Insurance Glossary
Confused about an insurance or financial term? Need to know what an acronym stands for? Use our helpful glossary to find the definition of many insurance-related words. Don't forget to call one of our insurance professionals at (516) 484-5200 if you need further assistance.
Sources: A.M. Best, US Dept. of Health and Human Services, Agencyinfo.net
Accidental Death Benefit
In a life insurance policy, benefit in addition to the death benefit paid to the beneficiary, should death occur due to an accident. There can be certain exclusions as well as time and age limits.
Actual Cash Value
Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year-old sofa will not be replaced at current full value because of a decade of depreciation.
Adjustable Rate
An interest rate that changes, based on changes in a published market-rate index.
Adjuster
A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted.
Agent
individual who sells and services insurance policies in either of two classifications: 1. Independent agent represents at least two insurance companies and (at least in theory) services clients by searching the market for the most advantageous price for the most coverage. The agent's commission is a percentage of each premium paid and includes a fee for servicing the insured's policy. The Curran Cooney Penny Agency is an independent agent and broker. 2. Direct or career agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent.
Aggregate Limit
Usually refers to liability insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents might occur.
Annual Administrative Fee
Charge for expenses associated with administering a group employee benefit plan.
Annual Maximum Benefit Amount
The maximum dollar amount set by an MCO that limits the total amount the plan must pay for all healthcare services provided to a subscriber in a year.
Annuitization
Process by which you convert part or all of the money in a qualified retirement plan or nonqualified annuity contract into a stream of regular income payments, either for your lifetime or the lifetimes of you and your joint annuitant. Once you choose to annuitize, the payment schedule and the amount is generally fixed and can't be altered.
Annuitization Options
Choices in the way to annuitize. For example, life with a 10-year period certain means payouts will last a lifetime, but should the annuitant die during the first 10 years, the payments will continue to beneficiaries through the 10th year. Selection of such an option reduces the amount of the periodic payment.
Annuity
An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.
Assets
Assets refer to "all the available properties of every kind or possession of an insurance company that might be used to pay its debts." There are three classifications of assets: invested assets, all other assets, and total admitted assets. Invested assets refer to things such as bonds, stocks, cash and income-producing real estate. All other assets refer to non-income producing possessions such as the building the company occupies, office furniture, and debts owed, usually in the form of deferred and unpaid premiums. Total admitted assets refer to everything a company owns. All other plus invested assets equals total admitted assets. By law, some states don't permit insurance companies to claim certain goods and possessions, such as deferred and unpaid premiums, in the all other assets category, declaring them "non-admissible."
Attained Age
Insured's age at a particular time. For example, many term life insurance policies allow an insured to convert to permanent insurance without a physical examination at the insured's then attained age. Upon conversion, the premium usually rises substantially to reflect the insured's age and diminished life expectancy.
Automobile Liability Insurance
Coverage if an insured is legally liable for bodily injury or property damage caused by an automobile.
Balance Sheet
An accounting term referring to a listing of a company's assets, liabilities and surplus as of a specific date.
Benefit Period
In health insurance, the number of days for which benefits are paid to the named insured and his or her dependents. For example, the number of days that benefits are calculated for a calendar year consists of the days beginning on Jan. 1 and ending on Dec. 31 of each year.
Best's Capital Adequacy Relativity (BCAR)
This percentage measures a company's relative capital strength compared to its industry peer composite. A company's BCAR, which is an important component in determining the appropriateness of its rating, is calculated by dividing a company's capital adequacy ratio by the capital adequacy ratio of the median of its industry peer composite using Best's proprietary capital mode. Capital adequacy ratios are calculated as the net required capital necessary to support components of underwriting, asset, and credit risks in relation to economic surplus.
Broker
Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies. The Curran Cooney Penny Agency is an independent agent and broker.
Broker-Agent
Independent insurance salesperson who represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant's coverage to maximize protection and minimize cost. This person is licensed as an agent and a broker. The Curran Cooney Penny Agency is an independent agent and broker.
Capital
Equity of shareholders of a stock insurance company. The company's capital and surplus are measured by the difference between its assets minus its liabilities. This value protects the interests of the company's policyowners in the event it develops financial problems; the policyowners' benefits are thus protected by the insurance company's capital. Shareholders' interest is second to that of policyowners.
Captive Agent
Representative of a single insurer or fleet of insurers who is obliged to submit business only to that company, or at the very minimum, give that company first refusal rights on a sale. In exchange, that insurer usually provides its captive agents with an allowance for office expenses as well as an extensive list of employee benefits such as pensions, life insurance, health insurance, and credit unions. The Curran Cooney Penny Agency is not a ôcaptive agent.ö
Casualty
Liability or loss resulting from an accident.
Casualty Insurance
That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.
Chartered Property and Casualty Underwriter (CPCU)
Professional designation earned after the successful completion of 10 national examinations given by the American Institute for Property and Liability Underwriters. Covers such areas of expertise as insurance, risk management, economics, finance, management, accounting, and law. Three years of work experience also are required in the insurance business or a related area.
Claim
A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.
Claim (medical)
An itemized statement of healthcare services and their costs provided by a hospital, physician's office, or other provider facility. Claims are submitted to the insurer or managed care plan by either the plan member or the provider for payment of the costs incurred.
Closed Access
A plan that requires you to select a primary care physician. He or she is the only one allowed to send you to other health care providers within the plan. Also called Closed Panel or Gatekeeper model.
Coinsurance
In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20% health insurance coinsurance clause, the policyholder pays for the deductible plus 20% of his covered losses. After paying 80% of losses up to a specified ceiling, the insurer starts paying 100% of losses.
Coinsurance (medical)
The amount you pay for medical care after you've met your deductible. The coinsurance rate is usually shown as a percentage. If you have an 80/20 plan, the health insurance company pays 80 percent of the claim, and you pay 20 percent.
Collision Insurance
Covers physical damage to the insured's automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.
Commercial Lines
Refers to insurance for businesses, professionals and commercial establishments.
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. Commissions are paid by the insurance company, not the insured.
Common Carrier
A business or agency that is available to the public for transportation of persons, goods or messages. Common carriers include trucking companies, bus lines and airlines.
Comprehensive Insurance
Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be covered under the comprehensive section.
Concurrent Periods
In hospital income protection, when a patient is confined to a hospital due to more than one injury and/or illness at the same time, benefits are paid as if the total disability resulted from only one cause.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
A federal act which requires each group health plan to allow employees and certain dependents to continue their group coverage for a stated period of time following a qualifying event that causes the loss of group health coverage. Qualifying events include reduced work hours, death or divorce of a covered employee, and termination of employment.
Convertible
Term life insurance coverage that can be converted into permanent insurance regardless of an insured's physical condition and without a medical examination. The individual cannot be denied coverage or charged an additional premium for any health problems.
Co-payment (co-pay)
A predetermined, flat fee an individual pays for health-care services, in addition to what insurance covers. For example, some HMOs require a $10 co-payment for each office visit, regardless of the type or level of services provided during the visit. Co-payments are not usually specified by percentages.
Cost-of-Living Adjustment (COLA)
Automatic adjustment applied to Social Security retirement payments when the consumer price index increases at a rate of at least 3%, the first quarter of one year to the first quarter of the next year.
Coverage
The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.
Coverage Area
The geographic region covered by travel insurance.
Covered Expenses
Covered services are those medical procedures the insurer agrees to pay for. They are listed in the health insurance policy. Most health insurance plans don't pay for all services. Treating wrinkles to make you look younger is one example of a service that is usually not covered.
Creditable Coverage
Term means that benefits provided by other drug plans are at least as good as those provided by the new Medicare Part D program. This may be important to people eligible for Medicare Part D but who do not sign up at their first opportunity because if the other plans provide creditable coverage, plan members can later convert to Medicare Part D without paying higher premiums than those in effect during their open enrollment period.
Current Liquidity (IRIS)
The sum of cash, unaffiliated invested assets and encumbrances on other properties to net liabilities plus ceded reinsurance balances payable, expressed as a percent. This ratio measures the proportion of liabilities covered by unencumbered cash and unaffiliated investments. If this ratio is less than 100, the company's solvency is dependent on the collectibility or marketability of premium balances and investments in affiliates. This ratio assumes the collectibility of all amounts recoverable from reinsurers on paid and unpaid losses and unearned premiums.
Customary Fee
Most health insurance plans will pay only what they call a reasonable (or usual) and customary fee for any service. This fee is defined as the charge for health care that is consistent with the average rate or charge for identical or similar services in a certain geographical area. If your doctor charges more, you may have to pay the difference.
Death Benefit
The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.
Deductible
Amount of loss that the insured pays before the insurance kicks in.
Dental preferred provider organization (dental PPO)
An organization that provides dental care to its members through a network of dentists who offer discounted fees to the plan members.
Direct Premiums Written
The aggregate amount of recorded originated premiums, other than reinsurance, written during the year, whether collected or not, at the close of the year, plus retrospective audit premium collections, after deducting all return premiums.
Direct Writer
An insurer whose distribution mechanism is either the direct selling system or the exclusive agency system.
Disease Management
A system of coordinated health-care interventions and communications for patients with certain illnesses.
Dividend
The return of part of the policy's premium for a policy issued on a participating basis by either a mutual or stock insurer. A portion of the surplus paid to the stockholders of a corporation.
Drug Card
Identification cards issued by a pharmacy benefit management plan to plan members. Also known as pharmaceutical cards or prescription cards.
Earned Premium
The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.
Elimination Period
The time which must pass after filing a claim before policyholder can collect insurance benefits; also known as the "waiting period."
Employee Contribution
The employee's share of the premium costs.
Employer Contribution
The employer's share of the health insurance costs.
Employers Liability Insurance
Coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by a workers' compensation law.
Encumbrance
A claim on property, such as a mortgage, a lien for work and materials, or a right of dower. The interest of the property owner is reduced by the amount of the encumbrance.
Exclusions
Items or conditions that are not covered by the general insurance contract.
Exclusive Provider Organization (EPO)
A type of preferred provider organization (see definition below) for which you use designated providers rather than having a choice. In an EPO, a primary physician monitors care and makes referrals within a network of providers.
Exposure
Measure of vulnerability to loss, usually expressed in dollars or units.
Extended Replacement Cost
This option extends replacement cost loss settlement to personal property and to outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment, subject to limitations on certain kinds of personal property; includes inflation protection coverage.
Financing Entity
Provides money for purchases.
Flexible Spending Account
A flexible spending account (FSA) is a financial account with tax advantages. An FSA allows an employee to set aside a portion of his or her earnings to pay for qualified expenses, most commonly for medical expenses, but often also for dependent care or other expenses. Money that is deducted from an employee's pay and placed in an FSA is not subject to payroll taxes.
Floater
A separate policy available to cover the value of goods beyond the coverage of a standard rentersÆ insurance policy including movable property such as jewelry or sports equipment.
Future Purchase Option
Life and health insurance provisions that guarantee the insured the right to buy additional coverage without proving insurability; also known as "guaranteed insurability option."
General Account
All premiums are paid into an insurer's general account. Thus, buyers are subject to credit-risk exposure to the insurance company, which is low but not zero.
General Liability Insurance
Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured's premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.
Generic Substitution
The dispensing of a drug that is the generic equivalent of a drug listed on a pharmacy benefit management plan's formulary. In most cases, generic substitution can be performed without physician approval.
Grace Period
The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time. In Universal Life policies, it typically provides for coverage to remain in force for 60 days following the date cash value becomes insufficient to support the payment of monthly insurance costs.
Group Model HMO
An HMO that contracts with a multi-specialty group of physicians who are employees of the group practice. Also known as a group practice model HMO.
Guaranteed Insurability Option
Life and health insurance provisions that guarantee the insured the right to buy additional coverage without proving insurability; also known as "future purchase option."
Guaranteed Issue Right
The right to purchase insurance without physical examination; the present and past physical condition of the applicant is not considered.
Guaranteed Renewable
A policy provision in many products which guarantees the policyowner the right to renew coverage at every policy anniversary date. The company does not have the right to cancel coverage except for nonpayment of premiums by the policyowner; however, the company can raise rates if they choose.
Guaranty Association
An organization of life insurance companies within a state responsible for covering the financial obligations of a member company that becomes insolvent.
Hazard
A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.
Hazardous Activity
Bungee jumping, scuba diving, horse riding and other activities not generally covered by standard insurance policies. For insurers that do provide cover for such activities, it is unlikely they will cover liability and personal accident, which should be provided by the company hosting the activity.
Health Insurance Portability and Accountability Act (HIPAA)
A federal act that protects people who change jobs, are self-employed, or who have pre-existing medical conditions. HIPAA standardizes an approach to the continuation of healthcare benefits for individuals and members of small group health plans and establishes parity between the benefits extended to these individuals and those benefits offered to employees in large group plans. The act also contains provisions designed to ensure that prospective or current enrollees in a group health plan are not discriminated against based on health status.
Health Maintenance Organization (HMO)
Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.
Health Reimbursement Account (HRA)
HRAs are accounts that employers set up to pay employees back for qualified medical expenses. An HRA pays until the funds are gone. They balance part of the costs employees have to pay with a high-deductible plan. All unused funds are rolled over at the end of the year. HRAs remain with the original employer and do not follow an employee to new job.
Health Savings Account (HSA)
Plan that allows you to contribute pre-tax money to be used for qualified medical expenses. HSAs, which are portable, must be linked to a high-deductible health insurance policy.
Hurricane Deductible
Amount you must pay out-of-pocket before hurricane insurance will kick in. Many insurers in hurricane-prone states are selling homeowners insurance policies with percentage deductibles for storm damage, instead of the traditional dollar deductibles used for claims such as fire and theft. Percentage deductibles vary from one percent of a home's insured value to 15 percent, depending on many factors that differ by state and insurer.
Impaired Insurer
An insurer which is in financial difficulty to the point where its ability to meet financial obligations or regulatory requirements is in question.
Income Taxes
Incurred income taxes (including income taxes on capital gains) reported in each annual statement for that year.
Indemnity
Restoration to the victim of a loss by payment, repair or replacement.
Independent Insurance Agents & Brokers of America (IIABA)
Formerly the Independent Insurance Agents of America (IIAA), this is a member organization of independent agents and brokers monitoring and affecting industry issues. Numerous state associations are affiliated with the IIABA. The Curran Cooney Penny Agency is a member of the Independent Insurance Agents & Brokers of New York.
Inflation Protection
An optional property coverage endorsement offered by some insurers that increases the policy's limits of insurance during the policy term to keep pace with inflation.
Insurable Interest
Interest in property such that loss or destruction of the property could cause a financial loss.
Insurance Adjuster
A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an "as needed" basis and might work for several insurance companies at the same time. Independent adjusters charge insurance companies both by the hour and by miles traveled. Public adjusters work for the insured in the settlement of claims and receive a percentage of the claim as their fee.
Insurance Attorneys
An attorney who practices the law as it relates to insurance matters. Attorneys might be solo practitioners or work as part of a law firm. Insurance companies who retain attorneys to defend them against law suits might hire staff attorneys to work for them in-house or they might retain attorneys on an as-needed basis.
Insurance Institute of America (IIA)
An organization which develops programs and conducts national examinations in general insurance, risk management, management, adjusting, underwriting, auditing and loss control management.
Insurance Regulatory Information System (IRIS)
Introduced by the National Association of Insurance Commissioners in 1974 to identify insurance companies that might require further regulatory review.
Interest-Crediting Methods
There are at least 35 interest-crediting methods that insurers use. They usually involve some combination of point-to-point, annual reset, yield spread, averaging, or high water mark.
Investment Income
The return received by insurers from their investment portfolios including interest, dividends and realized capital gains on stocks. It doesn't include the value of any stocks or bonds that the company currently owns.
Investments in Affiliates
Bonds, stocks, collateral loans, short-term investments in affiliated and real estate properties occupied by the company.
Laddering
Purchasing bond investments that mature at different time intervals.
Least Expensive Alternative Treatment
The amount an insurance company will pay based on its determination of cost for a particular procedure.
Leverage
Measures the exposure of a company's surplus to various operating and financial practices. A highly leveraged, or poorly capitalized, company can show a high return on surplus, but might be exposed to a high risk of instability; also known as ôcapitalization.ö
Liability
Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense.
Liability Insurance
Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.
Licensed
Indicates the company is incorporated (or chartered) in another state but is a licensed (admitted) insurer for this state to write specific lines of business for which it qualifies.
Lifetime Maximum
The maximum amount of money a plan will pay toward health care services during your lifetime.
Lifetime Reserve Days
Sixty additional days Medicare pays for when you are hospitalized for more than 90 days in a benefit period. These days can only be used once during your lifetime. For each lifetime reserve day, Medicare pays all covered costs except for a daily coinsurance amount.
Liquidity
Liquidity is the ability of an individual or business to quickly convert assets into cash without incurring a considerable loss. There are two kinds of liquidity: quick and current. Quick liquidity refers to fundsùcash, short-term investments, and government bondsùand possessions which can immediately be converted into cash in the case of an emergency. Current liquidity refers to current liquidity plus possessions such as real estate which cannot be immediately liquidated, but eventually can be sold and converted into cash. Quick liquidity is a subset of current liquidity. This reflects the financial stability of a company and thus their rating.
Living Benefits
This feature allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home; also known as "accelerated death benefits."
Lloyd's
Generally refers to Lloyd's of London, England, an institution within which individual underwriters accept or reject the risks offered to them. The Lloyd's Corp. provides the support facility for their activities.
Lloyds Organizations
These organizations are voluntary unincorporated associations of individuals. Each individual assumes a specified portion of the liability under each policy issued. The underwriters operate through a common attorney-in-fact appointed for this purpose by the underwriters. The laws of most states contain some provisions governing the formation and operation of such organizations, but these laws don't generally provide as strict supervision and control as the laws dealing with incorporated stock and mutual insurance companies.
Loss Adjustment Expenses
Expenses incurred to investigate and settle losses.
Loss Control
All methods taken to reduce the frequency and/or severity of losses including exposure avoidance, loss prevention, loss reduction, segregation of exposure units and non-insurance transfer of risk. A combination of risk control techniques with risk financing techniques forms the nucleus of a risk management program. The use of appropriate insurance, avoidance of risk, loss control, risk retention, self insuring, and other techniques that minimize the risks of a business, individual, or organization.
Loss Ratio
The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio measures the company's underlying profitability, or loss experience, on its total book of business.
Loss Reserve
The estimated liability, as it would appear in an insurer's financial statement, for unpaid insurance claims or losses that have occurred as of a given evaluation date. Usually includes losses incurred but not reported (IBNR), losses due but not yet paid, and amounts not yet due. For individual claims, the loss reserve is the estimate of what will ultimately be paid out on that claim.
Medicaid
A jointly funded federal and state program that provides hospital expense and medical expense coverage to the low-income population and certain aged and disabled individuals.
Medical Loss Ratio
Total health benefits divided by total premium.
Medicare
A federal government hospital expense and medical expense insurance plan primarily for elderly and disabled persons.
Medicare Supplement
A private medical expense insurance plan that supplements Medicare coverage. Also known as a Medigap policy.
Member
Anyone covered under a health plan, such as the enrollee or eligible dependents.
Member Month
Total number of health plan participants who are members for each month.
Mortality and Expense Risk Fees
A charge that covers such annuity contract guarantees as death benefits.
Mortgage Insurance Policy
In life and health insurance, a policy covering a mortgagor with benefits intended to pay off the balance due on a mortgage upon the insured's death, or to meet the payments due on a mortgage in case of the insured's death or disability.
Mutual Insurance Companies
Companies with no capital stock, and owned by policyholders. The earnings of the company--over and above the payments of the losses, operating expenses and reserves--are the property of the policyholders. There are two types of mutual insurance companies. A non-assessable mutual charges a fixed premium and the policyholders cannot be assessed further. Legal reserves and surplus are maintained to provide payment of all claims. Assessable mutuals are companies that charge an initial fixed premium and, if that isn't sufficient, might assess policyholders to meet losses in excess of the premiums that have been charged.
Named Perils
Perils specifically covered on insured property.
National Association of Insurance Commissioners (NAIC)
Association of state insurance commissioners whose purpose is to promote uniformity of insurance regulation, monitor insurance solvency and develop model laws for passage by state legislatures.
Net Investment Income
This item represents investment income earned during the year less investment expenses and depreciation on real estate. Investment expenses are the expenses related to generating investment income and capital gains but exclude income taxes.
Network
The group of physicians, hospitals, and other medical care providers that a specific managed care plan has contracted with to deliver medical services to its members.
Network Provider
A doctor, hospital or lab that has a contract with the insurance company. The provider agrees to accept the amount your health insurance pays for a service as payment in full.
Non-cancelable
Contract terms, including costs that can never be changed.
Non-Recourse Mortgage
A home loan in which the borrower can never owe more than the home's value at the time the loan is repaid.
Nonstandard Auto (High Risk Auto or Substandard Auto)
Insurance for motorists who have poor driving records or have been canceled or refused insurance. The premium is much higher than standard auto due to the additional risks.
Occurrence
An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn't have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.
Open Enrollment Period
A period during which members can make changes in their health care coverage.
Other Income/Expenses
This item represents miscellaneous sources of operating income or expenses that principally relate to premium finance income or charges for uncollectible premium and reinsurance business.
Out-of-Pocket Limit
A predetermined amount of money that an individual must pay before insurance will pay 100% for an individual's health-care expenses.
Outpatient Care
Treatment that is provided to a patient who is able to return home after care without an overnight stay in a hospital or other inpatient facility.
Own Occupation
Insurance contract provision that allows policyholders to collect benefits if they can no longer work in their own occupation.
Paid-Up Additional Insurance
An option that allows the policyholder to use policy dividends and/or additional premiums to buy additional insurance on the same plan as the basic policy and at a face amount determined by the insured's attained age.
Participation Rate
In equity-indexed annuities, a participation rate determines how much of the gain in the index will be credited to the annuity. For example, the insurance company may set the participation rate at 80%, which means the annuity would only be credited with 80% of the gain experienced by the index.
Peril
The cause of a possible loss.
Personal Injury Protection
Pays basic expenses for an insured and his or her family in states with no-fault auto insurance. No-fault laws generally require drivers to carry both liability insurance and personal injury protection coverage to pay for basic needs of the insured, such as medical expenses, in the event of an accident.
Personal Lines
Insurance for individuals and families, such as private-passenger auto and homeowners insurance.
Point-of-Service Plan (POS))
Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed.
Policy
The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
Policy or Sales Illustration
Material used by an agent and insurer to show how a policy may perform under a variety of conditions and over a number of years.
Policyholder Dividend Ratio
The ratio of dividends to policyholders related to net premiums earned.
Pre-Existing Condition
A coverage limitation included in many health policies which states that certain physical or mental conditions, either previously diagnosed or which would normally be expected to require treatment prior to issue, will not be covered under the new policy for a specified period of time.
Preferred Auto
Auto coverage for drivers who have never had an accident and operates vehicles according to law. Drivers are not a risk for any insurance company that writes auto insurance, and no insurance company would be afraid to take them on as risk.
Preferred Provider Organization (PPO)
Network of medical providers who charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.
Premium
The price of insurance protection for a specified risk for a specified period of time.
Premium Earned
The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.
Premium to Surplus Ratio
This ratio is designed to measure the ability of the insurer to absorb above-average losses and the insurer's financial strength. The ratio is computed by dividing net premiums written by surplus. An insurance company's surplus is the amount by which assets exceed liabilities. The ratio is computed by dividing net premiums written by surplus. For example, a company with $2 in net premiums written for every $1 of surplus has a 2-to-1 premium to surplus ratio. The lower the ratio, the greater the company's financial strength. State regulators have established a premium-to-surplus ratio of no higher than 3-to-1 as a guideline.
Premium Unearned
That part of the premium applicable to the unexpired part of the policy period.
Primary Care
General medical care that is provided directly to a patient without referral from another physician. It is focused on preventative care and the treatment of routine injuries and illnesses.
Private-Passenger Auto Insurance Policyholder Risk Profile
This refers to the risk profile of auto insurance policyholders and can be divided into three categories: standard, nonstandard and preferred. In the eyes of an insurance company, it is the type of business (or the quality of driver) that the company has chosen to taken on.
Provider
Any person (doctor, nurse, dentist) or institution (hospital or clinic) that provides medical care.
Provider-Sponsored Organization (PSO)
A healthcare organizationùestablished and organized, or operated, by a healthcare provider or a group of affiliated healthcare providers to arrange for the delivery, financing, and administration of healthcareùthat meets requirements established by the Balanced Budget Act of 1997 and that has the authority to contract directly with Medicare.
Qualified High-Deductible Health Plan
A health plan with lower premiums that covers health-care expenses only after the insured has paid each year a large amount out of pocket or from another source. To qualify as a health plan coupled with a Health Savings Account, the Internal Revenue Code requires the deductible to be at least $1,000 for an individual and $2,000 for a family. High-deductible plans are also known as catastrophic plans.
Qualified Versus Non-Qualified Policies
Qualified plans are those employee benefit plans that meet Internal Revenue Service requirements as stated in IRS Code Section 401a. When a plan is approved, contributions made by the employer are tax deductible expenses.
Qualifying Event
An occurrence that triggers an insured's protection.
Quick Assets
Assets that are quickly convertible into cash.
Quick Liquidity Ratio
Quick assets divided by net liabilities plus ceded reinsurance balances payable. Quick assets are defined as the sum of cash, unaffiliated short-term investments, unaffiliated bonds maturing within one year, government bonds maturing within five years, and 80% of unaffiliated common stocks. These assets can be quickly converted into cash in the case of an emergency.
Reciprocal Insurance Exchange
An unincorporated group of individuals, firms or corporations, commonly termed subscribers, who mutually insure one another, each separately assuming his or her share of each risk. Its chief administrator is an attorney-in-fact.
Re-Entry
Re-entry, which is the allowance for level-premium term policyowners to qualify for another level-premium period, generally with new evidence of insurability.
Reinsurance
In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn't fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period.
Renewal
The automatic re-establishment of in-force status effected by the payment of another premium.
Replacement Cost
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.
Residual Benefit
In disability insurance, a benefit paid when you suffer a loss of income due to a covered disability or if loss of income persists. This benefit is based on a formula specified in your policy and it is generally a percentage of the full benefit. It may be paid up to the maximum benefit period.
Risk Class
Risk class, in insurance underwriting, is a grouping of insureds with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.
Risk Management
Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.
Secondary Market
The secondary market is populated by buyers willing to pay what they determine to be fair market value.
Section 1035 Exchange
This refers to a part of the Internal Revenue Code that allows owners to replace a life insurance or annuity policy without creating a taxable event.
Section 7702
Part of the Internal Revenue Code that defines the conditions a life policy must satisfy to qualify as a life insurance contract, which has tax advantages.
Separate Account
A separate account is an investment option that is maintained separately from an insurer's general account. Investment risk associated with separate-account investments is born by the contract owner.
Solvency
Having sufficient assetsùcapital, surplus, reserves--and being able to satisfy financial requirementsùinvestments, annual reports, examinations--to be eligible to transact insurance business and meet liabilities.
Standard Auto
Auto insurance for average drivers with relatively few accidents during lifetime.
State of Domicile
The state in which the company is incorporated or chartered. The company also is licensed (admitted) under the state's insurance statutes for those lines of business for which it qualifies.
Statutory Reserve
A reserve, either specific or general, required by law.
Stock Insurance Company
An incorporated insurer with capital contributed by stockholders, to whom earnings are distributed as dividends on their shares.
Stop Loss
Any provision in a policy designed to cut off an insurer's losses at a given point.
Subrogation
The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.
Successive Periods
In hospital income protection, when confinements in a hospital are due to the same or related causes and are separated by less than a contractually stipulated period of time, they are considered part of the same period of confinement.
Surplus
The amount by which assets exceed liabilities.
Surrender Charge
Fee charged to a policyholder when a life insurance policy or annuity is surrendered for its cash value. This fee reflects expenses the insurance company incurs by placing the policy on its books, and subsequent administrative expenses.
Surrender Period
A set amount of time during which you have to keep the majority of your money in an annuity contract. Most surrender periods last from five to 10 years. Most contracts will allow you to take out at least 10% a year of the accumulated value of the account, even during the surrender period. If you take out more than that 10%, you will have to pay a surrender charge on the amount that you have withdrawn above that 10%.
Term Life Insurance
Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn't build up any of the non-forfeiture values associated with whole life policies.
Tort
A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.
Total Annual Loan Cost
The projected annual average cost of a reverse mortgage including all itemized costs.
Total Loss
A loss of sufficient size that it can be said no value is left, such as the complete destruction of a property. The term also is used to mean a loss requiring the maximum amount a policy will pay.
Umbrella Policy
Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.
Underwriter
The individual trained in evaluating risks and determining rates and coverages for them; also known as an ôinsurer.ö
Underwriting
The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.
Underwriting Guide
Details the underwriting practices of an insurance company and provides specific guidance as to how underwriters should analyze all of the various types of applicants they might encounter; also called an underwriting manual, underwriting guidelines, or a manual of underwriting policy.
Unearned Premiums
That part of the premium applicable to the unexpired part of the policy period.
Uninsured Motorist Coverage
Endorsement to a personal automobile policy that covers an insured collision with a driver who does not have liability insurance.
Universal Life Insurance
A combination flexible premium, adjustable life insurance policy.
Usual, Customary and Reasonable Fees
An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor or required for treatment.
Utilization
How much a covered group uses a particular health plan or program.
Valuation
A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial condition of a pension plan.
Valuation Reserve
A reserve against the contingency that the valuation of assets, particularly investments, might be higher than what can be actually realized or that a liability may turn out to be greater than the valuation placed on it.
Variable Life Insurance
A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products supporting the policy at the time payment is due.
Variable Universal Life Insurance
A combination of the features of variable life insurance and universal life insurance under the same contract. Benefits are variable based on the value of underlying equity investments, and premiums and benefits are adjustable at the option of the policyholder.
Viator
The terminally ill person who sells his or her life insurance policy.
Voluntary Reserve
An allocation of surplus not required by law. Insurers often accumulate such reserves to strengthen their financial structure.
Waiting Period
The time which must pass after filing a claim before policyholder can collect insurance benefits; also known as the "elimination period."
Waiver of Premium
A provision in some insurance contracts which enables an insurance company to waive the collection of premiums while keeping the policy in force if the policyholder becomes unable to work because of an accident or injury. The waiver of premium for disability remains in effect as long as the ensured is disabled.
Whole Life Insurance
Life insurance which might be kept in force for a person's whole life and which pays a benefit upon the person's death, whenever that might be.
