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ACCELERATED DEATH BENEFIT:
A percentage of the policy?s face amount, discounted for interest, that can be paid to the insured prior to death, under specified circumstances. This is in lieu of a traditional policy that pays beneficiaries after the insured?s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.
ACCIDENT AND HEALTH INSURANCE:
Coverage for acci-dental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses, and catastrophic care, with limits.
ACCIDENTAL DEATH BENEFIT:
An endorsement that pays the beneficiary an additional benefit if the insured dies from an accident.
ACCOUNTS RECEIVABLE (DEBTORS) INSURANCE:
Indemnifies for losses that are due to an inability to collect from open commercial account debtors because records have been destroyed by an insured peril.
ACTS OF GOD:
Perils that cannot reasonably be guarded against, such as floods and earthquakes.
ACTUAL CASH VALUE:
A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation.
ACTUAL LOSS RATIO:
The ratio of losses incurred to premiums earned actually experienced in a given line of insurance activity in a previous time period.
Actuarial COST ASSUMPTIONS:
Assumptions about rates of investment earnings, mortality, turnover, salpatterns, probable expenses, and distribution or actual ages at which employees are likely to retire.
ACTUARY :
An insurance professional skilled in the analysis, evaluation, and management of statistical information. Evaluates insurance firms? reserves, determines rates and rating methods, and determines other business and financial risks.
ADDITIONAL INSUREDS:
Persons who have an insurable interest in the property/person covered in a policy and who are covered against the losses outlined in the policy. They usually receive less coverage than the pri-mary named insured.
ADVERSE SELECTION:
The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all. In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance. works best when risk is shared among large numbers of policyholders.
AFFIRMATIVE WARRANTY:
An agreement between an insurance company and an agent, granting the agent authority to write insurance from that company. It specifies the duties, rights, and obligations of both parties.
AGENT:
Insurance is sold by two types of agents: inde-pendent agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.
AGGREGATE DEDUCTIBLE:
A type of deductible that applies for an entire year in which the insured absorbs all losses until the deductible level is reached, at which point the insurer pays for all loses over the specified amount.
ANCILLARY CHARGES:
In hospital insurance, covered charges other than room and board.
ANNUAL STATEMENT:
Summary of an insurer?s or rein-surer?s financial operations for a particular year, including a balance sheet.
ANNUAL-PREMIUM ANNUITY:
An annuity whose purchase price is paid in annual installments.
ANNUITANT:
: An individual receiving benefits under an annuity.
ANNUITY:
A life insurance company contract that pays periodic income benefits for a specific period of time or over the course of the annuitant?s lifetime. These payments can be made annually, quarterly or monthly.
From a life insurer?s viewpoint, an annuity presents the opposite of mortality risk from a life insurance policy. Life insurance pays a benefit when the policyholder dies. An annuity pays benefits as long as the annuitant lives. With both products, the insurer?s profit or loss depends on whether it made correct assumptions about the policyholder?s life expectancy and the company?s future investment returns.
ANNUITY CERTAIN:
An annuity that is payable for a specified period of time, without regard to the life or death of the annuitant.
ANNUITY UNITS:
A measure used in valuing a variable annuity during the time it is being paid to the annui-tant. Each unit?s value fluctuates with the performance of an investment portfolio.
APPORTIONMENT:
The dividing of a loss proportion-ately among two or more insurers that cover the same loss.
APPRAISAL:
A survey to determine a property?s insura-ble value, or the amount of a loss.
ARBITRATION:
Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.
Arson:
The deliberate setting of a fire
ASSESSABLE POLICY:
A policy subject to additional charges, or assessments, on all policyholders in the company.
ASSIGN:
To use life insurance policy benefits as collat-eral for a loan.
ASSIGNEE:
The party to whom the rights of the insured under a policy are transferred.
ASSIGNMENT:
A clause that allows the transfer of rights under a policy from one person to another, usually by means of a written document.
ASSIGNOR:
The party granting the transfer of the insured?s rights to the assignee
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BAILMENT:
A situation in which one has entrusted personal property to another.
BASIC HEALTH INSURANCE POLICY:
Hospital insur-ance, surgical insurance, and regular medical expense insurance.
BENEFICIARY:
A person named in a life insurance policy to receive the death proceeds.
BIND:
In property and liability insurance, the agent customarily is given the authority to accept offers from prospective insureds without consulting the insurer; in such cases, the agent is said to bind the insurer.
BINDER:
Temporary authorization of coverage issued prior to the actual insurance policy.
BLANKET BOND:
A fidelity bond that covers all employees of a given class and may also cover perils other than infidelity.
BLANKET COVERAGE:
Insurance coverage for more than one item of property at a single location, or two or more items of property in different locations.
BOND:
A security that obligates the issuer to pay interest at specified intervals and to repay the principal amount of the loan at maturity. In insurance, a form of suretyship. Bonds of various types guarantee a payment or a reimbursement for financial losses resulting from dishonesty, failure to perform and other acts.
BOOK OF BUSINESS:
Total amount of insurance on an insurer?s books at a particular point in time.
BROKER:
An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance. In life insurance, agents must be licensed as securities brokers/dealers to sell variable annuities, which are similar to stock market-based investments.
BURGLARY:
The unlawful taking of property from within premises, entry to which has been obtained by force, leaving visible marks of entry.
BURGLARY AND THEFT INSURANCE:
Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners policy and in a business multiple peril policy.
BUSINESS INCOME INSURANCE:
Coverage for the reduction in revenue in the event of an insured peril.
BUSINESS INTERRUPTION INSURANCE:
Commercial coverage that reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed while the premises are being restored because of physical damage from a covered peril, such as a fire. Business interruption insur-ance also may cover financial losses that may occur if civil authorities limit access to an area after a disaster and their actions prevent customers from reaching the business premises. Depending on the policy, civil authorities coverage may start after a waiting period and last for two or more weeks.
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CANCELABLE:
A health policy that can be cancelled by the insurer at any time for any reason.
CAPACITY:
The supply of insurance available to meet demand. Capacity depends on the industry?s financial ability to accept risk. For an individual insurer, the maximum amount of risk it can underwrite based on its financial condition. The adequacy of an insurer?s capital relative to its exposure to loss is an important measure of solvency.
CEDING COMPANY:
An insurer, also called a primary insurer, that passes on to other insurers some part of its risk under insurance policies it has accepted.
CESSION:
A reinsurance term meaning that portion of a risk that is passed on to reinsurers by ceding compa-nies.
CHANCE OF LOSS:
The long-term chance of occurrence or relative frequency of loss. Expressed by the ratio of the number of losses likely to occur compared to the larger number of possible losses in a given group.
CLAIMS MANAGEMENT:
The functions performed in handling loss claims
CLAIMS-MADE POLICY:
A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers? exposure to unknown future liabilities.
COLLATERAL:
Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. (Also called security.)
COLLISION COVERAGE:
Portion of an auto insurance policy that covers the damage to the policyholder?s car from a collision.
COMBINED RATIO:
Percentage of each premium rupee a property/casualty insurer spends on claims and expenses. A decrease in the combined ratio means financial results are improving; an increase means they are deteriorating. When the ratio is over 100, the insurer has an underwriting loss.
COMMISSION:
Fee paid to an agent or insurance sales-person as a percentage of the policy premium. The percentage varies widely depending on coverage, the insurer, and the marketing methods.
CONCEALMENT:
The failure of an applicant to reveal, before the insurance contract is made, a fact that is material to the risk.
CONDITIONS:
Circumstances under which an insurance contract is in force. Breach of the conditions is grounds for refusal to pay the loss.
CONSEQUENTIAL DAMAGE ENDORSEMENT:
Coverage for losses incurred as a result of the failure of an insured object on the insured?s premises.
CONSEQUENTIAL LOSSES:
Losses other than property damage that occur as a result of physical loss to a business for example, the cost of maintaining key employees to help reorganize after a fire.
CONSIDERATION:
In an insurance contract, the specified premium and an agreement to the provisions and stipulations that follow.
CONSTRUCTIVE TOTAL LOSS:
Loss occurring when property is not completely destroyed but when it would cost more to restore it than it is worth
CONTINGENT BENEFICIARY:
A person named in a life insurance contract to receive the benefits of the policy if other named beneficiaries are not living.
CONTINGENT BUSINESS INCOME INSURANCE:
Coverage for losses that result from losses to a supplier or cus-tomer on whom the firm depends.
CONTINGENT LIABILITY:
Liability of individuals, corporations, or partnerships for accidents caused by people other than employees for whose acts or omissions the corporations or partnerships are responsible.
CONTRACT:
An agreement embodying a set of promises that are enforceable by law
COST OF RISK:
The sum of (1) outlays to reduce risks, (2) the opportunity cost of activities forgone due to risk considerations, (3) expenses of strategies to finance potential losses, and (4) the cost of reimbursed losses.
COST-OF-LIVING RIDER:
An endorsement that auto-matically increases the amount of coverage by the same percentage the Consumer Price Index has risen since policy issue.
COST-TO-REPAIR BASIS:
The cost to replace property after a loss but perhaps not with like materials and labor.
COVERAGE:
Synonym for insurance.
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DECLARATION:
Part of a property or liability insurance policy that states the name and address of policy-holder, property insured, its location and description, the policy period, premiums, and supplemental information.
DEDUCTIBLE:
The amount of loss borne or paid by the policyholder. Either a specified rupee amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.
DEFERRED ANNUITY:
Benefits that begin at some specified time after the annuity is purchased.
DEGREE OF RISK:
Relative variation of actual from expected losses.
DEPENDENT LIFE:
Group term life insurance covering an employee?s dependent.
DIMINUTION OF VALUE:
The idea that a vehicle (or any other asset) loses value after it has been damaged in an accident and repaired.
DIRECT LOSS:
A loss that stems directly from an unbroken chain of events leading from an insured peril to the loss.
DISABILITY INCOME INSURANCE:
Health insurance that provides periodic payments if the insured becomes disabled as a result of illness or accident.
DISABILITY LOSS:
The inability of a person to work because of an illness or injury.
DIVERSIFICATION:
Process of spreading risk through a firm?s involvement in various businesses or through the location of its operations in different geographic areas.
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EARNED PREMIUM:
The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insur-ance company does not fully earn them until the policy period expires.
EARNINGS FORM:
A commercial property form without a 50 percent or more coinsurance coverage.
EARTHQUAKE INSURANCE:
Covers a building and its contents, but includes a large percentage deductible on each. A special policy or endorsement exists because earthquakes are not covered by standard homeowners or most business policies.
ELIMINATION PERIOD:
The period that must elapse before disability income is payable under a health insurance policy covering disability income loss.
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ENDORSEMENT:
A written form attached to an insurance policy that alters the policy?s coverage, terms, or conditions. Sometimes called a rider.
ESCROW ACCOUNT:
Funds that a lender collects to pay monthly premiums in mortgage and homeowners insurance, and sometimes to pay property taxes.
ESTOPPEL:
A legal doctrine in which a person may be required to do something or be prevented from doing something that is inconsistent with previous behaviour; may prevent an insurer from denying liability after a loss.
EXCLUSION:
A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.
EXCLUSIONS:
Restrictions for the coverage provided by an insurance policy
EXCLUSIVE AGENT:
A captive agent, or a person who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent?s company.
EXPECTED LOSS RATIO:
The ratio of losses incurred to premiums earned; anticipated when rates are first for-mulated.
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FACE AMOUNT:
In a life insurance contract, the stated sum of money to be paid to the beneficiary upon the insured?s death.
FAIR RENTAL VALUE:
In a dwelling policy, the rent the building could have earned at the time of the loss whether or not it was actually rented.
FIDELITY BOND:
A form of protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
FIDUCIARY BOND:
A type of surety bond, sometimes called a probate bond, which is required of certain fiduciaries, such as executors and trustees, that guarantees the performance of their responsibilities.
FIDUCIARY LIABILITY :
Legal responsibility of a fiduci-ary to safeguard assets of beneficiaries. A fiduciary, for example a pension fund manager, is required to manage investments held in trust in the best interest of beneficiaries. Fiduciary liability insurance covers breaches of fiduciary duty such as misstatements or misleading statements, errors and omissions.
FINANCIAL RISKS:
Risk involving credit, foreign exchange, commodity trading, and interest rate; may involve chance for gain as well as loss.
FIRE:
Combustion in which oxidation takes place so rapidly that a flame or glow is produced.
FIRE INSURANCE:
Coverage protecting property against losses caused by a fire or lightning that is usually included in homeowners or commercial multiple peril policies.
FIXED ANNUITY:
An annuity that pays the annuitant a guaranteed, fixed return every month for a fixed pre-mium. The guarantee is based on the expected return of the underlying investments of the insurance com-pany. (See Annuity)
FIXED-AMOUNT OPTION:
A life insurance option allow-ing the beneficiary to take the proceeds in the form of a fixed periodic payment.
FIXED-PERIOD OPTION:
Payment of a death benefit in equal instalments over a specified time period.
FLOATER:
Attached to a homeowners policy, a floater insures movable property, covering losses wherever they may occur. Among the items often insured with a floater are expensive jewellery, musical instruments, and expensive apparel. It provides broader coverage than a regular homeowners policy for these items.
FLOATER POLICY:
An inland marine insurance policy that covers property subject to movement from one location to another.
FLOOD:
(1) An overflow of inland or tidal waves, (2) unusual and rapid accumulation of runoff of surface waters, (3) landslides or mudslides, (4) excessive erosion along the shore of a lake or any other body of water, or (5) erosion or undermining caused by a body of water exceeding its anticipated cyclical levels.
FLOOR-OF-PROTECTION CONCEPT:
An underlying principle of social insurance specifying that the goal of social insurance is to provide only limited protection, not one?s entire need.
FRAUD:
Intentional lying or concealment by policy-holders to obtain payment of an insurance claim that would otherwise not be paid, or lying or misrepresentation by the insurance company managers, employees, agents, and brokers for financial gain.
FREE-OF-CAPTURE-AND-SEIZURE (FC&S) CLAUSE:
A clause in ocean marine insurance that excludes war as a covered peril.
FREIGHT:
Money paid for the transportation of goods. Freight insurance is a common coverage in marine insurance, purchased by the owners of transporting vessels.
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GENERAL AVERAGE CLAUSE:
A clause in ocean marine insurance that requires ship and freight interests other than the insured to respond to loses suffered by the insured interest when those losses result from voluntary, necessary, and successful sacrifice of the insured?s freight because of shipping peril.
GENERAL INSURANCE:
Another term for property insurance.
GRACE PERIOD CLAUSE:
A clause in life insurance giv-ing the insured an extra 30 days to pay a premium due before lapse takes place.
GROSS PREMIUM:
The premium charge for insurance that includes anticipated cost of losses, overhead, and profit.
GROUP INSURANCE:
A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents. Coverage occurs under a master policy issued to the employer or association.
GUARANTEED RENEWABLE:
A policy that cannot be cancelled by the insurer prior to a specified age. Premiums may be increased only for an entire class of insureds.
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HACKER INSURANCE:
A coverage that protects businesses engaged in electronic commerce from losses caused by hackers.
HAZARDS:
Conditions that introduce or increase the probability of loss stemming from the existence of a given peril.
HEDGER:
The transferor of a speculative risk via a hedging contract
HEDGING:
A transfer of risk from one party to another; similar to speculation and may be used to handle risks not subject to insurance, such as price fluctuations.
HULL INSURANCE:
Property insurance policy covering a sea-going vessel.
HUMAN LIFE VALUE:
The sum of money that when paid in instalments of both principal and interest over the individual?s remaining working life, will produce the same income the person would have earned, minus taxes and personal expenses.
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