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Insurance Terms & Definitions

A

Accident

An unexpected event or circumstance without deliberate intent.

Accident Insurance

Insurance for unforeseen bodily injury.

Accidental Bodily Injury

Unexpected injury to a person.

Accidental Death & Dismemberment

An insurance contract that pays a stated benefit in the event of death and/or dismemberment caused by accident or specified kinds of accidents.

Actual Cash Value

Repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation.

Actuarial Report

A document or other presentation, prepared as a formal means of conveying to the state regulatory authority and the Board of Directors, or its equivalent, the actuary's professional conclusions and recommendations, of recording and communicating the methods and procedures, of assuring that the parties addressed are aware of the significance of the actuary's opinion or findings and that documents the analysis underlying the opinion. (In Life and Health) this document would be called an "Actuarial Memorandum."

Actuary

Business professional who analyzes probabilities of risk and risk management including calculation of premiums, dividends and other applicable insurance industry standards.

Adjuster

A person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.

Admitted Company

An insurance company licensed to do business in a state(s), domiciled in an alternative state or country.

Advance Premiums

Occur when a policy has been processed, and the premium has been paid prior to the effective date. These are a liability to the company and not included in written premium or the unearned premium reserve.

Adverse Selection

The social phenomenon whereby persons with a higher than average probability of loss seek greater insurance coverage than those with less risk.

Agent

An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Aggregate

The maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single project.

Aircraft

Coverage for aircraft (hull) and their contents; aircraft owners' and aircraft manufacturers liability to passengers, airports and other third parties.

Allied Lines

Coverages which are generally written with property insurance, e.g., glass, tornado, windstorm and hail; sprinkler and water damage; explosion, riot, and civil commotion; growing crops; flood; rain; and damage from aircraft and vehicle, etc.

All-Risk

Also known as open peril, this type of policy covers a broad range of losses. The policy covers risks not explicitly excluded in the policy contract.

Annual Statement

An annual report required to be filed with each state in which an insurer does business. This report provides a snapshot of the financial condition of a company and significant events which occurred throughout the reporting year.

Annuitant

The beneficiary of an annuity payment, or person during whose life and annuity is payable.

Annuities – Immediate Non-variable

An annuity contract that provides for the fixed payment of the annuity at the end of the first interval of payment after purchase. The interval may vary, however the annuity payouts must begin within 13 months.

Annuity

A contract providing income for a specified period of time, or duration of life for a person or persons.

Appraisal

An estimate of value.

Arbitration

A binding dispute resolution tactic whereby a conciliator with no interest in the outcome intercedes.

Assessed Value

Estimated value for real or personal property established by a taxing entity.

Asset

Probable future economic benefits obtained or controlled by a particular entity as a result of past transactions or events. An asset has three essential characteristics: It embodies a probable future benefit that involves a capacity, singly or in combination with other assets, to contribute directly or indirectly to future net cash inflows; A particular entity can obtain the benefit and control others' access to it; and The transaction or other event-giving rise to the entity's right to or control of the benefit has already occurred.

Assisted Living Care

A policy or rider that provides coverage only while a policyholder is confined to an assisted living facility and meets the policy requirements for coverage.

Assumed Reinsurance

The assumption of risk from another insurance entity within a reinsurance agreement or treaty.

Authorized Company

An insurer licensed or admitted to do business in a particular state.

Auto Liability

Coverage that protects against financial loss because of legal liability for motor vehicle related injuries (bodily injury and medical payments) or damage to the property of others caused by accidents arising out of ownership, maintenance or use of a motor vehicle (including recreational vehicles such as motor homes). Commercial is defined as all motor vehicle policies that include vehicles that are used primarily in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit. No Fault is defined by the state concerned.

Auto Physical Damage

Motor vehicle insurance coverage (including collision, vandalism, fire and theft) that insures against material damage to the insured's vehicle. Commercial is defined as all motor vehicle policies that include vehicles that are used in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit.

Automobile Liability Insurance

Coverage for bodily injury and property damage incurred through ownership or operation of a vehicle.

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B

Balance Sheet

Accounting statement showing the financial condition of a company at a particular date.

Beneficiary

An individual who may become eligible to receive payment due to will, life insurance policy, retirement plan, annuity, trust, or other contract.

Blanket coverage

Coverage for property and liability that extends to more than one location, class of property or employee.

Boatowners/Personal Watercraft

Covers damage to pleasure boats, motors, trailers, boating equipment and personal watercraft as well as bodily injury and property damage liability to others.

Bodily Injury

Physical injury including sickness or disease to a person.

Builders' Risk Policies

Typically written on a reporting or completed value form, this coverage insures against loss to buildings in the course of construction. The coverage also includes machinery and equipment used in the course of construction and to materials incidental to construction.

Burglary and Theft

Coverage for property taken or destroyed by breaking and entering the insured's premises, burglary or theft, forgery or counterfeiting, fraud, kidnap and ransom, and off-premises exposure.

Business Auto

Coverage for motor vehicles, other than those in the garage business, engaged in commerce. Business auto filings include singularly or in any combination coverage such as the following: Auto Liability, PIP, MP, Uninsured Motorist and/or Underinsured Motorists (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.

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C

Capital and Surplus

A company's assets minus its liabilities.

Casualty Insurance

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

Catastrophe Loss

A large magnitude loss with little ability to forecast.

Ceded Premium

Amount of premium (fees) used to purchase reinsurance.

Ceding Company

An insurance company that transfers risk by purchasing reinsurance.

Chartered Life Underwriter (CLU)

A professional designation awarded by the American College to persons in the life insurance field who pass a series of exams in insurance, investment, taxation, employee benefit plans, estate planning, accounting, management, and economics.

Chartered Property Casualty Underwriter (CPCU)

A professional designation awarded by the American Institute of Property and Casualty Underwriters to persons in the property and liability insurance field who pass a series of exams in insurance, risk management, economics, finance, management, accounting, and law. Designates must also have at least three years experience in the insurance business or related field.

Claim

A request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.

Claims-made Form

A type of liability insurance form that only pays if the both event that causes (triggers)the claim and the actual claim are submitted to the insurance company during the policy term.

Coinsurance

A clause contained in most property insurance policies to encourage policy holders to carry a reasonable amount of insurance. If the insured fails to maintain the amount specified in the clause (Usually at least 80%), the insured shares a higher proportion of the loss. In medical insurance a percentage of each claim that the insured will bear.

Commencement Date

Date when the organization first became obligated for any insurance risk via the issuance of policies and/or entering into a reinsurance agreement. Same as "effective date" of coverage.

Commercial General Liability

Flexible & broad commercial liability coverage with two major sub-lines: premises/operations sub-line and products/completed operations sub-line.

Commercial Property

Property insurance coverage sold to commercial ventures.

Commission

A percentage of premium paid to agents by insurance companies for the sale of policies.

Completed Operations Liability

Policies covering the liability of contractors, plumbers, electricians, repair shops, and similar firms to persons who have incurred bodily injury or property damage from defective work or operations completed or abandoned by or for the insured, away from the insured's premises.

Concurrent Causation

Property loss incurred from two or more perils in which only one loss is covered but both are paid by the insurer due to simultaneous incident.

Conditions

Requirements specified in the insurance contract that must be upheld by the insured to qualify for indemnification.

Condos

Homeowners insurance sold to condominium owners occupying the described property.

Construction and Alteration Liability

Covering the liability of an insured to persons who have incurred bodily injury or property damage from alterations involving demolition, new construction or change in size of a structure on the insured's premises.

Contingent Liability

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

Contractual Liability

Liability coverage of an insured who has assumed the legal liability of another party by written or oral contract. Includes a contractual liability policy providing coverage for all obligations and liabilities incurred by a service contract provider under the terms of service contracts issued by the provider.

Convertible Term Insurance Policy

An insurance policy that can be converted into permanent insurance without a medical assessment. The insurer is required to renew the policy regardless of the health of the insured subject to policy conditions.

Credit

Individual or group policies that provide benefits to a debtor for full or partial repayment of debt associated with a specific loan or other credit transaction upon disability or involuntary unemployment of debtor, except in connection with first mortgage loans.

Creditor-Placed Home

Single interest or dual interest credit insurance purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss to property that would either impair a creditor's interest or adversely affect the value of collateral on homes, mobile homes, and other real estate.

Crop

Coverage protecting the insured against loss or damage to crops from a variety of perils, including but not limited to fire, lightening, loss of revenue, tornado, windstorm, hail, flood, rain, or damage by insects.

Crop-Hail Insurance

Coverage for crop damage due to hail, fire or lightning.

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D

Date of Issue

Date when an insurance company issues a policy.

Declarations

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

Deductible

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

Deferred Annuity

Annuity payment to be made as a single payment or a series of installments to begin at some future date, such as in a specified number of years or at a specified age.

Direct Incurred Loss

Loss whereby the proximate cause is equivalent to the insured peril.

Direct Loss

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

Domestic Insurer

An insurance company that is domiciled and licensed in the state in which it sells insurance.

Dwelling Property/Personal Liability

A special form of package policy composed of dwelling fire and/or allied lines, and personal liability insurance.

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E

Earthquake

Property coverages for losses resulting from a sudden trembling or shaking of the earth, including that caused by volcanic eruption. Excluded are losses resulting from fire, explosion, flood or tidal wave following the covered event.

Effective Date

Date at which an insurance policy goes into force.

Employers Liability

Employers' liability coverage for the legal liability of employers arising out of injuries to employees. This code should be used when coverage is issued as an endorsement, or as part of a statutory workers' compensation policy.

Encumbrance

Outstanding mortgages or other debt related to real estate and any unpaid accrued acquisition or construction costs.

Endorsement

An amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.

Environmental Pollution Liability

Liability coverage of an insured to persons who have incurred bodily injury or property damage from acids, fumes, smoke, toxic chemicals, waste materials or other pollutants.

Equity Indexed Annuity

A fixed annuity that earns interest or provides benefits that are linked to an external reference or equity index, subject to a minimum guarantee.

Excess and Umbrella Liability

Liability coverage of an insured above a specific amount set forth in a basic policy issued by the primary insurer; or a self insurer for losses over a stated amount; or an insured or self insurer for known or unknown gaps in basic coverages or self insured retentions.

Exposure

Risk of possible loss.

Extra Expense Insurance

A type of property insurance for extraordinary expenses related to business interruption such as a back-up generator in case of power failure.

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F

Face Amount

The value of a policy to be provided upon maturity date or death.

Facultative Reinsurance

Reinsurance for a specific policy for which terms can be negotiated by the original insurer and reinsurer.

Fair Value

The amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale. Quoted market prices in active markets are the best evidence of fair value and shall be used as the basis for the measurement, if available. If a quoted market price is available, the fair value is the product of the number of trading units times market price.

Farmowners Insurance

Farmowners insurance sold for personal, family or household purposes. This package policy is similar to a homeowners policy, in that it has been developed for farms and ranches and includes both property and liability coverage for personal and business losses. Coverage includes farm dwellings and their contents, barns, stables, other farm structures and farm inland marine, such as mobile equipment and livestock.

Federal Flood Insurance

Coverage for qualifying residents and businesses in flood prone regions through the National Flood Insurance Act, a federally subsidized flood insurance program enacted in 1968.

Federally Reinsured Crop

Crop insurance coverage that is either wholly or in part reinsured by the Federal Crop Insurance Corporation (FCIC) under the Standard Reinsurance Agreement (SRA). This includes the following products: Multiple Peril Crop Insurance (MPCI); Catastrophic Insurance, Crop Revenue Coverage (CRC); Income Protection and Revenue Assurance.

FEMAFederal Emergency Management Agency

An independent agency, tasked with responding to, planning for, mitigating and recovery efforts of natural disasters.

Financial Responsibility Law

A statute requiring motorists to show capacity to pay for automobile-related losses.

Fire

Coverage protecting the insured against the loss to real or personal property from damage caused by the peril of fire or lightning, including business interruption, loss of rents, etc.

Fire Legal Liability

Coverage for property loss liability as the result of separate negligent acts and/or omissions of the insured that allows a spreading fire to cause bodily injury or property damage of others. An example is a tenant who, while occupying another party's property, through negligence causes fire damage to the property.

Flood

Coverage protecting the insured against loss or damage to real or personal property from flood. (Note: If coverage for flood is offered as an additional peril on a property insurance policy, file it under the applicable property insurance filing code.).

Foreign jurisdiction

A jurisdiction outside of the United States, Canada or any province or political subdivision of the foregoing.

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G

Group Accident and Health

Coverage written on a group basis (e.g., employees of a single employer and their dependents) that pays scheduled benefits or medical expenses caused by disease, accidental injury or accidental death. Excludes amounts attributable to uninsured accidents and health plans and the uninsured portion of partially insured accident and health plans.

Group Annuities – Deferred Non- Variable and Variable

An annuity contract that provides an accumulation based on both (1) funds that accumulate based on a guaranteed crediting interest rates or additional interest rate applied to designated considerations, and (2) funds where the accumulation vary in accordance with the rate of return of the underlying investment portfolio selected by the policyholder. The contract provides for the initiation of payments at some designated future date.

Group Annuities – Deferred Variable

An annuity contract that provides an accumulation based fund where the accumulation varies in accordance with the rate of return of the underlying investment portfolio selected by the policyholder. Must include at least one option to have the accumulation vary in accordance with the rate of return of the underlying investment portfolio selected by the policyholder and may include at least one option to have the series of payments vary in accordance with the rate of return of the underlying investment portfolio selected by the policyholder. This annuity contract provides for the initiation of payments at some designated future date.

Group Annuities – Immediate Non-Variable and Variable

An annuity contract that provides an accumulation based on both (1) funds that accumulate based on a guaranteed crediting interest rates or additional interest rate applied to designated considerations, and (2) funds where the accumulation vary in accordance with the rate of return of the underlying investment portfolio selected by the policyholder. The contract provides for the initiation of payments at some interval that may vary, however the annuity payouts must begin within 13 months.

Group Annuities – Immediate Variable

An annuity contract that provides for the first payment of the annuity at the end of the fixed interval of payment after purchase. The interval may vary, however the annuity payouts must begin within 13 months. The amount varies with the value of equities (separate account) purchased as investments by the insurance companies.

Group Annuities – Unallocated

Annuity contracts or portions thereof where the Insurer purchases an annuity for the retirees.

Group Annuity

A contract providing income for a specified period of time, or duration of life for a person or persons established to benefit a group of employees.

Guaranty Fund

Funding mechanism employed by states to provide funds to cover policyholder obligations of insolvent reporting entities.

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H

Hazard

Circumstance which tends to increase the probability or severity of a loss.

Health Insurance

A generic term applying to all types of insurance indemnifying or reimbursing for losses caused by bodily injury or illness including related medical expenses.

Health Maintenance Organization (HMO)

A medical group plan that provides physician, hospital, and clinical services to participating members in exchange for a periodic flat fee.

Health Plan

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

Hold-Harmless Agreement

A risk transfer mechanism whereby one party assumes the liability of another party by contract.

Homeowners Insurance

A package policy combining real and personal property coverage with personal liability coverage. Coverage applicable to the dwelling, appurtenant structures, unscheduled personal property and additional living expense are typical. Includes mobile homes at a fixed location.

Hull Insurance

Coverage for damage to a vessel or aircraft and affixed items.

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I

Incontestability Provision

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

Incurred But Not Reported (IBNR)

(Pure IBNR) claims that have occurred but the insurer has not been notified of them at the reporting date. Estimates are established to book these claims. May include losses that have been reported to the reporting entity but have not yet been entered into the claims system or bulk provisions. Bulk provisions are reserves included with other IBNR reserves to reflect deficiencies in known case reserves. IBNR can sometimes include estimates of incurred but Not Enough Reported (IBNER).

Incurred Claims

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

Indemnity, Principle of

A general legal principle related to insurance that holds that the individual recovering under an insurance policy should be restored to the approximate financial position he or she was in prior to the loss. Legal principle limiting compensation for damages be equivalent to the losses incurred.

Independent Adjuster

Freelance contractor paid a fee for adjusting losses on behalf of companies.

Independent Agent

A representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.

Independent Contractor

An individual who is not employed for a company but instead works for themselves providing goods or services to clients for a fee.

Index Annuity

An interest bearing fixed annuity tied to an equity index, such as the Dow Jones Industrial Average or S & P 500.

Individual Annuities – Deferred Variable

An annuity contract that provides an accumulation based fund where the accumulation varies in accordance with the rate of return of the underlying investment portfolio selected by the policyholder. Must include at least one option to have the accumulation vary in accordance with the rate of return of the underlying investment portfolio selected by the policyholder and may include at least one option to have the series of payments vary in accordance with the rate of return of the underlying investment portfolio selected by the policyholder. This annuity contract provides for the initiation of payments at some designated future date.

Individual Annuities – Immediate Variable

An annuity contract that provides for the first payment of the annuity at the end of the fixed interval of payment after purchase. The interval may vary, however the annuity payouts must begin within 13 months. The amount varies with the value of equities (separate account) purchased as investments by the insurance companies.

Individual Annuities – Special

Contracts with certain noteworthy attributes.

Individual Annuities- Deferred Non-Variable and Variable

An annuity contract that provides an accumulation based on both (1) funds that accumulate based on a guaranteed crediting interest rates or additional interest rate applied to designated considerations, and (2) funds where the accumulation vary in accordance with the rate of return of the underlying investment portfolio selected by the policyholder. The contract provides for the initiation of payments at some designated future date.

Individual Annuities- Deferred Non-Variable

An annuity contract that provides an accumulation based on funds that accumulate based on a guaranteed crediting interest rate or additional interest rate. This annuity contract provides for the initiation of payments at some designated future date.

Individual Annuities- Immediate Non-Variable

An annuity contract that provides for the fixed payment of the annuity at the end of the first interval of payment after purchase. The interval may vary, however the annuity payouts must begin within 13 months.

Individual Annuities- Immediate Non-Variable and Variable

An annuity contract that provides an accumulation based on both (1) funds that accumulate based on a guaranteed crediting interest rates or additional interest rate applied to designated considerations, and (2) funds where the accumulation vary in accordance with the rate of return of the underlying investment portfolio selected by the policyholder. The contract provides for the initiation of payments at some interval that may vary, however the annuity payouts must begin within 13 months.

Inland Marine

Coverage for property that may be in transit, held by a bailee, at a fixed location, a movable good that is often at different locations (e.g., off road constructions equipment), or scheduled property (e.g., Homeowners Personal Property Floater) including items such as live animals, property with antique or collector's value, etc. This line also includes instrumentalities of transportation and communication, such as bridges, tunnels, piers, wharves, docks, pipelines, power and phone lines, and radio and television towers.

Insurable Interest

A right or relationship in regard to the subject matter of the insured contract such that the insured can suffer a financial loss from damage, loss or destruction to it. (Bickelhaupt and Magee ).

Insurance

An economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.

Insurance to Value

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

Insured

Party(ies) covered by an insurance policy.

Insurer

An insurer or reinsurer authorized to write property and/or casualty insurance under the laws of any state.

Internet Liability Insurance/Cyber Insurance

Coverage for cyber commerce including copyright infringement, libel, and violation of privacy.

Irrevocable Beneficiary

A life insurance policy beneficiary who has a vested interest in the policy proceeds even during the insured's lifetime because the policy owner has the right to change the beneficiary designation only after obtaining the beneficiary's consent.

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J

Joint and Last Survivor Annuity

Retirement plan that continues to payout so long as at least one, of two or more, annuitants is alive.

Joint-Life Annuity

An annuity contract that ceases upon the death of the first of two or more annuitants.

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K

Key-Persons Insurance

A policy purchased by, for the benefit of, a business insuring the life or lives of personnel integral to the business operations.

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L

Lapse

Termination of a policy due to failure to pay the required renewal premium.

Level Premium Insurance

Life insurance policy for which the cost is equally distributed over the term of the premium period, remaining constant throughout.

Liability

A certain or probable future sacrifice of economic benefits arising from present obligations of a particular entity to transfer assets or to provide services to other entities in the future as a result of a past transactions(s) or event(s). three essential characteristics: a) It embodies a present duty or responsibility to one or more other entities that entails settlement by probable future transfer or use of assets at a specified or determinable date, on occurrence of a specified event, or on demand; b) The duty or responsibility obligates a particular entity, leaving it little or no discretion to avoid the future sacrifice; and c) The transaction or other event obligating the entity has already happened.

Life – Endowment

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

Life – Flexible Premium Adjustable Life

A group life insurance that provides a face amount that is adjustable to the certificate holder and allows the certificate holder to vary the modal premium that is paid or to skip a payment so long as the certificate value is sufficient to keep the certificate in force, and under which separately identified interest credits (other than in connection with dividend accumulation, premium deposit funds or other supplementary accounts) and mortality and expense charges are made to individual certificates while providing minimum guaranteed values.

Life Settlements

A contract or agreement in which a policyholder agrees to sell or transfer ownership in all or part of a life insurance policy to a third party for compensation that is less than the expected death benefit of a policy.

Lifetime Disability Benefit

A provision in some disability income policies to recoup lost wages for the term of disability or remainder of insured's life in case of permanent disability.

Limited Payment Life Insurance

A form of whole-life insurance with a pre-defined number of premiums to be paid.

Limits

Maximum value to be derived from a policy.

Line of Business

Classification of business written by insurers.

Liquor Liability

Coverage for the liability of an entity involved in the retail or wholesale sales of alcoholic beverages, or the serving of alcoholic beverages, to persons who have incurred bodily injury or property damage arising from an intoxicated person.

Living benefits rider

A rider attached to a life insurance policy providing long term care for the terminally ill.

Loss

Physical damage to property or bodily injury, Including loss of use or loss of income.

Loss Frequency

Incidence of claims on a policy during a premium period.

Loss of Use Insurance

Policy providing protection against loss of use due to damage or destruction of property.

Loss Payable Clause

Coverage for third party mortgagee in case of default on insured property, secured by a loan, that has been lost or damaged.

Loss Ratio

The percentage of incurred losses to earned premiums.

Losses Incurred

Includes claims that have been paid and/or have amounts held in reserve for future payment.

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M

Medicaid

Policies issued in association with the Federal/State entitlement program created by Title XIX of the Social Security Act of 1965 that pays for medical assistance for certain individuals and families with low incomes and resources.

Medical Payments, Auto

Optional coverage under an auto policy to pay for medical expenses for an insured who sustains bodily injury (BI) caused by an auto accident, without regard to fault. Coverage for persons other than the name insured and his or her family members is typically restricted to circumstances when they are occupants of the insured’s auto. (IRMI)

Medical Payments, Homeowners

Coverage designed to pay for medical expenses to others who are accidentally injured on an insured location or by the activities of an insured, resident employee, or an animal owned by or in the care of an insured. These payments are not based on the law of negligence; that is no negligence on the part of the insured has to be proven for payment to be made. (IRMI)

Medicare

A state assistance program, passed under Title XVIII of the Social Security Amendments of 1965, to provide hospital and medical expense insurance to those over 65 years of age.

Morale Hazard

Negligence or disregard on the part of the insured which could lead to probable loss.

Morbidity

The frequency or severity of disease or illness within a subset of the population.

Morbidity Risk

The potential for a person to experience illness, injury, or other physical or psychological impairment, whether temporary or permanent. Morbidity risk excludes the potential for an individual's death, but includes the potential for an illness or injury that results in death.

Morbidity Table

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

Mortality Table

Chart that shows the death rates of a particular population at each age displayed as the number of deaths per thousand.

Mortgage

A note used to secure a loan for real property.

Mortgage Guaranty

Insurance that indemnifies a lender for loss upon foreclosure if a borrower fails to meet required mortgage payments.

Multi-Peril Insurance

Personal and business property coverage combining several types of property insurance in one policy.

Mutual Insurance Company

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

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N

Named Insured

The individual defined as the insured in the policy contract. .

Named Peril Coverage

Insurance for losses explicitly defined in the policy contract.

National Association of Insurance Commissioners (NAIC)

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

Negligence

Failure to exercise reasonable consideration resulting in loss or damage to oneself or others.

NFIP National Flood Insurance Program

Flood insurance and floodplain management for personal and business property administered under the National Flood Act of 1968. Encourages participation by private insurers through a flood insurance pool .

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O

Occurrence

An accident , including injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected or intended from the standpoint of the insured. (Bickelhaupt and Magee).

Other Liability

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

Owner Occupied

Homeowners insurance sold to owners occupying the described property.

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P

Peril

The cause of property damage or personal injury, origin of desire for insurance. "Cause of Loss"

Permanent Life Insurance

Policy that remains active for the life of the insured.

Personal Auto Policy

Coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or husband and wife.

Personal Earthquake

Earthquake property coverage for personal, family or household purposes.

Personal GAP Insurance

Credit insurance that insures the excess of the outstanding indebtedness over the primary property insurance benefits in the event of a total loss to a collateral asset.

Personal Injury Liability

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

Personal Injury Protection Coverage/PIP

Automobile coverage available in states that have enacted no-fault laws or other auto reparation reform laws for treatment of injuries to the insured and passengers of the insured.

Personal Property

Single interest or dual interest credit insurance (where collateral is not a motor vehicle, mobile home, or real estate) that covers perils to goods purchased or used as collateral and that concerns a creditor's interest in the purchased goods or pledged collateral either in whole or in part; or covers perils to goods purchased in connection with an open-end credit transaction.

Policy

A written contract ratifying the legality of an insurance agreement.

Policy Period

Time period during which insurance coverage is in effect.

Policy Reserve

The amount of money allocated specifically for the fulfillment of policy obligations by a life insurance company; reserves are in place to safeguard that the company is able to pay all future claims.

Pollution

Environmental contamination.

Preferred Provider Organization (PPO)

Arrangement, insured or uninsured, where contracts are established by Health Plan Companies (typically, commercial insurers, and, in some circumstances, by self-insured employers) with health care providers. The Health Plans involved will often designate these contracted providers as "preferred" and will provide an incentive, usually in the form of lower deductibles or co-payments, to encourage covered individuals to use these providers. Members are allowed benefits for non-participating provider services on an indemnity basis with significant copayments and providers are often, but not always, paid on a discounted fee for service basis.

Preferred Risk

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

Premises and Operations

Policies covering the liability of an insured to persons who have incurred bodily injury or property damage on an insured's premises during normal operations or routine maintenance, or from an insured's business operations either on or off of the insured's premises.

Premium

Money charged for the insurance coverage reflecting expectation of loss.

Premiums Net

Is the amount calculated on the basis of the interest and mortality table used to calculate the reporting entity's statutory policy reserves.

Premiums Written

Total premiums generated from all policies (contracts) written by an insurer within a given period of time.

Primary Insurance

Coverage that takes precedence when more than one policy covers the same loss.

Private Passenger Auto (PPA)

Filings that include singularly or in any combination coverage such as the following: Auto Liability, Personal Injury Protection (PIP), Medical Payments (MP), Uninsured/Underinsured (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.

Producer

An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Product Liability

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

Property

Coverage protecting the insured against loss or damage to real or personal property from a variety of perils, including but not limited to fire, lightening, business interruption, loss of rents, glass breakage, tornado, windstorm, hail, water damage, explosion, riot, civil commotion, rain, or damage from aircraft or vehicles.

Provisions

Contingencies outlined in an insurance policy.

Proximate Cause

Event covered under insured's policy agreement.

Public Adjuster

Independent claims adjuster representing policyholders instead of insurance companies.

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Q

Qualified Actuary

A person who meets the basic education, experience and continuing education requirements (these differ by line of business) of the Specific Qualification Standard for Statements of Actuarial Opinion, NAIC Property and Casualty Annual Statement, as set forth in the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States, promulgated by the American Academy of Actuaries, and is in good standing of the American Academy of Actuaries who has been approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the American Academy of Actuaries.

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R

Rate

Value of insured losses expressed as a cost per unit of insurance.

Reinsurance

A transaction between a primary insurer and another licensed (re) insurer where the reinsurer agrees to cover all or part of the losses and/or loss adjustment expenses of the primary insurer. The assumption is in exchange for a premium. Indemnification is on a proportional or non-proportional basis.

Reinsurer

Company assuming reinsurance risk.

Renewable Term Insurance

Insurance that is renewable for a limited number of successive terms by the policyholder and is not contingent upon medical examination.

Renters Insurance

Liability coverage for contents within a renter's residence. Coverage does not include the structure but does include any affixed items provided or changed by the renter.

Replacement Cost

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

Reserve

A portion of the premium retained to pay future claims.

Rider

An amendment to a policy agreement.

Risk

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

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S

Salvage

Value recoverable after a loss.

Self-Insurance

Type of insurance often used for high frequency low severity risks where risk is not transferred to an insurance company but retained and accounted for internally.

Standard Risk

A person who, according to a company's underwriting standards, is considered a normal risk and insurable at standard rates. High or low risk candidates may qualify for extra or discounted rates based on their deviation from the standard.

State of Domicile

The state where a company's home office is located.

Statutory Accounting

Method of accounting standards and principles used by state regulatory authorities to measure the financial condition of regulated companies and other insurance enterprises. This method tends to be more conservative than the Generally Accepted Accounting Principles used by most businesses. Compliance with solvency and other standards is determined using financial documents prepared in accordance with Statutory Accounting Principles.

Subrogation

Situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.

Subrogation Clause

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

Substandard Risk

(impaired risk) risks deemed undesirable due to medical condition or hazardous occupation requiring the use of a waiver, a special policy form, or a higher premium charge.

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T

Tenants

Homeowners insurance sold to tenants occupying the described property.

Term

Period of time for which policy is in effect.

Term Insurance

Life insurance payable only if death of insured occurs within a specified time, such as 5 or 10 years, or before a specified age.

Third Party

Person other than the insured or insurer who has incurred losses or is entitled to receive payment due to acts or omissions of the insured.

Treaty

A reinsurance agreement between the ceding company and reinsurer.

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U

Umbrella and Excess (Personal)

Non-business liability protection for individuals above a specific amount set forth in a basic policy issued by the primary insurer; or a self-insurer for losses over a stated amount; or an insured or self-insurer for known or unknown gaps in basic coverages or self-insured retentions.

Underinsured Motorist Coverage

Policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover total dollar amount of losses. Compensation for the injured party is equal to the difference between the losses incurred and the liability covered by the motorist at fault.

Underwriter

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

Underwriting

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

Unearned Premium

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

Universal Life Insurance

Adjustable life insurance under which premiums and coverage are adjustable, company expenses are not specifically disclosed to the insured but a financial report is provided to policyholder's annually.

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V

Variable Annuity

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

Variable Life Insurance

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

Variable Universal Life

Combines the flexible premium features of universal life with the component of variable life in which excess credited to the cash value of the account depends on investment results of separate accounts. The policyholder selects the accounts into which the premium payments are to be made.

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W

Whole Life Insurance

Life insurance that may be kept in force for the duration of a person's life and pays a benefit upon the person's death. Premiums are made for same time period.

Workers' Compensation

Insurance that covers an employer's liability for injuries, disability or death to persons in their employment, without regard to fault, as prescribed by state or federal workers' compensation laws and other statutes.

Written Premium

The contractually determined amount charged by the reporting entity to the policyholder for the effective period of the contract based on the expectation of risk, policy benefits, and expenses associated with the coverage provided by the terms of the insurance contract.

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