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A

ACTUAL CASH VALUE – A form of
insurance that pays damages equal to the replacement value of damaged property
minus depreciation.  

ACTUARY – An insurance
professional skilled in the analysis, evaluation,
and management of statistical information. Evaluates insurance firms’ reserves,
determines rates and rating methods, and determines other business and financial
risks.

ADDITIONAL LIVING EXPENSES
Extra charges covered by homeowners policies over and above the policyholder’s
customary living expenses. They kick in when the insured requires temporary
shelter due to damage by a covered peril that makes the home temporarily
uninhabitable.

ADJUSTER– An individual employed
by a property/casualty insurer to evaluate losses and settle policyholder
claims. These adjusters differ from public adjusters, who negotiate with
insurers on behalf of policyholders, and receive a portion of a claims
settlement. Independent adjusters are independent contractors who adjust claims
for different insurance companies.

AGENCY COMPANIES- Companies that
market and sell products via independent agents.

ALTERNATIVE DISPUTE RESOLUTION / ADR
Alternative to going to court to settle disputes. Methods include arbitration,
where disputing parties agree to be bound to the decision of an independent
third party, and mediation, where a third party tries to arrange a settlement
between the two sides.

ANNUAL STATEMENT -Summary of an
insurer’s or re-insurer’s financial operations for a particular year, including
a balance sheet. It is filed with the state insurance department of each
jurisdiction in which the company is licensed to conduct business.

ANTITRUST LAWS– Laws that
prohibit companies from working as a group to set prices, restrict supplies or
stop competition in the marketplace. The insurance industry is subject to state
antitrust laws but has a limited exemption from federal antitrust laws. This
exemption, set out in the McCarran-Ferguson Act, permits insurers to jointly
develop common insurance forms and share loss data to help them price policies.

APPRAISAL– A survey to determine
a property’s insurable value, or the amount of a loss.

ARBITRATION– Procedure in which
an insurance company and the insured or a vendor agree to settle a claim dispute
by accepting a binding or non-binding decision made by a third party.

ARSON -The deliberate setting of
a fire.

ASSETS – The property owned, in
this case by an insurance company, including stocks, bonds, and real estate
investments. State laws require a conservative valuation of assets so they do
not allow insurance companies to list some assets whose values are uncertain,
such as furniture, fixtures, debit balances, and accounts receivable that are
more than 90 days past due.

ASSIGNED RISK PLANS – Facilities
through which drivers can obtain auto insurance if they are unable to buy it in
the regular or voluntary market. These are the most well-known type of residual
auto insurance market, which exist in every state. In an assigned risk plan, all
insurers selling auto insurance in the state are assigned these drivers to
insure, based on the amount of insurance they sell in the regular market

AUTO POLICY – There are
basically six different types of coverage’s. 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, 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.
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B

BALANCE SHEET – Provides a
snapshot of a company’s financial condition at one point in time. It shows
assets, including investments and reinsurance, and liabilities, such as loss
reserves to pay claims in the future, as of a certain date. It also states a
company’s equity, known as policyholder surplus. Changes in that surplus are one
indicator of an insurer’s financial standing.
BINDER – Temporary authorization of coverage issued prior to
the actual insurance policy.

BLANKET COVERAGE – Insurance
coverage for more than one item of property at a single location, or two or more
items of property in different locations.

BODILY INJURY LIABILITY COVERAGE
– Portion of an auto insurance policy that covers injuries the policyholder
causes to someone else.

BOOK OF BUSINESS -Total amount
of insurance on an insurer’s books at a particular point in time.

BROKER -An intermediary between
a customer and an insurance company. Brokers typically search the market for
coverage appropriate to their clients. They work on commission and usually sell
commercial, not personal, insurance.

BURGLARY AND THEFT INSURANCE
Insurance for the loss of property due to burglary, robbery or larceny. It is
provided in a standard homeowners policy and in a business multiple peril
policy.  

C

CAPACITY – The supply of
insurance available to meet demand. Capacity depends on the industry’s financial
ability to accept risk. Reduced capacity leads to higher premiums, but higher
premiums eventually attract more capacity to the market.

CAPITAL MARKETS -The markets in
which equities and debt are traded.

CAPTIVE AGENT – A person who
represents only one insurance company and is restricted by agreement from
submitting business to any other company, unless it is first rejected by the
agent’s captive company.

CAPTIVES – Insurers that are
created and wholly-owned by one or more non-insurers, to provide owners with
coverage. A form of self-insurance.

CATASTROPHE – Term used for
statistical recording purposes to refer to a single incident or a series of
closely related incidents causing severe insured property losses totaling more
than a given amount.

CATASTROPHE DEDUCTIBLE – A
percentage or dollar amount that a homeowner must pay before the insurance
policy kicks in when a major natural disaster occurs. These large deductibles
limit an insurer’s potential losses in such cases, allowing it to insure more
property. A property insurer may not be able to buy reinsurance to protect its
own bottom line unless it keeps its potential maximum losses under a certain
level.

CHARTERED PROPERTY/CASUALTY UNDERWRITER /
CPCU
– A professional designation given by the American Institute for
Property and Liability Underwriters. National examinations and three years of
work experience are required.

COLLISION COVERAGE – Portion of
an auto insurance policy that covers the damage to the policyholder’s car from a
collision.

COMBINED RATIO – Percentage of
each premium dollar a property/casualty insurer spends on claims and expenses.
When the ratio is over 100, the insurer has an underwriting loss.

COMMERCIAL LINES -Products
designed for and bought by businesses. Among the major coverage’s are boiler and
machinery, business interruption, commercial auto, comprehensive general
liability, directors and officers liability, fire and allied lines, inland
marine, medical malpractice liability, product liability, professional
liability, surety and fidelity, and workers compensation. Most of these
commercial coverage’s can be purchased separately except business interruption
which must be added to a fire insurance (property) policy. (See Commercial
multiple peril)

COMMISSION – Fee paid to an
agent or insurance salesperson as a percentage of the policy premium. The
percentage varies widely depending on coverage, the insurer, and the marketing
methods.

COMPLAINT RATIO – A measure used
by some state insurance departments to track consumer complaints against
insurance companies. Generally, it is written as the number of complaints upheld
against an insurance company, as a percentage of premiums written. In some
states, complaints from medical providers over the promptness of payments may
also be included.

COMPREHENSIVE COVERAGE – Portion
of an auto insurance policy that covers damage to the policyholder’s car not
involving a collision with another car (including damage from fire, explosions,
and riots), and theft.

CONTINGENT LIABILITY – Liability
of individuals, corporations, or partnerships for accidents caused by people
other than employees for whose acts or omissions the corporations or
partnerships are responsible.

COVERAGE – Synonym for
insurance.

CREDIT SCORE – The number
produced by an analysis of an individual’s credit history. Studies have shown
that credit history provides an indicator of the likelihood of an auto insurance
loss. Some companies use insurance scores as an insurance underwriting and
rating tool.

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D
DECLARATION – Part of a property or liability insurance policy
that states the name and address of policyholder, property insured, its location
and description, the policy period, premiums, and supplemental information.
Referred to as the “dec page.”
DEDUCTIBLE – The amount of loss paid by the policyholder.
Either a specified dollar amount, a percentage of the claim amount, or a
specified amount of time that must elapse before benefits are paid. The bigger
the deductible, the lower the premium charged for the same coverage.

DEMUTUALIZATION – The conversion
of insurance companies from mutual companies owned by their policyholders into
publicly-traded stock companies.

DEREGULATION – In insurance,
reducing regulatory control over insurance rates and forms. Commercial insurance
for businesses of a certain size has been deregulated in many states.

DIRECT SALES/ DIRECT RESPONSE
Method of selling insurance directly to the insured through an insurance
company’s own employees, through the mail, or via the Internet. This is in lieu
of using captive or exclusive agents.

DIRECT WRITERS – Insurance
companies that sell directly to the public using exclusive agents or their own
employees, through the mail, or via Internet. Large insurers, whether
predominately direct writers or agency companies, are increasingly using many
different channels to sell insurance. In reinsurance, denotes re-insurers that
deal directly with the insurance companies they reinsure without using a broker.

DOMESTIC INSURANCE COMPANY
Term used by a state to refer to any company incorporated there.

E

ECONOMIC LOSS – Total financial
loss resulting from the death or disability of a wage earner, or from the
destruction of property. Includes the loss of earnings, medical expenses,
funeral expenses, the cost of restoring or replacing property, and legal
expenses. It does not include non-economic losses, such as pain caused by an
injury.

ELECTRONIC COMMERCE / E-COMMERCE
– The sale of products such as insurance over the Internet.

ENDORSEMENT – A written form
attached to an insurance policy that alters the policy’s coverage, terms, or
conditions. Sometimes called a rider.

ESCROW ACCOUNT – Funds that a
lender collects to pay monthly premiums in mortgage and homeowners insurance,
and sometimes to pay property taxes.

EXCESS & SURPLUS LINES
Property/casualty coverage that isn’t available from insurers licensed by the
state (called admitted insurers) and must be purchased from a non-admitted
carrier.

EXCLUSION – A provision in an
insurance policy that eliminates coverage for certain risks, people, property
classes, or locations.

EXCLUSIVE AGENT – A captive
agent, or a person who represents only one insurance company and is restricted
by agreement from submitting business to any other company unless it is first
rejected by the agent’s company.

EXPENSE RATIO – Percentage of
each premium dollar that goes to 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.

F

FAIR ACCESS TO INSURANCE REQUIREMENTS
PLANS / FAIR PLANS
– Insurance pools that sell property insurance to
people who can’t buy it in the voluntary market because of high risk over which
they may have no control. FAIR Plans, which exist in 28 states and the District
of Columbia, insure fire, vandalism, riot, and windstorm losses, and some sell
homeowners insurance which includes liability. Plans vary by state, but all
require property insurers licensed in a state to participate in the pool and
share in the profits and losses.

FEDERAL INSURANCE ADMINISTRATION / FIA
– Federal agency in charge of administering the National Flood Insurance
Program. It does not regulate the insurance industry.

FEDERAL RESERVE BOARD
Seven-member board that supervises the banking system by issuing regulations
controlling bank holding companies and federal laws over the banking industry.
It also controls and oversees the U.S. monetary system and credit supply.

FILE-AND-USE STATES – States
where insurers must file rate changes with their regulators, but don’t have to
wait for approval to put them into effect.

FINANCIAL RESPONSIBILITY LAW – A
state law requiring that all automobile drivers show proof that they can pay
damages up to a minimum amount if involved in an auto accident. Varies from
state to state but can be met by carrying a minimum amount of auto liability
insurance.

FIRE INSURANCE – Coverage
protecting property against losses caused by a fire or lightning that is usually
included in homeowners or commercial multiple peril policies.

FIRST-PARTY COVERAGE – Coverage
for the policyholder’s own property or person. In no-fault auto insurance it
pays for the cost of injuries. In no-fault states with the broadest coverage,
the personal injury protection (PIP) part of the policy pays for medical care,
lost income, funeral expenses and, where the injured person is not able to
provide services such as child care, for substitute services.

FLOOD INSURANCE – Coverage for
flood damage is available from the federal government under the National Flood
Insurance Program but is sold by licensed insurance agents. Flood coverage is
excluded under homeowners policies and many commercial property policies.
However, flood damage is covered under the comprehensive portion of an auto
insurance policy.

FOREIGN INSURANCE COMPANY – Name
given to an insurance company based in one state by the other states in which it
does business.

FRAUD – Intentional lying or
concealment by policyholders to obtain payment of an insurance claim that would
otherwise not be paid, or lying or misrepresentation by the insurance company
managers, employees, agents, and brokers for financial gain.

FREQUENCY – Number of times a
loss occurs. One of the criteria used in calculating premium rates.

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G

GENERIC AUTO PARTS – Auto crash
parts produced by firms that are not associated with car manufacturers. Insurers
consider these parts, when certified, at least as good as those that come from
the original equipment manufacturer (OEM). They are often cheaper than the
identical part produced by the OEM.
GLASS INSURANCE – Coverage for glass breakage caused by all
risks; fire and war are sometimes excluded. Insurance can be bought for windows,
structural glass, leaded glass, and mirrors. Available with or without a
deductible.

GRADUATED DRIVER LICENSES
Licenses for younger drivers that allow them to improve their skills.
Regulations vary by state, but often restrict night time driving. Young drivers
receive a learner’s permit, followed by a provisional license, before they can
receive a standard drivers license.

H

HACKER INSURANCE – A coverage
that protects businesses engaged in electronic commerce from losses caused by
hackers.

HOUSE YEAR – Equal to 365 days
of insured coverage for a single dwelling. It is the standard measurement for
homeowners insurance.

I

INDEMNIFY – Provide financial
compensation for losses.

INDEPENDENT AGENT – Agent who is
self-employed, is paid on commission, and represents several insurance
companies.

INFLATION GUARD CLAUSE – A
provision added to a homeowners insurance policy that automatically adjusts the
coverage limit on the dwelling each time the policy is renewed to reflect
current construction costs.

INLAND MARINE INSURANCE – A
broad type of coverage developed for shipments that do not involve ocean
transport. Covers all forms of land and air transit. Floaters are included in
this category.

INSOLVENCY – Insurer’s inability
to pay debts. Insurance insolvency standards and the regulatory actions taken
vary from state to state, but the last resort in the case of insolvency is
liquidation.

INSURABLE RISK – Risks for which
it is relatively easy to get insurance and that meet certain criteria. These
include being definable, accidental in nature, and part of a group of similar
risks large enough to make losses predictable. The insurance company also must
be able to come up with a reasonable price for the insurance.

INSURANCE – A system to make
large financial losses more affordable by transferring the risk from individuals
to large groups, or pools, in return for a premium.

INSURANCE POOL – A group of
insurance companies that pool assets, enabling them to provide an amount of
insurance substantially more than can be provided by individual companies to
ensure large risks such as nuclear power stations. Pools may be formed
voluntarily or mandated by the state to cover risks that can’t obtain coverage
in the voluntary market such as coastal properties subject to hurricanes.

INSURANCE REGULATORY INFORMATION SYSTEM /
IRIS
– Uses financial ratios to measure insurers’ financial strength.
Developed by the National Association of Insurance Commissioners. Each
individual state insurance department chooses how to use IRIS.

INSURANCE-TO-VALUE – Insurance
written in an amount approximating the value of the insured property.

INTERNET INSURER – An insurer
that sells exclusively via the Internet.

INTERNET LIABILITY INSURANCE
Coverage designed to protect businesses from liabilities that arise from the
conducting of business over the Internet, including copyright infringement,
defamation, and violation of privacy.

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J

JOINT UNDERWRITING ASSOCIATION / JUA
– Insurers which join together to provide coverage for a particular type of risk
or size of exposure, when there are difficulties in obtaining coverage in the
regular market, and which share in the profits and losses associated with the
program. JUAs may be set up to provide auto and homeowners insurance and various
commercial coverage’s, such as medical malpractice.

L

LAW OF LARGE NUMBERS – The
theory of probability on which the business of insurance is based. Simply put,
this mathematical premise says that the larger the group of units insured, such
as sport-utility vehicles, the more accurate the predictions of loss will be.

LIABILITY INSURANCE – Insurance
for what the policyholder is legally obligated to pay because of bodily injury
or property damage caused to another person.

LIMITS – Maximum amount of
insurance that can be paid for a covered loss.

LINE – Type or kind of
insurance, such as personal lines.

LLOYD’S OF LONDON – A
marketplace where underwriting syndicates, or mini-insurers, gather to sell
insurance policies and reinsurance. Originally, Lloyd’s was a London coffee
house in the 1600s patronized by ship-owners who insured each other’s hulls and
cargoes.

LLOYDS – Corporation formed to
market services of a group of underwriters. Does not issue insurance policies or
provide insurance protection. Insurance is written by individual underwriters,
with each assuming a part of every risk. Has no connection to Lloyd’s of London,
and is found primarily in Texas.

LOSS – A reduction in the
quality or value of a property, or a legal liability.

LOSS RATIO – Percentage of each
premium dollar an insurer spends on claims.

LOSS RESERVES – The company’s
best estimate of what it will pay for claims, which is periodically readjusted.
They represent a liability on the insurer’s balance sheet.

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M

MANUAL – A book published by an
insurance or bonding company or a rating association or bureau that gives rates,
classifications, and underwriting rules.

MCCARRAN-FERGUSON – Federal law
signed in 1945 in which Congress declared that states would continue to regulate
the insurance business. Grants insurers a limited exemption from federal
antitrust legislation.
MEDICAL PAYMENTS INSURANCE – A coverage in which the insurer
agrees to reimburse 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.

MULTIPLE PERIL POLICY – A
package policy, such as a homeowners or auto insurance policy, that provides
coverage against several different perils. It also refers to the combination of
property and liability coverage in one policy. In the early days of insurance, coverage’s
for property damage and liability were purchased separately.

MUTUAL INSURANCE COMPANY – A
company owned by its policyholders that returns part of its profits to the
policyholders as dividends. The insurer uses the rest as a surplus cushion in
case of large and unexpected losses.

N

NAMED PERIL – Peril specifically
mentioned as covered in an insurance policy.

NATIONAL FLOOD INSURANCE PROGRAM
– Federal government-sponsored program under which flood insurance is sold to
homeowners and businesses.

NO-FAULT MEDICAL – A type of
accident coverage in homeowners policies.

NOTICE OF LOSS – A written
notice required by insurance companies immediately after an accident or other
loss. Part of the standard provisions defining a policyholder’s responsibilities
after a loss.

O

ORDINANCE OF LAW COVERAGE
Endorsement to a property policy, including homeowners, that pays for the extra
expense of rebuilding to comply with ordinances or laws that did not exist when
the building was originally built.

ORDINARY LIFE INSURANCE – A life
insurance policy that remains in force for the policyholder’s lifetime. It
contrasts with term insurance, which only lasts for a specified number of years
but is renewable.

P

PACKAGE POLICY – A single
insurance policy that combines several coverage’s previously sold separately.
Examples include homeowners insurance and commercial multiple peril insurance.

PERIL – A specific risk covered
by an insurance policy, such as a fire, windstorm, flood, or theft.

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
– Portion of an auto insurance policy that covers the treatment of injuries to
the driver and passengers of the policyholder’s car.

PERSONAL LINES
Property/casualty insurance products that are designed for and bought by
individuals, including homeowners and automobile policies.

POLICY – A written contract for
insurance between an insurance company and policyholder stating details of
coverage.

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.

PROPERTY / CASUALTY INSURANCE
Covers damage to or loss of a policyholder’s property and a policyholder’s legal
liability for damages caused to other people or their property.

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R

RATE – The cost of a unit of
insurance, usually per $1,000. Rates are based on historical loss experience for
similar risks and may be regulated by state insurance offices.

RATING AGENCIES – Six major
credit agencies determine 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.
Factors considered include company earnings, capital adequacy, operating
leverage, liquidity, investment performance, reinsurance programs, and
management ability, integrity and experience. A high financial rating is not the
same as a high consumer satisfaction rating.

REINSURANCE – Insurance bought
by insurers. A re-insurer assumes part of the risk and part of the premium
originally taken by the insurer, known as the primary company. Reinsurance
effectively increases an insurer’s capital and therefore its capacity to sell
more coverage. The business is global and some of the largest re-insurers are
based abroad. Re-insurers have their own re-insurers, called retrocession Aires.
Re-insurers don’t pay policyholder claims. Instead, they reimburse insurers for
claims paid.

REPLACEMENT COST – Insurance
that pays the dollar amount needed to replace damaged personal property or
dwelling property without deducting for depreciation but limited by the maximum
dollar amount shown on the declarations page of the policy.

RESERVES – A company’s best
estimate of what it will pay for claims.

RESIDUAL MARKET – Facilities
that exist to provide coverage for those who cannot get it in the regular
market. Insurers generally must participate in these pools. For this reason it
is also known as the shared market.

RETENTION – The amount of risk
retained by an insurance company that is not reinsured.

RIDER – An attachment to an
insurance policy that alters the policy’s coverage or terms.

RISK – The chance of loss or the
person or entity that is insured.

RISK MANAGEMENT – Management of
the varied risks to which a business firm or association might be subject. It
includes analyzing all exposures to gauge the likelihood of loss and choosing
options to minimize loss. These options typically include reducing and
eliminating the risk with safety measures, buying insurance, and self-insurance.

S

SALVAGE – Damaged property an
insurer takes over after paying a claim to reduce its loss. Insurers receive
salvage rights over property on which they have paid claims, such as
badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have
the right to recover sunken treasures. Salvage charges are the costs associated
with recovering that property.

SCHEDULE – A list of individual
items or groups of items that are covered under one policy.

SECURITIES AND EXCHANGE COMMISSION / SEC
– The organization that oversees publicly-held insurance companies. Those
companies make periodic financial disclosures to the SEC, including an annual
financial statement (or 10K), and a quarterly financial statement (or 10-Q).
Companies must also disclose any material events and other information about
their stock.

SELF-INSURANCE – The concept of
assuming a financial risk oneself, instead of paying an insurance company to
take it. Every policyholder is a self-insurer in terms of paying a deductible
and co-payments. Large firms often self-insure frequent, small losses such as
damage to their fleet of vehicles or minor workplace injuries. Self-insurance
also refers to employers who assume all or part of the responsibility for paying
health insurance claims of their employees. Firms that self insured for health
claims are exempt from state insurance laws mandating the illnesses that group
health insurers must cover.

SEVERITY – Size of a loss. One
of the criteria used in calculating premiums rates.

SOLVENCY – Insurance companies’
ability to pay the claims of policyholders. Regulations to promote solvency
include minimum capital and surplus requirements, statutory accounting
conventions, limits to insurance company investment and corporate activities,
financial ratio tests, and financial data disclosure.

STOCK INSURANCE COMPANY – An
insurance company owned by its stockholders who share in profits through
earnings distributions and increases in stock value.

STRUCTURED SETTLEMENT – Legal
agreement to pay a designated person, usually someone who has been injured, a
specified sum of money in periodic payments, usually for his or her lifetime,
instead of in a single lump sum payment.

SUBROGATION – The legal process
by which an insurance company, after paying a loss, seeks to recover the amount
of the loss from another party who is legally liable for it.

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T

TERM INSURANCE – Protection
against premature death that comes in a form of life insurance. It pays a
benefit only when an insured dies within a specified period, and a designated
beneficiary receives the death benefit. If the insured lives beyond the
specified period, the beneficiary receives nothing.

THIRD-PARTY ADMINISTRATOR
Outside group that performs clerical functions for an insurance company.

THIRD-PARTY COVERAGE – Liability
coverage purchased by the policyholder as a protection against possible lawsuits
filed by a third party. The insured and the insurer are the first and second
parties to the insurance contract.

TITLE INSURANCE – Insurance that
indemnifies the owner of real estate in the event that his or her clear
ownership of property is challenged by the discovery of faults in the title.

TORT – A wrongful act, resulting
in injury or damage on which a civil action may be based.

TORT LAW – The body of law
governing negligence, intentional interference, and other wrongful acts for
which civil action can be brought, except for breach of contract, which is
covered by contract law.

TORT REFORM – Refers to
legislation designed to reduce liability costs through limits on various kinds
of damages and through modification of liability rules.

TOTAL LOSS – The condition of an
automobile or other property when damage is so extensive that repair costs would
exceed the value of the vehicle or property.

U

UMBRELLA POLICY – Coverage for
losses above the limit of an underlying policy. It applies to losses over a
large dollar amount, but terms of coverage are sometimes broader than those of
underlying policies.

UNDERWRITING – Examining,
accepting, or rejecting insurance risks and classifying the ones that are
accepted, in order to charge appropriate premiums for them.

UNDERWRITING INCOME – The
insurer’s profit on the insurance sale after all expenses and losses have been
paid. When premiums aren’t sufficient to cover claims and expenses, the result
is an underwriting loss. Underwriting losses are typically offset by investment
income.

UNINSURED MOTORISTS COVERAGE
Portion of an auto insurance policy that protects a policyholder from uninsured
and hit-and-run drivers.

UNIVERSAL LIFE INSURANCE – A
flexible premium policy that combines protection against premature death with a
savings account that typically earns a money market rate of interest. Premiums
can be changed during the life of the policy within limits and the policy will
lapse if there isn’t enough money to cover mortality and administrative costs.

V

VANDALISM – The malicious and
often random destruction or spoilage of another person’s property.

VARIABLE LIFE INSURANCE – A
policy that combines protection against premature death with a savings account
that can be invested in stocks, bonds, and money market mutual funds at the
policyholder’s discretion.

VOID – A policy contract that
for some reason specified in the policy becomes free of all legal effect. One
example under which a policy could be voided is when information a policyholder
provided is proven untrue.

W

WAIVER – The surrender of a
right or privilege which is known to exist.

WHOLE LIFE INSURANCE – The
oldest kind of cash value life insurance that combines protection against
premature death with a savings account. Premiums are fixed and guaranteed and
remain level throughout the policy’s lifetime.

WORKERS COMPENSATION – Insurance
that pays for medical care and physical rehabilitation of injured workers and
helps to replace lost wages while they are unable to work.

WRITE – To insure, underwrite,
or accept an application for insurance.

INDEX

A
B  C
D    E
F    G
H    I
J   L   M
N   O
P   R
S   T
U    V
W

 

These definitions provide a brief description of
several terms used within the insurance industry. These definitions do not apply
for all states or for all products. This is not an insurance contract. Other
terms, conditions, and exclusions may apply. These definitions do not change the
terms of any insurance contract. The inclusion of a definition of a particular
coverage does not necessarily indicate that we offer that coverage. Should any
conflict exist between these definitions and the provisions of the applicable
insurance policy, the terms of the insurance policy control. Coverage
availability varies by state.