Terms and Definitions

Not quite sure what insurance Misrepresentation means?  Confused about a Coinsurance Provision? Here’s a list of some common (and some less common) insurance terms to help you understand your policy. We can’t guarantee it will include answers to all of your questions, but you can call or text 401.596.2525 anytime, we’re always happy to help!

A


Accident: An unexpected event or circumstance without deliberate intent.

Accident Insurance: Insurance for unforeseen bodily injury.

Accident Only: An insurance contract that provides coverage for death, dismemberment, disability or hospital and medical care as a result of an accident.

Accidental Bodily Injury: Unexpected injury to a person.

Accidental Death & Dismemberment (AD&D): An insurance contract that pays a stated benefit in the event of death and / or dismemberment caused by an accident.

Accidental Death and Dismemberment (AD&D) Rider: A supplement to life insurance policies providing additional cash benefits to the insured or his / her beneficiaries should an accident cause either death or dismemberment of the insured.

Accumulation Period: The amount of time the insured must incur eligible medical expenses in order to establish a benefit period under a major medical expense or comprehensive medical expense policy.

Actual Cash Value: The repayment value for indemnification due to loss or damage of property.

Actual Cash Value: The value of property based on the cost of repairing or replacing it with property of the same kind and quality.

Actuarial Report: A formal presentation of the actuary’s professional conclusions and recommendations. Known as an “Actuarial Memorandum” in Life and Health.

Actuary: Business professional who analyzes probabilities of risk and risk management.

Adjuster: A person who investigates and settles losses for an insurance carrier.

Admission: Hospital inpatient care for a medical condition.

Admitted Assets: Insurer assets valued and included on a balance sheet to determine a business’ financial viability.

Advisory Organization: A group supported by member companies whose purpose is to gather and publish varying loss statistics.

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

Agent: The individual authorized to represent the insurer in negotiating, servicing or affecting insurance policies.

Aggregate: The maximum dollar amount payable for a loss (or multiple losses) during a policy period or during a project.

ALAE: An estimate of the claims settlement associated with a claim.

Alien Company: An insurance company formed according to the laws of a foreign country. It must conform to state standards to legally sell insurance within that state.

Allied Lines: Coverage generally written along with property insurance.

All-Risk (Open-Peril): Typically covers a broad range of losses not explicitly excluded in the policy contract.

Alternative Workers’ Compensation: A dollar amount set by the plan which caps the amount of money the insured must pay for covered expenses over the course of one calendar year.

Annuitant: The beneficiary of an annuity payment.

Annuity: A contract providing for a series of payments to be made / received at regular intervals.

Applicant: The party applying for an insurance policy.

Application: A printed form developed by an insurer that includes questions about the prospective insured and the desired insurance coverage and limits.

Appraisal: A professionally determined estimate of value.

Arbitration: A binding resolution process using an unbiased conciliator for moderation.

Assessed Value: Estimated value for real or personal property as established by a tax entity.

Asset: Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events.

Asset Risk: Risk assigned formulaically to the company’s assets.

Assigned Risk: A risk insured through a pool of insurers and assigned to a specific insurer.

Assumed Reinsurance: The assumption of risk from another insurance entity within a reinsurance agreement.

Authorized Company: An insurer licensed or admitted to do business within a particular state.

Authorized Control Level Risk Based Capital: Theoretical amount of capital plus surplus an insurance company should maintain.

Authorized Reinsurance: Insurance placed with a reinsurer who is licensed or otherwise allowed to conduct reinsurance within a state.

Auto Collision Coverage: Optional auto insurance which pays for damage to your car caused by collision with another car or object, or by rolling the car over.

Auto Comprehensive Physical Damage Coverage: Optional auto insurance which pays for damage caused by things other than collision, such as fire, theft, vandalism, flood or hail.

Auto Liability: Coverage that protects against financial loss because of legal liability for motor vehicle related injuries or damage to the property of others caused by accidents.

Automatic Premium Loan: A provision in some life insurance policies that authorizes a policy loan using the cash value accumulated by the insurance policy to pay for past due premiums at the end of the grace period.

B


Building Code Effectiveness Grading Schedule (BCEGS): A classification system for building assessments that puts special emphasis on mitigation of loss from natural disasters.

Beneficiary: Any person, persons, or other entity designated to receive the policy benefits upon the death of the policyholder.

Binder: A written or oral contract issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately.

Blanket Coverage: Coverage for property and liability extending to multiple locations, classes of property or employees.

Bodily Injury: Any physical injury, including sickness or disease.

Bond: A debt security whereby the debt holder has a creditor stake in the company.

Book Value: Original cost, including capitalized acquisition costs and accumulated depreciation, unamortized premium and discount, deferred origination and commitment fees, direct write-downs, and increase / decrease by adjustment.

Broker: An individual who receives commissions from the sale and service of insurance policies. These individuals work on behalf of the customer, not the insurance provider, and are not restricted to selling policies for specific companies.

Builders’ Risk Policies: Coverage against loss to buildings in the course of construction. The coverage also includes machinery and equipment used in the course of construction and materials incidental to construction.

Burglary and Theft: Coverage for property taken or damaged by breaking and entering insured premises, burglary or theft, forgery or counterfeiting and off-premises exposure.

Business Auto: Coverage for motor vehicles engaged in commerce. Examples include: Auto Liability, PIP, MP, Uninsured Motorist and / or Underinsured Motorists (UM/UIM), Specified Causes of Loss, Comprehensive and Collision.

Business Interruption: Loss of income due to property damage to business facility.

Business Owners Policy: Business insurance typically for property, liability and business interruption coverage.

Buy-Sell Agreement: Agreement that a deceased business owner’s interest will be sold and purchased at a predetermined price or at a price according to a predetermined formula.

C


Calendar Year Deductible: The amount of health care expenses that the insured person must pay before insurance payments for covered eligible expenses.

Cancellation: The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.

Captive Agent: An individual who sells insurance contracts for a specific insurance provider. These individuals work on behalf of the provider, not the customer, and are restricted to selling policies for the company they represent.

Carrying Value (Amount): The SAP book value plus accrued interest, reduced by valuation allowances and any non-admitted adjustments applied to the individual investment.

Cash Value (Cash Surrender Value): The cash amount payable to a policy owner in the event of termination or cancellation of the policy before its maturity or realization of insured event.

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

Catastrophe Bonds: Bonds issued with funding tied to a company’s losses from disasters or Acts of God.

Catastrophe Loss: A high-magnitude loss with little ability to forecast.

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

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

Certificate of Insurance: A statement of coverage issued to an individual insured under a group insurance contract, outlining the benefits and provisions applicable to the member.

Claim: An individual’s request for payment from an insurer for a loss covered by an insurance policy.

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

Coinsurance Provision: A specified percentage of the cost of treatment the insured is required to pay for all covered medical expenses remaining after the policy’s deductible has been met.

Collision Insurance: Protection against loss resulting from any damage to the policyholder’s car caused by collision with another vehicle or object, or by upset of the insured car, whether it was the insured’s fault or not.

Combinations: A special form of package policy composed of personal, automobile and homeowner’s insurance.

Combined Ratio: An indication of the profitability of an insurance company, calculated by adding loss and expense ratios.

Commencement Date (Effective Date): Date when the organization first became obligated for insurance risk via the issuance of policies and / or entering into a reinsurance agreement.

Commercial Auto: Coverage for motor vehicles owned by a business that protects against financial loss from motor vehicle related injuries, damage to the property of others caused by accidents, maintenance, use or care-custody and control of a motor vehicle. Examples include Commercial Auto Combinations of Business Auto, Garage, Truckers and / or Other Commercial Auto.

Commercial Earthquake: Earthquake property coverage for commercial ventures.

Commercial Farm and Ranch: A commercial package policy for farming and ranching risks including both property and liability coverage.

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

Commercial General Liability: Broad commercial liability coverage with two major sub-lines: premises / operations sub-line and products / completed operations sub-line.

Commercial Multiple Peril: Policy packaging two or more insurance coverages to protect an enterprise from various property and liability risk exposures.

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

Commercial Property: Property insurance coverage sold to commercial ventures.

Community Rating: A rating system where standard rating is established and usually adjusted within specific guidelines for each group on the basis of anticipated use by the group’s employees.

Company Code: A five-digit identifying number assigned by NAIC, assigned to all insurance companies filing financial data with NAIC.

Completed Operations Liability: Policy covering the liability of contractors, plumbers, electricians, repair shops and other contractors when someone incurs bodily injury or property damage from defective work.

Comprehensive Auto Insurance: Protection against loss resulting from damage to the insured auto, other than loss by collision or upset.

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

Comprehensive / Major Medical: Policies providing fully insured indemnity, HMO, PPO or Fee for Service coverage for hospital, medical and surgical expenses.

Comprehensive Personal Liability: Comprehensive liability coverage for exposures arising out of residence premises and activities of individuals and family members.

Compulsory Auto Liability Insurance: Minimum coverage established by law in some states for motorists.

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

Conditions: Requirements that state the obligations of the person insured and those of the insurance company.

Contingent Beneficiary: In a life insurance policy, person designated to receive the policy benefits if the primary beneficiary dies before the insured.

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

Contract: A legally enforceable agreement between two or more parties.

Contractual Liability: Liability coverage of an insured who has assumed legal liability of another party by written or oral contract.

Convertible Term Life Insurance: Term insurance offering the policyowner the option to exchange the term policy for a form of permanent insurance.

Corrective Order: Commissioner’s directive of action to be completed by an insurer.

Covered Lives: The total number of lives insured, including dependents, under individual policies and group certificates.

Credit Health Insurance: Policy assigning creditor as beneficiary for insurance on a debtor, thereby remitting balance of payment to creditor should the debtor become disabled.

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

D


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

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

Deductible: Portion of the insured loss (in dollars) paid by the policy holder

Deferred Annuity: Annuity payment to be made as a single payment series of installments beginning on a specific future date, in a specified number of years or at a predetermined age.

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

Dependent: A person for whom the insured has a legal obligation.

Depreciation: Reduction in the value of property over time and through use.

Derivative: Securities priced according to the value of other financial instruments such as commodity prices, interest rates, stock market prices or exchange rates.

Difference in Conditions (DIC) Insurance: A special form of open-peril coverage written in conjunction with basic fire coverage and designed to provide protection against loss not reimbursed under the standard fire forms.

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

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

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

Direct Written Premium: Total premiums received by an insurance company without adjustments for the ceding of any portion of these premiums to the Reinsurer.

Directors and Officers Liability: Liability coverage protecting directors or officers of a corporation (including Non-Profit Organizations) from liability arising out of the performance of professional duties on behalf of the corporation.

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

Disability Income, Long-term: Policy providing a weekly or monthly income benefit for more than five years for individual coverage and more than one year for group coverage for full or partial disability.

Disability Income, Short-term: Policy providing a weekly or monthly income benefit for up to five years for individual coverage and up to one year for group coverage for full or partial disability.

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

Domestic Insurer: An insurance company domiciled and licensed in the state in which it sells insurance.

Dual Interest: Insurance that protects the creditor and the debtor’s interest in the collateral securing the debtor’s credit transaction.

Dwelling Property/Personal Liability: A special form of package policy composed of dwelling fire and / or allied lines, as well as personal liability insurance.

E


Earned Premium: A portion of insured’s prepaid premium allocated to the insurance company’s loss experience, expenses and year-to-date profit.

Endorsement: Attachment or addendum to an insurance policy. An endorsement changes the contract’s original terms.

Earned but not Reported (EBNR): The premium amount insurer reasonably expects to receive for which contracts are not yet final and exact amounts are not definite.

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

Effective Date: Date at which an insurance policy becomes effective.

Employee Benefit Liability: Liability protection for an employer for claims arising from provisions in an employee benefit insurance plan provided for the economic and social welfare of employees.

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

Employers Liability: Employers’ liability coverage for the legal liability of employers arising out of injuries to employees.

Employment Practices Liability Coverage: Liability insurance for employers providing coverage for wrongful termination, discrimination or sexual harassment of current or former employees.

Errors and Omissions Liability: Liability coverage of a professional protecting against persons incurring bodily injury or property damage, or who have sustained loss from omissions, errors in judgment, breach of duty or negligent acts in business conduct.

Excess and Umbrella Liability: Liability coverage of an insured above a specific amount set forth in a basic policy issued by the primary insurer.

Excess of Loss Reinsurance: Loss-sharing mechanism where an insurer pays claims up to a specified amount and a reinsurance company pays claims in excess of stated amount.

Exclusions and Limitations: Conditions, situations and services not covered by a plan.

Extended Term Life Insurance: A nonforfeiture benefit under which the net cash value of the policy is used to purchase term insurance for the amount of coverage available under the original policy.

F


Face Amount: The amount stated in a policy to be met upon maturity or insured incident.

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

Fair Value: The amount at which an asset or liability can be bought, incurred, sold or settled in a current transaction between willing parties.

Fidelity: A bond or policy covering an employer’s loss, resulting from an employee’s dishonest act (e.g., loss of cash, securities, valuables, etc.).

Floater: Additional coverage for items not otherwise included in the basic policy (such as jewelry or antiques).

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

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

Fronting: An arrangement in which a primary insurer acts as the insurer of record by issuing a policy, but then passes the risk to a reinsurer in exchange for a commission.

G


Grace Period: The specified length of time, after a Life or Health premium payment is due in which the insured may make the payment and keep the policy in force. (Usually thirty days.)

Gross Premium: The net premium for insurance plus commissions, operating and miscellaneous commissions.

Group Accident and Health: Coverage written on a group basis that pays scheduled benefits or medical expenses caused by disease, accidental injury or accidental death.

Group Code: A unique three to five-digit number assigned by the NAIC to identify companies that are part of a larger group.

Guaranteed Renewable Policy: A policy the insurer is required to renew as long as premiums are paid or until an event specified in the policy matures.

H


Hazard: A circumstance or likely event which increases the probability or severity of a loss.

Health, Excess / Stop Loss: This type of insurance may be extended to either a health plan or a self-insured employer plan. It insures against the risk that one claim will exceed a specific dollar amount or an entire plan’s losses will exceed a specific amount.

Health Maintenance Organization (HMO) – a medical group plan that provides physician, hospital, and clinical services to participating members in exchange for a periodic flat fee.

Health Plan: Written promise of coverage given to an individual, family or group of covered individuals, where a beneficiary is entitled to receive a defined set of health care benefits in exchange for a defined consideration, such as a premium.

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

Homeowners Insurance: A package policy combining real and personal property coverage with personal liability coverage.

Hospital Indemnity Coverage: Coverage providing a pre-determined, fixed benefit or daily indemnity for contingencies based on a stay at a hospital or intensive care facility.

I


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

Incurred but Not Reported (IBNR): Claims that occurred but were not reported to the insurer by the reporting date.

Incurred Claims: Paid claims plus amounts held in reserve for those that have been incurred but not yet paid.

Incurred Losses: Sustained losses, paid or not, during a specified time period.

Indemnification: Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.

Insolvent: Having insufficient financial resources (assets) to meet financial obligations (liabilities).

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

Insurable Risk: Conditions that make a risk insurable.

Insurance Regulatory Information System (IRIS): A baseline solvency screening system for the National Association of Insurance Commissioners (NAIC) and state insurance regulators.

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

Insured: A person or organization covered by an insurance policy, including the “named insured” and any other parties for whom protection is provided under the policy terms.

Insurer: The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.

J


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

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

Joint Underwriting Association (JUA): A loss-sharing mechanism combining several insurance companies.

K


Key-Persons Insurance: A policy purchased by or for the benefit of a business insuring the life or lives of personnel integral to its operations.

L


Lapse: Termination of a policy due to nonpayment of premiums.

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

Liability: A legal obligation to compensate a person harmed by one’s acts or omissions.

Liability Coverage: Insurance that provides compensation for a harm or wrong to a third party for which an insured is legally obligated to pay.

Life, Endowment: Insurance that pays the same benefit amount should the insured die during the term of the contract or if the insured survives to the end of the specified coverage term or age.

Life, Flexible Premium Adjustable: A group life insurance that provides a face amount that is adjustable to the certificate holder and allows the certificate holder to vary the modal premium paid.

Lifetime Maximum: The maximum amount of money a plan will pay toward healthcare services over the course of the insured’s lifetime.

Limited Benefit: Policies that provide coverage for vision, prescription drug, and / or other single service plans or programs.

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

Limited Policies: Health insurance coverage for specific ailments, such as cancer.

Limit: Maximum value to be derived from a policy.

Loss: Physical damage to property or bodily injury, including loss of use or of income.

Loss Adjustment Expense (LAE): Expected payments for costs to be incurred in connection with the adjustment and recording of losses.

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

Loss of Use Insurance: A policy providing protection against loss of use due to damage or destruction of property.

Loss Payable Clause: Coverage for third party mortgagee in case of default on insured property that has been lost or damaged.

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

Loss Reserve: An amount set aside by insurers to cover claims incurred but not yet paid.

Losses Incurred: Includes claims paid and / or amounts held in reserve for future payment

Losses Incurred but Not Reported (IBNR): An estimated amount set aside by the insurer to pay claims that may have occurred but have not yet been reported.

M


Major Medical: A hospital, surgical or medical expense contract that provides comprehensive benefits as defined in the state in which the contract will be delivered.

Mandated benefits: Insurance required by state or federal law.

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

Medicare: A state assistance program providing hospital and medical expense insurance to those over 65 years of age.

Medicare Supplement: Insurance coverage sold on an individual or group basis to help fill the “gaps” in the protections granted by the federal Medicare program.

Medigap: Supplementary private health insurance for Medicare insurance benefits.

Misrepresentation: Act of making, issuing, circulating or causing to be issued or circulated an estimate, an illustration, a circular or a statement of any kind that does not represent the correct policy terms, dividends or share of surplus or the name or title for any policy or class of policies that does not in fact reflect its true nature.

Morbidity Risk: The potential for a person to experience illness, injury or other physical or psychological impairment, whether temporary or permanent.

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

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

Mortgage Guaranty: Insurance indemnifying a lender for loss upon foreclosure if a borrower fails to meet required mortgage payments.

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

Mortgage-backed Securities: A type of asset-backed security secured by a mortgage or collection of mortgages.

Multi-Peril Insurance: Personal and business property coverage combining several types of property insurance into one policy.

Municipal Bond Guarantee Insurance: Coverage sold to municipalities to guarantee the principle payment on bonds issued.

Municipal Liability: Liability coverage for the acts of a municipality.

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

Mutual Insurance Holding Company: A company organized as a Mutual and owning a capital stock insurer or insurers for the benefit of pooling risk for many people, typically those in the same industry.

N


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

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

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

National Flood Insurance Program (NFIP): Flood insurance and floodplain management for personal and business property administered under the National Flood Act of 1968.

Negligence: Failure to use a generally acceptable level of care and caution, resulting in loos or damage.

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

Network: A group of doctors, hospitals and other health-care providers contracting with a health plan, usually to provide care at special rates and to handle paperwork with the health plan.

Non-admitted Insurer: An insurance company not licensed to do business within a given state.

Non-controlled Stock Insurers: Insurers in which a parent company has a financial interest represented by the direct or indirect ownership of less than 50% of voting shares and does not have the ability to exercise control over the insurer.

Non-proportional Reinsurance: Reinsurance that protects the ceding company’s overall experience on its entire portfolio of business or a broad segment of it.

O


Occurrence: An accident resulting in bodily injury or property damage neither expected nor intended from the standpoint of the insured.

Ocean Marine: Coverage for ocean and inland water transportation exposures, goods or cargo, ships or hulls, earnings and liability.

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

Option: An agreement giving the buyer the right to buy or receive, sell or deliver, enter into, extend, terminate or effect a cash settlement based on the actual or expected price, level, performance or value of one or more Underlying Interests.

Other Considerations:  Unallocated annuity considerations and other unallocated deposits that incorporate any mortality or morbidity risk and are not reported as direct premiums, direct annuity considerations or deposit-type contract funds.

Other Liability: Coverage protecting the insured against legal liability resulting from negligence, carelessness, or a failure to act resulting in property damage or personal injury to others.

Other Underwriting Expenses: Allocable expenses other than loss adjustment expenses and investment expenses.

Out-of-Network: Health care services received outside the HMO, POS or PPO network.

Out-of-Pocket Expense: Any medical care costs not covered by insurance, which must be paid by the insured.

Owner Occupied: Homeowner’s insurance sold to owners occupying the insured property.

P


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

Peril: The cause of property damage or personal injury, origin of desire for insurance.

Permanent Life Insurance: A policy that remains active for the life of the insured.

Personal Auto: Coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual for non-commercial use.

Personal Flood: Separate flood insurance policy sold for personal, family or household purposes.

Personal GAP Insurance: Credit insurance that covers the excess of the outstanding indebtedness over the primary property insurance benefits in the event of a total loss.

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

Personal Injury Protection Coverage / PIP: Automobile coverage available in states that have enacted no-fault laws or other auto reparation reform laws for treatment of injuries to the insured their passengers.

Personal Property: Credit insurance that covers perils to goods purchased or used as collateral.

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

Policy Declarations: The elements of an insurance contract listing basic underwriting information, including the insured’s name, address and description of insured locations as well as policy limits.

Policy Dividend: A refund of part of the premium on a participating life insurance policy determined by subtracting the actual premium expense from the premium charged.

Policy Limits: The maximum amount an insured may collect or for which an insured is protected, under the terms of the policy.

Policy Loan: A loan from a life insurer to the owner of a policy that carries cash value.

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

Policy Reserve: The amount of money allocated specifically for the fulfillment of policy obligations by a life insurance company.

Policyholders Surplus: Assets in excess of the liabilities of a company or net income above any monies indebted to legal obligation.

Preferred Provider Organization (PPO): An organization where providers are under contract to an insurance company or health plan to provide care at a discounted or negotiated rate.

Pre-Existing Condition: (1) According to most individual health insurance policies, an injury that occurred or a sickness that first appeared or manifested itself before the policy was issued and that was not disclosed on the application for insurance. (2) According to most group health insurance policies, a condition (excluding pregnancy) for which an individual received medical care during the three to six months immediately prior to the enrollment of his coverage.

Pre-Existing Conditions Provision: A health insurance policy provision stating benefits will not be paid for any illness and / or condition that existed prior to becoming an insured under the health plan in question.

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

Premium: The price for insurance coverage as described in the insurance policy for a specific period of time.

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

Premiums Net: The amount calculated on the basis of interest and mortality tables used to calculate the reporting entity’s statutory policy reserves.

Premiums Written: Total premiums generated from all policies written by an insurer within a given period of time.

Primary Beneficiary: The person designated as the first to receive the proceeds of a life insurance policy upon the death of the insured.

Primary Care Physician (PCP): A general or family practitioner who serves as the insured’s personal physician and first contact with a managed care system. The PCP will usually direct the course of your treatment and/or refer you to other doctors and/or specialists in the network.

Primary Insurance: Coverage taking precedence when more than one policy covers the same loss.

Policyholder: The person who buys insurance.

Prior Approval Law: A state regulatory requirement for pre-approval of all insurance rates and forms.

Probationary Period: The length of time that a new group member must wait before becoming eligible to enroll in a group insurance plan.

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

Proof of Loss: A sworn statement that usually must be furnished by the insured to an insurer before any loss under a policy may be paid.

Professional Errors and Omissions Liability: Coverage available for liability arising out of the performance of professional or business-related duties, with coverage being tailored to the needs of the specific profession.

Property Damage Coverage: An agreement by an insurance carrier to protect an insured against legal liability for damage by an insured automobile to the property of another.

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

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

Provider Sponsored Network (PSN): A formal affiliation of providers, sometimes called “integrated delivery systems,” organized and operated to provide an integrated network of healthcare providers with which third parties may contract for health care services to covered individuals.

Proximate Cause: An event covered under the insured’s policy agreement.

Public Adjuster: An independent claims adjuster representing policyholders instead of insurance companies.

Pure Premium: A portion of the premium equal to expected losses void of insurance company expenses, premium taxes, contingencies or profit margin.

Pure Risk: Circumstance including possibility of loss or no loss, but without possibility of gain.

Q


Qualified Actuary: An individual who meets the basic education, experience and continuing education requirements of the Specific Qualification Standard for Statements of Actuarial Opinion and is in good standing with the American Academy of Actuaries, and is approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the American Academy of Actuaries.

R


Rate: The pricing factor upon which the insurance buyer’s premium is based.

Reinstatement: The process by which a life insurance company puts back in force a policy that has lapsed or has been canceled for nonpayment of premium.

Reinsurance: A transaction between a primary insurer and another licensed (re) insurer where the reinsurer agrees to cover all or part of the losses and/or loss adjustment expenses of the primary insurer.

Renewable Term Life Insurance: A renewable life policy permits the owner of the policy to automatically renew the policy beyond its original term by acceptance of a premium for a new policy term without evidence of insurability.

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

Reported Losses: Includes both expected payments for losses relating to insured events that have occurred and been reported to the insurance company but not yet paid.

Retention: A mechanism of internal fund allocation for loss exposure.

Retention Limit: Maximum amount of medical and hospital expense an insurer will carry on its own.

Retrocession: The portion of risk a reinsurance company cedes or amount of insurance the company chooses not to retain.

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

Reserve: A portion of the premium retained to pay future claims.

Revocable Beneficiary: A life insurance policy whose designation as beneficiary can be revoked or changed by the policyowner at any time prior to the insured’s death.

Rider: An addition to an insurance policy that becomes a part of the contract.

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

Risk Retention Group: A group-owned insurer organized to assume and spread the liability risks of its members.

S


Salvage: The value recoverable by the insurer after a loss.

Settlement: An agreement between a claimant or beneficiary to an insurance policy and the insurance company regarding the amount and method of a claim or benefit payment.

Standard Risk: A person considered a “normal risk level” and insurable at standard rates determined by underwriter standards.

State Children’s Health Insurance Program: Policies issued in association with the Federal / State partnership created by title XXI of the Social Security Act.

State of Domicile: The state wherein a home office is located.

State Page: Exhibit of Premiums and Losses for each state in which a company is licensed to sell insurance.

Statutory Accounting Principles (SAP): A set of accounting principles set forth by the National Association of Insurance Commissioners to prepare statutory financial statements.

Stock Insurance Company: An insurance company owned by stockholders.

Stop Loss / Excess Loss: Individual or group policies providing coverage against the risk that a claim, or plan’s losses, will exceed a specified dollar amount.

Stop-Loss Provision: A major medical policy provision under which the insurer will pay 100 percent of the insured’s eligible medical expenses after the insured has incurred a specified amount of out-of-pocket expenses in deductible and coinsurance payments.

Subrogation: When an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured.

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

Substandard Risk (Impaired Risk): A risks deemed undesirable due to medical condition or hazardous occupation requiring the use of a waiver, special policy form or a higher premium charge.

Surety Bond: A three-party agreement whereby an insurer assumes the responsibility to pay a second party should the principal debtor enter default.

Surplus Line: Specialized property or liability coverage available via non-admitted insurers.

T


Term: Period of time for which a policy is valid and enforceable.

Term Insurance: Life insurance under which the benefit is payable only if the insured dies during a specified period. Coverage ceases if the insured survives beyond that period.

Theft Limit (Inside Policy Limits): The highest amount an insurance company will pay on certain items of personal property.

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

Title Insurance: Coverage guaranteeing the validity of a title to property.

Total Liabilities: Total money owed or expected to be owed by the insurance company.

Travel Coverage: Covers financial loss due to trip cancellation / interruption, lost or damaged baggage, trip or baggage delays, missed connections and / or changes in itinerary and casualty losses due to rental vehicle damage.

Treaty: A reinsurance agreement between the ceding company and reinsurer.

U


Unallocated Loss Adjustment Expense (ULAE): Loss adjustment expenses not be specifically tied to a claim.

Umbrella and Excess, Commercial: Coverage for the liability of a commercial venture above a specific amount set forth in a basic policy.

Umbrella and Excess, Personal:  Non-business liability protection for individuals above a specific amount set forth in a basic policy.

Unauthorized Reinsurance: Reinsurance placed with a company not authorized in the reporting company’s state of domicile.

Underinsured Motorist Coverage: Policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover total dollar amount of losses.

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

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

Underwriting Risk: The section of risk-based capital formula calculating requirements for reserves and premiums.

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

Unearned Premium Reserve: All premiums received for coverage extending beyond the statement date.

Universal Life Insurance: Adjustable life insurance under which premiums and coverage are adjustable.

Unpaid Losses: Claims in the course of settlement. The term may also include claims that have been incurred but not reported.

V


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

Valued Policy Law: State legislation which specifies that the insured shall receive the face amount of the policy in the event of a total loss to a dwelling rather than the actual cash value regardless of the principle of indemnity.

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

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

Variable Universal Life: Combines the flexible premium features of universal life with components of variable life.

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

W


Waiver: An agreement attached to a policy which exempts from coverage certain disabilities or injuries that otherwise would be covered by the policy.

Warrant: An agreement that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times according to a schedule or agreement.

Warranty: Coverage that protects against manufacturer’s defects past the normal warranty period and for repair after breakdown to return a product to its originally intended use.

Whole Life: Life insurance that may be kept in force for a person’s entire life that pays a benefit upon the person’s death, whenever it may be.

Whole Life Insurance: Life insurance kept in force for the duration of a person’s life and pays a benefit upon their death.

Workers’ Compensation: Insurance that covers an employer’s liability for injuries, disability or death to persons in their employment, without regard to fault.

Written Premium: The contractually determined amount charged by the reporting entity to the policyholder for the effective period of the contract.

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