Home / Frequently Asked Questions

Frequently Asked Questions

An agent operating as an independent contractor under the independent agency system.

A facility whose primary purpose is the provision of care for emergency medical conditions. Also called emerge-center or urgi-center.

The debtor who receives money and in turn grants a mortgage on his or her property as security for a loan.

The creditor to whom a mortgage is given and who lends money on the security of the value of the property mortgaged.

The physician who examines an applicant or claimant on behalf of the insurer and as an agent of the insurer.

The party to whom money or insurance proceeds is to be paid in the event of loss, such as the lienholder on an automobile or the mortgagee on real property.

The party to an insurance arrangement whom the insurer agrees to indemnify for losses, provide benefits for, or render services to. This term is preferred to such terms as policyholder, policy owner, and assured. See also Named Insured.

An agent representing companies in a sales and service capacity as an independent contractor on a commission basis. A local agent usually has a small territory, and his powers are limited by contract.

Usually, a Life Insurance agent. It can be more narrowly defined as a risk appraiser. See also Risk Appraiser.

A lobbying organization established by the National Association of Life Underwriters.

A group of individuals who band together to assume risks are sometimes called a Lloyd’s association. They are organized along the same lines as, though not connected with, Lloyd’s of London. Each person is responsible only for the share of the risk that he assumes. There are a limited number of these associations in the United States.

Health personnel who perform duties which would otherwise have to be performed by physicians, optometrists, dentists, podiatrists, nurses, and chiropractors.  Also called paramedical personnel.

Vandalism and Malicious Mischief. Damage or destruction to property which is willful. Traditionally VM&M coverage was optional on many forms or added by endorsement, but today it is automatically covered by basic commercial and homeowner forms.

State law which states that if the insured and beneficiary die in the same accident and it cannot be determined which died first, it will be assumed that the beneficiary died first, and all proceeds will then pass to the insured’s contingent beneficiary.

A form which provides temporary coverage for wedding presents, usually starting shortly before the wedding and ending shortly thereafter.

A type of pension plan providing retirement benefits a definite amount or percentage of earnings for each year of service with the employer. If a unit of annuity is purchased each year to fund the ultimate benefit, this may also be referred to as a unit-purchase type of plan.

Pleas that can defeat an injured worker’s suit for injuries against his employer in the absence of a Workers Compensation law or Employers Liability legislation. The three defenses are contributory negligence, assumption of risk, and fellow servants rule.

The process of selecting risks and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.

A general term applied to forms of third party liability insurance with the respect to both bodily injury and property damage liability. It protects the insured against suits brought by members of the public.

Insurance providing Hull coverage and Protection and Indemnity Liability coverage on pleasure boats. It is usually written on an all-risk basis for Hull coverage, although named-perils forms are sometimes used.

Explosion, Collapse, and Underground Damage. This term is used in Business Liability Insurance to indicate that certain types of construction work involves these hazards. Many Liability policies excludes them. They can be added by endorsement for an additional premium charge.

A civil court suit brought by survivors against someone believed responsible, by negligence or intention for another’s death. In a few states actions for wrongful death have statutory minimums or maximums, but in most states they do not.

A term which is used usually in connection with Money and Securities coverage. Insurance covering wrongful abstraction protects against all forms of burglary, robbery, and stealing.

Insurance on which an application has been taken out but which is not yet delivered and/or the first premium settled.

To insure, to underwrite, or to accept an application.

(1) A schedule of benefits payable to an employee by his employer without regard to liability, required by state law in the case of injury, disability, or death as the result of occupational hazards. (2) Insurance agreeing to pay Workers Compensation law benefits on behalf of the insured employer.

Worker’s comp insurance is a type of insurance purchased by employers to cover employment related injuries and illnesses. A policy offers salary replacement and medical benefits to employees that are injured while being employed for exchange that the employee doesn’t sue his or her employer for the wrongdoing or negligence. The range of injuries and situations covered is broad, but there are limits. States can impose drug and alcohol testing on the injured employee, and they can deny the employee workers’ compensation benefits if such tests show the employee was under the influence at the time of the injury. Compensation may also be denied if the injuries were self-inflicted, the employee was violating a law or company policy, or the employee was not on the job at the time of the injury.

The system of state underwritten and issued Life Insurance established by the state of Wisconsin and providing Life Insurance for citizens who apply. Wisconsin is unique among the 50 states in this respect.

Wind of sufficient violence to be capable of damaging insured property. Windstorm coverage has traditionally been part of extended coverage (EC), but today it is usually included automatically as part of basic coverages.

Coverage that remains in effect regardless of the geographical location in which a loss occurs.

Insurance which may be kept in force for a person’s whole life and which pays a benefit upon his death, whenever that may be. All Whole Life policies build up non-forfeiture values, but they are paid for in 3 different ways. Under a Straight or Ordinary Life policy, premiums are paid for as long the insured lives. A single premium policy is paid for at one time in one premium. Between these two types there are many limited-payment plans, under which the insured pays premiums for a certain period or until reaching a certain age. Contrast with Term Insurance

Insurance provided to Ocean Marine forms, covering ships and their cargos.

(1) A policy the premium on which is collected weekly by an agent calling at the door. It is usually sold in small face amounts. (2) A form of Debit or Industrial Life Insurance. See also Industrial Life Insurance

 

An exclusion found in many Inland Marine policies. It excludes loss resulting from wear and tear, which means normal usage over a period of time which reduces the value of the property insured.

These words are used to refer to the insurer in many of the modernized/personalized policy forms recently introduced.

Coverage against damage to property resulting from high wave or tides.

Coverage for an insured who suffers a water damage loss which also damages the property of others on the floor below or in adjoining premises.

A clause sometimes found in Inland Marine overage extending the policy to cover from the shipper’s warehouse to the consignee’s warehouse.

Coverage protecting warehousemen from liability claims, common to the business of warehousing, for loss or damage to property in storage.

Insurance covering damage caused by war. Most often written by Ocean Marine Insurance companies covering vessels.  

An allocation of surplus not required by law. Such reserves are often accumulated by insurers in order to strengthen their financial structure.

A trust established under IRS Code 501(c)(9) that can be used to prefund health care.

A coverage similar to Workers Compensation used in circumstances in which Workers Compensation coverage does not apply or is not required by law. An example would be an employer wanting to voluntarily pay compensation benefits to members of a company-sponsored athletic team, or a church wishing to cover volunteer workers. 

A policy contract that can be made void at the option of one or more of the parties to it. An example would be Property Insurance policy which is voidable by the insured commits certain acts.

 

 

Voidable- A policy contract that can be made void at the option of one or more of the parties to it. An example would be Property Insurance policy which is voidable by the insured commits certain acts.

A term used to describe a policy contract that is completely free of all legal effect.

A health care plan usually offered only on a group basis which covers routine eye examinations, and which may cover all or part of the cost of eyeglasses and lenses.

An accident for which no one is responsible, an act of God.

The law says that under certain circumstances a person is liable for the acts of someone else. For example, in matters related to an automobile a parent might be held responsible for the negligent acts of a child. In such a case the parent would be vicariously liable.

The attainment of a benefit right by a participant, attributable to employer contributions, that is not contingent upon a participant’s continuation in specified employment. See also Contingent Vesting, Deferred Vesting, and Immediate Vesting.

The present value of a participant’s retirement benefits which are non-forfeitable.

Variable life insurance is a form of permanent life insurance that has an investment component. This type of insurance is generally a expensive because it allows the insured to invest in sub-accounts available within the policy. These sub-accounts typically are compromised of various instruments and investment funds within the insurance company’s portfolio, such as stocks, bonds, equity funds, money market funds, and bond funds. There’s also a cash value account that has the potential to grow as an underlying investment. Because of the investment risks, variable policies are regulated under the federal securities laws and must be presented with a booklet detailing all policy charges, fees and sub-account expenses. Annual growth of the cash value account is not taxable as ordinary income. Additionally, these values can be revisited in later years and, when done properly through loans using the account as collateral, instead of direct withdrawals, they may be received free of any income taxation.

A form whose face value varies depending upon the value of the dollar or securities or other equity investments, and premiums and benefits are adjustable at the option of the policyholder.

Relating to an agreement by an insurer to pay a specified amount of money to or on behalf of the insured upon occurrence of a defined loss.

A term used in Property Insurance to describe a building that has nothing in it. This goes one step beyond the description of unoccupied. The Standard Fire policy prohibits vacancy beyond a specified period of time. Contrast with Unoccupied.

This refers to how much a covered group uses a particular health plan or program. 

This procedure or process utilizes a review coordinator to evaluate the necessity and appropriateness of various health care services.

A term that was once used to refer to the coverages later known as Business Interruption Insurance, and now called Business Interruption Insurance, and now called Business Income Coverage. In this sense it is obsolete. It is, however, still used to refer to such loss of earnings in Boiler and Machinery Insurance. It is also used in some contracts which promise to pay on a valued basis, or fixed amount, for each day the insured is deprived of the use or occupancy of described property because of damage caused by a peril insured against.

Refers to property which may be furnished or have furnishings in it but is not occupied or being lived in. The Standard Fire policy prohibits unoccupancy beyond a specified period of time. This term is contrasted with vacant, which means that there is nothing within the building.

A combination flexible premium, adjustable life insurance policy. The premium payer may select the amount of premium he or she can pay and the policy benefits are those which the premium will purchase. Or, the premium payer may change the amount of insurance and pay premium accordingly. Many believe this is the only true solution to the “buy term invest the difference” problem.

Universal life insurance is a type of permanent life insurance that’s flexible. There are two components to a universal life insurance policy; the cost of insurance and savings, that’s known as the cash value. When you buy a policy, the insurance company establishes a minimum interest crediting rate as outlined in your contract. However, if your account earns more then the minimum interest rate, the company may credit the excess interest to your policy. This means that there’s flexible premiums that may allow you to adjust how much you’ll pay each year by accessing some of your policy’s cash value. Depending on your policy’s potential cash value, it may be used to skip a premium payment or be left alone with the potential to accumulate in value over time.

A form of Life Insurance issued to members of the armed forces during World War I until about the end of World War II.

A coverage in an Automobile Insurance policy under which the insurer will pay damages to the insured for which another motorist is liable if that motorist is unable to pay because he is uninsured. The coverage usually applies to Bodily Injury damages only. Injuries to the insured caused by a hit-and-run driver are also covered.

Insurance against loss of income due to unemployment. It is funded by payroll taxes and subject to control by both the federal and state governments. Individuals who are willing and able to work quality for this insurance by working at a job in an eligible classification, earning a minimum amount of money, and being subject to involuntary unemployment.

Health Insurance that covers off-the-job accidents and sickness. It does not cover disability resulting from an injury or sickness covered by Workers Compensation Insurance. See also Disability Benefits Law

A testing laboratory for manufactured items to determine their safety propensities.

The amount of insurance or reinsurance on a risk that attaches before the next higher excess layer of insurance or reinsurance attaches.

A coverage in an Automobile Insurance policy under which the insurer will pay damages up to specified limits for bodily injury damages, if the limits of liability under the liable motorist’s policy are exhausted and he cannot pay the full amount he is liable for.

A condition in which not enough insurance is carried to cover the insurable value.

Refers to damage to underground property, such as wires, conduits or pipes, sewers, etc., beneath the surface of the ground caused by the use of mechanical equipment for the purpose of grading land, paving, excavating, drilling, burrowing, filling, backfilling, or pile driving.

For property coverage, if a company and a claimant fail to agree on the amount of loss, each may appoint an appraiser, and these in turn select an umpire. A decision by any two of the three is binding.

Umbrella Liability Policy- A coverage basically affording high limit coverage in excess of the limits of the primary policies as well as additional liability coverages. These additional coverages are usually subject to a substantial self-insured retention. The term “umbrella” is derived from the fact that it is a separate policy over and above any other basic Liability Policies the insured may have.

Umbrella insurance provides excess liability coverage above your other insurance policies, such as homeowners, renters, and automobile. It helps protect you from major claims and lawsuits by supplementing your basic policies with a higher limit to cover the difference.  Standard policies will provide some liability coverage if you are ever sued and must pay for judgements and/or lawyer expenses.  The policy isn’t activated until you reach the liability coverage limit of your standard policy.

The total sum that the insured or any company as its insurer, or both, become legally obligated to pay either through adjudication or compromise, including among others, legal, medical, and investigative costs.

Ultimate Mortality Table- A mortality table based on mortality experience from which the first few policy years after issue (usually five) have been excluded to eliminate the effect of possible adverse selection.

Latin for “utmost good faith.” A basic principle of the insurance contract is that it is bases on “utmost faith.”

The act of, or attempt thereat, which induces a policy owner, by means of misrepresentation, to drop an existing policy and take another. Note that it is the misrepresentation that is illegal, not the replacement of one policy by another.

The number of persons hired within a stated period to replace those leaving or dropped; also, the ratio of this number to the average workforce maintained. In pension plans, turnover refers to the ratio of participants who leave employment through quits, discharge, etc. to the total of participants at any age or length of service.

Insurance coverage which includes General Liability for Contractors and Architects Errors and Omissions.

An adaptation of Business Interruption coverage. It protects a school against the indirect loss of tuition fees that may result from a fire or other peril covered by the policy which closes the school.

Those persons who, by entering into trust agreement with the employer, assume the impartial supervision of a retirement plan. They may be employees, a trust company or outside individuals.

A person appointed to manage the property of another.

A provision found in some Property, Ocean Marine, and Inland Marine policies enabling a person to insure his interest in the property of another.

(1) A supplemental agreement attached to and made a part of a Life Insurance policy setting forth the manner in which the proceeds are to be paid, in lieu of having them paid in a lump sum or under one of the other installment settlement options in the policy itself. (2) An agreement or instrument under which a corpus (fund/property) is given over to the management of the trustee named in a trust instrument for the benefit of the beneficiaries of the trust. (3) A written agreement between two parties – the employer and the trustee – setting forth the provisions of a pension plan.

Group insurance issued under a master contract with certificates of insurance that are not policy contracts issued to persons included in the group. This would be in contrast to Franchise or Wholesale “Group” Insurance, under which a covered person is issued an individual policy contract.

A commercial Automobile Insurance coverage form used to insure truckers who are engaged in the business of transporting goods for others.

A form of Life Insurance that is usually a combination of Whole Life and twice as much Term Insurance. The Term portion applies until a stated date. Such a policy might be used to provide maximum protection to an individual at an earlier age when the need for insurance is greater but the ability to pay is less.

A plan where employees have their choice, among different types of provides such as HMO, PPO, or basic indemnity plan. Usually, their choice depends on how much they want to pay for the coverage.

A type of policy which provides coverage for goods in transit for a specified trip and by a specified mode of transportation.

A method of ranking sick or injured people according to the severity of their sickness or injury in order to ensure that medical and nursing staff facilities are used most efficiently.

An individual who goes onto another person’s property without any legal right to do so. The only duty that the owner of the property owes a trespasser is not to intentionally harm or set a trap for him.

The factor applied to rates which allows for such changes as increased cost of medical providers, the cost of new and expensive medical technology, etc.

A contract of automatic reinsurance setting forth the conditions for reinsuring a class or classes of business.  Contrast with Facilitative Reinsurance.

Travel insurance is insurance to cover medical expenses, trip cancellations, lost luggage, flight accidents and other losses incurred while traveling. You can buy travel insurance for any trip, whether you’re traveling internationally or within your own country. Typically, you will buy insurance at the same time you book your trip to cover the exact length of your trip. 

A form of Health Insurance limiting coverage to accidents occurring while the insured is traveling.

An injury to a person’s physical body caused by an outside source, as distinct from physical disability caused by sickness or disease.

An accidental Death and Dismemberment and Disability Benefit policy issued with a common carrier ticket and limited to the risks or travel and the duration of the trip for which the ticket has been purchased. The name is derived from the fact that it was originally issued in the form of an extra stub on a travel ticket.

Usually an open form policy which covers the insured’s property in the course of transportation. It can include all modes of transportation, including ocean vessels, required to carry the property from the originating location to the final destination.

Automobile coverage for transportation expenses incurred by the named insured only in the event of theft of an entire covered auto. Coverage begins after a 48-hour waiting period and is subject to a daily limit and maximum dollar limit, and it applies only when the insured has physical damage coverage for theft.

In commercial liability insurance, rules designed to offset wide differences in premiums for mercantile risks because of a change in the rating base from area to gross sales. It limits maximum and minimum premium changes resulting solely from the change in the rating base.

A policy which provides coverage for loss to property while it is being transported.

Shifting all or part of a risk to another party. Insurance is the most common method of risk transfer, but other devices, such as hold harmless agreements, also transfer risk. One of the four major risk management techniques. See Risk Management.

The solicitation, inducement, and preliminary negotiations effecting a contract of insurance and the subsequent carrying on of business pertaining to it. The exact definition will vary somewhat according to the state laws regulating insurance.

Coverage for the legal liability of truckers for loss or damage to non-owned trailers and equipment which are in the insured ‘s possession under a written trailer interchange agreement.

An arrangement whereby one trucker transfers a trailer containing a shipment to a second trucker for continued transportation.

Optional Automobile coverage which pays the cost up to a fixed amount for the towing of a disabled automobile.

A loss of sufficient size so that it can be said there is nothing left of value. The complete destruction of the property. The term is also used to mean a loss requiring the maximum amount a policy will pay.

A degree of disability from injury or sickness that prevents the insured from performing the duties of any occupation from remuneration or profit. The definition in any given case depends on the wording in a covering policy.

A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and it is mainly against liability for unintentional torts that one buys Liability Insurance.

A person who has committed a tort.

A kind of policy that came into use after the Civil War. It was a high premium contract that paid dividends to those participants who were still living at the end of a stated period, at the expense of those who had died or let their policies lapse. It is almost the opposite of insurance and is no longer allowed by law.

A commercial Property coverage form used to insure tobacco warehouse operations. Tobacco is covered only while in the warehouse, and only for a limited period before, during, and after the regular auction season.

Insurance which indemnifies the owner of real estate in the event that his clear ownership of property is challenged by the discovery of faults in the title that was passed to him.

The limits of time within which notice of a claim and proof of a loss must be submitted.

One of the uniform individual accident and sickness provisions required by state law to be included in every Individual Health Policy. It sets a limit on the number of years after a policy has been in force that an insurer can use as a defense against a claim the fact that a physical condition of the insured existed before the policy was issued, but was not declared at that time.

Insurance which covers expenses consequent to damage or destruction by an insured peril that continue over a period of time. The amount paid depends on the length of time during which the expenses accumulate. An example would be Business Interruption insurance, which pays for the loss of earnings during the time it takes to repair the property.

A reminder system used to call an individual’s attention to actions that must be taken at a future point in time.

A notation on a separate sheet of paper attached to a daily report setting forth the details of any reinsurance which has been effected.

Any type of retirement plan in which an employee savings feature is added.

The point at which the insured may bring tort action under a modified No-Fault Auto Plan. Many of these plans prohibit tort action for pain and suffering unless medical bills exceed some figure, like $1,000, or disfigurement or death occurs.

A clause stating that the maximum loss the insurer will pay is three-fourths of the actual cash value of the property. It is rarely used today.

This refers to any organization such as Blue Cross/Blue Shield, Medicare, Medicaid, or commercial insurance companies which is the payor for coverages provided by a health plan.

A term for liability insurance. Liability always involves a third party, the one who has suffered a loss, in addition to the insurer and the insured. See also Liability Insurance.

A person who is not a party to a contract but who has legally enforceable rights under the contract. It might be a Life Insurance beneficiary, or a mortgagee.

A firm which provides administrative services for employers and other associations having group insurance policies. The TPA I addition to being the liaison between the employer and the insurer is also involved with certifying eligibility, preparing reports required by the state and processing claims. TPA’s are being used more and more with the increase in employer self-funded plans.

Different drugs which will control a symptom or illness exactly the same as other drugs used to control that illness.

Alternate drug products which may be different in chemical content, but provide the same effect when administered to patients.

The mathematical principle upon which insurance is based. See also Degree of Risk, Law or Large Numbers, Odds, and Probability.

The act of stealing. It includes such acts larceny, burglary, and robbery.

A commercial crime coverage form covering money and securities against the causes of loss described in its title.

This form may be attached to a dwelling policy to provide theft coverage for a named insured who is an owner occupant.

An inland Marine form used to cover theatrical properties, such as costumes and scenery.

This is a provision found in many Property Insurance policies which states that the insured is allowed to have the typical types of work and materials for his business. The clause makes this clear so that the policy cannot be voided later because the “increased hazard” Provision of the Standard Fire policy.

An association of women Life Insurance agents who produce the volume of business required by the organization for membership. It is sponsored by the National Association of Life Underwriters.

A law passed by a state legislature which requires that in the event of a total loss to a building, the insurance company must pay the face amount of a valued property, regardless of the actual cash value of the property which was destroyed. It can have the effect of allowing the insured to recover an amount much greater than the actual cash of the property. The intent of the law is to guard against unscrupulous insures purposely writing in excess of the value of property in order to collect greater premiums.

A group of insurers providing facilities for all forms of Aviation Insurance.

This code is scheduled to be implemented on October 1, 1993. It’s a federal directive which states how a hospital must provide their patients with bills, itemizing all services included and billed on each invoice.

An antitrust law from which insurance is exempted to the extent that it is regulated by state law.

A federal law which requires the registration of companies and agents with the federal government if they are selling securities.

A federal law which requries full and fair disclosure and the use of a prospectus in the sale of securities.

If you would not purchase a car without test driving it first, why would you purchase insurance without first reviewing its ratings? There are two different types of ratings to look for. Ratings that are based on customer reviews are considered Customer Satisfaction Ratings and ratings that are based on the financial standing of each company are called Financial Strength Ratings. A.A. Best, Fitch, Moody’s and Standard & Poor’s are the four different types of agencies used to rate the financial strength of an insurance company. Each one of these agencies uses a different rating scale, rating standard, their own population of rated companies, and their own distribution of companies across its scale. What they all have in common is that they do all utilize a numbers or a “plusses and minuses” system to indicate the variations in ratings. It is best to review from multiple agencies before deciding whether you want to continue to use an insurance company or buy a new one.

A flat amount included in the premium for small Workers Compensation policies, for dwellings in some jurisdictions, and for some prescribed Inland Marine Insurance lines. The purpose of the Loss Constant is to offset the greater-than-average loss experience which most small risks have when compared to all other risks in a given classification.

A special policy designed for offices. It usually consists of several Crime coverages on office equipment and supplies which are purchased as a package. There is relatively low limit for each coverage and very little flexibility in that the policyholder must buy the complete package.

A federal statute which establishes safety and health standards on a nationwide basis. The act is enforced by Labor Department safety inspectors and also provides for the recordkeeping of statistics relevant to work injuries and illnesses.

The basic Fire Insurance contract which was used in nearly every state with only a handful of exceptions. It provided coverage against loss by fire, lightning, and removal, and established policy provisions that became the foundation for property insurance contracts. EC and VMM coverage could be added by endorsement. With the introduction of modern policy forms, the standard fire policy has become obsolete, except in a few states where its use continues to be required by law.

The increase in the total amount of business an insurer has to force over a given period of time. It is figured as the total of new policies issued plus those renewed less policies lapsed and cancelled.

A statement recommended by the National Association of Insurance Commissioners which indicates the types of insurance which are to be written under Ocean or Inland Marine policies. Most states use this definition, subject to some individual exceptions. See also Ocean Marine Insurance and Inland Marine Insurance.

A nonprofit organization chartered by Congress in 1913. It is made up of approximately 12,000 industry members nationwide. The purpose of the council is the dissemination of safety education material.

An intercompany association of insurers formed to exchange information and ideas on common problems unique to the black community.

A federation of fraternal benefit societies.

Federal program providing flood insurance for fixed property. Under a “dual” program coverage may be written directly by the NFIP or by private carriers whose losses may be reimbursed by the NFIP.

A system for identifying drugs.

A voluntary, nonprofit organization made up of more than 140 member companies that compiles research and statistics in order to develop crop insurance rates and forms.

A sister organization to the Crop Hail Insurance Actuarial Association (CHIAA). In 1989 these two organizations were consolidated to become National Crop Insurance Services (NCIS).

An association of insurers selling compensation coverage and operating as a rating organization. NCCI collects statistics, develops rates and policy forms, and makes state filings for its members.

An organization engaged in the prevention and reduction of motor vehicle fire and theft losses.

A voluntary association of brokers and securities dealers handling over-the-counter securities. It serves a quasi-official function in the regulation of licensing and also acts as a bureau which formulates rates, rating plans and policy wording for about half of the states. Many other states subscribe to the various services it provides. It is supported by the insurance companies which belong to it.

A voluntary intercompany organization of Mutual Property and Liability insurers formed for the exchange of information and discussions.

An association of Life Insurance agents, the activities of which center on the welfare and education of agents and legislation affecting agents.

A voluntary association of smaller and newer companies for exchange of information and ideas.

Originally National Convention of Insurance Commissioners. An association of state insurance commissioners formed for the purpose of exchanging information and of developing uniformity in the regulatory practices of the several states through drafting model legislation and regulations. The NAIC has no official power to enforce compliance with its recommendations.

A voluntary association of insurance brokers which exists to exchange information and make recommendations to state legislatures.

The former name of the Independent Insurance Agents of America. See the listing under this name.

An association comprised of Fire, Casualty, and Surety insurers which do not belong to large rating bureaus. The association distributes considerable information about legislation and litigation.

A type of Fidelity Bond which covers losses caused by the dishonesty of only those employees holding positions specifically named in the bond. Contrast with Name Schedule Bond and Blanket Bond.

The record of an automobile driver’s accidents and/or traffic violations.

A commercial Property form which protects the interests of mortgage holders from losses resulting from errors and omissions.

The remainder, if any, after subtracting experienced mortality from expected mortality.

A table showing the incidence of sickness at specified ages in the same fashion that a mortality table shows the incidence of death at specified ages.

The ratio of the incidence of sickness to the number of will persons in a given group of people over a given period of time. It may be the incidence of the number of new cases in the given time or the total number of cases of a given disease or disorder.

An IBM card showing the status of MDO business in force and lapsed.

Ordinary Insurance the premiums for which are collected at the door monthly in the same fashion as Industrial policies.

The state-operated company in those states having laws which require that all businesses buy Workers Compensation Insurance from the state. Private insurers cannot compete in these states.

Any insurance coverage written as a single line policy. Contrast with Multiple Line or Package policy.

A type of insurance purchased by a business to protect itself against the loss of money and securities from almost any type of hazard except forgery or employee dishonesty. It commonly covers against “destruction, disappearance, and wrongful abstraction of money and securities.” It has largely been replaced by the commercial Theft, Disappearance and Destruction Coverage Form.

A building which has exterior walls, floors and roof constructed of masonry or fire-resistive materials.

A method of determining rates for medical services based on data from a given geographic area.

Rules at Lloyd’s of London providing an informal method of resolving disputes between members and agents when the sum involved is unlikely to exceed £10,000.

The method of premium payment (mode) elected by the policy owner, Modes generally available are monthly, quarterly, semiannually, and annually.

A commercial property form specifically designed to insure farm machinery and equipment when it is the only exposure, or when the coverage must be written separately. Similar coverage may also be included in the Farm Property Coverage Form.

Giving the wrong age for oneself on an application for Life and Health Insurance or for a beneficiary who is to receive benefits on a basis involving his life contingency. (2) A provision in most Life and Health policies setting forth the action to be taken if a misstatement of age is discovered after the policy is issued. This is one of the uniform provisions for Individual Health Insurance policies.

Used in a retrospective rating plan and defined as the lowest amount the insured can pay under the plan, regardless of the losses incurred.

A rate for low hazard risks?

The smallest amount of premium for which an insurer will issue coverage under a given policy.

A Cash Value Life Insurance policy having a first-year loan value that is available to borrow against immediately upon payment of the first-year premium. This is not the case with most Life Insurance policies, the main reason being high first-year expenses.

The amount of compensation an employee must earn before being eligible to participate in a pension or profit sharing plan.

Anyone entitled to Medicare benefits based on the designation by the Social Security Administration.

A form of coverage, optional in Automobile and other Public Liability Policies, that provides for the payment of medical and similar expenses without regard for liability.

Total health benefits divided by total premium.

A data pool service that stores coded information on the health histories of persons who have applied for insurance from subscribing companies in the past. Most Life and Health insurers subscribe to this bureau to get more complete underwriting information.

An American morality experience table developed in 1896 by McClinton McClintock from the experience of 15 American insurers and influenced by foreign underwriting experience.

The most an insured will be required to pay under a retrospective rating plan, regardless of the amount of losses incurred.

A form of noncancellable Disability Income Insurance that limits an insurer’s liability for any one claim but not the aggregate amount of all claims. In other words, for any one claim there is a maximum amount payable, but there could be any number of separate claims for different disabilities.

A list of prescriptions where the reimbursement will be based on the cost of the generic product.

In insurance, it refers to a fact which is so important that the disclosure of it would change the decision of an insurance company, either with respect to writing coverage, settling a loss, or determining a premium. Usually, the misrepresentation of a material fact will void a policy.

The rule that all employers are obligated to protect the public from the acts of their employees. Courts hold employers liable for torts committed by employees in the course of their employment.

The policy contract issued to an employer or other entity authorized by state law for a group insurance plan. See also the first definition of Certificate of Insurance. (2) A Property Insurance policy issued to an insured who can issue certificates of coverage to cover the property of others.

A location which manufactures products for delivery to the insured’s customers under a sales contract. One of the four types of dependent properties for which Business Income coverage may be written.

A method of settlement whereby the beneficiary receives the entire proceeds of a policy at once rather than in installments.

A statement signed by an insured releasing the insurer from all liability for a lost or mislaid contract of insurance. It is usually signed after the company has issued a replacement policy.

When the owner of a stock certificates loses if, the insurer of the certificate will not issue a duplicate until the owner furnishes an indemnity bond guaranteeing that if he finds the original he will turn it over to the surety company.

The losses divided by the premiums paid. The numerator (losses) can be losses incurred or losses paid, and the denominator (premium) can be earned premiums or written premiums, depending on what use is going to be made of the loss ratio.

This is a recent development under retrospective rating plans. It was designed to give the insurer additional money to allow for the subsequent development of losses and to reimburse for claims which are late in being reported. The factor was introduced primarily because of the effect of inflation on losses which take a long time to settle. See also IBNR.

A term used in a retrospective rating plan. It is a factor applied to losses in the formula to give the insurer the funds needed to handle the investigation of claims.

A federal act that stipulates compensation levels for injured longshoremen and harbor workers.

Action undertaken by a state Insurance Department to dissolve an impaired or insolvent insurer which cannot be restored to sound financial standing. Contrast with Rehabilitation of Insurer.

A prescribed procedure for allocating Property Insurance losses among insurers that provide protection on a given piece of property. It is called the “pro rata liability rule” in a Standard Fire policy.

An organization that prepares and administers training programs for Life Insurance agents.

An organization that, through research, seeks solution to the problems of administering the agency costs of a Life insurer.

Under Universal Life insurance, the level death benefit option provides the greater of (1) the face amount of the policy at the time of death, or (2) a stipulated percentage of the accumulation value.

A method of accumulating money for payment of future pensions under which the level annual charge is payable each year until retirement so that the benefit is fully funded.

A group form of insurance which provides members with legal services paid for on a schedule basis. Similar to Dental Insurance.

An organization of agents who qualify for membership annually or on a lifetime basis by producing certain high levels of Health Insurance premium volume in a year. It is sponsored by the International Association of Health Underwriters.

This law states that the larger the number of exposures considered, the more closely the losses reported will match the underlying probability of loss. The simplest example of this law is the flipping of a coin. The more times the coin is flipped, the closer it will come to actually reaching the underlying probability of 50% heads and 50% tails. See also Degree of Risk, Odds, and Probability.

The ratio of the number of Life Insurance contracts lapsed within a given period to the number in force at the beginning of that period.

Coverage provided to the owner of property who leases the entire premises to another. This coverage is very reasonable because the full control of the premises rests with the lease.

A type of instrument used connection with the sale of real estate. It differs from a mortgage in that title to the land remains with the seller until the buyer has completed the payments, though possession rests with the buyer. Specifically, a land contract is the instrument that conveys the deed of land from one person to another upon full payment of the stated purchase price. (G)

A formula designed to handle adjustments of Property Insurance losses when the insurance policies are nonconcurrent.

This insurance is written primarily for financial institutions and covers named employees for individual or aggregate amounts paid as ransom, with deductible requiring the insured to participate in about 10% of any loss. There are few markets for this coverage and no standardization of rates. See also Extortion Insurance.

An insurance policy on the life of a key employee whose death would cause the employer financial loss, owned by and payable to the employer. In health insurance, the term Key Employee A&H policy is also used to designate salary continuation insurance payable to a key employee or to a medical benefits plan, payable to that employee paying all or part of the premium.

Insurance on the life or health of a key employee, the loss of whose services would cause an employer financial loss. The policy is owned by and payable to the employer. (2) In Health Insurance the term is also used to designate Salary Continuation Insurance or a medical benefit plan payable to the key employee himself, with the employer paying all or part of the premium.

Or individual to establish a formal retirement plan including himself and to obtain tax advantages similar to those available in qualified corporate pension plans.

A rule proposed by Roger Kenney which suggests that to insure solvency Property and Liability insurers should not write insurance premiums equal to more than twice their capital and surplus.

A plan of Auto Insurance reparations devised by Professors Robert Keeton and Jeffrey O’Connell which was the forerunner of No-Fault Insurance plans. See also No-Fault Insurance.

The federal act which provides for the covering of ship’s crews under Workers Compensation plans.

A federal law which regulates the organization and activities of investment companies and requires the registration of investment companies with the federal government.

An institution established to promote worldwide exchanges of ideas and techniques between insurance people. The major focus of IIS is its annual seminar which brings together academicians and insurance practitioners.

An association of agents and related personnel on the Health Insurance business.

An organization of the Property and Liability Insurance business designed to gather statistics, promulgate rates, and develop policy forms.

Information and early warning system used by the National Association of Insurance Commissioners (NAIC) to keep track of the financial soundness of insurers.

An organization which develops programs and conducts national examinations in General Insurance, Risk Management, Management, Adjusting, Underwriting, Auditing, and Loss Control Management. Diplomas are given to recognize achievement in these areas.

The agency of the Property and Liability business design to deal with the public relations programs of various segments of the business.

An institution created to honor those who have made outstanding contributions to insurance thought and practice. Selections are made on an international basis.

The legislation enacted in many states providing for guaranty funds for the policyholders of insolvent insurers. See Guaranty Fund.

A governmental bureau in each state and the federal government in Canada charged with the administration of insurance laws, including the licensing of agents and insures and their regulation and examination. In some jurisdictions the department is a division of another state department or bureau.

An organization of insurance company educators whose primary purposes are to promote insurance education and exchange information on the subject.

The head of a state’s insurance regulatory agency in most jurisdictions. In some states the title of Director or Superintendent is used.

Formerly an agency of the Life Insurance business responsible for building the image of Life Insurance through a variety of programs. It is now division of the American Council of Life Insurance.

An organization created by a Property and Liability insurers to investigate exposures and to establish rates. Many bureaus which establish fire and related perils rates for Property contracts are called “inspection bureau’s.”

A situation where an individual practice association is contracted with to provide health care services. The individual practice association contracts with individual physicians or groups of physicians for their services.

An association of independent insurance agents historically known to represent stock insurance companies more than mutual companies. Members are also members of their state associations.

Generally the corporate headquarters of insurers and the location where the chief officers of the organization our housed.

An organization offering a course of study for home office Life Underwriters.

An HMO is a prepaid medical service plan which provides service to plan members. Medical providers contract with the HMO to provide medical services to plan members. Members must use contracted providers. The emphasis is on preventative medicine, and it is an alternative to employee benefit plans. Employers of more than 25 persons are required to offer the alternative of HMO employees, but not if the cost exceeds that of present employee benefits plans. (H)

The public relations arm of the Health Insurance Association of America. It provides for a flow of information from Health insurers to the public and from the public to the insurers.

An association supported by Life and Health insurers to provide the research, public relations, education, and legislative base for the promotion of voluntary private Health Insurance.

See Home Office. The term “head office” is primarily used in British insurance operations, whereas “home office” is used for American operations.

Some states have legislation which restricts the rights of a guest to collect from the driver of an automobile he is riding in on the grounds of ordinary negligence. Usually such cases require proof of willful and wanton and negligence on the part of the driver before the guest can collect. See also Assumption of Risk.

An association of insurance general agents and managers affiliated with the National Association of Life Underwriters.

An independent company which adjusts claims of all types for insurance companies. GAB also provides training programs for adjusters.

One method of determining which parent’s medical coverage will be primary for the dependent children: the father’s coverage will automatically be considered primary and will pay first.

Under this model of HMO and PPO organizations, the primary care physician (the gatekeeper) is the initial contact for the patient for medical care and for referrals. This is also called a closed access or closed panel.

Under this clause, and insured is required to report values periodically. The clause provides for a penalty to the insured if true values are not reported.

An insurance contract provision that excludes losses due to war, capture, and seizure.

A state law which requires the insured to furnish evidence of ability to pay for losses. Some laws require this evidence before an accident, whereas others require evidence after the first accident. Evidence of ability to pay most often takes the form of an insurance policy with certain minimum limits of coverage.

A non-governmental group that sets standards for generally accepted accounting principles.

(1) See Field Force.

(2) A type or line of insurance as “in the Life Insurance field.”

(3) An area or territory covered by and agent, agency, or insurer.

A common law defense used by employers before the passage of compensation laws. It held that if an employee was injured due to the carelessness of a fellow employee, the right of action was against the fellow worker and not against the employer.

A designation which is gained by the completion of a series of examinations, as well as other experience requirements.

A United States government instrumentality that insures share accounts in savings and loans and similar institutions up to a maximum per account.

A government office, part of HUD, which oversees the handling of FAIR plans, Federal Crime Insurance plans, and the Flood program.

Passed by Congress in 1908 before there were worker compensation statutes and benefits in this country, this Act applies to railroad workers only. It puts injured workers in a favorable position in terms of liability claims, allowing them to sue the employer for negligence. Because railroad workers and their unions were unwilling to trade their favorable positions for statutory benefits, they remain exempt from compensation laws in many states. Cases are decided on the issue of employer liability.

Under this act, workers compensation benefits are provided to civilian federal government employees. The U.S. government administers and operates the system, as well as provides the benefits. Therefore, no private insurance is involved.

An agency of the federal government which insures bank deposits up to a stated maximum.

A federal government agency which provides insurance on growing crops.

A federally administered program under which pooling companies write Crime Insurance for those unable to secure it in the open market. Available for residential and commercial risks in sixteen states and the District of Columbia.

Fellow of the Chartered Insurance Institute, whose designation is gained by the completion of examinations and other requisites.

A farm coverage form which may be used to cover residential dwellings, other private structures, household personal property, farm personal property, and other farm structures.

Fair Credit Reporting Act- Public Law 91-508 requires that an applicant be advised if a consumer report may be requested and be told the scope of the possible investigation. Should his request for insurance be declined because of information contained in that report, the applicant must be given the name and address of the reporting agency.

(FIA) An association of stock property insurers established to provide insurance and engineering services for insurer writing highly protected exposures.

A contract provision found in Industrial Life policies which permits the insurer to pay a portion of the proceeds of the policy to any relative or person who has possession of the policy and who appears equitably entitled to such payment. This provision is designed to facilitate payment when some doubt may exist as to who the beneficiary is and to save legal expenses in the settling of the estate.

The First page of a Life insurance policy.

This act prescribes federal standards for funding, participation, vesting, termination, disclosure, fiduciary responsibility, and tax treatment of private pension plans.

The educational arm of the International Association of Health Underwriters, the Health Insurance agents’ professional society. It seeks to encourage agent educational projects by local Health associations, conducts university seminars in advanced Health underwriting areas, and conducts annual seminars for home office executives in sociological social insurance and demographic trends that may affect future application of policy forms and Health Insurance.

A state law requiring an employer to provide disability benefits to covered employees for nonoccupational injuries, in contrast to Workers Compensation, which pays for occupational injuries. These laws are currently in effect in New York, New Jersey, Rhode Island, California, and Hawaii.

Claims Made and Per Occurrence deal with the time an event takes place.  Claims Made responds only to claims made for events that happened during the policy period.  It is triggered as soon as the claim is made, however coverage is determined by the date of the incident. There isn’t usually a retroactive period, so to stay protected it is important to always maintain continuous coverage. Per Occurrence responds to events that happened during the policy period, but it doesn’t matter when the claim is made.   It is triggered once the incident occurs.  Once the date is established, the insurance company/agent knows which policy covers the incident. Once the policy period is over, the policy will still respond to claims that happened during the covered period.

The difference between an agent and a broker can be confusing. Basically, a real estate broker can work as an agent but an agent cannot work as a broker without the correct licensing. See, real estate agents are basically licensed salespersons. They have to work for an employing real estate brokers and they cannot work independently, whereas brokers can own their own business. This means that a broker is a step above an agent. Brokers generally have more education and experience then agents do. Brokers are held to higher standards of knowledge and their exam is normally longer and more difficult. Brokers are responsible for their real estate agent’s actions.

Difference in Conditions (DIC) coverage is for any business that needs more protection then the standard property insurance, especially when it comes to flood and earthquake perils. Typically, a DIC policy will be purchased when an insured has a greater risk of having a flood or earthquake. The commercial property insurer usually does not offer flood and earthquake coverage, cannot provide full coverage, or only offers coverage at premiums that are prohibitive. There isn’t a standard DIC policy, so when looking for one it’s cautioned to review it very carefully.

A federal department whose responsibility is primarily dealing with social service functions such as administration and supervision of the Medicare program.

The ratio of total deaths to total population during any given period.

The amount a policy owner pays to an insurer, minus what he or she gets back from the insurer. This expression is used when determining the true cost of permanent forms of Life Insurance to a policy owner. It considers the fact that premiums are paid in but also that an actual cash value is being built up, which is the portion that the insured will get back from the insurance.

 (1) The share of a loss payable by an insurer when contract with two or more insurers covering the same loss.

(2) The insurer’s share of a loss under a coin insurance or similar provision.

(3) The amount of the premium for group insurance for a pension plan paid by the employee.

The contract whereby an insurer agrees to indemnify and insured for losses, provide other benefits, or render services to her on behalf of the insured. The contract of insurance is often called an insurance policy, but the policy is merely the evidence of the agreement.

A law passed by many states which protects a policyholder from the misconduct, misrepresentation, or “sharp” trade practices of insurers, brokers, and agents.

Legislation providing for a continuation of the group health care benefits under the group plan for a period of time when benefits would otherwise terminate. Continuation rights apply to enrolled persons and their dependents. Coverage may be continued for up to 18 months if the insured person terminate employment or is no longer eligible. Coverage may be continued for up to 36 months in nearly all other cases, such as loss of dependent eligibility because of death of the enrolled person, divorce, or attainment of the limiting age.

Under this rating system, the charge for insurance to all insurance depend on the medical and hospital costs in the community or areas to be covered. Individual characteristics of the insurance are not considered at all.

An industrial mortality table approved by the NAIC as a standard for evaluation and for computation of non-forfeiture values for Industrial policies.

An industrial mortality table approved by the NAIC for evaluation and computation of Extended Term Insurance in Industrial policies, where additional mortality margins are deemed necessary. This is a companion table to the CSI 1961.

A mortality table approved by the NAIC in 1958 as a standard for evaluation and for computation of non-forfeiture values for Ordinary Life policies. The CSO 1941 tables super-ceded the long-used American Experience table, compiled in 1868, and the American Men Table, published in 1918 but never as widely used as the American Experience Table. The CSO 1958 superseded the CSO 1941 and is now required as minimum basis for use by all companies.

Part of the Uniformed Services Health Benefits Program which supplements the medical care available for families of active, deceased, and retired military personnel.

A religious organization which is certified by the First Church of Christian Scientists. The organization may also be Medicare certified as a hospital or skilled nursing facility.

A professional society for actuaries in areas of insurance work other than Life Insurance. This society grants the designation of Associate and Fellow of the Casual Actual Society (ACAS and FCAS).

This refers to a situation where one carrier replaces one or more carriers.

The California FAIR plan is a private association based in Los Angeles. It’s comprised of insurers licensed to write property in California, and all insurers that run a property business in California must be a member of the Association. The profits and losses are shared by it’s member’s in direct proportion to their market share of property insurance written in California; public funding and taxpayers’ money is not involved. All California property owners are able to get coverage, provided that the basic underwriting guidelines are met and that the applicant makes a thorough search of the voluntary market before making a submission. It’s recommended that consumers contact a licensed agent or broker in their area for assistance, instead of dealing directly with the FAIR Plan.

The FAIR Plan provides basic fire insurance for residential and commercial buildings, personal property coverage for residential and business residences, and optional coverages for residential and commercial property.

An executive who manages a branch office for an insurer or an agency. see also Regional Office.

An organization of Life company attorneys which seeks to increase knowledge in areas of the law affecting Life Insurance.

An association made up of several previously independent insurance groups.  It is concerned with legislative matters, intercompany communications, and the exchange of information.

An educational institution within the Life Insurance business.  In confers with Chartered Life Underwriter designation and is concerned with continuing agents’ training and with research and publication in areas related to Life Insurance business.  It also sponsors specialty Life Insurance courses and offers a college degree in financial services.  It was formally known as the American College of Life Underwriters (ACLU).

An association of insurance companies working together in the following areas of common interest: (1) Government affairs affecting insurance; (2) Education of employees of member companies; (3) Loss prevention, and (4) Other insurance activities.

Under this clause, the insured and the insurer agree that the amount of insurance carried will automatically satisfied the co-insurance clause. The effect is to eliminate the necessity of determining whether or not the amount carried is equal to the stated percentage of the actual cash value indicated in the co-insurance clause.

Accumulating money for a pension plan by actually determining the present value of all future benefit payments, deducting whatever funds may be on hand with the trustee or insurance company, and distributing the balance of as a cost over the future.

This limit represents the amount of money which an insurer will pay during the term of a policy for all product liability claims which it covers.

A certificate of authority from the state which permits the agent to conduct business.

Compares the age and sex risk of medical costs of one group relative to another. An age/sex factor above 1 indicates higher than average risk of medical costs due to that factor. Conversely, a factor below 1 indicates a lower than average risk. This measurement is used in underwriting.

Prescription drugs listed as commonly prescribed by physicians for patients long term use. Subject to review and change by the health plan involved.

A procedure, using actuarial assumptions, for measuring the expected value of benefits and assigning such value to time periods.

The value assigned by the actuary to the assets of a plan for the purposes of an Actuarial Valuation.

The period of time, prior to retirement, during which an annuitant is making payments or investments in an annuity.

An ancient Greek benevolent society which was a step in the evolution of Life and Health Insurance.

In boiler and machinery insurance, a provision that excludes coverage for any object while it is being tested.

A trust created after the grantor’s death, according to the provisions of the deceased person’s last will and testament. Contrast with Inter Vivos Trust.

Transfer of the assets of an estate according to the provisions of the deceased person’s last will and testament. Contrast with Inter Vivos Transfer.

Services provided by such providers as thoracic surgeons, intensive care units, neurosurgeons, etc.

A beneficiary designated as third in line to receive proceeds or benefits if the primary and secondary beneficiaries do not survive.

The time the coverage under an insurance policy ends, either because its term has expired or because it has been cancelled by either party.

The cessation of premium paying for a Whole Life or Endowment policy before the agreed upon time. This ends the coverage, and the insured receives one of the nonforfeiture values. The cessation of a policy that does not or has not yet developed a cash value is termed a “lapse.”

A term which refers to the status of a person who will normally die within 6 months of a specific illness or sickness. Often refers to the terminally ill requirement for hospice care.

The period of time for which a policy or bond is issued.

The provision in a rating manual which states the periods for which coverages run, and discounts, if any, which apply to the rates or premiums of policies issued for more than one year.

Term life insurance is a policy that has a set time limit on the coverage period. It’s known as pure life insurance because it’s only purpose is to insure individuals against the loss of life. Policies will provide the benefit to the beneficiary if the person dies within the specified term, but if the term expires before death there’s no death benefit. However, policy holders may be able to renew a term policy at it’s expiration, but their premiums will be based on their attained age. Premiums for life insurance are solely based on a person’s age, health, and the life insurer’s determination of life expectancy. Term insurance is best suited for people who know for certain their need for life insurance coverage will be temporary… in other words, they feel their surviving family members will no longer have a need for the extra protection life insurance provides or that they will have accumulated enough liquid assets to self-insure.

The type of Life Insurance policy that provides protection only for a specified period of time. A common policy period would be one year, five years, 10 years, or until the insured reaches age 65 or 70. It does not build up any of the nonforfeiture values associated with Whole Life policies.  Contrast with Whole Life Insurance.

A Homeowners form which is specifically designed for people who rent.

Property affixed to an owner’s building by the lessee or tenant which may not be legally removed at the end of the rental period.

Primarily for older individuals, this type of funding requires that premiums be payable for 10 years even though retirement is permitted within 10 years.

A notice, placed prominently on the face page of the policy, advising the insured of his or her right to examine a health policy, and if dissatisfied return the policy within ten days for a full refund of premium and no further obligation.

A condition where an injured party is unable to work at all while he is recovering from injury, but he is expected to recover.

A condition where an injured party ‘s capacity is impaired for a time, but he is able to continue working at reduced efficiency and is expected to fully recover.

Legislated benefits payable to employees for nonoccupational disabilities under TDB laws in certain states. See also Disability Benefits Law.

A person who is licensed to act as an agent for a brief period of time (usually 90 days) without taking a written examination. Temporary licenses are commonly granted to allow someone to continue the business of an agent who has died, become disabled, or entered active military service.

An organization selling Life and Health Insurance and annuities to college and university staff members.

The tax-free transfer of assets from one qualified retirement plan to an IRA or annuity, and vice versa.

An annuity program under which contributions reduce the taxable income of participating employees, and the benefits are not taxable until distributed.

A qualified annuity for employees of certain non-profit organizations as described in the Internal Revenue Code , such as school system employees, church employees, etc.

A factor applied in retrospective rating to an insurance premium to increase it to cover state premium taxes.

This act defines the primary and secondary coverage responsibilities of the Medicare program and also the provisions to be used by health plans in their contracts with the HCFA (Health Care Financing Administration).

For tax purposes, this is money which has yet to be taxed.

A rate established by a rating organization, which comes from the tables, schedules and rules found in the tariff of rates.

(1) Certain high-value bridges, tunnels, and fine art collections that are excluded from an automatic reinsurance contract to permit specific handling of the capacity problem and to release the reinsurer from the potential heavy accumulation of liability on any one risk. (2) A large, hazardous risk on which insurance is difficult to place. (3) A large, attractive risk that is considered a target for competing insurance companies.

This term has been used to describe both the exposure that exists after expiration of a policy and the coverage that may be purchased to cover that exposure. On “occurrence” forms a claims tail may extend for years after policy expiration, and the losses may be covered. On “claims made” forms tail coverage may be purchased to extend the period for reporting covered claims beyond the policy period. See Mini, Midi, Maxi Tail.

Of or pertaining to a table. Tabular cost is the cost of mortality, morbidity, or other claims, according to the valuation tables and assumptions used by the insurer.

A retrospective rating plan, which uses tables to furnish the various values for the rating formula.

A group of insurers or underwriters who jo in to insure property that may be of such total value or high hazard that it can be covered more safely or efficiently on a cooperative basis. See also Pool.

A provision for Group Health Maternity coverage on female employees only when their husbands are included in the plan as dependents.

A provision granting immediate maternity coverage in a Group Health Insurance plan but terminating coverage on pregnancies in progress upon termination of the plan. The term “swap” means providing the coverage at the beginning of the policy where it is not usually provided, but not providing it after the end of the policy where it usually is provided.

Funds available to pay an annuitant who survives longer than statistically expected from premiums paid by annuitants who died before they had collected amounts equal to their contributions.

The beneficiary of an annuity contract, i.e., the annuitant’s survivor.

To give up a Whole Life policy. The insurer pays the insured the cash value which the policy has built up if it is surrendered.

The amount by which assets exceed liabilities.

A reinsurer’s portion of a risk, that part which remains after deducting the retention established by the ceding company.

The use of admitted reinsurance on a portfolio basis to offset extraordinary drains on policyholder’s surplus. See also Portfolio Reinsurance.

(1) A form of pro rata reinsurance wherein the reinsurer accepts that part of each risk written in excess of a specified retention. The part reinsured is usually a multiple of the retention. See also Lines. (2) The amount of any risk which exceeds the net line retained by the ceding company. The reinsurer receives premiums and contributes to the payment of losses in proportion to its share of the risk.

A risk or a part of a risk for which there is no market available through the original broker or agent in its jurisdiction. Therefore, it is placed with nonadmitted insurers on an unregulated basis, in accordance with the surplus or excess lines provisions of the state law.

Usually part of a basic medical expense plan which itemizes various surgical procedures and the monetary benefit allocated to each procedure.

A separate facility (from a hospital) that provides outpatient surgical services.

The means by which one person or entity, the surety, guarantees another entity, the obligee, that a third entity, the principal, will or will not do something. It differs from insurance by being a three-party contract, but most sureties today are insurers.

One who guarantees the performance or faithfulness of another. A surety can be either a corporation or an individual, but it is usually an insurance company.

A bond guaranteeing that a principal will carry out the obligation for which he is bonded. A surety bond is most often issued to a contractor, a person seeking a license or permit, or someone involved in a court case.

A federal Small Business Administration program for minority contractors. The SBA agrees to back the surety company in the event of loss under a construction contract bond.

An association of bonding companies that establishes rules and regulations, rates and rating plans, and forms and collects information on rating that is supplied to members.

A provision in most liability policies under which the insurer agrees to pay defense costs, premiums on various bonds, interest accruing after a judgment, and other reasonable expenses in addition to the limit of liability.

Additional services which can be purchased over and above the basic coverage of a health plan.

Part B of Medicare is a voluntary program which generally covers physician’s services and various outpatient services. A premium is charged for electing Part B coverage.

An optional “maxi tail” or “full tail” which extends for an unlimited period of time after expiration of a “claims-made” liability policy, and covers claims made after the policy period.

A rider usually relating to the method of settlement of the proceeds of a Life Insurance policy.

The Actuarial Present Value of all benefits expected to be provided in the future under a plan reduced by the Actuarial Present Value of a future Annual Actuarial Values (including any Participants’ contributions), with respect to the Participants included in the valuation of the plan.

An endorsement or provision on a new bond under which the new bonding company assumes liability for claim that cannot be recovered from the prior bond because its discovery period has ended. The discovery period of a bond is normally one year, during which it will cover any loss which occurred during the term of the bond.

The title of the head of a state or provincial insurance department used in some jurisdictions. In most states the title “commissioner” is used.

A form that specifically lists all of the services provided by the physician. It cannot be used in place of the standard AMA form.

This is a recap or summary of the benefits provided under the plan. It is used most often with employees covered by self-funded plans.

A provision permitting and requiring an insured to take all practical measures to protect any salvage, without prejudicing any right to claim against the insurer. The intent of this clause is to make sure the insured does not fail to use proper care to preserve the property. One effect of it is that in case of a total loss an insurer may pay the loss plus the cost of salvage.

A risk not measuring up to underwriting standards. I may still be written but usually at a surcharged premium.

Movement of the land on which property is situated. A structure built on a hillside may slide down the hill due to earth movement caused by heavy rains. This is different from earthquake damage.

A policy to which two or more insurers may subscribe, indicating in the policy the share of the risk to be borne by each insurer.

This term has two meanings – first, it refers to a person or organization who pays the premiums, and second, the person whose employment makes him or her eligible for membership in the plan.

An agreement which describes the individual’s benefits under a health care policy.

The right of one who has taken over another’s loss to also take over his right to pursue remedies against a third party. It is never used in Life Insurance and seldom in Health.

The right of a surety, in its name or in the name of the obligee under a bond, to pursue a course of action against the principal or any other party liable for a loss paid by the surety.

A waiver by the named insured giving up any right of recovery against another party. Normally an insurance policy requires that subrogation (recovery) rights be preserved. In commercial property insurance, a written waiver of subrogation rights is permitted if it ii executed before the loss occurs.

A release taken by an insurer upon indemnifying an insured. It contains a provision specifying that the insurer will be subrogated to the rights of recovery that the insured has against any person responsible for the loss.

A clause giving an insurer the right to pursue any course of action, in its own name or the name of a policy owner, against a third party who is liable for a loss which has been paid by the insurer. One of its purposes is to make sure that an insured does not make any profit from his insurance. This clause prevents him from collecting from both his insurer and a third party. It is never part of a Life Insurance policy.

Putting below in importance. Sometime s the creditors of a contractor will subordinate their interests in the obligations owed them until a construction project is completed. This has the effect of increasing the contractor’s working capital.

 

Applications for insurance submitted to an insurer but not yet acted upon by it.

Any limit of insurance which exists within another limit. For example, special classes of property may be subject to a specified dollar limit per occurrence, even though the policy has a higher overall limit; a health insurance policy may limit certain benefits to fixed dollar amounts or maximum amounts per day, even though the overall coverage limit is higher.

A ceding company’s premium to which the reinsurance premium rate (factor) is applied to produce the reinsurance premium. In other words, the reinsurance premium is a percentage of the ceding company’s premium.

A corporate form of business in which all profits and losses are shared by the stockholders and thus the corporation is taxed on an individual basis as opposed to corporate taxation.

An intermediary from whom another intermediary obtains reinsurance business to be placed.

Agents reporting to other agents or general agents, and not directly to the company.

A clause providing that, in the event of the insolvency of a ceding insurer, the reinsurer continues to be liable for its share of losses, which will then be payable directly to the insured rather than to the liquidator of the insolvent ceding insurer. See also Insolvency Clause.

Usually when referring to Products coverage.  The liability that manufactures and merchandisers may be subject to for defective products sold by them, regardless of fault or negligence.  A claimant must prove that the product is defective and therefore unreasonably dangerous.  See also Absolute Liability.

A term used to describe a ship that has run aground.

A single limit package policy covering bodily injury and property damage liability claims in the operation of the, storekeeper’s business. It includes limited coverage on contractual am products liability.

A type of package crime policy designed for a storekeeper which provides coverage on 7 different crime hazards. A specific amount of coverage is purchased and the limits apply separately to each of the coverages. There is very little flexibility in that the insured must buy the package. See also Broad Form Storekeepers Insurance.

This is a type of reinsurance which can be taken out by a health plan or self-funded employer plan. The plan can be written to cover excess losses over a specified amount either on a specific or individual basis, or on a total basis for the plan over a period of time such as om year.

Any provision in a policy designed to cut off an insurer’s losses at a given point. In effect, a stop loss agreement guarantees the loss ratio of the insurer.

(1) See Aggregate Excess of Loss Reinsurance(2) A form of reinsurance under which the reinsurer reinsures the ceding insurer for an amount by which the latter’s incurred losses in a calendar year for a specified class of business exceed a specified loss ratio.

Merchandise for sale or materials in the process of manufacture, as distinguished from furniture, fixtures, or equipment.

A formal buy-sell agreement whereby the corporation is bound by the agreement to purchase the shares of 2 deceased stockholder and the heirs are obligated to sell.

A formal buy-sell agreement whereby each stockholder is bound by the agreement to purchase the shares of a deceased stockholder and the heirs are obligated to sell.

Surviving stockholders have the option to purchase or not purchase the shares of a deceased stockholder.

An incorporated insurer with capital contributed by stockholders, to whom the earnings arc distributed as dividends on their shares. Contrast with Mutual Insurer.

Premium is increased at times specified in the policy, based on a predetermined attained age, or number of policy years in force.

Required by or having to do with law or statute.

A reserve, either specific or general, required by law.

Earnings or losses shown on the NAIC convention blank, in contrast to earnings or losses that would be shown if generally accepted accounting procedure statements were used.

Those principals required by statute which must be followed by an insurance company when submitting its financial statement to the state insurance department. Such principles differ from generally accepted accounting principles (GAAP) in some important respects. For one thing SAP requires that expenses must be recorded immediately and cannot be deferred to track with premiums as they are earned and taken into revenue.

The time limit set by law during which a person must bring legal action on a case.

A statute which states that certain contracts must be in writing in order to be enforceable. An example would be any contract involving the sale of real estate.

A statistical computation which is periodically updated and is used to determine compensation benefit amounts. Many benefits are set forth as a percentage of the SAWW.

Sometimes property is written using a blanket rate and one single limit of liability applying to all locations. In order to determine the blanket or average rate, a rating bureau or company requires an insured to submit a declaration of the amounts of value at each separate location on a Statement of Values form.

For Universal Life policies, this document is prepared at the end of each year giving complete information on all transactions affecting the policy, such as premium paid, current death benefit, interest credited, loans outstanding, monthly charges, and cash surrender value.

An agreed amount of insurance which is shown on the policy, and which will be paid in the event of total loss regardless of the actual value of the property.

A fund set up by a state government to finance a mandatory insurance system, such as Workers Compensation, nonoccupational disability benefits, or, in Wisconsin, state-offered Life Insurance. Such a fund may be monopolistic, i.e., purchasers of the type of insurance required must place it in the state fund; or it may be competitive, i.e., an alternative to private insurance if the purchaser desires to use it.

Each state may have one or more associations of insurance agents. These organizations are made up of individual agents who have joined forces to discuss common problems and promote the American agency system.

A risk that is on a par with those on which the rate has been based in the areas of health, physical condition, and morals. An average risk, not subject to rate loadings or restrictions because of poor health.

(1) Provisions prescribed by state law that must appear in all policies issued in that jurisdiction.

(2) Provisions adopted by the NAIC to apply to group Life Insurance as minimum protection. They are required by law in most states.

(3) Formerly, a set of prescribed provisions regulating the operating conditions of a Health Insurance policy required by law in most jurisdictions between about 1912 and 1950. They are now superseded by uniform provisions for Individual Accident and Health Insurance policies which contain an NAIC model bill. These have been enacted in virtually all jurisdictions.

Most often used in connection with retrospective rating for Worker’s Compensation and General Liability Insurance.  It is the premium of which the basic premium is a percentage and is developed by applying regular rates to an insured’s payroll.  See also Retrospective Rating and Basic Premium.

Most often used in connection with retrospective rating for Workers Compensation and General Liability Insurance. It is the premium of which the basic premium is a percentage and is developed by applying the regular rates to an insured’s payroll. See also Retrospective Rating and Basic Premium.

This is a coding system which assigns separate codes for different types of industries. (G)

In Workers Compensation Insurance certain classes of employees are classified separately for rating, rather than being included in the main classification for a risk. Examples would be clerical office employees, outside sales representatives, draftsmen, drivers, chauffeurs, and their helpers.

This is rate which is arrived at by using a base rate per participant multiplied by a factor to allow for group demographic information.

The 1937 Standard Annuity Table; a mortality table widely used for annuities. 

This is an HMO where physicians are employed and all premiums are paid to the HMO, which then compensates the physicians on a salary and bonus arrangement.

Applying the limits of more than one policy to an occurrence, loss or claim. In some cases, courts have required a stacking of limits when multiple policies, or multiple policy periods, cover an occurrence.

Insurance which covers the legal liability of an insured who has a sprinkler leakage loss which damages the property of others, on a floor below or in adjoining premises, for instance.

Insurance against damage done by the accidental discharge of water from an automatic sprinkler system, as contrasted with discharge because of heat from a fire.

(1) The working cover subject to a prospective rating plan.

(2) A form of excess reinsurance wherein each year’s premium rate is determined by the amount of the ceding insurer’s excess losses for a specified number of preceding years. A form of experience rating.

An employer that establishes or maintains a plan for its employees; or an employee organization that establishes or maintains a plan for the employees of the organization; or in the case of a plan established and maintained by two or more employers, the committee, Board of Trustees or relatives of the parties who establish or maintain the plan.

Any insurance coverage which is expressed in different amounts for different types of losses.  Contrast with Single Limit.

Any insurance coverage which is expressed in different amounts for different types of losses. For example, automobile liability of 50/100/50 means bodily injury limits of $50,000 per person, $100,000 per accident, and a property damage limit of $50,000 per accident. Contrast with Single Limit.

A combination of Installment Annuity and Term Insurance under which the amount of annuity consideration (premium) paid determines the amount of one-year renewable Term Insurance an annuitant can purchase and place on the life of anyone designated.

A method of purchasing life insurance whereby the employer and employee jointly purchase the policy, pay premiums and share in the policy’s benefits.

An arrangement of Disability Income Insurance in which the employer and employee each pay a portion of the premium. The employer purchases coverage for the sick pay or paid disability leave provided as an employee benefit. The employee pays for disability coverage beyond what the employer provides as a benefit.

An arrangement under which an employer pays that part of the premium that equals the annual increase in the cash value of a policy, while the employee pays the rest. Under assignment upon the death of the employee, the employer recovers the total of its payments from the proceeds of the policy, with the remainder going to the employee’s beneficiary. (LI)

A clause in most Life Insurance policies which prevents the creditors of a beneficiary from claiming any of the benefits payable to him before he actually receives the money. The purpose of this clause is to keep those to whom he is in debt from taking legal action to require the insurer to pay the proceeds directly to them. (LI)

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

A commercial automobile physical damage coverage for loss by the specified perils of fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, vandalism, or the sinking, burning, collision or derailment of any conveyance transporting a covered auto. Comprehensive coverage is slightly broader.

A rate applying to an individual piece of property.

A policy which describes specifically the property to be covered. This is in contrast to a policy which covers on a blanket basis all property at one or more locations without specific definitions. In the case of overlapping coverages, specific insurance is considered the primary one.

A form which provides all-risk coverage on the personal property (contents) of commercial risks with certain exclusions. It was once the broadest coverage available on commercial contents. Largely replaced by the Building and Personal Property Coverage Form.

A Business policy which combined into one contract the coverages normally purchased under several. Property and Liability coverages were mandatory, Crime and Boiler and Machinery were optional. Many other options and endorsements allowed the SMP to be tailor made for each policyholder. Largely replaced by new commercial forms. See Commercial Package Policy.

Any of the commercial or personal lines property forms which provide coverage on an all-risk type basis. These forms provide the broadest coverage and do not list covered perils, but do include a lengthy list of exclusions.

A form which provides all-risk coverage on commercial buildings, subject to certain exclusions. It was once the broadest coverage available on buildings. Largely replaced by the Building and Personal Property Coverage Form.

An Automobile policy with a single limit of liability applying to bodily injury and property damage and a corresponding limit applying to medical payments. Broad physical damage coverage could be added to it. This policy, which was designed for private passenger vehicles, has become obsolete. See Personal Auto Policy

A specific agreement by a reinsurer to accept a risk that would not be automatically included within the terms of a reinsurance contract.

A Property Insurance rating organization which was the defendant in the 1944 United States Supreme Court decision declaring insurance to be commerce and thus subject to regulation by federal law. This pronouncement was later modified by Public Law 15. See also Public Law 15. 

Noise, pressure, and shock waves resulting from an aircraft or missile exceeding the speed of sound. At one time property damage caused by sonic boom was excluded under most property forms. Modern commercial property forms and homeowner policies now cover losses by sonic boom.

With regard to insurers, having sufficient assets (capital, surplus, reserves) and being able to satisfy financial requirements (investments, annual reports, examinations) to be eligible to transact insurance business and meet liabilities.

A business enterprise owned by one person who is its manager and employee.

Life and Health Insurance that handles the business continuity problems peculiar to a sole proprietorship. Such insurance, for instance, could be used to enable the heirs of the sole proprietor to bring the value of the business back to the level where it was prior to the death of the owner.

An organization which encourages insurance research and promotes the exchange of ideas and methods of research.

The society of people who have been awarded the CPCU (Chartered Property and Casualty Underwriter) designation. Its primary purpose is the continuing education of its members. It also encourages insurance research.

An association of actuaries organized in 1948 as the successor to the Actuarial Society of America and the American Institute of Actuaries. It grants the designation Associate of the Society of Actuaries upon completion of five examinations and Fellow of the Society of Actuaries upon the completion of five additional examinations.

A tax paid by workers and employers on wages earned. The taxes support the benefit programs under the Social Security System.

A demonstration project funded by the Health and Human Services Department that combines the delivery of acute and long term care with adult day care services and transportation.

Damage caused by the smoke from a fire in contrast to damage caused by the actual combustion.

The combining into one pool of several small group business – used especially for computing more accurate premium rates for members of the pool.

A paper submitted by a broker to the underwriters at Lloyd’s of London which identifies syndicates accepting the risk and notes the extent of their participation.

A commission adjustment under a formula whereby the actual commissions paid by a reinsurer to a ceding insurer varies inversely with the loss ratio, subject to a maximum and minimum.

A spoken statement about someone which is personally injurious to the individual.

A facility designed to qualify for treatment to Medicare eligible people. Included is treatment for rehabilitation and other care such as 24-hour nursing coverage, physical, occupational and speech therapies, etc.

Daily nursing and rehabilitative care that is performed only by or under the supervision of skilled professional or technical personnel. Skilled care includes administering medication, medical diagnosis and minor surgery.

A Products Insurance Exclusion which denies coverage for the withdrawal and recall of products from the market.

The peril of a sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or similar rock formations. This peril is now covered by the latest commercial property forms. Other forms of earth movement continue to be excluded in most cases.

A Life Insurance policy paid for in one single premium in advance rather than in annual premiums over a period of time.

A method of accumulating money for future payment of pension benefits under which the money required to pay for each year’s accumulated benefits is paid to an insurance company or paid to the trust fund annually.

Any insurance coverage which is expressed as a single amount of insurance, or a single limit of liability.  Contrast with Split Limit.

Insurance protecting the interest of only one of the parties having an insurable interest in property, such as insurance protecting a mortgagee but not a mortgagor or protecting a seller but not a buyer.

A situation where one carrier replaces several other carriers who had been providing services.

This rule says that a person’s conduct is not held to be the cause of a loss if the loss would have occurred anyway.

A plan where the employer contributes a specific amount into an eligible employee ‘s IRA on behalf of the employee.

Any agreement between a railroad and a customer who is served by a railroad sidetrack built on his premises. Among other things, it provides that the customer hold the railroad harmless for losses resulting from certain types of accidents.

Includes physical illness, disease, pregnancy, but does not include mental illness.

A form of Health Insurance against loss by illness or disease. It does not include accidental bodily injury.

A policy written for a period of less time than is normal for that type of policy.

A group or individual policy usually written to cover disabilities of 13 or 26 weeks duration, though coverage for as long as two years is not uncommon.  Contrast with Long-Term Disability Insurance.

A disability income policy with benefits payable for “Short Term,” usually less than two years, as opposed to a Long Term Disability Income policy.

The premium required for issuing a policy for a period less than its normal term.

A cancellation procedure in which the premium returned to the insured is not in direct proportion to the number of days remaining in the policy period.  In effect, the insured has paid more for each day of coverage than if the policy had remained in force for the full term.  Contrast with Pro Rata Cancellation.

A catastrophic loss so large that it has a material effect on the underwriting results of a company.

Usually, a policy benefit or claim payment. It connotes an agreement between both parties to the policy contract as to the amount and method of payment.

Conclusion of litigation by the mutual agreement of parties involved prior to final verdict; certain settlements must be court-approved.

Plans of insurance where benefits are the actual services rendered rather than a monetary benefit. See Blue Cross and Blue Shield.

The area, allowed by state agencies or by the certification of authority, in which a health plan can provide services.

An account established or maintained by an insurance company under which the income, gains, and losses of that specific account are credited or charged without consideration of the income and investment results of the other assets of the insurance company.

The creation of a fund by an insurer to absorb losses beyond its normal retention. It is used in place of buying reinsurance.

That portion of a risk or potential loss assumed by an insured. It may be in the form of a deductible, self-insurance, or no insurance.

Making financial preparations to meet pure risks by appropriating sufficient funds in advance to meet estimated losses, including enough to cover possible losses in excess of those estimated. Few organizations are large or dispersed enough to make this a sound alternative to insurance.

A retirement plan where contributions are paid to a trustee who invests the money, accumulates the earnings and interest, and pays benefits to eligible employees.

The choosing by an underwriter of risks acceptable to an insurer.

Service Employees Group Life Insurance, which is issued to members of the armed forces while they are in the service. After separation it is convertible to individual policies from certain private insurers.

A partial stock redemption permitted under Section 303 of the IRC for the purpose of providing funds for estate settlement costs.

A total stock redemption which qualifies as a capital transaction and not a dividend distribution.

A plan which provides flexible benefits. This plan qualifies under the IRS code which allows employee contributions to meet with pre-tax dollars.

Coverage which provides payment for charges not covered by the primary policy or plan.  See also Coordination of Benefits.

Medical services provided by physicians who do not have first contact with patients. Examples would be specialists such as urologists, cardiologists, etc.  See also Primary Care and Tertiary Care.

The second person named to receive benefits upon the death of an insured if the first-named beneficiary is not alive or does not collect all the benefits before his or her own death.  See also Contingent Beneficiary.

Reinsurance accepted by a second reinsurer in a Surplus Treaty. It is that amount which exceeds the total of the original insurer’s net retention and the full limit of the first surplus treaty.  See also Surplus Reinsurance.

Special funds set up by each state to pay all or part of the compensation required when a partially disabled employee suffers a subsequent injury. Because the compound effect of two injuries can be greater than the effect of the same two injuries in isolation, employers might be reluctant to hire the handicapped if they had to bear the full burden for a second injury. Second injury funds relieve employers of some of this burden.

The Federal Securities Act of 1933 and the Federal Securities Exchange Act of 1934 place very stringent obligations on those offering stock issues to the public to disclose full information on the offering. If misrepresentations, intended or not, are made, liability can attach to them.

A whole life policy which features a fixed, level premium and a minimum guaranteed face amount. The performance of the policy is dependent on the separate account.

(1) Applying debits or credits within established ranges for various characteristics of a risk which are either below or above average according to an established schedule of items.

(2) Under Liability and Automobile Insurance, the schedule rating plan has been designed to allow credits and debits for various good or bad features of a particular commercial risk. An example in automobile schedule rating would be allowing credits for driver training classes or fleet maintenance programs.

An insurance contract that lists separate kinds of property, separate locations, or separate insurance coverages with the amount of insurance applying to each.

(1) A reserve required in Automobile Liability, other Liability, and Workers Compensation by the NAIC Convention Blank.

(2) A formula set up for the calculation of such reserves.

A list of specified amounts payable for surgical procedures, dismemberments, ancillary expenses, and the like in hospital and medical reimbursement policies.

Life Insurance sold by mutual savings banks. Allowed only in a few states, such as New York, Connecticut, and Massachusetts.

Property taken over by an insurer to reduce its loss.

Property recoverable by salvagers under maritime law.

An organization whose duties are limited to preventing further damage to property during or after a fire. They are established by Property Insurance companies.

Insurance issued to an individual employee whose employer agrees to deduct the premiums from his paychecks and submit them to the insurer.

A form of insurance against the loss of property from a bank safety deposit box.

A system in which points are assigned for traffic violations and certain accidents, and each point adds a percentage surcharge to the rating factor. It is similar to merit rating.

A form of insurance against loss by forcible entry into a safe. Under this definition of burglary there must be visible signs of entry.

That cargo which is thrown overboard in order to save the rest of the cargo and the ship. See Jettison.

A termination provision in a reinsurance contract stipulating that the reinsurer shall remain liable for loss under each reinsured policy in force until its expiration date.

This is an additional coverage which can be added to an Ocean Marine Hull policy to provide protection to the insured against liability for damage to another ship caused by collision.

The felonious taking, either by force or fear of force, of the personal property of another.

A commercial Crime coverage form insuring property other than money and securities against inside or outside loss or damage by robbery, and inside loss or damage by safe burglary.

The part of Ocean Marine Insurance which addresses itself to the insuring of craft which work on inland waterways.

(1) Uncertainty as to the outcome of an event when two or more possibilities exist. See also Pure Risk and Speculative Risk. (2) A person or thing insured. Contrast with Hazard and Peril.

The physical units of property insured or the physical units of property at risk. Contrast with Peril and Hazard. (PR)

Liability insurance companies owned by their policyholders. Membership is limited to people in the same business or activity which exposes them to similar liability risks. The purpose is to assume and spread liability exposure to group members and to provide an alternative risk financing mechanism for liability.

Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk, reducing the risk, retaining the risk, or transferring the risk, usually by insurance .

An employee of a Life insurer who screens the applications submitted. He may accept an applicant, reject him, or propose an alternative policy or premium.

An association of risk managers and insurance buyers, organized for educational purposes to promote the risk management concept. RIMS attempts to foster closer relationships among buyers, to make the insurance needs of businesses known, and to promote better relations among all interested parties within the insurance industry.

The process of determining what benefits to offer and premium to charge a particular group.

A peril covered by the extended coverage (EC) or direct reference in some policies. It is violent action by two or more people. State laws vary as to how many people it takes to constitute a riot.

The beneficiary in a Life Insurance policy in which the owner reserves the right to revoke or change the beneficiary.

A contract providing annuity benefits only if the annuitant is living upon the death of the insured, such as the wife upon the death of her husband. Although labeled an annuity, this contract is actually a form of Life Insurance on the life of the person whose death will initiate the benefit.

The same as Premium.

A portion of the premium returned to a policy owner as a result of cancellation, rate adjustment, or a calculation that an advance premium was in excess of the actual premium. See also Pro Rate and Short Rate

A rider or provision in a Health Insurance policy agreeing to pay a benefit equal to the sum of all the premiums paid, minus claims paid, if claims over a stated period of time do not exceed a fixed percentage of the premiums paid.

A rider on a Life Insurance policy providing that, in the event of the death of the insured within a specified period of time, the policy will pay, in addition to the face amount, an amount equal to the sum of all premiums paid to date. This is a form of Increasing Term Insurance and is used as a sales tool.

A provision or rider on a Life Insurance policy that states that if death occurs during a certain period of years (often 20), the policy will pay an amount, in addition to the face amount, that is equal to the cash value of the policy as of the date of death. This is really a form of Increasing Term Insurance and is used as a sales tool.

A commission which is paid back by the agent if a policy is cancelled before its normal expiration date. This situation arises because the commission was based on the full annual premium, and if the policy is cancelled before it is earned, a pro rata portion of the commission must be returned.

A plan for which the final premium is not determined until the end of the coverage period and is based on the insured’s own loss experience for that same period. It is subject to a maximum and minimum. A plan of this type can be used in various types of insurance, especially Workers Compensation and Liability, and is usually elected by only very large insureds. See also Basic Premium.

A rating system whereby the employer becomes responsible for a portion of the group’s health care costs. If health care costs are less than the portion the employer agrees to assume, the insurance company may be required to refund a portion of the premium.

The final premium in a retrospective rating plan. See Retrospective Rating.

(Rare) The reinsurer of a reinsurer.

The transaction whereby a reinsurer cedes all or part of the reinsurance it has assumed to another reinsurer.

Date on a “claims made ” liability policy which triggers the beginning period of insurance coverage. A retroactive date is not required. If one is shown on the policy, any claim made during the policy period will not be covered if the loss occurred before the retroactive date.

The conversion of a Term Life Insurance policy the time the conversion is made. In other words, the Cash Value policy will have already attained the age of the former Term policy.

An adaptation of an endowment at a selected retirement age in which the annuity benefit is a percentage of the face amount of Life Insurance in force prior to retirement age, usually 10%; e.g., for each $1000 of insurance a $10 per month annuity installment is payable. Under this type of policy, the cash value will exceed the face amount in the later policy years, and if death occurs before the selected retirement age, the death benefit would be the face amount or the cash value, whichever is greater.

A form of annuity contract that is entered into before a selected retirement age with the consideration paid in installments until that age is reached. It is a form of deferred annuity.

The portion of the premium which is used by the insurance company for administrative costs.

The amount of liability retained by the ceding company and not reinsured. Contrast with Cession.

Assuming all or part of a risk instead of purchasing insurance or otherwise transferring the risk. One of the four major risk management techniques. See Risk Management.

A state law that says that agents from another state applying for a license to operate in the state in question will be accorded the same treatment as agents residing in the retaliatory state are given in the foreign state.

A clause stating how much a company placing reinsurance intends to retain.

The former name of Equifax, a credit reporting organization. See Equifax.

A provision in many Major Medical Plans which restores a person’s lifetime maximum benefit amount in small increments after a claim has been paid. Usually, only a small amount ($1,000 to $3,000) may be restored annually.

Originally the law said that, under certain circumstances, a master was liable for the wrongful acts of his servant. In today’s usage this expression refers to the fact that, under certain circumstances, a principal is responsible for the wrongful acts of its agents or an employer for those of its employees. Under this doctrine, if an employee negligently injures a customer while in the course of his employment, the employer could be held liable.

Normally associated with Hospice care, respite care is a benefit to family members of a patient whereby the family is provided with a break or respite from caring for the patient. The patient is confined to a nursing home for needed care for a short period of time.

This is a classification system which is used to determine how physicians will be compensated for services provided under Medicare benefits.

Various insurance markets outside of the normal agency-company marketing system. Residual markets include government insurance programs, specialty pools (aviation risks and nuclear risks), and shared market mechanisms (assigned risk plans).

A clause used with disability income policies that provides for benefits to be paid when the insured can do some but not all of his/her normal duties. For example, if the insured suffers a disability that causes him or her to lose a third of his or her earning power, the residual disability clause would provide one-third of the benefit that the policy would provide for total disability.

That form of disability which becomes defined as partial disability when an insured has returned to work immediately following a period of total disability.

An agent domiciled in the state in which he writes insurance.

In homeowners insurance, the dwelling , other structures and grounds, or that part of any other building where the named insured lives.

A person who performs full- or part-time services of a household nature.

(1) An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. (2) An amount allocated for a special purpose . Note that a reserve is usually a liability and not an extra fund. On occasion a reserve may be an asset, such as a reserve for taxes not yet due.

(1) Repudiation of a contract. A party whose consent to a contract was induced by fraud, misrepresentation or duress may repudiate it. A contract may also be repudiated for failure to perform a duty. (2) The termination of an insurance contract by the insurer when material misrepresentation has occurred.

Literally translated, this expression means “facts speak for themselves.” Under this doctrine, an individual is presumed to be negligent if the circumstances of injury are under his complete and exclusive control, and it can be shown that the injury or damage could only have occurred if the individual were negligent.

An agent or sales representative.

A statement made on an application for insurance that the applicant represents as correct to the best of his knowledge and belief. See also Warranty.

The form for a periodic report to an insurer by an insured that covers the fluctuating values of stocks of merchandise, furniture and fixtures, and improvements and betterments. Premiums are adjusted annually, based on the average values insured during the policy period. An insured with fluctuating inventories might use this form.

A new policy written to take the place of one currently in force.

The cost of replacing property without a reduction for depreciation. By this method of determining value, damages for a claim would be the amount needed to replace the property using new materials. Contrast with Actual Cash Value.

Insurance that provides that loss will be paid on a replacement cost basis. See also Replacement Cost.

Renters insurance is very similar to homeowner’s insurance but it does not include coverage for structure, although there is an exception of small alterations that a tenant makes to the structure. It provides liability insurance and the tenant’s personal property is covered against named perils such as a fire, theft, and vandalism. It also pays expenses when the residence becomes uninhabitable. Renter’s insurance is significantly less expensive than a homeowner’s policy because it’s mainly to protect against losses to a tenant’s personal property. The owner of the building is usually responsible for insuring the dwelling itself but bears no responsibility for the tenant’s belongings.

A form of Property Insurance that provides indemnity (1) for the loss of the rental value of property when the owner or tenant is deprived of the use of the property because it has been damaged by an insured peril, or (2) for the loss by the owner-landlord of the rent that would have been payable by a tenant of the property, under the terms of the lease or by statute, when he is relieved of liability for the payment of rent during a period of untenantability due to an insured peril.

(1) The premiums paid for renewed policies. (2) The commissions paid on renewal premiums.

The reestablishment of the in-force status of a policy, the term of which has expired or will expire unless it is renewed.

The automatic reestablishment of in-force status effected by the payment of another premium.

A commission paid on premiums subsequent to the first-year commission.

A short form certificate which is used to renew a policy. It refers to the original policy, keeping all of its provisions, but does not restate all of its insuring agreements, exclusions, and conditions.

Term Insurance that may be renewed for another term without evidence of insurability.

Removing property to protect it from loss. Most personal and commercial property forms cover damage to property at another location when it has been removed from the premises to protect it from loss by a peril insured against.

Usually used in appellate courts whereby the appellate court refers the case back to the original court for further action.

The amount of a risk to be reinsured after deducting the amount the ceding company is keeping in its own account.

1) To give up, abandon, and discharge a claim or an enforceable right of one person against another. (2) The name of the instrument evidencing such an act. For example, if a claim representative obtains a release from a claimant, this means that the claimant has given up all further rights against the insurance company.

Sometimes used instead of dollar amounts in a surgical schedule, this number is multiplied by a conversion factor to arrive at the surgical benefit to be paid.

A surgical schedule which basically compares the value of one surgical procedure to another and establishes the surgical fee to be paid.

(1) Refusal by an insurer to underwrite a risk. (2) Sometimes used to refer to the refusal or denial of a claim by an insurer.

An insurer that assumes all or a part of the insurance or reinsurance written by another insurer.

A type of insurance that involves acceptance by an insurer, called the reinsurer, of all or a part of the risk of loss covered by another insurer, called the ceding company. It is a way for an insurer to avoid having to pay for large or catastrophic losses.

The consideration paid by a ceding company to a reinsurer for the reinsurance afforded by the reinsurer.

Credit taken on its annual statement by a ceding company for reinsurance premiums ceded and losses recoverable.

An individual or organization which places reinsurance for the ceding companies who are its customers.

(1) See Cession. (2) The premium for an assumption of reinsurance .

(1) Restoration of a lapsed policy. (2) Restoration of the original amount of a type of policy that reduces the principal amount by the amount of claims.

Putting back into effect a catastrophe reinsurance coverage that has been reduced by the payment of a reinsurance loss as the result of one catastrophe. This is usually effected by the payment of a reinstatement premium.

Payment of an amount of money upon the occurrence of a loss covered by the policy.

A second hearing by a court. Its purpose is to call the court’s attention to an error or omission which may have occurred in the court’s first consideration of the claim.

Action undertaken by a state Insurance Department to restore an impaired or insolvent insurer to sound financial standing. Contrast with Liquidation of Insurer.

Any clause in a Health Insurance policy, particularly a Disability Income policy, that is intended to assist the disabled policyholder in vocational rehabilitation.

Physical and/or vocational rehabilitation benefits provided to an injured person following a work-related injury, and intended to restore the person to a point where gainful employment is possible.

Warships: The weight or displacement. Commercial vessels: The cubic capacity of enclosed space. One ton occupies 100 cubic feet.

A person who has met the qualifications set by law or regulation to sell securities to the public.

A licensed professional with a four-year nursing degree. Able to provide all levels of nursing care including the administration of medication.

Coverage for loss of money and securities sent through the post office by registered mail.

A record of all policies charged to a debit account.

A suboffice of a home office which is equipped to handle all lines of business in a particular territory or region. Some companies use the term branch office.

An annuity paying installments as long as the insured lives and installments after death to the beneficiary until the amount paid equals the principle sum of insurance.

A form of annuity that provides for a cash or installment refund to the beneficiary if the annuitant dies before having drawn benefits equal to the total consideration that he paid on the policy.

Occurs when a physician or other health plan provider receives permission to consult another physician or hospital.

The person or provider to whom a participating provider has referred a member of the plan.

A decrease in the benefits in an insurance policy because of a specified condition . For example, benefits may be reduced because a disability is caused by a specific condition.

Taking steps to reduce the probability or severity of a possible loss. For example , installing alarms and sprinkler systems to reduce the risk of fire loss to a building. One of the four major risk management techniques. See Risk Management.

A form of insurance available as a nonforfeiture option. It provides that the cash value of the policy be used as a single premium to purchase paid-up insurance in whatever amount the cash value will provide, which will be less than the original face amount in most cases. See also Nonforfeiture values.

Discriminating unfairly against a risk solely because off its location. An example would be refusing to insure a risk because the building is located in a depressed area or location. Sometimes these areas are referred to as blackout areas.

A Health Insurance policy provision defining the duration of a period of time during which the recurrence of a condition will be considered a continuation of a prior period of disability or confinement.

Disability resulting from the same or a related cause as a prior disability.

The hiring of insurance agents, or the process of looking for, interviewing, and hiring agents. It is also used to mean the process of locating and hiring any type of employee.

The name by which a policy writing agent is known in the Property Insurance business.

A system of placing reinsurance on a reciprocal basis so that a ceding company will give a share of its reinsurance to a reinsurer who is able to offer reinsurance in return.

An unincorporated group of individuals, called subscribers, who mutually insure one another, each separately assuming his share of each risk. Its chief administrator is an attorney in fact.

Anyone designated by Medicaid as being eligible to receive Medicaid benefits.

A location which accepts the insured’s products or services. One of the four types of dependent properties for which Business Income coverage may be written.

This term refers to how often a patient returns to an inpatient hospital status for the same reason.

The action of a ceding company taking back from a reinsurer insurance previously ceded.

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

The company that purchases reinsurance. See Ceding Company.

The charge for medical services which refers to the amount approved by the Medicare Carrier for payment. Customary charges are those which are most often made by a provider for services rendered in that particular area.

Real property, as opposed to personalty; land and anything affixed to it such as buildings.