Insurance Glossary Glossary
The insurance glossary is an extensive range of terms and definitions related to insurance broking, annuity, and business insurance - with references and examples.
Feedback, Corrections and Additions: Glossary Feedback Form 
- 529 Savings Plans:
- State-administered plans designed to encourage households to save for college education.
- References:
- Ref-1
- A
- ^^^
- Accelerated Death Benefits:
- A type of life insurance policy option which offers policy profits to insured people over their lifetime, in the event of a terminal illness. These types of benefits are available if the insured becomes terminally ill, needs extreme medical intervention, or needs to be admitted to the nursing home.
- References:
- Ref-1
- Accident & Health Insurance:
- This is a policy which covers accidental injury, accidental death, and other related expenses to health. The benefit of this type of a policy is that payments will be made for preventative services, medical expenses, and catastrophic care. However, there are certain limits attached to this coverage.
- Account Receivables:
- See Receivables.
- References:
- Ref-1
- Actual Cash Value:
- This is a type of insurance that compensates costs equivalent to the substitute worth of damaged property without the depreciation. (See Replacement Cost).
- Actuary:
- An insurance expert who is accomplished in the study, assessment, and administration of statistical data. The individual estimates insurance companies’ funds, decides the rates and rating techniques, and also resolves other business and financial risks.
- References:
- Ref-1
- Additional Living Expenses:
- Added costs covered by homeowners’ policies over and above the policyholder's customary living costs. They are obtainable when the insured needs provisional protection due to damage by a covered danger that makes the home momentarily uninhabitable.
- Adjuster:
- An expert who is employed by a property/casualty insurer to determine losses and resolve policyholder claims. These adjusters are different from public adjusters, who discuss with insurers on behalf of policyholders.
- Admitted Assets:
- Are assets which are documented and established by state insurance laws while deciding the solvency of insurers and reinsurers. In order to make it easier to determine an insurance firm’s financial position, state statutory accounting rules do not allow several assets to be incorporated on the balance sheet. (See Assets).
- References:
- Ref-1
- Admitted Company:
- An insurance company which is certified and endorsed to undertake business in a particular state.
- Adverse Selection:
- The inclination of those exposed to an increased risk to seek greater insurance coverage than those at a lesser jeopardy. Insurers respond either by pricing premiums at a higher cost or not insuring at all.
- References:
- Ref-1
- Affinity Sales:
- Selling insurance through groups such as professional and business organizations.
- Aftermarket Parts:
- See Crash Parts; Generic Auto Parts.
- Agency Companies:
- Companies that promote and trade products through independent agents.
- Agent:
- An individual who vends insurance. There are two types of agents: independent agents and exclusive or captive agents. Independent agents are self-employed and work for various insurance firms and are compensated on commission. Meanwhile, captive agents work for only one insurance company on commission.
- Alien Insurance Company:
- A type of insurance for property which includes water, wind and vandalism damages. Allied lines insurance is generally bought along with fire insurance.
- Allied Lines:
- An insurance firm included under the laws and regulations of a foreign country, contrasting to a foreign insurance firm that conducts trade in states outside its own.
- References:
- Ref-1
- Alternative Dispute Resolution/ADR:
- Another option available rather than going to court to settle disputes. Methods for ADR include arbitration and mediation.
- References:
- Ref-1
- Alternative Markets:
- Mechanisms used to fund self-insurance. Examples of such types of markets include captives and risk-retention groups.
- Annual Annuity Contract Fee:
- This type of a contract fee includes the price of managing an annuity contract.
- References:
- Ref-1
- Annual Statement:
- The synopsis of an insurer’s or reinsurer’s financial processes and operations for an annual year. The statement is recorded with the state insurance department of each jurisdiction in which the firm is authorized to carry out its business.
- Annuitant:
- An individual who obtains the profits from an annuity contract. Generally, the annuitant is the owner of the contract or someone related to the owner.
- Annuitization:
- The change of the account balance of a delayed annuity contract to income expenses.
- References:
- Ref-1
- Annuity:
- A life insurance product that pays recurring profit reimbursement for a certain duration of time or during the lifetime of the annuitant. There are two basic types of annuities: deferred and immediate: Deferred or delayed annuities permit assets to develop tax deferred over time before being changed to payments to the annuitant. Meanwhile, immediate annuities permit payments to start within a year of being bought.
- Annuity Accumulation Phase or Period:
- This is the duration during which the owner of a deferred annuity makes payments to build up assets.
- References:
- Ref-1
- Annuity Administrative Charges:
- These charges take care of the charge of customer services for owners of variable annuities.
- Annuity Beneficiary:
- An individual who obtains annuity contract payments if the annuity owner or annuitant passes away while the payments are still due.
- Annuity Contract:
- This is an arrangement similar to an insurance policy for other insurance offerings such as auto insurance.
- References:
- Ref-1
- Annuity Contract Owner:
- The individual or company that buys an annuity and has procured all rights to the agreement. In most of the cases, the annuity contract owner is the annuitant.
- References:
- Ref-1
- Annuity Death Benefits:
- The assurance that if an annuity contract owner dies before annuitization, the beneficiary will get the value of the annuity that is due.
- Annuity Insurance Charges:
- These charges take care of administrative and mortality and expense risk costs.
- Annuity Investment Management Fee:
- The charge paid for the administration of variable annuity invested assets.
- References:
- Ref-1
- Annuity Issuer:
- The insurance company that supplies the annuity.
- Annuity Prospectus:
- Legal documents providing complete information about variable annuity agreements. The prospectus has to be given to each potential buyer.
- Annuity Purchase Rate:
- The price of an annuity based on dynamics as the age and gender of the contract owner.
- Antitrust Laws:
- Laws that forbid firms from working as a group to set prices, restrict supplies or stop competition in the marketplace.
- References:
- Ref-1
- Apportionment:
- The dividing of a loss proportionately among two or more insurers that cover the same loss.
- Appraisal:
- A review to decide a property’s insurable worth, or the loss amount.
- Arbitration:
- A process in which an insurance firm and the insured concur to resolve a claim argument by accepting a decision made by a third party.
- Arson:
- The purposeful setting of a fire.
- A-Share Variable Annuity:
- A form of variable annuity contracts which have up-front sales charges instead of surrender charges and charges for sales are calculated as a percentage of each purchase payment.
- References:
- Ref-1
- Asset-Backed Securities:
- These are securities backed by loan receivables, accounts receivable or other quantifiable assets.
- References:
- Ref-1
- Assets:
- Property and resources, such as cash investments, of a person or company. (See Admitted Assets).
- Assigned Risk Plans:
- These are services through which drivers can obtain auto insurance if they are unable to purchase it in the regular or voluntary market. (See Residual Market).
- Auto Insurance Policy:
- There are basically six different types of auto coverages. Some may be required by law. Others are optional. They are: 1. Bodily injury liability, for injuries the policyholder causes to someone else. 2. Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car. 3. Property damage liability, for damage the policyholder causes to someone else’s property. 4. Collision, for damage to the policyholder’s car from a collision. 5. Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft. 6. Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.
- References:
- Ref-1
- Auto Insurance Premium:
- The fee an insurance firm charges for coverage, based on the occurrence and cost of possible accidents, theft and other losses. Prices differ from company to company, as with any product or service.
- Aviation Insurance:
- Insurance of accident and liability risks, as well as hull damage, connected with the operation of aircraft is known as aviation insurance. Damage is covered on the ground and in the air.
- Bank Holding Company:
- A firm that possesses or controls one or more banks or companies associated with banking such as leasing companies, credit companies, etc.
- Basis Point:
- A 0.01% of the yield of a mortgage, bond or note.
- References:
- Ref-1
- Beach & Windstorm Plans:
- These are State-sponsored insurance pools that sell property coverage for the peril of windstorm to people unable to buy it in the voluntary market because of their high exposure to risk.
- Binder:
- Temporary approval of coverage issued before the actual insurance policy is known as a binder.
- Blanket Insurance:
- This is a type of property insurance that covers, through a single contract, more than one type of property in one location or many types of property at several locations.
- References:
- Ref-1
- Bodily Injury Liability Coverage:
- This is a part of a standard auto insurance policy that covers the policyholder for losses that result when they inflict bodily injuries on others.
- Boiler & Machinery Insurance:
- Also known as Equipment Breakdown, or Systems Breakdown Insurance, this type of insurance covers damage caused by the malfunction or breakdown of boilers, and other equipments.
- Bond:
- A security that forces the issuer to pay interest at particular intervals and to repay the principal amount of the loan at maturity.
- Bond Rating:
- This is a method of evaluating the possibility of default by a bond issuer. Bond rating is also an evaluation of a bond’s financial strength.
- Book of Business:
- This is the total amount of insurance on an insurer's books at a particular point in time.
- Broker:
- An individual who for compensation solicits, negotiates or procures insurance or the renewal or continuance thereof on behalf of insureds or prospective insureds. Brokers work on commission and generally sell commercial insurance.
- B-Share Variable Annuity:
- Being the most common form of annuity contract, b-share variable annuity is a type of variable annuity contract with no initial sales charge. However, if the contract is cancelled, the holder pays deferred sales charges.
- References:
- Ref-1
- Burglary & Theft Insurance:
- Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners’ policy and in a business multiple peril policy.
- Business Income Insurance (also known as Business Interruption Insurance):
- This is a type of insurance covering loss of business income and continuing expenses following an insured loss. Depending on the policy, civil authority coverage may start after a waiting period and last for two or more weeks.
- References:
- Ref-1
- Businessowners Policy/BOP:
- This is an insurance policy which merges property, liability and business disruption coverage for small- to medium-sized businesses.
- References:
- Ref-1
- Capital:
- The shareholder’s equity and preserved earnings. There is no general measure of capital adequacy for property/casualty insurers.
- Capital Markets:
- Markets for long to medium term investment. Equities and debt are traded on these markets. (See Securitization of Insurance Risk).
- References:
- Ref-1
- Captive Agent:
- An individual who works only one insurance company and is not allowed to submit business to any other company. (See Exclusive Agent).
- Captives:
- Insurers that are formed and owned complete by one or more non-insurers. Captives provide coverage to owners. This is a form of self-insurance
- Car Year:
- This is the usual measurement for automobile insurance. A car year is equal to 365 days of insured coverage for a single vehicle.
- Case Management:
- A process of organizing medical services to treat a patient, improve care, and reduce cost.
- Catastrophe:
- A term used to refer to an incident or a series of closely related incidents causing severe insured property losses totaling more than a given amount.
- Catastrophe Bonds:
- These are risk-based securities that are worth high interest rates and provide insurance firms with a form of reinsurance. This form of reinsurance is often used by companies to pay losses from a catastrophe such as those caused by a major hurricane. (See Securitization of Insurance Risk).
- References:
- Ref-1
- Catastrophe Deductible:
- An amount (either in dollars or in percentage) that a homeowner needs to pay to the insurance company in order for the insurance policy to become activated when a major natural disaster occurs.
- Catastrophe Factor:
- Probability of catastrophic loss, based on the total number of catastrophes in a state over a 40-year period.
- Catastrophe Model:
- Models made using computers and are a process of network long-term disaster data with current available data. The purpose of the model is to determine the potential cost of natural disasters and other catastrophic losses for a given geographic area.
- Catastrophe Reinsurance:
- This is an insurance for insurers for catastrophic losses. After major disasters, such as Hurricane Andrew and the World Trade Center terrorist attack, the availability of catastrophe reinsurance becomes extremely limited.
- References:
- Ref-1
- Cell Phone Insurance:
- This type of insurance, often sold with the cell phones themselves, are provided to cover cell phones for damage or theft.
- References:
- Ref-1
- Chartered Financial Consultant/ChFC:
- This is a designation given to individuals who complete courses in financial planning from The American College.
- Chartered Life Underwriter/CLU:
- A designation given to individuals who clear business examinations on insurance, investments, and taxation, and have life insurance planning experience. This professional designation is given by The American College.
- Chartered Property/Casualty Underwriter/CPCU:
- A designation, given after individuals fulfill national examination and three years of work experience, by the American Institute for Property and Liability Underwriters.
- Claims-Made Policy:
- A policy that pays for events occurring during a specified period and for which a claim is made during the policy period, subject to stipulated limitations and extensions. (See Occurrence Policy).
- References:
- Ref-1
- COBRA:
- An abbreviation for Consolidated Omnibus Budget Reconciliation Act. This is a federal law under which group health plans supported and sponsored by employers with 20 or more employees need to offer continuation of coverage to employees who leave their jobs and their dependents.
- References:
- Ref-1
- Coinsurance:
- In terms of property insurance, a clause that states that the insured will share in losses to the extent that he is underinsured at the time of loss. In terms of medical insurance, the insured person and the insurer share the covered procedures under a policy in a specified ratio (80% by the insurer and 20% by the insured).
- Collateral:
- This is property which is presented to get a loan or other credit and that becomes subject to seizure on default. (Also called Security.)
- Collateral Source Rule:
- This rule stops a wrongdoer from lowering its financial responsibility for the injuries it causes by the amount an injured party receives from outside sources. The rule also prevents juries from learning about such collateral payments, so as not to influence with the verdict.
- References:
- Ref-1
- Collision Coverage:
- Part of an auto insurance policy that provides coverage for the damage to the policyholder’s car from an accident.
- Combined Ratio:
- A combination of the claims ratio and the expense ratio. A combined ratio below 100% generally indicates profitable underwriting prior to the consideration of investment income. A lower combined ratio means that financial results are improving.
- Commercial General Liability Insurance/CGL:
- This is a commercial policy covering all liability exposures, such as product liability, completed operations, etc., of a business that are not specifically excluded.
- Commercial Lines:
- Insurance products for businesses, professionals, and commercial establishments.
- Commercial Multiple Peril Policy:
- This is a package policy that includes property, boiler and machinery, crime, and general liability coverage.
- References:
- Ref-1
- Commercial Paper:
- These are debt instruments issued by commercial firms and financial companies to secure finance for current business.
- Commission:
- Fee paid to an agent or insurance salesperson as a percentage of the policy premium.
- Community Rating Laws:
- Laws endorsed in several states regarding health insurance policies. As per the rule, insurers are required to accept all applicants for coverage and charge all applicants the same premium for the same coverage regardless of age or health.
- Competitive Replacement Parts:
- See Crash Parts; Generic Auto Parts.
- Competitive State Fund:
- This is a facility which sells compensation to workers. The fund competes with private insurers and is generally established by a state.
- References:
- Ref-1
- Complaint Ratio:
- This is a measure used by some state insurance departments to follow consumer complaints against insurance companies.
- References:
- Ref-1
- Completed Operations Coverage:
- Coverage which pays for bodily injury or property damage caused by a completed project or job is known as completed operations coverage.
- References:
- Ref-1
- Comprehensive Coverage:
- This is a type of coverage which pays for damage to or loss of the policyholder’s automobile from causes other than accidents, such as hail, vandalism, flood, fire, and theft.
- Compulsory Auto Insurance:
- Compulsory auto insurance is the minimum amount of auto insurance required by law.
- Contingent Liability:
- Liability imposed on a business entity (individual, partnership, or corporation) for acts of a third party for which the business entity is responsible is known as contingent liability.
- References:
- Ref-1
- Coverage:
- Synonym for insurance.
- Crash Parts:
- Sheet metal parts that are most often damaged in a car crash. (See Generic Auto Parts).
- Credit:
- The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.
- Credit Derivatives:
- A contract to transfer the risk of the total return on a credit asset falling below an agreed level, without transfer of the underlying asset.
- Credit Enhancement:
- This is a process which lessens the interest payments on a bond by increasing the issue’s credit rating, often through insurance in the form of a financial guarantee or with standby letters of credit issued by a bank.
- Credit Insurance:
- A policy that pays off the card debt in the event that the borrower loses his job, dies or becomes disabled. The coverage is mainly for manufacturers, wholesalers, and service providers who may be dependent on a few accounts.
- References:
- Ref-1
- Credit Life Insurance:
- Life insurance coverage on a borrower designed to repay the balance of a loan in the event the borrower dies before the loan is repaid.
- Credit Rating:
- See Bond Rating.
- Credit Score:
- A statistical summary of the information contained in a consumer's credit report.
- Crime Insurance:
- Term referring to property coverage for the perils of burglary, theft and robbery.
- References:
- Ref-1
- Crop-Hail Insurance:
- Insurance for the protection against damage to growing crops as a result of hail, fire, or lightning.
- C-Share Variable Annuities:
- This type of annuities have no surrender charges although tax penalties may apply to withdrawals before age 59 ½. C-share contracts generally carry higher internal expenses than standard variable annuity contracts and L-shares, which will reduce the return.
- Earned Premium:
- The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance.
- Earthquake Insurance:
- Insurance covering a building and its contents, which comes into play once an earthquake strikes.
- Economic Loss:
- Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property.
- Electronic Commerce/E-Commerce:
- A term used to refer to transactions which are conducted over an electronic network (Internet generally) where the buyer and merchant are not at the same physical location.
- Elimination Period:
- A kind of deductible or waiting period usually found in disability policies. It is counted in days from the beginning of the illness or injury.
- Employee Dishonesty Coverage:
- This type of insurance covers direct losses and harm to businesses resulting from the dishonest acts of employees.
- References:
- Ref-1
- Employee Retirement Income Security Act/ERISA:
- Federal legislation that was passed in 1974 and which regulates the establishment, management, operation, and funding of most non-government pension and benefit plans.
- References:
- Ref-1
- Employer’s Liability:
- Part B of the workers compensation policy that provides coverage for lawsuits filed by injured employees who, under certain circumstances, can sue under common law. (See Exclusive Remedy).
- Employment Practices Liability Coverage:
- Liability insurance for employers that covers wrongful termination, discrimination, or sexual harassment toward the insured’s employees or former employees.
- References:
- Ref-1
- Endorsement:
- A written form attached to an insurance policy that alters the policy’s coverage, terms, or conditions. An endorsement is sometimes also called a rider.
- Environmental Impairment Liability Coverage:
- A type of coverage to cover losses and liabilities from damage to property caused by pollution.
- References:
- Ref-1
- Equity:
- In investments, the ownership interest of shareholders. In a corporation, stocks as opposed to bonds.
- Equity Indexed Annuity:
- This is an annuity whose return returns are based upon the performance of an equity market index. The principal investment is protected from losses in the equity market, while gains add to the annuity's returns.
- References:
- Ref-1
- Errors & Omissions Coverage/E&O:
- A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.
- References:
- Ref-1
- Escrow Account:
- An account set up by a lender to which the borrower makes monthly payments for such obligations as real estate taxes, homeowners insurance, and private mortgage insurance.
- Excess & Surplus Lines:
- This is a type of property/casualty coverage that is not available from insurers licensed by the state and needs to be purchased from a non-admitted carrier.
- Excess of Loss Reinsurance:
- A contract between an insurer and a reinsurer, where the insurer agrees to pay a certain part of a claim and the reinsurer to pay all or a part of the claim above that amount.
- Exclusion:
- A provision in a coverage that cancels coverage for certain risks, people, property classes, or locations.
- Exclusive Agent:
- See Captive Agent.
- References:
- Ref-1
- Exclusive Remedy:
- Part of the social agreement forming the basis for workers compensation statutes, under which employers are responsible for work-related injury and disease, regardless of whether is was the employee’s fault and in return the injured employee gives up the right to sue when the employer’s negligence causes the harm.
- Expense Ratio:
- The percentage of the premium that is consumed by the insurers’ expenses including overhead, marketing, and commissions.
- Experience:
- Record of losses.
- Exposure:
- Possibility of loss.
- Extended Coverage:
- An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.
- References:
- Ref-1
- Extended Replacement Cost Coverage:
- Insurance which pays a specific amount above the policy limit to replace a damaged home.
- F
- ^^^
- Facultative Reinsurance:
- A reinsurance policy that is negotiated for a particular risk or insurance policy. It provides an insurer with coverage for specific individual risks that are unusual or so large that they are not covered in the insurance company's reinsurance treaties.
- References:
- Ref-1
- Fair Access To Insurance Requirements Plans/FAIR Plans:
- Insurance pools that sell property insurance to people who cannot buy it in the voluntary market because of high risk over which they may have no control. FAIR Plans insure fire, vandalism, riot, and windstorm losses. Some also sell homeowners insurance which includes liability.
- Farmowners-Ranchowners Insurance:
- Package policy that protects the policyholder against named perils and liabilities and usually covers homes and their contents, along with barns, stables, and other structures.
- Federal Funds:
- Reserve balances that depository institutions lend each other. This is generally on an overnight basis.
- Federal Insurance Administration/FIA:
- Federal agency in charge of administering the National Flood Insurance Program. It does not regulate the insurance industry.
- References:
- Ref-1
- Federal Reserve Board:
- This is a seven-member board to supervise the banking system. It issues laws controlling bank holding companies and federal laws over the banking industry.
- Fidelity Bond:
- A form of protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.
- Fiduciary Bond:
- A type of surety bond that is required of certain fiduciaries, such as executors and trustees. This bond assures the performance of their responsibilities.
- References:
- Ref-1
- Fiduciary Liability:
- Legal responsibility of a fiduciary to safeguard assets of beneficiaries.
- File-and-Use States:
- States where insurers must file rate changes with their regulators, but do not have to wait for approval to put them into effect.
- References:
- Ref-1
- Financial Guarantee Insurance:
- This type of insurance covers losses from specific financial transactions and guarantees that investors in debt instruments.
- Financial Responsibility Law:
- This is a state law entailing that all automobile drivers display evidence that they are capable of paying damages up to the least amount if they are implicated in an auto accident. (See Compulsory Auto Insurance).
- Finite Risk Reinsurance:
- This is an agreement which stipulates that the eventual liability of the reinsurer is capped and on which probable investment revenues are recognized as an underwriting factor. This is also known as Financial Reinsurance.
- References:
- Ref-1
- Fire Insurance:
- This is a form of insurance providing security for properties in the event of losses caused by a fire or lightning. This type of a policy is generally included in homeowners or commercial multiple peril coverages.
- First-Party Coverage:
- Insurance for a policyholder’s personal property or person. (See No-fault; Third-Party Coverage)
- Fixed Annuity:
- Annuity whose periodic payment is a guaranteed fixed amount. During the payment phase, a fixed amount of income, paid on a regular schedule, is guaranteed.
- References:
- Ref-1
- Floater:
- This is a clause which is attached to a homeowners’ policy and it insures movable property, covering losses wherever they may occur. Items insured under a floater are expensive jewelry, musical instruments, etc.
- Flood Insurance:
- Insurance for flood damage. This type of coverage is generally available from the federal government under the National Flood Insurance Program (See Adverse Selection).
- Forced Place Insurance:
- Coverage bought by a bank or creditor on behalf of an uninsured debtor so in the event of damage to property, financial support is available to repair it.
- Foreign Insurance Company:
- An insurance firm stationed in one state by the other states in which it does business.
- Fraud:
- Intentional lying by policyholders to achieve payment of an insurance claim that would otherwise not be paid.
- Free-Look Period:
- A duration of one month during which the buyer of an annuity can terminate the agreement with no fine.
- References:
- Ref-1
- Frequency:
- Number of times a loss occurs.
- Fronting:
- A process in which a prime insurer performs as the insurer of record by issuing a policy, but then passes the entire risk to a reinsurer for a commission.
- Futures:
- Contract to purchase a security for a certain cost at a certain date.
- Generally Accepted Accounting Principles/GAAP:
- The set of accounting principles used by most firms outside the life insurance industry and sometimes used by life and health insurance companies. GAAP is based on the going-concern concept of asset valuation. (See Statutory Accounting Principles/SAP)
- Generic Auto Parts:
- Auto crash parts manufactured by companies that are not associated with car manufacturers. (See Crash Parts; Aftermarket Parts; Competitive Replacement Parts; Original Equipment Manufacturer Parts/OEM).
- Glass Insurance:
- An insurance policy used to insure plate glass, lettering, frames, and ornamentation. Glass insurance is available with or without a deductible.
- Graduated Driver Licenses:
- Licenses for younger drivers that permits them to develop their skills.
- Gramm-Leach-Bliley Act:
- A US law containing provisions that require all financial institutions to disclose to consumers and customers their policies and practices for protecting the privacy of nonpublic personal information.
- References:
- Ref-1
- Group Insurance:
- A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents.
- Guarantee Period:
- Duration of time during which the level of interest detailed under a fixed annuity is defined.
- Guaranteed Death Benefit:
- Basic death benefits guaranteed under variable annuity contracts.
- Guaranteed Income Contract/GIC:
- Guaranteed Income Contract/GIC: An alternative in an employer-sponsored retirement savings plan, which assures a stated rate of return on invested funds over the life of the agreement.
- References:
- Ref-1
- Guaranteed Living Benefit:
- An assurance in a variable annuity that a specific level of annuity payment will be maintained.
- Guaranteed Replacement Cost Coverage:
- Homeowners policy that pays the entire cost of replacing or repairing a damaged or destroyed home. (See Extended Replacement Cost Coverage)
- Guaranty Fund:
- A fund used when insolvent insurance companies cannot pay their claims. The fund is managed by the state and is created with money collected from insurance companies licensed in that state.
- References:
- Ref-1
- Gun Liability:
- A recent legal conception that holds gun makers responsible for the cost of injuries caused by guns.
- Hard Market:
- A seller’s market in which insurance is expensive and in short supply. (See Property/Casualty Insurance Cycle).
- References:
- Ref-1
- Homeowners Insurance Policy:
- The usual homeowners’ insurance policy covering the house, the garage and other structures on the property, along with the dangers to which a homeowner is exposed.
- References:
- Ref-1
- House Year:
- The standard measurement for homeowners insurance, which is equal to 365 days of insured coverage for a single dwelling.
- Hurricane Deductible:
- An amount added to a homeowner’s insurance policy to restrict an insurer’s exposure to loss from a hurricane.
- I
- ^^^
- Identity Theft Insurance:
- Insurance for costs incurred due to an identity theft. This type if coverage may include expenses for notarizing fraud affidavits and certified mail, lost income from time taken off from work to meet with law-enforcement personnel or credit agencies, etc.
- References:
- Ref-1
- Immediate Annuity:
- An annuity under which income payments begin one period after the annuity is purchased.
- Incurred but not Reported Losses/IBNR:
- Losses that are not report with the insurer or reinsurer until years after the policy is sold.
- References:
- Ref-1
- Incurred Losses:
- Losses occurring within a fixed period, whether or not adjusted or paid during the same period.
- Indemnify:
- Provide financial compensation for losses.
- Independent Agent:
- Agent who is self-employed, is paid on commission, and represents several insurance companies. (See Captive Agent).
- Individual Retirement Account/IRA:
- A tax-deductible retirement savings plan in which the allowable contributions and earnings are not taxed until the funds are withdrawn.
- References:
- Ref-1
- Inflation Guard Clause:
- A condition added to a homeowners’ coverage policy that adjusts the coverage limit on the dwelling each time the policy is renewed to reflect current construction expenses.
- Inland Marine Insurance:
- A broad type of coverage which covers articles in transit as well as bridges, tunnels and other means of transportation and communication. Floaters that cover expensive personal items such as fine art and jewelry are included in this category. (See Floater)
- References:
- Ref-1
- Insolvency:
- The inability of a borrower to meet financial obligations as they mature or having insufficient assets to pay legal debts. (See Liquidation; Risk-based Capital)
- Institutional Investor:
- An organization such as a bank or insurance company that buys and sells large quantities of securities.
- Insurable Risk:
- A risk that meets the ideal criteria for efficient insurance. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable.
- Insurance:
- A process to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance firm in return for a premium.
- Insurance Pool:
- A group of insurance firms that collect assets, allowing them to offer an amount of insurance substantially more than can be provided by individual companies to ensure large risks such as nuclear power stations. (See Beach and Windstorm Plans; Fair Access to Insurance Requirements Plans/FAIR Plans; Joint Underwriting Association / JUA)
- Insurance Regulatory Information System/IRIS:
- An information system developed by the National Association of Insurance Commissioners in the US to help state regulatory organizations to assess the financial stability of individual insurance companies by means of a series of ratios derived from the companies' statutory annual statements.
- References:
- Ref-1
- Insurance Score:
- Confidential gradings based on credit information. It is a measure of how well customers manage their financial affairs, not of their financial assets.
- Insurance-to-Value:
- Insurance written in an amount approximating the value of the insured property.
- Integrated Benefits:
- Insurance where the difference between job-related and non-occupational diseases or injuries is canceled and employee compensation and general health coverage are combined.
- Intermediation:
- The procedure carried out by a financial institution serving as a link, or intermediary, between borrowers and savers. Savers deposit funds in the institution, which lends those funds to home buyers and other borrowers.
- Internet Insurer:
- An insurer that sells exclusively via the Internet.
- Internet Liability Insurance:
- Insurance intended to save businesses from legal responsibilities that may come up from the conducting of business over the Internet. This includes copyright infringement, defamation, and violation of privacy.
- Investment Income:
- Income generated by the investment of assets.
- Joint Underwriting Association/JUA:
- An unincorporated association of insurance companies formed to provide a particular form of insurance to the public. Those who insure with a JUA pay assessments in addition to their premiums which provide monies for the operation of the association. (See Assigned Risk Plans; Residual Market).
- Junk Bonds:
- Wall Street slang term used for bonds listed at below investment grade (below the top four ratings) by agencies that rate bonds.
- Kidnap/Ransom Insurance:
- Insurance up to certain limits for the price of ransom or extortion payments and related expenses. This type of insurance is generally bought by international corporations to cover employees.
- Law of Large Numbers:
- This is the theory of probability on which the business of insurance is based. Basically a prediction that must be made from actuarial experience or statistical analysis of the number of losses to be expected in a group of exposures.
- Liability Insurance:
- Insurance for what the policyholder is legally obliged to compensate due to bodily injury or property damage caused to another person.
- Life Insurance:
- See Ordinary Life Insurance; Term Insurance; Variable Life Insurance; Whole Life Insurance.
- Limits:
- Maximum amount of insurance that can be paid for a covered loss.
- Line:
- Type or kind of insurance, such as personal lines.
- Liquidation:
- The process of converting securities or other property into cash. The dissolution of a company, with cash remaining after sale of its assets and payment of all indebtedness being distributed to the shareholders. Such insurance company liquidations are not subject to the Federal Bankruptcy Code.
- Liquidity:
- The ability and speed with which a security can be converted into cash.
- Liquor Liability:
- Coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the policyholder.
- Lloyds:
- A company formed to market services of a group of underwriters. Not connected to Lloyd’s of London, and is found primarily in Texas.
- Lloyd's of London:
- A marketplace where underwriting syndicates, or mini-insurers, gather to sell insurance policies and reinsurance. The Lloyd’s market is a major player in the international reinsurance market as well as a primary market for marine insurance and large risks.
- Long-Term Care Insurance:
- Insurance that provides expert nursing, intermediate care, or custodial care for a patient (generally over age 65) in a nursing facility.
- References:
- Ref-1
- Loss:
- A reduction in the quality or value of a property, or a legal liability.
- Loss Adjustment Expenses:
- The sum insurers pay for investigating and settling insurance claims.
- Loss Costs:
- Part of an insurance rate used to cover claims and the costs of adjusting claims.
- Loss of Use:
- A term included in homeowners’ and renters’ insurance policies that reimburses policyholders for any additional living costs due to having to live elsewhere while their home is being restored following a disaster.
- Loss Ratio:
- Percentage of each premium dollar an insurer spends on claims.
- Loss Reserves:
- A firm’s best approximation of what it will pay for claims, which is periodically readjusted.
- L-Share Variable Annuities:
- A form of variable annuity contract usually with short surrender periods and higher mortality and expense risk charges.
- References:
- Ref-1
- Managed Care:
- A contract between an employer or insurer and selected providers to provide comprehensive health care at a discount to members of the insured group and coordinate the financing and delivery of health care.
- Manual:
- A book published by an insurance or bonding company or a rating association or bureau that gives rates, classifications, and underwriting rules.
- Marine Insurance:
- Insurance that compensates the owners of goods transported overseas in the event of loss that cannot be legally recovered from the carrier. Also covers air shipments. Wear and tear, dampness, mold, and war are not included. (See Inland Marine and Ocean Marine)
- McCarran-Ferguson Act:
- A federal law signed in 1945 in which Congress declared that states would continue to regulate the insurance business. The law grants insurers a limited exemption from federal antitrust legislation.
- References:
- Ref-1
- Mediation:
- Non-binding procedure in which a third party attempts to resolve a conflict between two other parties.
- Medicaid:
- A program sponsored by the federal government and administered by states that is intended to provide health care and health-related services to low-income individuals.
- Medical Malpractice Insurance:
- See Malpractice Insurance.
- Medical Payments Insurance:
- A coverage in which the insurer agrees to pay the insured and others up to a certain limit for medical or funeral expenses as a result of bodily injury or death by accident. Payments are without regard to fault.
- Medical Utilization Review:
- The practice used by insurance companies to review claims for medical treatment.
- Medicare:
- Federal program for people 65 or older that pays part of the costs associated with hospitalization, surgery, doctors’ bills, home health care, and skilled-nursing care.
- Medigap/Medsup:
- Policies that supplement federal insurance benefits particularly for those covered under Medicare.
- References:
- Ref-1
- Mine Subsidence Coverage:
- An approval to a homeowner’s insurance policy for losses to a home caused by the land under a house sinking into a mine shaft.
- Money Supply:
- Total supply of money in the economy, composed of currency in circulation and deposits in savings and checking accounts.
- Mortality & Expense (M&E) Risk Charge:
- A fee that covers such annuity contract guarantees as death benefits.
- Mortgage Guarantee Insurance:
- Insurance for the mortgagee in the event that a mortgage holder defaults on a loan.
- Mortgage Insurance:
- A policy that allows mortgage lenders to recover part of their financial losses if a borrower fails to fully repay a loan. Mortgage insurance makes it possible to buy a home with as little as 5% down payment.
- Mortgage-Backed Securities:
- Investment grade securities backed by a pool of mortgages.
- Multiple Peril Policy:
- A package policy, such as a homeowners’ or business’ coverage policy, that offers insurance against several different perils.
- References:
- Ref-1
- Municipal Bond Insurance:
- Insurance that assures bondholders timely payment of interest and principal even if the issuer of the bonds defaults. This type of coverage is offered by insurance companies with high credit ratings, the coverage raises the credit rating of a municipality offering the bond to that of the insurance firm.
- Municipal Liability Insurance:
- Liability insurance for municipalities.
- Mutual Holding Company:
- A company which offers mutual firms with the organizational and capital raising rewards of stock insurers, while keeping a hold on the policyholder ownership of the mutual.
- Mutual Insurance Company:
- A firm owned by its policyholders that returns part of its profits to the policyholders as dividends.
- National Flood Insurance Program:
- Federal government-sponsored program under which flood insurance is sold to homeowners and businesses. (See Adverse Selection; Flood Insurance)
- Net Premiums Written:
- See Premiums Written.
- References:
- Ref-1
- No-Fault:
- A type of auto insurance that pays for each driver’s own injuries, regardless of who caused the accident.
- No-Fault Medical:
- A type of accident coverage in homeowner’s policies.
- Non-Admitted Assets:
- Assets that are not included on the balance sheet of an insurance company. These assets include fixtures, furniture, past-due accounts receivable, and agents’ debt balances. (See Assets).
- Non-Admitted Insurer:
- Insurers who are not licensed in some states, but are in others.
- No-Pay, No-Play:
- This is a concept that people who don’t buy insurance should not receive benefits. The concept bans uninsured drivers from collecting damages from insured drivers.
- Notice of Loss:
- A written notice the insured provides to the insurer that a loss has occurred.
- Nuclear Insurance:
- Insurance to covers operators of nuclear reactors and other facilities for liability and property damage in the case of a nuclear accident. This type of coverage involves both private insurers and the federal government.
- References:
- Ref-1
- Nursing Home Insurance:
- A form of long-term care policy that covers a policyholder’s stay in a nursing facility.
- Occurrence Policy:
- Coverage that pays claims arising out of incidents that occur during the policy term. (See Claims-made Policy).
- Ocean Marine Insurance:
- Insurance for sea-going vessels, including liabilities connected with them, and their cargoes.
- Open Competition States:
- States where insurance firms are allowed to set new prices without prior approval.
- References:
- Ref-1
- Operating Expenses:
- The cost of maintaining a business’s property, includes insurance, property taxes, utilities and rent, but excludes income tax, depreciation and other financing expenses.
- Options:
- Agreements that allow, but do not oblige, the purchasing or selling of assets at a set price on a specific date.
- Ordinance or Law Coverage:
- Approval to a property policy, including homeowners, that pays for the additional cost of rebuilding to fulfill laws. For example, a building severely damaged in a hurricane may be elevated above the flood line when it is rebuilt.
- Ordinary Life Insurance:
- Life insurance which is available to individuals in relatively unrestricted maximum death benefit amounts, and premiums may be paid monthly or less frequently. (See Term Insurance).
- Original Equipment Manufacturer Parts/OEM:
- Sheets of metal auto parts made by the manufacturer of the vehicle. (See Generic Auto Parts)
- Over-the-Counter (OTC):
- Security that is not listed or traded on an exchange such as the New York Stock Exchange.
- Pay-at-the-Pump:
- A system proposed in the 1990s in which auto insurance premiums would be paid to state governments through a per-gallon surcharge on gasoline.
- Pension Benefit Guaranty Corporation:
- The Federal body responsible for administering a retirement insurance programs, under ERISA. Benefits are paid up to certain limits.
- References:
- Ref-1
- Pensions:
- Programs to provide employees with retirement income after they meet minimum age and service requirements. (See Defined Benefit Plan; Defined Contribution Plan).
- Peril:
- A certain risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.
- Personal Articles Floater:
- A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.
- Personal Injury Protection Coverage/PIP:
- Part of an auto coverage policy that takes care of the treatment of injuries to the driver and passengers of the policyholder’s car.
- References:
- Ref-1
- Personal Lines:
- Insurance covering the liability and property damage exposures of private individuals and their households. (See Commercial Lines).
- Point-of-Service Plan:
- Health insurance plan which allows choice of receiving services from a participating or from non-participating provider.
- Policy:
- A written agreement for coverage between an insurance firm and policyholder stating details of coverage.
- Policyholders' Surplus:
- Sum left after liabilities are deducted from assets. Sums such as paid-in capital and special voluntary reserves are included in this term. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation.
- Political Risk Insurance:
- Insurance for businesses operating abroad against loss due to political upheavals.
- Pollution Insurance:
- Coverage that covers property loss and liability due to pollution-related damages. (See Claims-made Policy)
- References:
- Ref-1
- Pool:
- See Insurance Pool.
- Preferred Provider Organization:
- A program in which contracts are established with providers of medical care. Providers under such contracts are referred to as preferred providers.
- Premises:
- The particular location of the property or a portion of it as designated in an insurance policy.
- Premium:
- The price of an insurance policy typically charged annually or semiannually. (See Direct Premiums; Earned Premium; Unearned Premium).
- Premium Tax:
- A state tax on premiums paid by its residents and businesses and collected by insurers.
- Premiums in Force:
- The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time.
- Premiums Written:
- The total premiums on all policies written by an insurer during a specified period of time.
- Primary Company:
- In a reinsurance transaction, the insurance company that is reinsured.
- Primary Market:
- Market for new issue securities where the proceeds go directly to the issuer.
- Prime Rate:
- The interest or discount rate charged by banks to its largest and strongest customers.
- Prior Approval States:
- States where insurance firms needs to file probable price changes with state regulators, and gain permission before they can go into effect.
- References:
- Ref-1
- Private Mortgage Insurance:
- See Mortgage Guarantee Insurance.
- Private Placement:
- Sale of stocks, bonds or other investments directly to an institutional investor or individuals.
- Product Liability:
- Legal liability incurred by a manufacturer, merchant, or distributor because of injury or damage resulting from the use of their product.
- Product Liability Insurance:
- Protects manufacturers’ and distributors’ exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product.
- Professional Liability Insurance:
- Covers professionals for negligence and errors or omissions that injure their clients.
- Proof of Loss:
- Documents showing the insurance company that a loss occurred.
- Property/Casualty Insurance:
- Type of insurance that is primarily concerned with the legal liability for losses caused by injury to persons or damage to the property of others.
- Property/Casualty Insurance Cycle:
- Industry business cycle with recurrent periods of hard and soft market conditions.
- Proposition 103:
- A November 1988 California ballot that called for a statewide auto insurance rate rollback and for rates to be based more on driving records and less on geographical location.
- References:
- Ref-1
- Purchasing Group:
- A group that offers coverage to groups of similar businesses with similar exposures to risk.
- Pure Life Annuity:
- A type of annuity that finishes payments when the annuitant dies.
- Rate Regulation:
- The process by which states monitor insurance companies’ rate changes.
- Rating Agencies:
- Six major credit agencies decide insurers’ financial strength and viability to meet claims obligations. They are A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Moody’s Investors Services; Standard & Poor’s Corp.; and Weiss Ratings, Inc.