Dollar Threshold
In no-fault Auto Insurance states with the dollar threshold, it prevents individuals from suing in tort to recover for pain and suffering unless their medical expenses exceed a certain dollar amount.
Domestic Insurer
An insurance company is a domestic company in the state in which it is incorporated. See also Foreign Insurer, Alien Insurer.
Double Indemnity
A policy provision usually associated with death, which doubles payment of a designated benefit when certain kinds of accidents occur.
Dramshop Law
Law that imputes negligence to the owner of a business that sells liquor in the case that an intoxicated customer causes injury or property damage to another person. Usually excluded from General Liability Policies.
Dread Disease Insurance
Insurance providing an unallocated benefit, subject to a maximum amount, for expenses incurred in connection with the treatment of specified diseases, such as cancer, poliomyelitis, encephalitis and spinal meningitis.
Driver Education Credit
Student discount or reduction in premium amount for which young drivers become eligible on completion of a driver education course.
Duplication of Benefits
Overlapping or identical coverage of the same Insured under two or more health plans, usually the result of contracts of different insurance companies, service organizations, or pre-payment plans; also known as multiple coverage.
Dwelling Property 1
Property Insurance policy that insures the dwelling at actual cash value, other structures, personal property, fair rental value, and certain other coverages. Covers a limited number of perils.
Dwelling Property 2
Property Insurance policy that insures the dwelling and other structures at replacement cost. It adds additional coverages and has a greater list of covered perils than the Dwelling Property 1 policy.
Dwelling Property 3
Property Insurance policy that covers the dwelling and other structures against direct physical loss from any peril except for those perils otherwise excluded. However, personal property is covered on a named-perils basis.
Early Retirement
Retirement of a participant prior to the normal retirement date, usually with a reduced amount of annuity. Early retirement is generally allowed at any time during a period of 5 to 10 years preceding the normal retirement date.
Earned Income
Employment income derived from salary, wages, commissions, or fees.
Earned Premium
The portion of a premium which is the property of an insurance company, based on the expired portion of the policy period. For example, an insurance company is considered to have earned 75 percent of an annual premium after a period of nine months of an annual policy has elapsed.
Earnings Test (Retirement Test)
Determination of the amount of Social Security benefits payable to a beneficiary after adjusting for earnings.
Economic Loss
The estimated total cost, both insured and uninsured, of mishaps (such as motor vehicle accidents, work accidents, and fires); includes such factors as property damage, funeral expenses, wage loss, insurance administration costs, and medical, hospital and legal costs.
Economic Policy
Special type of participating Whole Life Insurance in which the dividends are used to buy Term Insurance or paid-up additions equal to the difference between the face amount of the policy and some guaranteed amount.
Effective Date
The date on which the insurance under a policy begins.
Elements of a Negligent Act
Four elements an injured person must show to prove negligence: existence of a legal duty to use reasonable care, failure to perform that duty, damages or injury to the claimant, and proximate cause relationship between the negligent act and the infliction of damages.
Eligibility Date
The date on which an individual member of a specified group becomes eligible to apply for insurance under an (group Life or Health) insurance plan.
Eligibility Period
A specified length of time, such as one month, following the eligibility date during which an individual member of a particular group will remain eligible to apply for insurance under a group Life or Health Insurance policy without evidence of insurability.
Eligibility Requirements
For retirement plans, (1) The conditions which an employee must satisfy to participate in a retirement plan, for instance completion of 1 to 3 years of service with the employer, the attainment of a specified age, such as 25, or (2) Conditions which an employee must satisfy to obtain a retirement benefit, such as the completion of 15 years of service and the attainment of age 65.
Eligible Employees
Those members of a group who have met the eligibility requirements under a group Life or Health Insurance plan.
Elimination Period
A period of time between the period of disability and the start of Disability Income Insurance benefits, during which no benefits are payable. The elimination period may be as short as a few days or as long as one year or more. See also: Waiting Period.
Embezzlement
Fraudulent use or taking of another's property or money which has been entrusted to one's care.
Employee Benefit Plan Insurance
Coverage designed to protect the employer against claims by employees or former employees resulting from negligent acts or omissions in the administration of the Insured's employee benefits programs. Coverage is intended to extend to the administration of these plans, including counseling employees, interpreting employee benefits programs, handling records, enrolling, terminating or cancelling employees in specified plans on a timely basis, etc.
Employee Benefit Programs
Programs designed to benefit employees, arranged by the employer, which are not paid for primarily or directly by the employee, including for instance group Life Insurance and group Accident and/or Health Insurance; profit sharing plans; employee stock subscription plans; Workers' Compensation; Unemployment Insurance; Social Security benefits; disability benefits, etc.
Employee Dishonesty Coverage Form
Commercial Crime Insurance form drafted by the Insurance Services Office that covers the loss of money, securities, and other covered property because of any dishonest act of a covered employee or employees.
Employee Dishonesty Insurance
Coverage designed to protect an employer from financial loss due to the fraudulent activities of one or more employees. The coverage includes protection for loss of money, securities, and other property of the Insured. Some scheduled policies are still available, but the majority are written on a blanket basis. This provides coverage for all employees, subject to the policy definitions. The limit of liability is per loss and is applied on an occurrence basis. All acts involving the same employee or group of employees is considered one occurrence.
Employee Retirement Income Security Act (ERISA)
Legislation passed in 1974 applying to most private pension and welfare plans that requires certain minimum standards to protect participating employees.
Employment Practices Liability Insurance
Coverage designed to protect the corporation, directors & officers and employees for claims resulting from wrongful termination, discrimination, sexual harassment, wrongful discipline and failure to employ or promote.
Employment Stock Ownership Plan (ESOP)
A defined contribution pension plan which is designed to invest primarily in securities of the employer, such as common stock and debentures.
Endorsements
An additional piece of paper, not a part of the original contract, which cites certain terms and which, when attached to the original contract, becomes a legal part of that contract. See Rider.
Endowment
Life Insurance payable to the policyholder if living, on the maturity date stated in the policy, or to a beneficiary if the Insured dies prior to that date.
Enrolled Actuary
A person who performs actuarial service for a plan and who is enrolled with the Federal Joint Board for the Enrollment of Actuaries.
Enrollment Card
A document signed by an employee as notice of his/her desire to participate in the benefits of a Group Insurance plan.
Entire Contract Clause
Provision in Life Insurance policies stating that the policy and attached application constitute the entire contract between the parties.
Entity Purchase Agreement
The terms for the business to buy back a deceased's share of the business's ownership.
Environmental Damage
The injurious presence in or on land, the atmosphere, or any water course or body of water of solid, liquid, gaseous, or thermal contaminants, irritants, or pollutants.
Environmental Impairment Liability Insurance
Coverage designed to cover losses and liabilities arising from damage to property by pollution.
Equities
Investments in the form of ownership of property, usually common stocks, as distinguished from fixed income bearing securities, such as bonds or mortgages.
Equity in the Unearned Premium Reserve
Amount by which an unearned premium reserve is overstated because it is established on the basis of gross premium rather than net premium.
Errors and Omissions Insurance
Coverage designed to protect an Insured against loss due to a claim of some negligent act, error, or omission by the Insured.
Estate Planning
The process of developing a plan to transfer property from one generation to the next, or within a generation (e.g., from husband to wife).
Estoppel
Legal doctrine that prevents a person from denying the truth of a previous representation of fact, especially when such representation has been relied on by the one to whom the statement was made.
Evidence of Insurability
Any statement of proof of a person's physical condition and/or other factual information affecting his/her acceptance for insurance.
Excess and Surplus Insurance
(1) Coverage designed to protect against losses above a certain amount, with losses below that amount usually covered by a regular policy. (2) Insurance for a risk for which coverage is unavailable in the normal market. Such risks are frequently unusual, e.g., damage to a musician's hands or the multiple perils of a convention. See also: Umbrella Liability, Surplus Lines.
Exclusion or Exception
Specified conditions or circumstances, listed in the policy, for which the policy will not provide benefits.
Exclusion ratio
The portion of an annuity payment, considered by tax law to be a return of your initial investment, that is not subject to income tax when received.
Exclusions
Specific conditions or circumstances listed in the policy for which the policy will not provide benefit payments.
Exclusive Agent
An agent who is employed by one and only one insurance company and who solicits business exclusively for that company.
Exclusive Provider Organization (EPO)
People who belong to an EPO must receive their care from affiliated providers; services rendered by unaffiliated providers are not reimbursed. See also: Health Maintenance Organization.
Exclusive Remedy Doctrine
Doctrine in Workers Compensation Insurance which states that Workers Compensation benefits should be the exclusive or sole source of recovery for workers who have a job-related accident or disease. The doctrine has been eroded by legal decisions.
Expense Loading
See Loading.
Experience Modification Factor
Used in Workers Compensation rating to reflect the degree to which a particular employer has experience that is better or worse than expected for that industry. Weighted by employer's credibility factor.
Experience Rating
The process of determining the premium rate for a group risk, wholly or partially on the basis of that group's experience.
Experience Refund
A provision in most group policies for the return of premium to the policyholder because of lower than anticipated claims.
Explosion
A violent expansion, with force and noise, generally due to rapid chemical change; term covered under various Property/Casualty Insurance policies.
Exposure Unit
Unit of measurement used in insurance pricing.
Extended Coverage Insurance
Protection for the Insured against property damage caused by windstorm, hail, smoke, explosion, riot, riot attending a strike, civil commotion, vehicle and aircraft. This is provided in conjunction with the Fire Insurance policy and the various Package Policies.
Extended Nonowned Coverage
Endorsement that can be added to an Automobile Liability Insurance policy that covers the Insured while driving any non-owned automobile on a regular basis.
Extended Reporting Period
An additional period of time after policy expiration during which valid claims will be paid under a claims-made policy of Liability Insurance
Extended Reporting Period Endorsement
Added to a claims-made policy of Liability Insurance to provide an additional period of time during which valid claims will be paid
Extended