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Resource Center
You & Your Family | Q & A Section | Glossary | Forms
Glossary
 
Look it up! Whether you want to learn about something new or explain it to a client, our glossary of insurance terms is a valuable and indispensable tool. 
From A to Z, it's all here...

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z


A

Abandonment
Relinquishing title to lost or damaged property to the insurance company in order to claim a total loss. Most insurance policies prohibit this practice.

Absolute Liability
Liability that is imposed even though no negligence or fault was committed. Usually imposed when a product or operations are hazardous or highly dangerous.

Accelerated Death Benefits
When benefits in a life insurance policy are paid prior to the death of an insured person when that person is terminally ill and may require expenses for living and medical bills.

Accelerated Endowment
In life insurance, under these policies the dividends instead of being disbursed as usual are applied to the policy and cause it to mature prior to its maturity date.

Accelerated Option
The use of accumulated dividends to pay up a life insurance contract or create an endowment.

Accident
An unforeseen fortuitous event that is definite as to time and place.

Accident and Health Insurance
A type of insurance that pays benefits in the event of disability, disease or accidental injury or death.

Accidental Death Benefit
An amount paid in a life insurance policy in the event the insured dies from causes other than natural causes or homicide.

Accidental Death and Dismemberment Insurance
A policy that provides coverage for death, dismemberment resulting from accidental means. It is often referred to a double indemnity.

Accident Insurance
A policy that covers death, dismemberment, loss of sight, loss of income and medical expenses caused by accident only, not disease.

Accident Report
Documents the time, cause, results, injuries, persons involved and other facts of an incident for insurance purpose.

Accommodation Line
Business that an insurer accepts which does not meet its underwriting criteria but is accepted for other reasons. Examples include the value of the total account, the producer or other sources of business.

Account Current
A monthly statement from insurance companies to agents showing premiums written, return premiums, commissions and net amount due to the insurance company.

Accounts Receivable Insurance
Pays for loss of records, which show how much is due the insured against loss due to the inability to collect outstanding receivables because of damage or destruction due to a covered peril.

Accrued Benefit
A participant's balance in any retirement plan that is a defined benefit pension plan and is determined under the terms of the plan expressed in the form of an annual benefit, which begins at normal retirement age.

Accrued Future Service Benefit
That portion of a retirement benefit that relates to his period of credit service after the effective date of the plan and before a specified date.

Accumulated Benefit Obligation (ABO)
Present value of benefits attributed by the pension benefit formula to employee service rendered before a specified date and based on employee service and compensation before that date.

Accumulation
A life insurance term that reflects the increase in value and the benefits available for payouts as the life of the policy progresses and premiums accumulate and earn income for the insurance company.

Accumulation Period
Refers with respect to health and medical insurance to the amount of time within each policy period that is available for the insured to meet with deductible requirement. Also could be defined as the period during which premiums are payable on a deferred annuity.

Accumulation Units
Premiums paid by the purchaser of a variable annuity are credited to the purchaser's account in the form of accumulation units. The number of units purchased depends upon the current valuation of a unit in dollars.

ACORD (Agency-Company Organization for Research and Development)
A nonprofit insurance facility that serves the insurance industry by developing and maintaining standard forms, electronic data interchange and support of agency automation.

Acquisition Costs
The insurance company's cost of acquiring new business, which includes agent's commission, marketing, inspection and examination expenses.

Act of God
An accident or event that is the result of natural causes without any human intervention, such as floods, lightning or earthquake.

Active Life Fund
A life insurance product where an unallocated fund is maintained for the active members of the fund. Fund assets are included in a deposit account. When a member retires, an annuity is then purchased for them using the resources within the fund.

Active Life Reserve
Life insurance reserves set up by an insurer to accommodate the present value of future death claims.

Actual Cash Value
An amount equal to the replacement cost of damaged property less appropriate depreciation.

Actuarial Adjustment
The revision made to reserve or premiums based on an insurer's experience and projected claims.

Add on Plans
A flexible benefits system where current benefit levels remain in effect and employees are permitted to purchase benefits they need or extended coverage.

Additional Deposit Provision
A clause used in some whole life insurance policies that allow the insured to make unscheduled premium payments.

Additional Insured
A party that is named on a policy in addition to the named insured, usually someone who has a financial interest in the insured's operations.

Additional Living Expense Insurance
Coverage for the additional costs to an insured for meals, living, quarters and other expenses incurred while their property is being repaired.

Adhesion Contract
A contract written by the insurer with no input from the insured that must adhere to the terms set forth with no negotiation. Any ambiguity in this type of contract will be construed in favor of the insured.

Adjustable Premium
A policy issued that does not guarantee the premium upon renewal. The policy may be re-rated at renewal and may by higher or lower than the previous policy.

Adjusted Community Rating
A type of rating wherein group-specific demographics are considered.

Adjuster
A person who determine and amount of loss and settles claims for an insurance company.

Adjusting
The process of investigating, measuring and settling losses with or by an insurance company.

Adjustment Bureau
An organization that adjusts losses for member insurance companies.

Administrative Manager (Employee Benefit Plans)
An organization or individual who provides administrative services to an employee benefit plan. May be salaried or a contract arrangement.

Administrative Services Only (ASO)
A type of employee benefit arrangement under which an insurance carrier will, for a fee, handle the administration of claims, benefits and other functions for a self-insured group.

Admission Certification
A review in which assessment is made of the necessity of a patient's admission to a hospital or other inpatient institution.

Admitted Company
An insurance company authorized to do business in the State.

Advance Funding
A method of funding retirement benefits whereby the employer periodically sets aside funds for each employee on a systematic basis during their working years.

Adverse Selection
Insuring risks with a higher chance of loss than assumed in the applicable insurance rate.

Advertising Injury
Damages sustained by a claimant in the course of the insured's advertising activities, which include libel, slander, violation of right of privacy, misappropriation of advertising ideas or infringement of copyright.

Affiliation of Health Providers
An association of health care providers who offer health care coverage to a specific group of patients.

Aftercare
Providing continued contact that will support and increase the progress made in a health treatment process.

Age Adjustment Clause
A provision in a life insurance policy that adjusts the death benefit payment if the age of the insured was misrepresented at the time of application.

Age Change
In life and health insurance, this is a provision that allows the insurer to determine the age of the insured and when that age changes to another year to be used in setting rates and benefits of the policy.

Age Limits
Minimum and maximum ages below and above which the insurance company will not accept or renew policies.

Agent
A licensed person or organization that represents an insurance company and is authorized to solicit, effect contracts of insurance and service policyholders on behalf of the insurer.

Aggregate Indemnity
The maximum dollar amount that may be collected for any disability, period of disability or under the policy.

Aggregate Limit
In a liability policy, it is the maximum amount payable in the policy period.

Agreed Value
An agreement made between the insurance company and the insured as to the value of an item. This value will be paid at the time of loss without depreciation or other deductions.

AIA-American Insurance Association
An association of stock property and casualty insurers that perform numerous functions such as fire and accident prevention, reviews insurance legislation, research, investigations, etc.

Aleatory Contract
A contract in which the consideration between parties to the contract is not equal. In the case of insurance contracts, the insured pays the premium and may collect nothing from the insurer if no loss occurs, or if a loss does occur, the insured may collect considerably more than the amount of the premium.

Alien Insurer
An insurance company that is domiciled in another country.

All Clause Deductible
The application of a deductible under a health care plan to all covered expenses incurred by a person as a result of the same causes with an accumulation period.

Allocated Benefits
Benefits for which the maximum amount payable for specific services as itemized in the contract.

Alternate Delivery System (ADS)
An organized, nontraditional system of financing and delivering health care services from participating providers on a prepaid basis to a voluntary enrolled population.

Alternate Treatment Benefit Provision
Health plan provision under which the amount of benefits payable gives consideration to alternate procedures, services or courses of treatment that might be performed.

Ambulatory Care Benefits
Benefits for health care services received as an outpatient.

Ambulatory Care Facility
A facility providing preventive diagnosis, emergency services, surgery or other treatment not requiring overnight confinement.

Ambulatory Delivery System
Health care system in which care if provided on an outpatient basis, not requiring a hospital stay.

Annuity
A type of life insurance policy that provides income for a certain period, such as a number of years.

Annuity Certain
A contract that provides an income for a specific number of years, regardless of life or death.

Annuity Consideration
The payment or one of regular payments an annuitant makes for an annuity.

Annuity Conversion Rate
A factor used to determine the amount of annuity payable for each dollar of a participant's contributions accumulated to the date of retirement.

Annuity Reserve Fund
A monetary sum equal to the actuarial present value of future payments to be made on account of annuities currently being paid, set aside in a reserve.

Application
A signed statement of facts made by a person seeking coverage. In life insurance, the application becomes part of the contract when the policy is issued.

Appraisal
A written estimate of the value of damaged property.

Appraisal Clause
A condition in the policy, which sets forth the procedures to be followed when an insured does not agree with the insurance company's estimate of the damaged property.

Approved Plan
A pension, deferred profit sharing or stock bonus plan that meets the requirements of the Internal Revenue Code and the applicable regulations, such approval qualifies the plan for favorable tax treatment.

Arbitration
A form of dispute resolution where an independent panel renders a decision concerning liability or amount of a loss.

Arson
The willful burning or setting fire to a structure.

Assessment
The charge levied by an insurer under an assessable policy in addition to the policy premium, in the event the insurer becomes unable to pay its total losses.

Assessment Mutual
An insurance company that is owned by its policyholders and has the right to assess the policyholders for losses and expenses.

Assignment
The transfer of one person's interest in a policy from one person to another, this requires approval of the insurance company.

Assignment of Benefits
A health insurance benefit payment option where an insured may assign policy benefits directly to the health provider.

Association Captive Insurance Company
A captive insurance company that is formed by the members of an association to provide insurance only for their own association members.

Association Group Insurance
Group insurance offering coverage to an association the same as it would be offered to the employee group of an employer.

Attained Age
An individual's age at his or her last birthday.

Attractive Nuisance
A condition at property that can attract and injure children.

Audit
Verification by accounting professionals of the books or accounts of an insured to determine the final premium when rates are based on payroll or sales of the insured.

Automatic Premium Loan
A provision in a life insurance policy to utilize cash value of the insurance policy to pay past due premiums, this prevents a lapse in coverage.

Automatic Reinstatement
After a loss has been paid, most policies provide that the amount of insurance will automatically return to its original amount.

Automobile Insurance
Coverage for risks associated with driving and owning an automobile. The policy can include liability, medical payments, uninsured motorists, underinsured motorists, collision and other than collision coverage.

Automobile Liability Insurance
Coverage that protects the insured against financial loss because of legal liability caused by an automobile accident.

Automobile Medical Payments Insurance
This option coverage pays for the medical expenses of insureds and passengers regardless of fault in the accident.

Automobile Physical Damage Insurance
Coverage to pay for loss to an insured's vehicle resulting from collision, fire, theft, vandalism and other perils.

Average
A term used for loss in ocean marine insurance.


B

Bail Bond
A bond intended to guarantee the appearance of a person in court to answer to a legal summons for personal appearance.

Bailee
A person who has custody of the property of others.

Bailees Customers Policy
A policy that provides coverage for property of customers left in the care of a bailee such as a dry cleaners or repair shop.

Bailment
An owner of property (bailor) who delivers it to another (bailee) are considered to have entered into a contract of bailment.

Balance Billing
The practice of charging full fees in excess of covered amounts and then billing a patient for the portion of the bill that the insurance company does not cover.

Barratry
An ocean marine term which means the willful and illegal sinking, casting away or damaging of a ship at sea or its cargo.

Base Rate
The manual or starting rate for a specific coverage based on a normal or standard class risk.

Basic Cause of Loss
A list of perils covered in an insurance policy which include fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicle damage, riot, civil commotion, vandalism, sprinkler leakage, sinkhole collapse and volcanic action.

Beneficial Interest
Refers to a party who does not own an insurance policy but has a financial interest in the property covered by the insurance contract.

Beneficiary
A person or entity named in a life policy to receive proceeds of that policy.

Benefit Booklet
A publication issued by the insurance company to an employee that contains a general explanation of benefits and related provisions of the health plan.

Benefit Multiplier
A percentage that is multiplied by a participant's salary to determine a monthly benefit.

Benefit Package
A list of specific benefits provided by an employee benefit plan.

Benefit Period
Period for application of deductibles, after which time deductible must be satisfied again.

Benefits
The amount paid by the insurance company to a claimant or beneficiary under the policy.

Benefits Specialist
Individual whose responsibility it is to administer the employee benefits program.

Bid Bond
A guarantee that the contractor will enter into a contract, if awarded and furnish a performance bond as required by the terms of the bond.

Binder
A temporary contract of insurance issued verbally or in written prior to the issuance of the policy.

Blanket
One limit on the policy covering several types of property.

Blanket Contract
A contract of health insurance affording benefits, such as accidental death and dismemberment that applies to a class of persons not individually identified. Commonly used for travel policy for employees.

Blanket Medical Expense
A provision in loss of income policies that entitles the insured person to collect up to a maximum limit in the policy for all hospital and medical expenses incurred without any limitations on individual types of medical expenses.

Block Policy
A policy covering all property of an insured and property of others against most perils. Examples are jeweler's block, camera and musical instrument dealers and equipment dealers.

Blue Cross/Blue Shield Associations
Independent, nonprofit, voluntary membership organizations formed for the purpose of prepaying medical care expenses for their insureds (subscribers).

Boat Owners Package Policy
A policy providing property and liability for boat owners that provides physical damage coverage to the boat and liability for injuries to third parties.

Bodily Injury Liability Insurance
A form of coverage that protects the insured in the event they are sued by a third party for bodily injury as a result of a covered occurrence.

Boat Owners Package Policy
A policy covering boats for liability, medical expenses, collision and other perils of the sea.

Boiler and Machinery Insurance
A policy covering loss to objects such as pressure devices, electrical equipment for damage to property, loss of income and liability for damage to property of others.

Bond
A three-party contract in which one party agrees to guarantee the act, performance or promise of a second party to the third party. Two common types of bonds are fidelity and surety bonds.

Broad Cause of Loss
A list of perils covered in an insurance policy which include fire, lightning, explosion, windstorm, hail, smoke, aircraft, vehicle damage, riot, civil commotion, vandalism, sprinkler leakage, sinkhole collapse and volcanic action, plus additions which include breakage of glass, falling objects, weight of ice, sleet or snow, water damage and collapse as defined in the form.

Broker
A licensed person or organization that represent the insured to the insurance company.

Buffer Layer
An amount of insurance purchased to meet the requirement of an excess carrier with respect to underlying insurance.

Builders Risk
A property insurance form that covers buildings including machinery and equipment in the course of construction.

Burglary
Breaking into or out of a property for the purpose of unlawfully taking property.

Business Auto Policy
An insurance policy covers autos and trucks of commercial insureds.

Business Continuation Insurance
When a partner dies or is disabled, remaining partners are provided with the funds to purchase that partner's interest in the firm.

Business Income Insurance
A policy covering business owners for loss of income and continuing expenses due to temporary shut down due to a covered peril.

Business owners Policy
A type of commercial package policy, which provides several coverage's for a discounted premium and is designed for small businesses.

Business Travel Accident Insurance
A policy covering an insured in the event of an accident while traveling on company business.

Buy-Sell Agreement
An agreement that binds the surviving partners to purchase the partnership interest of the first partner to die at a prearranged price set forth in the agreement and obligates the estate of the deceased partner to sell his interest to the surviving partners.


C

Cafeteria Plan
Defined by the Internal Revenue Code as a plan that permits the participant to choose between two or more benefits consisting of cash and qualified plans such as group life, medical expense, disability, and dental benefits.

Calendar Year Deductible
A deductible amount that applies to any eligible medical expenses incurred by the insured during one calendar year.

Cancellation
The termination of an insurance policy before its expiration, this can be done by the company or by the insured subject to contractual (defined in a policy) terms and/or state statutory regulations.

Capacity
The amount of insurance, which an insurance company is able to issue as a maximum as, limited by legal or corporate restrictions.

Capital Accumulation Plan
An employer-sponsored plan in which contributions are made to a participant's individual account.

Captive Agent
A licensed person who, by contract, represents only one insurance company.

Captive Insurance Company
insurance company that is a subsidiary of a non-insurance corporation. This insurer writes insurance on its parent company and its subsidiaries.

Card Program
Use of a drug benefit identification card, which entitles them to receive medication from a participating pharmacy for minimum co-pay.

Cargo Insurance
Coverage that protects shippers for damage to goods in transit.

Career Average Pay Formula/Career Average Plan
A benefit formula that bases benefits on the employee's compensation over the entire period of service with the employer.

Carve Out
A program separate from the primary group health plan designed to provide a specialized type of care, such as a mental health carve-out.

Case Management
A process that focuses on coordinating a number of services needed by clients.

Cash Surrender Value
The amount of cash accumulated in a life insurance policy and payable upon the voluntary surrender of that policy.

Casualty Insurance
A category of insurance that includes legal liability, workers compensation, automobile and crime coverage's.

Catastrophe
A peril, which causes an extraordinary amount of damage such as a hurricane, tornado, earthquake or flood.

Cause of loss form
A policy form, which is attached to commercial property insurance that indicate the perils covered. The causes of loss forms include basic, broad, special and earthquake.

Cede
The transfer of risk exposure from one entity to another via a risk financing or transfer mechanism that may include the purchase of insurance or a contractual agreement.

Certificate Holder
1) The person or entity who has been designated on a certificate of insurance that provides proof of an insured's insurance coverage's. 2) A person who represents the family unit covered by a dental benefits program. Other family members are referred to as dependents.

Certificate of Authority
A certificate issued by the Department of Insurance to an Insurance Company.

Certificate of Insurance
A form that the agent completes which lists the coverage the insured has purchased and provides proof of coverage to others as needed by the insured.

Certified Employee Benefit Specialist (CEBS)
An individual who completed ten college level courses and examinations in the areas of design and operation of employee benefit plans.

Certified Financial Planner (CFP)
A professional who has studied extensive aspects of financial planning and passed a series of exams administered by the College of Financial Planning.

Certified Insurance Counselor (CIC)
A professional who has studied extensive aspects of insurance including property, casualty, life and health insurance and has passed a series of exams administered by the Society of Certified Insurance Counselors.

Certified Length of Stay
The period of time approved as necessary for a patient to receive inpatient care in a hospital.

Chartered Financial Consultant (ChFC)
A professional who has studied financial planning, investments, life and health insurance and has passed a series of exams administered by the American College.

Chartered Life Underwriter (CLU)
A professional who has studied extensive aspects of life insurance and has passed a series of exams administered by the American College.

Chartered Property and Casualty Underwriter (CPCU)
A professional who has studied extensive aspects of property and casualty insurance and passed a series of exams administered by the American Institute for Property and Liability Underwriters.

Civil Commotion
An uprising of a group of people causing injury or damage.

Claim
A notice to an insurance company that a loss has occurred, which may be covered under the terms of the insurance policy.

Claim Administrator
An entity that manages the claim process for, or on the behalf of, an insurer or a self-insured. Activities may include determination of coverage, adjusting, review, and on going tracking and reporting.

Claimant
The first or third party, any person who is presenting a claim, which may be covered under the terms of the policy.

Claims-made policy
A liability policy under which coverage applies at the time the claim is presented rather than at the time of occurrence.

Claims Review
In health care prepayment, the routine examination by a carrier of the claim submitted to it for payment of benefits.

Class Rating
A rate making method in which types of risks are grouped rates calculated accordingly.

Classification
The systematic arranging of properties, persons or business operations into groups or categories.

Co-insurance
A condition in the policy, which states that the insured must carry at least, a percentage of the replacement cost of the property or they are penalized at the time of loss and forced to pay a percentage of the claim.

Collision Insurance
Provides coverage for damage to the policyholder's vehicle caused by collision with another object or upset to the vehicle.

Combination Methods in Health Care
Use of various types of plans such as self-funded for basic plan and insured for supplemental major medical coverage.

Combined Ratio
A ratio used by insurance companies to determine their profitability; it is usually a ratio of losses and expenses to earned premiums.

Commercial General Liability Policy
A commercial policy which provides liability coverage to business owners including bodily injury, property damage, personal injury, advertising injury and medical payments to others as a result of the insured's negligence.

Commercial Package Policy
A commercial policy that can include several policies such as property, liability, crime and auto at a discounted premium.

Commission
A percentage of the premium paid by the insurance company to the agent or broker as a fee for writing and servicing insurance policies.

Commissioner
An officer who is elected or appointed by the State to oversee and administer matters of insurance.

Competitive Medical Plans (CMP)
Health care plans that deliver comprehensive, coordinated health care services to voluntary enrolled members on a prepaid basis.

Composite Rate
A group premium rate that does not differentiate between single and family policies.

Comprehensive Major Medical Coverage
Provides protection similar to a combined basic and major medical plan. Features usually include a low deductible, less than 100% reimbursement and a high maximum benefit.

Comprehensive Medical Care
A package of health care services and benefits including prevention, early detection and early treatment of conditions.

Comprehensive Medical Plan
A plan that combines basic and major medical coverage in one plan.

Comprehensive Personal Liability Insurance
A policy, which provides coverage for, an insured for bodily injury and property damage to a third party.

Compulsory Insurance
Mandatory coverage required by some States in certain circumstances such as in workers compensation and automobile insurance.

Computer Fraud Coverage Form
A crime policy, which protects insureds against the loss of money or other property when theft occurs via the computer.

Concealment
Failure to disclose a material fact before or after a loss, which may void an insurance policy.

Concurrent Insurance
Where two or more policies cover the same risk in the same manner with the same conditions and policy effective dates.

Conditions
The part of the policy which sets forth the duties of the insured including duties after a loss, loss settlement, mortgagee rights, appraisal and salvage.

Condominium Unit Owners Form
An insurance policy designed for the owner of condominiums, which includes property and liability coverage.

Consequential Loss
A financial loss, which results from direct damage to property such as loss of income and additional living expenses.

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
A federal act which makes provision for the continuation of an employee's and dependent's health insurance coverage should the employee terminate his or her employment.

Contingent Beneficiary
Person named to receive benefits in a policy if the primary beneficiary is deceased.

Contingent Liability
Legal liability that may be incurred by an insured as a result of negligence on the part of independent persons who perform work for the insured.

Continuation of Benefits
Under the laws of COBRA, employers have the obligation to make available to employees and dependents some continued benefit coverage after the employment relationship has been terminated. Employees must pay for this coverage.

Contractual Liability
A legal obligation assumed under a contract by the insured.

Contribution
The transfer of funds by either an employer or an employee to an employee retirement plan.

Contribution Carry-Over
This is created whenever annual contributions exceed the maximum allowable deductions. This carry-over can be deducted in future years, in which payments are less than the maximum deduction allowed by the Internal Revenue Service.

Conversion Privilege
A provision included in many life and health insurance policies whereby an insured is permitted to change from one type of policy to another or increase limits without taking physical examinations or prove insurability.

Coordination of Benefits
in a health insurance policy, insurance companies to avoid duplicate payment for losses insured under more than one policy use this provision.

Co-payment
A flat, preset fee paid by an insured for office visits, drugs and other medical services as a member of an HMO or preferred provider.

Corridor Deductible
Once a major medical policy has paid the full stated amount of limits to an insured, if additional expenses are to be incurred, this deductible is the amount that must be paid by the insured before additional coverage is available.

Court Bonds
A variety of bonds that may be required in lawsuits or other court proceedings.

Coverage Trigger
The event, which determines when coverage of a liability policy applies such as an "occurrence" or "claims made".

Coverage
The protection provided under a contract of insurance.

Credit Health Insurance
A form of health insurance that provides payments to creditors in case of disablement of debtors with respect to amount owed on installment loans.

Credit Life Insurance
A form of life insurance that provides payments to creditors in the case of death of debtors with respect to amount owed on the balance of the loan.

Crime Coverage
A variety of related coverage's that protect against losses of money, securities and property due to employee dishonesty, forgery, theft, burglary, robbery, kidnap, extortion and fraud.

Crop-hail Insurance
Insurance against hail damage to growing crops. Often includes other perils such as fire, windstorm, lightning, drought, frost, excessive heat, snow, sleet, etc.


D

Damages
estimated compensation for injuries to a claimant.

Death Benefit
the sum payable to beneficiaries as a result of death of a policyholder.

Declaration Page
The first page of an insurance policy which gives information concerning the policy such as name and address of the insured, amount of coverage, policy period and risk covered.

Declination
an insurance company's refusal to offer a policy for a perspective insured.

Decreasing Term Life Insurance
A type of life insurance policy in which the death benefit starts out a the full stated amount, but declines on a set scale throughout the life of the policy, finally reaching zero at the end of the policy term.

Deductible
The amount stated in the policy that the insured must pay in the event of a covered loss.

Deferred Annuity
An annuity contract providing for the initiation of payments at a designated future date or age.

Deferred Life Insurance
A life insurance policy designed to pay a higher death benefit after a certain period of time to allow the benefits to become vested.

Deferred Premium
A premium payment method, which allows the insured to pay the premium on an installment basis rather than the entire premium up front.

Defined Benefit Plan
A form of pension plan, which requires contributions from both the employer and employee. The benefit is known while the amount of contributions varies.

Defined Contribution Plan
A form of pension plan, which requires contributions from the employer and employee. Benefit varies according to factors such as participant's income, age, etc.

Delayed Payment Clause
A clause in a life insurance policy, which allows the insurer to defer the payment of benefits to the beneficiary for a specified period of time after death of the insured under certain conditions.

Dental Insurance
A type of health insurance coverage for specified dental services.

Dependent
Usually the spouse and children of a covered individual, as defined in a contract.

Deposit Administration Plan
A group annuity plan in which members of the plan or their employers make scheduled deposits or payments to the plan.

Deposit Premium
A tentative charge made at the start of a policy, which will be adjusted when the actual earned premium has later been determined.

Depositors Forgery Bond
A bond, which insures against losses from forgery or alteration of outgoing negotiable instruments only.

Depository Bond
A bond for use by financial institutions to guarantee the safety of funds made by depositors and their availability for withdrawal as indicated in the terms of the deposit.

Depreciation
The reduction in value of property caused by deterioration or obsolescence.

Determination Period
The 12 month period used for calculating the premium to be charged for continuation of coverage under the rules of COBRA.

Diagnostic Related Group (DRG)
A medical claims reimbursement system, developed by Medicare for hospitals, where predetermined payment amounts have been set for certain listed procedures.

Difference in Conditions Insurance
A property policy that covers perils not included in other policies such as flood and earthquake.

Direct Billing
A system for the collection of premiums, the insurance company sends a notice of the premium due directly to the insured in lieu of sending it to the agent.

Direct Damage
Causes of loss that produces property damages.

Direct Loss
Damage to property, which causes a financial loss to the insured.

Direct Writer
An insurance company, which uses employees to sell direct to the public, they do not appoint agents.

Directors and Officers Liability Insurance
A policy written to cover corporate officers against damages from claims resulting from the negligent or wrongful acts in the course of their duties.

Disability
Inability to work due to injury or illness.

Disability Income Insurance
A type of health insurance that provides periodic payments to an insured while they are unable to work due to injury or illness.

Disability Pension
An annuity that is payable in the event that an employee becomes disabled before the age of usual retirement.

Disbursed Self-Funded Plan
A type of self-insured plan where employees' claims are paid directly out of the company's cash flow as an expense and are therefore tax deductible when paid, not incurred.

Discovery Period
A period of time, after the termination of a policy, during which the insured may discover a claim, which would be covered under the policy even though it was reported after the coverage period. This clause is usually found in claims-made coverage's and crime insurance policies.

Disenrollment
The termination of an employee's health insurance coverage.

Disinsured
Unemployed workers no longer covered by a group insurance plan.

Disintermediation
The process of taking money through loans and surrendered policies from a financial intermediary in an attempt to earn a higher yield elsewhere.

Dismemberment
The loss or loss of use of a limb or loss of sight from an accident.

Dividend
An amount of money paid to the insured as a result of profits earned by the insurance company.

Domestic Insurer
an insurance company domiciled in the State where it is incorporated.

Double Indemnity
A provision where certain benefits are doubled when an accident is due to specified circumstances.

Draft
A substitute for a check, used by insurance companies to pay claims.

Dram Shop Laws
Laws, which pertain to owners and operators of businesses that serve or provide alcoholic beverages concerning liability for injury or damage caused by or to an intoxicated driver.

Dread Disease Policy
A limited forms of health insurance that pays for treatment of specific diseases such as cancer.

Drive Other Car Coverage
A provision in a business auto policy designed to protect the insured when driving cars other than the vehicles described in the policy.

Dwelling Property Form 1
A personal lines property insurance policy that insures a dwelling, other structures, personal property and fair rental value for 11 named perils.

Dwelling Property Form 2
A personal lines property insurance policy that insures a dwelling, other structures, personal property, fair rental value and additional living expense for 16 named perils.

Dwelling Property Form 3
A personal lines property insurance policy that insures a dwelling, other structures, personal property, fair rental value and additional living expense for direct risks of physical loss on the dwelling and 16 named perils on personal property.


E

Earned Premium
That portion of the premium, which the company is entitled to for coverage provided during the policy period.

Easement
The privilege or right of an owner of property to use non-owned property usually adjoining the owned property.

Economic Loss
actual out of pocket expenses incurred by an insured as a result of a loss such as medical expenses, loss of income, transportation expenses and property damage.

Effective Date
The date in the policy on which coverage begins.

Eligibility Date
The date an individual and/or dependents become eligible for benefits under their employee benefit plan.

Eligibility Period
A certain period of time, usually 31 days when potential members of a group policy can enroll without evidence of insurability for life or health insurance.

Eligibility Requirements
Conditions that an employee must meet to participate in a plan or obtain a benefit.

Elimination Period
Also known as a waiting period before benefits are payable in a disability insurance policy.

Employee Assistance Program (EAP)
A program designed to help employees whose job performance is being adversely affected by personal problems such as alcoholism, hypertension, etc.

Employee Benefit Plan
A plan established by an employer to provide employees with certain benefits such as pension, profit-sharing, sickness, etc.

Employee Dishonesty Coverage Form
A crime policy, which protects insureds from dishonest acts of employees such as theft of money or property.

Employers Liability Insurance
Coverage, which provides protection for, an employer, which defends the insured in the event of lawsuits, brought by employees or their families.

Endorsement
An amendment to the policy issued by the insurance company.

Endowment Insurance
Payable to the insured if they are living as of the maturity date stated in the policy or to a beneficiary if the insured dies prior to that date.

Enrollee
A person eligible as a subscriber or a dependent in accordance with an employee benefit plan.

Errors and Omissions Insurance
A liability policy that defends the insured in the event of lawsuits brought by their clients due to alleged negligence of the insured.

Evidence of Insurability
A statement of a person's physical condition, occupation or other factor affecting his or her acceptance for insurance.

Excess Liability Insurance
A liability policy that provides extra coverage above other liability policies.

Exclusions
Certain causes and conditions listed in the policy that are not covered.

Experience Rating
A method of rating, which takes into consideration the loss history of a particular risk and applies a credit or debit to future rates accordingly.

Expiration Date
The date on which a policy ends.

Exposure
Chance of loss and measure of rating units or premium basis of a risk.

Extended Coverage Insurance
An endorsement added to a property insurance policy which includes the perils of windstorm, civil commotion, smoke, hail, aircraft, vehicles, explosion and riot.

Extended Health Insurance
Coverage for retired persons to cover the surplus after retirement health insurance and Medicare benefits are exhausted.

Extended Period of Indemnity
Additional income protection available in a business income policy that covers the insured after their property is repaired and before business is back to where is was prior to loss.

Extended Reporting Period
An additional period of time for claims to be reported after claims made liability policy expires.

Extended Term Life Insurance
An option available in some whole life insurance policies allowing the insured to use the cash value of the policy to purchase additional term life insurance.

Extra Expense Insurance
A business insurance policy or an endorsement of a business insurance policy that provides coverage for expenses incurred by the insured caused by loss to property.


F

Face Amount
The dollar amount listed in a life insurance policy that is paid to the beneficiary when the insured dies.

Facultative Reinsurance
Reinsurance, which is purchased on an item by item basis.

FAIR Plan
A State program designed to provide "fair access to insurance requirements" for property owners who have difficulty purchasing fire insurance in certain areas.

Fair Rental Value
A coverage included in dwelling policy, which provides the insured reimbursement for the loss of rents due to a covered property.

Family Deductible
A deductible in a health insurance policy that is satisfied by the combined expenses of all covered family members.

Fidelity Bond
A bond, which reimburses an employer for losses resulting from dishonest acts of employees.

Fiduciary
A person who occupies of position of trust, such as holding money or property of others.

Fiduciary Liability Insurance
A policy, which provides protection for those who administer pension or other employee benefit funds, coverage is provided for loss due to errors or omissions by the administrator.

Financial Responsibility Law
A statute, which requires a motorist to provide evidence of the ability to pay for negligence in causing losses to others from the operation of a motor vehicle.

Fire Insurance
A policy covering property damaged by fire, lightning and removal of property from the premises to avoid further loss.

Fire Legal Liability Insurance
Provides coverage for an insured that damages premises by fire for property they rent or occupy.

First Dollar Insurance
Coverage that pays the entire covered amount without use of a deductible.

First Named Insured
In Commercial insurance, the party named first in the declarations. This person has significant duties and obligations in the contract.

Fixed Annuity
A life insurance annuity providing guaranteed payments for the term of the annuity.

Fixed Benefit
A life insurance or annuity benefit paid on a regular basis that does not vary.

Flat Cancellation
The cancellation of a policy as of the time it was effective with the entire premium refunded to the policyholder.

Flat Schedule
A schedule in group insurance under which everyone is insured for the same benefits regardless of salary or position.

Flexible Benefit Plan
Offered by employers to employees that allow the employee some choices in the benefits, coverage's and limits selected.

Flexible Premium Life Insurance
A variable life insurance where the insured has the right to choose the amount and time of premium payments.

Floater
An inland marine policy that covers property at various locations.

Floor Plan Insurance
Coverage purchased by a financial institution to protect their interest alone or its joint interest with the merchant under a special form.

Flood Insurance
A policy, which provides coverage in the event property is damaged by surface waters, which cause flooding conditions.

Following Form Excess Liability Insurance
A policy, which extends an additional limit of liability insurance above the primary policy providing exactly the same coverage.

Foreign Insurance Company
An insurance company doing business in one State but incorporated in another State.

Forgery or Alteration Coverage Form
A commercial crime insurance policy that provides coverage for losses resulting from forgery or alteration of checks, drafts and similar instruments.

Fortuitous
Accidental, unexpected and unforeseen.

Fraternal Insurance
A cooperative type of life or disability insurance that some social organizations offer to their members.

Free Choice
A provision that permits the insured to choose any licensed health provider.

Functional Replacement Cost
An endorsement for property policies, which provides for replacement of the operation or function portion of a building or personal property.


G

Gap Coverage
An amount of insurance purchased to satisfy the requirement of an excess carrier with respect to underlying insurance.

Garage Insurance Policy
Provides liability coverage for service stations and car dealerships for premises, operations and automobiles.

General Average
In ocean marine insurance, a loss that is common to all interests such as owners of the hull and cargo.

Good Driver Discount
Credits or discounts given by some auto insurance companies for drivers with favorable driving records.

Good Student Discount
Credits or discounts given by some auto insurance companies for drivers with high scholastic achievement.

Grace Period
A period after the premium due date, during which an overdue premium may be paid without penalty and with no lapse in coverage.

Graded Death Benefits
A provision in life insurance contracts for death benefits that are less than the face amount of the policy in the early years of the contract and increases with the passage of time.

Group Annuity Plan
A pension program underwritten and administered by an insurance company.

Group Contract
A life and health insurance contract made with an employer or others that covers a group of employees or other members of a group.

Group Insurance
Insuring a number of persons under a single master contract.

Guaranteed Benefit Policy
An insurance policy that provides benefits guaranteed by the insurer.

Guaranteed Insurability
A provision in a life or health insurance policy, which guarantees the insured the right and ability to increase or purchase additional coverage without proving insurability.

Guaranteed Renewable Contract
A policy where the insured has the right to continue in force by timely payment of premiums to a specified age, during which time the insurer has no right to make any change in provision to the policy, but may make changes in premium rates by policyholder classifications.

Guaranty Fund
A State fund created to provide funds to pay claims of persons who were insured with a company, which becomes insolvent.


H

Hazard
A condition, which increases the possibility of loss.

Health Insurance
A policy that pays specified sums for medical expenses or treatments.

Health Maintenance Organization (HMO)
A prepaid medical group practice plan that provides a predetermined medical care benefit package.

Hold Harmless Insurance
A contractual agreement in which one party agrees to assume certain liability which otherwise would be borne by the other party.

Homeowners Insurance
A personal lines package policy that provides coverage for the insureds dwelling, other structures, personal property, and additional living expenses and provides liability for the premises and insureds.

Hospital Benefit Plan
A plan that makes cash payments or reimburses employees for hospital charges up to a certain amount.

Hospital Expense Insurance
Health Insurance that protects the insured against the cost of hospital care resulting from illness or injury of the insured person.

Hospital Indemnity Policy
A form of health insurance that provides a specified daily, weekly or monthly payment during hospital confinement.

Hull
The ship, which is covered in an ocean marine insurance policy. It is also the plane in an aviation policy.

Hull Insurance
Provides financial protection to the insured in the event that an insured watercraft is damaged.


I

Immediate Annuity
A type of annuity policy that begins making benefit payments as of the last premium payment.

Impaired Property
Property, which is not damaged but cannot be used due to defective parts.

Improvements and Betterment's
Additions to buildings made by tenants enhancing the value of real estate.

Incontestable Clause
A clause in many life and health insurance policies that sets a time period during which the insurer has to investigate and determine any grounds for voiding or contesting coverage because facts provided in the application.

Incurred But Not Reported (IBNR)
The liability for future payments on losses which have already occurred by have not yet been reported to the insurance company and/or losses that have been reported, but have not yet developed to their "ultimate" incurred.

Indemnify
To restore a person to the same position they were in prior to the loss.

Independent Agent
A licensed person who represents several insurance companies on a commission basis and who owns the expiration records of their customers.

Indirect Loss
A financial loss, which results from direct damage to property such as loss of income and additional living expenses.

Individual Retirement Account (IRA)
A retirement savings program for individuals in which yearly tax deductible contributions up to a limit specified by tax laws can be made.

Inflation Guard Endorsement
An endorsement added to property insurance policies, which increases the amount of insurance by a certain percentage, which is listed on the policy each year.

Inherent Vice
The characteristics of property, which cause deterioration or damage within that property.

Inland Marine Insurance
A category of insurance, which provides coverage for personal property, imported, exported as well as instrumentality's of transportation and communication and mobile property.

Inspection
A physical examination of a property to determine information important to the insurance company such as value, condition and hazards.

Insurable Interest
A financial interest in property in the event of loss to the property, one would suffer a financial loss.

Insurance
A social device for the transfer of risk from individuals to the insurance company.

Insurance Commissioner
the top insurance regulatory official in a State.

Insurance Company
An organization chartered in a State to operate as an insurer in various types of insurance such as property, casualty, life and health.

Insurance Policy
A written contract between the insured and the insurer detailing the coverage that is provided, applicable exclusions, limitations, conditions in the event of loss, the premium and other details pertinent to the contract.

Insurance Services Office (ISO)
An organization, which files rates and policy, forms on behalf of member insurance companies.

Insured
The person or organization to be protected by an insurance policy.

Insurer
The insurance company or other organization that is providing insurance coverage to policyholders.

Insuring Agreement
The part of the insurance policy that details the coverage provided.

Irrevocable Beneficiary
A beneficiary that cannot be changed without their consent.

Intermediary
A knowledgeable benefits professional that assists plan sponsors in designing, purchasing and administering health insurance programs.


J

Jacket
The outside covering of an insurance policy, it provides information such as phone numbers to call in the event of loss and may contain many of the basic coverage provisions.

Jettison
In ocean marine insurance, it is the voluntary throwing overboard of part of the cargo for the purpose of saving life or property.

Jewelers Block Insurance
A policy covering the property of a jeweler and their customers.

Jewelry Floater
An inland marine policy insuring jewelry.

Joint Insured
One of the insureds in a type of life insurance policy covering more than one insured.

Joint Life and Survivor Annuity
A combination type of life insurance policy that converts to annuity.

Joint Life and Survivor Insurance
A type of life insurance policy covering more than one insured, the death benefit is paid when either one of the insureds dies.

Joint and Several Liability
A type of liability that occurs when more than one party is involved in a contract and where both are liable jointly and individually.

Joint Underwriting Associations
An association of insurance companies formed by the State to provide coverage to those who are unable to obtain a policy in the voluntary market.

Jones Act
A federal law, which provides legal protection to maritime employees who are not covered, by State workers compensation laws in the event of work related injury.

Judgment Rating
A method used by underwriters to decide the rates for a particular risk without use of standard or class rates.

Judicial Bond
A type of bond often requested by courts to guarantee performance by a party involved in court proceedings.

Juvenile Insurance
Life insurance policies written for children under 16 years of age.


K

Keogh Plan
A retirement plan for self-employed persons and their employees in which yearly tax deductible contributions can be made up to a limit specified by the Internal Revenue Code.

Key Employee Insurance
Protection of a business against financial loss caused by the death or disability of a vital member of the firm.


L

Labor and Material Bond
A bond given by a contractor to guarantee payment to laborers and suppliers used in the work performed under the contract.

Lapse
Termination of an insurance policy without reinstatement.

Laser Endorsement
An amendment to the Commercial General Liability policy, which excludes certain products or activities of the insured.

Law of Large Numbers
A mathematical concept that states that the greater the number of exposures, the more predictable the outcome becomes.

Lay Up Warranty
A provision in a policy insuring a vessel where the policyholder agrees that the vessel will not be in use for a period of time.

Layering
The practice of purchasing policies to cover limits in layers when risks have high limits or exposures.

Leasehold Insurance
Protection for the insured's interest in a favorable lease.

Legal Liability
Imposed by law rather than by contract or agreement usually involves negligence.

Level Death Benefit Option
A life insurance policy that allows an option in which the beneficiary may choose either to receive the face amount of the policy at the time of death of the insured or a percentage of the total value, whichever is greater.

Level Premium Life Insurance
A life insurance policy where the premium remains the same throughout the term of the policy.

Level Term Life Insurance
A term life insurance policy whose face value does not change throughout the term of the policy.

Liability Insurance
A risk financing mechanism that provides protection for an insured that is accused of "wrongdoing" by a third claimant.

Liability Limits
The policy limits on the face of the policy, which is the maximum amount payable in the event of a loss.

Liberalization Clause
A provision in some insurance property and casualty policies that states that if the insurance company, within a specified period of time, offers a broadened version of the current policy for no additional premium, the insured is given the benefit of increased coverage.

License
A certificate of authority granted by the State to insurance companies, agents, brokers and loss adjusters as a permit to engage in the insurance business within the State.

License and Permit Bond
A type of performance bond often required by municipalities to indemnify them against loss from breach of regulation or ordinance.

Life Annuity
A series of payment that continue throughout the remaining lifetime of the annuitant.

Life Expectancy
The average number of years that a person of a given age is expected to live.

Life Income Option
A benefit payout option available in some life insurance policies where the beneficiary is able to have the benefits converted into an annuity based upon life expectancy and payable as long as the beneficiary is alive.

Life Income with Period Certain Option
A benefit payout option available in some life insurance policies where the beneficiary is able to have the benefits converted into an annuity based upon life expectancy and for a set period of time whether or not the beneficiary is alive.

Life Insurance
A policy that promises to pay at the death of the insured or at another determined time, if earlier.

Life Insurance Trust
A life insurance policy that has a trust named as the beneficiary instead of an individual.

Life Maintenance Contracts
Specially designed life, health and disability insurance policies where conditions are set in the policy that the insured maintain a specified type of lifestyle in order to collect coverage.

Limited Health Service Plan
A health insurance plan that provides only specific types of services or areas of medical specialty such as mental illness.

Limited Life Insurance Policy
A life insurance policy that provides benefits only if the insured dies of a specific type of illness, injury or disease, such as cancer.

Limited-Payment Life Insurance
A type of life insurance policy for which the insured pays a premium during a limited number of years or specified period of time.

Limited Risk Health Insurance Policy
A limited type of health insurance that usually has low limits and limited benefits such as Medicare supplements.

Line
The class of business to be written such as property, casualty, life or health.

Liquor Liability Insurance
An insurance policy that covers legal liability of dram shop, liquor control or alcoholic beverage laws.

Livestock Insurance
A policy covering horses and other cattle against injury or death.

Lloyd's of London
A collection of individuals who assume policy obligations at their own risk.

Long-tail
A term referring to the lengthy period of time between an occurrence of an event and the date it is reported to the insurance company.

Loss
An occurrence, which is reported to the insurance company and may result in payment to the insured or other claimant.

Loss Assessment Coverage
A coverage, which provides a condominium unit owner with protection in the event they are assessed by the condominium association for injury or damage not covered by association insurance.

Loss Constant
A flat charge added to the premium of workers compensation risks.

Loss Control
Steps and procedures made by insureds to reduce the frequency or severity of claims.

Loss Experience
The loss history for an account, line of business or book of business.

Loss Frequency
The calculation of how often a type of loss occurs to an account, a line of business or a book of business within a given period of time.

Loss of Income Benefit
A benefit in health, accident or disability insurance policies to provide for loss of the insured's wages or income while ill, injured or disabled.

Loss Payable Clause
An amendment to a policy listing a bank or other lien holder for the purpose of protecting their interest in the event of a loss. All first party claims will be made payable to the insured and the loss payee.

Loss Ratio
The amount of money paid for losses divided by the premiums paid to the insurance company, it is used in determining profitability of the company.

Loss Reserve
An estimate, set by adjuster, of the amount an insurer expects to pay for reported claims.

Lost Policy Release
An agreement signed by the policyholder to cancel an insurance policy.


M

Major Medical Insurance
A policy designed to reimburse the insured for excess medical expenses in and out of the hospital.

Malicious Mischief
Intentional and willful vandalism and destruction of property.

Malpractice Insurance
A policy covering the improper actions or failure to exercise proper care by a medical professional or attorney.

Managed Care
A type of insurance protection or plan that manages the services provided to an insured or member by placing limits on the number and type of services covered.

Managing General Agent
A licensed agent who represents an insurance company and is authorized to accept business from other licensed agents on behalf of the company.

Manual Rate
Standard rates used by insurance companies for common risks.

Manuscript Policy
A policy written by an insurance company for one risk, not a standard contract.

Marine Insurance
One of the major divisions of insurance primarily written for maritime risks and property in transit.

Master Policy
An insurance policy, used in group insurance that covers a group of persons to whom certificates of insurance are issued as evidence of individual coverage under the policy.

Material Fact
Any information, which influences an insurance company underwriter to accept or reject an application for insurance.

Material Misrepresentation
A false statement of an important statement on an application.

McCarran-Ferguson Act
A law passed by Congress that granted authority to the States to continue to tax and regulate insurance.

Medicaid
Provided by the U.S. Federal Government to pay for medical care for the needy.

Medical Expense Insurance
Provides for payment of medical, surgical and hospital expenses.

Medical Payments Insurance
Pays the cost of medical care to an injured eligible party regardless of fault, general included in general and automobile liability policies.

Medicare
The U.S. Federal Government plan for paying certain hospital and medical expenses for those who qualify, primarily those over 65 years of age.

Medicare Supplement Policy
A voluntary private insurance plan available to Medicare eligibles to cover the costs of deductibles, coinsurance and other medical services not covered by Medicare.

Merit Rating
A system of rating in which the experience of the insured is a factor in determining the rate.

Minimum Premium
The lowest flat or earned policy charge for which a policy is issued.

Minimum Premium Plan (MPP)
This is an arrangement where the employer and the insurance company or service plan agree that the employer will be responsible for paying all claims up to an aggregate level with the carrier responsible for the excess.

Misrepresentation
A false, incorrect, improper or incomplete statement of a material fact.

Mobile Home Insurance
A policy designed to meet the needs of mobile home owners that covers the home, personal property and personal liability when the home is used as a residence.

Monoline Policy
A policy covering only one type of policy.

Monopolistic State Fund
A State plan that writes all of the workers compensation insurance in that State.

Moral Hazard
A criminal mental attitude that contributes to a loss.

Morale Hazard
A lax mental attitude that contributes to a loss.

Morbidity Table
Depicts the average number of illnesses amongst a large group of persons.

Mortality
The number of deaths resulting from each specific type of illness or disease.

Mortality Table
Depicts how many members of a group, starting at a certain age, will be alive at each succeeding age.

Mortgage Clause
A condition in the policy that affords the financial institution or individual listed as mortgagee certain rights.

Multiple Employer Trust (MET)
Self-funded or insured corporate group benefit plan that covers medical, dental, pensions for mostly small employers.

Mutual Insurance Company
An insurance company owned by its policyholders.


N

Named Insured
A person designated in the insurance policy as the insured.

Named Perils
A policy, which specifies the exact causes of loss covered in the policy.

National Association of Insurance Commissioners (NAIC)
An organization of State officials having authority to regulate insurance.

Nationwide Marine Definition
Established by the NAIC in 1953, which defines those subjects, which should be considered as marine insurance for regulatory purposes.

Negligence
The failure of a person to act in a reasonable and prudent manner.

Net Cash Value
The amount that will be paid to the insured or beneficiary at the time of the insured's death or surrender of the policy.

Net Premium
The gross premium less any return premium or dividend. Also described as premium less commission.

No-Fault Automobile Insurance
Coverage designed to compensate victims for medical claims resulting from automobile accidents without regard to fault.

Non-admitted Insurance Company
An insurance company, which is permitted to do business in a State but is not licensed in that State.

Non-Cancelable Guaranteed Renewable Policy
A provision in some policies that neither the policyholder nor the insurance company may terminate the contract during its term nor make changes to the provisions of the policy.

Noncontributory Provision
A term applied to employee benefit plans in which the employer bears the full cost of the benefits for the employees.

Noncurrent
The condition existing when two or more policies do not cover identically.

Nonforfeiture Benefit
A benefit to a life insurance policyholder, which provides the amount of money or paid-up insurance from a life insurance policy to its owner when terminated by that person before the policy, matures.

Nonoccupational Policy
A contract that insures a person against off-the-job accident or sickness.

Non-owned Automobile Liability Insurance
Provides coverage to an insured in the event they are held liable for the acts of others driving on behalf of the insured. It can also provide coverage for the insured driving a vehicle not owned by them.

Nonparticipating Insurance
A policy, which does not share in policyholder dividends declared by the company.

Non-renewal
When an insurer chooses not to offer renewal coverage on a policy for causes such as higher losses, failure to comply with recommendations, etc.

Nonresident Agent
Insurance agents must be licensed in each State where they write business, when an agent is domiciled in one State, but writes business in another, the agent is considered a nonresident in all States other than the State they are domiciled.


O

Obligee
The party to whom the surety is obligated in a bond.

Obligor
The party who is bound by the obligation covered by a bond.

Occupancy
The use of an insured building.

Occurrence
A fortuitous event happening at a specific period of time and an incident, which occurs over a period of time.

Ocean Marine Insurance
Coverage for maritime exposures such as vessels, cargo and passengers.

Officers and Directors Liability Insurance
Protects officers and directors of a corporation against damages from claims resulting from negligent or wrongful acts in the course of their duties.

Omnibus Clause
A part of an auto or yacht liability policy, which extends coverage to persons or organizations other than, the named insured.

Open Enrollment
A period of time during which new subscribers may elect to enroll in a health insurance plan or prepaid group practice.

Open Perils
A term used for policies that provide coverage for perils that are not specified in the policy, but are covered unless they are excluded specifically in the contract.

Optional Life Insurance Settlement Modes
A life insurance concept that applies to those policies which offer the insured or beneficiary a selection of the methods to be used for the payment of benefits.

Optionally Renewable Contract
A group health contract that gives the insurance company the right to determine if the contract is to be renewed or terminated upon each renewal period.

Ordinance or Law Coverage
A property endorsement that provides coverage to pay for renovations to buildings required by State or local ordinances after a covered loss.

Ordinary Life Insurance
A form of whole life insurance with premiums payable on an annual, semiannual, quarterly or monthly basis to the death of the insured.

Ordinary Life Pension Trust
A trust-funded pension plan that provides death benefits through the purchase of ordinary or whole life insurance contracts for employees covered.

Overhead Expense Insurance
A type of disability insurance providing coverage for the cost of overhead expense to continue business operations, in the event the insured should become ill, injured or disabled.

Owners and Contractors Protective Liability Insurance
A liability policy that provides coverage for the insured for the negligent acts of independent contractors hired by the insured.


P

Package Policy
A policy that contains two of more forms of coverage. Such as property and liability insurance.

Paid-Up Insurance
A whole life insurance policy that gives standard protection, but where the policy becomes paid up at a certain age.

Pair and Set Clause
A provision which requires the insurer, at their option, to restore or pay for the entire set or pair or to only pay for the portion of the value of that set or pair.

Participating Insurance
Insurance on which the policyholder is entitled to receive policy dividends reflecting the difference between the premium charged and actual experience.

Particular Average
In ocean marine insurance, a loss either partial or total which falls one or more properties or interests such as cargo owners.

Pension Plan
A plan that provides benefits, after retirement, from a trust or other separately maintained fund, by the purchase of insurance or from general assets.

Pension Trust
A fund consisting of money contributed by the employer and/or employees plus earnings to provide benefits after retirement.

Peril
The cause of a loss.

Perpetual Insurance
A form of property insurance written without an expiration date.

Personal Articles Floater
A policy providing specific coverage for items such as jewelry, fine arts, coins, stamps and silverware.

Personal Injury
Injury, other than bodily injury, such as libel, slander, false arrest, wrongful eviction, invasion of privacy, malicious prosecution and false imprisonment.

Personal Injury Protection
Provides insurance for medical expenses, loss of income, funeral expenses and other costs arising out of injuries caused by automobile accidents, also known as no-fault insurance.

Personal Lines
Types of insurance written for individuals such as automobile, homeowners, watercraft and mobile homes.

Physical Damage
In auto insurance; damage to the insured's vehicle caused by collision or other perils such as fire, theft, vandalism, windstorm, etc.

Policy
The contact of insurance, which sets forth the promises of the insurance company and the duties of the insured.

Pollution Insurance
Designed to provide protection for the liability exposures that may result from damage and cleanup costs caused by pollution.

Port Risk Insurance
An ocean marine policy designed to protect a vessel that is portside for a lengthy period of time.

Post-Mortem Dividend
For a participating life insurance policy, it is the dividend paid after the death of the insured, which includes the earnings owned since the last dividend payment.

Pre-Existing Condition
Injuries from accidents or sickness, which occur earlier than the date on which insurance became effective.

Premium
The amount an insurance company charges as consideration for coverage.

Primary Beneficiary
The individual named first in a life insurance policy to receive the policy benefits and proceeds.

Primary Care Provider (PCP) / Gatekeeper
A primary care physician (PCP) is a physician that directs all of a patient's health care under a Managed Care health plan. Ideally, the primary care physician (usually an internist, family practitioner, obstetrician-gynecologist, or pediatrician) will know the patient's complete medical history and make initial diagnoses for any illness. In most managed care plans, patients cannot see Specialists without a referral from their PCP.

Primary Insurance
The policy providing the first layer of coverage that will respond first to any loss exceeding the deductible.

Primary Layer
The initial layer or amount of insurance applying to loss, the underlying level.

Principal
In a bond, it is the one whose honesty, fidelity or ability to perform is guaranteed.

Principal Sum
The stated amount that a policy of health or accident insurance will pay in the event of covered loss.

Private Passenger Automobile
An auto, station wagon, pickup or van not customarily used in business.

Probationary Period
The period of time in a health insurance policy between when the policy goes into effect and when coverage actually becomes available to the insured.

Producer
The person who solicits insurance from the buyer and places it with the insurer such as a licensed agent, broker or solicitor.

Product Liability Insurance
Provides coverage for an insured that is sued due to alleged negligence as a manufacturer, seller or distributor of products.

Proof of Loss
A signed statement required by the insurance company after a loss, which sets forth the circumstances and amount of loss.

Property Insurance
Coverage for buildings and personal property against physical loss or damage.

Pro-Rata Cancellation
When the insurance company terminates the policy, return premium is calculated on the exact period coverage was provided.

Proration
The adjustment of benefits paid because of a mistake in the amount of the premiums paid or the existence of other insurance coverage on the same accident or disability.

Protection and Indemnity Insurance (P & I Insurance)
For ship owners against liabilities arising out of the operation of the vessel for loss of life, injury or illness to passengers and crew.

Protection Class
A 10-category ranking or schedule of public fire protection of cities and towns.

Proximate Cause
The uninterrupted chain of events, which causes a loss or damage.

Public Adjuster
A person who, for a fee, represents a policyholder in the adjustment of their losses.

Punitive Damages
Damages awarded by the courts separate from compensatory damages usually on account of wanton misconduct to serve as a punishment for the wrongdoer.


Q

Qualified Benefits
Nontaxable benefits that can be included in a cafeteria plan such as group term life, accident and health and dependent care.

Qualified Plan
A plan the Internal Revenue Service approves as meeting the requirements of Section 401(a) of the 1954 Internal Revenue Code to receive tax advantages.

Qualifying Event
An occurrence entitling a person to elect continuation coverage under COBRA, such as termination of employment, death of a covered employee, etc.


R

Rate
The price per unit for insurance.

Rebating
Returning a portion of the premium to the insured as an inducement for buying the policy.

Refund Annuity
A type of annuity, which allows for the return of all premiums paid to the beneficiary, including interest should the insured die prior to the accumulation period.

Reinstatement
Restoration of the policy without any lapse in coverage.

Reinsurance
A transaction whereby an insurance company transfer part or all of their risk to another insurance company.

Renewable Term Life Insurance
A term life insurance policy that offers the renewal of the coverage without making the insured take physical exams or otherwise prove insurability.

Renewal
A policy issued to replace one that has expired.

Replacement Cost
The full cost to replace property with similar quality without deduction for depreciation.

Reporting Form
An endorsement, which requires the policyholder to report the values of property to the company at certain intervals such as monthly, quarterly, etc.

Reserve
an amount representing a liability of an insurer, usually for losses that have not yet been paid.

Residual Disability Income Policy
A health or disability policy providing income protection for insureds that experience reduced income when returning to work after an accident or illness because they are unable to work on a full-time basis.

Residual Market
A plan that allows people who are unable to purchase insurance through voluntary markets to buy insurance at generally higher rates.

Retention
The amount of risk kept by an insurance company in a reinsurance arrangement or kept by the insured in an insurance policy.

Retirement Annuity
A specific type of annuity designed to provide benefits to the annuitant once a specific retirement age has been reached.

Retroactive Date
The earliest date for which coverage is afforded under a claims-made form.

Retrospective Rating
A procedure, which uses the insured's experience during the policy year to determine the file premium.

Rider
An amendment to a policy.

Risk
The category of loss exposure in question and the Uncertainty concerning loss.

Risk Retention Group
An insurance company organized by a group of businesses or institutions in the same line of business to provide liability insurance for the owners or organizers.

Robbery
The act of taking of property by violence or threat of violence.

Rollover
When an agent moves a book of business from one carrier to another.

Running Down Clause
The clause in an ocean marine hull policy, which covers damage done to another ship by collision and other property damage also caused by collision.


S

Salvage
The amount the insurance company is entitled to receive due to the sale of property recovered after a loss has been paid.

Schedule
A list of properties or items, which are insured.

Schedule Rating
A system of making fire insurance rates for commercial properties determined by a physical inspection of each risk.

Second Injury Fund
Funds that reimburse employers for the difference between the total compensation benefits and the partial compensation that would have been paid to a disabled employee had that not been disabled previously while working for another employer.

Self-Administered Plan
When an employer decides to fund and administer their own employee benefit plan instead of using outside sources.

Self-Insurance
The retention of sufficient exposure units by an entity to permit the Law of Large numbers to operate. No insurance company collects premiums and assumes risk.

Self-Pay Option
In some health care plans, the opportunity offered to laid-off workers or those with insufficient hours to maintain health benefits by paying the premium themselves to avoid lapse in coverage.

Service Plan
A prepayment plan that guarantees to provide covered health care services to subscribers, as opposed to indemnifying expenses.

Short-Rate Cancellation
When the policyholder prior to the expiration date terminates the policy, the return premium is calculated on approximately 90 percent of the pro-rata premium.

Simplified Employee Pension (SEP)
A type of retirement plan designed for small businesses where the employer makes contributions to the employee's IRA.

Sinkhole Collapse
The collapse of a building into subterranean voids created by the action of water on limestone or rock formations.

Special Form
A property coverage form that protects insured from risks of physical loss subject to policy exclusions.

Specific Insurance
1) A single amount of insurance covering a single type of insurable property such as building or contents. 2) The amount of insurance available for any one loss and usually stated with an Aggregate Limit.

Sprinkler Leakage
Accidental discharge of water from automatic sprinklers and similar fire prevention devices.

Stated Amount
The value of property is agreed upon at the issuance of the contract.

Subrogation
A process by which an insurance company pays their insured and seeks reimbursement from the responsible party.

Subscriber
The employee or member who elects coverage under the plan.

Supplementary Medical Insurance (SMI)
Also known as Part B, this is a voluntary insurance program that provides benefits for physician and other medical services under the Social Security Act for aged and disabled individuals who elect to enroll.

Surety
The person or organization guaranteeing the fulfillment of an obligation.

Surety Bond
A written agreement where one party (surety) obligates itself to a second party (obligee) to respond for the default of a third party (principal) in failing to perform specified duties within a stated time.

Surgical Expense Insurance
Health insurance policies that provide benefits for doctor's operating fees.

Surplus Lines Insurance
Policies written by insurers who are not licensed in the State where the risks are located.

Surrender Charge
A charge for the cancellation of an insurance or annuity policy.

Surrender Value
The net proceeds, after applicable charges, available from the termination or cancellation of insurance or deferred annuity contract.

Surviving Spouse Benefit
Payments made to the spouse of a deceased participant.

Syndicate Policy
A policy issued on behalf of a number of companies, which share a risk or class of certain risks.


T

Tail
Liability that exists for losses that are not discovered or reported and settled until some time after the policy has expired.

Tail Coverage
Liability coverage that is typically purchased upon the discontinuance of claims-made policy, or the change of a claims-made policy to an occurrence policy, that provides protection for exposures that are not yet discovered and reported.

Tariff
The rate made and published by a rating bureau.

Temporary Disability Benefits
State employer liability laws that mandate the minimum benefits that must be offered to temporarily injured, sick or disabled employees who are not covered by workers compensation laws.

Tenants Policy
A type of homeowner's policy for people who rent homes or apartments.

Term Insurance
A type of life insurance that is written to cover only a certain period of time, since it is not a whole life policy, it does not build cash value.

Termination
The cessation of coverage caused either by the expiration, cancellation or non-renewal of the policy.

Territorial Rating
Rates based on the physical, environmental, political and overall potential of geographic locations.

Theatrical Floater
An inland marine policy covering loss or damage to scenery, costumes and other properties of a production.

Theft
Any act of stealing.

Third Party
The claimant who makes a demand against a liability policyholder of another company.

Third Party Administrator (TPA)
The party that has been contracted by an insurer, self-insured, pool, reciprocal, or similar to administer services that are identified. These services may include claims administration, premium collection, underwriting, and other administrative functions.

Time Element Insurance
A policy that pays for indirect losses that are related to time such as loss of income and continuing, expenses.

Title Insurance
Protection, which indemnifies the purchaser of real estate against loss occasioned from defects in legal title to property.

Tort
A civil wrong causing injury to persons or property.

Total Loss
Loss to all insured property, the maximum amount of the policy may be paid.

Travel Accident Insurance
A type of life or accident policy sold at airports, railroads, etc. to provide coverage for bodily injury or death suffered by passengers.

Treaty
A reinsurance agreement between an insurance company and the reinsurance company, which provides for the sharing of risk for a period of time.

Trip Insurance
Written to cover a single shipment of property to cover loss by specified or open perils.

True Group Insurance
A group insurance program where an entire related group of people is offered access to the same coverage usually life, health, accident and disability.

Twisting
The practice of misrepresenting an insurance policy for the purpose of causing the insured to cancel one policy and in order to accept another.


U

Ultimate Net Loss
The amount an insured is obligated in a liability policy to pay in the event of a loss.

Unbundled Services
A range of services related to insurance that some insurance companies and subsidiaries offer to their insureds but can be separated from the insurance transaction.

Umbrella Liability
A form of liability coverage that protects the insured against claims in excess of the limits of their primary liability policies.

Unallocated Benefit
A policy provision that provides reimbursement up to a maximum amount for the costs of all extra miscellaneous hospital services.

Underinsurance
Insurance that is insufficient to cover a loss.

Underlying Limits
The limits of the primary policy below the excess or umbrella policy, which will respond first to loss.

Universal Life Insurance
Flexible premium life insurance policy under which the policyholder may change the death benefit and vary the amount or timing of premium payments.

Uninsured Motorists Coverage
Coverage an insured may purchase to protect himself or herself from injury or damage caused by a hit and run motorist or one who has no insurance.

Underinsured Motorists Coverage
Coverage an insured may purchase to protect himself or herself from injury or damage caused by a negligent party who does not have enough insurance or funds to cover the loss.

Underwriter
A person who works for an insurance company accepts or rejects risks on behalf of the company; their duty is to prevent the adverse selection of risk.

Underwriting
The process of identifying and classifying the potential degree of risk, the purpose of underwriting is to avoid the adverse selection of risk.

Unearned Premium
The part of the premium representing the remainder of the policy term.

Unsatisfied Judgment Fund
A State fund created to reimburse persons injured in auto accidents who cannot collect damages awarded to them because the negligent party if insolvent or uninsured.


V

Vacant Building
A property with nothing in it and unoccupied.

Valued Policy
A policy in which the company agrees to the value of property and will pay the policy amount without regard to depreciation in the event of a total loss to the property.

Variable Annuity
An annuity that is expressed in terms of benefit units instead of fixed dollar amounts.

Variable Life Insurance
A life insurance policy under which the premiums are level, but the benefits are not level.

Voluntary Compensation Coverage
Protection, which an employer may purchase to cover employees not otherwise included in workers compensation laws.

Voluntary Market
Coverage that is offered by companies that is not required to be purchased by federal or state requirement.


W

Waiting Period
The duration of time between the start of a disability and the start of benefits, as provided in the policy.

Waiver
An intentional relinquishment of a right.

Waiver of Subrogation
A condition of an insurance policy which states that the coverage will not be prejudiced if the insured has waived in writing prior to a loss any rights of recovery from a party responsible for the loss.

Warranty
A statement by the insured about the truth on which the contract depends.

Whole Life Insurance
A type of life insurance that provides a face value death benefits for the entire life of the insured.

Workers Compensation Insurance
Coverage that provides benefits mandated by State law to employees who are injured by work related accidents or disease.

Wrap-Up-Policy
One policy, covering all involved interests for large construction projects.


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