Discounts

To receive a no-obligation auto and home insurance quote through Insurance Brokers of MN, fill out the forms on this website, or call (888) 877-1221 or (763) 862-1221. Mention your Affinity Plus membership in the notes of quote form to receive the best rates and discounted AAA membership.

Affinity Plus Federal Credit Union members are now eligible for membership in AAA at special group rates. The credit union recently teamed up with AAA and Insurance Brokers of MN. With this partnership, members can count on the following services: no-obligation auto insurance quotes, , driving routes, roadside assistance, auto safety programs if you become a member of AAA. Plus, AAA's "Show Your Card and Save" program saves members up to 20% at retailers nationwide such as car washes, hotels, dining, theme parks, and more. If you renew an existing AAA membership as an Affinity Plus member, you will receive additional savings.

If you are affiliated with one or more of the following groups, you may be eligible for a discount. Please ask your own insurance agent for more details.

• Affinity
• Chambers of Commerce
• Auto Owners

Glossary

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

• Back to Top

• (ADB) accelerated death benefits

  ADB—accelerated death benefits In a life insurance policy, this is when the benefits or payoff are paid before the death of the insured person in cases where that person is terminally ill and may need those benefits for medical and living expenses.
• Back to Top

• 3-D policy

  (See dishonesty, disappearance, and destruction policy.)
• Back to Top

• 401(k) Plan

  Retirement plan in which employees can make contributions (or elective deferrals) to the plan on a pretax basis. Employers can also make contributions to the plan on behalf of the employee. The maximum combined amount that can be contributed by the employee and employer is 25% which is also subject to a dollar amount cap. A 401(k) Plan is also known as a qualified savings plan.

• 403(b) Plan

  Retirement plan, designed specifically for public school and other local or state public employees, in which employees can make contributions (or elective deferrals) to the plan on a pretax basis. Employers can also make contributions to the plan on behalf of the employee. The maximum combined amount that can be contributed by the employee and employer is 20% which is also subject to a dollar amount cap. The 403(b) Plan is similar to the 401(k) Plan. Other employees eligible for this type of plan are those employed by nonprofit, scientific, religious or charitable organizations.
• Back to Top

• 501(c)(3)

  A company that qualifies and is formed under IRS code 501(c)(3) is not-for-profit and is exempt from income tax. Charities are formed under 501(c)(3).

• 501(c)(9) (VEBA)

  A trust formed under IRS code 501(c)(9), also known as a Voluntary Employee Beneficiary Association. Used by self-insured groups to fund their group health and other employee benefits plans. Contributions made to the trust are deductible from federal income tax and appreciation of trust assets is not taxable.
• Back to Top

• A (or Judgment) Rates

  Rates used by an insurer that are not statistically credible because adequate data does not exist for that particular coverage or class. Such rates are based on the experience and best judgment of the underwriter for each individual risk.

• A-rates

  A rates Rates that are not actuarially credible because there are inadequate statistics or loss experience to set forth class or general rates; therefore, the underwriter or insurer must complete an evaluation of the exposures posed by the individual risk and determine a judgment rate. Rates should be equitable to the exposure retained by the insurer.

• A.S.--automatic sprinkler

  An indication on a diagram that the risk is protected by automatic sprinklers.

• AAA

  (See American Academy of Actuaries.)

• AAI

  Alliance of American Insurers (See: 1. accredited adviser in insurance; 2. Alliance of American insurers [also see Property Casualty Insurers Association of America.])

• AAIPA

  (See African-American Insurance Professionals Association.)

• AAIS--American Association of Insurance Services

  The rating bureau for inland marine, aircraft hull and package insurance fields for insurers choosing to participate. Formerly Transportation Insurance Rating Bureau. Headquarters: Bensenville, IL.

• AAIS--American Association of Insurance Services

  A and E coverage (See architects and engineers coverage.)

• AAIS--American Association of Insurance Services

  ADR (See alternative dispute resolution.)

• AAIS--American Association of Insurance Services

  agent of record letter A simple letter that a new agent sends to an insurer as formal notice that he or she has been authorized to take over an insurance account from another agent. It permits the insurer to change its records to reflect the change.

• AAIS--American Association of Insurance Services

  AICP (See Association of Insurance Compliance Professionals.)

• AAIS--American Association of Insurance Services

  alternative dispute resolution Refers to methods that attempt to resolve an insurance dispute without resorting to litigation. Common methods are mediation, and either binding or nonbinding arbitration.

• AAIS--American Association of Insurance Services

  alternative risk transfer Typically refers to methods of transferring the risk of loss that don't involve traditional insurance, such as risk retention groups, captive insurers and contractual agreements to shift or transfer an exposure to loss.

• AAIS--American Association of Insurance Services

  architects and engineers (A&E) coverage A shorthand reference to any package of policies that are tailored to handling architectural and engineering operations such as design-build firms, environmental contractors/engineers, project managers, surveyors, etc. Coverage usually encompasses general, professional, business auto, environmental (pollution), and other related liability.

• AAIS--American Association of Insurance Services

  ART (See alternative risk transfer.)

• AAIS--American Association of Insurance Services

  Association of Insurance Compliance Professionals Originally called the Society of State Filers, this organization serves members from property, casualty, life and health insurers, regulatory agencies, consultants and other specialty operations who have an active interest in insurance compliance. It provides a host of compliance-related educational and networking opportunities. Headquarters: Reston, VA.

• AAM

  Associate in Automation Management designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• AAMGA--American Association of Managing General Agents

  A trade association of independent insurance general agents serving the interests of insurance companies and local agents. Provides markets for all types of insurance with emphasis on surplus and specialty lines. Established in 1926. Headquarters: Washington, DC.

• AAU--Associated Aviation Underwriters

  Formerly a pool of aviation risk underwriters formed in the 1920s. AAU is now, through a merger with a British aviation insurer, known as Global Aerospace.

• abandonment

  1) In ocean marine insurance, the transfer by the insured to an insurer of all rights, title, and interest in and to the insured property, in return for the sum insured. It is effected by the insured's tender of such transfer (notice of abandonment) and the insurer's acceptance. A valid tender can be made only when the facts show that there has been a "constructive total loss" or "actual total loss" of the insured property through an insured cause of loss. In such case, however, the insured can recover the sum insured as for a total loss, even though the insurer has refused to accept the tender and there has been no abandonment. 2) The word also appears in "sue and labor" clauses of various inland marine policies by way of a stipulation that compliance with the requirements of the clause shall be without prejudice to either the insured or the insurer respecting waiver or acceptance of abandonment. 3) In property insurance, abandonment is relinquishing ownership of damaged property to an insurer to permit a total loss claim to be made; but most commercial property coverage forms, dwelling policies, and the homeowners policy prohibit such abandonment. Instead, these policies require the insured to protect damaged property from further loss. (See abandonment clause.)

• abandonment clause

  The actual provision in an insurance contract, usually ocean marine, inland marine or property, that refers to abandonment and whether or not it is allowed by that particular policy. (See abandonment, actual total loss, and constructive total loss.)

• abatement

  With regard to insurance, refers to acts to reduce or minimize the effects of a harmful event; similar to remediation.

• ABI

  (See Association of British Insurers.)

• absolute assignment

  When the policyowner or insured transfers or assigns all of the rights and subsequent control in a policy to another party or entity. (See assignment and absolute ownership.)

• absolute beneficiary

  A provision in a life insurance policy stating that the beneficiary cannot be changed unless the insured obtains the beneficiary's consent. (See irrevocable beneficiary.)

• absolute exclusion

  absolute exclusion Refers to any clause that is designed to bar coverage for a given peril without the use of any coverage exceptions.

• absolute liability

  Liability that exists and is imposed upon a party, even though no negligence or fault was committed by that party. Absolute liability is most often imposed when the circumstances of the operation, product, or activity are considered highly hazardous or dangerous.

• absolute ownership

  Those cases where the policyowner or insured has full and absolute rights to assign, sell or give away all rights to a policy to another party. (See absolute assignment and assignment.)

• abutting coverage

  Two or more insurance policies with consecutive policy periods providing common insurance to an insured.

• ACAS

  Associate, Casualty Actuarial Society designation sponsored by the Casualty Actuarial Society. Headquarters: Arlington, VA.

• accelerated death benefits (ADB)

  In a life insurance policy, this is when the benefits (or payoff) are paid before the death of the insured person in cases where that person is terminally ill and may need those benefits for medical and living expenses.

• accelerated endowment

  With respect to life insurance, some policies will offer an option to convert the policy into an endowment before its normal or set maturity date by using the accumulated policy dividends for this purpose. (See accelerated option.)

• accelerated option

  With respect to life insurance, some policies will offer an option to convert the accumulated policy dividends and cash value to pay off the policy. (See accelerated endowment.)

• accept

  The taking of risk (by an insurer or other person authorized to act for that insurer, such as an underwriter) by expressing a willingness to issue insurance. Also known as assume.

• accident

  An event or occurrence that is unintended, unforeseen, and unexpected; something which could not be considered as a foreseeable occurrence and consequence of an undertaking; a casualty or mishap.

• accident and sickness insurance

  A broad term describing protection from loss because of illness or injury which may result in loss of life, loss of earnings, or expenses incurred. Within the broad area of health insurance, there are several major coverages which focus on more specific needs. (See disability income insurance, health insurance, hospitalization insurance, and sickness insurance.)

• accident control

  Inspection and engineering work on insured risks to help remove potential causes of loss. Loss prevention work applies to both property and casualty insurance and is also referred to as safety engineering, accident prevention, accident control, or loss prevention.

• accident experience

  1) A summary of claims activity, which details the insured's frequency of accident to a selected unit of measurement, thus making the loss experience more meaningful. 2) In workers compensation insurance, the rate of disabling injuries, number of lost work days due to accidents, or the number of first-aid cases are among items that may be considered in an accident experience.

• accident frequency

  The determination of how often the rate or frequency of accidents occur at a particular operation, site, location, or to the insured as a whole for a specified period of time for the exposure units involved. These ratios and calculations are used to determine and verify the projected claims and loss exposure a risk may experience in order to price and set rates, claims services, and loss control services needed. Use of accident frequency ratios over a period of time for a specified risk also may be used to determine if loss trends are improving and if the loss control services are effective.

• accident insurance

  Insurance covering death, dismemberment, loss of sight, loss of income, and medical expenses caused by accidental injury.

• accident only insurance

  Policies issued to cover death, dismemberment and medical services for accidents only.

• accident prevention

  All the ways and means used to avoid the occurrence of an accident or to reduce its consequences if it does occur, such as the control of personal performance, machine performance, and physical environment, including the training needed to reduce the number of accidents and cost of accidental injuries. Accident prevention is one of the less publicized functions of risk managers and insurers, many of which improve safety in industry, the home, and on the roads through safety engineering and research. Also called loss prevention, safety engineering, accident control, or loss prevention.

• accident reconstructionist

  A person with expertise in evaluating accident circumstances (such as vehicle or craft speed, lighting conditions, weather, influence, substances, reaction times, safety equipment, human factors, etc.) in order to report on that accident?s cause (and sometimes whether the applicable accident could have been avoided) .

• accident report

  Either the report that is used to document the time, cause, results, injuries, parties, and other pertinent facts of an accident for insurance purposes or a similar type of report prepared by law enforcement persons as a result of an accident.

• accident severity

  A formula or calculation used to determine a ratio for use in evaluating how serious or severe an insured's accidents or injuries are, such as the ratio of the amount of loss to the value of property in property insurance, or the amount of loss to exposure units in liability or workers compensation insurance.

• accident year experience

  Simply stated, it is the statistical matching of all losses occurring (regardless of when the losses are reported) during a given 12-month period of time, with all premium earned (regardless of when the premium was written) during the same period of time. Calendar year experience, on the other hand, is the statistical matching of all losses incurred (not necessarily occurring) within a given 12-month period, usually beginning on January 1, with all premium earned within the same period of time. Yet a third related term is policy year experience which, to put it simply, is the statistical segregation of all premiums and losses attributable to policies having an inception or renewal date within a given 12-month period. (See calendar year experience and policy year experience.)

• accidental bodily injury

  Bodily injury to a person or persons that has been caused accidentally and with unforeseen results.

• accidental death

  Any death that results from causes other than natural causes or homicide.

• accidental death and dismemberment insurance (AD&D)

  A specific type of life insurance policy that pays benefits in the case of the death or dismemberment of the insured from accidental causes. If dismemberment occurs, benefits are paid on a periodic basis, such as weekly, bi-weekly or monthly for the injury. The amount of the benefit payment is based on the type and severity of the dismemberment.

• accidental death benefit

  Some life insurance policies have provisions that provide for an additional benefit payment in the case of an accidental death. (See double indemnity and multiple indemnity.)

• accidental death insurance

  A life insurance policy that pays a benefit only in the event that death was accidental.

• accidental means

  The cause of a result which was not intentional.

• accidental occurrence

  Injury or damage that is caused by an unexpected and unforeseen incident, event or series of events.

• accommodation line

  A line of business an insurer accepts which does not meet all or most underwriting criteria but which is accepted for other reasons: 1) the value of the total account, the producer, or the center of influence 2) to help a good producer, and thus possibly obtain more submissions from that producer.

• account current

  A monthly report between an agent and the insurer, which includes policy numbers, premiums, and applicable commissions on business produced by that agent.

• account executive

  A person whose duty is to specifically service an account or group of accounts for an agency or brokerage firm.

• account premium modification plan

  Rating plans that have been developed for accounts and that apply to specified lines of business, most often property lines. Usually based on some combination of size and loss ratio with respect to that individual account. These rating plans can result either in credits or debits to the risk.

• account selling

  An insurance sales strategy that focuses on handling all of a client's coverage needs rather than handling only a portion of those needs. The method is one that improves customer retention.

• accountants professional liability insurance

  A form of professional liability insurance covering the negligence of accountants in their professional practices.

• accounts receivable insurance

  Coverage that protects businesses against their inability to collect their accounts receivable because of the loss of supporting records that have been destroyed by a covered cause of loss. Also covered are the extra collection expenses that are incurred because of such loss or damage and other reasonable expenses incurred to re-establish records of accounts receivable after loss or damage.

• accrual basis of accounting

  A specific accounting method that records credits and debits when the income and expenses actually occurred rather than on the date they are actually paid or received.

• accrued benefit

  Refers to the amount of benefit that accrues for an individual participant of a defined benefit pension plan. The benefit is often calculated as a percentage of salary combined with years of service, but it is not paid until normal retirement age.

• accumulate at interest option

  One of the dividend options of participating life insurance policies. Dividends paid by the insurer are left with the insurance company to accumulate interest.

• accumulated funding deficiency

  If a company fails to fund the qualified pension plan to the minimum levels required by law it has a funding deficiency. Such plans (and their sponsors) are subject to penalties and other legal remedies designed to correct the situation before participants are hurt by the underfunding.

• accumulation

  This is a life insurance term that reflects the increase in value and, therefore, the subsequent benefits available for payouts as the life of the policy progresses and the premiums paid into the policy have a chance to accumulate and earn income for the insurer.

• accumulation period

  With respect to health and medical insurance policies, it normally refers to the amount of time within each policy period that is available to the insured to satisfy the deductible amounts.

• accumulation units

  Variable annuities are invested in equities called side funds. The monies paid into the annuity are placed into the side funds and one way to represent their value is in units. For example, a $100 annuity premium may purchase 2.3 units this month and 3.2 units next month because the value of the equities in the side fund has fallen.

• accumulation value

  Specifically applicable to universal life insurance policies, this term is used to express the sum total of all the premiums paid and interest accrued without regard for deductions made for benefits, expenses, etc.

• ACFE--Association of Certified Fraud Examiners

  An international organization that sponsors the certification of professionals trained to detect, investigate and prevent fraud and white collar crime. Headquarters: Austin, Texas.

• acid and chemical damage policy

  A specially designed property policy to provide coverage to property for loss from acids and chemical contact or spills. Related coverage to consider would be a difference in conditions insurance. (See difference in conditions insurance (DIC).)

• ACORD - User Groups Information Exchange

  A network created and supported by ACORD. Its purpose is to encourage greater use of standardized processes and procedures between insurance carriers and agents.

• ACORD forms

  Standard application forms, used nationwide, for gathering the necessary data needed to rate, classify and underwrite requested insurance coverages. These forms come under the auspices of the nonprofit ACORD insurance association.

• ACORD—Association for Cooperative Operations Research and

  Development Development A nonprofit insurance facility dedicated to serving the independent agency system in the USA by developing and maintaining standard application forms, providing electronic data interchange standards and other support of agency automation. ACORD is located in Pearl River, NY.

• acquisition cost

  1) The cost of selling insurance. Normally the agent's and broker's commission, but in some cases the term is used to designate any cost of putting the business on the books. 2) In rate filings by insurers with state insurance departments, one of three expense elements shown: general expenses, commissions, and other acquisition costs (such as advertising and service office expenses).

• ACS

  Associate Customer Service designation sponsored by the Life Office Management Association. Headquarters: Atlanta, GA.

• ACSR

  Accredited Customer Service Representative designation sponsored by the Independent Insurance Agents of America. Headquarters: Alexandria, VA.

• act of God

  An event beyond human origin or control (lightning, windstorms and earthquakes are examples), the damage from which would not be the responsibility of an insured. Acts of God are excluded under certain liability insurance policies.

• act of God bond

  (See catastrophe bond.)

• actionable

  Omissions, conditions, offenses or acts which could result in contractual or legal action. Example: If an insured does not file the required proof of loss on an insurance policy within the specified period of time, that omission is actionable, meaning the coverage on the claim may be denied.

• active life fund

  A life product where an unallocated fund is maintained for the active members of the fund. Fund assets are included under a deposit accumulation plan. When a member retires, an individual annuity is purchased for the member with the resources within the fund.

• active life reserve

  Life insurance reserves set up to accommodate the present value of future death claims. Since claims are usually low in the early years of policies but increase throughout the life of the policies, the expected results are that the reserves are overstated during the early years and understated in the later years when viewed on an individual policy basis.

• active malfunction

  With respect to products liability, this term refers to a product that actually results in damage or injury to a user's property when put to use as originally designed and intended.

• actively-at-work-provision

  This is a health insurance policy provision. It stipulates that on the date a group insurance contract becomes effective, an employee who is absent due to an accident or illness is ineligible for coverage until he or she returns to work.

• actual authority

  The level of operating responsibility that an insurance carrier deliberately assigns to an agent. (Also see express authority and implied authority.)

• actual cash value

  The basis of loss settlement in property insurance policies, which takes into consideration factors such as replacement value less depreciation, market value, rental value, the use of the building, the area in which it is located, obsolescence, assessed valuation, and any other factor that would have an effect upon the value. A working rule-of-thumb definition, however, is "replacement cost new at the time of loss, less depreciation." (See replacement cost insurance.)

• actual total loss

  When insured property is so badly damaged by a covered cause of loss that it is not repairable or recoverable or when there is so little remaining of the salvageable or repairable nature that it no longer has any value, it is considered an actual total loss. This usually signifies the maximum settlement possible under the terms of the policy. (See abandonment clause.)

• actuarial adjustment

  This term refers to the revisions that are made to reserves or premiums, based on a company's experience and projected claims.

• actuarial assumptions

  Estimated factors used by an actuary to project future financial situations. The factors forecasted may include such items as premium levels, company expenses, or loss reserves.

• actuarial benefit equivalence

  When plans or coverages have benefit differences, this term is used to explain the degree of difference when comparing the benefits of the different plans.

• actuarial cost method

  A method used to determine future benefits based on present fixed contributions or the contributions necessary to reach a desired benefit level at some time in the future.

• actuarial equivalent

  In order to statistically compare data on unlike items, products or factors, mathematical or actuarial equivalencies are set.

• actuarial funding method

  A method developed by the actuarial operation to set the amounts of contributions and the intervals of those contributions that are necessary to achieve the benefit(s) offered.

• actuarial gains and losses

  With respect to insurance company operations, actuarial calculations are used to predict or determine the necessary rate, premium, expense and reserve levels, etc., needed to accomplish goals. When the actual results are better than those set or predicted, actuarial gains are achieved; and when results are worse than those set or predicted, losses are experienced. (See experience.)

• actuarial present value

  A term used to designate the current value that has been assigned to future benefits, including contingencies for factors such as early payouts of benefits. (See present value.)

• actuarial report

  A report outlining current conditions or future requirements of an insurer, self-insured or pension fund necessary to meet its obligations. The report is prepared and signed by an actuary.

• actuarial science

  The science of using data, statistics and mathematical calculations to make rate, premium, coverage, loss/ claims, benefit and other pertinent decisions as applied to the insurance industry.

• Actuarial Society of South Africa

  This society consists of actuaries and actuarial students in South Africa. Founded in 1948, it promotes professionalism among its members who work (or plan to someday work) in the country's financial services sector. It promotes conferences for networking and continuing education. Headquarters: Cape Town, South Africa.

• actuarial valuation

  The review and evaluation of the creditability of some specific aspect of the insurance operation at a given time. For example, a valuation of the creditability of a reserve for a line of business as of a specified date and time.

• actuaries and pension consultants professional liability

  Professional liability insurance developed for actuaries and pension consultants and their unique and special needs.

• actuary

  A social mathematician who uses mathematical skills to define, analyze and solve complex business and social problems involving insurance and employee benefit programs. The work of actuaries involves the various contingencies that face human beings: birth, marriage, sickness, accident, loss of property, legal liability, retirement and death, and the financial effects which these and other contingencies have on various insurance and benefit programs. Many of these programs involve long-range financial obligations, for which actuarial forecasts are fundamental in maintaining a sound financial basis: rate-making, premium and loss reserving, investment valuation, pension benefits, and insurance statistics, among others.

• ad valorem

  A legal term meaning according to value. Often used with respect to a value bill of lading. A value bill of lading is the receipt issued by the transportation company for goods being shipped and which describes the specifics of carriage, including freight and value of goods. (See value bill of lading.)

• ADA--Americans With Disabilities Act

  ADA—Americans With Disabilities Act A federal act designed to set standards to remove the barriers to employment, transportation, public accommodations, public services, and telecommunications that exist to those members of our society who have physical disabilities of many types. The act encompasses many aspects of everyday life and generates wide-ranging implications for almost every commercial business or service.

• add-ons

  Coverages provided under a policy that are extras, supplementing the main coverages.

• additional coverages

  Largely obsolete term that formerly referred to adding additional causes of loss to a very basic property insurance policy, Typically, such coverages are included in broad or special cause of loss forms.

• additional death benefit

  Life insurance benefits offered should death occur during a specific time period or as a result of specific causes. (See death benefit and double indemnity.)

• additional deposit provision

  A clause used in some whole life insurance policies that allows the insured to choose to make unscheduled premium payments. This type of provision is common in policies that pay variable rates of interest on deposit premiums or that allow for the purchase of additional insurance coverage.

• additional extended coverage

  Additional causes of loss added to property policies which include items such as vandalism and malicious mischief, water from ruptured plumbing and heating systems, glass breakage, ice, snow and freezing, and falling trees and collapses. This coverage is rarely used and has been replaced by the broad or special cause of loss forms as they relate to property insurance.

• additional insured

  A person, other than the named insured, who is protected by the terms of the policy. Usually a specified individual such as a spouse or a member of the insured's family but sometimes, as in automobile insurance, any person, provided that person is driving the insured vehicle with the insured's permission.

• additional living expense insurance

  Insurance for the extra amount it costs an insured to live until repairs are made to the insured's dwelling.

• additional medical

  A workers compensation endorsement used to provide additional medical benefits in excess of those required by the workers compensation law of the state jurisdiction(s) covered in the policy.

• additional named insured

  A party, other than the first named insured, that has been shown as an insured in the policy Declarations or in an addendum to the policy Declarations or by endorsement once the policy has been issued. This party has the status of named insured.

• additional premium

  When a policy has been issued subject to rate, audit, inspection; is assessable; or when the policy is endorsed; the additional premium is the extra amount due, over and above the initial premium stated in the Declarations. Such premium is charged for increased exposures, retrospective rate calculations, additional coverage, or premium audit.

• additional provisions

  Additional clauses or provisions that have been added to the basic coverage form insuring agreements, to the benefit provisions of a policy, or to the standard/uniform provisions which have been added to clarify, define, broaden, exclude, or limit the coverage normally provided.

• additional term insurance option

  Sometimes called the fifth dividend option in a participating life insurance policy, paid dividends are entered as a single net premium to purchase one-year term insurance.

• adequacy

  (See rate adequacy.)

• adhesion contract

  A type of contract in which the conditions of the contract are drawn or written by the insurer with no input from the insured who must adhere to the terms and conditions as set forth, and who has little recourse to negotiate for better benefits or terms. If there is any ambiguity when a contract of adhesion has been written, court decisions and rulings will be in favor of the party who did not have control of the wording of the provisions; in this case the insured.

• adjacent

  One building is adjacent to another if it is very close to another building although not actually touching it, with no intervening building.

• adjoining

  When a building is so located that it touches another building.

• adjustable life insurance policy

  A form of life insurance where the insured is permitted to adjust either their insurance coverage or premiums. The effect of increasing premiums without increasing coverage is that more cash tends to accumulate. Keeping coverage the same while decreasing premium will make the policy look more like term insurance because there will be less cash accumulation. Universal life is also called flexible premium adjustable life insurance.

• adjustable policy

  A policy in which the exposure basis is a variable (such as sales or payroll), which can be determined only at the end of the policy term. (See audit, and reporting policy (or form).)

• adjustable premium

  Policies issued by an insurer that do not guarantee the premium upon renewal. At each subsequent renewal the policy may be re-rated and bear premiums that may or may not be substantially different than the previous period premium. (See annualization.)

• adjuster

  One who determines the amount of loss suffered. A "company" adjuster represents the company. A "public" adjuster represents the policyholder. An "independent" adjuster may be hired by either.

• adjusters errors and omissions insurance

  A type of insurance designed to provide coverage for adjusters for their errors, omissions, or negligent acts committed while performing the functions of their job. This coverage is available for individuals, firms or insurers.

• adjustment

  The process of handling and settling claims by determining the amount of a loss an agreeing on the amount requested by a policyholder or claimant because of a loss or damages suffered. Also referred to claims adjustment.

• adjustment bureau

  An organization that maintains a staff of adjusters and whose business it is to adjust losses for those companies which refer their losses to the bureau. (See General Adjustment Bureau, Inc.)

• adjustment expenses

  Those expenses that are directly attributed to the process of handling or adjusting claims, but which specifically exclude the actual claims payment amounts. Expenses may include items to investigate the claim, forensic reports, and cost of research.

• adjustment income

  A life insurance benefit which provides the beneficiary with income often used during the interim period while other living finances are arranged; hence, the term adjustment income.

• administration expenses

  The normal and expected operating costs to run an organization.

• administrative services only (AS0) plan

  Where a self-insurer pays an insurer or other organization to administer its operations, including benefits and claims.

• administrator

  An individual who has been appointed by the court to administer or manage the estate and affairs of a deceased person. The difference between an administrator and an executor is that an executor is named in the decedent's will, while the administrator is appointed by the court in cases where there is no will or where the executor cannot or will not fulfill the necessary duties. (See executor and executrix.)

• admiralty

  A term used to encompass anything to do with maritime operations.

• admiralty courts

  Section of the federal or national court system that deals with matters pertaining to vessels, crew and their cargoes navigating on interstate or international waters. Maritime procedures, precedents and rules are different in admiralty courts than in other courts.

• admiralty liability

  The liability posed by the combination of both common and statutory law, as it relates to maritime operations and activities.

• admiralty proceeding

  A legal proceeding relating specifically to maritime law (including ocean marine insurance issues) and handled in a maritime court.

• admitted assets

  Those assets, or portions thereof, of an insurance company which under state insurance laws may be taken into account in establishing the financial condition of the insurance company, e.g., agents' balances or uncollected premiums under 90 days old. (See nonadmitted assets and assets.)

• admitted company

  A foreign or alien insurance company which has been licensed by the insurance department of the state in question and which, thereby, is authorized to conduct business within that state to the extent licensed. Also called an admitted market or admitted insurer.

• admitted insurer

  A foreign or alien insurance company which has been licensed by the insurance department of the state in question and which, thereby, is authorized to conduct business within that state to the extent licensed. Also called an admitted market or admitted company.

• admitted liability

  An aviation specific coverage for passengers or guests aboard aircraft, which precludes the need for those guests or passengers to prove the liability of the insured owner or operator of the aircraft in order to recover for damages suffered in an accident. This coverage is normally written with a maximum limit per seat, and the passenger or guest can recover up to that amount.

• admitted market

  A foreign or alien insurance company which has been licensed by the insurance department of the state in question and which, thereby, is authorized to conduct business within that state to the extent licensed. Also called an admitted company or admitted insurer.

• admitted reinsurance

  Reinsurers that have been admitted to operate in the states in which they are accepting cessions from primary insurers.

• admitted reinsurer

  (See admitted company. Same status, except for a reinsurance operation.)

• Advance deposit premium plan

  advance deposit premium plan A reinsurance industry arrangement in which a ceding company pays its premiums in installments over the period of the reinsurance contract. Ideally the payments should, ultimately, match the amount the reinsurer pays to cover losses. The plan is adjusted at the contract's end if payments do not balance.

• advance funding

  The basic premise behind pension plans is that money accumulates during an employee's working years in order to "fund" the payment of benefits after the employee retires.

• advance payment

  Moneys or payments made for coverage payment prior to the inception of the policy period, usually accompanied by the application or request for coverage.

• advance premium

  A provisional or deposit premium charged at the start of a policy term, with the final premium determined after the policy has expired.

• advance profits insurance

  This is a form of business income (interruption) insurance, but with a twist. Rather than acting as a contingency against a halt to ongoing activity, it protects against a delay in getting new operations up and running on time. Naturally the delay has to be due to a source of direct damage that is eligible for coverage. Typically such insurance must be negotiated on a customized basis.

• adventure

  With respect to ocean marine insurance, any type of commercial venture which exposes a maritime vessel (including cargo) to potential losses by perils of the sea.

• adventure clause

  With respect to ocean marine insurance, the clause within the insurance coverage that requires the insured to provide the insurer with an accurate and detailed description of the voyage, which in turn will become attached to and part of the Declarations of the policy and which will be used as the basis for the coverage, underwriting, and pricing of the insurance policy.

• adverse selection

  The insuring of one or more risks with a higher chance of loss than that contemplated by the applicable insurance rate. The selection of such risks is adverse because the rate is inadequate. Also called anti-selection.

• advertisers liability insurance

  Covers an insured against claims for libel, slander, defamation, infringement of copyright, invasion of privacy, etc., arising out of its advertising program. Also available for radio and television stations and advertising agencies.

• advertising injury

  Damages or injury sustained by a claimant in the course of the advertising activities of the insured which included such injury as libel, slander, violation of the right to privacy, misappropriation of advertising ideas, or the infringement of copyright.

• advisory organization

  One of the three basic forms of insurance organizations: rating bureaus, advisory organizations, and trade associations. Rating bureaus make and file rates, loss costs, rating plans, schedules, manuals and forms for members, subscribers and service purchasers who choose to use them. Advisory organizations perform advisory functions for insurers relative to these rating bureau activities and, like rating bureaus, are licensed by state insurance departments, subject to examination and other regulation. Trade associations are cooperative organizations to protect the business interests of their member insurers, producers, adjusters, attorneys, or other groups. Either a rating bureau or an advisory association can function as a statistical organization, and the function of advisory organizations and trade associations can overlap. Distinctions in functions can best be appreciated by understanding that, historically, rating and advisory organizations were licensed and regulated under state rating laws because of the public interest in the cooperative activities of insurers, relative to pricing and the need for regulation, in order to replace application of antitrust laws. (See rating bureau and trade association.)

• affiliated company

  A company that is operated independently from other related companies but has some type of common ownership with those companies, such as the same set or sub-set of owners or stockholders.

• affiliation of health providers

  An association or partnering of health care providers that collectively offer health care coverages to a specific group of patients.

• affinity group

  A group of persons with some area of interest in common (such as a job, hobby or employer) that is turned into an association to which insurance products are marketed on a group rather than an individual basis.

• affinity marketing

  (See target marketing.)

• affirmative warranty

  An acknowledgment or affirmation by the insured as to the credibility or verification of certain facts or conditions pertinent to the issuance of the policy.

• AFNI

  See Associate in National Flood Insurance.

• African-American Insurance Professionals Association (AAIPA)

  An association that promotes the advancement and enhancement of the image of African-American professionals whose job responsibilities are related to the insurance industry. The association is also dedicated to educating the public about insurance careers and to improve network opportunities. Headquarters: Los Angeles, CA.

• AFSB

  Associate in Fidelity and Surety Bonding designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• after care

  aftercare The care, follow-up treatment, or therapy needed by a patient who has recently undergone surgery, accident, or illness.

• after charge

  In some fire insurance rating schedules for commercial property, certain additions or loadings on the rate are made for defects (such as poor housekeeping or minor wiring defects) that can be easily corrected. The purpose of separate charges for such defects is to encourage their prompt correction, in which event the rate will be lowered by the amount of the after charges.

• aftershock

  An earthquake of similar or lesser intensity that follows a main (initial) earthquake.

• AGC

  (See Associated General Contractors of America.)

• AGC Surety Bond Committee

  An Associated General Contractors of America standing committee. It assists various surety organizations with policy questions related to forms, industry issues and products.

• age adjustment clause

  With respect to a life insurance policy, it is the provision that allows the insurer to adjust the death benefit payment if the age of the insured was misrepresented, and if that misrepresentation has been proved.

• age change

  In life and health insurance, a concept that allows the insurer to set a procedure to determine the "age" of the insured and when that age changes to another year to be used in the setting of rates and benefits. When used for life insurance contracts, it is common to use the date midway between the insured's natural birthdays. When used by health insurers, it is common to use the insured's age of the previous birthday.

• age discrimination in employment act (ADEA)

  Age Discrimination in Employment Act (ADEA) Federal legislation prohibits mandatory retirement at age 65 and requires pension plans to continue funding individual accounts and benefit accruals if an employee should work after the age of 65. The law also provides protection for older employees (aged 40+) from discriminatory hiring, firing and other practices.

• age limits

  For certain coverages or types of policies, insurers will set minimum and maximum age limits in order for applicants or insureds to remain eligible. Should an existing insured reach the maximum age limit, coverage may not be offered for renewal.

• age of majority

  age of majority It is the age (which varies by state) when an individual may legally enter into and be bound by the terms of any contract. Until the age of majority a minor may not apply for life insurance without the signature of a parent or guardian.

• agency

  A business office whose function is the sales of insurance and insurance products. An agency may be owned or run by a general agent, manager, independent agent, or company manager. The principal is responsible for the statements and actions of agents performing within the scope of authorization specified in the agency agreement. (See captive agent, general agent, and independent agent.)

• agency appointment

  An insurance company's formal agreement to grant an agency the authority to represent the company and sell its insurance products.

• agency bill

  A payment procedure in which an insurance agency sends the premium bills to the insured, collects the premium, and sends the premium to the insurer, less any applicable commission.

• agency company

  Insurers who use agents as their sales force when producing insurance business.

• agency contract

  The legal contract drawn to establish the terms and conditions used as the basis of the relationship between an insurance company and its agency force.

• agency expiration list

  The record of an insurance agency's current policyholders and the dates their policies expire.

• agency plant

  This term refers to those insurers who use agents as the company's sales organization and includes both captive and independent agency forces.

• agency reinsurance

  A very specific type of reinsurance arrangement in which a contract is drawn between insurer and reinsurer covering only the specified business that is produced by a specific agent of that ceding insurer.

• agency superintendent

  A management position of an insurance company. An agency superintendent usually oversees a territorial division and the agents within that territory. Often strictly a production person, as distinguished from one in charge of certain lines of insurance.

• agent

  One who has the authority to act for another. In insurance language, an agent is the person who sells insurance by contacting the policyholder. By contract and by law, the agent is endowed with many of the powers of the company itself. There are various types of agents, based upon the contractual relationship with the insurer they represent. (See independent agent, exclusive agent, and broker.)

• agent of record

  The agent who has been recognized by the insured or customer as his or her authorized representative for handling the specified insurance transactions.

• agent's authority

  The authority that has been legally granted to an agent in the agency contract between the agent and insurer.

• agent's balance

  Based on the commission schedule set forth in the agency contract between the insurer and agent, the agent's balance is the detailed statement of commission credits or debits earned by the agent on the business written with that insurer.

• agent's commission

  The income or remuneration earned by an agent for writing business with an insurer, usually based on commission or specified percent of premium placed by that agent with the insurer. The commission schedule (the percent of premium for the business placed) is set forth as part of the agency contract with the insurer. (See commission.)

• agent's license

  The license issued by a state which confirms that an agent has completed the requirements and has been given authority to conduct the specified types of business for the time period indicated. Often, agents must qualify for a license by examination, and licenses must be renewed annually with proof of continuing education.

• agent's qualification laws

  Laws that define standards of insurance knowledge that an individual must meet in order to be licensed as an agent.

• agents errors and omissions insurance

  A type of professional liability insurance designed for agents covering professional acts, errors, and omissions that may occur during the performance of their duties as an agent.

• aggregate benefits

  The maximum amount an insured is able to collect under a single policy regardless of the number of claims, injuries, accidents, or number of insureds.

• aggregate deductible

  Under this deductible provision, an insured qualifies for insurance payment only after all eligible, incurred losses during the policy year exceeds the established deductible amount.

• aggregate excess insurance

  Coverage developed for operations that fully or partially retain (self-insure) their losses, subject to a specified maximum loss amount. When accumulated annual losses exceed the established maximum, any remaining (subsequent) losses are paid by the aggregate excess policy (subject to that policy's limit).

• aggregate excess of loss reinsurance

  A company wishing to protect itself in the event its net loss ratio for a given year rises above a certain percentage, may buy reinsurance which pays in excess of that figure up to a higher agreed percentage beyond which the company is once more liable. In short, a plan which takes the sting out of an above-average net loss ratio. Also known as stop loss reinsurance or excess of loss ratio reinsurance.

• aggregate extension clause

  (See claims series clause.)

• aggregate funding method

  A method where the necessary contributions for a pension plan are calculated for the entire group of plan participants. This approach is less expensive than performing individual calculations.

• aggregate indemnity

  The most that an insured or beneficiary is allowed to collect in indemnity benefits under that policy as a result of any one disability or in that policy period.

• aggregate limit

  In a policy providing such an aggregate limit, the maximum amount the insurer will pay during the policy period, irrespective of the policy's limit of liability. (See limit or limit of liability.)

• aggregate working excess reinsurance

  Treaty reinsurance in which the ceding insurer retains a portion of each risk plus an aggregate amount of loss in excess of each retention.

• aggregator

  A vendor who combines information from information publishers with similar characteristics (rating, underwriting, forms analysis, etc.) into larger packages. Value is derived from cost savings or the ability to reach a larger market and charge higher prices from bundling multiple products.

• agreed amount

  The amount of coverage that the insurer and insured have mutually agreed to be the value of the property at the time the insurance is purchased.

• agreed amount clause

  A condition of a policy stating that the insurer agrees to waive the coinsurance requirement in consideration of the insured's maintaining insurance equal to the amount agreed upon at the inception of the policy.

• agreed value

  An agreement made between the insurer and insured at policy inception confirming that both parties concur that the limit of insurance set forth in the schedule of property is that item's value, and that agreed upon value is the amount that will be paid by the insurer in the event of a total loss.

• agreed value clause

  A condition of a policy stating that the insurer agrees to waive the coinsurance requirement in consideration of the insured's maintaining insurance for the scheduled item, equal to the value agreed upon at the inception of the policy.

• agricultural equipment insurance

  An inland marine policy tailored to insure the equipment found on a farm or ranch. Available with causes of loss on an "all-risk" or "specified cause of loss" basis.

• AIA--American Insurance Association

  A trade association of primarily stock property and casualty insurers that performs numerous functions, such as fire and accident prevention, reviews of insurance legislation, research, setting of building and fire department standards, arson and fraudulent claims investigations, etc. Headquarters: Washington, DC.

• AIAF

  Associate in Insurance Accounting and Finance designation sponsored by the Insurance Institute of America, headquarters: Malvern, PA, and the Life Office Management Association, headquarters: Atlanta, GA.

• AIC

  Associate in Claims designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• AIM

  Associate in Management designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• AIMU

  AIMU A trade association representing marine insurers and related organizations. It also acts as a lobbyist on marine insurance issues and provides support services, such as inspections, claims, loss control, and tracking legal and industry trends and news. Headquarters: New York, NY.

• air cargo liability insurance

  Coverage for the legal liability of an air carrier for loss or damage to cargo while in its care, custody or control.

• air passenger insurance

  Life insurance purchased at airports by passengers on scheduled airlines. The face value of the policy is paid to the beneficiary in the event of death on that particular flight. Also called air travel insurance.

• air travel insurance

  Life insurance purchased at airports by passengers on scheduled airlines. The face value of the policy is paid to the beneficiary in the event of death on that particular flight. Also called air passenger insurance.

• aircraft hull insurance

  Covers any loss arising out of physical damage to the aircraft itself in flight, on the ground, or both.

• aircraft insurance

  A type of package policy for aircraft which combines both the property insurance for the hull and coverage for bodily injury and property damage liability arising out of the ownership or use of the insured aircraft.

• aircraft liability insurance

  Covers the insured for both bodily injury and property damage liability arising out of the ownership or use of the insured aircraft.

• aircraft passenger liability insurance

  Covers the liability resulting from bodily injury and sickness or disease suffered by any passenger arising out of the ownership or use of the insured aircraft.

• aircraft product liability insurance

  Coverage required by a manufacturer of aircraft, components or equipment. Also covered are those involved in selling aircraft, parts or fuel, or entities that repair or maintain aircraft. This policy protects such operations against claims arising from injury or damage caused by product defects or by improperly completed operations.

• aircraft spare parts insurance

  All-risk coverage for leased aircraft parts, such as engines, spare parts and equipment, while the property is on the ground or being carried as cargo by air, land or waterborne transit.

• airport liability insurance

  Covers the liability arising out of the ownership or maintenance of premises, normally a hangar located at either a municipal or private airport.

• airway bill

  A bill of lading specifically designed for air carriers. When issued by an air carrier, the bill verifies that the carrier is in receipt of the cargo and sets the terms and conditions for carrying that cargo.

• AIU--American International Underwriters Corporation

  Acting as foreign manager for a group of American stock insurance companies, this corporation underwrites all classes of insurance on properties and risks outside the United States and Canada. Headquarters: New York, NY.

• alarm valve

  A mechanism on many automatic sprinkler systems which activates an alarm, sometimes a loud gong, or in other cases signals directly to the fire department when a sprinkler head has opened.

• ALCM

  Associate in Loss Control Management designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• Alcoholic Beverage Control (ABC) laws

  (See dram shop laws.)

• alcoholic beverage liability insurance

  More commonly called liquor liability insurance or dram shop liability insurance, this coverage is for owners and operators of a business that sells or serves liquor. This coverage was designed to protect against liability for accidents caused by intoxicated customers.

• aleatory contract

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

• alien company

  An insurance company that is domiciled or incorporated in a country outside the United States, but which conducts either insurance or reinsurance operations in the U.S. (See domestic company.)

• alienated premises exclusion

  A provision that bars liability for property damage occurring to a structure that is alienated (sold, abandoned, donated, given away) by an insured.

• alienation clause

  A policy clause that details the terms, conditions, or requirements that will apply should property which is the subject of the insurance be sold and title transferred during the policy term. Two of the most common examples are the alienation clause in a mortgage insurance policy which requires that the balance of a loan be paid should the property be sold, or a property insurance policy which clarifies that the insurance coverage cannot be assigned or transferred to the new owners when the property is sold.

• alienation of benefits

  Refers to a situation when someone other than the plan participant is designated to receive a pension benefits, such as a creditor attempting to garnish pension benefits to pay for a defaulted loan. Federal law generally forbids alienation of benefits.

• All American Marine Slip

  A syndicate of many American insurance and reinsurance companies formed in 1972 to provide a substantial market for large, high-risk or unusual marine exposures historically handled by foreign markets.

• all payers system

  This is a health insurance term that indicates that both public and private participants are subject to the same rules and rates when paying hospitals for services rendered.

• all-comers

  State requirements or pending legislation that require an insurer to take or accept all applicants for a given type of insurance. Also referred to as take-all-comers.

• all-lines insurer

  Insurers offering property, liability, life and health coverages. Governmental and business constraints prevent an insurer from literally providing every single possible line of insurance.

• all-risk policy

  A policy that covers loss caused by any cause of loss which is not excluded, as contrasted to "named peril" policies which protect against certain perils named in the policies. Usual to certain types of property and marine insurance contracts, the term "all risk" frequently appears in quotes, since such coverage includes "almost" all risks (i.e., all but those excluded).

• Alliance of American Insurers

  A trade association made up primarily of mutual property and casualty insurers, though as of September, 1977, membership was open to nonmutual companies. Fosters research and publishes educational materials, with headquarters in Schaumburg, IL. Formerly the American Mutual Insurance Alliance. (See Property Casualty Insurers Association of America.)

• allied lines

  Those coverages that are frequently written with fire insurance (e.g., sprinkler leakage, earthquake and water damage).

• allocated benefits

  When the benefits provided by a health or disability policy are scheduled for specified items, as to the maximum amount allowed for that item. As an example, a maximum amount is set per day for room charges or specified tests.

• allocated claim expense

  Expenses that can be attributed to an individual claim and are charged to that specific claim. The most common are investigative expenses such as research and forensic or defense costs.

• allowed assets

  (See admitted assets.)

• allowed costs

  In health insurance, those expenses that are covered by the insurance policy, which may include such items as physicians' or nursing services, drugs, dressings, bandages, prosthetics, etc.

• alphabet broker (alphabet house)

  Slang for any of several large brokers occasionally referred to by initials derived from their names.

• alternate settlement option

  In mortgage insurance, it refers to a carrier?s claim settlement option. An insurance company may settle a loss by paying the total actual loss, as well as legal costs and expenses that are related to the foreclosure and/or repossession. However, the action has to take place before actual foreclosure and the option waives the insurer?s right to any future recovery when the applicable property is later sold.

• alternative market

  This term applies to the use of insurance or coverage sources that fall outside of the traditional insurance/reinsurance market and includes captive insurance companies, insurance purchasing groups and risk retention groups.

• alternative risk financing

  (See alternative risk transfer.)

• ambiguity

  Anything doubtful, uncertain, unclear, or capable of being misunderstood in an insurance contract. Ambiguities are usually construed against the insurer.

• ambulance service malpractice insurance

  Professional liability coverage for ambulance drivers, EMTs, and attendants for bodily injury, mental injury, or death to patients caused by error, omission, or negligence in the services rendered in the course of their professional duties.

• ambulatory care

  Medical services provided on an outpatient (non-hospitalized) basis. Services may include diagnosis, treatment, surgery and rehabilitation.

• amendment

  A document with language attached to and becoming part of a basic policy for the purpose of modifying the policy, either at inception or mid-term. The term endorsement is usually associated with property and casualty policies while the term rider is normally used with life, accident and health contracts. (See attachment and rider.)

• American Academy of Actuaries (AAA)

  National association that promotes training, education and accreditation in expertise in the actuarial (pricing and ratemaking) sciences. Headquarters: Washington D.C.

• American agency system

  The contracting of insurance companies with agents who are independent contractors to effect property-liability insurance, to issue policies, to own the expiration records thereof, and in general to represent the companies in their communities. Agents may represent more than one company. The system has reached its highest development in the United States, hence "American" agency system. (See independent agent, direct writer and expiration.)

• American Arbitration Association

  An organization sponsoring voluntary arbitration for labor-management and commercial and international trade disputes. Has established an accident claims tribunal to service arbitration proceedings under the family protection coverage of automobile liability policies, which name the association as administrator of arbitration. Headquarters: New York, NY.

• American Association of Insurance Services (AAIS)

  AAIS is a national insurance advisory organization that develops policy forms, rules, rating information, provides statistical reporting and product development for its programs in personal, commercial, farm, and inland marine insurance. Headquarters: Wheaton, IL.

• American Association of Managing General Agents (AAMGA)

  A trade association of independent insurance general agents serving the interests of insurance companies and local agents. Provides markets for all types of insurance with emphasis on surplus and specialty lines. Established in 1926. Headquarters: Washington, DC.

• American Bureau of Shipping

  A technical society, sponsored by ship owners, which sets minimum standards for ship design, materials and construction. Provides periodic surveys of ships and machinery to maintain adequate standards, and publishes American Bureau of Record listing vessels "classed." This record provides detailed information, such as type, size, construction material, machinery, fuel used, and date and type of last survey. Headquarters are in New York, but the bureau has correspondents in principal seaports.

• American Cargo War Risk Reinsurance Exchange

  An association of companies writing ocean marine business, formed for the purpose of reinsuring war risks on ocean cargoes. The reinsurance facilities established by this organization permitted member companies to provide automatic cargo coverage to importers and exporters even during the worst part of World War II. Headquarters: New York, NY.

• American College, The

  (Formerly The American College of Life Underwriters.) Founded in 1927, The American College is a private, nonprofit educational institution for the advancement of learning and professionalism in life insurance and related financial sciences. Those properly qualified persons who successfully pass the examinations this college prepares are awarded the designation "Chartered Life Underwriter" (CLU), or the graduate degree of "Master of Science in Financial Services." Headquarters: Bryn Mawr, PA.

• American Council of Life Insurance

  A public relations organization representing legal reserve life insurance in legislative and administrative matters at federal, state and municipal levels of government. Conducts economic and social research programs, compiles statistics, and publishes pamphlets and consumer booklets. Headquarters: Washington, DC.

• American Hull Insurance Syndicate

  An association of insurance companies writing hull, war risk and builders risk coverage on larger commercial vessels. Formed to provide a ready and sufficient market for American and foreign ships. Management issues its own policies and settles losses on behalf of subscriber companies. Headquarters: New York, NY.

• American Institute for Property and Liability Underwriters,

  Inc. Inc. Inc. Inc. An insurance educational organization which establishes insurance educational standards and fosters educational work. Those properly qualified persons who successfully pass the examinations this body prepares are awarded the designation "Chartered Property and Casualty Underwriter" (CPCU). Headquarters: Malvern, PA.

• American Institute Hull Clauses

  Ocean marine?s version of the Standard Fire Clause. It consists of more than 200 lines of text that includes coverages, conditions and exclusions that may be used to insure large vessels. The original clauses were introduced by the American Institute of Marine Underwriters in 1977.

• American Institute of Marine Underwriters (AIMU)

  A trade association representing marine insurers and related organizations. It also acts as a lobbyist on marine insurance issues and provides support services, such as inspections, claims, loss control, and tracking legal and industry trends and news. Headquarters: New York, NY.

• American Insurance Association (AIA)

  A trade association of primarily stock property and casualty insurers that performs numerous functions, such as fire and accident prevention, reviews of insurance legislation, research, setting of building and fire department standards, arson and fraudulent claims investigations, etc. Headquarters: Washington, DC.

• American International Underwriters Corporation (AIU)

  Acting as foreign manager for a group of American stock insurance companies, this corporation underwrites all classes of insurance on properties and risks outside the United States and Canada. Headquarters: Lloyd's, New York, NY.

• American Lloyd's

  Associations of individual underwriters operating in a limited number of states. Separate organizations from Lloyd's of London. (See Lloyd's.)

• American Mutual Insurance Alliance

  (See Alliance of American Insurers.)

• American Nuclear Insurers

  A syndicate of stock property and casualty companies formed to write material damage and liability insurance on industry-operated nuclear reactors and related operations. Headquarters: Farmington, CT. Formerly known as Nuclear Energy Liability-Property Insurance Association (NEL-PIA).

• American Risk and Insurance Association

  An association that promotes the advancement of knowledge of risk management and the career advancement of its members. The organization sponsors annual educational meetings and sponsors a variety of publications including the Journal of Risk Management and the Risk Management Insurance Review. Headquarters: Malvern, PA.

• American Society of Insurance Management, Inc. (ASIM)

  (See Risk and Insurance Management Society, Inc. (RIMS).)

• Americans with Disabilities Act (ADA)

  A federal act designed to set standards to remove the barriers to employment, transportation, public accommodations, public services, and telecommunications that exist for those members of our society who have physical disabilities of many types. The act encompasses many aspects of everyday life and generates wide-ranging implications for almost every commercial business or service.

• AMIM

  Associate in Marine Insurance Management designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• amortization

  Periodical write-down of premium paid on purchase of a bond or write-up of discount received on purchase of a bond so as to reach par value at maturity date.

• amortization period

  Used in reinsurance rating to describe the number of years it would take for a policy's premium to equal the amount of indemnification.

• amortized value

  The current appraised worth of any bond not yet matured and which was either bought at a discount (less than its face value) or at a premium (more than its face value). For example, a bond bought today at $1,050 to mature in 10 years would have an amortized value one year hence of $1,045, two years hence of $1,040, etc.

• amount at risk

  A life insurance term to express the amount the insurer would pay in benefits in case of death on a whole life policy. It is calculated using the difference between the face amount of the policy and the cash value that has been accumulated.

• amount of insurance

  Based on the terms of a specific policy, the most an insurer will pay for any single loss. The maximum amount an insured can collect.

• amount subject

  Also known as maximum possible loss (MPL). The largest percentage of the insured property which could possibly be destroyed by the insured perils. Normally this amount would be all the property within the four walls of a structure plus loss to adjacent property due to its proximity. An amount subject or MPL estimate is invariably the ultimate in pessimism, but it is a most important concept in underwriting large risks in order to compute rates and to understand the need for capacity, as well as to appreciate all exposures. Maximum foreseeable loss (MFL) is used periodically and has substantially the same meaning.

• Analytic System for the Measurement of Relative Fire Hazards

  Also known as Dean Schedule. A method (now obsolete) of rating fire insurance risks developed by A. F. Dean (Chicago, 1901). Geographically, much of the country is rated under this schedule. Dean described a standard unoccupied risk for which a base rate was named depending on overall territorial factors. Each individual hazard or factor (construction, area, damageability, occupancy, exposure, etc.) that appeared in the risk added or subtracted a percentage of the base rate to produce the specific rate. A successful, logical method which has contributed much to insurance thinking and practice.

• analytics

  A term that formerly referred to the science of logical analysis. However, the term is now used to describe certain types of business or operational information that facilitate decision-making via the close examination of such information and activities.

• ancillary benefits

  Benefits in a health insurance policy that are available to pay for unscheduled service and miscellaneous charges such as medication, bandages, etc.

• animal insurance

  Life and health insurance for animals or livestock. (See poultry insurance (chickens).)

• animal mortality insurance

  A type of animal life insurance that provides benefits for the death of the specified animal for any cause unless otherwise excluded. Coverage is normally very broad and the exclusions few, if any at all. (See livestock mortality insurance.)

• anniversary date

  The anniversary date of policy inception as listed in the policy Declarations, and each subsequent expiration and renewal.

• annual (yearly) renewable term insurance

  A term life insurance policy that the insured can renew for a specific number of years without proving insurability. Each year the policy?s premium increases. (See also yearly renewable term.)

• annual aggregate deductible

  The total amount an insured is responsible to retain for the sum of all losses up to a specified deductible during an annual policy period. Once the annual aggregate deductible has been reached by the accumulation of payment by the insured, the insurer responds to the remaining claims up to the policy limits.

• annual form

  A transportation policy used by organizations that frequently ship property.

• annual renewal agreement

  Certain policy forms contain a clause whereby the company agrees to renew the policy for a certain number of times at some specified rate.

• annual report

  The formal financial report issued by an insurer or other corporation that provides the year's financial information to its shareholders, stockholders, and/or policyholders.

• annual statement

  A summary of an insurance company's operations for the year and a balance sheet at the end of the year, supported by detailed exhibits and schedules, and filed with the insurance department of each state where the company is licensed to conduct an insurance business. Details and the precise form of the annual statement are prescribed by the NAIC. Also known as convention blank.

• annualization

  A provision in multi-year policies giving the insurer the option to re-rate the policy on each subsequent renewal or anniversary date, using the rates in effect as of the anniversary date. (See adjustable premium.)

• annuitant

  The owner or beneficiary of an annuity.

• annuity

  A popular device used in retirement planning, it refers to any type of periodic (generally monthly) payments made to an individual (called the annuitant). The payments may be arranged to last for a defined period of time or may be paid until the annuitant's death. In the latter case, remaining funds may continue to a new annuitant or be paid in a lump sum to a beneficiary.

• annuity certain

  An annuity that guarantees to pay income for a specified period of time, whether or not the annuitant is still alive.

• annuity due

  An annuity in which the income benefits are paid at the start of the annuity period instead of the end.

• annuity period

  With respect to the scheduled payments of income for an annuity, this is the amount of time between each payment.

• annuity table

  The mortality table used to set rates for annuity policies.

• annuity with period certain

  An annuity that pays income benefits for the life of the insured, but with an additional built-in guarantee committing the payment of income benefits for a minimum number of years, whether or not the insured survives for that minimum number of years.

• anti-arson application forms

  Specially designed fire and property insurance forms for territories or areas that have a high arson rate.

• anti-coercion laws

  State laws making the use of coercion illegal, falling into the category of unfair labor practice.

• anti-discrimination laws

  antidiscrimination laws State laws that prohibit an insurer from offering any type of preferential terms or rates to one class of insured over another, when such treatment is not warranted by the company's normal and usual underwriting standards and is not actuarially credible. Also known as antidiscriminatory laws.

• anti-rebate law

  State insurance regulations making it illegal for an agent to offer any part of the commission from a policy to an insured as an enticement to purchase the policy.

• anti-selection

  The adverse impact on an insurer when risks are selected that have a higher chance of loss than that contemplated by the applicable insurance rate. Also known as adverse selection. The selection of such risks is adverse because the rate is inadequate.

• antitrust laws

  Federal and state laws that attempt to prevent price fixing or price discrimination, prevent monopolies, and as a result, also prevent illegal restraints in commerce. Anti-compact laws which forbid companies from agreeing on prices, products, and other business conditions to the detriment of competition, except under conditions stated in the laws.

• any occupation

  A level of disability, meaning that an injured person is unable to perform any job that he or she has the training and/or skill to do, if they were not disabled.

• APA

  Associate in Premium Auditing designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• apartment package policy

  A package policy forming part of the special multiperil policy (SMP) program combining the various coverages applicable to the ownership and operation of an apartment house. Basically, it covers fire, allied lines and liability. It can be extended for other coverages, such as boiler and machinery, glass, fidelity, etc. The SMP has been replaced in most jurisdictions by the commercial package policy (CPP).

• APM

  Associated Professional Member designation sponsored by the American Society of Pension Actuaries. Fairfax, VA.

• apparent authority

  Under agency law, apparent authority occurs when an agent exceeds express (actual) authority in an action but the person dealing with the agent has a justifiable belief that the agent is authorized to do the act in question. For example, an agent tells the customer she can bind coverage on her Corvette. The agent forgot that she cannot bind coverage on a Corvette but the customer does not know this and believes the agent is able to place insurance on the car.

• applicant

  The person in a life insurance policy who actually applies for the insurance. The applicant does not have to be the insured if he or she has an insurable interest in the insured at the time the application is taken.

• application

  In all types of insurance requiring it, a written statement by a prospective policyholder which gives the information the company relies upon when underwriting, rating and issuing the insurance. In England this is called a proposal.

• appointment

  The process by which an insurance company authorizes an agent to act on that company's behalf.

• apportionment

  The process which determines how much each policy on a risk must pay when there is more than one policy involved in a loss. Apportionment refers directly to the proportioning or splitting of the loss amount.

• appraisal

  (See appraisal clause or arbitration clause.)

• appraisal clause

  The clause in a policy that sets forth the conditions under which a disputed loss is decided by appraisers. (See arbitration clause.)

• appraisal inventory

  The inventory or list that details each item and its value, as determined by an appraiser, with respect to either the property owned by an insured or the property to be covered by a policy.

• appraiser

  1) A person who determines the value of property. 2) A party who determines the amount of a disputed loss.

• appreciation

  The amount by which property has increased in value. (See depreciation.)

• approved

  A term rather loosely used to mean something which meets the standards set up by insurers, e.g., approved roof or approved cargo.

• approved roof

  Usually a roof made of fire-resistive material as distinguished from wood.

• appurtenant structures

  Other structures or real property of lesser value that are located on the same premises as the main building insured under a property insurance policy. Common examples are small metal service buildings or storage sheds.

• arbitrage

  Regarding the alternative risk transfer area, refers to dealing in rapid transactions (purchase and resale) in similar financial assets in different markets and making a profit by taking advantage of short term price differences (discrepancies).

• arbitration clause

  Language in most policies of insurance providing that, in the event the company and the claimant are unable to agree on the amount due after loss, the matter shall be submitted to disinterested parties for solution. One party is appointed by the insured, one by the company, and the two appointed arbitrators then pick a third, the "umpire." (See appraisal clause and reference.)

• arbitration/mediation deductible credit

  Because of the high deductibles used in some professional liability coverages, some policies may offer a repayment or a credit for a policyholder's deductible for a claim resolved through mediation.

• arbitrator

  One chosen to decide disputes out of court.

• architects and engineers professional liability insurance

  Protects architects and engineers against claims arising out of their professional services caused by error, omission or negligent acts.

• Architects', Surveyors' and Consulting Engineers' Fees

  This coverage responds to loss involving fees related to making structural or equipment repairs when fees for such building experts are not included in a loss settlement.

• ARe

  Associate in Reinsurance designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• ARIA

  (See American Risk and Insurance Association.)

• ARM

  Associate in Risk Management designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• armored car and messenger service insurance

  Specialty insurance designed specifically to cover the exposures of an armored car or messenger service while loading, transporting, storing, unloading, or otherwise, during the handling of money, gems, precious metals, stock certificates and other highly negotiable instrumentalities by the service.

• ARP

  Associate in Research and Planning designation sponsored by the Insurance Institute of America (headquarters: Malvern, PA) and the Life Office Management Association (headquarters: Atlanta, GA.)

• arson

  The intentional destruction of property by fire.

• arson fraud

  Arson that is either committed by the insured or at the direction of the insured solely for the purpose of collecting insurance proceeds by the insured.

• AS0 plan

  Where a self-insurer pays an insurer or other organization to administer its operations, including benefits and claims.

• ASA

  Associate of the Society of Actuaries designation sponsored by the Society of Actuaries. Headquarters: Schaumburg, IL.

• ASIM--American Society of Insurance Management, Inc.

  Now known as Risk and Insurance Management Society, Inc. (RIMS). Formed in 1950. A nonprofit association dedicated to the advancement of professional standards of risk management. RIMS sponsors educational programs and maintains relationships with insurers, brokers, rating organizations, and regulatory and governmental bodies. Headquarters: New York, NY.

• ASLI

  (See Associate in Surplus Lines Insurance.)

• ASO

  (See alternate settlement option.)

• ASSA

  (See Actuarial Society of South Africa.)

• assailing thieves

  A term used in ocean marine policies to indicate insurance against theft by physical force from persons other than the ship's officers or crew.

• assessable insurance

  A type of insurance which may require the policyholder to contribute in the event the insurer becomes unable to pay its losses. Confined to certain mutual companies. Also known as assessable policies. (See assessment mutual and nonassessable policy.)

• assessable policies

  A type of insurance which may require the policyholder to contribute in the event the insurer becomes unable to pay its losses. Confined to certain mutual companies. Also known as assessable insurance. (See assessment mutual and nonassessable policy.)

• assessment

  The charge levied by an insurer writing an assessable policy (as sold by some mutual insurers), in addition to the policy premium, in the event the insurer becomes unable to pay its total losses.

• assessment mutual

  A mutual insurance company that has the option or right to assess or charge policyholders additional premiums when losses or expenses have increased beyond the predictions set at policy inception. (See assessable insurance.)

• asset-backed security

  Any asset that is used as collateral in support of securities sold to investors for that asset.

• assets

  All the property and resources of a business. (See admitted assets.)

• assigned risk plan

  An association of insurers in a given state in which automobile risks unable to get insurance in the voluntary market are shared among subscribing insurers in proportion to the amount of automobile liability insurance each insurer writes in that state. All companies writing this class are required to participate in this activity, currently administered by the Automobile Insurance Plans Service Office, headquartered at Johnston, RI. Also known as automobile insurance plans, these plans sometimes take the form of joint underwriting associations.

• assignee

  The person to whom life insurance policy proceeds or other (life insurance) contractual rights are assigned. There can be collateral assignees (creditors) and absolute assignees (irrevocable). (See also assignor.)

• assignment

  Transferring property rights to another. Insurance policies may thus be assigned or transferred to another, but usually this requires the consent of the insurer. (See absolute assignment and absolute ownership.)

• assignment of benefits

  A health insurance benefit payment option where an insured may assign policy benefits directly to the health provider. The provider is paid directly, less any deductible. Any balance is paid by the insured.

• assignor

  In life insurance, the assignor is the person who possesses ownership rights and who assigns those rights to an assignee. (See also assignee).

• Associate in National Flood Insurance

  A designation offered by the AICPCU/IIA which demonstrates expertise in the critical aspect of the National Flood Insurance Program, particularly its requirements and administration.

• Associate in Surplus Lines Insurance

  This designation is sponsored by NAPSLO (National Association of Professional Surplus Lines). It was developed in part by the Insurance Institute of America and is awarded after successful completion of its four parts and exams on various key aspects of surplus lines insurance.

• Associated Aviation Underwriters (AAU)

  A multi-company aviation pool writing a substantial volume of most types of aviation business (domestic and international). Founded in 1929. Headquarters: New York, NY.

• Associated General Contractors of America

  An organization consisting of construction contractors and related companies dedicated to industry education and other services. Its goal is to represent the concerns of the industry as an advocate and to enhance its image with the general public. Headquarters: Alexandria, VA.

• association captive insurance company

  A captive insurance company that is formed by the members of an association to underwrite and provide insurance only for their own association members.

• association group insurance

  Group insurance offering coverage to an association, much in the same manner that it would be offered to the employee group of an employer.

• Association of Average Adjusters

  Professional organization of persons involved in the adjustment of maritime losses with a specific emphasis on the ancient concept of general average (a loss common to all interests in the voyage). Headquarters: New York, NY.

• Association of British Insurers

  Formed in 1985, this organization consists of hundreds of insurers operating in the United Kingdom. The member companies account for nearly 100 percent of the insurance business written in the UK. The ABI acts to encourage high operating standards among its members and is also an advocate of insurer issues. Headquarters: London, England.

• Association of Certified Fraud Examiners--ACFE

  Association of Certified Fraud Examiners (ACFE) An international organization that sponsors the certification of professionals trained to detect, investigate and prevent fraud and white collar crime. Headquarters: Austin, Texas.

• Association of Trial Lawyers of America (ATLA)

  Also known as Trial Lawyers Association of America. Successor to National Association of Claimants Compensation Attorneys (NACCA). An international association of plaintiffs' lawyers primarily engaged in the field of personal injury law. Through meetings, lectures, seminars, and publications, ideas are exchanged and techniques are developed for the successful prosecution of their cases and the award of higher court judgments. Headquarters: Washington, DC.

• association professional liability insurance

  Professional liability insurance for the directors, officers, and other members of an association while performing their duties on behalf of the association.

• assume

  To accept (by an underwriter or other person authorized to act) all or part of a risk or an exposure, at which time insurance "attaches." Also known as accept.

• assumed liability

  Contractual liability which arises from an agreement between people, as opposed to liability which arises from common or statute law.

• assumption endorsement

  Also known as a cut-through endorsement, this endorsement is an addition to an insurance policy between an insurance company and a policyholder which requires that, in the event of the company's insolvency, any part of a loss covered by reinsurance be paid directly to the policyholder by the reinsurer. The cut-through endorsement is so named because it provides that the reinsurance claim payment "cuts through" the usual route of payment from reinsured company-to-policyholder and then reinsurer-to-reinsured company, substituting instead the payment route of reinsurer-to-policyholder. The effect is to revise the route of payment only, and there is no intended increased risk to the reinsurer. Similar to the guarantee endorsement.

• assumption of risk

  A common law defense used by employers in which an employee assumes the risks for the hazards normally associated with a type of employment when that employee accepts employment. This defense is not available with workers compensation laws.

• assumption reinsurance

  An insurance company may want to eliminate a block of business. It could effectively "sell" that block of business to another company through assumption reinsurance. The assuming company (reinsurer) takes over all responsibility for the policies and the ceding company is no longer a party to the contracts for that block of business.

• assurance

  Same as "insurance" but used more in England and more often restricted to "life assurance" (insurance).

• assured

  The person or party protected by a policy of insurance. Same as insured or policyholder.

• at-will employment

  Describes a common situation in which a worker is employed at the will of the employer and the employee may be fired for any reason unless the reason would violate state or federal law (such as the Americans with Disabilities Act).

• ATLA--American Trial Lawyers Association

  Also known as the Association of American Trial Lawyers. Successor to National Association of Claimants Compensation Attorneys (NACCA). An international association of plaintiffs' lawyers primarily engaged in the field of personal injury law. Through meetings, lectures, seminars, and publications, ideas are exchanged and techniques are developed for the successful prosecution of their cases and the award of higher court judgments. Headquarters: Washington, DC.

• attach

  The commencement of insurance coverage in a policy.

• attachment

  An attachment is a rider, endorsement, or any other modification made to a policy that in some way changes, broadens, restricts or clarifies the basic coverage provided. (See rider, and endorsement.)

• attachment point

  The limit or amount at which reinsurance attaches or comes into play. The limit or amount below that point is retained by the ceding company.

• attained age

  The age of the insured today. (See attained age conversion).

• attained age conversion

  Many term life insurance policies can be converted to other types of insurance (e.g., whole life) before the insured reaches a certain age. In such conversions, the premiums charged for the new policy are according to the insured's current (attained) age and not his original age (age of the person when the term policy took effect).

• attending physician's statement

  Found in life and health insurance. It is the statement of the physician who treated the patient for a particular illness or accident. Underwriters often ask for an attending physician's statement regarding illnesses and injuries appearing on a life or health insurance application to determine the exact nature of the problem, the duration of the problem and/or the prognosis for recovery. Claims adjusters use attending physician's statements in determining coverage and payments.

• attestation clause

  The clause in a policy which identifies the required signature of an officer of the insurer authorizing the coverage.

• attorney-in-fact

  One who has been given specific authority to act for another in certain clearly defined matters. Often used in insurance to refer to the person or entity operating a "reciprocal exchange" or "inter-insurance exchange."

• attractive nuisance

  A condition which, although normally harmless, may nevertheless attract those (usually children) who do not understand its uses and may cause injury. Although it may be proper to maintain such a condition, the owner is nevertheless required to take such means as may be necessary to prevent its causing injury to innocent people, e.g., an empty swimming pool, an unattended tractor, or an upended ladder.

• AU

  Associate in Underwriting designation sponsored by the Insurance Institute of America. Headquarters: Malvern, PA.

• auctioneers errors and omissions insurance

  Insurance coverage designed for auctioneers to protect against claims resulting from negligent acts, errors or omissions of auctioneers in the performance of their business-related duties.

• audit

  Verification of books or accounts to determine their accuracy. Certain policies written on a reporting or adjustable form give the insurer the privilege of auditing the policyholder's records to verify the accuracy of the premiums paid. (See Adjustable Policy.)

• audit bureau

  An office which checks rates and forms of issued policies for accuracy of rates and rules. Sometimes called stamping bureau because the daily report is stamped with a rubber stamp if correctly prepared.

• audit policies

  These are the types of policies that the insurer has the right to audit or examine at the end of each policy term, to determine if the premium charged was adequate based on the actual final exposure experienced by that insured.

• audit provision

  A policy condition or provision that details the right of the insurer to examine or audit the records of the insured at any time during the term of the insurance policy issued or for up to three years after the expiration of that policy, to determine the actual exposure that insured places on the insurer.

• audited premium

  (See auditor.)

• audited premium

  anti-concurrent causation Refers to a type of insurance exclusion that bars coverage for a loss from a given cause (such as flood or earthquake), even when that cause is preceded, followed or occurred at the same time as another, normally eligible cause of loss (such as fire or lightning).

• auditor

  One who checks the accuracy of figures, either the company's or those of its policyholders who are insured by policies permitting or calling for audits. Payroll auditors in workers compensation insurance are a good example. (See payroll audit.)

• AUGIE

  (See ACORD - User Groups Information Exchange.)

• AUS--automated underwriting systems

  Systems developed by insurers for use by companies and their agents. The system consists of automatically screening insurance applicants through a grid of questions, scoring the responses and generating an underwriting decision. The theory is that such systems reduce underwriting costs and processing time while introducing greater consistency.

• authorization

  A statement, written or oral, made by an underwriter to a producer, expressing the underwriter's ability, willingness, and readiness to insure a certain risk for a certain amount on certain terms.

• authorized company or insurer

  An insurer licensed by the state insurance department to write certain types of insurance in that state. A synonym for licensed or admitted company.

• authorized reinsurer

  authorized reinsurer Describes reinsurance that is written (placed) with a company that is licensed (authorized) in the state where the transaction is made.

• auto insurance premium discounts

  Auto insurance credits given for items that are normally considered to be safety features such as air bags, seat belts, antitheft devices or for good driving records and completion of driver training courses. Credits are also given for non-safety items such as having multiple vehicles on one policy.

• automated home

  Refers to any residence that contains some level of technology (usually computer) to automate control of its major systems (lighting, sound, plumbing, heating/cooling, electricity). The equipment needed to create the automated environment results in a higher exposure to loss represented by the home and its contents.

• automated underwriting systems (AUS)

  Systems developed by insurers for use by companies and their agents. The system consists of automatically screening insurance applicants through a grid of questions, scoring the responses and generating an underwriting decision. The theory is that such systems reduce underwriting costs and processing time while introducing greater consistency.

• automatic cover

  Policy protection applied simultaneously with the acquisition of new property similar to that already covered by the policy. Certain policies provide that they will assume liability for property other than that covered at the commencement of the contract if and when the policyholder acquires ownership or in the event of some similar happening which the policy describes.

• automatic dividend option

  A participating life insurance policy often provides several dividend options, i.e., accumulate at interest, paid-up insurance, additional term insurance, etc. The owner of the policy may select among the options at time of application and is also allowed to change the option after the policy is issued by amending the policy.

• automatic nonforfeiture option

  A whole or cash value life insurance policy will lapse if premiums are not paid. However, the owner is still entitled to (does not forfeit) the cash accumulated by the policy. Three common options are surrender for cash, the purchase of a smaller paid-up whole life policy or a term policy for the same limit of insurance. The owner of the policy may select among the options at time of application and is also allowed to change the option after the policy is issued by amending the policy.

• automatic premium loan

  Instead of allowing a whole or cash value life insurance policy to lapse, this option permits a company to use accumulated cash value to pay the premiums. If all the cash value is used up by a series of automatic premium loans, the policy lapses.

• automatic reinstatement

  After a loss has been paid or the damaged property restored, most policies provide that the amount of insurance will automatically return to its original amount. Some policies are reduced by the amount of loss paid but can be reinstated for additional premium.

• automatic reinsurance

  An agreement between a primary insurer and a reinsurer that obligates the former to pass on (cede) and the reinsurer to accept all risks that fit the guidelines established by the agreement. For instance, an automatic treaty may require Insurer A to automatically cede any homeowner policy with a dwelling limit at or above $300,000.

• automatic sprinklers (A.S.)

  A system to protect property from severe damage by fire in which water is piped to devices called sprinkler heads, which melt with heat and release water to extinguish a fire. Extensively used to protect valuable properties and property so protected normally is charged a lower fire insurance rate than property not so protected.

• automatic treaty

  An agreement between a primary insurer and a reinsurer that obligates the former to pass on (cede) and the reinsurer to accept all risks that fit the guidelines established by the agreement. For instance, an automatic treaty may require Insurer A to automatically cede any homeowner policy with a dwelling limit at or above $300,000.

• automobile death and disability coverage

  A form of accident insurance coverage available under a private passenger automobile liability policy where the insurer pays a principal sum for accidental death, stated benefits for specific injuries (such as loss of limbs, fractures, etc.), and weekly indemnity for total disability. Covers accidents while traveling in an automobile, including getting in and out of, or by being struck by an automobile. An extra premium is charged for this coverage which is available to the policyholder, a spouse, or any other named person.

• automobile fleet

  A group of automobiles, used commercially and owned or leased by the insured, which may get special rate treatment.

• automobile insurance

  Any kind of insurance pertaining to the ownership, maintenance, or use of automobiles.

• automobile insurance plan

  An association of insurers in a given state in which automobile risks unable to get insurance in the voluntary market are shared among subscribing insurers in proportion to the amount of automobile liability insurance each insurer writes in that state. All companies writing this class are required to participate in this activity, currently administered by the Automobile Insurance Plans Service Office, headquartered at Johnston, RI. Long identified as "assigned risk plans," such plans sometimes take the form of joint underwriting associations.

• automobile liability excess policy

  Provides excess limits for bodily injury and property damage liability for persons unable to secure more than minimum limits under their basic automobile liability insurance. Primarily purchased by assigned risk plan policyholders, the excess insurance always stipulates that the primary policy must be kept in force.

• automobile liability insurance

  Protection for loss incurred through legal liability for bodily injury and damage to property of others caused by accidents arising out of ownership, maintenance or use of an automobile.

• automobile medical payments insurance

  An optional coverage under an automobile liability policy which pays the medical expenses of the policyholder and any of the passengers injured by the insured automobile, irrespective of who was responsible for the accident. This was originally called "basic medical payments." In addition, it pays the medical expenses of the policyholder and members of the immediate family injured while passengers in any other automobile or when struck by an automobile. In some no-fault states, medical payments insurance has been replaced by personal injury protection (PIP); in other states, it may supplement no-fault insurance. (See personal injury protection (PIP).)

• automobile physical damage insurance

  Material damage insurance covering loss or damage to the policyholder's automobile. (See combination automobile policy.)

• auxiliary yacht

  A pleasure boat propelled both by sail and power.

• average

  1) The ocean marine underwriter's term for loss. 2) Derived from the French word "avarie," meaning damage to ship or cargo.

• average adjuster

  An adjuster of marine losses, such as particular or general average.

• average clause

  Language in an insurance policy which distributes the insurance among several items in proportion to their value or in a similar way. Also known as a coinsurance clause, average distribution clause and pro rata distribution clause. (See distribution clause, pro rata clause and pro rata distribution clause.)

• average indexed monthly earnings (AIME)

  The formula used by the Social Security Administration to determine an individual's benefits. The formula takes into account all of the income earned and social security taxes paid during an individual?s working life. Most people do not pay the maximum into social security from the day they enter the workplace, so the formula adjusts benefits for those with lower earnings.

• average rate

  Since rates generally apply to individual items (e.g., a building or specific contents), when two or more such items are combined in a single "blanket" amount of insurance, the value of each item is multiplied by its own rate. The sum of the premiums thus determined is divided by the total amount of insurance on all the items to produce an average rate for all the insured property.

• average risk

  The type of risk that an insurer defines as average or standard for class as far as size, quality and acceptability. The baseline set by the insurer as the proverbial company normal. (See standard risk.)

• average weekly wage

  1) A calculation which reflects the average rate of remuneration of employees, used as a basis for determining benefits in workers compensation insurance. 2) A type of statistic promulgated by the U.S. Department of Labor on a national level and used for determining benefits under federal compensation acts.

• aviation clause

  Language in certain policies which describes restrictions in coverage in or on aircraft.

• aviation insurance

  A broad field of protection covering both domestic and international operations of aircraft owned and used, involving hulls, liability, passenger liability, and airport and hangerkeeper's liability.

• aviation passenger liability insurance

  Insurance protection for the operators of aircraft, in the event of an accident where a passenger(s) is injured, killed or disabled while on a covered aircraft.

• avoidance of risk

  One of the tools of the risk management process, where steps are taken by an insured to remove a process, cause of loss or hazard and thus avoid the chance of loss. Steps include changing processes or even ending a specific exposure, if necessary.
• Back to Top

• backdating

  Many life insurers permit a life insurance applicant to backdate their age for up to six months, in order to base the premiums on the earlier age. Of course, the coverage and the premiums are effective as of the earlier backdate. This can provide an insured with a significant long-term premium savings.

• backloading

  Refers to a pension plan that accrues greater benefits to a plan participant in the later years of service (employment) in order to encourage employee retention.

• bad faith

  An allegation that an insurer has failed to settle a claim within its policy limits when the opportunity existed or has dealt with another party without regard to fairness or reasonableness. Also refers to a complaint (to insurance authorities) or a suit based on an insurer's improper actions.

• bad faith doctrine

  Refers to any codification of actions that demonstrate an insurer's unwillingness to fairly handle a claim, thereby justifying legal action.

• baggage coverage

  Insurance protection for the contents of luggage or the personal effects of and for the personal use, adornment, or amusement of the insured, or a family member of the insured, while traveling. Coverage is normally worldwide and is written on an "all-risk" basis.

• bail bond

  A bond intended to guarantee the appearance of a person in court to answer a legal summons for personal appearance. In the event the person out on bail fails to appear, the bondsperson or bonding company is required to pay the amount of the bond to the court.

• bailee

  A person (or entity) who has temporary possession (custody) of property belonging to others, usually in order to perform a service to the property such as cleaning, restoring, repairing or storing.

• bailee customers insurance

  Insurance arranged by a bailee for the account of bailors or customers. An example is the insuring of furs in a storage warehouse arranged by the warehouse bailee for the benefit of the owners of the furs.

• bailees liability coverage

  Normally, this is an inland marine insurance, despite the title. This type of coverage is designed for a bailee to provide coverage for liability for the property of customers, in that bailee's care, custody or control. Although this coverage was designed to cover the bailee's liability exposure, it can often be endorsed or have options exist to provide a no-fault coverage to protect the customer's property against any damage, whether or not there is negligence and subsequent liability.

• bailment

  Personal property delivered by its owner to another to be held and returned to the owner in good condition. The owner who delivers the property is called the bailor, the one who receives it is the bailee.

• bailor

  A person entrusting goods to another.

• balance

  1) The excess on either side of a bookkeeping account. 2) The net amount due a company by an agent.

• balance sheet

  A statement of the assets, liabilities and owners' equity (surplus) of an enterprise. Assets minus liabilities equals owners' equity.

• balance sheet reserve

  Claim reserves set up to provide the funds needed to pay benefits to insureds. These reserves are regulated by law, to guarantee that an insurer is capable of paying the claims, losses and benefits promised its customers. The amount of the reserve as compared to the premium written is monitored and controlled.

• balanced billing

  Refers to a physician or health care service provider that bills a patient directly for services that are not reimbursed by Medicare. The practice is prohibited by several states.

• bank burglary and robbery insurance

  A package policy that provides banks with burglary, robbery, vandalism and malicious mischief protection. Typically, it is written on a primary basis for small banks and on an excess basis for larger banks.

• bankers blanket bond

  A special form of bond designed to insure banks against loss from employee dishonesty, burglary, robbery, larceny, theft, forgery, misplacement and certain other perils.

• banking plan

  banking plan A reinsurance industry arrangement in which a ceding company pays its premiums in installments over the period of the reinsurance contract. Ideally the payments should, ultimately, match the amount the reinsurer pays to cover losses. The plan is adjusted at the contract's end if payments do not balance.

• bare

  (See going bare.)

• bareboat basis

  Operating (including hiring/chartering) a vessel without a captain, crew or normal provisions.

• barratry

  Willful and illegal sinking, casting away, or damaging of a ship at sea or its cargo.

• base premium

  base premium The written or earned premium that a reinsurer uses to develop its reinsurance premium.

• base rate

  The manual or starting rate for a specific coverage, based on a normal or average for class risk. Deviations are made from the base rate for risk-specific characteristics, hazards, exposures, protection or lack of, and individual loss experience. After all credits and debits have been computed, a final rate is determined, which is used to calculate the coverage premium.

• baseline data

  The benchmark data and statistics used by the insurance industry as a starting point to contrast and compare actual loss experience and to make loss projections.

• basic cause of loss

  Property insurance covering only those causes of loss (perils) specified as covered. The types of losses insured are fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action.

• basic death benefit

  The limit of life insurance provided by a policy, not including coverage from additional death and dismemberment, decreasing term or other insurance riders.

• basic extended reporting period

  In "claims-made" liability policies, only those claims that occur after the retroactive date and are reported or filed against the insured during the policy period, are covered by the policy. The ERP, or tail, is an endorsement available to extend the reporting period for the filing of a claim to give additional time in order to be considered covered.

• basic form

  An ISO homeowners form which covers a limited number of causes of loss.

• basic limits

  Certain minimum amounts of liability in liability insurance (determined by custom or laws), for which "basic" premiums apply. Additional amounts of liability insurance are charged for by the addition of certain percentages of the premium charged for the minimum limits.

• basic rate

  A fundamental rate usually applied to an entire class of policies or to similar properties in a given territory, such as one state.

• beach plans

  FAIR plans to make property insurance available for Atlantic and Gulf coast states with coverage for hurricanes and catastrophic winds. Some of the states include Alabama, Florida, Louisiana, Mississippi, North and South Carolina, and Texas. (See beachfront plans.)

• beachfront plans

  Assigned risk property plans to provide coverage for damage to coastal properties caused by hurricanes and heavy winds. (See beach plans and hurricane insurance.)

• bench error

  A products liability term used to designate those losses resulting from faulty manufacture of products caused by error or negligence during the production stage, such as the insertion by an employee of the wrong size part.

• beneficial interest

  This term applies to a party who does not necessarily own an insurance policy but who has a financial interest in the property covered by an insurance contract.

• beneficiary

  The person or entity named in a life insurance policy to receive the proceeds.

• benefit formula

  The formula used to calculate and determine the benefits payable to an insured or beneficiary covered by a pension plan.

• benefit schedule

  A document included in group health policies that lists what the policy covers and the insurance limits per accident or illness, lifetime maximums, surgical schedules, daily limits for hospital stays, etc.

• benefits

  In life, health and accident insurance, the money payable or services rendered under the policy.

• bespoke liability

  A United Kingdom term for a type of third-party liability coverage that is tailored (customized) for a given insured.

• best practices

  Written methods of operating within an industry such as insurance, which results in the highest level of performance.

• Best's rating

  Best's rating Refers to a rating or grade that an insurance company's financial strength is assigned by the A.M. Best Company, a veteran rating and financial information supplier headquartered in Oldwick, New Jersey.

• betterments

  Significant additions made to real estate enhancing its value and amounting to more than mere repairs or replacement. Often, these betterments are to customize a property to the specific type risk now occupying the property, such as fire protection or hood and vent work in a restaurant. When made by a tenant, these additions are usually included in the tenant's own property insurance. (See improvements and betterments.)

• bicycle floater

  An "all-risk" inland marine coverage form written to cover high-value bicycles. One method of providing this coverage is through the bicycle dealers who issue certificates on a master policy issued through the dealer. Others obtain personal floaters on their personal insurance policies.

• bid bond

  A bond intended to guarantee that the bidder on a construction, supply or service contract will enter into the contract if successful as a bidder. Should the bidder fail to enter the contract, the surety on the bid bond may be called upon to pay the difference between the amount of the principal's bid and the bid of the next lowest qualified bidder.

• bill of lading

  A document issued by the transportation carrier as receipt for the goods being shipped, which describes the voyage, vessel, date of sailing, and goods. It also states the carrier's liability, limitations and exemptions. Some bills of lading may be used as negotiable instruments. There are three types of bills of lading: under deck, on deck, and on board. (See Carriage of Goods by Sea Act (COGSA), endorsement in blank, and Harter Act.)

• binder

  An oral or written agreement to provide insurance which serves as evidence of coverage prior to the issuance of a policy. It is often considered to be a temporary insurance policy to provide coverage until a permanent policy has been issued. (See cover note.)

• binding authority

  When one party (usually an agent) has been given the right and commensurate authority to represent another party (usually an insurer) in effecting or creating an insurance contract.

• binding receipt

  Once the initial payment has been made and while the pending life and health application for insurance is being investigated and either issued or rejected, a binding receipt is issued to verify receipt of payment and offer temporary coverage until final decision is made.

• birthday rule

  When both parents work and have insurance plans that provide dependent coverage, which plan will provide coverage for the children? Under this coordination of benefits provision the birthday rule will provide coverage for dependents from the policy on the parent who has the earliest birthday in the year. For example, if the mother?s birthday is May and the father?s is December, the mother's policy provides for the children.

• black swan catastrophe

  Originally an investment theory, refers to any loss event that is rare, very severe and highly unpredictable.

• blanket contract

  1) In property insurance, contracts or policies providing coverage for either more than one location, coverage or type of property. 2) In the case of health insurance, a policy or contract covering an entire specified group of people (such as employees) against a listed set of hazards or perils (for example, for medical or dental protection).

• blanket coverage

  1) In property insurance, a single limit of insurance that covers a number of items, such as one amount of insurance to cover two buildings or a single building and its contents. A blanket policy usually contains certain restrictions, which may be absent in "specific" or "itemized" policies, such as the use of a 90% coinsurance clause. 2) In the case of health insurance, a policy or contract covering an entire specified group of people (such as employees) against a listed set of hazards or perils (for example, for medical or dental protection).

• blanket crime policy

  An obsolete coverage that insured against employee dishonesty, losses inside and outside the premises, losses from money orders and counterfeit currency, and depositor's forgery. The policy protected money, securities and other property with a single limit of insurance applying to all coverages.

• blanket group

  A boiler and machinery term used to designate the objects that are covered by categorizing the types of machinery into fairly broad classes. The items covered by boiler and machinery insurance are referred to as objects. When blanket groupings of boiler and machinery objects are used, each individual piece of machinery does not have to be scheduled.

• blanket group policy

  Policies issued to provide coverage for an entire group or category of persons with a common point of interest or relationship, for example, all U.S. veterans, or all the credit card holders of a specific bank, or employees of an employer. The coverage is made available to the entire group without underwriting the acceptability of individual members.

• blanket insurance

  1) A single amount of insurance covering several items, e.g., one amount of insurance to cover two buildings, or one building and its contents. Such policies usually require the fulfillment of certain restrictions which may not be required in "specific" or "itemized" policies, such as the use of a 90% coinsurance clause. 2) In the case of health insurance, a policy or contract covering an entire specified group of people (such as employees) against a listed set of hazards or perils (for example, for medical or dental protection).

• blanket medical expense

  An insurance coverage for individuals providing protection for any and all medical expenses, up to the specified maximum, with no caps or sublimits for individual or specified procedures, services, drugs and equipment.

• blanket position bond

  A fidelity bond which insures an employer against loss from dishonest acts by employees. As the name implies, blanket coverage is granted for all employees in the regular service of the employer during the term of the bond. The bond is issued for a fixed sum and each employee is covered up to the full amount of the bond. The maximum amount payable for any one embezzlement involving more than one employee would thus be the amount of the bond multiplied by the number of employees involved. (See commercial blanket bond.)

• blanket position public official bond

  A fidelity bond that insures a public organization from the dishonest acts of any listed public employee.

• blanket rate

  A fire insurance rate which applies to blanket insurance.

• blanket retrocession

  Retrocession protecting a portfolio of reinsurance, as opposed to specific retrocession, which deals with a particular reinsurance. (See retrocession.)

• blended rates

  Blended rate health plans use a base or manual rate that is modified by the experience of the group. This can help mid-sized groups even out premiums when faced with shock losses and add a premium cushion for the company when experience is good.

• block cancellation

  When an insurer makes the decision to cancel an entire line of business, class of business, coverage within a territory, coverage within an agency, or book of business without consideration for the retention of the individual policies.

• block limit

  A maximum amount of insurance an insurer is willing to write within any one city block or one block of an urban area. An uncommon practice today.

• block policy

  Inland marine coverages offering protection for all of the described type property of an insured on an "all-risk" basis, from the time the insured obtains possession, through loading, transport, unloading, storage, display, or sales, including any repair or processing necessary at off-premises locations. Two of the most common block policies are the jewelers block or the furriers block coverages.

• blood bank professional liability insurance

  Coverage designed for owners and operators of blood banks against negligence, errors or omissions arising out of alleged malpractice, rendering or failing to render professional services, or mistakes in taking, handling, processing, storing or distributing blood products.

• bloodstock insurance

  Livestock mortality coverage for high-value racing horses and prize show horses (both stallions and brood mares).

• bloodstock insurance

  bloodstock Insurance Coverage for horses raised and used in racing and as breeding stock (typically pedigree).

• Blue Cross Plan

  A nonprofit, tax-exempt health service prepayment organization providing coverage for health care and related services. Unlike most private insurance companies, the plans usually provide service rather than indemnity benefits, often paying hospitals on the basis of reasonable costs (by pre-arranged agreement) rather than charges. The 70 individual plans in the U.S. should be distinguished from their national association, the Blue Cross Association.

• Blue Shield plan

  A Blue Shield plan pays for physician and other medical expenses while a Blue Cross plan pays for hospital expenses. (See also Blue Cross plan.)

• bluewater

  Boating insurance term referring to ocean waters.

• board of education liability insurance

  Liability protection for elected or appointed members of school boards, including administrators, teachers and other employees. Coverage is for alleged damages to third parties resulting from the negligence, wrongful acts, errors and omissions occurring during the performance of duties with respect to schools boards or boards of education.

• bobtail coverage

  Auto liability coverage that protects against losses involving trucks while being operated without a trailer (typically occurs after a trailer has been delivered or for cabs traveling to pick up a trailer, prior to its delivery).

• bodily injury (BI)

  Injury, sickness or disease sustained by a person, including death at any time resulting therefrom.

• bodily injury liability insurance

  A form of "third-party" protection covering the insured's legal liability for bodily injury to others caused by the insured's negligence. (See liability insurance.)

• boiler and machinery insurance

  Protection against loss from disruption of boilers and machinery by an insured peril: loss to the boiler and machinery itself, damage to other property, business interruption losses, or all three. Also known as machinery breakdown insurance.

• boilerplate language or policy

  boilerplate language or policy An older term that refers to any policy or form that consists entirely of standard provisions, absent any special or custom features.

• bond

  There is more than one type of bond. Insurance bonds are normally three-party contracts in which one party agrees to guarantee the act, performance or behavior of a second party to a third party. Two common types of bonds are fidelity and surety. (See bond--fidelity and bond--surety.)

• bond--fidelity

  An insurance policy that reimburses an employer for employee theft or embezzlement. (See bond.)

• bond--surety

  A written agreement wherein one party, called the surety, obligates itself to a second party, called the obligee or beneficiary, to answer for the default of a third party, called the principal. (See bond.)

• book debts insurance

  (See accounts receivable insurance.)

• book of business

  1) A defined body of insurance policies in force. (See portfolio.) 2) All of the policies or insurance accounts written by a company or agent. Example: an insurer's book of commercial business, or an agent's overall book of business, or an agent's book of business by insurer.

• book value

  The dollar amount of assets (bonds, stocks, real estate, etc.) shown in a company's books.

• BOP--businessowners policy

  Similar to the commercial package policy (CPP), it provides broad property and liability protection in a single contract and is designed for small and medium-sized mercantile, service, office or apartment risks.

• Bordereau

  A report by an insurance company to its reinsurer listing and summarizing certain insurance transactions affecting the reinsurance.

• borderline risk

  An average risk in terms of loss potential, neither unusually good or bad, but considered barely acceptable by an underwriter for insurance.

• bottomry

  In the early days of marine insurance, a ship owner would borrow money by mortgaging the ship; the mortgage would provide that if the ship were lost, the borrower would not have to repay the loan. This was bottomry, which thus combined money lending with insurance. When cargo instead of hull was involved, it was called respondentia. (See respondentia.)

• bourse

  A place where goods or services are exchanged. (See insurance exchanges.)

• boycott

  As it relates to insurance, boycott falls into the category of unfair trade practices. It is when one party refuses to do business with a second party until that second party either complies with certain conditions or makes concessions.

• branch manager

  Supervisory level professional charged with managing an insurance carrier or agency?s branch (subsidiary) office.

• branch office

  A territorial office, reporting to the home or head office, supervising business in its operational area and providing agency service by a staff of special agents, underwriters, claims personnel, auditors, and engineers.

• brands and labels clause

  This is a coverage provision that pays for the cost of re-labeling products or goods prior to sale (usually at a substantially reduced price). The need to re-label has to be a result of a covered occurrence.

• breach of warranty

  Warranties are statements of commitments by the insured on the literal truth of which the insurance contract depends. Warranties may relate to matters existing at or before the time the policy is issued or may be undertakings by the insured that something be done or omitted after the policy takes effect and during its continuance. Breach of warranty exists when a warranty is broken or violated by an insured.

• break in service

  A break in service in employee benefits plans (principally pension plans) is any time that the employee leaves the service of the company. After a break in service the employee is entitled to all vested benefits. Federal law provides rules for pension plan participants who return from a break in service relative to how much of their previously accumulated time in service can be carried over.

• breeders policy

  Inland marine insurance to cover the high value livestock of breeders against the causes of loss as indicated.

• brick building

  A type of construction in which the outer walls are at least the thickness of two bricks in width. (See brick veneer and frame building.)

• brick veneer

  A building where the outer walls are made of wood faced with a single course of brick. In other words, it is a frame building with a brick outside covering, as distinguished from a brick building in which the supporting walls are brick. (See brick building and frame building.)

• bridge policy

  Special inland marine forms which insure bridges against many hazards.

• broad cause of loss

  Property coverage providing protection for loss from a specified group of causes including all of those provided in the basic cause of loss form (fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action) plus additions which include breakage of glass, falling objects, weight of ice, sleet, or snow, water damage, and collapse as defined in the cause of loss form.

• broad form

  An ISO homeowners form which covers the same causes of loss as the basic form, plus six additional causes of loss.

• broad form personal theft policy

  Theft coverage for personal property at private homes or residences. Coverage is offered for all types of theft and on any personal property unless otherwise excluded or limited. Usually written in conjunction with a homeowners policy.

• broad form property damage endorsement

  An endorsement to a commercial general liability policy which amends or modifies the care, custody, or control exclusion that normally eliminates this coverage. A standard endorsement is not currently available to delete the exclusion; thus each insurer endorsing this exclusion must develop its own company-specific version. Endorsements vary greatly as to the extent of coverage. (See care, custody or control.)

• broad form storekeepers policy

  A package (now obsolete) designed to provide broad crime insurance for small retail stores. It insures principally against loss of money and securities, merchandise burglary losses, and losses from employee dishonesty and forgery. Combinations of the current crime coverage forms are now used to offer the equivalent protection.

• broadcasters liability insurance

  Professional liability coverage for operations that distribute news, educational, entertainment or commercial information via the airwaves. Protection is usually against harm caused by distributing incorrect information (libel and slander) and allegations of copyright infringement, invasion of privacy rights, or illegal use of intellectual property. The coverage typically includes a separate provision for handling legal defense costs.

• broker

  A licensed, legal representative of the insured who negotiates with underwriters on behalf of the insured; nevertheless, the broker receives a commission from the insurer (underwriter). (See agent and insurance agent.)

• broker of record

  A licensed broker who has been designated by the policyholder to represent that policyholder.

• broker-dealer

  A stock broker or similar equities business that employs or appoints sales persons who are licensed to sell equities based on life and other insurance products. Not all equities-licensed agents are also licensed to sell stocks. Broker-dealers also employ stock brokers who sell equities and may not be licensed to sell any form of insurance. Broker-dealers are financial intermediaries.

• broker?agent

  broker-agent Large agents at times operate both as brokers representing the policyholder and as agents representing the company. Or they may have an office in one city which operates strictly on a brokerage basis and one in another city in which they are agents.

• brokerage commission

  brokerage commission The fees paid to a broker for getting reinsurance coverage placed and for related services.

• brokerage market

  brokerage market The insurance marketplace in which reinsurance coverage is handled through the use of reinsurance brokers.

• brownfields

  Commercial and industrial facilities that are not used, abandoned or which are not fully utilized and a party is interested in expanding or reviving their use. However, such sites have to be evaluated for possible environmental contamination and, if contaminated, cleaned up before they can be put back into productive use.

• brownwater

  Boating insurance term referring to inland lakes and rivers.

• bucking arrears

  A form of embezzlement unique to the insurance industry where an agent will falsify records by manipulating the application of premiums paid for advance payments from one policy to the delinquent payments of another on a floating basis to cover the embezzlement of funds.

• buffer layer

  An amount of insurance purchased to satisfy the requirement of an excess carrier with respect to underlying insurance. Also known as gap coverage.

• builders risk

  1) A building or a ship in the course of construction. 2) A special form dealing with the unique loss exposure of property under construction.

• building and personal property coverage form

  A commercial property coverage form which can be used to cover buildings, business personal property, and personal property of others.

• building code

  A set of laws which prescribe the standards by which buildings must be constructed in a city which has adopted the code.

• building rate

  The fire insurance rate on a building as distinguished from the rate for insurance on its contents.

• bullion

  Gold or silver insured for its value as metal and not for its value as coin.

• bumbershoot

  An umbrella or excess liability policy specifically for ocean marine risks.

• bureau

  Usually bureaus are associations or organizations where members combine data, information and resources to accomplish a specific insurance function as in the case of a rating bureau. (See rating bureau or advisory organization.)

• burglar alarms

  Devices of various types which give warning of entry into premises by unauthorized persons. Burglary insurance premium discounts are allowed for burglar alarm systems approved by the Underwriters Laboratories.

• burglary

  Theft by forcible and illegal entry, evidenced by visible signs made by tools, explosives, electricity or chemicals.

• burglary and theft insurance

  Insurance against loss of property (from the various types of theft or damage) caused by burglary or theft.

• burning cost

  The ratio of actual (or "as if") reinsured losses to a ceding company's subject matter premium (either written or earned premium) for the same period. Used to analyze past experience and to predict future experience of a per-risk excess cover.

• burning layer

  The bottom or first layer of coverage in property or casualty insurance which will experience the primary losses.

• burning ratio

  The ratio of actual losses experienced to the amount of insurance in effect. This is not a "loss ratio," which is the ratio of losses to premium.

• business

  (See class of business.)

• business auto policy

  Coverage designed to provide a "standard" form for insuring commercial vehicles (other than private passenger cars).

• business continuation insurance

  Should one partner/corporate officer, etc., die or become disabled, business continuation insurance provides cash to the surviving partners/stockholders to continue the business and/or purchase the stock or interest of the deceased partner.

• business income insurance

  A time element coverage which pays for loss of earnings or income when business operations are interrupted, curtailed or suspended due to property loss as a result of an insured cause of loss. Also covered are loss of rents and rental value. Extra expenses incurred to continue operations at another location are included as long as they reduce the total amount of loss. (See gross earnings form, use and occupancy, and business interruption insurance.)

• business interruption insurance

  A time element coverage which pays for loss of earnings when business operations are curtailed or suspended due to property loss as a result of an insured cause of loss. This coverage is now obsolete and has been replaced by a more comprehensive and generic business income insurance. (See time element insurance and business income insurance.)

• business personal property

  Refers to portable property that is owned by an insured business entity, including goods for sale, fixtures, equipment, machines, materials (raw through finished), and similar property. Such property must be used by the business operation.

• Business Risk Management

  business risk management A newer, broader application of the risk management concept. It refers to an aggressive approach to handling an organization?s multitude of exposure to loss of tangible and intangible property, including income. It may use a variety of tools to avoid loss, such as safety procedures, insurance, shifting of risk via contracts, arranging for alternate supply channels, etc. The concept focuses on growing concerns that face new, often unanticipated, risks.

• businessowners policy (BOP)

  businessowners policy--BOP Similar to the commercial package policy (CPP), it provides broad property and liability protection in a single contract and is designed for small and medium-sized mercantile, service, office or apartment risks.

• buy-back deductible

  A deductible which may be removed by payment of additional premium when full coverage is required.

• buyers guide

  Many states require that an agent (or company) provide a prospective life insured with a buyers guide to life insurance at or about the time the sale is made. The buyers guide explains how the different life insurance policies work and what the policyowner's rights are.

• By Order of Civil Authority

  A directive from city officials or other civil authority confirming that a building may be destroyed by the fire department in order to prevent the spread of conflagration. (See civil authority clause.)
• Back to Top

• CAFE

  (See Corporate Average Fuel Economy.)

• cafeteria plan

  Often called a Section 125 plan after the IRS code, a cafeteria plan provides an employee with options under an employee benefits plan. The employee may be enrolled in a basic health plan with a certain amount of unallocated dollars. These dollars may be used to purchase additional benefits such as orthodontia, additional life insurance or to pay health deductibles.

• calendar year experience

  Calendar year experience is the statistical matching of all losses incurred (not necessarily occurring) within a given 12-month period, usually beginning on January 1, with all premium earned within the same amount of time. Accident year experience is the statistical matching of all losses occurring (regardless of when the losses are reported) during a given 12-month period of time, with all premium earned (regardless of when the premium was written) during the same period of time. Yet a third related term is policy year experience which, to put it simply, is the statistical segregation of all premiums and losses attributable to policies having an inception or renewal date within a given 12-month period. Also known as accident year experience. (See accident year experience, and policy year experience.)

• California Insurance Wholesalers Association (CIWA)

  An insurance trade association organized to promote education and good business practices, and to represent the interest of their members with insurance companies and vendors. Headquarters: Montrose, California.

• call center

  In its simplest form, a physical site used by an organization (insurer) to handle large volumes of incoming and outgoing phone calls involving customer service, marketing, and other business transactions. Such centers are highly dependent upon sophisticated data management and technology. Also called contact centers.

• camera and musical instruments dealers coverage

  An inland marine coverage designed for the property exposures of camera or musical instruments dealers to protect against loss to furniture, fixtures, and stock both on premises and while in transit, on an "all-risk" basis.

• camera floater

  An inland marine form designed to insure cameras and their equipment.

• cancel

  To terminate a contract. Usually applied to the termination of a policy before its natural expiration, but may be used to describe the ending of any contract during its natural life, such as an agent's contract.

• cancelable policy

  This type of insurance policy may be canceled by the insured or the insurer at any time, as long as the other party is notified according to the terms and conditions set forth in the policy, and the appropriate time is allowed during the notification process.

• cancellation

  The termination of a contract. Usually applied to the termination of a policy before its natural expiration, but may be used to describe the ending of any contract during its natural life, such as an agent's contract.

• cancellation clause

  The provision in a policy that explains the conditions and terms to be complied with for the termination of a contract. Usually applied to the termination of a policy before its natural expiration, but may be used to describe the ending of any contract during its natural life, such as an agent's contract.

• cancellation notice

  The notice issued by one party of the policy to the other, informing of the intent and request to cancel. The policy provisions must be followed during the notification process with respect to how the notice must be given (normally in writing), the number of days that must be allowed, and how the notice must be delivered (registered mail, delivery, etc.).

• cancer policy

  Also known as a dread disease policy because it covers one or more major maladies such as cancer, heart disease, etc. (See also dread disease policy.)

• capacity

  The amount of insurance (measured either by face value of policies or by premium) which an insurer is able or willing to issue as a maximum, as limited by legal restrictions, corporate restrictions, or indirect restrictions. Legal restrictions (e.g., "no policy may be issued for an amount in excess of 10% of policyholder surplus") or corporate restrictions (e.g., a board of directors resolution that "the company shall not knowingly commit itself to a policy amount in excess of $10 million") establish the maximum capacity an insurer is able to write. Indirect restrictions on the capacity an insurer is willing to write include: 1) the financial strength (policyholder surplus) of the insurer, or 2) the willingness of the insurer to venture a portion of its current anticipated underwriting (or overall) profit on a single policy (this willingness could also be expressed as a percent of annual premium) and the confidence felt in that anticipated result.

• Capital Asset Pricing Model

  An actuarial method for determining how to pay back investors for taking two actions. One is to compensate investors for the value of supplying funds over a given period of time and the second is to compensate those same investors for facing a given level of loss of investment value.

• capital assets policy

  All-risk property coverage for personal property of industrial firms away from the insured's own manufacturing premises.

• capital gain

  That part of a company's income which is realized when its invested assets are sold at a price above book value (or below book value, for a capital loss). Unrealized capital gains or losses do not affect a company's income; however, increases or decreases in the market values of equity securities produce a corresponding effect on policyholder surplus, although market value changes in other invested assets do not affect policyholder surplus. (See investment income.)

• capital loss

  That part of a company's income which is realized when its invested assets are sold at a price below book value.

• capital stock insurance

  Insurance business transacted by an insurer whose ownership element is divided into shares of stock represented by certificates, as opposed to a mutual insurer which does not have capital stock and whose ownership element is divided among its policyholders. While a stock insurer has both stockholders (its owners) and policyholders (its customers), a mutual insurer has only policyholders (its owners and customers). (See mutual insurance and mutual insurance companies.)

• capital sum

  The total policy amount, the entirety of which is made in a one-time payout to the beneficiary of an accident policy in the event of accidental death or dismemberment of the insured.

• capital transaction

  The sale of a major (capital) asset such as stock or structures. Typically, when such sales involve securities, they must be taxed as ordinary rather than dividend income.

• capitalization

  (See leverage.)

• capitation benefits

  An HMO program which, instead of paying a fee for service, pays a physician a flat amount for each subscriber/patient. A physician with a relatively sick population of subscribers will earn less than the physician who has a healthy group of patients.

• CAPM

  (See Capital Asset Pricing Model.)

• captive agent

  An agent who, by contract, represents only one company and its affiliates. Sometimes called an exclusive agent. (See agency and insurance agency.)

• captive insurance company

  A company which is wholly owned by another organization (generally non-insurance), the main purpose of which is to insure the risks of the parent organization. A pure captive is owned by a single parent, while an association captive is owned by a group of companies usually in the same line of business.

• Captive Insurance Company Association (CICA)

  An association formed to educate persons working for or interested in captive insurance companies. It provides information, education and support services for both domestic and foreign captives. Headquarters: Minneapolis, MN.

• care, custody or control

  Most liability policies have provisions that exclude coverage for physical damage or loss to property while it is in the care, custody or control of the insured. Two methods are available to buy back some or all of the care, custody or control coverage: either endorsements to the liability policy, such as the broad form property damage endorsement or its company-specific equivalent which will provide limited coverage, or the purchase of inland marine coverages such as bailees' forms. (See broad form property damage endorsement.)

• career agent

  career agent An agent who is licensed to write life insurance (usually) exclusively for one company.

• career average benefit formula

  Defined benefit pension plans do not accumulate cash but calculate an accrued benefit. A career average formula averages the compensation of the employee over the entire career (years of participation in the plan) of the employee and pays benefits related to that average (perhaps 55% of the average less Social Security benefits). Contrast this with the backloaded plan that gives greater weight to the latter years of employment. (See also accrued benefit and backloaded.)

• CARFRA--Coordinated Advertising Rate and Form Review Authority

  An initiative created by the NAIC, it involves a special panel of insurance regulators who review various insurance product rates and forms on an expedited basis for use nationally. Primarily used for life and health insurance products and rates.

• cargo

  Goods being transported by rail, plane, truck, ship, or other conveyance, excluding the equipment needed to operate the conveyor.

• cargo insurance

  A generic term used in both inland marine and ocean marine insurance to designate the types of insurance available to provide coverage for cargo that is being transported by truck, rail, air, ship or boat.

• Carpenter Plan

  A form of excess of loss reinsurance in which a ceding company spreads its losses over a three- to five-year period, first introduced in the U.S. by a broker by that name. (See spread loss reinsurance.)

• Carriage of Goods by Sea Act (COGSA)

  An international agreement subscribed to by most maritime nations and ratified by the U.S. in 1936, prescribing the format and content of uniform ocean bills of lading on goods shipped internationally. (See bill of lading.)

• carrier

  1) The insurance company which provides the protection for a particular risk. 2) A transporter of goods, a form of bailee for which insurance is provided. A common carrier is one which is available to the public for the transport of any goods. A private carrier transports only the goods of its owner.

• carriers legal liability

  An insurance policy designed to provide coverage for the bailee exposure of cargo carriers that would result from damage to property of others that has been entrusted to the carrier for transport.

• carry-over provision

  A provision found in many health plans which permits expenses arising out of claims that occur in the last three months of the year to carry over into the next year, without incurring new deductibles or coinsurance.

• carve-out insurance

  A method of eliminating high-risk exposure from a general liability policy by excluding it (carving it out) and then providing coverage specifically designed for that exposure under a separate policy.

• case management

  With regard to workers compensation, this refers to an approach for coordinating the medical care and communication necessary to handle persons who have suffered serious, work-related illness or disability and who are recuperating at their residence (rather than at a medical facility).

• cash flow plan

  A method of paying casualty insurance premiums in which the insured (usually a large commercial concern) pays the fixed portion (administrative expenses) of the premium in installments and the variable portion (loss payments and loss reserves) as incurred.

• cash payment option

  An option found in many participating life insurance policies in which a cash dividend is paid to the policy owner.

• cash refund annuity

  In this type of annuity, if the annuitant dies before the balance of the annuity has been paid out in periodic disbursement, any amount remaining will be paid to a designated beneficiary in one lump sum.

• cash surrender value

  In a life insurance policy, if the insured wishes to surrender the policy in order to collect the cash value of the policy, the cash surrender value is the amount the insured is entitled to, as stated in the policy, based upon time in the policy, limits and payments. The amount of cash the insured will receive may be reduced by a surrender fee, any outstanding loans, and applicable interest.

• cash value

  The amount that a life insurance policy will pay the insured if the policy is terminated or canceled prior to maturity. The cash value is the amount the insured is entitled to, as stated in the policy, based upon time in the policy, limits and payments. The amount of cash the insured will receive may be reduced by a surrender fee, any outstanding loans, and applicable interest.

• cash-flow underwriting

  Emphasis by an insurer on quick premium growth in its underwriting activities, at the expense of sound underwriting at adequate rates, with the hope that investment income from the increased premium writings will more than offset any unreasonable underwriting losses. The practice becomes more tempting as short-term interest rates rise.

• Casualty Actuarial Society

  An organization formed to promote actuarial and statistical knowledge applicable to casualty insurance. Following multiple line development in the insurance industry, the scope of the society has been enlarged to include all lines of insurance other than life. Headquarters: New York, NY. Its life and health counterpart is Society of Actuaries.

• casualty insurance

  Insurance concerned with legal liability for personal injuries or damage to property of others, including many other types of insurance, such as workers compensation, plate glass, burglary, boiler and machinery, aviation, etc. "Casualty" is generally accepted to cover all classes outside the definition of "property insurance," so that a property and casualty company would tend to handle all forms of insurance other than life.

• cat bond

  Refers to catastrophe bonds. These instruments are typically issued by an entity that deals with insurance (private or public). The securities may consist of any single or multiple source of investment grade securities and, generally, pay a higher yield. However, the investor faces the risk of a lower return or even a total loss of investment should a catastrophe occur within the parameters set by the bond issue.

• cat modeling

  Refers to programs used to predict the likelihood that severe circumstances will occur.

• catastrophe

  A severe loss, usually involving many risks, or having substantial financial impact.

• catastrophe (excess) cover

  1) In reinsurance, a form of excess of loss reinsurance which, subject to a specified limit, indemnifies the ceding company for the amount of loss in excess of a specified retention, with respect to an accumulation of losses resulting from a catastrophic event or series of events. The actual reinsurance document is referred to as "a catastrophe cover." 2) In primary insurance, an amount of insurance on a single risk or group of risks in excess of self-insured retention or other primary insurance. (See catastrophe reinsurance.)

• catastrophe inflation

  See demand surge.

• catastrophe number

  Whenever a catastrophe occurs which produces losses within a prescribed period of time in excess of a certain amount (now $5 million), the amount of such losses is recorded separately from noncatastrophe losses, and is numbered by the American Insurance Association. Such losses may be treated differently in the state's statistical experience records used in setting rate levels.

• catastrophe policy

  1) A type of policy, primary or reinsurance, in the property or casualty industry, to provide protection against catastrophic events. 2) A major medical insurance policy purchased by an insured to provide adequate coverage in case of major illness such as cancer.

• catastrophe provision

  Provision which gives consideration to the impact catastrophes have on loss experience; procedures are developed to include an allowance for the catastrophe exposure in the insurance rate.

• catastrophe reinsurance

  1) In reinsurance, a form of excess of loss reinsurance which, subject to specified limits, indemnifies the ceding company for the amount of loss in excess of a specified retention, with respect to an accumulation of losses resulting from a catastrophic event or series of events. 2) In primary insurance, an amount of coverage on a single risk or group of risks in excess of self-retention or other primary insurance. (See catastrophe (excess) cover.)

• catastrophic loss funds

  Reserves that have been specifically formed to provide funds to an insurer in case of catastrophic and cataclysmic losses.

• cause of loss

  Previously called "peril," this is the actual type of event that causes the loss. Examples are: theft, collision, earthquake, flood, fire or mischief.

• causes of loss forms

  Forms that may be added to the Commercial Property Coverage Part. They describe the perils (basic, broad or special) and exclusions that apply to the covered property.

• caveat emptor

  Latin term meaning "let the buyer beware." It is an admonishment or reminder of the buyer's responsibility for checking the quality of the product prior to purchase. It may also describe a purchase where the buyer has no recourse to the seller if the product or service is defective or of poor quality.

• CBNR

  (See chemical, biological, nuclear and radiological attacks.)

• CCIP

  (See Contractor Controlled Insurance Program; also see wrap.)

• CCLA

  Casualty Claim Law Associate designation sponsored by the American Educational Institute. Headquarters, Basking Ridge, NJ.

• CCRA

  (See Certified Catastrophe Risk Analyst.)

• CDW

  See collision damage waiver.

• CE--continuing education

  An on-going process in the insurance industry to keep its member professionals current, updated and responsive to the many legislative, coverage and marketing changes, through the offering of courses, workshops and seminars.

• CEBS

  Certified Employee Benefits Specialist designation sponsored by the International Foundation of Employee Benefit Plans CEBS Program, 18700 West Bluemound Road, Brookfield, WI 53008-1270.

• cede

  To pass on to another insurer (the reinsurer) all or part of the insurance written by an insurer (the ceding insurer) with the object of reducing the possible liability of the latter.

• ceding commission

  The commission paid by the reinsurer to the ceding company (primary insurer) on reinsurance agreements as compensation to place the business with the reinsurer and to cover the ceding company's acquisition expenses.

• ceding company

  An insurer that has bought reinsurance protection as distinguished from the reinsurer that has issued the reinsurance protection.

• cemetery professional liability insurance

  Liability coverage specifically designed to meet the needs and exposures of owners or operators of a cemetery to protect for damages suffered by third parties, as a result of the rendering or failing to render professional services as the owner, operator, management or staff of a cemetery.

• central processing unit (CPU)

  The part of an insurer's computing system containing the circuits that calculate and perform logic decisions based on a manual program of operating instructions.

• CERA

  (See Chartered Enterprise Risk Analyst.)

• cert holder

  (See certificate holder.)

• certificate holder

  The individual or business that requests and receives written verification of insurance coverage on an individual or business. The insurance company issues the certificate of insurance.

• certificate of authority

  A written certificate issued by one party showing the authority that party has granted to another to perform on the first party's behalf. The two most common examples in insurance are state insurance department grants to insurers issuing authority to write insurance kinds of policies and contracts within that state, and the certificate which grants authority to agents to write policies on behalf of an insurer.

• certificate of convenience

  An interim or temporary certificate that has been issued by a state insurance department allowing an agent to write business in that state during the licensing procedure, until a final license is issued or denied.

• certificate of insurance

  A short-form documentation of an insurance policy.

• certificate of reinsurance

  The certificate issued by reinsurers to confirm the reinsurance transaction. It is a form of an insurance contract as it contains the terms and conditions of the reinsurance transaction, as well as details as to who, what, where, and when coverage applies to that cession.

• certified act of terrorism

  certified act of terrorism Any terrorist act that is described as an action that qualifies for coverage under the Terrorism Risk Insurance Act (TRIA) of 2002. Specifically, terrorist acts are certified when the U.S. secretary of the treasury, secretary of state and attorney general makes the determination. Any such act must involve an attempt to coerce the behavior of the targeted populace (civil or governmental), must exceed a certain dollar amount (five million dollars) in total damages, and must occur at the direction of a foreign party.

• Certified Catastrophe Risk Analyst

  A designation conferred after completing a special course created and offered by independent risk management and risk control services provider, Risk Management Solutions. Headquarters: Newark, CA.

• Certified Fraud Examiner

  A professional designation awarded by the Association of Certified Fraud Examiners (ACFE). The designation recognizes a person's successful completion of courses and training in identifying and addressing instances of corporate fraud.

• Certified Insurance Counselor (CIC)

  CIC--Certified Insurance Counselor Certified Insurance Counselor designation sponsored by the Society of Certified Insurance Counselors. Headquarters: Austin, TX.

• Certified Insurance Data Manager

  A professional designation awarded by the Insurance Data Management Association (IDMA). The designation recognizes a person's successful completion of courses and training in properly managing the information (particularly reporting system) needs of a modern insurance operation.

• Certified Subrogation Recovery Professional

  A designation awarded by the National Association of Subrogation Professionals. Besides successful completion of an exam covering major aspects of subrogation, a candidate must also meet an industry experience requirement.

• cession

  1) The unit of insurance passed to a reinsurer by a primary company which issued a policy to the original insured. A cession may accordingly be the whole or a portion of single risks, defined policies, or defined divisions of business, all as agreed in the reinsurance contract. 2) The act of ceding where such an act is necessary to invoke the reinsurance protection.

• cession number

  The identification numbering process applied to a reinsurance transaction to assist in the payment tracking of premiums. Similar to policy numbers on insurance contracts.

• CFA

  Chartered Financial Analyst designation sponsored by the Association for Investment Management and Research. Headquarters: Charlottesville, VA.

• CFE

  (See Certified Fraud Examiner.)

• CFP

  Certified Financial Planner designation sponsored by the National Endowment of Financial Education.

• CGL--commercial general liability policy

  The commercial general liability policy provides comprehensive general liability coverage for commercial risks covering all liability exposures for all locations and causes of loss except those specifically excluded or limited either within the coverage form or by endorsement. Protection may be provided on either an occurrence type of policy or on a claims-made basis.

• chain store multiple location policy

  A commercial policy designed for a series of related stores under the same ownership with central management and selling the same type of merchandise at various locations. Examples include clothing chains, appliance stores, sporting goods stores, and card shops.

• change in occupancy or use

  A provision contained in some property or casualty policies which requires the insured to inform the insurer of any change in occupancy or use of the premises. This allows the insurer to re-rate or add the necessary conditions or exclusions when the change adversely changes the exposures covered. Should the insured not comply and the change increases the hazard to the insurer, some states allow the insurer the option to cancel or void the policy.

• change in ownership clause

  (See change of control clause.)

• change of control clause

  A condition that allows one party to terminate an agreement when there has been a change in ownership or control of the other party involved in that agreement. The provision acknowledges the possibility that such changes would subject one party to unacceptable conditions.

• charitable immunity doctrine

  A form of state law involving the level that a charitable organization (such as a nonprofit school, church or hospital) is relieved of legal liability for injury due to its negligent acts or decisions. The acts or decisions must be directly related to its function.

• charter

  1) To rent or lease a boat, ship, vessel or aircraft. 2) The instrument issued by a governmental body (state) recognizing the organization of an insurance company and giving authority to operate within the stated jurisdiction. The charter also contains the condition under which the insurer must operate.

• charter fare protection insurance

  A specially designed insurance coverage for persons who have paid for the cost of a trip or tour. This policy provides coverage for individual insureds who are unable to participate in the specified trip or tour should an accident, injury, sickness, death or other covered incident occur. Coverage is also provided for expenses should the insured become ill or suffer a covered event while on the trip or tour and need to return home prior to the end of the trip or tour. Also known as trip cancellation insurance.

• charter party

  The document which outlines the agreements between a ship owner and the person or organization that chartered (or leased) a ship.

• Chartered Enterprise Risk Analyst

  A designation conferred by the Society of Actuaries after completing a series of five exams and electronic course modules, and after passing a separate validation process (regarding a required level of actual risk analyst experience).

• Chartered Life Underwriter (CLU)

  Chartered Life Underwriter designations sponsored by The American College. Headquarters: Bryn Mawr, PA.

• charterer's liability

  charterer's liability A form of liability coverage that protects against the loss exposures faced by entities that charter (rent out) vessels.

• charters liability insurance

  Liability coverage for parties or individuals who lease a vessel from another party.

• chattel mortgage

  A mortgage, the collateral for which is personal or movable property, as distinguished from a mortgage on land or buildings.

• chemical, biological, nuclear and radiological attacks

  A shorthand (CBNR) reference to the sources of cataclysmic exposures inherent to major acts of terrorism. Such exposures are seen as suited to be addressed by publicly subsidized (government) insurance.

• ChFC

  Chartered Financial Consultant designation sponsored by The American College. Headquarters: Bryn Mawr, PA.

• chief risk officer (CRO)

  An executive charged with the task of creating, managing and implementing an organization?s risk strategy that, increasingly, encompasses financial, market, credit and operational risks.

• ChoicePoint, Inc.

  Formerly the insurance division of Equifax and now known as ChoicePoint, Inc., it is an organization widely used by insurance professionals to obtain information on applicants for underwriting purposes such as motor vehicle reports, prior loss or claims history (C.L.U.E.) reports, retail credit reports and even inspection reports. Headquarters: Atlanta, GA.

• chop shop

  Slang term for illegitimate enterprises that sell parts from dismantled stolen vehicles.

• CIAB

  (See Council of Insurance Agents and Brokers.)

• CICA--Captive Insurance Company Association

  An association formed to educate persons working for or interested in captive insurance companies. It provides information, education and support services for both domestic and foreign captives. Headquarters: Minneapolis, MN.

• CIDM

  (See Certified Insurance Data Manager.)

• CIF--cost, insurance and freight

  CIF (cost, insurance and freight) This refers to a common term in a sales contract that may be encountered in international trading when ocean marine travel is used. In this type of contract, the selling price includes the cost of the goods, all shipping charges and the cost of marine insurance. Although the seller is obligated to purchase marine insurance, the seller's responsibility for the goods ends when the goods have been delivered to the marine carrier or have been delivered on board the shipping vessel, depending upon the terms of the contract.

• CIP

  Controlled Insurance Program, please see wrap.

• civil authority clause

  A provision in a policy requiring the payment of the loss suffered by the policyholder if the insured property is destroyed by the city or other civil authority in an effort to prevent the spread of fire. (See By Order of Civil Authority.)

• civil commotion

  A disturbance among, or a popular uprising of, a large number of people. (See riot and civil commotion insurance.)

• civil commotion exclusion

  A property policy exclusion that specifies that there is no coverage for property damage suffered as a result of any type of civil commotion or riot.

• civil commotion policy

  A special property policy to provide coverage for loss occurring as a result of civil commotion or riot.

• CIWA

  CIWA (Califorina Insurance Wholesalers Association) An insurance trade association organized to promote education and good business practices, and to represent the interest of their members with insurance companies and vendors. Headquarters: Montrose, California.

• claim

  1) The formal request by a policyholder or a claimant for payment of loss under an insurance policy. 2) The final amount made in payment of a covered loss.

• claim agent

  In marine insurance, a person authorized by a marine underwriter to survey and certify losses. Underwriters maintain claim agents in various important ports and cities throughout the world. Claim agents do not have the authority to pay losses as do settling agents.

• claim department

  The personnel of an insurance company dealing with losses or claims. In casualty operations it is a "claim" department, in fire operations, a "loss" department. As the property and liability business develops more on a multiline basis, these distinctions are rapidly disappearing. (See loss department.)

• claim file

  The paper or electronic file that contains information for a loss.

• claim handling

  The function that processes demands for claim payments.

• claimant

  One who presents a claim or one who has suffered a collectible loss.

• claims adjustment

  The process of handling and settling claims or the amount requested by a policyholder or claimant because of a loss or damages suffered.

• claims reserve

  An estimate of the amount an insurance company expects to pay for reported and estimated claims. This may include amounts for loss adjustment expenses. In an insurance company's financial statement, it includes losses incurred but not reported, losses due but not yet paid, and amount not yet due.

• claims series clause

  Typically regarding product claims, refers to a provision that takes all product losses related to a given party's product and classifies them as a single loss.

• claims-made

  A liability insurance method covering losses from claims asserted against the insured during the policy period, regardless of whether the liability-imposing causes occurred during or prior to the policy period. (However, many underwriters may not cover liability-imposing causes occurring prior to the policy period.) The coverage trigger is based on the retroactive date stated in the Declarations. (See longtail and retroactive date.)

• claims-made trigger

  In order to trigger coverage in a claims-made liability policy, a claim must be made against the insured during the policy period and the injury or damage alleged in the claim must not have occurred prior to the retroactive date specified in the policy Declarations.

• clarified and expanded condominium coverage

  Refers to optional coverage that is attached to a condominium association's Master policy. The coverage typically deals with several coverages such as protection caused by selecting an insurance policy that does not match what was required by the association's rules, insuring against deliberate acts by individual board members, officers or unit owners, coverage of incidental construction activity that has not been completed and coverage of certain types of common property.

• clash cover

  A reinsurance agreement applying to casualty insurance. This is an excess of loss agreement where the underlying amount to be retained by the ceding insurer is at an amount which is higher than the limit on any one reinsured policy. This agreement provides payment of loss when the unusual circumstances occur where two or more casualty policies experience the same occurrence of loss and the total amount of the payment of losses for the multiple policies exceeds the clash cover retention amount. This is sometimes known as contingency cover. (See contingency cover.)

• class action lawsuit

  Legal action filed in court by one or more people on behalf of themselves and others having an identical interest in the alleged wrong.

• class beneficiary designation

  Instead of naming each child as a beneficiary in a life insurance policy one can say "all children of the insured," "all children of the marriage between Mike and Ethel" (if there are stepchildren and different plans have been provided for them). This class beneficiary designation may prevent disinheriting children who arrive after the policy has been issued.

• class of business

  A term used by underwriters to describe a particular industry group or exposure, e.g., "We do not wish to write insurance for long-haul truckers." "We do want to insure the class of business that includes homes valued at $25,000 and below."

• class rate

  Rates developed for a line of property/casualty business based on the concept of what is average for that particular class. For example: the class rate for fire on a frame grocery store would be based on the average statistics for all frame grocery stores and would be applied to all frame grocery stores unless otherwise specifically rated. Rates are then deviated for other factors such as the public protection class and, when applicable, individual risk characteristics.

• classification

  The systematic arranging of properties, persons or business operations into groups or categories according to certain criteria. The purposes of such classification in insurance are to create bases for establishing statistical experience and determining rates, and to avoid unfair discrimination. The essential concept of establishing classifications is that each risk should bear its fair share of the overall cost of expenses and losses in relation to its own relevant expenses and hazards. It is unfair discrimination to charge different rates for similar risks, and it is equally wrong to treat in the same manner risks which have different costs and expenses. (See unfair discrimination, discrimination and selection.)

• classification society

  An organization that institutes standards for construction of large vessels, with follow-up surveys periodically or after accidents. The objective of such a society is to maintain minimum standards for cargo carrying vessels to reduce hull and cargo insurance costs. The society is supported by fees charged to shipowners for services rendered and publishes an annual register of approved vessels.

• clause

  Language in a policy that describes, limits or modifies coverage granted. (See provisions.)

• cleanup costs

  Costs that a party incurs to clean pollutants from the ground, water or air after the occurrence of a pollution incident. These costs are usually mandated or assessed in response to a confirmed incident by the Environmental Protection Agency (EPA). (See corrective action costs.)

• clear?space clause

  clear-space clause Language which requires that the property insured be separated from some other property, e.g., from stacks of lumber or from the forest.

• clergy professional liability

  Professional liability for clergy members for claims that might arise out of rendering or failing to render services related to their professional duties, including counseling.

• close out

  To complete a binder through issuance of the corresponding policy.

• closed corporation

  A type of corporate entity that is controlled and operated by a small, closed group of individuals (often family members). The stock of this kind of corporation is not publicly traded.

• closed panel

  A requirement of a health maintenance organization (HMO) mandating that the insured or subscriber must use only the medical treatment, services, physicians, and facilities approved by the HMO.

• closure and post-closure insurance

  Insurance coverage that is purchased to protect owners and operators of hazardous waste treatment, storage and disposal facilities, in response to the Resource Conservation and Recovery Act of 1976 (RCRA).

• CLU--Chartered Life Underwriter

  Chartered Life Underwriter designations sponsored by The American College. Headquarters: Bryn Mawr, PA.

• CLUE? Report

  Stands for Comprehensive Loss Underwriting Exchange. CLUE reports provide information on a given person's loss history, generally under an auto or homeowners policy. Insurers typically use these reports to assist in determining whether an applicant's request for coverage is accepted.

• co-payment

  copayment A flat, preset fee paid by an insured for office visits, drugs, and other medical services as member of an HMO or preferred provider service. These copayments are normally a small fraction of the overall cost and act much like a service charge or handling fee.

• Coastal Barrier Resources Act

  Federal law introduced in 1982. A major objective of the law is to discourage building/development of coastal property (particularly barrier islands). While it does not prohibit building and development, the act does exclude such areas from eligibility for disaster area assistance and National Flood Insurance Program coverage.

• coastal waters

  For the insurance of yachts and outboard motor boats, the waters of bays and inlets, as well as of the sea along the coast. Also referred to as contiguous waters.

• COB--coordination of benefits

  In health insurance, policy provisions used by insurers to avoid duplicate payment for losses insured under more than one insurance policy (e.g., automobile or health) by making one of the insurers the primary payer, assuring that no more than 100% of the costs are covered and preventing the claimant from making a profit.

• COBRA--Consolidated Omnibus Budget Reconciliation Act of 1985

  A federal act making provision for the continuation of an employee's health insurance coverage, as well as the coverage for dependents, should the employee terminate his or her employment. This act is in effect whether or not the termination was voluntary. Further, it applies to employer-sponsored group health plans with 20 or more employees.

• code

  A number assigned to represent some characteristic of a risk, e.g., its state of location, its occupancy class, or the type of policy involved.

• coding

  The act of translating data and information into numerical format to be used for statistical purposes in rate setting, actuarial and other reporting or report writing mechanisms.

• coercion

  An unfair trade practice that is prohibited by most state insurance departments. It is when an agent, broker or other insurance professional applies physical, financial or mental pressure to persuade a second party to participate in an insurance transaction.

• COGSA--Carriage of Goods by Sea Act

  An international agreement subscribed to by most maritime nations and ratified by the U.S. in 1936, prescribing the format and content of uniform ocean bills of lading on goods shipped internationally. (See bill of lading.)

• COIL--Conference of Insurance Legislators

  An organization of state legislators that specialize in insurance legislation.

• coinsurance

  See coinsurance clause

• coinsurance clause

  1. In property insurance, a condition of the policy requiring the insured to maintain insurance at least equal to a stipulated percentage of value in order to collect partial losses in full. If the insurance is less than the minimum required, a penalty is applied to the amount of loss based on a proportionate formula of the amount of insurance carried divided by the amount of loss required to be carried. 2. In major medical insurance, the clause that specifies the percentage of a loss which the company will pay and the percentage which the insured will bear (e.g., 80/20, 75/25).

• coinsurer

  1) An insured which has not carried the required amount of insurance and must bear a portion of the loss proportionate to the inadequacy. 2) In countries other than the United States, an insurer that shares a risk with one or more other insurers. 3) An insured or an insurance company that participates with an insurer in bearing losses covered by a particular policy.

• COLA

  Cost of Living Adjustment clauses can be found in many health, pension and disability plans, including Social Security. In order to match or keep up with inflation, benefits are increased (or decreased) in relation to particular indices such as the Consumer Products Index.

• collateral

  With respect to a surety bond, collateral is anything of value that is pledged with the surety to protect that surety from a default loss by the principal.

• collateral assignment

  When benefits in an insurance policy are transferred to a creditor or lienholder as part of the collateral for a loan. The creditor receives only that portion of the policy benefits or payments that compare to the amount of the creditor's interest or value of the loan. Most common in property, life and inland marine coverages.

• collateral protection insurance

  Insurance policies designed specifically to meet the exposure needs of financial institutions, by covering physical damage losses to collateral held by the lenders of loans.

• College of Insurance, The

  An accredited collegiate institution offering an associate degree with majors in various aspects of the insurance business, a Bachelor of Business Administration degree with an insurance major, a Bachelor of Science degree in actuarial science, and a Master of Business Administration degree with an insurance major. Offices are in New York City.

• collision

  Damage to a motor vehicle which is caused by its impact with another vehicle or object, or by the vehicle's overturn.

• collision damage waiver

  When renting an automobile or other vehicle from a rental agency, the rental agreement between renter and rental agency may contain an option allowing the renter to pay an additional fee in exchange for the agreement by the rental agency to waive its rights to collect any collision losses to the vehicle from the renter.

• collision insurance

  Coverage for the loss resulting from the striking of another object by a moving vehicle.

• collision of the load

  The striking of another object by the cargo of a moving vehicle, as opposed to the vehicle itself striking the object. In insuring merchandise in transit by motor truck, many policies insure against collision damage only if the vehicle itself collides with something. This excludes collision damage if, for example, a part of the load extends beyond the limits of the truck and hits a bridge or some other object.

• collusion

  When two or more entities secretly agree to conspire together in the act of defrauding or depriving another entity or other entities of their property or rights.

• combination automobile policy

  A policy combining the coverages afforded under automobile physical damage and automobile liability policies. (See automobile physical damage insurance.)

• combined ratio

  The addition of the ratio of losses incurred to earned premiums, and the ratio of underwriting expenses to written premiums.

• combined single limit:

  combined single limit Insurance policy limits under a liability policy that indicate a single dollar amount that applies to either/or bodily injury and property damage that may occur during an eligible occurrence.

• coming and going rule

  coming and going rule An informal term that typically refers to commuting to and from work and that time being excluded as part of a workday. This distinction is important in determining whether an employer may be held partially or totally responsible for a loss that occurs during a commute.

• commercial articles coverage

  An inland marine policy providing coverage on an "all-risk" basis for loss or damage to cameras, fine arts, and musical instruments of a business insured.

• commercial auto

  Coverage designed to provide a "standard" form for insuring commercial vehicles (other than private passenger cars).

• commercial blanket bond

  A fidelity bond which insures an employer against loss from dishonest acts committed by employees, covering all employees in the regular service of the employer during the term of the bond. The bond is issued for a fixed amount which is the maximum sum payable for any one embezzlement, whether one or more employees are involved. (See blanket position bond.)

• commercial crime policy

  This ISO crime policy incorporates most commercial crime coverages into one policy. It is an ala carte policy that starts with eight insuring agreements but can be expanded to include up to eleven additional insuring agreements. The insured can choose one or more insuring agreements.

• commercial general liability policy (CGL)

  The commercial general liability policy provides comprehensive general liability coverage for commercial risks covering all liability exposures for all locations and causes of loss except those specifically excluded or limited either within the coverage form or by endorsement. Protection may be provided on either an occurrence type of policy or on a claims-made basis.

• commercial lines

  Types of insurance written for businesses instead of individuals (for which the term personal lines applies)

• commercial multiple peril

  A general term, sometimes shortened to commercial multiperil, relating to that class of package policies which provides coverage for more than one peril or cause of loss in one contract. Not the same as a commercial package policy, that contains more than one line of business.

• commercial package policy (CPP)

  A package policy designed for commercial insureds that can provide in one policy several lines of insurance business as needed by that commercial venture. Lines of business which may be included in the CPP are property/glass, general liability, inland marine, crime, boiler and machinery insurance, and commercial automobile.

• commercial property policy

  commercial property policy Commercial property policy provides coverage for real and personal property that is used in a business.

• commercial umbrella

  A form of liability insurance protecting policyholders for claims in excess of the limits of their primary automobile, general liability and workers compensation policies, and for some (few) claims excluded by their primary policies which are subject to a deductible, which may range from $250 for a personal umbrella to a minimum of $10,000 for a commercial umbrella.

• commercial umbrella liability insurance

  A form of liability insurance protecting policyholders for claims in excess of the limits of their primary business automobile, general liability, and workers compensation policies. It also provides coverage for some sources of loss that are not covered by their primary policies. Such cases are subject to a deductible (or self-insured retention).

• commission

  The portion of the premium paid the agent or broker for having produced the business. (See agent's commission.)

• commissioner of insurance

  The official of a state charged with the duty of enforcing its insurance laws. Also called the superintendent of insurance (in three states) and director of insurance (in eight states). The official is elected in 11 states, appointed by a governor or state agency in 38 states, and is a civil service appointee in Colorado.

• Commissioners' Values

  A list that is revised and published annually by the National Association of Insurance Commissioners. The list consists of values that insurance companies must use in order to post security values in their financial statements.

• commitment ceremony insurance

  A special event policy that protects against loss from unforeseen circumstances that affect commitment ceremony plans (used in instances where legal marriage is not an option due to law or participant preference). Covered items include the cost to cancel and reschedule, having to replace a caterer or band, event party travel expense, gift coverage, loss of event attire or rings, etc.

• commitments

  Amounts of insurance on risks which a company has written or agreed to write.

• common accident provision

  Found in some health insurance plans. If two or more persons are injured in the same accident, the deductible applies only once. Some travel accident plans will also have a common accident provision that will pay out no more than a certain multiple if a certain number of employees are killed in a common accident, e.g., a plane crash.

• common area

  Most often used in reference to the property and liability coverages for apartments, condominiums, townhouses, cooperatives, and other related risks. Common areas are those areas not specifically owned by a tenant or individual property owner, but are owned either by the landlord or all the occupant-owners, or are under the control of the landlord or association. Common areas are open to all. The most common examples are hallways, parking areas, and recreational facilities.

• common carrier

  1) The insurance company which provides the protection for a particular risk. 2) A transporter of goods, a form of bailee for which insurance is provided. A common carrier is one which is available to the public for the transport of any goods. A private carrier transports only the goods of its owner.

• common disaster clause

  Found in life insurance policies. If the insured (husband) and the primary beneficiary (wife) die in the same car accident, the secondary beneficiary (Junior) will become the beneficiary. If wife survives for a while and then dies without a common disaster clause, her estate would receive the benefits of the policy. In addition to problems with survivors, there can be tax implications with the payment of benefits to the wife that could be mitigated by payment to Junior. The common disaster clause states that the primary beneficiary must survive the insured by (usually 30-90 days) or the benefit is automatically paid to the secondary beneficiary.

• common law

  Law based on precedents that have been made by courts throughout the years in Great Britain and the United States. This is, therefore, law that has not been enacted into statutes by lawmaking bodies (which make "statute" law).

• common law liability

  The legal responsibility that one party owes another (for injury or damage caused by negligent actions) which is based on common law principles.

• communications liability

  (See Media Professional Liability.)

• community rating

  In health insurance, particularly with Blue Cross-Blue Shield plans, rather than develop rates and experience based upon the individual or the group of employees within one business, the plan will accumulate the experience of all employees within a specific geographic territory or some other large population.

• commutation clause

  A clause in a reinsurance agreement which provides for discharge of all obligations (past, present and future) between the parties for reinsurance losses incurred. This clause is usually optional but may be mandatory.

• comparative negligence

  A more modern system of allocating damages between two or more persons than the method of contributory negligence, which remains effective in many states (under which one cannot collect damages for bodily injury or property damage caused by another party's negligence if one were oneself in any way negligent). Under comparative negligence, the damages collectible in relation to another person are diminished in proportion to one's degree of negligence. In most instances, damages cannot be collected at all if the claimant's negligence was greater than that of the other party. Currently, in a few instances, the courts have awarded both parties damages as a percent of the total damages, depending on respective degrees of fault. (See contributory negligence.)

• compensation insurance

  Protection which provides various benefits to employees for any injury or contracted disease arising out of and in the course of employment. All states have laws which require such protection for workers and prescribe the length and amount of such benefits that are provided. Originally, workers ceded their rights to sue in exchange for worker's compensation benefits, but in recent years lawsuits have successfully eroded this concept.

• compensatory damages

  Not to be confused with punitive damages, which are additional damages requested by an injured party to punish the party responsible for the loss. Compensatory damages are normally monetary damages alleged by the claimant to compensate for actual injuries or expenses sustained. These may include all types of medical expenses, as well as other expenses such as lost wages, legal fees, pain and suffering, mental anguish, loss of consortium, etc.

• completed operations coverage

  Protection for a business which sells service instead of products against liability claims arising out of work completed away from the business premises. Differs from products liability coverage, which protects against products liability claims.

• composition roof

  A roof made of asphalt shingles, asbestos shingles or tar paper roofing, or the usual forms of roofing materials. It does not refer to slate roofs, tile roofs, or metal roofs, which are not combustible, nor does it refer to wood shingle roofs, which are usually so designated.

• comprehensive automobile coverage

  An "all-risk" type of physical damage protection for automobiles including theft but excluding loss by collision or upset (which may be added).

• comprehensive automobile liability policy

  The broadest form of business coverage for claims alleging bodily injury or property damage resulting from the insured's ownership, maintenance or use of an automobile. The premium, which is adjusted (audited) at the expiration of the policy term, is based on the insured's actual exposure during the policy term.

• comprehensive crime coverage endorsement

  Endorsement (now obsolete) that at one time could be attached to a special multiperil policy providing optional employee dishonesty, money and securities, money orders, counterfeit paper currency, and depositors' forgery coverages.

• comprehensive dishonesty, disappearance and destruction policy

  Commonly known as the 3-D policy, this is an obsolete package policy providing crime protection principally covering dishonesty, forgery, loss of money and securities, and safe deposit losses.

• comprehensive general liability policy

  (See commercial general liability policy.)

• comprehensive major medical insurance

  Coverage designed to provide protection including that which is otherwise contained in both the basic and the major medical insurance policies. A relatively small dollar amount deductible is found in this type policy, as well as coinsurance. Dollar amounts of the benefits provided are normally higher than those found in either a basic or a major medical policy by themselves.

• comprehensive medical expense policy

  One form of health insurance that provides coverage for hospital expenses, surgical expense, physicians' costs, drugs, and other medical coverages. Normally, the coverage is subject to a deductible and coinsurance provisions. This type of coverage is often offered as group insurance.

• comprehensive personal liability

  A form of liability insurance which reimburses the policyholder, if liable, to pay money for damage or injury caused to others. This form does not include automobile liability but does include almost every activity of the policyholder except such as may arise from the operations of a business, hence "personal" liability. The coverage is a part of either homeowners or tenants policies and is almost obsolete as a separate policy.

• compulsory insurance

  Coverage required by certain states of certain people in certain circumstances, e.g., workers compensation and automobile liability.

• computer fraud coverage form

  A crime coverage form designed to protect against loss of money, securities and property when conversion occurs via computer fraud.

• computer insurance

  Protects computers and related equipment in amounts that supplement the modest limit available under a standard HO policy. Generally, the coverage is written as an optional endorsement to homeowner coverage. Besides providing a higher, separate limit, the coverage tends to be broader, allowing for more off-premises protection as well as being applicable to certain business use.

• concealment

  In insurance, failure to disclose a material fact which may void an insurance policy. (See material fact.)

• concurrent causation

  A legal concept of applying insurance coverage when two or more hazards or perils (with at least one being a covered hazard/peril) contribute to creating a loss, essentially at the same time.

• concurrent insurance

  Coverage in one policy on the same property under the same conditions as another policy.

• condition

  Something established or agreed upon to be necessary to make a policy of insurance effective. (See warranty.)

• conditional delivery

  Insurance policies containing provision preventing the policy from becoming effective until all terms and conditions stated have been fully met.

• conditional premium receipt

  In life insurance there is usually no insurance granted until the first mode of premium is received by the company. However, the applicant may pay the first mode of premium at application or before the policy is issued. A conditional receipt is used to provide insurance should the insured die before the policy is issued. If the insured would have been otherwise insurable (but for the premature death), then the company, by the conditional receipt, would have to pay either the entire policy limit or some lesser limit as indicated on the receipt.

• conditional reserves

  Insurer and reinsurer balance sheet items such as unauthorized reinsurance and unsecured and/or overdue reinsurance recoverables that, due to accounting regulations or restrictions, are treated as liabilities.

• conditional sales floater

  An inland marine policy covering property which has been sold on the installment plan. Also known as installment sales floater.

• conditionally renewable policy

  Found in health policies. Gives the company the right not to renew the policy for specific reasons enumerated in the contract. Conditions vary by contract and the conditional renewal is often at the next premium payment period, i.e., quarterly, annually, third year, etc. (See also guaranteed renewable and noncancelable or noncancelable/guaranteed renewable policy.)

• condominium

  A form of real estate ownership becoming increasingly popular. It is the individual ownership of a single unit in a multiple-unit building or group of buildings, together with a percentage interest in that part of the total property owned jointly by all unit owners. In an apartment building, each apartment would be a unit and the stairways, pathways and parking areas would be in common ownership. Condominium property requires special insurance treatment.

• condominium association coverage

  Insurance policies designed to meet the specific liability exposures of condominium associations and to provide protection for the property held in common, such as the building, hallways, recreational facilities, and maintenance equipment.

• condominium declarations map

  A survey map or plat of the surface of the ground included within a condominium project.

• condominium unit owners form

  Insurance policies designed to meet the liability and property needs of the condominium unit owner. Both personal and commercial versions of this type of policy are available.

• conduit

  A trust established for the single purpose of receiving a given firm's assets and issuing various types of debt, backed by those assets.

• Conference of Insurance Legislators (COIL)

  An organization of state legislators who specialize in insurance legislation.

• conflagration

  A sweeping fire which destroys many properties and usually involves large values.

• conflagration area

  An area in which property may be consumed by a sweeping fire or conflagration.

• consent-to-rate

  consent-to-rate This rating rule is no longer widely used since it is prohibited by many state regulations. It refers to a company writing a risk that falls outside of underwriting guidelines by getting the insured's written permission to use rates that are higher than those that have been filed for use with the applicable line of business.

• consent-to-settle clause

  A provision that typically appears in professional liability policies. It requires the insurance company to secure the insured's permission to settle a claim or lawsuit. It allows the insured to have control over an action that could affect his or her reputation. (Also see hammer clause.)

• consequential loss

  In property insurance contracts, consequential losses are indirect losses, a reduction in the value of property that is a result of a direct damage loss. Usually associated with time element or other remote or indemnification type losses. Consequential losses are different than ensuing losses since consequential losses are indirect losses not direct damage losses, whereas ensuing losses are further or additional direct damage losses that have been initiated by the original direct damage cause of loss.

• conservation

  The acts or efforts of a company or agent to attempt to prevent a life insurance policy from lapsing.

• consideration

  In legal terms, it is the inducement to a contract or the promises made. It may be either express or implied. The insurance policy is a common example. The consideration provided by the insured is the premium dollar, and the consideration of the insurer is a promise to pay should loss, accident or injury occur. If a loss does not occur, nothing is paid by the insurer. Should there be a loss, however, the amount of coverage provided by the insurer may exceed the lifetime accumulation of premiums paid by the insured.

• consignee

  The party listed on a bill of lading to whom the cargo is to be delivered.

• consignor

  The party shipping the cargo as listed on a bill of lading.

• Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)

  A federal act making provision for the continuation of an employee's health insurance coverage, as well as the coverage for dependents, should the employee terminate his or her employment. This act is in effect whether or not the termination was voluntary. Further, it applies to employer-sponsored group health plans with 20 or more employees.

• consortium

  Refers to the right shared in spousal (and sometimes parent-child) relationships to enjoy companionship, affection, intimacy and similar feelings for which, if lost because of injury or death, a suffering party may seek damages.

• construction bond

  A surety bond designed to protect the owner of property on which a building or structure is being built should the contractor not complete the job. If the contractor fails to fulfill the construction contract, the insurer must then make sure the work is finished.

• constructive total loss

  Damage to property which is so great that the cost of recovering and repairing the property would exceed the insured value. (See abandonment.)

• consumer reporting agency

  An entity that provides various types of insurers with lifestyle, credit history, and other information about their potential and existing customers.

• contact center

  In its simplest form, a physical site used by an organization (insurer) to handle large volumes of incoming and outgoing phone calls involving customer service, marketing, and other business transactions. Such centers are highly dependent upon sophisticated data management and technology. Also called call centers.

• contact lens insurance

  Reimburses for replacement of lost or damaged contact lenses.

• container

  A portable, box-like metal structure (resembling the non-wheel portion of a railroad boxcar) used for transporting goods on ships, planes or trucks.

• contents

  Personal property that is usually contained in a building or other structure.

• contents rate

  The fire insurance rate on the contents of a building as distinguished from the rate for insurance on the building itself.

• contestable period

  Typically a two-year contestability period during which an insurer has the right to void the contract if fraud or material misrepresentation by the insured is discovered in the application. (See also incontestable period.)

• contingency cover

  A reinsurance agreement applying to casualty insurance. This is an excess of loss agreement where the underlying amount to be retained by the ceding insurer is at an amount which is higher than the limit on any one reinsured policy. This agreement provides payment of loss when the unusual circumstances occur where two or more casualty policies experience the same occurrence of loss and the total amount of the payment of losses for the multiple policies exceeds the clash cover retention amount. This is sometimes known as clash cover.

• contingency reserve

  1) Assets maintained by an insurance company to absorb some unexpected outgo or loss, such as the sudden fall in the value of securities owned. Companies may carry as a contingency reserve the excess between the market value of securities on the last day of the year over their NAIC required valuation. 2) A voluntary reserve not specifically assigned.

• contingent beneficiary

  The party designated to receive the benefits or proceeds of a life insurance policy or retirement plan, should the primary beneficiary die.

• contingent business income

  The insurance against loss due to interruption of business by fire or other insured cause of loss occurring at the premises of another on whom the continuation of the business is dependent, such as the premises of a supplier or a large customer.

• contingent commission

  A profit-sharing commission paid to an agent, which depends upon the profit the company has realized from the agency's operations. Also known as profit-sharing commission.

• contingent liability

  1) A liability which may be incurred by an insured as a result of negligence on the part of independent persons engaged to perform work. The most common example is the contingent liability of a principal contractor, which may result from construction operations undertaken by subcontractors. Also applies to the liability of a principal for the acts of an agent or servant. (See protective liability insurance.) 2) In property damage insurance, the possibility of financial loss to a policyholder, resulting from damage or loss to the property of another, such as a supplier or a customer.

• contingent payee

  In life insurance, the primary payee normally will receive all proceeds. However, proceeds may be paid out over a specific period and if the primary payee dies before all proceeds are paid, the designated contingent payee will receive the balance of payments.

• continuing education (CE)

  An ongoing process in the insurance industry to keep its member professionals current, updated and responsive to the many legislative, coverage and marketing changes, through the offering of courses, workshops and seminars.

• continuing education requirement

  Requirements imposed by state departments on insurance agents and in some cases adjusters and other professionals to periodically complete a minimum number of hours of insurance-related education in order to be eligible for a professional license or license renewal.

• continuing expenses

  A term used in commercial time element coverage to indicate those expenses that will continue during the restoration period after a business is closed because of a loss. These expenses may include such items as taxes, certain executive and key person payroll, loan payments, utilities, and other expenses the insured may be contractually obligated to continue.

• continuous coverage or continuous liability insurance

  Continuous coverage refers to the length of time you have maintained insurance on your vehicle.

• continuous premium whole life insurance

  Life insurance that is payable for the life of the insured. Most whole life insurance policies are continuous premium whole life insurance because premiums are payable for life or until age 100, whichever comes first.

• continuous trigger theory

  An event is recognized as an insurable loss (or occurrence) along a timeline from when damage first appears until it terminates. The continuous damage is eligible for coverage under every policy in existence during the period that damage occurred. Under this theory, each policy would cover its share of damage that occurred during the time the policy was in effect. (See exposure theory, injury-in-fact theory and manifestation theory.)

• contra proferentium

  A Latin term used when any ambiguity in contract is construed against the drafting party.

• contract bond

  In general terms, a surety bond guaranteeing the performance of a contract, usually associated with construction work, but possible for almost any kind of contract. Sometimes called a performance bond.

• contract carrier

  A cargo transport operation that contracts with only one or a limited few shippers. This type of operation often has consistent delivery routes and rarely contracts with other operations.

• contract of indemnity

  A contract agreeing to restore an injured party to the condition that was present prior to the occurrence of injury or loss.

• contract price

  The entire cost of the contract between the owner of property and the contractor providing service to fulfill the obligations of the contract. It is used as the basis for the premium charge on many varieties of construction and supply bonds.

• contractor-controlled insurance program

  An insurance program for larger construction projects that is purchased and administered by, typically, the project's general contractor. Also see wrap.

• contractors protective liability

  A policy which provides liability coverage for the insured for the negligent acts of contractors and subcontractors hired by the insured. May also cover for their own negligent supervision of the work performed.

• contractors' equipment

  Equipment used by contractors in their business operations. Examples may be anything from concrete forms, asphalt plants, bulldozers, cherrypickers, and scaffolding, to small hand tools. This equipment is most often protected by inland marine insurance coverages due to its mobile nature. (See mobile equipment.)

• contractors' equipment floater

  An inland marine form which insures the equipment, tools and materials of a contractor. (See equipment floater insurance.)

• contractual liability

  A legal obligation voluntarily assumed under the terms of a contract, as distinguished from liability imposed by the law (legal liability).

• contractual liability insurance

  Insurance coverage to provide protection for the additional liability exposure an insured has assumed in a contract. Only specified contractual liability exposures are covered in standard liability policies for items such as leases and related types of contracts because the assumption of such liability in a contract is not only voluntary, but may be extensive. When contractual liability insurance is purchased, the contracts covered must be individually evaluated for the type and amount of exposure posed.

• contributing excess

  A reinsurance term for when more than one reinsurer shares coverage on a particular line of insurance, i.e., general liability, and all are in excess of a particular retained limit. Example: There are three reinsurers. Each agrees to one-third of the loss above the $500,000 retained limit up to a limit of $1,000,000. In a million dollar claim, the insured will pay the first $500,000 and each of the three reinsurers will pay $166,000.

• contribution

  The amount payable by each of several policies when covering a loss.

• contribution clause

  The clause in a policy which describes how much its issuer must pay if there is insurance in more than one company on a given loss. (See overlapping insurance.)

• contribution to surplus

  A company that makes more in money than it spends in claims or underwriting expenses can contribute the excess to its surplus account. (See also surplus.)

• contributory group insurance

  Group insurance in which all or part of the premium is paid by the employee or group member, with any remainder being paid by the employer or union. In noncontributory insurance, the employer pays all the premium without any contributions from employees.

• contributory negligence

  A common law defense in which the plaintiff must be entirely free from fault in order to recover from a negligent defendant. If the plaintiff has in any way been guilty of neglect, the plaintiff cannot recover from the defendant. This principle has been modified in some states by legislation and interpretation by the courts. (See comparative negligence.)

• contributory plan

  In a contributory pension plan, a participant has the option to or is required to make payments or contributions into the plan in addition to those contributions made by the employer. (See also noncontributory plan.)

• contributory value clause

  Used in ocean marine hull, cargo and freight policies, setting forth the insured's responsibilities and the underwriter's obligations, with respect to the insured's interest, when involved in a general average and/or an act of salvage. The insured can be a coinsurer if the insured's interest is underinsured. (See general average.)

• controlled business

  Business over which an agent is able to exercise his or her personal influence. Generally, such business includes the agent's company, employees and immediate family. Most states limit the amount of controlled business which may be written by an agent. The limitation prevents persons from securing a license for the sole purpose of writing business more cheaply (such as by saving commission costs) for relatives, employers and employees.

• Controlled Insurance Program

  (See wrap.)

• convention blank

  Another name for annual statement, a form of financial report prescribed by the NAIC.

• Convention of Salvage

  Via its 1989 revision, an international maritime provision that allows some level of compensation for unsuccessful salvage operations that were performed with a given level of expertise and which involved reduced environmental harm.

• convergence

  The term refers to any instance of "coming together." With regard to insurance, it refers to the trend of that service, as well as other, previously separate financial services, being offered by the same source, or risk managers arranging both traditional and nontraditional programs to address loss exposures.

• conversion

  The wrongful exercise of ownership rights over another's personal property, whether by taking, withholding or misusing.

• conversion privilege

  A life and health insurance provision. It permits an insured to change from one type of policy to another or to increase coverage limits, without having to take additional physical examinations or prove insurability.

• converted losses

  The factor indicative of the insured's specific loss experience, used in some retrospective rating and retention plans, computed by multiplying incurred losses by a loss conversion factor.

• convertible collision

  A form of full coverage collision insurance for automobiles in which 50% of the full coverage premium is charged as an initial premium, the remaining 50% being payable only if the policyholder makes a claim during the policy period. Thus, the effect is that the policyholder is not likely to make a claim unless the amount of the loss exceeds the initial premium, in which case the premium payable is changed (or converted) from 50% of the full cover rate to 100%, becoming obsolete.

• convertible term insurance

  Term insurance that is convertible to a higher premium paying plan (usually whole life) without evidence of insurability. Convertible term insurance can be convertible without medical examination for only a limited part of its term, e.g., a ten-year convertible term policy may be convertible only during the first seven years of the term.

• cooperative

  One type of ownership arrangement for an apartment building. It is owned by the cooperative or cooperative association, a group of individuals, each of whom owns shares in the building, rather than the person's individual units or apartments as with a condominium.

• Coordinated Advertising Rate and Form Review Authority

  Coordinated Advertising Rate and Form Review Authority An initiative created by the NAIC, it involves a special panel of insurance regulators who review various insurance product rates and forms on an expedited basis for use nationally. Primarily used for life and health insurance products and rates.

• coordination of benefits (COB)

  In health insurance, policy provisions used by insurers to avoid duplicate payment for losses insured under more than one insurance policy (e.g., automobile or health) by making one of the insurers the primary payer, assuring that no more than 100% of the costs are covered and preventing the claimant from making a profit.

• COP--Commercial Output Policy

  Essentially an updated version of a manufacturers output policy. The coverage is designed for medium and larger firms that make and/or distribute goods. The policy offers liability and property coverage. Covered property includes building and building personal property (particularly computers and equipment). Broad coverage is offered for both on-premises and off-premises exposures.

• Corporate Average Fuel Economy

  Refers to the provision of the Energy Policy and Conservation Act of 1975. It initially established vehicle fuel efficiency standards (miles per gallon) for manufactured vehicles and is periodically updated to take advantage of technological advancements and other policy considerations.

• corporate surety

  A corporation which has obtained the necessary and proper licenses under applicable state insurance law, to legally act as the surety for others

• corrective action costs

  Expenses that a party incurs to clean or correct the damage done by pollutants to the ground, water or air after the occurrence of a pollution incident. These costs are usually mandated or assessed in response to a confirmed incident by the Environmental Protection Agency (EPA). (See cleanup costs.)

• correlation

  correlation A relationship or connection between (at least two) items. In credit scoring, it refers to the relationship between an individual's score (that is derived from their credit history, existing accounts and debt service) and their likelihood of experiencing an insurable loss.

• corridor

  In universal life insurance the corridor is the difference between the policy death benefit and the cash value. This corridor is important because the IRS will consider the size of the corridor (too narrow = too much cash value) to determine whether the contract meets the definition of life insurance and retains the tax-free inside buildup of cash value or is considered an investment vehicle and subject to more immediate taxation.

• corridor deductible

  A corridor deductible is exclusive to the health insurance industry. Once a major medical policy has paid the full stated amount of limits or benefits to an insured, if additional expenses still exist, the corridor deductible is the amount that must be borne by the insured before additional coverage is available.

• Cost Based Pricing

  Cost Based Pricing-Method in which a fixed sum or a percentage of the total cost is added (as income or profit) to the cost of the product to arrive at its selling price.

• cost of living adjustment

  cost of living adjustment (See COLA.)

• cost, insurance and freight (CIF)

  This refers to a common term in a sales contract that may be encountered in international trading when ocean marine travel is used. In this type of contract, the selling price includes the cost of the goods, all shipping charges and the cost of marine insurance. Although the seller is obligated to purchase marine insurance, the seller's responsibility for the goods ends when the goods have been delivered to the marine carrier or have been delivered on board the shipping vessel, depending upon the terms of the contract.

• cosurety

  One of several who participate in underwriting a surety bond.

• Council of Insurance Agents and Brokers

  Established in 1913 as the NAIB, this organization is a trade association that is composed of the largest United States agents and brokers who handle property and casualty insurance and employment benefits. Headquarters: Washington D.C.

• counterclaim

  counterclaim A party that is confronted by a legal action responds by filing a separate action, alleging a different set of circumstances.

• countersignature

  1) An additional signature placed on a policy by an authorized person at the time it is issued, supplementing any other signature appearing on the printed form used for the policy. 2) When used to describe a countersignature law, the signature which must be obtained from an authorized person (usually a licensed agent or broker in a state having such a law) on a policy covering property in that state, but written by a party outside the state.

• countersignature law

  State insurance laws, in some states, requiring that policies issued to insureds within that state, but written by agents or insurers outside the state, be countersigned by agents licensed within that state.

• country damage

  In marine cargo insurance, damage to baled cotton caused from poor methods of baling, handling or storing which discolor and strain the cotton.

• countrywide rates

  Refers to any vendor?s published, advisory rates (typically minimum) that apply on a national (rather than state) basis.

• Countrywide Rules

  Refers to any vendor?s published rating rules that apply on a national (rather than state) basis.

• county clerks and recorders errors and omissions insurance

  Insurance protection designed to protect against the liability exposures of county clerks and recorders for losses as a result of the rendering or failing to render official services and duties, including negligent acts, errors, and omissions of the insured and employees.

• court bonds

  A generic term encompassing a variety of bonds that may be required of, or used by, the participants in a lawsuit. These bonds permit those participants to pursue certain legal remedies in court

• cover

  1) To protect with insurance. 2) The insurance itself. Same as coverage.

• cover note

  1) A document issued by an agent or broker which tells the insured that the agent or broker has effected the insurance described therein. Since there are often delays in issuing formal policies, a cover note gives the insured a description of what insurance the agent or broker has put into effect. A cover note is similar to a binder although a binder usually refers to a document given by a company to an agent instead of one given by the agent to a customer. 2) Used by surplus lines brokers to evidence coverage placed with nonadmitted companies. (See binder.)

• coverage

  The extent of insurance protection afforded by a policy of insurance.

• coverage trigger

  The event which determines when coverage of a liability policy applies. In an "occurrence" policy, the event is the occurrence of the injury or damage. In a "claims-made" policy, the event is the notification to the insurer or the insured, whichever comes first, of the happening of the injury or damage.

• CPC

  Certified Pension Consultant designation sponsored by the American Society of Pension Actuaries. Headquarters: Fairfax, VA.

• CPCLA

  Casualty Property Claim Law Associate designation sponsored by the American Educational Institute. Headquarters: Basking Ridge, NJ.

• CPCU--Chartered Property Casualty Underwriter

  The professional designation conferred by the American Institute for Property and Liability Underwriters.

• CPIW/M

  Certified Professional Insurance Woman/Man designation sponsored by the National Association of Insurance Women (International). Headquarters: Tulsa, OK.

• CPP--commercial package policy

  CPP (commercial package policy) A package policy designed for commercial insureds that can provide in one policy several lines of insurance business as needed by that commercial venture. Lines of business which may be included in the CPP are property/glass, general liability, inland marine, crime, boiler and machinery insurance, and commercial automobile.

• CPSR

  Certified Professional Service Representative designation sponsored by the National Association of Professional Insurance Agents. Headquarters: Alexandria, VA.

• CPU--central processing unit

  The part of an insurer's computing system containing the circuits that calculate and perform logic decisions based on a manual program of operating instructions.

• crash manual

  A book which describes procedures for estimating the cost to repair damage to vehicles; it also lists auto parts prices and typical labor times to repair or replace the part.

• credibility

  The measure of credence or belief which is attached to a particular body of statistical experience for rate making purposes. Generally, as the body of experience increases in volume, the corresponding credibility also increases. This term would frequently be defined in terms of specific mathematical formulas.

• credit arbitrage

  Now considered a method of alternative risk management, it refers to the buying and selling of corporate credit and, based on price discrepancies between different credit markets, realizing a profit from the transaction.

• credit card insurance

  Covers against losses stemming from the misuse of lost or misappropriated credit cards. Usually written for individuals as an endorsement to the homeowners policy, but is also offered to business corporations as a separate contract or as part of forgery of comprehensive crime policies.

• credit health insurance

  A form of health insurance to provide payments in case of disablement of debtors with respect to the amount owed on installment loans. If the debtor becomes disabled, the insurance will provide continued monthly payments, either to the end of the loan or for a specified number of months.

• credit insurance

  1) A form of life and health insurance protecting the lender against loss from death or disability of the borrower, often written as group insurance. The coverage can be written to protect the interest of the creditor only (single interest), or the interests of both creditor and debtor (dual interest). (See single interest cover (or insurance) and margin account insurance.) 2) Protection against loss caused by the insolvency of a firm's customers in excess of its normal credit losses; written by a few specialty casualty insurers. (See floor plan insurance.)

• credit life insurance

  A form of life insurance to provide payments in case of death of debtors with respect to the amount owed on installment loans. In case of death of the debtor, the insurance pays the balance of the loan.

• credit report

  A report on an individual's personal characteristics, credit standing, habits, and including other facts which might influence the decision to insure that individual. (See inspection.)

• credit scoring

  credit scoring Refers to assigning a numerical score to a number of attributes in an individual's financial history in order to evaluate his or her desirability as a customer or loan prospect. Due to a discovery of a correlation between credit scores and loss probability, credit scores have been modified for use as an underwriting tool by insurers.

• credit-based scoring

  credit-based scoring Refers to assigning a numerical score to a number of attributes in an individual's financial history in order to evaluate his or her desirability as a customer or loan prospect. Due to a discovery of a correlation between credit scores and loss probability, credit scores have been modified for use as an underwriting tool by insurers.

• crime coverages

  A generic term used to encompass the variety of crime coverage forms available to protect against losses of money, securities and property by such causes of loss as employee dishonesty, forgery, theft, burglary, robbery, kidnap, extortion and fraud.

• criticism

  In reference to an audit, it refers to a suggestion that an outside party makes to an insurer regarding needed, corrective action

• CRO

  An executive charged with the task of creating, managing and implementing an organization?s risk strategy that, increasingly, encompasses financial, market, credit and operational risks.

• crop dusting and spraying liability insurance

  Protection against claims alleging bodily injury or property damage arising from the normal business operations of crop dusters.

• crop insurance

  Insurance against hail damage to growing crops. Although hail is the basic peril in these policies, cover is often granted for crop damage resulting from additional perils such as fire, windstorm, lightning, drought, frost, excessive heat, snow, sleet, etc.

• crop revenue coverage

  crop revenue coverage Refers to a policy that pays for loss of farm income due to a low yield, low market prices or both.

• crop-hail insurance

  Insurance against hail damage to growing crops. Although hail is the basic peril in these policies, cover is often granted for crop damage resulting from additional perils such as fire, windstorm, lightning, drought, frost, excessive heat, snow, sleet, etc.

• Crop-Hail Insurance Actuarial Association

  Rating organization, statistical and research association for crop-hail insurance and rain insurance on public events, business ventures and private proceedings. Headquarters: Chicago, IL.

• cross liability coverage

  A provision that responds to a liability claim that is made against an insured by a person who is also an insured under the same policy. However, the total insurance limit available under the policy is unchanged.

• cross liability coverage endorsement

  Most liability policies will not respond to claims between two or more insureds covered by the same insurance policy whether they be named insureds or additional insureds. This endorsement adds coverage for insureds who make a claim against another insured under specific circumstances. It is important to note that this endorsement does not increase the insurance company's overall limit of liability.

• cross sell

  cross sell In insurance, refers to the technique of reviewing one's current clients for one type of business and selling them coverage in different lines (such as selling auto insurance to homeowner clients or selling life and health products to current property and casualty clients).

• CSA

  Customer Service Agent.

• CSP

  Certified Safety Professional designation sponsored by the Board of Certified Safety Professionals. Headquarters: Savoy, IL.

• CSR

  Customer Service Representative.

• CSRP

  See Certified Subrogation Recovery Professional.

• cumulative liability

  Relates to fidelity bonds where a substantial claim could be made under a canceled bond containing a discovery period and also under another bond replacing it, since defalcations of dishonest employees often are spread over lengthy periods. To avoid this cumulative liability which could expose a surety company to a loss totaling the sum of two bonds, a clause--the superseded suretyship rider--is used, which picks up any liability under the prior bond and bars possibility of an accumulation of liability between the two bonds if issued by the same company.

• cure

  An ocean marine term used to express the medical expenses made by the owner or operator of a vessel to a sailor who has become ill, injured or disabled while on a voyage or while performing the duties of a sailor for the owner/operator.

• current assets

  Current assets consist of cash and other assets that can be quickly liquidated and converted to cash within one year.

• current assumption whole life insurance

  This type of policy deviates from the whole life concept where premiums remain level. With current assumption whole life insurance, the premium payments are flexible and are linked to current interest rates. Premium adjustments are usually made on specific policy anniversary dates. Premium adjustments come from higher or lower mortality, expenses or investment returns of the insurer.

• current liabilities

  Liabilities that must be paid within a one-year period, including the current (one year's worth) portion of long-term debt.

• current ratio

  The ratio of current assets to current liabilities. Normally, the greater or higher the ratio, the more liquid a firm is determined to be and thus is considered better able to pay debt. As a rule of thumb, a ratio of 2-to-1 is normally considered an acceptable minimum.

• curtain wall

  Many buildings built of steel frames or concrete have walls which support no load, but serve merely to protect from the weather. Such walls are "curtain walls." Modern fire-resistive construction usually calls for wall structure of this kind.

• custodian

  A term typically used in crime insurance. It refers to any insured person (partner, officer, employee) who has custody of insured property while inside the covered premises.

• custom brokers and freight forwarders errors and omission

  insurance insurance Special insurance policies designed for custom brokers which provide coverage for liability as a result of errors, omissions, or negligence in arranging for the clearance and forwarding of imports of behalf of the importer.

• cut rate

  A generic reference to below market insurance rates or premiums.

• cut-off cancellation

  The cancellation provision in a reinsurance agreement which clarifies that the reinsurer is not obligated to cover any loss that may occur after the specified cancellation date.

• cut-through clause

  The cut-through clause is a provision in a reinsurance agreement which clarifies that, should the primary insurer becomes insolvent, the reinsurer is still liable for its stated share of the loss but that payment will be made directly to the insured and not to the insurer as is normally done. (See cut-through endorsement.)

• cut-through endorsement

  An addition to an insurance policy between an insurance company and a policyholder which requires that, in the event of the company's insolvency, any part of a loss covered by reinsurance be paid directly to the policyholder by the reinsurer. The cut-through endorsement is so named because it provides that the reinsurance claim payment "cuts-through" the usual route of payment from reinsured company-to-policyholder and then reinsurer-to-reinsured company, substituting instead the payment route of reinsurer-to-policyholder. The effect is to revise the route of payment only, and there is no intended increased risk to the reinsurer. Similar to the guarantee endorsement, the cut-through endorsement is also known as an assumption endorsement. (See cut-through clause.)

• CWCLA

  Casualty-Workers Compensation Claim Law Associate designation sponsored by the American Educational Institute. Headquarters: Basking Ridge, NJ.

• cyber forensics

  A form of electronic discovery that involves examining an individual computer. The process consists of making a digital copy of its hard drive and examining its contents for relevancy to a criminal or civil case. The original PC is secured as evidence.

• cyber risks

  Exposures to loss faced by organizations that conduct business online, particularly loss caused by unauthorized entry into their systems by hackers.

• cyber-insurance

  cyber insurance A special form of commercial insurance created to protect businesses against cyber (Internet) risks, such as hackers and other breaches of computer system security.
• Back to Top

• D.H.--double hydrant

  On a fire insurance diagram, this designates a double hydrant for the attachment of fire hose.

• daily report

  A working copy of a policy, used as the agent's or the company's record.

• damage from strikers insurance

  A special commercial property insurance policy designed to provide coverage for employers for damage and loss caused by vandalism or sabotage of strikers.

• damages

  In liability insurance, refers to awards, which can be either compensatory or punitive. Compensatory consists of either general damages, which include pain and suffering, or special damages, which are out-of-pocket expenses. Punitive (or exemplary) are amounts that are awarded as a form of punishment or to act as an example.

• dangerous instrumentality

  (See instrumentality.)

• data processing equipment insurance

  Most often, an inland marine coverage form, for "all-risk" protection on equipment, software, extra expenses incurred as a result of the failure of such equipment caused by an insured loss, and loss of earnings. Also known as an "EDP" policy. May be extended to cover liability claims alleging errors and omissions by data processing companies. This coverage is known as data processors errors and omissions insurance. (See data processors errors and omissions insurance and EDP insurance.)

• data processors errors and omissions insurance

  A special liability insurance policy designed to provide protection for insureds who offer data processing services to others. Coverage is for injury and damages resulting from negligent acts and errors or omissions in the rendering or failing to render of data processing service on the financial data or financial records of others. (See data processing equipment insurance and EDP insurance.)

• date of issue

  Not to be confused with the policy effective date or the effective date of coverage, the date of issue is the date the policy was actually processed, typed, or issued by the insurer.

• deadheading coverage

  Auto coverage for the liability exposure of operating a tractor/trailer rig (truck) with an empty trailer

• Dean Schedule

  A method (now obsolete) of rating fire insurance risks developed by A. F. Dean (Chicago, 1901). Geographically, much of the country was rated under this schedule which was known as the "Analytic System for the Measurement of Relative Fire Hazards." Dean described a standard unoccupied risk for which a base rate was named depending on overall territorial factors. Each individual hazard or factor (construction, area, damageability, occupancy, exposure, etc.) that appeared in the risk added or subtracted a percentage of the base rate to produce the specific rate. A successful, logical method which contributed much to insurance thinking and practice.

• death benefit

  The limit of insurance or the amount of benefit that will be paid in the event of the death of the covered person. (See additional death benefit.)

• death claim

  When an insured dies, a death claim is made to the insurer. Prior to payment, if the policy is in its incontestable period, the claim may be investigated. Proof of death in the form of a death certificate is normally required.

• debit

  With respect to life insurance: 1) The amount of premium that is charged (or debited) against an agent for collection. 2) The book of business the premiums charged against an agent consist of. 3) In regard to the book of business charged to an agent, it may be the territory those insureds are located in. 4) In regard to the book of business charged to an agent, it may be the number of insureds assigned for premium collection. With respect to commercial property and liability insurance: during the premium calculation process, debits refer to surcharges that may be assessed against an insured based on adverse individual risk characteristics or adverse loss experience, justifiable by verifiable facts. The factors qualifying for debit or surcharges are filed by the insurer and are approved by the various state jurisdictions.

• debit agent

  The person who collects industrial insurance premiums (usually for life insurance) weekly or monthly from policyholders by personal contact.

• debit insurance

  Insurance (usually life insurance) written in small amounts, the premium for which is payable in frequent installments (usually weekly or monthly) and collected by an agent known as a debit agent. The payment frequency and collection facilities were designed decades ago to accommodate workers at industrial factories who were paid weekly. Also called industrial insurance.

• debris removal clause

  A property insurance provision which provides coverage for the cost of cleanup and debris removal after a covered cause of loss has occurred, such as cleanup after a fire or windstorm.

• decennial insurance

  A form of international coverage. Essentially, it insures against damage related to structural defects in design, plans and materials. Its name comes from the fact that the coverage stays in effect for up to a decade after a given building project is complete.

• Declaration or Declaration Page

  1) With respect to property and liability insurance, the portion of the insurance policy itself, used to detail the name and address of the insured, the locations covered, the policy period, limits of insurance, endorsements attached and premiums for coverage. Commercial policies also contain such items as the type of entity and type of operation of the insured. 2) A statement made to the company or to its agents by a policyholder, upon which the company may rely in undertaking the insurance.

• declaratory judgment

  declaratory judgment An opinion handed down by a court that determines a question that may be submitted by any party in a dispute. In insurance, declaratory judgments are typically requested on whether a loss qualifies for coverage or whether a policyholder should be provided with defense coverage.

• decreasing term life insurance

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

• decrement

  A pension plan that loses participants is said to be in decrement. Changes can occur from death, disability, retirement termination (plant closings, etc.). Loss of participants may affect the plan's continuity or desirability.

• deductible

  In a policy providing a deductible clause, the amount which must first be subtracted from the total damage incurred before determining the insurance company's liability. Of several types used, the straight deductible establishes the insurer's liability above the deductible but not below it; the franchise deductible establishes the insurer's liability for the entire amount of damage once the deductible amount is exceeded in a loss; and the disappearing deductible establishes the insurer's liability for an increasing proportion of the loss, as the total damage rises above the deductible, until the deductible finally "disappears." Then the insurer is liable for the entire amount. The deductible may be in the form of an amount of dollars, a percent of the loss, a percent of the value of the insured property, or a period of time, as in health insurance. (See franchise clause.)

• deemed

  deemed An agreement to treat a condition or circumstance in a given manner, regardless of any specific details.

• defalcation

  Embezzlement of money, as used in fidelity bonds.

• defective product

  There are three major areas of product defects: 1) defect occurring as a result of faulty manufacturing or assembly of the product 2) defective design 3) failure to give proper warning. Even in products that are not inherently dangerous, the principle of strict liability is being applied more and more, whenever serious injury or damage occurs. Strict liability will always be applied in those cases where the manufacturing, installing, marketing, or selling of products with known defects have occurred.

• Defense Base Act Coverage

  This item is an extension of the United States Longshore & Harborworkers Compensation Act. It applies to employees of American contractors and subcontractors involved in public works projects (including civilian support of overseas military bases, defense contracts and relief organization activity) located outside the continental U.S.

• defense clause

  A provision in commercial and personal liability insurance policies whereby the insurer has the right and duty to defend a lawsuit against the insured, even when those suits are considered false, groundless or fraudulent. (See duty to defend.)

• Defense Research Institute, Inc. (DRI)

  A nonprofit organization of defense lawyers engaged in personal injury litigation, formed principally to increase the skills of legal defense. Headquarters: Milwaukee, WI.

• Defensive Driver Course

  These are classes either offered through or approved by Departments of Motor Vehicles to enhance driving skills. These courses may make drivers eligible for discounts on their premiums. Courses taken for traffic school because of a moving violation are not eligible.

• deferred annuity

  A type of annuity where premiums are paid on an ongoing basis, but the benefit payments are deferred until a later date. The annuity can be scheduled to begin on a specific date or when a set age of the recipient is attained. A common example is an annuity that has been purchased for a child to pay for the child's college education. Payments are ongoing, and the payout may be scheduled to begin when the child turns 18.

• deferred compensation plan

  Employees may contract with their employers to defer compensation until some future date, i.e., retirement. Life insurance can be used to build cash for the deferred compensation (i.e., nonqualified deferred compensation plan). The death benefit can fully fund a plan at the premature death of the person for whom the compensation is being deferred.

• deferred life insurance

  Life insurance policies designed to pay a higher death benefit after a specified period to allow the benefits to become vested.

• deferred premium

  A premium payment method which allows an insured to pay premiums on an installment basis rather than the entire amount up front. Payments may be made monthly, quarterly or semiannually, but the payment amounts must be equal at least to the portion of the premium that has been earned.

• deferred premium payment plan

  Provides for the payment of premium in installments. An initial installment is due upon attachment of liability with additional installments payable at monthly, bi?monthly or quarterly periods. The premiums due are usually in excess of the net premium earned on a short-rate basis.

• deficit

  When the total amount outgoing owed exceeds the amount incoming owned in any given accounting period, or when debits exceed credits.

• defined benefit plan

  A basic form of pension plan which requires contributions from both an employer and employee. In this plan, the amount of the benefit is known while the amount of the contributions needed to fund the plan varies.

• defined contribution plan

  A basic form of pension plan that requires contributions from both an employer and employee. In this plan, the amount of the benefit varies according to factors such as the plan participant's income, contribution amount, years until retirement, age, etc., while the amount of the contributions funding the plan is fixed.

• delay clause

  1) In ocean marine insurance, a clause in the policy that excludes coverage for any loss experienced by the insured that results in damage to goods or loss of income/market that results from the vessels not arriving at its destination as scheduled (delayed). 2) In life insurance, a clause in the policy that allows the insurer to delay a loan on the cash surrender value of the policy, for a time period of normally six months, as clarified in the policy. The reasons and conditions allowing this delay are set forth in the contract; however, the purpose of this clause is to protect an insurer from excess demands by insureds for loans during periods of economic disasters or catastrophes.

• delayed payment clause

  A life insurance clause which allows an insurer to defer the payment of the policy benefits to a beneficiary for a specified period of time after the death of the insured under certain conditions. This normally occurs when the insured and the primary beneficiary are both subjected to a common disaster, or in the case of other natural disaster. One example would be when a husband and wife are involved in the same airplane accident which kills the husband and leaves the wife in critical condition. The payment of the proceeds can be delayed and, if necessary, paid to the contingent beneficiary or the estate of the primary, in the event the primary beneficiary does not survive. Many life insurance policies clarify that a primary beneficiary must survive a stated period of time after the death of the insured in order to collect the benefits.

• delivery receipt

  The acknowledgment by the insured of receipt of the policy, sometimes requested by the agent or insurer in writing, similar to a postal receipt.

• demand surge

  This refers to the substantial spike in the cost of materials and construction labor that occurs after a catastrophe such as an earthquake or hurricane. Demand surge represents a huge increase in loss settlement costs to insurers.

• demolition insurance

  Insurance against the cost of removing the ruins of a building partially destroyed by an insured peril, when required by some city ordinances.

• demurrage

  Refers to a vessel owner?s loss of use when that loss is caused by either damage to the vessel or due to delays in loading or unloading while in port.

• demutualization

  The process where an insurance company owned by its policyholders (a mutual company) converts its charter to that of a company owned by shareholders (a stock company). The process may involve returning to the policyholders shares of stock or other value for their loss of ownership interest (membership rights) in the mutual company prior to the company conversion to a stock company. The process is regulated by the state where the demutualizing company is domiciled. More and more states are permitting a hybrid approach (mutual holding company) that combines both mutual policyholder ownership and marketable stock. (See mutual holding company.)

• dental insurance

  Health insurance coverage for specified dental services, most often provided on a group basis.

• dentists professional liability insurance

  Insurance designed to cover the professional liability exposures of dentists that result from claims for bodily injury and/or personal injury which may occur from alleged malpractice, errors or omissions in the rendering or failing to render professional services.

• dependent life insurance

  Optional and voluntary life insurance benefits on dependents and spouse of a member in a group insurance contract. Limits of coverage are generally lower than on the life of the dependent and the dependent may be responsible for all or a portion of the premium payments on dependent life insurance.

• dependent property

  dependent property Protects against income that is lost because of critical reliance on another property that has been damaged or destroyed (i.e., a key customer, supplier or processing partner).

• deposit administration plan

  A group annuity plan, often to administer pensions, in which the members of the plan (or their employers) make scheduled deposits or payments to the plan. These payments go into a single group fund which may be invested. When each member reaches an agreed upon date, such as retirement, annuities are purchased by the plan, for that individual member for the benefit and payment of that member.

• deposit premium

  A tentative charge made at the beginning of certain policies and reinsurance agreements, to be adjusted when the actual earned charge has been later determined. Also known as initial premium.

• deposit term insurance

  A term insurance policy that, in the earlier years, has a higher premium than it does in the later years. In the beginning, the excess premium is considered savings, and this extra amount of money is set aside to earn interest. Later these dollars (interest plus the lump sum or deposit) will be used to reduce the premium payment. The entire deposit will be consumed in premium payments.

• depositor

  A limited purpose entity which initially accepts assets intended for securitization from an originator firm and then transfers the assets to an SPV.

• depositors forgery bond

  A bond where a person or corporation can insure against losses from forgery or alteration of outgoing negotiable instruments only, i.e., instruments drawn against the insured's account.

• depository bond

  Bonds specifically developed for use by financial institutions to guarantee the safety of funds made by depositors and their availability for withdrawal as indicated in the terms of deposit. It should be noted that this is not a federal deposit guarantee.

• depreciation

  The reduction in value of tangible property caused by physical deterioration or obsolescence. (See appreciation.)

• depreciation insurance

  Insurance which pays the difference between the depreciated value of property at the time it is damaged or destroyed by a covered cause of loss insured against, and the cost of replacing it with new property of similar kind and quality. Fast becoming obsolete and now provided for in replacement cost coverage of most personal and commercial property insurance policies.

• derivative

  (See insurance derivative.)

• design professionals professional liability

  A newer term for architects and engineers professional liability.

• detached structures

  Structures located on the same premises, but not physically attached to each other.

• detention

  Arrest or detention which involves the illegal restraint of an individual?s liberty; it is considered to be a type of personal injury.

• developed to net premiums earned

  A financial ratio that compares an insurers premiums that have developed through a given year to its net earned premiums. The ration is a measure of whether a company's loss reserves match its premium growth.

• development to policyholder surplus

  A financial ratio that measures an insurer's reserve status (deficiency or redundancy) with regard to its policyholder surplus.

• deviation

  1) A rate filing which departs from the filing made by a rating bureau. Under all-industry prior approval rating laws (and some earlier laws), insurers who were members of and subscribers to rating bureaus (for the class of insurance involved) were required to use the rate filed by the bureau, unless the insurers deviated by making a filing with an insurance department and relating their variation to the bureau filing. Deviated filings should be distinguished from independent filings where an insurer withdraws from its affiliation with the bureau for the area of the filing and files directly with the insurance department separate and apart from the bureau filing. Deviations are no longer necessary in over half the states with open competition type rating laws, under which an insurer has no legal obligation to adhere to the filing and may make independent filings while remaining a member or subscriber. 2) In marine insurance, the route taken by a vessel going to some other port or taking some course other than that described in the policy of marine insurance, contract of carriage, or bill of lading.

• Diagnostic Related Group (DRG)

  A DRG is the medical claims reimbursement system, developed by Medicare for hospitals, where predetermined payment amounts have been set for listed procedures. The DRG systems have also been used by some employers and insurers as a cost commitment technique with health care providers.

• DIC--difference in conditions insurance

  1. A property policy insuring "all risks" of physical loss or damage, excluding fire and extended coverage perils. This would include any cause of loss that would result in the property being left in a condition different from what it was prior to the occurrence of the loss event, except for those causes of loss specifically excluded. Such unnamed losses would include collapse, water damage, theft and (optionally) flood and earthquake. Often, this coverage is provided on an inland marine basis. 2. A term used to describe liability coverage needed by wrap-up program enrollees to protect them when either the wrap-up ends or the wrap-up aggregate limit is exhausted.

• difference in conditions insurance (DIC)

  A property policy insuring "all risks" of physical loss or damage, excluding fire and extended coverage perils. Any cause of loss that would result in the property being left in a condition different from what it was prior to the occurrence of the loss event, except for those causes of loss specifically excluded. Such unnamed losses would include collapse, water damage, theft and (optionally) flood and earthquake. Often, this coverage is provided on an inland marine basis.

• diminished value

  Refers to either a real or perceived reduction in market value to a vehicle that has been damaged in an accident and then repaired.

• direct action statute

  direct action statute Any law that permits a third party to sue an insurer or a reinsurer directly (instead of suing, respectively, an insured or a ceding insurance company).

• direct billing

  A system for the collection of premiums where the insurance company sends a notice to the insured for the premium in lieu of the conventional collection of premiums by the agent. The company sends a statement to the agent, usually monthly recording the premiums collected direct, and credits the agent with commission due on those items.

• direct damage

  Causes of loss that produce direct and straightforward property damage (without interruption in time or deviation in space) from the cause of the event to the damaged property.

• direct loss

  Causes of loss that produce direct and straightforward property damage (without interruption in time or deviation in space) from the cause of the event to the damaged property.

• direct response system

  direct response system An insurance sales system in which the insurer offers insurance directly to the public, using only its own employees and forgoing the use of agents. Common methods are the use of the U.S. mail, the telephone, or the Internet.

• direct selling system

  An insurance sales system in which the insurer offers insurance directly to the public, using only its own employees and forgoing the use of agents. Common methods are the use of the U.S. mail, the telephone, or the Internet.

• direct writer

  A company that sells insurance to the public either through employees licensed as agents or through licensed agents, compensated on a commission basis, who represent only one company; but not through independent agents representing more than one company. (See American agency system and independent agent.)

• direct written premium

  The policy premium, adjusted by additional or return premiums, but excluding any reinsurance premiums.

• director of insurance

  The official of a state charged with the duty of enforcing its insurance laws. Also called the superintendent of insurance and commissioner of insurance. The official is elected in 11 states, appointed by a governor or state agency in 38 states, and is a civil service appointee in Colorado.

• directors and officers liability insurance

  Protects officers and directors of a corporation against damages from claims resulting from negligent or wrongful acts in the course of their duties. Also covers the corporation (and even the officers and directors in some cases) for expenses incurred in defending lawsuits arising from alleged wrongful acts of officers or directors. These policies always require the insured to retain part of the risk uninsured.

• disability

  Inability to work due to personal injury or illness. Each policy may contain its own modified definition.

• disability benefits

  The benefits paid for one who becomes disabled. Normally these benefits are periodic, i.e., weekly or monthly. Occasionally benefits may be in the form of a lump sum. The qualification for benefit payout is determined by the definition of disability.

• disability buy-out insurance

  If a partner or officer/shareholder of a business becomes permanently disabled, the other owners may want to buy out that partner's or shareholder's interest in the business. A contract is formed between the owners and funded by a disability policy that will pay if one of the owners becomes permanently disabled for more than six months, one year, two years, etc. The payment is usually in the form of one lump sum or a series of large payments.

• disability income insurance

  A form of coverage which provides benefits to employees disabled by sickness or accident not related to employment. An extension of workers compensation acts in New York, New Jersey, California, Hawaii, Puerto Rico and Rhode Island. (See accident and sickness insurance.)

• disability insurance

  A form of health insurance coverage which provides benefits in the form of income (usually weekly or monthly) to employees disabled by sickness or accident not related to employment. An extension of workers compensation acts in New York, New Jersey, California, Hawaii, Puerto Rico and Rhode Island. (See accident and sickness insurance.)

• disappearing deductible

  A disappearing deductible is a dollar amount deducted from the amount of loss which is reduced as the size of losses increase, finally disappearing entirely (for a "large" loss) to provide full coverage when a loss reaches a certain specified figure. Deductible amounts vary from $500 to $5,000, and the limit at which the deductible disappears is usually between $5,000 and $25,000. Disappearing deductible plans are principally associated with fire policies, which thus qualify for reduced rates.

• disappearing deficit

  Elimination of a deficit (loss) year (should one occur) from the computation of contingent commission in exchange for an annual charge in the contingent commission statement, such charge being a percentage of earned premiums.

• disaster

  Any event that creates an inability on an organization?s part to provide critical business functions for some predetermined period of time.

• disaster prevention

  Any course of action that identifies, mitigates or prevents occurrences that could result in a substantial disruption of business operations.

• disaster prevention checklist

  A list of questions for evaluating disaster prevention measures that are in place in an organization?s critical areas of operation.

• disaster recovery

  Refers to an organization?s ability to restore critical functions and to resume operations after activity is disrupted by a disaster.

• disaster recovery plan

  A plan that documents the steps necessary for an organization to begin recovery from operations that are being disrupted by a disaster. The plan should include specific objectives, such as finding a replacement site within 48 hours, contacting alternate suppliers, etc.

• disaster recovery plan

  disbursements Prior to the sailing of a vessel, it is necessary to spend money for supplies, labor and other things which will be totally lost if the vessel does not complete its voyage. Insurance on "disbursements" reimburses the owner for these expenses in case the ship becomes a total loss before reaching its destination.

• disclaimer

  1) The denial of liability or an obligation. 2) The denial of a claim or coverage based on just grounds.

• discounted premium

  An insurance premium that has received a discount or credit because it was paid in full in advance of the due date.

• discovery period

  A period of time after cancellation of an insurance contract or bond during which the insured can discover whether there would have ben a recoverable loss if the contract had remained in force. The period varies considerably and, in the case of certain bonds, could be indefinite by statutory requirements.

• discrimination

  The exercise of choices in selecting risks, as an essential function of any insurance system, when used in matching individual risks with the rates representing their chances of loss or their expenses. Often used erroneously to imply unfair discrimination, which is illegal. (See classification, selection, and unfair discrimination.)

• dishonesty, disappearance and destruction policy

  A now obsolete crime insurance policy that provided a combination of fidelity coverages with other crime coverages. It was previously called the 3-D policy. This policy has been replaced by more inclusive commercial crime coverage forms.

• disinterested party

  Refers to any individual who does not have a reason for a dispute to be resolved in any particular manner. A party who has nothing to gain from how an argument is decided is valuable as a party to help resolve a dispute, such as an arbitrator or mediator.

• dismemberment

  Loss of, and sometimes loss of use of, specified members of the body.

• dismemberment benefit

  In accident and health insurance coverages, the schedule of benefits that will be paid should dismemberment occur. The schedule includes the amount of payment for each of the various types of dismemberment.

• distribution clause

  A provision in a property insurance policy stating that the coverage is "blanket," in other words, one amount covering several items shall be limited on each item to the proportionate amount which the value of the particular item bears to the total value of all the insured items. (See average clause.)

• diversification

  The practice insurance companies employ to spread their risks geographically by type of insured and by peril in order to minimize the catastrophe potential.

• dividend

  An amount of money paid to the policyholders of a mutual insurer because of their ownership interest. A stock corporation may also pay a dividend to its policyholders if it writes participating insurance. In either event, the amount is payable on the basis of certain savings in losses or expenses realized by the insurer on that participating class of business. (See participating insurance.)

• dividend accumulation

  An option in some life insurance policies which allows the insured to choose to leave the dividends earned by the policy with the insurer, in order to accumulate interest income for the insured.

• dividend option

  In some life insurance policies, insureds may select from specified options for the method best suited to that insured, with respect to the handling of the dividends earned by the policy. Some of the most common options available are reduced premiums on continuing coverage, payment to the policyholder in cash, the ability to purchase paid-up additions of whole life insurance, to leave the dividends on deposit to accumulate at compound interest, or to apply the dividends to the purchase of extended term insurance.

• division wall

  A wall which effectively separates a building into two separate fire areas. Must meet certain standards to qualify in the making of fire insurance rates. (See fire wall.)

• dockominiums

  Trendy reference to a situation in which vessels are owned individually (similar to a condominium unit owner), but the applicable docks and piers are under association ownership.

• doctrine of reasonable expectations

  A term courts use to interpret policy language. A court may chose to rule that coverage applies if a reasonable person would assume, by the nature of the policy, that a particular circumstance should be covered.

• domestic company

  An insurance company incorporated or organized under state law is a domestic insurer in that particular state. (See alien company and foreign company.)

• domestic partners

  Two adults of the same or opposite sex sharing a household and involved in a spousal relationship.

• domestic preference

  The practice of some state governments to impose more favorable tax rates for domestic insurers than foreign or alien insurers.

• domestic terrorism

  Describes an intentional act to cause serious property damage or bodily injury for political purpose that is perpetrated by a country's citizen against persons or property in that same country.

• domiciliary state or state of domicile

  The state in which an insurer is incorporated. In the case of an insurer incorporated in a foreign country, the state which such insurer "desiring to be an authorized insurer in the U.S." has designated as its state of entry.

• door-to-door coverage

  An inland marine and ocean marine insurance that covers goods or cargo shipped for the entire time of transport from the premises of the manufacturer to its final destination.

• double indemnity

  Twice the life insurance benefit, payable if death is caused by accident. Multiple indemnity is often available beyond that of double indemnity for death due to certain accidents. (See accidental death benefit and additional death benefit.)

• double trigger contract

  Any contractual situation that requires two independent events or conditions to be satisfied in order to initiate (trigger) an obligation. Such agreements are increasingly used in complex reinsurance or alternative risk transfer arrangements.

• downgrade clause

  downgrade clause A contract provision used by ceding insurers asking reinsurers, as part of their treaty agreement, to make adjustments to strengthen their balance sheet if a financial rating service lowers their financial rating.

• draft

  A substitute for a check, used by many insurance companies to pay claims. A draft is payable through a named bank, which collects the amount of the draft from the issuing insurance company and then gives credit to the claimant payee's local bank.

• draft authority

  The authority that an insurer gives to an agent which allows the agent to settle and pay certain types of claims up to a specified limit.

• dram shop laws

  The laws will vary by state, but for the most part, the owner or operator of an establishment serving or providing alcoholic beverages is liable for injury or damages caused by or to an intoxicated customer, if it can be established that the owner or operator caused or contributed to the intoxication of the person through the sale of alcoholic beverages. These laws are sometimes called liquor liability laws. (See liquor liability laws.)

• dram shop liability insurance

  A form of liquor liability coverage in which the basis for legal liability is a dram shop, liquor control, or alcoholic beverage law. The laws vary, but most provide that the owner of an establishment that serves alcoholic beverages is liable for injury or damage caused by an intoxicated person if it can be established that the liquor licensee caused or contributed to the intoxication of the person. (See liquor liability laws.)

• dread disease policy

  Often called a cancer policy because it covers only one or more dread diseases: cancer, heart disease or other major malady. (See also cancer policy.)

• DRG--Diagnostic Related Group

  A DRG is the medical claims reimbursement system, developed by Medicare for hospitals, where predetermined payment amounts have been set for listed procedures. The DRG systems have also been used by some employers and insurers as a cost commitment technique with health care providers.

• DRI--Defense Research Institute, Inc.

  A nonprofit organization of defense lawyers engaged in personal injury litigation, formed principally to increase the skills of legal defense. Headquarters: Milwaukee, WI.

• drive to and from work

  A personal lines auto insurance rating category. It is used to classify vehicle usage with respect to the distance driven by the principal operator when traveling to or from the workplace. Traditional categories have been: under 3 miles to work one way; 3 to 15 miles to work one way; over 15 miles to work one way.

• drive-by claims

  An informal reference to Americans With Disabilities Act (ADA) compliance lawsuits that are filed by disabled persons and lawyers against, typically, small businessowners. Usually such suits are typically filed without contact or notice to the plaintiffs. They are nuisance actions intended to force settlement or to collect attorney fees rather than to influence ADA compliance.

• drive?in claims service

  drive-in claims service A system employed by some automobile insurers where vehicles with minor insured damage can be driven to the company's local "drive-in" claims office for inspection and immediate settlement of the damage claim.

• drive?other?car coverage

  drive-other-car coverage A provision in an automobile policy designed to protect the policyholder (and insureds other than the policyholder) when driving cars other than the one described in the policy.

• driver training credit

  To encourage driver education courses at schools and colleges, many insurers grant lower rates to applicants for private passenger automobile insurance who have successfully completed an approved training program.

• drop down coverage

  Refers either to an excess or reinsurance policy that extends its coverage to provide protection on either a primary or a lower layer basis. The coverage may exist as a result of the applicable policy language or by written agreement. Note: Distinct from drop down provision.

• drop down provision

  Refers to a private auto insurer policy wording that affects youthful operators. When a younger driver is involved in an auto accident that includes injuries and damage to third parties, a separate, substantially lower set of liability limits are applied. This applies in policies that have no youthful operators rated on the policy as regular drivers. Note: Distinct from drop down coverage.

• dry valve

  A device in automatic sprinklers which uses air pressure to prevent water from entering the pipes in a sprinkler system until released by the opening of a sprinkler head. The purpose of such a dry valve is to prevent freezing of water-filled pipes and consequent bursting.

• dual coverage

  An insurance term with respect to claims handling, used to indicate that more than one policy or coverage form may be available to respond to payment of a claim or loss.

• dual valuation clause

  An ocean marine policy provision that applies to the hulls of older vessels. The clause values a vessel differently for total and partial losses. In the case of a total loss, the settlement amount will reflect the age and condition of the vessel. For partial losses, settlement amounts will reflect the added cost of repair and refurbishing to make a damaged vessel seaworthy. Another purpose of this type of valuation clause is to discourage incidents of intentional total losses.

• duty to defend

  A provision in commercial and personal liability insurance policies where the insurer has the right and duty to defend lawsuits against the insured, even when those suits are considered false, groundless or fraudulent. (See defense clause.)

• duty to warn

  The legal responsibility or duty of manufacturers, retailers, or wholesalers to warn purchasers of any known or potentially dangerous condition, use or misuse of the product that could result in injury or damage.

• DV

  DV (Diminished Value) Refers to either a real or perceived reduction in market value to a vehicle that has been damaged in an accident and then repaired.

• dwelling

  A house in which people live as distinguished from a store, a factory or any other building.

• dwelling policy or dwelling fire policy

  A property policy available for owners of dwellings. Usually used for those dwelling risks that are not eligible for the homeowners package policies. There are three groupings of covered causes of loss available. Form 1 provides protection for basic causes of loss. Form 2 provides broad and Form 3 provides special perils coverage. Personal liability protection may be available as an endorsement to the dwelling policy but is not automatic.
• Back to Top

• E&O

  1) A form of professional liability insurance which provides coverage for mistakes made by a person or persons in a profession not involved with the human body, such as lawyers, architects, engineers, or for mistakes made in a service business, such as insurance, real estate, and others. (See nonrecording chattel mortgage policy.) 2) A form of coverage for financial institutions protecting against loss to lending institutions which fail to effect insurance coverage. (See malpractice and medical malpractice.)

• e-discovery

  See electronic discovery.

• E-filing

  (See System for Electronic Rate and Form Filing.)

• e-insurance

  An evolving term that typically refers (theoretically) to any form of insurance coverage that is sold, delivered and serviced electronically, specifically via the Internet. Another term is virtual insurance.

• e-mediation

  Any on-line process that allows disputing parties to resolve an argument over the amount of damage suffered in a loss. One popular method allows the parties to submit separate, blind offers electronically; agreement is then reached if the submissions fall within a predetermined value range.

• e-signature

  Electronic signature that is a valid, legally binding signature which facilitates transactions, such as insurance applications and purchases, via the Internet.

• early retirement age

  early retirement age If a person retires before the target retirement date in a pension plan, that person is taking early retirement. Plans usually have a minimum early retirement date which may be a specific age or a combination of age and years of service. Benefits are lower than if the person would have retired at the target retirement date because there is less time to accrue benefit (in a target retirement plan) or the years of service are not as great (in a defined benefit plan).

• Early Warning System

  Now known as the NAIC Insurance Regulatory Information System (IRIS), it is a financial ratio and performance criterion designed by the National Association of Insurance Commissioners to identify insurance companies which may need close surveillance by state insurance departments.

• earned premium

  The portion of the policy premium allocated to the expired or used portion of the policy term. This also includes any short-rate charge made on policy cancellation.

• earned reinsurance premium

  The earned portion of the policy premium paid to a reinsurer by the primary or ceding company.

• earnings test

  Regarding disability insurance, refers to the amount an injured worker may earn via part-time work and still remain eligible for disability benefits.

• earth movement exclusion

  A provision to exclude coverage for loss caused by settlement of earth, creep or slide of soil, or other instability of the earth.

• earthquake

  Sudden slipping or movement of a portion of the earth's crust that is accompanied and followed by a series of vibrations.

• earthquake insurance

  Insurance against damage by earthquakes and earth movement. Written most frequently on the Pacific coast.

• earthquake sprinkler leakage coverage

  Optional coverage against direct damage to insured property that is due to water that escapes from a sprinkler system after earth movement activity.

• easement

  A legal term used to express the privilege, convenience or right of an owner of a piece of property to use nonowned property, usually adjoining the owned property, without which the property owner might not have full access to or enjoyment of his/her owned property.

• ECO (extra contractual obligations)

  Where an insurer is judged to owe a responsibility for coverage that falls outside of the actual policy provisions.

• economic perils

  One of the three common categories of perils used in the insurance industry to classify causes of loss. Economic perils are those caused by loss of market, loss of income, local, national, or worldwide economic conditions, inflation, or obsolescence of an industry. The other two common categories of perils are human perils and natural perils. (See human perils, natural perils and peril.)

• edits or underwriting edits

  Account or risk elements selected by an insurer as evaluation points. Most often associated with automated underwriting systems (AUS).

• EDP insurance

  An "all-risk" policy that provides protection on equipment, software and extra expenses incurred as a result of failure of such equipment caused by an insured loss and loss of earnings. Also know as an EDP policy. Coverage may be extended to include liability claims alleging errors and omissions by data processing companies. (See data processors errors and omissions insurance and data processing equipment insurance.)

• edr

  (See event data recorder.)

• educators professional liability insurance

  Professional liability coverage specifically designed to offer protection for the hazards and exposures faced by educators, teachers, and school boards from claims or suits that may result from the acts, negligence, errors, omissions, rendering or failing to render of the professional services of school board members, faculty, staff, aides, or volunteers. Coverage for bodily injury resulting from corporal punishment is also available.

• EEOC--Equal Employment Opportunity Commission

  Federal commission designed to provide employees with employment opportunities and environments that are free of discrimination based upon such items as race, nationality, religion, gender, physical handicap or enviornments that involve improper working conditions such as sexual harassment. This commission provides protection against such abuses in accordance with federal law. The EEOC provides a method of recourse for employees who feel that they have been unfairly treated in the course of employment or possible employment.

• effective date

  The day upon which a policy first becomes eligible to pay covered losses.

• effects

  Personal property, goods, chattels, clothes and documents.

• efficient proximate cause

  While proximate cause generally refers to a chain of events that lead to injury or damage, efficient proximate cause refers to identifying a particular event as the chief or primary contributor to such loss or damage, even when other events occur in between.

• EFT

  (See Electronic Forms Transmittal.)

• EHS

  (See environmental health and safety.)

• EIFS

  Refers to exterior wall systems typically consisting of insulation board attached to a home?s exterior, covered by a base coat, a mesh reinforcement and a rigid finish coat. The system?s installation is promoted as being more energy efficient, reducing infiltration by elements.

• EIFS Problem

  In recent years, a widespread problem has developed with certain installations of EIFS. When not properly installed, gaps exist that allow water and moisture to seep in and then gets trapped. The trapped moisture results in large scale rotting of the home's framing and walls. This damage is considered ineligible for coverage under a homeowners policy. (See exterior insulation and finish systems (EIFS).)

• election period (COBRA)

  election period (COBRA) When a participant leaves a group health plan, the person has up to 60 days to elect to accept the COBRA continuation coverage. This period is called the election period. (See also COBRA.)

• election to avoid a policy

  When important information related to seeking insurance coverage has been concealed, misrepresented or is fraudulent, the insurer may have the right to dissolve a policy's coverage as though the policy never existed.

• elective contributions 401(k)

  elective contributions 401(k) The amount of money the employee elects to contribute towards his/her 401(k) plan. As qualified elective contributions are tax deferred, the employer actually reduces the participant's income by the amount of the elective contribution. The accumulations and earnings in a 401(k) plan build on a tax deferred basis as well. (See also 401(k) plan.)

• electrical exemption clause

  A clause in a policy that provides that damage to electrical machinery by electrical current is limited to such damage as is followed by fire damage. Several different clauses of this nature are used in different circumstances.

• electronic data processing coverage (EDP)

  (See EDP insurance) (See data processors errors and omissions insurance, and data processing equipment insurance.)

• electronic discovery

  At its simplest, refers to the process of investigating individual computers and networks for any information that may be relevant for a criminal or civil judicial proceeding. Discoverable information includes a wide array of content, such as audio files, graphics, viruses, e-mail, spreadsheets, videos, calendars, databases, etc.

• Electronic Forms Transmittal

  Software that enables an insurance carrier to send rate, rule and/or form filings to state regulators electronically. This is a format being required by an increasing number of jurisdictions.

• electronically stored information

  With regard to legal proceedings, refers to the massive amount of information, documents, records, etc. that is initially created, handled and stored electronically (via computer word processing, e-mail, blogs, IM, VOIP, cell phones and other media which becomes accessible via legal discovery.

• elements of negligence

  Negligence is established by considering whether a duty exists to act in a certain manner, that a person has failed to act as required and whether actual damage or injury is a direct result of failing to act properly.

• elevator liability insurance

  Liability coverage for elevators, escalators and other hoisting devices. This coverage is no longer written as a policy by itself but is now included in the standard commercial general liability coverage form.

• eligibility period

  Once an employee has become eligible for company benefits such as life and health insurance, the employee is usually given a limited period of time to decide which benefits to subscribe to without having to go through physical examinations and prove insurability. This is called the eligibility period. Once the eligibility period has expired, should the employee decide to purchase or subscribe to the insurance benefit programs, proof of insurability is normally required and the insurer may reject the employee's request.

• elimination period

  In health insurance, an amount of time after the occurrence of a disability during which no indemnities are payable, as provided in the policy. An elimination period can apply to accident, sickness, or to both. Commonly referred to as the waiting period. Also used in boiler and machinery business interruption insurance.

• embezzlement

  Fraud in using money for yourself that has been entrusted by another. A similar term, conversion, applies to property instead of money.

• emergency fund

  Life insurance policies often have a benefit provision that extends a set amount of money to the beneficiary or insured's family in the event of the insured's death, to handle emergency and funeral expenses until the final disposition of the policy has been determined.

• emergency road service

  Refers to coverage agreements that respond to risks of the road such as dealing with dead batteries, flat tires, towing charges, locksmith services, etc.

• emotional distress

  A type of injury where the victim suffers anguish and other disorders as a result of the infliction of duress such as threat of physical abuse, sexual harassment or racial/gender/religious discrimination. Emotional distress is not considered to be bodily injury in many jurisdictions; however, physical manifestations may result which may be considered bodily injury.

• employed lawyers coverage

  employed lawyers coverage A variation of professional liability coverage. It is designed to address the liability exposures faced by lawyers who are employed as general or in-house counsel (corporate legal departments), as opposed to law firms or private practice. It is meant to fill the gap that exists in standard general liability policies that exclude professional liability.

• employee benefit plan

  The benefit package offered by employers to their employees which may include such items as health, dental, accident, disability, and life insurance, as well as other non-insurance items such as vacation and retirement plans. The cost of the package or plan may be paid in its entirety by the employer but is most often subsidized by the employer so that the employee pays only a portion of the cost.

• employee benefit plans liability

  Protects the insured employer against any claims made against him or her by employees or former employees caused by a negligent act, error or omission in the administration of the insured's employee benefit programs. Exposures such as providing incorrect advice concerning an employee's pension plan or failure to enroll employees under a benefit program are covered under this insurance. The coverage is provided either under a separate policy or as an endorsement to the employer's general liability policy.

• Employee Retirement Income Security Act of 1974 (ERISA)

  This act is sometimes called the "pension reform act." One of the purposes of this act is to force employers to protect the assets of the business that have been designated as employee pension benefits. (See fiduciary liability insurance.)

• Employee Stock Ownership Plan (ESOP)

  Employee Stock Ownership Plan (ESOP) Any qualified employee benefit plan that invests in the stock of the employer. ESOP plans can be designed as qualified stock bonus plans, pension plans that invest entirely in the stock of the company and where the employees are the owners of the company, or a hybrid plan that combines some employer stock funding with other funding methods.

• employers liability insurance

  Coverage against the common law liability of an employer for injuries sustained by employees, as distinguished from liability imposed by a workers compensation law.

• employment-related practices liability (ERPL) or (EPL) or

  (EPLI) (EPLI) Impetus for this coverage started with public interest in the allegations made by Anita Hill during the confirmation hearings of Supreme Court Justice Clarence Thomas. Changes in federal and state laws, such as the Americans with Disabilities Act and the Civil Rights Act of 1991, resulted in increased consumer awareness of sexual harassment and discrimination in the workplace. Coverage is available for legal costs to defend claims involving sexual harassment, wrongful termination and discrimination including legal liability for such acts. The coverage is known by various titles. Employment-related practices liability, management risk protection, employers E&O and Americans with Disabilities Act insurance are basically the same coverage. Most policies provide limits ranging from as low as $25,000 per claim up to $1 million. Policies may cover employees as additional insureds.

• employment-related practices liability (ERPL) or employment

  practices liability insurance (EPLI) employment-related practices liability (ERPL) or employment practices liability insurance (EPLI) Impetus for this coverage started with public interest in the allegations made by Anita Hill during the confirmation hearings of Supreme Court Justice Clarence Thomas. Changes in federal and state laws, such as the Americans with Disabilities Act and the Civil Rights Act of 1991, resulted in increased consumer awareness of sexual harassment and discrimination in the workplace. Coverage is available for legal costs to defend claims involving sexual harassment, wrongful termination and discrimination including legal liability for such acts. The coverage is known by various titles. Employment-related practices liability, management risk protection, employers E&O and Americans with Disabilities Act insurance are basically the same coverage. Most policies provide limits ranging from as low as $25,000 per claim up to $1 million. Policies may cover employees as additional insureds.

• endorsement

  A document with language attached to and becoming part of a basic policy for the purpose of modifying the policy, either at inception or mid-term. The term endorsement is usually associated with property and casualty policies while the term rider is normally used with life, accident and health contracts. (See attachment and rider.)

• endorsement in blank

  An assignment method used in both ocean and inland marine insurance in order to be able to allow the insurance coverage on cargo to transfer with the cargo and to protect the various interests involved. To handle this approach, a special type of cargo insurance on a bill of lading may be issued, allowing the insured to sign off on the certificate of insurance, thus assigning the policy to the other interests as needed. (See bill of lading and open cargo policy.)

• endowment policy

  A type of life insurance policy in which the stated benefit or face amount is paid to the insured on the maturity date. Often, this type of policy is used as a retirement account. Should the insured die before the maturity date has been reached, a beneficiary will receive the benefit amount.

• engineer

  An individual in the insurance business who specializes in loss or accident prevention work and also develops rating and underwriting information.

• engineers professional liability policy

  Protects engineers against claims arising out of their professional services caused by error, omission or negligent acts. Most often written as architects and engineers professional liability policy or engineers and architects professional liability policy.

• enrolled actuary

  enrolled actuary Defined benefit pension plans generally require the services of an enrolled actuary to calculate the amount of contribution required and to perform other services required by the plan. Other plans may require the services of an enrolled actuary from time to time. An enrolled actuary is one who meets the standards set by and is enrolled by the federal agency called the Joint Board for the Enrollment of Actuaries.

• ensuing losses

  In commercial property insurance contracts, ensuing losses are further or additional direct damage losses that have been initiated by the original direct damage cause of loss. Different from consequential losses which are indirect property losses such as time element (loss of business income or extra expense) losses.

• Enterprise Risk Management

  enterprise risk management Described in a variety of ways, the term refers to implementing an integrated process for continually assessing risks that are obstacles to an organization's financial and operational goals. Under this concept, risks are viewed in two ways: as threats and as opportunities.

• entertainment insurance

  A category of insurance developed to address the exposures of a wide range of entertainment activities (theatrical events, contests, competitions, special events, etc.). This type of insurance may include liability, property and crime protection. It meets the insurable interests of promoters, entertainment venue property owners, show producers, and so forth. Coverage is also available for loss of income caused by the interruption, cancellation or postponement of a given event.

• entire contract provision

  entire contract provision In life insurance, the entire contract is the policy itself and the application for insurance (if attached). No change is valid unless an endorsement (signed by an executive officer of the company) is attached to the policy. No agent can change any of the policy provisions.

• entitlement, psychology of

  A concept or societal phenomenon expressing the expectation of people that their desires and wants are their legitimate needs which society can and must fulfill. The concept affects insurance when the law expands to permit increasing numbers of plaintiffs to recover from insurers in cases where questionable coverage exists (e.g., when courts appear eager to find that insurance coverage exists if there is any indication that the insured expected such coverage to exist, or when jury awards increase beyond economic justification).

• environmental health and safety

  Refers broadly to industrial or commercial resources dedicated to addressing various environmental and safety concerns such as workplace ergonomics, brownfield development, waste management, wastewater handling, and compliance with related workplace or industry regulations.

• environmental impairment liability insurance

  environmental impairment liability insurance Insurance designed to provide protection for the liability exposures that may result from damage, injury and, in some cases, clean-up costs caused by pollution. This coverage is excluded in the standard CGL, and the attempt has been to make the CGL exclusion as broad or absolute as possible.

• Environmental Protection Agency (EPA)

  A United States government agency charged with the responsibility of protecting and defending the environment for the peoples of the nation. This agency has the responsibility to test, monitor and evaluate possible damage to the environment for all varieties of pollution to ground, water and air. The EPA may set standards of controls, determine responsible parties, assess costs for cleanup and corrective actions, and impose fines and penalties for noncompliance.

• EPA--Environmental Protection Agency

  A United States government agency charged with the responsibility of protecting and defending the environment for the peoples of the nation. This agency has the responsibility to test, monitor and evaluate possible damage to the environment for all varieties of pollution to ground, water and air. The EPA may set standards of controls, determine responsible parties, assess costs for cleanup and corrective actions, and impose fines and penalties for noncompliance.

• epicenter

  The surface location that is directly above the point where an earthquake began and from which movement expands along the fault line.

• EPL--employment-related practices liability (also known as

  ERPL or EPLI) ERPL or EPLI) Impetus for this coverage started with public interest in the allegations made by Anita Hill during the confirmation hearings of Supreme Court Justice Clarence Thomas. Changes in federal and state laws, such as the Americans with Disabilities Act and the Civil Rights Act of 1991, resulted in increased consumer awareness of sexual harassment and discrimination in the workplace. Coverage is available for legal costs to defend claims involving sexual harassment, wrongful termination and discrimination including legal liability for such acts. The coverage is known by various titles. Employment-related practices liability, management risk protection, employers E&O and Americans with Disabilities Act insurance are basically the same coverage. Most policies provide limits ranging from as low as $25,000 per claim up to $1 million. Policies may cover employees as additional insureds.

• EPLI--employment-related practices liability (also known as

  ERPL or EPL) ERPL or EPL) Impetus for this coverage started with public interest in the allegations made by Anita Hill during the confirmation hearings of Supreme Court Justice Clarence Thomas, Changes in federal and state laws, such as the Americans with Disabilities Act and the Civil Rights Act of 1991, and increased consumer awareness of sexual harassment and discrimination in the workplace. Coverage is available for legal costs to defend claims involving sexual harassment, wrongful termination and discrimination including legal liability for such acts. The coverage is known by various titles. Employment-related practices liability, management risk protection, employers E&O and Americans with Disabilities Act insurance are basically the same coverage. Most policies provide limits ranging from as low as $25,000 per claim up to $1 million. Policies may cover employees as additional insureds.

• Equal Employment Opportunity Commission (EEOC)

  Federal commission designed to provide employees with employment opportunities and environments that are free of discrimination based upon such items as race, nationality, religion, gender, physical handicap or enviornments that involve improper working conditions such as sexual harassment. This commission provides protection against such abuses in accordance with federal law. The EEOC provides a method of recourse for employees who feel that they have been unfairly treated in the course of employment or possible employment.

• Equifax

  The insurance end of Equifax is now known as ChoicePoint, Inc. It is an organization widely used by insurance professionals to obtain information on applicants for underwriting purposes such as motor vehicle reports, prior loss or claims history (C.L.U.E.) reports, retail credit reports and even inspection reports. Equifax was formerly known as the Retail Credit Company. (See ChoicePoint, Inc.)

• equipment

  Personal property of a business which is not inventory or supplies; machinery and vehicles may be considered to be "equipment" for insurance purposes.

• equipment breakdown coverage

  Protection against loss from disruption of boilers and machinery by an insured peril: loss to the boiler and machinery itself, damage to other property, business interruption losses, or all three. Also known as machinery breakdown insurance.

• equipment floater insurance

  A form of inland marine insurance, often on an "all-risk" basis, covering various kinds of equipment. (See contractors' equipment floater.)

• equity

  1) When referring to property, it is the owner's actual interest or worth in a property. Computed by subtracting the amount owed on the property from the value of the property. The amount remaining is the equity in the property. 2) When referring to owner's equity in a business, it is the total amount of liabilities for that business, subtracted from total assets. The amount remaining is the owner's equity in the business.

• equity in unearned premium reserve

  An overstatement in the amount shown for this liability in the annual statement of an insurer. The overstatement is approximately 20-40% of an insurer's unearned premium reserve and is caused by statutory accounting requirements: 1) that initial expenses must be recorded immediately and cannot be deferred to track with premiums as they are earned and taken into revenue (as is done for expenses and income for other businesses). 2) that the sum of all premiums representing the unexpired portions of policies on the books must be kept in the reserve. The overstatement is the amount of initial expenses recognized, which will eventually flow to the surplus account with the passage of time. (See unearned premium reserve.)

• erection all risks

  A form of comprehensive coverage that focuses on loss to plants and machinery under construction (rather than buildings).

• ergonomics

  The applied science involving the factors and interaction of the workplace environment on its workers. Although it is most often associated with automation in the workplace, this science covers the cause and effect of any workplace environment. (See human factors engineering.)

• ergonomists

  ergonomists An expert, usually a consultant, in the study (some argue science) of ergonomics.

• ERISA--Employee Retirement Income Security Act of 1974

  This act is sometimes called the "pension reform act." One of the purposes of this act is to force employers to protect the assets of the business that have been designated as employee pension benefits. (See fiduciary liability insurance.)

• ERP--extended reporting period

  In "claims-made" liability policies, only those claims that occur after the retroactive date and are reported or filed against the insured during the policy period, are covered by the policy. The ERP, or tail, is an endorsement available to extend the reporting period for the filing of a claim to give additional time in order to be considered covered.

• ERPL--employment-related practices liability (also known as

  EPL or EPLI) EPL or EPLI) Impetus for this coverage started with public interest in the confirmation hearings of Supreme Court Justice Clarence Thomas and his alleged relationship with a woman coworker, other changes in federal and state laws, such as the Americans with Disabilities Act and the Civil Rights Act of 1991, and new consumer awareness of the practice of sexual harassment and discrimination in business. Coverage previously has been available for legal costs to defend claims against sexual harassment, wrongful termination and discrimination, but only recently has any policy covered actual legal liability for such acts. The coverage is known by various titles through a few insurers. Employment-related practices liability, management risk protection, employers E&O and Americans with Disabilities Act insurance are basically one and the same coverage. Most policies provide varying limits ranging from as low as $25,000 per claim up to $1 million. Policies may cover employees as additional insureds.

• errors and omissions clause

  Obligatory reinsurance treaties contain a provision to clarify that because of the nature of the treaty, should an error or omission occur in the process of recording or describing of the ceded risk, and if the risk is otherwise covered by the treaty, the reinsurer will still respond despite the error or omission.

• errors and omissions insurance

  1) A form of professional liability insurance which provides coverage for mistakes made by a person or persons in a profession not involved with the human body, such as lawyers, architects, engineers, or for mistakes made in a service business, such as insurance, real estate, and others. (See nonrecording chattel mortgage policy.) 2) A form of coverage for financial institutions protecting against loss to lending institutions which fail to effect insurance coverage. (See malpractice and medical malpractice.)

• escape clause

  A provision in an agreement that, under certain conditions, releases a party from its obligation to perform.

• ESI

  (See Electronically Stored Information.)

• ESOP employee stock ownership plan

  ESOP employee stock ownership plan Any qualified employee benefit plan that invests in the stock of the employer. ESOP plans can be designed as qualified stock bonus plans, pension plans that invest entirely in the stock of the company and where the employees are the owners of the company, or a hybrid plan that combines some employer stock funding with other funding methods.

• estate plan

  The plan for the disposition of a person's assets, including property, at the time of death. Estate plans include contingencies for the handling of property in the event of the incompetence or some type of disability of the estate owner. A will is one part of an estate plan.

• estoppel

  The prevention of one party from asserting rights that might otherwise have existed, by reason of that party's inequitable conduct. Waiver is a term sometimes used interchangeably.

• event data recorder

  A type of "black box" for personal and commercial vehicles. Depending upon the type of device, it can record and store various information regarding vehicle operation, particularly key information that happened during a collision. Data typically gathered is braking information, time, vehicle speed, operation of vehicle?s safety equipment, etc.

• event loss trigger

  event loss trigger Where a given event's date is deemed to be the loss date for all losses or claims that are related to that event, ignoring whether an applicable policy was written on a claims-made or an occurrence basis.

• eviction destruction

  A fairly recent trend, it describes homeowners who, while abandoning a home due to eviction/foreclosure, commit serious acts of vandalism to the residence's interior and/or exterior as an act of retaliation, anger or frustration (typically against the mortgage holder).

• evidence and duties provision

  A condition in most insurance policies requiring the insured to cooperate with the insurer in any (and all) investigation, settlement or defense of a claim or suit.

• evidence of insurability

  In life and health policies, a statement on the application that provides proof of an individual's occupation and/or physical condition. Used to help determine that individual's acceptability for insurance.

• ex gratia payment

  A payment made even though the company is not technically liable under the terms of its policy, usually made in order to avoid incurring greater legal expenses in defending a claim.

• examination

  An inspection of an insurance company or organization by a representative of a state insurance department to determine whether the laws of that state have been obeyed.

• examination of records clause

  A policy provision that gives an insurance company the right to examine (audit) a policy against relevant policyholder records to insure that the proper premium has been paid (under premiums that are subject to audit).

• examination under oath

  Securing testimony after being duly sworn that such information supplied is true to the best knowledge of the testifier, under penalty of perjury or voided insurance for false statements.

• examiner

  A representative or employee of a state insurance department to whom is delegated the task of verifying a company's records and procedures to determine that the law has been observed.

• exceptions

  Circumstances, causes of loss or property types that are excepted from either the coverage provided or from the exclusion listed. Example: There is no coverage for pollution losses except those exposures that result from a hostile fire.

• excess and surplus insurance

  excess and surplus insurance An amount of protection which bears all or a portion of a loss after the loss exceeds an agreed amount. This amount may or may not be insured elsewhere by the company issuing the policy. Excess policies are not subject to the basic principle of contribution with non-excess policies, although they may contribute or share the loss with other excess policies.

• excess clause

  An insurance policy provision that requires an insurer to respond to a loss only after any other source of coverage has been exhausted. (Also see pro rata clause and escape clause.)

• excess insurance

  An amount of protection which bears all or a portion of a loss after the loss exceeds an agreed amount. This amount may or may not be insured elsewhere by the company issuing the policy. Excess policies are not subject to the basic principle of contribution with non-excess policies, although they may contribute or share the loss with other excess policies.

• excess judgment loss

  excess judgment loss A judgment levied against an insurer due to a court determining that it acted in bad faith. Such judgments exceed any written limit of liability that ordinarily would apply to the loss.

• excess liability insurance

  Liability insurance designed to provide an extra layer of coverage above the primary layer. The excess insurance does not respond, however, until the limits of liability in the primary layer have been exhausted. Because of the method of response, it is often much less costly than the primary layer, per $1,000,000 of coverage. The excess layer provides not only higher limits, but catastrophic protection for very large losses.

• excess line

  A line of insurance provided by insurers not licensed in the states where the risks are located and placed under the surplus lines laws of the various states. Before such placements can be made through specially licensed surplus lines agents and brokers, state laws generally require evidence that placements could not readily be made in licensed insurers-- or broadly referred to as being all lines of insurance placed with nonadmitted insurers. (See surplus line.)

• excess of loss ratio insurance or reinsurance

  A company wishing to protect itself in the event its net loss ratio for a given year rises above a certain percentage may buy reinsurance which pays in excess of that figure up to a higher agreed percentage, beyond which the company is once more liable. In short, a plan which takes the sting out of an above-average net loss ratio. (See stop loss reinsurance.)

• excess of loss reinsurance

  A company wishing to protect itself in the event its net loss ratio for a given year rises above a certain percentage may buy reinsurance which pays in excess of that figure up to a higher agreed percentage, beyond which the company is once more liable. In short, a plan which takes the sting out of an above-average net loss ratio. (See stop loss reinsurance.)

• excess property insurance

  Insurance protection for large property risks that provides a layer of coverage above the primary layer. The primary policy will cover most property losses while the excess layer of coverage does not respond until the primary layer has exhausted all applicable limits. The primary layer acts much the same as a very large deductible.

• excess verdict

  See excess judgment loss.

• exchange

  A place where goods or services are traded. Also known as insurance exchanges.

• exclusion

  The peril, hazard, condition or circumstance that is not covered by the insurance and is so stated in the policy. A clause in an insurance policy which specifies what is excluded from the policy's coverage.

• exclusive agent

  An agent who, by contract, represents only one company and its affiliates. Sometimes called a captive agent. (See agent, independent agent and insurance agent.)

• exculpatory clause

  Any provision within a contract or agreement that is designed to relieve a party from their liability for any responsibility, obligation or duty. Generally, wording meant to shield parties against their negligence, particularly fiduciaries or trustees is voided as being against public policy.

• exculpatory statute

  In a community property state, both spouses jointly own all property acquired during the marriage. However, a life insurance policy (property) may be established by one spouse without the other knowing, with a beneficiary who may not be the spouse. An exculpatory statute allows the insurer to pay the proceeds from the policy as the policy directs without being obligated to also pay the surviving spouse what should have been his/hers as it relates to their community property.

• executor

  A person or a corporation named in a will to administer the decedent's estate. (See administrator.)

• executrix

  A female executor--the person named in a will to administer the decedent's estate. (See administrator.)

• exemplary damages

  Damages awarded separately and in addition to compensatory damages, usually because of malicious or wanton misconduct, to make an example of the wrongdoer and, possibly, as a deterrent to others. Sometimes referred to as punitive damages when intended to punish the actions of the wrongdoer. (See punitive damages.)

• exhausted limits

  Refers to a situation where the total amount of payments made for a given loss or provided during a policy period relieves the insurance company from its obligation to provide further coverage. The payment amounts are defined by the insurance policy's stated per-loss and aggregate coverage limits.

• expediting charges

  Money spent to speed up the repair or replacement of destroyed or damaged property. Important in the adjustment of time element losses, such as those under business interruption forms.

• expediting expenses

  expediting expenses This coverage applies to the extra cost the insured incurs to make temporary repairs and expedite (speed up) the permanent repairs or replacement of the damaged property.

• expense constant

  A flat premium charge made on small workers compensation policies based upon the fact that the expense factor on such risks is inadequate to cover the cost of issuing and handling the policy.

• expense loading

  When determining the rate per exposure unit of a risk, the expense loading is the amount that is added to the base rate to handle the cost of administrative expenses experienced by insurers.

• expense ratio

  Expenses incurred, expressed as a percentage of net written premiums.

• experience

  Classified statistics of claims and losses related to insurance, of outgo or of income, actual or estimated. (See actuarial gains and losses.)

• experience rating

  A form of individual risk rating which takes into consideration the loss experience of the particular risk as a credit or a debit to the manual rate for the insured's classification. As the size and number of exposure units increase (e.g., a multiple location risk), more credibility is given to the insured's own experience. (See merit rating.)

• expert systems

  Computer software programs that aid the underwriting decision making process. These systems ask for the information necessary to make an underwriting decision and ensure that no information is overlooked.

• expiration

  1) The cessation of insurance when the time period for which it was written has ended. 2) The date on which insurance expires. 3) The detailed policy records of customers served which are owned by independent insurance agents. (See ownership of expirations and American agency system.)

• expiration card

  A record of an expiration containing all important data relating to a particular insurance policy.

• expiration notice

  A notice sent (by an insurer to an agent or broker, by an agent to a client, or by an insurer to a policyholder) to the effect that a policy is about to expire on a given date.

• explosion

  1) A bursting of forces, usually from pressure within. 2) In general, a rupture of a pressure vessel of some kind due to too much internal pressure, accompanied by a loud noise. Courts, however, have interpreted it in many ways.

• exposure

  1) Synonymous with risk: chance of loss by fire, radiation, accident, etc. 2) The danger of loss (particularly by fire) arising from what happens to another risk close by. 3) The sum total of values which, if damaged or destroyed, would cause loss under a policy, i.e., the value of everything a policy insures. 4) A measure of the rating units or premium basis of a risk, e.g., payroll or number of automobiles. 5) A unit of loss potential (e.g., a life, a house, an automobile, a ship, a package in shipment, an acre of growing crops, a plate glass window, a fur coat) in which case the term "exposure unit" is used.

• exposure rating

  A method of rating a per-risk excess reinsurance cover where the rate is determined by the number of policies and limits of those policies which actually expose the cover being rated to loss. Generally requires a detailed profile of the policies in force for the reinsured company. This method is often used for rating upper layers that have not shown sufficient credible past experience to justify using a rate based on burning cost.

• exposure theory

  An event is recognized as an insurable loss (or occurrence) when the covered entity or property was first exposed to the source of loss that creates damage or injury. (See continuous trigger theory, injury-in-fact theory and manifestation theory.)

• exposure unit

  1) During the premium computation phase of insurance issuance, the exposure unit is the unit of measure that is used to associate the premium charged with some credible factor that relates directly to the exposure covered by the insurance policy. Examples are: per $100 of property value, per square foot area of a building, per $100 or $1,000 of payroll, admissions or gross receipts. 2) The property or location covered by the insurance policy.

• express authority

  Is derived from the specific authorizations given by the company to the agent in their agreement, e.g. the agent manual says that an agent can bind a homeowners policy if the value on the dwelling is not more than $250,000. (See also implied authority.)

• extended coverage insurance

  Protection against loss or damage caused by windstorm, hail, smoke, explosion, riot, civil commotion, vehicles, and aircraft. Written in conjunction with a fire policy either as part of the basic contract or by endorsement.

• extended health insurance

  Health insurance coverages available for retired persons to cover the surplus after retirement health insurance and Medicare benefits are exhausted.

• extended period of indemnity

  This endorsement option is available only for business income insurance coverage and may be purchased to provide additional income protection while a risk gets back on its feet and re-establishes a customer base, after that risk had been closed by a covered loss and after it had resumed operations, but was still not making the income it had prior to the direct physical loss.

• extended reporting period (ERP)

  In "claims-made" liability policies, only those claims that occur after the retroactive date and are reported or filed against the insured during the policy period, are covered by the policy. The ERP, or tail, is an endorsement available to extend the reporting period for the filing of a claim to give additional time in order to be considered covered.

• extended term life insurance

  An option available in some whole life insurance policies, allowing the insured to use the cash value of the policy to purchase additional term life insurance. The insured uses the whole life cash value to pay the premiums of the term coverage until the whole life cash value is exhausted.

• Exterior Insulation and Finish Systems (EIFS)

  Refers to exterior wall systems typically consisting of insulation board attached to a home?s exterior, covered by a base coat, a mesh reinforcement and a rigid finish coat. The system?s installation is promoted as being more energy efficient, reducing infiltration by elements.

• exterminators liability insurance

  Liability insurance designed specifically to cover the exposures and hazards faced by exterminators of all types of insects, pests, and rodents, and any chemical applications those operations may use.

• extortion insurance

  A type of crime coverage designed to protect any type of operation from loss of money, property, stock, or other tangible assets that are extorted during a threat of harm to persons or property.

• extra contractual obligations (ECO)

  Where an insurer is judged to owe coverage that falls outside of the actual policy provisions. Courts impose such obligations when determining that an insurer dealt unfairly or in bad faith with an insured (or beneficiary) while handling a claim.

• extra expense insurance

  Reimbursement for additional expenses incurred because of an insured loss. Written either as a separate policy or as an endorsement.

• extra percentage tables

  Life and health insurance tables that have been developed to assist in the computation of premium charges. These tables apply to the additional charges that need to be factored into the premiums based on the standard mortality or morbidity tables for certain health conditions, the most common being cancer or AIDS. The term "extra percentage table" is used because the calculation is normally expressed in terms of an additional percent to be added onto the base.
• Back to Top

• F.I.A.--full interest admitted

  An agreement in a policy of marine insurance that the named insured's ownership or right to collect the proceeds of the insurance is agreed to at the inception of risk without further proof of an insurable interest at time of loss.

• face

  The first page of an insurance policy, normally the Declarations.

• face amount

  As used in life insurance, the amount stated on the first page of the policy that will be paid at maturity, upon death of the insured or expiration of the endowment period. Additional benefits may be provided by riders or dividends. Also known as face value.

• face value

  As used in life insurance, the amount stated on the first page of the policy that will be paid at maturity, upon death of the insured or expiration of the endowment period. Additional benefits may be provided by riders or dividends. Also known as face amount.

• facility of payment clause

  A provision found in group life and industrial insurance policies that allows the insurer to pay benefits to persons or parties other than the insured or a beneficiary, under certain specified conditions. This clause was designed to assist in benefit payments when there is lack of clarity as to the actual beneficiary, and thus to prevent potential litigation against the insurer.

• factor

  In rating a property-casualty insurance policy, a factor is a multiplicative item. The base rate may be 1.00 with an increase factor of 10% applied because of a higher than expected exposure to theft. Thus, the new rate would be $1.10.

• Factory Insurance Association

  Now called Industrial Risk Insurers, this is a consortium of major stock property and casualty insurers formed to write large, highly protected risks and to provide fire laboratory facilities and engineering services. The organization was formed in 1975 by the merger of the Factory Insurance Association and the Oil Insurance Association. Headquarters: Hartford, CT.

• factory mutuals

  A group of direct-writing mutual insurance companies, independently owned and operated, which underwrite highly protected risks of substantial value on a reciprocal reinsurance basis. The central organization in New England maintains extensive fire laboratory facilities and provides its members with engineering services.

• facultative certificate

  The formal document between the ceding company and the reinsurer with respect to the reinsurance cession for facultative reinsurance.

• facultative reinsurance

  Reinsurance effected item by item and accepted or declined by the reinsuring company after scrutiny, as opposed to reinsurance effected by treaty. The word facultative connotes that both the primary insurer and the reinsurer have the faculty or option of accepting or rejecting the individual submission, as distinguished from the preset obligation to cede and accept already agreed upon by the parties in treaty reinsurance.

• facultative treaty

  A contract between a ceding company and a reinsurer with regard to the handling of the placement of individual risk. In a facultative treaty there is no automatic requirement to cede by the ceding company, nor is there a requirement to accept a risk by the reinsurer. Each may be negotiated individually.

• Fair Credit Reporting Act (FCRA)

  Became law in 1971. The purpose of the law is to protect consumers against the circulation of inaccurate or obsolete information and to ensure that consumer reporting agencies are fair and equitable in their treatment of customers. The Federal Trade Commission administers the law.

• Fair Plan

  A program to provide "fair access to insurance requirements" for property owners who experience difficulty in buying insurance on property located in blighted or deteriorating urban areas. Basically the plan assures a property owner of physical inspection of property and a promise to provide fire and allied lines insurance if the property is adequately maintained and if recommended improvements necessary to make the property insurable have been made. Many of these plans have been extended to cover statewide in those states adopting them.

• fair rental value

  Used in Coverage D-Loss of Use homeowners policy, this is the amount of rent (less any discontinued expenses) that the insured would have received for the residence, or any part of the residence rented to another individual for residential purposes, if the residence had not been damaged.

• fallen building clause

  A provision in some property insurance policies that voids coverage should a significant portion of the insured building collapse from causes of loss other than those covered in the insurance policy. For example, if the policy covers fire or explosion, and the building collapses as a result of flood, the fire coverage becomes void.

• false arrest

  Arrest or detention which involves the illegal restraint of an individual?s liberty; it is considered to be a type of personal injury.

• family automobile policy

  A predecessor personal automobile policy insuring liability, medical expense, physical damage and uninsured motorists, available only for individually owned, private passenger cars and some small trucks. It is somewhat similar to the combination automobile policy but provides broader coverage. This type of policy has been replaced by the personal auto policy, PAP, in most state jurisdictions.

• family deductible

  A health insurance policy deductible that was designed to address the expenses for services of the entire family unit rather than application to each person.

• family health plan

  Health insurance protection designed to cover the family unit as a whole instead of on a per-person basis.

• family income life insurance

  A type of life insurance program with both whole life and term life insurance products. Should the insured die before a specified date in the policy, benefits are paid in the form of monthly income. After that date, a flat amount is paid.

• family life policy

  A type of life insurance program with both whole life and term life insurance products in one policy, designed to cover all the members of a family unit.

• farmers comprehensive personal liability insurance

  Similar to comprehensive personal liability coverage, but amended to take care of the special accident risks found around the farm. A legal liability or third-party policy, i.e., it protects the farmer against bodily injury or property damage claims from others, including at times claims from farm employees.

• farmers mutual insurers

  An affiliation of small, domestic, mutual insurance companies that were originally formed by farmers to offer insurance coverage for farm property and farm-related causes of loss such as hail and crop, as well as other traditional coverages such as fire and wind.

• farmowners?ranchowners policy (FO-RO)

  farmowners-ranchowners policy (FO-RO) A package policy for farming and ranching risks which can be described as a homeowners policy adapted for farm and ranch properties. Basically, the policy provides property and liability insurance to which may be added appropriate additional coverages such as animal collision, employers liability, custom farming, etc.

• FAS--free along side

  A marine insurance term indicating that when goods are shipped FAS, the shipper agrees to assume all costs and liabilities for loss until the goods are safely on the pier or dock alongside the vessel.

• FASB--Financial Accounting Standards Board

  National board set up to review and administer accounting standards.

• fault (earthquake)

  The area of surface that is displaced during an earthquake which can be scarcely noticeable or yards in width.

• Fault Liability System

  (See tort liability.)

• faulty workmanship exclusion

  Most liability policies contain this property damage exclusion for products-completed operations losses, although it is now more often referred to as the work performed exclusion. The intent of this exclusion is to make sure that insureds are maintaining acceptable standards of performance and are not using the insurance contract to recover for poor training or poor business practices by the insured. Coverage does not exist for property losses to work performed or as a result of the work performed by the insured.

• FC&S

  Fire, Casualty and Surety Bulletins; a reference manual published by National Underwriter (owned by Summit Media) that analyzes property and casualty coverage forms and endorsements. Headquarters: Erlanger, KY

• FC&S--free of capture and seizure

  A clause which exempts the marine insurance company from paying losses caused by capture or seizure by enemies of a country.

• FCAS

  Fellow Casualty Actuarial Society designation sponsored by the Casualty Actuarial Society. Headquarters: Arlington, VA.

• FCIA--Foreign Credit Insurance Association

  A group of insurance companies cooperating with the Export-Import Bank of Washington (Exim-bank) to provide foreign credit insurance for American exporters, thus assisting United States business to become more competitive in foreign trade. Coverage provides for credit and political risks. Headquarters: New York, NY.

• FCLA

  Fraud Claim Law Associate designation sponsored by the American Educational Institute. Headquarters: Basking Ridge, NJ.

• Federal Crime Insurance Program

  This discontinued program was administered by the Federal Insurance Administration to provide limited burglary and robbery coverage for property owners who experienced difficulty in buying insurance on property located in blighted or deteriorating urban areas. It was successful in using federal reinsurance to encourage insurance carriers to continue writing in distressed areas and was phased out in the 1980s. It has gained new interest as a roadmap to move terrorism coverage from a governmental protected program to a fully private coverage.

• Federal Employees' Group Life Insurance Policy (FEGLI)

  Group life insurance policies offered to federal employees. Premiums are paid by insureds through payroll (or benefits) deductions.

• Federal Insurance Administration

  A government office (part of the Department of Housing and Urban Development) handling insurance programs such as the Federal Riot and Civil Commotion Reinsurance Contract (which backs up policies provided by FAIR Plans in force in a number of states), Federal Crime Insurance and the Federal Flood Insurance Program.

• federal risk retention act

  An insurance company organized by a group of businesses or institutions in the same line of business to provide liability insurance for the owners or organizers. As permitted by federal legislation passed in 1986, such a group is eligible to provide insurance for its members in any state after being licensed in any one state.

• Federal Tort Claims Act

  Historically, the sovereign, or government, cannot be sued without its consent. The Federal Tort Claims Act altered this principle and allows persons to sue the United States for personal injury or damage to property under circumstances in which the United States, if a private individual, would be liable for such injury or damage.

• fee for service

  In health insurance, it is the type of coverage where the insurer pays the specified portion of the charges when a patient goes to the physician, service or hospital of choice. Often considered to be the "traditional" form of health insurance coverage, fee for service protection is rivaled by HMOs, PPOs and other similar types of plans.

• FEGLI--Federal Employees' Group Life Insurance Policy

  Group life insurance policies offered to federal employees. Premiums are paid by insureds through payroll (or benefits) deductions.

• Fellow of the Institute of Actuaries (FIA)

  A degree or title held by one who has passed examinations and has been admitted to the Institute of Actuaries in England.

• fellow servant or employee defense

  A common law defense that is generally used in cases that are related to work (one employee injures another).

• FFD

  (See Full Family Direct.)

• FIA--Fellow of the Institute of Actuaries

  A degree or title held by one who has passed examinations and has been admitted to the Institute of Actuaries in England.

• FIC

  (See Financially Impaired Company.)

• fidelity bond

  An insurance policy which reimburses an employer for losses resulting from dishonest acts of employees. May be written to cover specific employees or all employees, using either a schedule or blanket basis, or by scheduling positions versus named persons.

• fiduciary

  A person who occupies a position of trust, especially one who manages the affairs of another. For example, the guardian of a minor is a fiduciary.

• fiduciary bond

  fiduciary bond A fidelity bond that protects a dependent party (such as a legal estate) against the dishonest acts of a fiduciary.

• fiduciary liability insurance

  Protection for those who administer pension and welfare funds, profit-sharing and other employee benefit programs against loss for errors and omissions by the administrator. The need for this coverage was created by the Employee Retirement Income Security Act (ERISA) of 1974. Also known as pension trust liability insurance. (See Employee Retirement Income Security Act of 1974 (ERISA).)

• field

  Territory away from the office.

• field underwriter

  In property-casualty insurance a field underwriter may be a company-employed underwriter who works out of a branch or in-home office and who spends a considerable amount of time in the field with agents, prospective insureds and policyholders. A field underwriter in life insurance is often synonymous with an agent.

• fifth dividend option

  The additional term insurance nonforfeiture option found in life insurance. (See also nonforfeiture benefit or nonforfeiture value.)

• file-and-use law

  The state law under which insurance rates must be filed with the state insurance department; they then can be used immediately.

• film coverage insurance

  An inland marine coverage providing protection for broad or "all-risk" causes of loss to exposed motion picture, magnetic or video tapes, which also include sound tracks and recordings.

• final average benefit formula

  Used in pension plans. Unlike career average benefit formulas that average earnings over the entire employment career in the plan, the final average formula looks at the last few years of earnings: i.e., the formula will use the average of the three highest earning years out of the last five to calculate the benefit. This formula is often thought to encourage workers to work just as hard before retirement as they did during their earlier working years.

• final rate

  The price per exposure unit which is determined by adjusting the prospective loss costs for expenses, profits and contingencies.

• financed premium

  Insurance premiums that are financed, either by an outside financial institution or, in some cases, through a financing agreement arranged with the insurer, which involves interest and collateral. This is not the same as an installment premium whereby the insurer allows the insured to pay the earned premium as it becomes due on an installment basis.

• Financial Accounting Standards Board (FASB)

  National board set up to review and administer accounting standards.

• financial guaranty

  A guaranty that a sum of money will be paid. A form of bond.

• financial planner

  An entity that offers direction and advice regarding finances, investments, retirement income and various other aspects in handling the overall finances of the individual.

• financial responsibility clause

  Language in a policy describing coverage required by any financial responsibility law.

• financial responsibility law

  A statute (in force in most states) which requires a motorist to provide evidence of the ability to pay for negligence in causing losses to others from the operation of a motor vehicle. Typically, the evidence furnished is an insurance policy, although most states also permit a bond or cash deposit to be used in lieu of a policy.

• financial underwriting

  Financial underwriting is when an insurer uses the investigation and evaluation of the financial data on a risk under consideration in order to determine the acceptability of that risk for insurance coverage. Financial indicators, such as profitability and liquidity provide the insurer with information on the stability and quality of management of the potential insured.

• financially impaired company

  This term refers to an insurer that may not be insolvent, but may suffer from difficulties that cause insurance regulators to begin action. A common triggering event may be evidence that the insurer has inadequate capital (surplus).

• fine arts insurance

  A personal lines coverage on works of arts, usually written by inland marine underwriters on an "all-risk" and a "valued" basis. The commercial lines equivalent is most often covered under a commercial articles floater which combines not only fine arts coverage, but also camera and musical instruments in one coverage form.

• finished stock

  Merchandise of a manufacturer which has been completely processed and is ready for sale.

• finite risk reinsurance

  A form or reinsurance that takes into account an insured's timing risk (regarding payments of losses) and the time value of money, and addresses them over a multi-year agreement.

• fire

  Combustion manifested in light, flame and heat for useful purposes (known as friendly fire), or for destructive purposes (called hostile fire). Insurance covers loss only from the latter.

• fire clause

  A condition in a lease which provides that in case fire should damage the property to some agreed extent, certain agreed modifications in the lease automatically take place.

• fire department service clause

  Sometimes when property is located outside the boundaries of a city or town, the fire department will agree to come to a fire, but a charge is made for it. This clause extends the policy to pay such charges in the event of loss.

• fire insurance

  1) Covers losses caused by fire, lightning and removal of insured property from the premises to avoid further loss. All resultant damage such as that done by water and smoke is also covered. Usually supplemented by extended coverage. Currently, this insurance is referred to as property insurance. 2) A type or line of insurance, as opposed to marine, casualty or fidelity bonding. The term fire insurance is now referred to as property insurance when denoting a line of insurance.

• fire insurance company

  An insurance company chartered and licensed under the fire insurance provisions of the laws of its home state, as opposed to one under the casualty section. Since the term fire insurance has been replaced in many state laws with property insurance, its legal use is limited; but fire insurance is still applied in a colloquial sense to describe those companies engaged principally in the property insurance business.

• fire mark

  fire mark A small sign or a medallion placed on a building by the company that provided fire insurance. It is commonly believed that the signs were proof to private fire departments that such buildings were insured. Therefore, they would be paid if they handled the fire call. It is more likely that such signs were merely an early form of advertising.

• fire marshal

  A public official involved in fire prevention and investigation of fires, particularly where arson is suspected.

• fire prevention

  Loss control methods used to prevent fire from occurring.

• fire protection

  The combination of loss control methods to prevent fire from occurring, to detect a fire that has occurred as quickly as possible and, should fire occur, to extinguish it immediately while reducing the severity of the potential injury to persons or damage to property.

• Fire Protection Class

  A 10-category ranking or schedule of public fire protection of cities and towns established in 1916. The grading is currently maintained by the Insurance Services Office for use in making fire insurance rates and to encourage local governments to maintain better fire fighting equipment and personnel. A city or town is ranked in one of the categories by receiving deficiency points for failing to meet established standards under each of these major headings: water supply, fire department, fire service communications, fire safety control, climate, and divergence between fire department and water supply. Fire Protection Class 1 is the best class (a city or town having fewer than 501 points), and Fire Protection Class 10 is the worst (more than 4,500 points). Also known as town class or town grading.

• fire resistive

  The construction of a building with steel and concrete or other noncombustible materials designed to prevent the frequency of fire or to reduce its effect once started. A better term than fireproof, since few materials are not subject to damage or destruction by fire. (See fireproof.)

• fire retardant

  Chemical treatments applied to a variety of items, such as clothing, furniture, carpets, and curtains in order to prevent or reduce the possibility of the item's catching fire and burning.

• fire wall

  A wall designed to prevent the spread of a hostile fire. (See division wall.)

• fireproof

  The construction of a building with steel and concrete or other noncombustible materials designed to prevent the frequency of fire or to reduce its effect once started. (See fire resistive.)

• first class mail insurance

  All-risk coverage on bonds, stock certificates and other securities shipped first class mail by banks, trust companies, investment corporations, and other firms engaged in security transactions.

• first dollar coverage

  Insurance coverages or benefits that pay the entire covered amount without subtraction of or use of a deductible.

• first loss insurance

  An insurance policy which is called upon to pay a loss before others covering the same loss, or a contract written to cover only the insured's expected loss during the policy period with no other insurance in force.

• first loss retention

  first loss retention The limit or amount at which reinsurance attaches or comes into play. The limit or amount below that point is retained by the ceding company.

• first named insured

  The party named first in the Declarations of an insurance policy. The first named insured has become significant in commercial insurance because the terms and conditions of the policy itself detail that many of the duties and obligations to the contract must be performed by, or are the responsibility of, the first named insured versus any or all named insureds. Additionally, the insurer has obligations, such as proper notice of cancellation or nonrenewal and return premium refund, that need go only to the first named insured.

• first party benefits

  Any insurance payments that are received by policyholders (and others eligible as insureds) under a policy in the event of injury, regardless of fault. The benefits may include medical expenses, loss of income, funeral and death benefits. This may also be called personal injury protection.

• first party insurance

  Insurance that pays for loss to an insured who is considered the first party to an insurance contract. The second party is the insurance company and other persons claiming injury are called third parties.

• first surplus (reinsurance) treaty

  As a reinsurance term, first surplus means the amount of liability assumed on a certain risk, which is in addition to the amount which the primary company cares to hold for its net account. A treaty or contract which reinsures this "surplus" on a pro rata basis is called a first surplus treaty. Since there usually is a limit on the amount which may be ceded, there may be second or third surplus treaties to permit the writing of larger direct lines.

• FISCAA (Flood Insurance Servicing Companies Association of America, Inc.)

  FISCAA (Flood Insurance Servicing Companies Association of America, Inc.) An organization of insurers who provide flood insurance under the National Flood Insurance Program's Write Your Own (WYO) program. Its goal is to educate the public about the protection available from the NFIP. It was established in 1992. Headquarters: Orlando, FL.

• fitness for a particular purpose

  A product warranty affirming not only the fitness of the product for its intended use, but also for any known use the purchaser has expressed to the seller or manufacturer and for which that seller or manufacturer has affirmed the fitness for the specified use.

• fixed amount option

  A life insurance option which allows the beneficiary to select to receive the proceeds in monthly installments of fixed amounts instead of a lump sum. The remaining principal will continue to earn interest until such time as the payouts exhaust both the principal and the interest earned.

• fixed annuity

  A life insurance annuity providing guaranteed or fixed benefit payments for the term of the annuity.

• fixed benefit

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

• fixed charges

  1) Costs of transacting business, e.g., rents, which are incurred regardless of the amount of business transacted. 2) A term used in business interruption insurance.

• fixed period option

  A life insurance benefit option that allows the beneficiary to receive the settlement in periodic payments for a fixed period of time or specified number of years instead of a lump sum. The unused portion of the principal sum will continue to earn interest during that period of time.

• fixtures

  Something attached to real estate which is removable. (See furniture and fixtures.)

• flat benefit

  A life insurance benefit in which the amount does not fluctuate.

• flat cancellation

  The cancellation of a policy as of the time it attached, with all of the premium refunded to the policyholder.

• flat commission

  A fee for selling and servicing insurance, payable to an agent or broker, which is the same percentage of the premium regardless of the size of the premium. (See graded commission.)

• flat deductible

  A flat deductible is a set amount that will be subtracted from each claim or loss, as indicated in the policy, for that coverage. It does not vary with each loss.

• flat extra premium method

  In life insurance, if a person does not meet health or other qualifications, insurance can be declined or rated. The flat extra premium method of rating the life insurance policy charges an extra flat dollar amount per $1,000 of policy value.

• flat rate

  1) In reinsurance, the rate agreed upon between the reinsurer and ceding company to be charged the insured for the coverage, which is a final rate and not adjusted for loss experience, size of the risk, or any other credits or debits. 2) A rate set for a coverage that remains unchanged throughout the policy period, even if the insured suffers unexpected losses. 3) A property insurance rate used when no coinsurance applies to the policy.

• fleet

  1) A group of ships, aircraft, or automobiles under common ownership or insured as if they were. 2) A group of companies under common ownership or management.

• fleet policy

  In automobile insurance, coverage for a number of cars for one owner. In marine insurance, coverage for a number of ships for one owner or manager.

• flex rating law

  The state law under which prior approval is required only if the new rates exceed a certain percentage above (and sometimes below) the rates previously filed.

• flexible benefit plan

  Benefit plans offered by employers to employees that allow the employee some choices in the benefits, coverages, and limits selected. For example, a health insurance package that allows the employee the option to choose between vision benefits or dental benefits or to select both if the employee wishes to bear the burden of the additional costs. Other options are higher or lower deductibles, coinsurance, whether or not to make the benefits pretax, and so forth. (See flexible spending accounts.)

• flexible premium life insurance

  A variable life insurance where the insured has the flexibility to choose the amount and timing of the premium payments, as well as the ability to change those options after inception.

• flexible spending accounts

  Amounts set aside by employees or employers to provide a choice of taxable or tax?free benefits to employees at their option, as allowed under Section 125 of the Internal Revenue Code, for health expenses otherwise not covered by insurance, such as dental care, deductibles, co-payments, vision and orthodontic care, and legal expenses. (See flexible benefit plan.)

• FLMI

  Fellow, Life Management Institute designation sponsored by the Life Office Management Association. Headquarters: Atlanta, GA.

• floater

  A policy which covers property at many locations, even worldwide and in the course of transit, i.e., the protection "floats around" with the objects insured.

• flood

  Overflow of water from its natural boundaries. More specifically defined by the National Flood Act of 1968 as "a general and temporary condition of partial or complete inundation of normally dry land areas from the overflow of inland or tidal waters, or the unusual and rapid accumulation or runoff of surface waters from any source."

• flood insurance

  Coverage against damage done by the rising or overflowing of bodies of water.

• Flood Insurance Rate Map

  A map published by the Federal Insurance Administration to plot the layout of communities in flood prone areas, based upon comprehensive study and used as the actuarial basis for the promulgation of flood rates. Once a community has been charted and the map completed, that community becomes eligible for the National Flood Insurance Program.

• Flood Insurance Servicing Companies Association of America, Inc. (FISCAA)

  Flood Insurance Servicing Companies Association of America, Inc. (FISCAA) An organization of insurers that provide flood insurance under the National Flood Insurance Program's Write Your Own (WYO) program. Its goal is to educate the public about the protection available from the NFIP. It was established in 1992. Headquarters: Orlando, FL.

• floor plan insurance

  Coverage acquired by the financier, whether finance company or bank, to protect either its interest alone or its joint interest with the merchant, in which a special form is used. Merchants of high valued articles, such as automobiles and expensive household equipment such as refrigerators, often borrow money from finance companies or banks on the collateral of their stock of specifically identified property "on the floor" for sale. (See single interest cover (or insurance) and credit insurance.)

• FOB--free on board

  When goods are shipped FOB, the shipper is responsible only until the goods have been placed on board the vessel, freight car, truck, or other means of transport. After that the risk belongs to the consignee.

• following form excess liability insurance

  An excess liability policy which extends an additional limit of insurance above the primary policy and provides exactly the same coverage as the underlying primary liability policy.

• following form excess property insurance

  An excess property policy which extends an additional limit of insurance above the primary policy and provides exactly the same coverage as the underlying primary property policy.

• following the fortunes

  A reinsurance principle stipulating that whatever the reinsured may find necessary to do in good faith, in connection with ceded business, is expected to be followed by the reinsurer. Reinsurance is strictly an honorable undertaking, from either side to the other.

• for account of whom it may concern

  A phrase used to protect the interests of others than the "named insureds," that is, other than the persons actually named in the policy.

• force majeure

  (See Act of God.)

• foreign company

  In insurance, a company doing business in one state but incorporated in another. A company incorporated in another country is an alien company. Some insurance codes (Florida, for example) define foreign company to include alien companies unless the contrary is stated. Each specific law should be checked for its particular meaning. (See domestic company.)

• Foreign Credit Insurance Association (FCIA)

  A group of insurance companies cooperating with the Export-Import Bank of Washington (Exim-bank) to provide foreign credit insurance for American exporters, thus assisting United States business to become more competitive in foreign trade. Coverage provides for credit and political risks. Headquarters: New York, NY.

• foreign reinsurer

  foreign reinsurer In insurance, a company doing business in one state but incorporated in another. A company incorporated in another country is an alien company. Some insurance codes (Florida, for example) define foreign company to include alien companies unless the contrary is stated. Each specific law should be checked for its particular meaning.

• forfeiture

  In a pension or profit sharing plan, the participant has vested (owned) and unvested (not yet owned) benefits. If an employee leaves before the benefits vest, the unvested benefits are called a forfeiture.

• forgery

  False or fraudulent making or altering of a written instrument. Also, the illegal signing of another's name to a document such as a check.

• form

  A document providing the specifics of the insurance issued, either separate unto itself or attached to other descriptive language.

• Form 5500

  The form that must be filed annually to the IRS for any pension plan. It contains details about the plan's finances and plan participant funding levels, vesting and other information.

• fortuitous cause

  An accidental and unexpected cause of loss. A happening by chance.

• foundation exclusion clause

  A clause in a fire policy which states that it does not insure foundations; hence, their value may not be used to determine the proper amount of insurance under a coinsurance clause.

• foundation wall

  A masonry wall below the surface which supports a building.

• foundering

  Sinking below the surface of water.

• FPA--free of particular average

  A clause which exempts the company insuring cargo from partial losses, usually limited to apply only if the amount is less than an agreed sum, or if some other described condition exists.

• frame building

  A type of construction in which the outer walls are made of lumber. (See brick building, and brick veneer.)

• franchise clause

  A provision in marine policies that no loss shall be paid by the insurer unless the damage exceeds an agreed amount called the franchise; but if the damage equals or exceeds the franchise, the company pays the entire amount. (See deductible.)

• franchise deductible

  franchise deductible A provision in marine policies that no loss shall be paid by the insurer unless the damage exceeds an agreed amount called the franchise; but if the damage equals or exceeds the franchise, the company pays the entire amount.

• franchise insurance

  A form of mass merchandising of insurance where policies are sold to members of some common group or association individually on the basis of individual rates, but with some discount based on expense savings. Franchise insurance should be contrasted with group or true group, where premiums are determined for the group on the basis of its own expenses and losses and where all or most of the group are insured. (See group merchandising.)

• fraternal benefit society

  Any incorporated society, order or supreme lodge. In order to purchase the insurance of a fraternal benefit society, a person must first become a member of the organization. Only members and their families can be covered by a fraternal benefit society insurance plan.

• fraternal insurance

  A form of cooperative life or disability insurance sold by certain fraternal organizations, usually as legal reserve insurers, to their members.

• fraud

  Dishonesty.

• free along side (FAS)

  A marine insurance term indicating that when goods are shipped FAS, the shipper agrees to assume all costs and liabilities for loss until the goods are safely on the pier or dock alongside the vessel.

• free of capture and seizure (FC&S)

  A clause which exempts the marine insurance company from paying losses caused by capture or seizure by enemies of a country.

• free of particular average (FPA)

  A clause which exempts the company insuring cargo from partial losses, usually limited to apply only if the amount is less than an agreed sum, or if some other described condition exists.

• free on board (FOB)

  When goods are shipped FOB, the shipper is responsible only until the goods have been placed on board the vessel, freight car, truck, or other means of transport. After that the risk belongs to the consignee.

• free on board destination

  When applying to cargo insurance, this is a provision in the term of sale making the shipper responsible for the cargo until the consignee accepts it.

• Free Trade Zone

  A special section of the New York State Insurance Law that exempts from rate regulation certain risks which develop property-liability policy premiums in excess of $100,000 annually, as well as certain other classes of unusual or exotic risks.

• free-look period

  The time period allowed a new insured to look over the terms and conditions of the final policy after delivery, during which the insured may cancel the policy with full premium refund. The free-look period is often 10 days after delivery of the policy for life and health, or up to 30 days on property and liability.

• friendly fire

  A visible flame or glow started voluntarily, under control, and in its intended place. (See hostile fire.)

• front-loaded policy

  Universal and variable universal life insurance plans may either be front-loaded or back-loaded. Front load means that the expense charges are taken out of the policy when premiums are paid. Back-loaded policies take the expense charges out when cash is withdrawn from the policy or the policy is surrendered.

• fronting

  Typically involves an admitted insurance company that, for a fee, serves as a policy issuer and primary insurer for an unlicensed firm that reinsures the liability it placed with the issuing carrier. The fronting company performs a variety of functions, including product/rate filings and handling required assessments and fees.

• frustration clause

  In an ocean marine policy that has been endorsed or extended to cover the peril of war, the frustration clause is a provision which clarifies that the cargo or goods must experience a direct physical loss or actual property damage to be covered. The delay of a voyage or termination of the voyage is not grounds for a claim even if that delay or termination occurred due to the outbreak of war, as otherwise covered.

• FSA

  Fellow of the Society of Actuaries designation sponsored by the Society of Actuaries. Headquarters: Shaumburg, IL.

• FSPA

  Fellow, Society of Pension Actuaries designation sponsored by the American Society of Pension Actuaries. Headquarters: Fairfax, VA.

• FTCA

  (See Federal Torts Claims Act.)

• full coverage

  The use of this terminology usually refers to a coverage that has been written without a deductible. The entire amount of loss is covered, up to the state policy limit.

• full family direct

  Refers to the process of determining all sources of Social Security payments and using that amount to reduce (offset) any payments an injured worker receives from a disability policy.

• full interest admitted (F.I.A)

  An agreement in a policy of marine insurance that the named insured's ownership or right to collect the proceeds of the insurance is agreed to at the inception of risk without further proof of an insurable interest at time of loss.

• full reporting clause

  A clause in many reporting policies that provides for a penalty in the event of loss if the insured has reported less value than required by the policy. Formerly called honesty clause.

• full value declared

  An ocean and inland marine insurance provision which requires the shipper to declare the full value of the cargo to the carrier when shipped.

• functional replacement cost

  An endorsement available for property policies which provides for replacement of the operation or function portion of a building or property, even if the replacement is for a building of less size or the more modern equipment is of less value. To illustrate, an insured owns an aged, four-story building in which only two floors are currently used. The remaining floors have been closed and are unused. Should the building suffer a total loss, functional replacement cost would provide for the rebuild of the square footage of the two functional floors.

• funds control

  Refers to a party who takes the place of a contractor that can't secure a bond for a building project. the fund controller gets the bond and handles responsibilities in the contractor's place.

• funds held account

  funds held account Money that a ceding company holds for use to pay losses under a reinsurance agreement. The held funds would normally be paid to a reinsurer and the money represents either an unearned premium or outstanding loss reserve.

• funds withheld

  funds withheld Money that a ceding company holds for use to pay losses under a reinsurance agreement. The held funds would normally be paid to a reinsurer and the money represents either an unearned premium or outstanding loss reserve.

• fur floater

  An inland marine policy insuring furs and garments containing fur on a scheduled item basis against all risks, wherever the furs may be.

• furnace explosion

  A bursting in the fire box of a furnace or boiler, as distinguished from one in the water bearing part. Usually, boiler explosion policies cover the latter, while extended coverage endorsements issued by fire insurance companies cover the former.

• furniture and fixtures

  In insurance language, usually the contents of a building, excepting merchandise for sale or in the course of manufacture (stock) and excepting machinery. Fixtures are the items fixed, that is, attached to the building. (See fixtures.)

• furriers customers insurance

  An inland marine form of insurance in which the customer of a furrier who stores fur garments is insured under a policy arranged by the furrier.
• Back to Top

• GAAP--generally accepted accounting principles

  A method of reporting the financial results of an insurer more in accordance with the "going-concern" basis used by other businesses. GAAP assigns income and disbursements to their proper period, as distinguished from the more conservative requirements of statutory accounting affecting insurers. (See statutory accounting principles (SAP).)

• gain share program

  With regards to P&C insurance, it refers to companies that offer employees a financial incentive to actively participate in safety programs IF adherence results in reduced losses. Typically, participating employees may qualify for some established amount or percentage of a described, realized gain (savings).

• gambling

  Creating risk by agreeing with another to win or lose something on the outcome of a certain event. Insurance is the opposite of gambling: gambling creates risk, while insurance shifts risk already in existence from one party to another.

• gap coverage

  An amount of insurance purchased to satisfy the requirement of an excess carrier with respect to underlying insurance. For example, if an excess insurer requires the insured to carry $500,000 of underlying coverage, but the primary insurer will write only $300,000, $200,000 is purchased to fill the gap. Also known as buffer layer.

• gap insurance

  gap insurance For auto insurance, refers to coverage against loss caused by the amount an insurer may pay for a vehicle that is lost/destroyed and the outstanding balance that is due under a loan or lease arrangement.

• garage policy

  Protects garage or service station operators, vehicle rental agencies, car washes, auto or vehicle dealers, and trailer or RV dealers for claims alleging bodily injury or property damage caused by the operator's negligence in business operations and the sale or use of automobiles.

• Garagekeepers Legal Liability (GKLL)

  Garagekeepers legal liability (GKLL) Pays amounts an insured is legally obligated to pay because of damage or loss to property of others that is in the insured?s care, custody or control.

• garment contractors floater

  An inland marine form of policy which insures the goods of the manufacturer against physical loss or damage while in transit. May be extended to cover while on the premises of the manufacturer.

• garnishment

  A court order issued to a person holding property or money of another: the order states not to give it to the owner or anyone else because suit has been filed or other legal steps have been taken to provide for other courses of action. Money due under insurance policies is sometimes subject to such procedure because of obligations of one to whom the loss would be paid.

• gatekeeper programs

  A program that creates and implements complete insurance packages for residential homeowners associations.

• GCW--gross carriage weight

  GCW The gross carriage weight of vehicles?usually trucks. It indicates how much cargo a vehicle can haul.

• gender rating

  When different sets of rates are developed for each gender based on the "verifiable" actuarial statistics of that gender, most often used in life, health and auto insurance.

• General Adjustment Bureau, Inc.

  A national firm providing extensive loss settling, appraisal, and other services for insurance companies and firms practicing risk retention. Headquarters: New York, NY. (See adjustment bureau.)

• general agency system

  An insurance sales and distribution system found most often in life and health insurance, where a general agent is appointed by the insurer to administer the insurance operations for that insurer in a specified territory. The general agency performs most of the same functions as a branch office would, saving the insurer much of the expense of a branch office.

• general agent

  1) An independent agent who represents one or more insurers with the authority to appoint subagents who report their business through the general agent, who receives an overriding commission for services provided. In some territories a general agent also sells insurance, while functioning in others solely as a manager. 2) A title used by some insurers for those agents receiving a higher commission rate than other agents (because of a higher volume of business placed with the insurer). Such a general agent normally has no additional authority or responsibility, and the title is used to designate the higher commission rate. (See agency and insurance agency.)

• general aggregate limit

  The sum or total amount that will be paid in any one policy period, regardless of how many claims, losses, suits, or insureds may be involved. Some policies allow the aggregate limit to be reinstated after it has been exhausted, by endorsement and for additional premium.

• general average

  In ocean marine insurance, a loss which is common to all interests, such as the hull owners, the cargo owners and the receivers of the freight and charges, etc., which may arise due to a peril to the entire venture, which requires a sacrifice or expenditure for the benefit of all. An example is the stranding of the vessel wherein the vessel must engage a tug to remove her from the strand. Without the tug's assistance, all would be lost. The expenses incurred are shared pro rata based on the value of each interest, whether insured or not. (See particular average, contributory value clause, general average bond, general average deposit, jettison and sacrifice.)

• general average bond

  As it applies to ocean marine insurance, this bond is issued for the obligation of the cargo owner with respect to that cargo owner's proportion of the general average. (See general average.)

• general average deposit

  A cash deposit required of cargo owners for the payment of that cargo owner's proportion of the general average. (See general average.)

• general aviation

  A term for any aviation exposure or risk except commercial airlines and military risks.

• general cover

  A policy covering property at several locations, the premium for which is determined by averaging the stated amounts of value, which the policyholder is required to report to the company at stated intervals.

• general damages

  In liability insurance, refers to awards which may fall into either compensatory or punitive. Compensatory consists of either general damages, which include pain and suffering, and special damages, which are out-of ?pocket expenses. Punitive (or exemplary) are amounts that are awarded as a form of punishment or to act as an example.

• general interrogatory

  A question such as found in the NAIC Annual Statement or as addressed by one party to another party in a lawsuit.

• general liability

  A form of insurance sold to businesses to indemnify the business for third party liability claims due to negligence. Coverages can include premises and operations liability for onsite and jobsite accidents and products liability claims for products that injure third parties.

• general partners liability coverage

  A policy that protects a partnership's general (managing) partner from his liability for causing loss to limited partners due to business-related errors and omissions, such as breach of duty and accusations of lack of devotion to operations.

• generally accepted accounting principles (GAAP)

  A method of reporting the financial results of an insurer more in accordance with the "going-concern" basis used by other businesses. GAAP assigns income and disbursements to their proper period, as distinguished from the more conservative requirements of statutory accounting affecting insurers. (See statutory accounting principles (SAP).)

• Geneva Association

  International organization of chief executives of major insurers from U.S., Europe and Japan, dedicated to the research and study of insurance and risk management and their impact on the global economy. Headquarters: Geneva, Switzerland

• geocoding

  geocoding Refers to the use of automation to process geographic information for specific locations. Its ability to identify a location's physical surroundings (such as distance to a shore line or other buildings) allows the information to be used by insurers as an underwriting tool.

• geopositioning

  Any method that facilitates the location of one point relative to the surface of the earth (i.e., intersection of an object's latitude and longitude).

• GIC (guaranteed investment contract)

  GIC--guaranteed investment contract Found in pension plans. Similar concept to a CD (Certificate of Deposit). The pension plan agrees to give the insurer a large block of money to invest. The insurer agrees to pay a fixed percent of interest on that block of money for a fixed period of time.

• gift tax

  Taxes against gifts that one person or one party makes to another. These taxes include both state and federal.

• glass insurance

  Coverage against the breakage of glass.

• GLB

  GLB (Gramm-Leach-Bliley Act) Also known as the Financial Services Modernization Act, which took effect in November 1999. The GLB?s major impact is on the greater freedoms of banks, insurers and security firms to participate more widely in financial areas that used to be strictly defined, such as banks, through holding companies, being able to purchase insurers or brokerages and sell such products. The other area concerns privacy rights and the new requirements placed on companies regarding how customer data is collected, used and shared.

• global insurance

  global insurance Refers to coverage that applies to losses from all classes of insurance policies.

• GNWPI--gross net written premium income

  The generic term to describe the rating base for excess of loss reinsurance: 1) the ceding company's premium income, as opposed to premium receipts 2) measured net, meaning after cancellations, refunds and premiums paid for reinsurance protecting the cover being rated 3) gross, meaning before deducting any expenses. (See subject premium.)

• going and coming rule

  going and coming rule An informal term that typically refers to commuting to and from work and that time being excluded as part of a workday. This distinction is important in determining whether an employer may be held partially or totally responsible for a loss that occurs during a commute.

• golfer's insurance

  A package policy that responds to legal liability arising out of golfing as well as loss to golfing equipment (clubs, bags, clothing, etc.)

• good driver discount

  Credits or discounts allowed by some insurers in some jurisdictions that are applied to reduce automobile insurance premiums for drivers with a good driving records.

• good student discount

  A reduced automobile insurance premium is sometimes granted students with high scholastic achievement because some studies have indicated a relationship between good grades and safe driving.

• goodwill

  An intangible business asset. It refers to the value of a business which has been built up through the reputation of the business concern and its owners.

• governing classification

  In determining rates for compensation insurance, the principal occupation of the insured.

• governmental action exclusion

  A property exclusion which clarifies that the insurance policy does not cover physical damage losses which result from any governmental seizure or destruction, except when the destruction is to prevent the spread of fire.

• grace period

  An amount of time (usually one month) after the life insurance policy's premium due date, during which the policy continues in effect when the premium due is not paid. Many policies that have cash values also provide an automatic premium loan provision, in which part of the cash value is used as a loan to pay the premium due, thereby keeping the policy in force for a longer period. Most state laws require a grace period in life insurance policies.

• graded commission

  Compensation for selling and servicing insurance, payable to an agent or broker, the percentage of which is dependent on the size of the premium. The higher the premium, the lower the commission percentage. The opposite of flat commission in which the same rate of commission applies for any size of premium. (See flat commission.)

• graded premium whole life insurance

  The premiums start out low and then jump to a higher level after a period of time. Used with medical students and others who have high future earnings potential but have limited funds today.

• grading of cities and towns

  A 10-category ranking or schedule of public fire protection of cities and towns established in 1916. The grading is currently maintained by the Insurance Services Office for use in making fire insurance rates and to encourage local governments to maintain better fire fighting equipment and personnel. A city or town is ranked in one of the categories by receiving deficiency points for failing to meet established standards under each of these major headings: water supply, fire department, fire service communications, fire safety control, climate, and divergence between fire department and water supply. Town Class I is the best class (a city or town having fewer than 501 points), and Town Class 10 is the worst (more than 4,500 points).

• Gramm-Leach-Bliley Act (GLB)

  Also known as the Financial Services Modernization Act, which took effect in November 1999. The GLB?s major impact is on the greater freedoms of banks, insurers and security firms to participate more widely in financial areas that used to be strictly defined, such as banks, through holding companies, being able to purchase insurers or brokerages and sell such products. The other area concerns privacy rights and the new requirements placed on companies regarding how customer data is collected, used and shared.

• grantee

  The buyer of real estate.

• grantor

  The seller of real estate.

• greenmail exclusion

  Greenmail refers to sales of corporate stock at a discounted price in order to dissuade certain stockholders who may be contemplating a hostile takeover. The greenmail exclusion is found in Directors Errors and Omissions policies and bars insurance protection for lawsuits (typically filed by stockholders who were not offered discounted shares) alleging harm from greenmail.

• grey fleet

  A business auto fleet comprised of employees required to use their personal vehicles for business purposes, exposing a company to greater risk due to fewer safety controls.

• gross earnings form

  A form of time element insurance which is now obsolete, where the premium consideration is based upon the policyholder's sales less cost of merchandise. The current coverage form available is business income coverage. (See business income insurance.)

• gross line

  The amount of insurance written on a particular exposure by an insurer. Gross line differs from the net line by the amount of reinsurance placed.

• gross net premiums

  In company language, gross written premiums less return premiums, but not less reinsurance.

• gross net written premium income (GNWPI)

  The generic term to describe the rating base for excess of loss reinsurance: 1) the ceding company's premium income (as opposed to premium receipts) 2) measured net, meaning after cancellations, refunds and premiums paid for reinsurance protecting the cover being rated 3) gross, meaning before deducting any expenses. (See subject premium.)

• gross premium

  In company language, the written premium before deducting any premium paid for reinsurance and, in some cases, before paying any return premium.

• gross rate

  gross rate The adjusted premium that is derived by adding a loading (a factor or fee) to a pure premium amount.

• gross vehicle weight (GVW)

  As it applies to auto coverages, this is the total of the combined weight of the vehicle itself plus the weight or tonnage that the vehicle is capable of carrying.

• group accident and health insurance

  Group insurance programs designed to offer affordable accident and/or health coverage to a natural group, such as employees of an employer or members of an association and their families. A single contract is provided for the entire group which outlines the standard benefits, terms and provisions that apply to all members of the group. Individual certificates are usually issued to the members to verify that they are covered.

• group captive insurance company

  A captive insurer formed and controlled by more than one entity.

• group contract

  Group insurance programs designed to offer affordable accident and/or health coverage to a natural group, such as employees of an employer or members of an association and their families. A single contract is provided for the entire group which outlines the standard benefits, terms and provisions that apply to all members of the group. Individual certificates are usually issued to the members to verify that they are covered.

• group credit life insurance

  Life insurance coverage designed to protect lenders should any of their borrowers become disabled or die. The limit of insurance is written on the total amount that the lender has outstanding to borrowers, but the lender will receive only the amount of the balance of the outstanding loan of each borrower who becomes disabled or dies, as the event occurs.

• group deferred annuity

  A funding method for pension plans. Employer contributions are made to purchase deferred retirement annuities for plan participants.

• group disability insurance

  Group insurance programs designed to offer affordable disability coverage to a natural group, such as employees of an employer or members of an association and their families. A single contract is provided for the entire group which outlines the compensation benefits available should accident or illness occur to a member of the plan. Normally the compensation is a percent of the actual income of the member and is limited in the length of time that a member can collect those benefits. These limitations are designed to encourage recovery and return to work. Individual certificates are usually issued to the members to verify that they are covered.

• group health insurance

  Group insurance programs designed to offer affordable health coverage to a natural group, such as employees of an employer or members of an association and their families. A single contract is provided for the entire group which outlines the standard benefits, terms and provisions that apply to all members of the group. Individual certificates are usually issued to the members to verify that they are covered.

• group insurance

  1) Insuring a number of persons under a single master contract. The persons have a common sponsor, such as an employer, a union or an association. 2) "True" group insurance precludes individual underwriting by the insurer, requires the employer to insure all employees if the employer pays any portion of the premium, and allows employees the option of participating in any coverage for which the employees must pay.

• group life insurance

  Group life insurance programs designed to offer affordable coverage to a natural group, such as employees of an employer or members of an association and their families. A single contract is provided for the entire group which outlines the standard benefits, terms and provisions that apply to all members of the group. Normally the life insurance benefits offered are based on the compensation earned by the individual member. Most of the group life insurance programs also offer the members the ability to convert to other permanent, whole or term life products upon termination of employment. Individual certificates are usually issued to the members to verify that they are covered.

• group merchandising

  A term often used in a misleading sense to cover all forms of mass merchandising. More accurately used to cover the sale of insurance to the members of a particular group or association under a single group contract, where premiums for the participants are determined for the group on the basis of its own expenses and losses and where all or most of the group are insured. (See mass merchandising and franchise insurance.)

• group ordinary life insurance

  A group life insurance plan that includes permanent life insurance.

• group permanent life insurance

  Permanent life insurance underwritten on a group basis, i.e., with limited medical questions. Group paid-up insurance is often the vehicle used in pension plans that include permanent life insurance.

• group property and liability insurance

  Group insurance programs designed to offer affordable property and liability insurance, most often automobile or homeowners coverages to a natural group such as employees of an employer or members of an association. This is usually an optional benefit that the group member may purchase and is not subsidized by the employer or group. The cost to the member, however, is usually less than what is otherwise available because of lower marketing, sales and administrative expenses saved by the insurer.

• group universal life insurance

  A group life insurance plan that includes universal life insurance with all its inherent flexibilities. (See also universal life.).

• guaranteed annuity payments

  A type of annuity that guarantees the continued payment of an annuity, even if the annuitant should die. At the death of the annuitant, payments are made either to a secondary annuitant or to the estate of the primary annuitant should a secondary not be mentioned.

• guaranteed insurability

  Life and health insurance provisions which guarantee the insured the right and ability to increase or purchase additional coverage without proving insurability.

• guaranteed investment contract (GIC)

  Found in pension plans. Similar concept to a CD (Certificate of Deposit). The pension plan agrees to give the insurer a large block of money to invest. The insurer agrees to pay a fixed percent of interest on that block of money for a fixed period of time.

• guaranteed issue

  Group insurance programs designed to offer affordable health coverage to a natural group, such as employees of an employer or members of an association and their families. The difference between this and other group insurance is that no proof of insurability is required. It is guaranteed that all participants will be issued. A single contract is provided for the entire group which outlines the standard benefits, terms and provisions that apply to all members of the group. These benefits, however, may be tempered by the age and size of the group. Individual certificates are usually issued to the members to verify that they are covered.

• guaranteed renewable

  In some life and health insurance programs, the insurer has guaranteed the renewal of policies for a set period of time or until an insured becomes a specified age. The insured has the option to renew. The insurer does not and must renew at the insured's request. The insurer cannot change benefits, terms, or conditions except rates, and then those rates cannot be changed for any one individual but must apply to an entire class.

• guaranty association

  Found in both life and property-casualty. Voluntary or state-mandated funds that insurers pay into to reimburse policyholders and claimants of an insolvent insurance company. (See also guaranty fund.)

• guaranty fund

  An amount of money assessed certain insurers in a given state to reimburse policyholders and claimants of an insolvent insurer in that state. The fund may be created before an insolvency occurs (pre-assessment, as in New York) or afterward (post-assessment), and virtually all states now have such protection. (See Insurance Guaranty (Insolvency Act), and insurance insolvency act.)

• guard

  Any person the insured retains specifically to have custody of property inside a covered premises.

• guest statutes

  In some states, legislation requiring that a guest passenger must prove something higher than ordinary negligence in order to recover from the host driver. Apart from such laws, the guest passenger would have the same rights as any other member of the public and would only be required to prove ordinary negligence.

• guiding principles

  Rules agreed on by most insurers for apportioning loss payments among two or more policies covering a given loss. (See overlapping insurance.)

• GVW--gross vehicle weight

  As it applies to auto coverages, this is the total of the combined weight of the vehicle itself plus the weight or tonnage that the vehicle is capable of carrying.
• Back to Top

• habitational insurance

  Typically refers to coverage designed for commercial apartments (including high-rises), condos, multi-unit dwellings, hotels and motels.

• Haddon Matrix

  A method used in evaluating and controlling injuries. It is a four-column, three-row table where three stages of a given event (pre-event, event and post-event) is examined across four different factors (personal, agent, physical and social) that influence the event.

• Hague Rules

  Maritime rules that were developed in Hague, Holland, in the early 1920s regarding the transport of cargo by sea. Many countries have adopted and abide by these rules.

• Hague-Visby Rules

  A set of international maritime rules that describe the responsibilities and obligations held by insurers and shippers when transporting goods over water.

• hail insurance

  Insurance against hail damage to growing crops. Although hail is the basic cause of loss protected against in these policies, coverage is often granted for crop damage resulting from additional causes of loss such as fire, windstorm, lightning, drought, frost, excessive heat, snow, sleet, etc.

• hammer clause

  An informal title for a provision that is a modification of a consent-to-settle clause. It requires the insurance company to secure the insured's permission to settle a claim or lawsuit. It allows the insured to have control over an action that could affect his or her reputation. However, if permission is not given, the typical clause usually caps any subsequent settlement at the amount the insurer originally sought to pay and/or it may limit or eliminate an insurer's obligation to continue to defend a lawsuit.

• hangarkeepers legal liability insurance

  Protection for the aircraft hangarkeeper for losses caused by negligence in storing aircraft as a bailee.

• hard market

  In the property and liability insurance business, underwriting philosophies fluctuate between periods called the hard market and the soft market. The hard market is the period during which underwriting standards are very tight and the rates are high. Normally the hard market closely follows a soft market period during which the underwriting standards had been soft and the price or rates are very low, resulting in substantial underwriting losses. The cycle swings back and forth between the two cycles and bounces between soft underwriting with low rates and heavy losses, to the hard market with subsequent tightening of standards and dramatic increases in price.

• hardware

  The mechanical, electronic and electrical devices comprising a computer. (See software.)

• Harter Act

  A law passed by Congress in 1893 which provides that a vessel owner is not responsible for loss or damage caused by faults or errors in navigation, provided the shipowner has taken proper care to see that the ship is in all respects seaworthy and properly manned and equipped. (See bill of lading.)

• hazard

  A condition which may lead to a loss, such as oily rags leading to a fire. (See moral hazard, morale hazard, and physical hazard.)

• hazardous waste

  Products or residues known or suspected to be toxic that require special care in their handling and disposal. Examples are asbestos, dioxin or radioactive substances.

• hazardous waste site

  1) A site that has been contaminated by hazardous waste and is subject to cleanup and EPA regulation. 2) A dump site used to dispose of hazardous waste.

• HCFA

  An agency established under the U.S. Department of Health and Human Services which administrates two major national health care programs: Medicaid and Medicare. Headquarters: Baltimore, Maryland.

• head office

  1) The principal place of business of a company; the head office or the chief office. 2) The term may be modified to include regional offices in some jurisdictions (Florida) for tax purposes, with a company's principal place of business referred to as its home office.

• heads of damages

  A legal and claims term referring to type or categories of damages that are sought to be recovered through litigation.

• Health Care Financing Administration (HCFA)

  An agency established under the U.S. Department of Health and Human Services which administrates two major national health care programs: Medicaid and Medicare. Headquarters: Baltimore, Maryland.

• health indemnity plan

  A group health insurance program that reimburses insureds for covered medical expenses, minus deductibles and co-payments, after they have paid the health care provider.

• health insurance

  A broad term describing protection from loss due to illness or injury, resulting in loss of life, loss of earnings, or expenses incurred. Within the broad area of health insurance, there are several major coverages which focus on more specific needs, for example, accident insurance, disability income insurance, hospitalization insurance, and sickness insurance. (See accident and sickness insurance.)

• Health Insurance Portability and Accountability Act

  Health Insurance Portability and Accountability Act A federal law that affects how confidential information is collected, used and shared. It has created new standards for insurers who must now take more precautions to protect the private information of their customers. The Act has also created constraints to the industry's ability to access medical records related to investigating claims-related injuries.

• health maintenance organization (HMO)

  An entity with four essential characteristics: 1) an organized system for providing health care in a geographic area 2) delivering an agreed upon set of basic and supplemental health maintenance and treatment services 3) to a voluntarily enrolled group of persons 4) for which services the HMO is reimbursed through a predetermined and periodic prepayment made by or on behalf of each person or family unit enrolled in the HMO, without regard to the amounts of actual services provided.

• health promotion

  Planned activities designed to support changes in behavior and the environment to enhance health by reducing risks, e.g., disease prevention, risk screening, medical self-care, and lifestyle modification. (See wellness programs.)

• held in trust

  A clause in property insurance extending the policy to cover property of others held by the insured as a bailee. Such coverage is always qualified by the requirement that the bailee is legally responsible for such property.

• herbicide applicator coverage

  This coverage supplements the protection of a Commercial General Liability policy by providing protection against loss or damage an insured causes by a pesticide or herbicide application. The loss must involve accidental introduction of a substance at a site that is not owned or controlled by the insured. Typically, the loss must occur in relation to an operation that complies with all government regulations.

• hidden defect

  A term used in connection with products liability coverage to designate a product that has a hidden or concealed flaw or problem which could cause injury or damage when used.

• high risk

  high risk Insurance coverages that are outside those considered "standard" with respect to the coverages, forms and endorsements provided. Standard insurance is those policies and forms that share common policy language and verbiage as well as same or similar clauses and provisions. Standard also refers to business types and the exposures that the business represents. Businesses that pose only commonly expected exposures are considered standard while businesses that pose unique, unusually or very high exposures are considered nonstandard and thus require nonstandard insurance.

• high-risk automobile insurer

  (See nonstandard insurance.)

• highly protected risk (HPR)

  A program for larger commercial properties meeting higher safety standards in order to obtain significantly lower premiums. Protection includes automatic sprinkler systems, better than average construction and occupancy.

• HIPAA--Health Insurance Portability and Accountability Act

  HIPAA--Health Insurance Portability and Accountability Act A federal law that affects how confidential information is collected, used and shared. It has created new standards for insurers who must now take more precautions to protect the private information of their customers. The Act has also created constraints to the industry's ability to access medical records related to investigating claims-related injuries.

• historical insurance audit

  A process, similar to an audit, for researching internal and external sources to reconstruct and document an organization?s history of insurance coverage. This is particularly important to assist with liability arising from past years or even decades, such as damage related to environmental liability or asbestos.

• hit and run

  An accident caused by someone who does not stop to assist or provide information related to that accident.

• HMO--health maintenance organization

  An entity with four essential characteristics: 1) an organized system for providing health care in a geographic area 2) delivering an agreed upon set of basic and supplemental health maintenance and treatment services 3) to a voluntarily enrolled group of persons 4) for which services the HMO is reimbursed through a predetermined and periodic prepayment made by or on behalf of each person or family unit enrolled in the HMO, without regard to the amounts of actual services provided.

• HO-1

  A package of basic homeowners insurance that covers a number of specified causes of direct loss to a residence and personal property as well as liability insurance.

• HO-2

  A package of basic homeowners insurance that covers a number of specified causes of direct loss to a residence and personal property as well as liability insurance. It responds to several more causes of loss than an HO-1 form.

• HO-3

  A broad package of homeowners insurance that, with exception of earthquake, flood, military and nuclear activity, covers all of direct loss to a residence that is not specifically excluded. It also provides personal property protection on a specified cause basis, as well as liability insurance.

• HO-4

  A package of basic homeowners insurance that covers a number of specified causes of direct loss to personal property as well as liability insurance. It responds similarly to an HO-2 form and is designed for tenants.

• HO-5

  A broad package of homeowners insurance that, with exception for earthquake, flood, military and nuclear activity, covers all of direct loss to a residence that is not specifically excluded. It also provides personal property protection on a specified cause basis, as well as liability insurance. It is broader than an HO-3 as it settles all eligible property losses on a replacement cost basis.

• HO-6

  A package of basic homeowners insurance that covers a number of specified causes of direct loss to certain types of structural and personal property as well as liability insurance. It also provides some coverage for structural property that is under joint ownership and limited coverage for property loss assessments. It responds similarly to an HO-2 form and is designed for condominium owners.

• HO-8

  A package of basic homeowners insurance that covers a number of specified causes of direct loss to a residence and personal property as well as liability insurance. However, losses are handled according to the cost of making adequate repairs, rather than replacement cost. This form is designed for older homes that, due to architectural, material or other characteristics, have a replacement cost that substantially exceeds their market value.

• hoists and lifts

  A type of insurance that protects insureds against their liability related to operating devices that raise and lower personnel and property and similar exposures that may be excluded under basic general liability policies.

• hold harmless agreement

  A contractual arrangement in which one party agrees to assume certain liability which otherwise would be borne by the other party. For example, an insurer may wish to pay a loss when it is uncertain whether it may be called upon a second time to some other party. The payee may be asked to execute an agreement whereby the company will be reimbursed or held harmless by the payee if such request should happen. Another example is when the principal in a large construction project frequently demands hold harmless agreements from all subcontractors in respect to claims made against the principal arising out of the subcontractors' negligence. The principal often stipulates the purchase of a liability policy by the subcontractor to support the hold harmless agreement.

• holdup

  The taking of property by violence or threat of violence.

• hole-in-one insurance

  hole-in-one insurance Hole-in-one coverage is a form of prize indemnification insurance usually purchased by a sponsor of a local golf tournament who donates a prize, such as a new car, tractor, clothes or other merchandise or cash, to be given to any golfer who scores a hole-in-one on a specified hole on the golf course. The insurance is arranged prior to the event and indemnifies the insured only if the hole-in-one is made and the prize awarded. The policy warrants that certification of the hole-in-one must be made by at least two tournament officials prior to payment of the insured's loss.

• Holistic Risk Management

  holistic risk management A newer, broader application of the risk management concept. It refers to an aggressive approach to handling an organization?s multitude of exposure to loss of tangible and intangible property, including income. It may use a variety of tools to avoid loss, such as safety procedures, insurance, shifting of risk via contracts, arranging for alternate supply channels, etc. The concept focuses on growing concerns that face new, often unanticipated, risks.

• home automation

  Refers to any residence that contains some level of technology (usually computer) to automate control of its major systems (lighting, sound, plumbing, heating/cooling, electricity). The equipment needed to create the automated environment results in a higher exposure to loss represented by the home and its contents.

• home office

  1) The principal place of business of a company; the head office or the chief office. 2) The term may be modified to include regional offices in some jurisdictions (Florida) for tax purposes, with a company's principal place of business referred to as its head office.

• homeowners policy

  A package policy for dwelling and contents risks combining fire and allied line coverage with comprehensive personal liability and theft insurance for homeowners and tenants. This policy carries an indivisible premium in that the premium is not separately stated or broken down for the various hazards insured against. There are different homeowners forms, varying in extent of coverage and cost from the broad cause of loss policy (HO2), to the special cause of loss policy (HO3), to the renter's policy (HO6).

• homogeneous exposure unit

  An insurance concept on which the actuarial credibility of insurance rate-making is based. Data and statistics of large numbers of similar or homogeneous exposure units (the persons or properties exposed to insurance losses), with similar characteristics and thus similar exposure to loss, are used to determine the frequency and severity of loss to that exposure group per exposure unit. The homogeneous exposure units are placed into rating categories based on their similar characteristics called classes.

• honesty clause

  The former name for the full reporting clause in reporting forms of fire policies. A clause in many reporting policies that provides for a penalty in the event of loss if the insured has reported less value than required by the policy.

• honorable undertaking

  A clause used in some reinsurance treaties, the purpose of which is that the agreement not be defeated by a strict or narrow interpretation of the language in the treaty.

• hospice

  A program that provides palliative and supportive care for terminally ill patients and their families, either directly or on a consulting basis with the patient's physician or another community agency, such as a visiting nurse association. The entire family is considered the unit of care, and care extends through the mourning process.

• hospital benefits

  In health and accident insurance, if an insured must be hospitalized for illness, accident, or injury, hospital benefits are the amounts provided in the insurance coverage for hospital expenses.

• hospital confinement insurance

  A type of health insurance policy which pays a specified periodic benefit should the insured be confined to a hospital for accident, illness or injury. This benefit is paid regardless of whether or not there is other insurance available and is not reflective of or dependent upon the amount of medical expenses involved. Sometimes called hospital income insurance.

• hospital expense insurance

  Reimbursement for certain limited expenses incurred while being hospitalized due to injury or illness. Also known as hospital-surgical expense insurance.

• hospital income insurance

  A type of health insurance policy which pays a specified periodic benefit should the insured be confined to a hospital for accident, illness, or injury. This benefit is paid regardless of whether or not there is other insurance available and is not reflective of or dependent upon the amount of medical expenses involved. Sometimes called hospital confinement insurance.

• hospital indemnity insurance

  (See hospital confinement insurance.)

• hospital professional liability insurance

  Protects a hospital against claims for injury resulting from malpractice, professional errors, or a mistake by the hospital staff.

• hospital-surgical expense insurance

  Reimbursement for certain limited expenses incurred while being hospitalized due to injury or illness. Also known as hospital expense insurance.

• hospitality insurance

  Package policies or entire coverage programs that are tailored to insure the property, liability, contingent liability, and specialty exposures faced by entities in the hospitality industry such as casinos, hotels, inns, motels and resorts.

• hospitalization insurance

  Reimbursement for certain expenses incurred while being hospitalized due to injury or illness. (See accident and sickness insurance.)

• host liquor liability

  A form of liquor liability directed at hosts of business or social functions where liquor or alcohol is served, with or without a charge. The basis for legal liability is a dram shop, liquor control or alcoholic beverage law. The laws vary by state, but most provide that the owner, operator or host serving or selling alcoholic beverages is liable for injury or damage caused by or to an intoxicated person if it can be established that the owner, operator or host caused or contributed to the intoxication of the person through the sale or serving of alcoholic beverages.

• host liquor liability insurance

  A form of liquor liability coverage where the basis for legal liability is a dram shop, liquor control, or alcoholic beverage law. The laws vary, but most provide that the owner of an establishment which serves alcoholic beverages is liable for injury or damage caused by an intoxicated person if it can be established that the liquor licensee caused or contributed to the intoxication of the person.

• hostile fire

  A fire occurring where it is not supposed to be, as distinguished from a friendly fire which occurs in its proper place, such as in a stove or a fireplace. Fire insurance policies do not insure losses caused by friendly fires. (See friendly fire.)

• hostile work environment

  A source of harassment that may be a basis of a lawsuit under federal law. It refers to improper or inappropriate (typically sexist or racist) behavior in the workplace that creates an atmosphere that is hostile or intimidating to other workers.

• hotel safe deposit box liability

  This crime coverage form was replaced with the Guest's Property Optional Insurance Agreement that is part of the ISO Commercial Crime policy. It combines coverage for an insured's bailee exposure for physical damage to the property of guests contained in safe deposit boxes or vaults of the insured. Both physical damage and the insured's legal liability are covered.

• household goods

  The normal contents of a dwelling, such as furniture, clothing, etc.

• housekeeping

  The care and management of property and the provision of equipment and services (as for a home or industrial organization).

• HPR--highly protected risk

  A program for larger commercial properties meeting higher safety standards in order to obtain significantly lower premiums. Protection includes automatic sprinkler systems, better than average construction and occupancy.

• HR-10

  (See Keogh plan.)

• hull

  1) In ocean marine insurance, the frame, body, machinery and equipment of a ship, excluding masts, yards, sails and rigging. 2) In aviation insurance, the fuselage, wings, tail, rudders, and other major structural features of an aircraft, including machinery and equipment.

• hull and machinery

  hull and machinery Hull and machinery insurance may be used to insure a very wide variety of commercial vessels. It protects a vessel's hull and any equipment and/or machinery that is aboard the vessel. Policy protection also includes damage from colliding with other vessels.

• Hull Clauses

  General reference to various sources of standard policy provisions that provide named peril coverage against damage to ship exteriors.

• hull policy

  1) An ocean marine policy designed to cover physical damage losses to the hull of a ship. 2) An aviation policy designed to cover physical damage losses to aircraft.

• hull syndicate

  A group of ocean marine underwriters who insure certain ships or who perform certain functions in the insurance of ships on a joint or cooperative basis to spread the risk automatically and to save expense. (See syndicate.)

• human factors engineering

  The applied science involving the factors and interaction of the workplace environment on its workers. Although it is most often associated with automation in the workplace, this science covers the cause and effect of any workplace environment. Also known as ergonomics. (See ergonomics.)

• human life value

  The monetary value placed on an individual's life, based on set criteria of economic and social factors.

• human perils

  One of three broad categories of perils commonly referred to in the insurance industry which include not only human perils, but also natural perils and economic perils. Human perils are those caused directly by people and include crime, liability, fidelity, and some types of property damage such as vehicle damage or arson. Contrast those with natural perils which include wind, flood, or earthquake, or economic perils such as inflation or obsolescence. (See economic perils and natural perils.)

• hurricane

  Violent, revolving-pattern windstorms that originate in the North Atlantic or in parts (particularly northeast and south) of the Pacific Ocean. They are classified in five categories, having a minimum wind speed of 74 mph (Category 1) to 156 mph (Category 5).

• hurricane insurance

  A type of property insurance policy specifically designed to cover physical damage as a result of wind from a hurricane. (See beachfront plans.)
• Back to Top

• I.C.C. Endorsement--Interstate Commerce Endorsement To Motor

  Truck Cargo Policies Truck Cargo Policies Truck Cargo Policies In inland marine insurance, this is the provision which broadens the policy coverage to conform to Interstate Commerce Commission requirements with respect to a carrier's liability for customers' goods.

• IASA--Insurance Accounting and Systems Association

  An international organization to promote the study, research and development of modern theory, practice and procedure as applied to insurance accounting and statistics. Headquarters: Durham, NC.

• IBHS

  (See Institute for Business and Home Safety.)

• IBNR--incurred but not reported

  The liability for future payments on losses which have already occurred but have not yet been reported to the insurer. This definition may be extended to include expected future development on claims already reported.

• ICMIF

  (See International Cooperative and Mutual Insurance Federation.)

• ICPI--Insurance Crime Prevention Institute

  Serves casualty insurers for the investigation of fraudulent insurance claims other than for accident and health or workers compensation, and provides a deterrent to such losses. Headquarters: Westport, CT.

• identity fraud

  identity fraud A generic reference to any crime involving the unauthorized use of key pieces of personal information, such as Social Security or driver's license numbers, in order to impersonate someone else. The information can be used to obtain credit, merchandise and services in the name of the victim, or to provide the thief with false credentials. The stolen information may be used either to open new accounts or to access current accounts.

• identity fraud expense insurance

  identity fraud expense insurance A person who has been victimized by identity theft faces the daunting task of correcting their account information, credit history, and initiating extensive communication with a multitude of lenders, businesses and legal authorities. ID fraud expense insurance helps to cover some of the related expenses, particularly postage and phone charges.

• IDL

  (See Independent Director Liability.)

• IDM

  (See integrated disability management.)

• IDMA

  (See Insurance Data Management Association.)

• IGIE

  (See Institute for Global Insurance Education.)

• IIA--Insurance Institute of America, Inc.

  An educational organization which sets standards and gives examinations for diplomas or fellowships in general insurance, loss adjusting, underwriting, management and risk management. Headquarters: Malvern, PA.

• IIAA--Independent Insurance Agents of America

  Formerly the National Association of Insurance Agents, a large trade association whose purpose is to protect the business interests of its members, who are also members of state associations. Headquarters: Alexandria, VA (Washington, DC in 1988).

• IIPRC

  (See Interstate Insurance Product Regulation Commission.)

• IIS

  (See International Insurance Society.)

• ILW

  (See industry loss warranty.)

• IMB

  (See International Maritime Bureau.)

• IMCA--Insurance Marketing Communications Association

  A trade association of those in charge of insurance company advertising, marketing and public relations functions. Formerly known as the Insurance Advertising Conference.

• immature policies

  Liability policies that are written on a claims-made basis are not considered to be mature until they have been in effect for five uninterrupted years as claims-made. Prior to that, claims are considered not to be fully developed. The premiums for these policies are given a credit that decreases yearly until it disappears after five years.

• immediate annuity

  A type of annuity policy that begins making benefit payments as soon as the last premium payment has been made.

• impaired capital

  The capital of an insurance company is said to be impaired if its liabilities, subtracted from its assets, leave less than the stated amount of capital. Most states have statutes outlining procedures to be taken by the insurance superintendent or commissioner in the event of such impairment. The word "impaired" has specific statutory meaning in state laws which may vary from state to state. Relevant state laws should be checked for meaning and effect.

• impaired property

  Property is considered to be impaired when it has not been physically damaged, but either cannot be used for its intended purpose or has lost monetary value because it contains a defective product or the work performed on it is defective or inadequate, or because the insured has not fulfilled a contractual obligation.

• impaired risk

  In life and health insurance, when an applicant has a substandard physical condition or a hazardous occupation or hobby, he/she is an impaired risk. Many insurers avoid such risks, while others specialize in them.

• impairment exclusion rider

  An endorsement or rider added to a health insurance contract; this rider excludes losses that occur because of pre-existing conditions.

• implied authority

  Specific authority is granted an agent or representative by contractual agreement. Other types of authority, not specifically mentioned by contract but assumed or implied by the nature of the relationship, are presumed to be given to an agent if that authority is necessary to perform the duties or responsibilities otherwise assigned to the agent or representative.

• implied warranty

  An indirect expression or inference, not in writing, by the policyholder that certain conditions exist or will be met; for example, that a building is not on fire when insured, or that a vessel is seaworthy.

• improvements and betterments

  Additions made to real estate enhancing its value and amounting to more than mere repairs or replacement of waste. When made by a tenant, such additions are normally included in the tenant's own property insurance. (See betterments.)

• imputed negligence

  imputed negligence Refers to a situation in which the responsibility for loss or damage is transferred from one party to another, such as a child to a parent or from a worker to his employer.

• in kind

  Replacement of damaged, destroyed, or lost property with other property instead of cash.

• in motion

  An aviation term that is used to express when an aircraft is in flight or under its own power or momentum.

• in trust policy

  A type of inland marine policy which provides protection for the covered property, no matter where located or in whose care, custody or control.

• in-force business

  The total premium amount of a book of business that is active and in effect at any specific period in time.

• in-force premiums

  The original premiums paid on all policies not yet expired, as distinguished from unearned premiums.

• inactive risks

  A term used to express a risk that is not presently operating or exposed to the hazards and potential for covered losses.

• incendiary

  1) The person who deliberately sets fire to a property. 2) A destructive fire intentionally set.

• Inchmaree clause

  A clause used in ocean marine policies to identify additional named perils beyond the basic marine perils. In the more recent hull insurance policies, the clause is now identified as the "additional perils" clause. The original clause grew out of a lawsuit brought in 1887 by the owners of a ship named "Inchmaree."

• incidental contracts

  Contracts that are considered necessary to conducting business and are covered as part of premises-operations liability coverage.

• incidental medical malpractice liability

  This coverage is for operations that have a medical professional exposure which is incidental to but is not the major function of their business. The coverage responds to injury arising out of either providing or failing to provide medical services. A school nurse is an example of a qualifying incidental medical malpractice liability situation.

• incidents of ownership

  Life insurance contains the following incidents of ownership. (A) The right to change the beneficiary (unless irrevocable); (B) the ability to use the policy as collateral in a loan; (C) the right to assign the policy to another; (D) the right to surrender the policy or cancel it; and (E) the right to obtain a loan against cash value (if there is any).

• incontestable clause

  A clause in many life and health policies that sets a time period (two years is common) in the contract during which the insurer has to investigate and determine any grounds for voiding or contesting coverage because of facts or material provided by the insured in the application. Once the policy has been in effect past the stated period, the insurer no longer has the right to deny or contest any claim or loss, or void coverage based on the statements or material facts from the application.

• increase in hazard

  The standard fire insurance policy is suspended from liability while the hazard in a risk has been increased beyond what was contemplated at the time the policy was written. For example, if a dwelling house, insured as such, should be occupied for manufacturing purposes without getting consent from the insurer for such increase in hazard, the company would not have to pay a loss as long as the manufacturing condition existed.

• increased annuity

  A type of annuity where the payments made by the insured increase at a set rate during the life of the policy.

• increased limits table

  With respect to liability insurance rates, most rates or loss costs are developed based on a standard limit of insurance purchased by the insured (most often $25,000). The increased limits table provides information on the factors that allow an increase in the base rate when higher limits are requested. Increased limits must be actuarially sound with credible data and statistics to support those factors, as are the rates that are developed.

• increasing term insurance

  A term insurance policy where the death benefit increases during the term of the policy. The increase may be straight line, on a stair-step basis, or increase according to an index such as the CPI (consumer price index) or other inflationary measure.

• incurred but not reported (IBNR)

  The liability for future payments on losses which have already occurred but have not yet been reported to the insurer. This definition may be extended to include expected future development on claims already reported. (See loss reserve.)

• incurred expense

  A cost of administering insurance which has happened, whether or not paid.

• incurred loss ratio

  Incurred losses divided by earned premiums.

• incurred losses

  1) Events which have happened and which will cause claims to be made to insurers. 2) The total amount shown in an insurer's operating statement as its obligations for policy claims, whether paid or not, during a given period (usually one year). The composition of incurred losses in such a total is derived by the following formula: losses paid during the year, plus loss reserves existing at the end of the year, minus loss reserves existing at the beginning of the year. (See loss reserve.)

• indemnify

  To pay for loss suffered or to reimburse.

• indemnitor

  In surety bonds, a person or company entering into a written agreement with a surety to hold that surety harmless from any loss or expense it may incur on a bond issued on behalf of another.

• indemnity

  Indemnity is when the person or party suffering a loss is paid or reimbursed for that loss, the purpose being to restore that party to the condition that was present prior to the loss. In a life insurance contract, the payment made to a beneficiary is called indemnity.

• indemnity agreement

  A contract agreeing to restore an injured party to the condition that was present prior to the occurrence of injury or loss.

• indemnity bond

  A bond to pay or reimburse an obligee should the principal fail to perform as agreed upon or fail to fulfill the terms of the contract or commitment as named in the bond.

• indemnity company

  Usually a company which confines its writings to the classes defined as "casualty," as opposed to fire or marine. The term is becoming meaningless in these days when fire companies are writing casualty lines and indemnity or casualty companies are writing fire lines.

• independent adjuster

  One who adjusts losses on behalf of companies as an independent contractor instead of as an insurer's employee (staff adjuster) or a representative of the policyholder (public adjuster).

• independent agency system

  The contracting of insurance companies with agents who are independent contractors to effect property-Sliability insurance, issue policies, own the expiration records thereof and, in general, to represent the companies in their communities. Agents may represent more than one company. The system has reached its highest development in the United States; hence, it is often called the "American" agency system.

• independent agent

  A property-casualty insurance producer who sells insurance as an independent contractor while representing one or more insurers of that agent's choosing on a commission basis, and who owns the expiration records of customers served. The independent status is further illustrated by the selling functions performed, which are not directed by the insurer, as would be the case if the agent were an employee. Those functions include contacting prospective insureds, effecting insurance, issuing policies, collecting premiums (in many or most cases), settling some losses of small amounts, and generally representing the insurers in the agent's community as a part of the American agency system. By contrast, the direct writing insurer directs the selling functions of its agents, known as exclusive agents, and owns the expiration records. (See American agency system, direct writer, exclusive agent, agency, independent agency system, and insurance agent.)

• independent director liability

  This is coverage for an individual member of a public corporation's board of the directors. The typical coverage acts as excess over any other director and officer insurance; in certain circumstances, also provides primary protection.

• Independent Insurance Agents of America (IIAA)

  Formerly the National Association of Insurance Agents, a large trade association whose purpose is to protect the business interests of its members, who are also members of state associations. Headquarters: Alexandria, VA (Washington, DC in 1988).

• index clause

  A clause in an excess of loss reinsurance agreement which shares the effect of future inflation between the insurer and its reinsurers by adjusting the retention and limits in accordance with the movement of a designated index. Other specific indexes include Consumer Price Index, Cost of Construction Index, etc.

• indexed life insurance

  A type of whole life insurance policy whose benefit payout is determined by a set index.

• indirect damage

  Loss resulting from, or as a consequence of an insured direct loss. For example, loss of business income to a firm from direct damage to the firm's premises, loss of business income to a supplier of a firm whose premises are destroyed, or loss of income to a family from death of the family's breadwinner. (See indirect loss.)

• indirect loss

  A type of loss that does not result from direct damage of a covered cause of loss or peril but is, instead, a consequence of the direct damage loss. To illustrate, if a restaurant burns to the ground from a fire, that is the direct loss; however, the income lost because the restaurant could not operate is the indirect loss. (See consequential loss, and indirect damage.)

• individual bond

  individual bond Refers to bonding a particular public official.

• individual contract

  The opposite of a group policy or contract, the individual contract is a policy covering one specific person and that person's immediate family members.

• individual rate

  A type of insurance rate which is based on the unique characteristics of an insured or the insured's property.

• Individual Retirement Account (IRA)

  A tax deferred savings plan that has been approved by the federal government for those individuals who are not otherwise covered by an employer's retirement plan. In order to be approved and eligible for deferred tax treatment, strict eligibility criteria are mandated.

• Individual Risk Premium Modification Rating Plan (IRPM)

  A program whereby equitable rates or premiums can be developed for large premium package risks by taking into consideration factors likely to affect future losses and expenses. Expense modification is based on the fact that handling costs for large risks may vary from the average. Risk modification recognizes special characteristics, other than those considered in the determination of the basic rate, which would improve the risk. This flexible rating approach, in effect for casualty insurance for many years, was extended to the remaining property and liability lines in 1966.

• industrial health insurance

  Health insurance usually written in small amounts, the premium for which is payable in frequent installments (usually weekly or monthly) and collected by an agent known as a debit agent. The payment frequency and collection facilities were designed decades ago to accommodate workers at industrial factories, who were paid weekly. Because of the expense and time involved, this coverage is rarely used. (See industrial insurance, and industrial life insurance.)

• industrial insurance

  Insurance (usually life or health insurance) written in small amounts, the premium for which is payable in frequent installments (usually weekly or monthly) and collected by an agent known as a debit agent. The payment frequency and collection facilities were designed decades ago to accommodate workers at industrial factories, who were paid weekly. Because of the expense and time involved, this coverage is rarely used. (See industrial health insurance, and industrial life insurance.)

• Industrial Insured

  A commercial operation that has a full-time employee who is responsible for acquiring insurance and risk management services. Typically a company must have more than 25 employees and have insurance premiums that exceed $25,000.

• industrial life insurance

  Life insurance usually written in small amounts, the premium for which is payable in frequent installments (usually weekly or monthly) and collected by an agent known as a debit agent. The payment frequency and collection facilities were designed decades ago to accommodate workers at industrial factories, who were paid weekly. Because of the expense and time involved, this coverage is rarely used. (See industrial health insurance, and industrial insurance.)

• industry loss warranty

  This is a tool that is used as a method to protect against catastrophic events. Payment of the warranty is made based upon whether the insurance industry as a whole suffers a certain level of loss due to a natural catastrophe such as earthquake or windstorms. An established index is used for the payment trigger.

• infidelity

  Refers to dishonest acts of employees.

• inflation guard endorsement

  Language which may be added to a homeowners policy for an additional premium to extend the coverage by increasing the limits of liability quarterly (by 1%, 2%, or some fixed amount) to offset inflation.

• inherent explosion

  Explosion caused by the normal processes of a risk (as opposed to one caused by external causes), such as a dust explosion in a grain elevator.

• inherent vice

  The characteristics of any physical property which are expected to cause deterioration or damage to that property without outside help, e.g., milk sours eventually, and wooden houses depreciate over time. Excluded by most insurance policies.

• initial premium

  A tentative charge made at the start of certain policies which is subsequently adjusted, at expiration or after certain information has been developed. Also known as deposit premium.

• injury

  An act which damages or destroys a person or property.

• injury-in-fact theory

  An event is recognized as an insurable loss (or occurrence) based upon the loss circumstances as reviewed by a court, with that court having authority to apply whichever trigger theory it decides is appropriate. (See continuous trigger theory, exposure theory, and manifestation theory.)

• inland marine

  1) The insurance of property (generally on an "all-risk" basis) that is in the course of transportation or is of such a nature that it may easily be transported. Also includes some risks at fixed locations considered "instruments of transportation or communication," such as bridges, tunnels, neon signs, and street clocks, etc., which were accepted as inland marine by custom. 2) Originally meant the insurance of goods in transit "inland," instead of at sea, by underwriters who specialized in ocean marine insurance.

• innkeepers legal liability

  Insures hotel/motel operators against their legal responsibility to care for the property of their guests. This coverage is now typically written under a commercial crime coverage form.

• innocent capacity

  The amount of insurance offered the public by inexperienced insurers or reinsurers.

• innocent insured (doctrine)

  A concept (that still appears statutorily in some jurisdictions) that preserves one person's right to recover under an insurance contract if the insurance coverage involved a loss that was deliberately caused by another insured. However, in order to recover, the affected insured must not have had any part in either deceiving the insurer or causing the loss. Also, an innocent insured's status may (depending on the jurisdiction) be voided if an insurance policy contains a provision that specifically excludes coverage for non-complicit parties.

• innocent spouse

  (See innocent insured (doctrine).)

• inside buildup

  The cash value that builds in a life insurance policy that (for most policyholders) escapes taxation until withdrawn from the policy.

• inside limits

  Sub-limits set within some types of policies, that limit specified benefits or types of losses to less than the policy limit.

• insolvency clause

  Required by law to be included in reinsurance contracts, this clause holds the reinsurer liable for payments under a treaty, even though the reinsured company in that treaty has become insolvent.

• insolvency fund

  An amount of money assessed certain insurers in a given state to reimburse policyholders and claimants of an insolvent insurer in that state. The fund may be created before an insolvency occurs (pre-assessment, as in New York) or afterward (post-assessment), and virtually all states now have such protection. Also called a guaranty fund.

• inspection

  A visual or physical examination of a property to determine whether it is an acceptable risk for insurance. (See credit report.)

• inspection bureau

  1) An organization which inspects risks and makes surveys for the use of companies in their underwriting. 2) In some states, a rating bureau.

• inspection reports

  Physical inspection of property ordered by underwriters to determine if property qualifies for insurance coverage.

• inspection slip

  The report of an inspector on the characteristics of the insured property.

• inspector

  One who looks at risks and reports on their acceptability for coverage. In marine insurance, an inspector is a "surveyor."

• installation insurance

  Protection for the installer of equipment against loss by specified perils or on an "all-risk" basis to property in the course of installation.

• installment premium

  The payment of certain premiums may be made by the policyholder in installments.

• installment refund option

  A settlement option in life insurance that pays a life income to the beneficiary. If the beneficiary dies before the original benefit is fully paid then the remainder (the refund) is paid to the contingent payee.

• installment sales floater

  Protects the seller of property in possession of the purchaser (for which payments by the purchaser have not been completed) against loss caused by insured perils to the seller's remaining financial interest. Also known as conditional sales floater.

• institute cargo clauses

  Refers to a standard set of marine cargo policy coverage conditions that are found in most such forms; they come in several packages (normally clauses A, B and C) with "A" offering the broadest coverage. Different clauses are applicable according to the type of cargo involved with a given situation.

• Institute for Business and Home Safety

  An organization composed of and funded by insurers and reinsurers. It provides information and research on methods to minimize the impact of property losses (including those caused by natural catastrophes). It promotes and suggests practices for improved construction and maintenance. Headquarters: Tampa, FL.

• Institute for Global Insurance Education

  A global association of independent, not-for-profit insurance institutions that promote the dissemination of education to insurance professionals, creates networking opportunities and assists in developing insurance programs at all levels. The association's members may be individuals as well as corporate entities. Headquarters: Malvern, PA

• institutional investors

  Sizable investors who invest funds that have been entrusted to them. One common example is insurance companies that invest allowable premiums and reserves to earn additional income while those funds are not currently needed to pay claims.

• institutional policy

  A package policy forming a part of the special multiperil policy program applicable to institutional buildings (such as buildings occupied by educational, religious, sanitary, charitable, governmental, or nonprofit organizations). Basically, the policy covers fire, allied lines and liability, and can be extended for most additional required coverages such as boiler and machinery, burglary and robbery, fidelity, business interruption, etc.

• instrumentality

  The means or methods by which functions or policies are carried out. The tools or implements used to accomplish a purpose.

• insurability statement

  Life insurance underwriting may take time. If weeks or months have elapsed since the applicant completed the application, the insurer may require the applicant to sign an insurability statement before the policy is delivered that says that health statements and other statements made on the original application are still correct.

• insurable interest

  A potential for financial loss from a certain event which a person must have before acquiring insurance against that event. The event may be illustrated by the following: the destruction of property owned (in fire insurance); the incurring of legal liability for negligence in causing loss to others (in liability insurance); the compliance with law (in workers compensation insurance); the loss or impairment of human life value (in life insurance, disability insurance, and annuities); or expenses fortuitously incurred (in hospitalization insurance). In life insurance, the applicant of the policy must suffer a financial loss, or the loss of love and affection, by the death of the insured. (See interest.)

• insurable risk

  Any subject matter eligible for insurance. While the law does not specify minimum criteria (except occasionally by regulation that the size of any risk insured and the amount of premium writings by an insurer be related to its financial strength), and textbook writers disagree on essential criteria, the following are probably desirable: 1) Enough relatively similar exposure units should be insured to permit the operation of the Law of Large Numbers (unless reinsurance is used by the insurer) 2) Losses insured should be measurable and accidental to the insured (to prevent intentional losses) 3) Risks taken should not threaten the insurer with a catastrophe (unless reinsurance is used) because of their centralized location or other condition.

• insurance

  The transfer of risk, or chance of loss from one party (the insured) to another party (the insurer), in which the insurer promises, usually specified in a written contract, to pay the insured or others on the insured's behalf, an amount of money, services, or both, for economic losses sustained from an unexpected (accidental) event, during a period of time for which the insured makes a premium payment to the insurer. (See insurer.)

• Insurance Accounting and Systems Association (IASA)

  An international organization to promote the study, research and development of modern theory, practice and procedure as applied to insurance accounting and statistics. Headquarters: Durham, NC.

• insurance advisory organization

  An independent organization that works with and on behalf of insurers that purchase or subscribe to its services.

• insurance agency

  A business office whose function is the sales of insurance and insurance products. An agency may be owned or run by a general agent, manager, independent agent or company manager. The principal is responsible for the statements and actions of agents performing within the scope of authorization specified in the agency agreement. (See captive agent, general agent and independent agent.)

• insurance agent

  One who has the authority to act for another. In insurance language, an agent is the person who sells insurance by contacting the policyholder. By contract and by law, the agent is endowed with many of the powers of the company itself. There are various different types of agents, based upon the contractual relationship with the insurer they represent. (See independent agent, exclusive agent and broker.)

• insurance agents and brokers errors and omissions insurance

  Protects an agent or broker against claims for negligent acts, errors or omissions in the conduct of business.

• insurance archaeology

  A process, similar to an audit, for researching internal and external sources to reconstruct and document an organization?s history of insurance coverage. This is particularly important to assist with liability arising from past years or even decades, such as damage related to environmental liability or asbestos.

• insurance broker

  A licensed, legal representative of the insured who negotiates with underwriters on behalf of the insured. The broker receives a commission from the insurer (underwriter).

• insurance call center

  In its simplest form, a physical site used by an organization (insurer) to handle large volumes of incoming and outgoing phone calls involving customer service, marketing, and other business transactions. Such centers are highly dependent upon sophisticated data management and technology. Also called contact centers.

• insurance commissioner

  A state official charged with enforcing the state's laws governing insurance, in some states appointed by the governor, and elected in others. Also referred to in some states as superintendent of insurance or director of insurance.

• insurance company

  An organization chartered by state law to operate as an insurer in some of the principal types of insurance: life, fire, marine, casualty, and surety. Reciprocals and Lloyd's syndicates permitted under many state laws are not companies, nor are they corporations.

• insurance contract

  The written contract or insurance policy between the insured and the insurer detailing the coverage provided, exclusions and limitations, conditions in case of loss, and other details pertinent to the terms of the agreement.

• insurance contract parts

  Refers to the four general sections of declarations.

• Insurance Crime Prevention Institute (ICPI)

  Serves casualty insurers for the investigation of fraudulent insurance claims other than for accident and health or workers compensation, and provides a deterrent to such losses. Headquarters: Westport, CT.

• Insurance Data Management Association

  The Insurance Data Management Association is an organization dedicated to encouraging professionalism in the insurance-related, data management area. The association creates and maintains training material and courses and also tests data management competency through its own certification program. Headquarters: Jersey City, NJ.

• insurance department

  That department of a state government which has charge of enforcing the laws governing insurance. Usually run by either an elected or appointed official called the superintendent or commissioner of insurance.

• insurance derivatives

  A contract under which an insurer is entitled to a substantial cash payment that is contingent upon another event, typically being a certain level of loss experienced by the total insurance industry due to a specified event (such as an earthquake or a hurricane). The underlying activity, or trigger, must occur within a certain time period.

• insurance examiner

  A representative or employee of a state insurance department delegated the task of verifying a company's records and procedures to determine that the law has been observed.

• insurance exchanges

  Exchanges established by law in New York, Illinois and Florida (and considered elsewhere) to provide facilities at a fixed location patterned after Lloyd's of London. Through insurance exchanges, buyers can secure insurance from insurers generally in the form of underwriting syndicates, which are members of the exchange. (See New York Insurance Exchange, bourse and Lloyd's of London.)

• insurance forensics

  insurance forensics A process, similar to an audit, for researching internal and external sources to reconstruct and document an organization?s history of insurance coverage. This is particularly important to assist with liability arising from past years or even decades, such as damage related to environmental liability or asbestos.

• insurance fraud

  Typically involves illegal attempts to secure insurance benefits by submitting false claims, selling illegal or phony coverage, or stealing insurance premiums.

• Insurance Guaranty (Insolvency) Act

  Legislation enacted in many states providing for assessments on insurance companies to reimburse policyholders and claimants of insolvent insurers. (See guaranty fund.)

• Insurance Hall of Fame

  An institution at Ohio State University recognizing individuals who have made outstanding contributions to insurance thought and practice anywhere at any time.

• Insurance Information Institute

  A public relations organization supported by several hundred property and liability insurance companies. Provides extensive literature to the public and to high schools throughout the country in furthering its purpose of improving public understanding of property and liability insurance. Headquarters: New York, NY.

• insurance insolvency act

  Legislation enacted in many states providing for assessments on insurance companies to reimburse policyholders and claimants of insolvent insurers. (See guaranty fund.)

• Insurance Institute for Highway Safety

  An independent, nonprofit scientific organization established and supported by the insurance companies. Its research identifies, evaluates and develops ways to reduce human and economic damage resulting from the use of motor vehicles. The institute also seeks to make the results of its studies known to the widest possible audience and provides substantial input to federal policymakers. Headquarters: Washington, DC.

• Insurance Institute of America, Inc. (IIA)

  An educational organization which sets standards and gives examinations for diplomas or fellowships in general insurance, loss adjusting, underwriting, management and risk management. Headquarters: Malvern, PA.

• insurance management

  The method used to handle a specific risk's exposure to loss by almost exclusive use of insurance coverages and policies, as well as the control and management of the insurance policies purchased.

• Insurance Marketing Communications Association (IMCA)

  A trade association of those in charge of insurance company advertising, marketing and public relations functions. Formerly known as the Insurance Advertising Conference.

• insurance policy

  The written contract or insurance policy between the insured and the insurer detailing the coverage provided, exclusions and limitations, conditions in case of loss, and other details pertinent to the terms of the agreement.

• insurance purchasing group

  A coverage alternative to using the traditional insurance market, it refers to a number of parties with similar coverage needs who incorporate into a group to buy liability insurance. Such arrangements are authorized by the Federal Liability Risk Retention Act of 1986.

• insurance rating system

  The price per exposure unit which is determined by adjusting the prospective loss costs for expenses, profits and contingencies.

• Insurance Regulatory Information System (IRIS)

  Formerly known as Early Warning System or Early Warning Tests, financial ratio and performance criteria designed by the National Association of Insurance Commissioners to identify insurance companies which may need close surveillance by state insurance departments.

• insurance representatives

  The collection of professionals that represents the insurance industry in the sales and field positions, such as agency, solicitors, brokers, producers, consultants, etc.

• insurance retention group (IRG)

  An insurance company organized by a group of businesses or institutions in the same line of business to provide liability insurance for the owners or organizers. As permitted by federal legislation passed in 1986, such a group is eligible to provide insurance for its members in any state after being licensed in any one state. Also known as risk retention group.

• insurance scoring

  insurance scoring Refers to assigning a numerical score to a number of attributes in an individual's financial history in order to evaluate his or her desirability as a customer or loan prospect. Due to a discovery of a correlation between credit scores and loss probability, credit scores have been modified for use as an underwriting tool by insurers.

• Insurance Services Office (ISO)

  A corporation which provides a wide variety of services on a national basis. Among its operations are rating, statistical, actuarial, and policy form services for all classes of property and casualty businesses. The corporation also functions as an insurance rating organization and, where applicable, as an advisory organization or as a statistical agent. Headquarters: New York, NY. (See rate card.)

• Insurance Society of New York, Inc.

  A nonprofit organization founded in 1901 for educational purposes. Its earliest contribution was the formation of its insurance library, today the world's largest collection of insurance literature. In 1917, it started insurance instruction, which in 1947 became The School of Insurance, which was converted in 1962 to the fully accredited degree-granting institution, The College of Insurance.

• insurance superintendent

  A state official charged with enforcing the state's laws governing insurance, in some states appointed by the governor, and elected in others. Also referred to in some states as commissioner of insurance or director of insurance.

• insurance to value

  1) In property insurance, a clause requiring the insured to maintain insurance at least equal to stipulated percentage of value in order to collect partial losses in full. If the insurance is less than the minimum required, that proportion of the loss will be paid which the amount of insurance carried bears to the amount which should have been carried. Symbolically: Insurance Carried x Loss = Payment (subject to policy limit) Insurance Required 2) In major medical insurance, the clause that specifies the percentage of a loss which the company will pay and the percentage which the insured will bear (e.g., 80?20, 75?25).

• Insurance Training Professional

  A designation created by the Society of Insurance Trainers & Educators (SITE) to acknowledge excellence in professional trainers. Headquarters: San Francisco, CA

• insurance trust

  One of any number of trusts into which life insurance is placed during the lifetime of the insured or into which the proceeds are payable upon death of the insured.

• insurance wraps

  A general contractor is typically the party responsible for providing primary insurance coverage on the contract. This coverage must include protection for the work done by and the exposures resulting from the use of subcontractors. This includes coverages such as general liability and workers compensation but may also include business auto exposures. In order to obtain the necessary coverage, insurers may have to develop special programs and manuscript or tailoring endorsements to clarify the extent of the protection and who/what it encompasses. It is sometimes referred to simply as a "wrap."

• insured

  The person(s) or party(ies) protected by an insurance policy, synonymous with assured. Some property-liability policies distinguish between the named insured and other insureds. (See policyholder and named insured.)

• insured contracts

  Contracts that are considered necessary to conducting business and are covered as part of premises-operations liability coverage.

• insured loss ratio

  Term used by an insurer when evaluating what portion or percent of that insured's losses are reinsured as compared to earned premium.

• insured peril

  Those causes of loss such as fire, explosion, or accident that are covered by the insurance contract. In many standard property insurance policies, peril is now called cause of loss.

• insurer

  The insurance company or other organization such as a syndicate, pool or association providing insurance coverage and services. (See insurance.)

• insuring agreement

  The portion or section of an insurance policy that details what is covered by the contract for causes of loss or perils, subject to other provisions such as exclusions, limitations and conditions.

• insuring clause

  That portion of a policy which describes the risk which the insurer has agreed to assume.

• insuror

  A term adopted and used by some agents to enhance their public image as persons who represent insurers in effecting contracts of insurance between insurers and insureds. As such, insuror may be considered a misnomer when confused with insurer, which is recognized in statutory law as the party to an insurance contract which undertakes to indemnify for losses incurred by, or to provide services to, the other party to the insurance contract (the insured). Thus, an insurer is a risk-bearing party in an insurance contract, while an insuror is not. Two state associations of insurance agents, Tennessee and Colorado, use insuror in their title.

• integrated disability management (IDM)

  A cost management program that combines (integrates) management of a disability (either work-related or non-work-related) claim with that same loss administration. The method focuses upon quality, individual health care and flexibility in options to return an ill/injured worker back to work in an appropriate job.

• integrated financial services

  integrated financial services Typically refers to the trend of consumers seeking a broader range of financial services such as banking, brokerage and insurance from a single provider. This approach is also referred to as integrated financial services.

• integrated program

  Refers to the combination of several lines of insurance coverage into a single program that, typically includes a single, high, aggregate limit. If designed properly, it uses premium dollars and available coverage limits more effectively and reduces coverage gaps and overlaps.

• Integrated Risk Management

  (See enterprise risk management.)

• integration

  Regarding an insurance program, the process of packaging different products while assuring that they do not provide duplicate coverages.

• intentional injury

  Depending upon the type of insurance: 1) injuries that are caused deliberately, or 2) self-inflicted injuries, either of which is usually considered excluded by its respective policy type.

• intentional loss

  Losses that were intentionally caused, most often occurring with intent to collect insurance benefits or defraud the insurer.

• inter vivos trust

  inter vivos trust A trust that is arranged during the creator's lifetime.

• intercompany arbitration

  When two or more insurers are involved in the settlement of a claim and those insurers are unable to agree as to the amounts and shares owed by each, arbitration may be involved in an attempt to settle the dispute out of court. When this happens, the matter is submitted to disinterested parties for solution. One party is appointed by each insurer, and the appointed arbitrators then pick an "umpire." Resolution occurs when two or more parties come to an agreement. The decision is binding on all parties involved.

• intercompany reinsurance

  intercompany reinsurance A reinsurance arrangement between two or more companies that are affiliates of the same major insurance company group. It is a strategy for spreading a company's total risk more evenly.

• interest

  The subject of insurance such as the property insured or the loss against which the insurance company agrees to indemnify. (See insurable interest.)

• interest option

  When a life insurance policy is called upon to pay the beneficiary the face amount after the death of the insured, some policies offer a settlement option to the beneficiary, whereby the beneficiary leaves the principal with the insurer to be invested or to accrue interest. That interest or investment income is paid periodically to the beneficiary until the beneficiary withdraws the balance.

• interest policy

  A policy which insures someone who has an interest in the described property, but who need not be the holder of full title to it. The New York standard form of fire policy adopted in 1943 is an interest policy, whereas the older forms were not.

• interest sensitive whole life insurance

  Whole life insurance that pays interest on cash value according to the variable investment results of the insurer. Traditional whole life pays a guaranteed cash value that does not participate in favorable or unfavorable insurer investment results.

• interim rates

  Temporary insurance prices, specified by a state insurance department for an insurer which has no legally effective rates otherwise, as a result of the commissioner's disapproval of its rates. The commissioner may require that a specified portion of premiums received during such interim period be placed in escrow until new rates become effective.

• interinsurance exchange

  A group of persons who agree to share each other's losses. An unincorporated mutual. Also known as "reciprocal exchange."

• interline endorsement

  In standard commercial insurance, an interline endorsement is one that applies across the lines of insurance to all coverage parts. Most often these types of endorsements have to do with general items, such as cancellation or nonrenewal provisions or the effective time of the policy.

• interlocking clause

  A reinsurance treaty provision. The clause reassigns loss or damage from a single occurrence to two or more reinsurance contracts.

• interlocutory appeal

  Refers to a district court level case that is presented to an appellate court during, rather than after, the case hearing. It is done in situations that will obviously be subject to review.

• intermediary

  One who arranges reinsurance between companies. A reinsurance broker.

• intermediary clause

  A contractual provision frequently used in reinsurance, in which payments (of premium) by the ceder company (the issuer of the original insurance policy) to the broker (the intermediary) discharge the ceder's debts, whereas payments (for losses) by the reinsurer to the broker do not discharge the debts of the reinsurer until payments have actually been received by the ceder.

• internal replacement

  Replacement is the canceling or lapsing of one life insurance policy for another. An internal replacement is when a policy is canceled and replaced by another policy with the same insurer.

• International Association of Health Underwriters

  A trade association composed of insurance companies writing health insurance. The purpose is to foster proper practice in the marketing of these products and to create good public relations.

• International Cooperative and Mutual Insurance Federation

  This group is a global association with membership consisting of cooperative and mutual insurers that provides conferences, networking opportunities, research and publications. Headquarters: Altrincham, United Kingdom.

• international insurance coverages/exposures

  Business coverage for companies that conduct business outside the USA. The scope of coverages available may include but are not limited to: premises and product liability, automobile liability, workers compensation and employers liability, property including transit, kidnap and ransom, confiscation and civil war, crime, business interruption, difference in limits and conditions, and endemic disease.

• International Insurance Society

  A globalwide membership of insurance entities that was founded in 1965. The group encourages networking, academic pursuits (particularly on international insurance issues) and education. It sponsors annual meetings, funds research projects and awards (including an international insurance hall of fame). Headquarters: New York, NY.

• international liability policy

  (See international insurance coverages/exposures.)

• International Maritime Bureau

  The International Maritime Bureau is a nonprofit division of the International Chamber of Commerce (ICC). The organization's focus is on providing information to facilitate safe maritime trading, including operation of its Piracy Reporting Center (that publishes information on pirate activity worldwide). The IMB also investigates maritime-related crime and fraud activity. Headquarters: Paris, France.

• interrogatory

  A question such as is found in the NAIC Annual Statement or as is addressed by one party to another party in a lawsuit.

• interstate commerce

  The Constitution of the United States places the regulation of commerce between the several states (interstate commerce) under the supervision of the federal government. Until the decision of the Supreme Court in 1944 in the Southeastern Underwriters Association Case, insurance had been held not to be commerce and therefore not interstate commerce. That decision changed the entire outlook, so that today the business is subject to such regulation as the Congress chooses to exert, "to the extent that the states are not regulating insurance." (See Southeastern Underwriters Association (SEUA), and S.E.U.A. Case.)

• Interstate Commerce Endorsement To Motor Truck Cargo Policies

  (ICC Endorsement) (ICC Endorsement) In inland marine insurance, this is the provision which broadens the policy coverage to conform to Interstate Commerce Commission requirements with respect to a carrier's liability for customers' goods.

• Interstate Insurance Compact

  An important modernization initiative that benefits state insurance regulators, consumers and the insurance industry. The Compact enhances the efficiency and effectiveness of the way insurance products are filed, reviewed and approved allowing consumers to have faster access to competitive insurance products in an ever-changing global marketplace.

• Interstate Insurance Product Regulation Commission

  This is the regulatory arm of the multistate Interstate Insurance Compact. It oversees insurance product filings, develops filing guidelines and standards and develops uniform product and rate reviews to facilitate insurance product introduction and approval on a multistate basis. Headquarters: Fairfax, VA.

• inventory

  A list of one's possessions, usually personal, as distinguished from "real" possessions. Also the stock in trade of a business.

• investment income

  That part of a company's income derived from its invested assets before realized capital gain or loss, as opposed to its underwriting (risk-taking) activities. (See capital gain.)

• involuntary associations

  Those industry or industry-related organizations operating under an industry or governmental program to supply insurance needs for what is purported to be an unfilled or residue market.

• involuntary costs

  Costs borne by insurers related to their mandated participation in a state?s insurance pools for covering exposures that are not handled by the voluntary market.

• IRA--Individual Retirement Account

  A tax deferred savings plan that has been approved by the federal government for those individuals who are not otherwise covered by an employer's retirement plan. In order to be approved and eligible for deferred tax treatment, strict eligibility criteria are mandated.

• IRG--insurance retention group

  An insurance company organized by a group of businesses or institutions in the same line of business to provide liability insurance for the owners or organizers. As permitted by federal legislation passed in 1986, such a group is eligible to provide insurance for its members in any state after being licensed in any one state. Also known as risk retention group.

• IRIS--Insurance Regulatory Information System

  Formerly known as Early Warning System or Early Warning Tests, financial ratio and performance criteria designed by the National Association of Insurance Commissioners to identify insurance companies which may need close surveillance by state insurance departments.

• IRMI

  A publisher of reference material for the insurance industry. Founded as International Risk Management Institute, Inc. Headquarters: Dallas, TX

• IRPM--individual risk premium modification rating plan

  IRPM--Individual Risk Premium Modification Rating Plan A program whereby equitable rates or premiums can be developed for large premium package risks by taking into consideration factors likely to affect future losses and expenses. Expense modification is based on the fact that handling costs for large risks may vary from the average. Risk modification recognizes special characteristics, other than those considered in the determination of the basic rate, which would improve the risk. This flexible rating approach, in effect for casualty insurance for many years, was extended to the remaining property and liability lines in 1966.

• irrevocable beneficiary

  A type of life insurance policy that does not allow a beneficiary to be changed without the beneficiary's written consent. (See absolute beneficiary.)

• ISO--Insurance Services Office

  A corporation which provides a wide variety of services on a national basis. Among its operations are rating, statistical, actuarial, and policy form services for all classes of property and casualty businesses. The corporation also functions as an insurance rating organization and, where applicable, as an advisory organization or as a statistical agent. Headquarters: New York, NY. (See rate card.)

• issued business

  Those policies that have been ordered or for which the request for coverage has been ordered by the insured, and the policy has been issued by the insurer, but has not yet been delivered to or accepted by the insured.

• ITP

  (See Insurance Training Professional.)
• Back to Top

• jacket

  The outer covering of an insurance policy, containing the declarations, insuring agreements, exclusions, conditions, and provisions to the policy, including any endorsements or riders.

• jettison

  In ocean marine insurance, the voluntary throwing overboard of part of the cargo or gear of the vessel to lighten the load and save the vessel from conditions of stress at sea. Because the jettison is done for the entire venture, the owner of the jettisoned goods is entitled to a general average, meaning the loss is shared by all interests in the voyage, including the owners of the vessel and freight as well as the owners of the cargo not thrown over. (See general average, and sacrifice.)

• jewelers block insurance

  Broad policies insuring jewelers against all loss to their stock in trade. Generally considered to be a type of inland marine insurance.

• jewelers package policy

  A special package policy developed for jewelry risks containing a package of coverages including crime both on and off-premises, "all-risk" cause of loss on the building and business personal property, as well as stock. Most contain coverage for business income and liability.

• jewelry floater

  An inland marine policy insuring jewelry wherever it may be.

• joint and several liability

  This type of liability occurs when more than one party is involved in a contract and where both joint liability (that of all the parties to the contract) and several liability (that of each individual party to the contract) promise the action in the contract. If the terms of the contract are not fulfilled, the injured party has the ability to seek a legal remedy from all the parties involved (joint) or each individual party(several).

• joint and survivor annuity

  A type of annuity that is most often written for a married couple. As long as both are alive, a period benefit payment is made. When one dies, the payment amount may change; however, payments still continue for the survivor.

• joint and survivorship option

  A life insurance settlement option that pays benefits to two or more persons. Benefits payments cease when the last payee dies.

• joint control

  When more than one party to a contract or agreement has equal control of the funds or interest in the designated venture. In the case of bond insurance, it is when the entity and the surety both have legal control of the funds or property used as collateral to a bond.

• joint credit life insurance

  Used in credit life insurance to cover more than one person, i.e., husband and wife as cosigners. Will pay off the remainder of the loan (the benefit) to the lender upon the death of either or any cosigner to the loan.

• joint insured

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

• joint life and survivor annuity

  A combination type of life insurance policy that converts to an annuity and is most often issued to a married couple. Payments are made until both are deceased.

• joint life and survivor insurance

  A type of life insurance coverage for more than one person. Benefits are not paid until the last of the covered insureds has died. Lower premiums exist on this policy than on individual life policies because of the potential for a much longer period of time that should normally exist before the policy is called upon to make benefits (all insureds must be deceased).

• joint life insurance

  A type of life insurance policy covering more than one insured. The death benefit is paid when either one of the insureds dies. This is a more costly type of life insurance because payments are paid as soon as any one of the insureds dies, increasing the chances for an early payout of the benefits.

• joint life insurance

  Covers two lives and pays on the death of the first.

• joint underwriting associations (plans) (JUA)

  An association of insurance companies formed with statutory approval for the express purpose of providing certain insurance to the public. JUAs are usually formed because the voluntary market is unwilling to write coverage. Regulators usually allow JUAs to establish their own rates and policy forms. They may cease when the voluntary market becomes available for that line of business.

• joint venture

  An entity formed by two or more legal entities for a specific purpose for a specified period of time. Unlike a partnership, this is a temporary arrangement and it does not have to include making a profit among its motives.

• Jones Act

  A federal law designed to offer remedy and legal protection to sailors, seamen, and other maritime employees who are not covered by state workers compensation and employers liability laws. State laws do not apply to employees on wharves, docks, or navigable waters whether they be interstate or international. It allows maritime employees the ability to sue their employers or shipowners should they be injured through the negligence of that employer or shipowner.

• Jones Act coverages

  These coverages provide a version of workers compensation protection for persons who are excluded from standard workers compensation policies. Specifically, it applies to vessel, captains and crews involved in most activities whether operating in navigable waterways, in territorial waters, while in dry dock or in temporary dock, and including vessel loading/unloading, construction and repairs. The protection may be provided by a separate policy or via an endorsement to a workers compensation or a marine liability policy.

• JUA--joint underwriting associations (plans)

  An association of insurance companies formed with statutory approval for the express purpose of providing certain insurance to the public. JUAs are usually formed because the voluntary market is unwilling to write coverage. Regulators usually allow JUAs to establish their own rates and policy forms. They may cease when the voluntary market becomes available for that line of business.

• Judgment or ("A") Rates

  Rates used by an insurer that are not statistically credible because adequate data does not exist for that particular coverage or class. Such rates are based on the experience and best judgment of the underwriter for each individual risk.

• judicial bond

  judicial bond A bond that is used in legal (court) matters, promising that a person will meet the obligations that arise out of the particular proceeding.

• jumbo line

  Any larger than usual line of business submitted to an insurer.

• jumbo risk

  A risk or insurance policy with very high limits of insurance.

• juvenile insurance

  Life insurance policies written for children under 16 years of age.
• Back to Top

• kart owners policy

  A special liability coverage for karts that are designed for and used in racing. Covers bodily injury and property damage legal liability arising from ownership, maintenance or use of the kart including racing, but only on private property.

• Keeton-O'Connell Plan

  A "no-fault" plan for compensating automobile accident victims for their loss of wages and medical expenses, etc., without the usual legal proof of negligence. Devised by Professors Robert E. Keeton and Jeffrey O'Connell. (See no-fault automobile insurance.)

• Kenney Ratio

  A guide or rule-of-thumb for insurers to use in preventing insolvency which suggests that property and liability insurers should not write insurance premiums equal to more than twice their capital and surplus. This guide was developed or proposed by Roger Kenney, hence the name.

• Keogh Plan

  A retirement plan for self-employed persons. Considered for tax purposes to be a qualified plan. The plan has either defined benefit or defined contribution options. A plan participant may contribute up to 20% of the net self-employment income in any one annual period, subject to a stated cap depending on which plan option has been selected.

• key employee insurance

  Insurance an employer buys on a key person within the organization to protect that employer from the financial impact that could result should that employee become ill, disabled, or die. This insurance may be life, health, or disability. Normally, the employee covered has special skills, training, management, or significant attributes that would cause the organization loss of income should that employee become unavailable and a replacement need to be hired or trained.

• kidnap/ransom insurance

  A specialty policy designed to cover the cost of ransom and related expenses, due to a person being kidnapped. Some policies may also provide varying limits of life and medical insurance coverage. Various territorial restrictions typically apply.

• Knock for Knock Agreement

  A long-term, intra-insurance company contract where each carrier agrees to handle their own insured's loss should accidents occur between their respective customers. Such arrangements allow companies to save on legal and administrative costs.
• Back to Top

• L.A.A.A.

  (See Latin American Agents Association.)

• L.A.A.I.A.

  (See Latin American Association of Insurance Agents.)

• labor and material bond

  A bond given by a contractor to guarantee payment to specific laborers and suppliers for the labor and material used in the work performed under the contract.

• landlords protective liability

  If an owner of a property leases the entire premises to others who assume full control, the chance of being held liable for accidents occurring on the premises is diminished. The owner can insure the liability as "landlords protective liability," at lesser rates than for the normal owner's, landlord's, and tenant's form of policy. This type of policy is rarely requested or used since the advent of the commercial general liability and the use of additional insured endorsements.

• landominiums

  Trendy reference to (residential) structures that are entirely owned by the unit owners but all land is owned and maintained by an association.

• lapse

  The termination of a policy for nonpayment of premium, used commonly in life insurance. If the insurance contract becomes void for other reasons, it is also said to have lapsed.

• lapse ratio

  A ratio based on the number of policies that were allowed to lapse during a specified period of time as compared to those in force at the start of that same period of time.

• larceny

  Theft of personal property; modern criminal laws include obtaining property under false pretenses and embezzlement, which common law did not include in theft.

• large deductible plans

  large deductible plans An arrangement in which the insurer pays the entire loss and the insured is then obligated to pay a huge (sometimes up to a million dollars) deductible on an installment (monthly or quarterly) basis.

• large risk

  An object of insurance, the loss of which would seriously affect the operating results of the insurer or the local insurance market over a period of years.

• laser beam endorsements

  A type of endorsement that may be attached to the claims-made version of the commercial general liability policy (CGL) for the purpose of excluding specific accidents, products, work or locations.

• laser devices

  As it relates to business or personal auto coverage, it is defined as equipment designed to detect or defeat speed or traffic control or detection devices including both radar and laser.

• laser endorsement

  A type of endorsement that may be attached to the claims-made version of the commercial general liability policy (CGL) for the purpose of excluding specific accidents, products, work, or locations.

• laser exclusion

  (See laser beam endorsements.)

• last clear chance rule

  Refers to a successful contributory negligence defense created by evidence that a claimant had a distinct chance to avert an accident; therefore, contributed to the loss.

• last surety on bond form

  last surety on bond form The surety incurs all liability for paying self-insured workers compensation claims but is released from all liability if a replacement security is posted.

• latent defect

  A defect found in a product that is not readily visible or discernible at the time of manufacture and not discovered until later, usually when in use.

• Latin American Agents Association

  An agency association acting as an advocate for the growing Hispanic insurance market. Its other primary goal is to enhance the image of Hispanic insurance professionals. Headquarters: El Monte, CA.

• Latin American Association of Insurance Agents

  An association formed as an advocate of its membership's rights. Its focus is on active participation in the communities served by its members. It promotes consumer education, network opportunities, and active involvement in community service and politics. Headquarters: Miami, FL.

• law of large numbers

  A mathematical concept which postulates that the more times an event is repeated (in insurance, the larger the number of homogeneous exposure units), the more predictable the outcome becomes. In a classic example, the more times one flips a coin, the more likely that the results will be 50% heads, 50% tails.

• lawyers professional liability insurance

  Protects an attorney or law firm against claims for negligent acts, errors or omissions in the performance of professional legal services.

• lay up warranty

  lay-up warranty A provision in a policy insuring a vessel, whereby the policyholder agrees that the vessel will not be in use at certain times.

• lay-up refund

  In a policy insuring a vessel, the company may agree to refund a certain proportion of the premium in the event that the vessel be laid up or not in use. Also applicable to automobiles.

• Layer

  A term typically found in reinsurance. i.e., the first, second and third layer of coverage. Layers represent horizontal breaks in coverage, e.g., the first layer is up to $1,000,000. The second layer is above $1,000,000 but less than $2,000,000.

• layering

  Risks that have high limits or high exposure to loss are often protected by purchasing policies to cover limits in layers. The first layer of coverage is called the primary layer and responds first to loss. When that limit has been exhausted, the second and subsequent layers respond. Because of the structure of layering, the second layer and above are normally much less expensive than the primary and, therefore, this method of protection can be cost effective.

• lead reinsurer

  Where there are multiple reinsurers, one typically will lead, negotiating conditions, terms, rates and first signs the reinsurance slip. The reinsurers who then sign below the lead reinsurer (who agree to the terms the lead reinsurer has negotiated) are called the following reinsurers.

• lead underwriter

  A concept or structure used by Lloyd's companies that signifies the underwriter whose name is the first to appear and the first to respond on a Lloyd's slip. Because the prestige of the lead underwriter may influence others to participate (or not participate), the lead underwriter must be reviewed carefully.

• Leaking Underground Storage Tank Trust Fund

  This is a federally established fund that is used to pay the costs associated with supervising and monitoring cleanups from underground storage tanks that have leaked and that threaten the environment (contaminated ground water). The fund is also used to enforce mandated cleanups and to pay the cleanup costs for abandoned sites (where the owners are unknown).

• lease

  To permit another party to take possession of one's property (real or personal) via a formal agreement and for a specified period of time.

• leased worker

  A person leased to an employer by agreement with a labor leasing firm to perform the employer's business. This does not refer to temporary workers, who are considered separately. (See temporary worker.)

• leasehold insurance

  Protection against the lessee's (tenant's) loss of value when a lease is canceled because a fire or other peril renders the property unusable, the value being the excess of the rental value of the property over the rental payable in the lease. The insurance against the loss of such value is "leasehold" insurance against whatever perils may be written. More popular with long leases in periods of rising rental values.

• ledger cost

  A life insurance accounting method used to determine the actual cost of a life insurance policy. It is determined by taking gross premiums paid for a policy and subtracting dividends and the cash value of the policy at a specified period of time. The amount remaining is the cost of the policy for that period of time.

• legacy system

  A generic reference to an organization?s computer system that is usually older than recent technology, using procedures and codes that may be obsolete, but enjoy continued use because of the time and cost involved in replacing the system.

• legal expense insurance

  Insurance covering legal costs, written generally on a group basis. Includes the indemnification through providing agreed legal services, as well as the payment of money to compensate the insured for costs. Also referred to as prepaid legal insurance.

• legal liability

  Liability imposed by law, as opposed to liability arising from an agreement or contract.

• legal reserve

  The minimum reserve required by law for an insurer for the specified line of insurance, in the jurisdiction where the insurer is operating.

• legal risk

  An exposure to loss represented by the occurrence of some court related activity.

• lender lawsuits

  Lawsuits filed by stockholders of financial institutions that alleged financial harm due to board of director decisions in approving inadequate lending policies.

• lessee

  The party that is granted or that assumes a lease obligation and who also assumes the companion rights to use the property. Under an insurance contract, a lessee acquires a separate insurable interest in the property.

• lessor

  The party who grants permission to another party to take possession of and to use property. The lessor typically also determines how the property may be used and, under insurance contracts, retains an insurable interest in the property.

• letter of credit

  1) A commitment made by an issuing bank or other party at the request of a customer to honor drafts or other demands for payment presented to the bank under the terms of the credit and, if the commitment is a documentary draft, upon presentation of the required documents of title. 2) In reinsurance, a commitment made by a bank to a reinsured which can be drawn upon to cover any of the reinsurer's liabilities to the reinsured under their reinsurance agreement.

• level death benefit option

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

• level premium annuity

  The premiums remain level throughout the accumulation phase of the annuity.

• level premium life insurance

  A life insurance policy where the premium remains the same throughout the term of the policy. Although the premium is unchanged, it is proportionately higher than actually needed by the insurer in the early years to offset the fact that the premium becomes lower than needed by the insurer in the later years.

• level term life insurance

  A term life insurance policy, whose face value does not change throughout the term of the contract. (See term insurance.)

• leverage

  Also called capitalization. Regarding insurance, it refers to the level of a carrier?s capital assets compared to their level of financial and operating liabilities, with a high leverage reflecting a reduced ability to meet, primarily, expected claims payment demands.

• leverage ratios

  Mathematical formulas used to determine the efficiency and health of an insurance operation.

• liability

  1) An obligation imposed by law or equity. 2) Money owed or expected to be owed. In an insurance company financial statement, the two columns it contains are its "assets" (or the amounts it owns) and the "liabilities" (or the amount it owes or expects to owe). Liabilities generally are defined by state statute or insurance department regulation for use in the annual statement of an insurer. The term is also defined for special purposes by other regulatory officials, such as the Securities and Exchange Commission.

• liability insurance

  Protection which pays sums that an insured is legally obligated to pay, or that the insurer has agreed to pay, as damages to others as a result of the insured's negligence. Usually provides coverage for bodily injury or damage to property of others. (See bodily injury liability insurance and property damage liability insurance.)

• liability loss exposure

  Any condition or situation presenting the possibility of a claim alleging legal responsibility of a person or business for damage or injury suffered by another party.

• Liability Risk Retention Act

  This federal act became law in 1986 as an expanded version of the 1981 Products Liability Risk Retention Act. The law facilitated the legal formation of group captive insurers (risk retention groups) as a way to encourage increased insurance availability as well as a more competitive insurance marketplace.

• libel

  1) To publish defamatory statements about another. The general distinction between libel and slander is that the first must be in writing or similar permanent form, while the latter is oral. The distinction at law is not as simple. 2) In maritime law, the word for a legal action directed against a ship.

• libel insurance

  Insurance against claims arising from purported libel, slander, defamation, etc. Bought principally by those engaged in the publishing or advertising business and radio and television. Now commonly included in the personal injury endorsement of commercial liability policies.

• liberalization clause or provision

  A provision in some standard property and casualty insurance policies that states that should the insurer, within a specified period of time such as 45 days of issue or renewal, begin offering a broadened version of the current policy and there is no premium charge for the increased coverage, then that increased coverage will apply to the current policy.

• license

  1) The certificate of authority granted by a state to insurance companies, agents, brokers, and (in some states) loss adjusters as a permit to engage in the insurance business within the state. 2) The fee or tax paid to secure a certificate of authority; for example, insurance accounting terminology refers to an insurer's "premium taxes, licenses, and fees."

• license or permit bond

  A surety bond often required by municipalities and other public authorities to indemnify them against loss from breach of any regulation or ordinance under which the license or permit is issued.

• lien

  A legally enforceable claim held by one entity on another entity's property. The claim exists until the property owner satisfies the claim.

• lien plan

  A life insurance plan offering coverage on substandard insureds at a standard premium and giving standard coverage, but which is issued with an outstanding lien against it to be paid off at time of payout of benefits. This type of plan is rarely used in the USA, and in some states it is illegal. It is used regularly in Canada and the United Kingdom.

• lienholder

  The person or entity that possesses a legal claim on the property of another. In insurance, it generally refers to a lender on real or personal property.

• life annuity

  A settlement option that pays a fixed and regular annuity payment for the life of the annuitant.

• life annuity with period certain

  A settlement option that pays a fixed and regular annuity payment for the life of the annuitant, but if the annuitant should die before the end of the period certain (e.g., 10 years) the remaining installments are paid to the annuitant's contingent payee.

• life care contracts

  A type of contract used most often by older adults to provide simple medical services and room and board for the remainder of the insured's life, or for a prolonged period, most often in excess of one year.

• life expectancy term insurance

  Term insurance developed and offered to an insured for the average number of years an individual of a given age is expected to live as based on mortality tables.

• life income option

  A benefit payout option available in some life insurance policies, whereby the beneficiary is able to have the benefits converted into an annuity which is based upon the individual's life expectancy and payable as long as the beneficiary is still alive.

• life income with period certain option

  A benefit payout option available in some life insurance policies, where the beneficiary is able to have the benefits converted into an annuity which is based upon the individual's life expectancy and payable as long as the beneficiary is still alive. This option has one additional twist; a set period of benefits is guaranteed, regardless of whether or not the beneficiary survives the entire period.

• life income with refund

  A settlement option that pays a fixed and regular annuity payment for the life of the annuitant, but if the annuitant should die before all of the original annuity proceeds are paid out, the remainder (lump sum refund) is paid to the annuitant's contingent payee.

• life insurance

  The promise to pay at the death of the insured, or at another determined time if earlier, an amount larger than the accumulated value of the consideration paid for the promise.

• life insurance trust

  A life insurance policy that has a trust named as the beneficiary instead of an individual. The trust then makes payouts and disbursements of funds based upon the terms and conditions that the trust was formed under.

• life maintenance contracts

  Specially designed life, health and disability insurance policies, where conditions are set in the policy that the insured maintain a specific type of lifestyle in order to collect coverage. Most common are nonsmoking, nondrinking, or abstinence from substance abuse conditions, or guarantees of weight controls or exercise.

• lifetime disability benefit

  A disability benefit providing income payments to the insured as long as the insured is disabled.

• lifetime maximum

  The most in benefits a health insurance policy will pay for the life of a participant.

• lightning clause

  A clause formerly attached to a fire insurance policy extending the coverage to include damage done by lightning. Since the fire policy now covers lightning damage, the term is of historical interest only.

• limit or limit of liability

  According to the terms of a given policy, the most an insurer will pay for any one loss. (See aggregate limit.)

• limitations

  When a policy contains limitations or exceptions to coverage otherwise insured by the contract.

• limited coverage policy

  Often called a cancer policy because it covers only one or more dread disease: cancer, heart disease, or other major malady. (See also cancer policy.)

• limited health service plan

  A health insurance plan that provides only specific types of services or areas of medical specialty, such as a plan for mental illnesses or substance abuse rehabilitation.

• limited liability company

  limited liability corporation A hybrid between a partnership and a corporation. The operation of the limited liability company is handled by managers on behalf of members who, on one hand, have the protection of a corporation in that personal assets are protected and only company assets can be assessed. On the other hand, the income and profit that is earned by the limited liability company is not taxed against the company but is the obligation of the members as individuals.

• limited life insurance policy

  Life insurance policies that provide benefits only if the insured dies of a specified type of illness, injury or disease, such as cancer.

• limited risk health insurance policy

  A limited type of health insurance that usually has very low limits and limited benefits; it is often a Medicare supplement.

• limited-payment life insurance

  A type of life insurance policy for which the insured pays a premium during a limited number of years or for a specified period of time, after which the policy is paid in full. (See paid-up at age life insurance.)

• line

  1) Either the limit of insurance to be written on a class of risk which a company has fixed for itself ("net line"), or the actual amount which it has accepted on a single risk or other unit ("gross line"). 2) A class or type of insurance (fire, marine or casualty, among others), also known as line of business. 3) The word "line" in reinsurance usually pertains to surplus reinsurance and means the amount of the reinsured's retention in regard to each risk. Thus, reference to a "two-line" reinsurance treaty pertains to a treaty which affords reinsurance for up to 200% of the reinsured's retention.

• line card

  1) When a risk does not appear on the Sanborn Map, fire insurance companies are accustomed to listing the details of it on a location card to determine if and when the company is offered another line on the same piece of property. 2) In an agent's office, the card on which all the insurance sold to one customer is listed.

• line guide

  A list of the maximum amounts of insurance which a company is prepared to write on various classes of risks. It usually includes a suggested net retention for each class of risk and is used to instruct an insurer's agents and underwriters. Also known as a line sheet.

• line of business (LOB)

  The general classification of insurance written by insurers, such as fire, allied lines and homeowners, among others.

• line sheet

  A list of the maximum amounts of insurance which a company is prepared to write on various classes of risks. It usually includes a suggested net retention for each class of risk and is used to instruct an insurer's agents and underwriters. Also known as a line guide.

• liner negligence

  Refers to a large vessel equipment breakdown caused by failure of ship?s owners or operating personnel to properly inspect and maintain such equipment.

• liquidation

  With respect to insurers, when an insurer becomes insolvent and is not capable of rehabilitation, the state insurance department authorizes that insurer's remaining assets to be liquidated and converted to cash. The cash funds are administered to pay outstanding claims against the insurer by both insureds and other creditors.

• liquidation charge

  With respect to annuities and mutual funds, the liquidation charge is the penalty assessed against an insured for the early withdrawal of funds.

• liquidation period

  With respect to annuities, it is that period of time in which the insurer is paying out the accumulated benefits of the annuity.

• liquidity

  The ability of an entity, insurer or insured to convert assets into cash. With reference to an insurer, the intent is to have the funds quickly available to pay claims. When the reference is to the insured, it is used in the underwriting analysis as one of the factors used to determine the financial stability of the account.

• liquor liability insurance

  Coverage where the basis for legal liability is a dram shop, liquor control, or alcoholic beverage law. The laws vary, but most provide that the owner of an establishment which serves alcoholic beverages is liable for injury or damage caused by an intoxicated person if it can be established that the liquor licensee caused or contributed to the intoxication of the person. (See liquor liability laws.)

• liquor liability laws

  State laws that hold a person or entity legally responsible for loss arising out of that party's providing alcoholic beverages to another, intoxicated party. (See dram shop laws, liquor liability insurance, and dram shop liability insurance.)

• liquor license bond

  Any bond required by federal, state or municipal authorities to comply with regulations for the handling and sale of liquor.

• litigation management

  litigation management Refers to the management of legal claims that are in the process of being arbitrated, litigated or mediated. The goal is to improve the quality of their handling and cost control. The process typically involves managing the use of internal and external legal and claims resources, facilitating communications and distributing pertinent information to interested personnel.

• livery

  A motor vehicle used for the transport of persons or goods for hire. Also known as public livery conveyance.

• livestock insurance

  Covers horses and other cattle against injury and death. Much of it is written by specialty companies which write only this one class.

• livestock mortality insurance

  Policies designed for farm or ranch operations to protect the insured against losses resulting from the death of livestock from specified causes of loss. Normally these causes of loss are fire, lightning, accident, acts of God, acts of persons other than the owner or employees, and necessary destruction for humane purposes. (See animal mortality insurance, and poultry insurance (chickens.)

• livestock transit

  Inland marine insurance designed to cover farmers and ranchers for loss resulting from the death or injury to livestock while being transported by truck, rail, air, or ship/boat.

• living benefits

  With the advent of many long-term and financially draining illnesses, insurers have responded by offering benefit options where the cash value or proceeds of life policies are paid to a terminally ill insured to provide funds for the financial burden of the illness. Cancer and AIDS are the most common illnesses provided for.

• living trust

  A trust that is arranged during the creator's lifetime.

• LLC--limited liability corporation

  A hybrid between a partnership and a corporation. The operation of the limited liability company is handled by managers on behalf of members who, on one hand have the protection of a corporation in that personal assets are protected and only company assets can be assessed. On the other hand, the income and profit that is earned by the limited liability company is not taxed against the company but is the obligation of the members as individuals.

• Lloyd's

  A group, acting as individuals, to share in making contracts of insurance. (See lloyd's of london, and american lloyd's.)

• Lloyd's American Trust Fund

  An account set up in the same manner of the institution's Premium Trust Fund, but this account is kept with a U.S. bank to respond to exposures written in that country.

• Lloyd's association

  The name given to any association of individuals or group that participates together in the same format as Lloyd's of London when assuming a risk(s).

• Lloyd's audit

  In order to make sure that the underwriters participating in coverage of Lloyd's accounts are solvent and able to meet their commitments, an annual audit is performed.

• Lloyd's broker

  A broker accredited to deal with underwriters at Lloyd's, London. Only accredited persons are permitted to place insurance with the organization.

• Lloyd's member

  Once an individual is able to show proof of a rather significant financial net worth and is willing to participate as a member by putting that net worth on the line as collateral, that individual must then be elected by the Lloyd's membership in order to become a member of Lloyd's of London. These persons are also known as "Lloyd's names." Individuals are insurers; the group is Lloyd's.

• Lloyd's name

  Once an individual is able to show proof of a rather significant financial net worth and is willing to participate as a member by putting that net worth on the line as collateral, that individual must then be elected by the Lloyd's membership in order to become a member of Lloyd's of London. These persons are also known as "Lloyd's names." Individuals are insurers; the group is Lloyd's.

• Lloyd's of London

  A collection of individuals who assume policy obligations as the individual obligations of each. The formal name is Underwriters at Lloyd's, London. Also, Lloyd's of London is a service organization which provides a central marketplace and ancillary services (such as policywriting, accounting, inspections, and adjusting) for its various members. (See insurance exchanges and Lloyd's.)

• Lloyd's Premium Trust Fund

  A trust fund established by Lloyd's of London. The underwriters or Lloyd's members are obligated to place the premiums received for insuring an account into this trust fund. The fund holds the premium for specified periods of time, and claim payments for that account are made from the trust fund. Any premiums remaining, including the interest or profits earned by the trust fund, are returned to the underwriter or Lloyd's member at the end of the specified period of time.

• Lloyd's register

  A catalogue of ships which describes each vessel, its dimensions, age, place of construction, registry, ownership, etc. A necessary tool of the ocean marine underwriters. Similar information is published by the American Bureau of Shipping.

• Lloyd's syndicate

  A group of underwriters at Lloyd's of London whose business is handled by an underwriter on behalf of all in the group. (See syndicate.)

• Lloyd's underwriter

  An individual who, after proving their significant financial net worth and after agreeing to use that net worth as collateral to assume insurance risks, is elected by the Lloyd's membership to become a member. Lloyd's underwriters are responsible only for their own assumptions of risk. They are not obligated for any risk assumed by others even if in the same syndicate, on the same account, or otherwise a part of the Lloyd's organization.

• LMX

  (See London Market Excess.)

• loading

  1) As an insurance term, an amount added to an insurance "pure risk" rate applicable to a class of risk, either to compensate the insurer for additional hazards present with an individual risk, or for the insurer's expenses, or both. 2) In marine language, the process of placing merchandise or cargo on board a ship or vehicle.

• loan value

  In life insurance, the amount of money insureds can borrow against the cash value of their own individual policy. As the cash value of the policy increases, so does the loan value.

• LOB--line of business

  The general classification of insurance written by insurers, such as fire, allied lines and homeowners, among others.

• LOC (letter of credit)

  LOC (letter of credit 1) A commitment made by an issuing bank or other party at the request of a customer to honor drafts or other demands for payment presented to the bank under the terms of the credit and, if the commitment is a documentary draft, upon presentation of the required documents of title. 2) In reinsurance, a commitment made by a bank to a reinsured which can be drawn upon to cover any of the reinsurer's liabilities to the reinsured under their reinsurance agreement.

• local agent

  The person in direct contact with the public as a licensed representative of an insurer for selling insurance.

• local board

  A trade association of local agents banded together to discuss their business, exchange ideas and promote good practices.

• lock-in provisions

  State insurance laws or insurance department regulations that act to restrict an insurer's ability to exit a given state's insurance market.

• lockbox plan

  A plan or arrangement between either an insurer or agent and a bank to use the bank as the premium collection facility. Insureds send payments to a post office box or bank lockbox controlled by the bank. The bank processes the payment directly to the proper account, for a service fee. Using this method speeds up the entire collection process, freeing up the accounting staff of the agent or insurer, and making premium funds available more quickly to earn investment income.

• London market excess

  Refers to any excess of loss reinsurance treaty written by London insurers, including Lloyd's.

• long term care insurance

  Sold either on a group or individual basis. Pays for nursing home or home health care costs including room, board and medical expenses.

• long-tail

  A colloquialism referring to the lengthy period of time between the occurrence of an event giving rise to a third-party claim and the claim itself. While this lengthy period is common to all kinds of third-party claims, as opposed to direct damage claims, it is most pronounced in professional liability insurance written on an "occurrence" basis, as opposed to a "claims-made" basis. (See claims-made.)

• long-tail liability

  Covered liability occurrences may take many years to fully develop into claims, be investigated, and settled. This development process is called long-tail. As a result, liability rates are not as responsive to losses, nor are they as credible as other lines of insurance.

• long-term disability insurance

  A disability insurance designed to offer income payments for long-term injuries, illnesses or disabilities. Long-term is often considered over 90 days.

• Longshore and Harbor Workers Compensation Act

  This act governs the work-related compensation cases of all United States maritime employees, as well as closely related occupations such as longshore workers who load/unload vessels, harbor workers and ship builders.

• longshore and harbor workers coverage

  A form of employee benefits protection for workers who are exempt from standard workers compensation coverage. It applies to longshore activities (ship cargo-handling, etc.), ship repair, shipbuilders and ship breakers, including persons while performing work on docks, wharfs, piers, and areas next to navigable waterways.

• loss

  1) The amount the insurer is required to pay because of a happening against which it has insured. 2) A happening that causes the company to pay. For example, any reduction in quantity, quality or value of insured property resulting from a covered cause of loss. 3) The overall financial result of some operation, as opposed to "profit." 4) The amount suffered by a person or property, with or without insurance.

• loss adjustment expense (LAE, ULAE, ALAE)

  The expenses associated with settling claims include salaries of adjusters, legal fees, court costs, expert witnesses and investigation costs. ULAE are unallocated loss adjustment expenses which are not claim-file specific but are calculated en mass, usually for a line of insurance. ALAE are allocated loss adjustment expenses. Here the expenses associated with a particular claim are allocated to that claim.

• loss assessment coverage

  A specially designed property coverage for condominium unit owners. This coverage provides protection for assessments made by the condominium association resulting from loss to the property. The policy is written to pay the assessment if the loss is caused by an insured peril.

• loss constant

  Used primarily in workers compensation insurance, a flat charge added to the premium of small risks to offset the higher loss ratios produced by such risks. Also used in some states in fire insurance premiums for low-valued dwelling risks to offset the higher loss ratios they produce.

• loss control

  The steps and processes made by a risk to reduce, eliminate or control the frequency of loss from occurring and the severity of the loss once it has occurred.

• loss control policy statement

  A formal written policy statement that clarifies a risk's position on loss control. Normally written by a loss control or risk management specialist, it clarifies intent and establishes procedures or protocol for the accomplishment of the loss control objectives.

• loss cost

  1) The ratio of actual (or "as if") reinsured losses to a ceding company's subject matter premium (either written or earned premium) for the same period. Used to analyze past experience and to predict future experience of a per-risk excess cover. 2) In order to reduce the allegations of rate-fixing and prevent antitrust suits and litigation, many rating bureaus and rate organizations have now eliminated the development of rates. Instead, they are providing only base statistics called a loss cost, which is the percent of each exposure base for each classification that is directly attributed to the amount of loss experienced by that class. To the loss cost, each insurer must then add its own loading for expense, contingencies, profit, etc.

• loss department

  The personnel of a company dealing with claims or losses. In casualty operations the department is referred to as the claim department. (See claim department.)

• loss development

  A comparison in the amount of and the development of the amount of losses that have occurred from a given point in time to a point at a later date.

• loss event

  A reinsurance term. ABC reinsurer may have a reinsurance treaty with XYZ covering all homeowner losses in excess of $200,000 per claim. A tornado ravages a heavily insured town of the primary insurer, XYZ. All of the losses ABC will have to pay that are associated with that tornado will be considered a loss event by ABC.

• Loss Executives Association

  A group of loss department executives of stock insurance companies formed to discuss loss and adjustment problems.

• loss expectancy

  Based on past experience, data, and statistics, an estimate is generated to predict the probable occurrence(s) of loss for a given period for either a specific insured or class of business.

• loss experience

  The loss history for an account, a line of business, a book of business, or some other defining category. Loss experience may include the date of loss, type of loss, amount of loss, whether the loss is open or closed, and a summary of the details of the loss.

• loss exposure

  Loss potential.

• loss frequency

  Loss frequency is the calculation of how often a type of loss occurs to an account, a line of business, a book of business, or some other defining category within a given period of time (usually one year).

• loss incurred

  1) Events which have happened and which will cause claims to be made to insurers. 2) The total amount shown in an insurer's operating statement as its obligations for policy claims, whether paid or not, during a given period (usually one year). The composition of incurred losses in such a total is derived by the following formula: losses paid during the year, plus loss reserves existing at the end of the year, minus loss reserves existing at the beginning of the year.

• loss loading

  A loading that is applied to a premium or rate based upon the losses experienced by the account, line of business, book of business, or some other defining category.

• loss of income benefit

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

• loss of use insurance

  Insurance which compensates the policyholder for the inability to use property destroyed or damaged by an insured peril. For example, if a car is stolen, loss of use insurance will pay or contribute to the cost of hiring a substitute car.

• loss payable clause

  A condition in a policy whereby the company may be directed by the policyholder to pay any loss due the policyholder to some other party designated in the policy. Usually the payment is made by check or draft payable to both the insured and the designated payee.

• loss payee

  Most often used with personal property--vehicles, equipment, etc. It is the company that holds the loan note on personal property.

• loss pick

  (See loss expectancy.)

• loss pocket

  A folder in which are placed all the documents pertaining to a certain loss.

• loss prevention

  Loss control, inspection and safety engineering work that is performed by an account in an attempt to prevent losses from occurring. Loss prevention work applies to property, liability, automobile, workers compensation, and most other P&C insurance. It is also known as safety engineering or accident prevention.

• loss prevention services

  Loss control, inspection and safety engineering services offered by an insurer in an attempt to prevent losses from occurring. Loss prevention work applies to property, liability, automobile, workers compensation, and most other P&C insurance. It is also known as safety engineering or accident prevention.

• loss ratio

  Losses incurred expressed as a percentage of premiums, most commonly earned premiums, although written premiums are sometimes used.

• loss reduction

  The loss control measure taken in an effort to reduce the severity of the consequences of a loss, damage, or injury once it has occurred.

• loss report

  A written statement made by an agent, an insured, a claimant, or a beneficiary containing details of the claim being made under an insurance policy.

• loss reserve

  An estimate of the amount an insurer expects to pay for reported and estimated claims. May include amounts for loss adjustment expenses. (See IBNR--incurred but not reported, reserve and incurred losses.)

• Loss Run (Report)

  A report that lists a variety of details on losses experienced by a given business. The report is usually for a three- to five-year period and is meant for analyzing the business' loss vulnerability. Typically, the automated report includes (at least) a loss date, whether the loss has been resolved (paid or pending), a claim number, loss description, claimant(s), loss (or loss reserve) amount.

• losses incurred

  1) Events which have happened and which will cause claims to be made to insurers. 2) The total amount shown in an insurer's operating statement as its obligations for policy claims, whether or not paid, during a given period (usually one year). The composition of incurred losses in such a total is derived by this formula: losses paid during the year plus loss reserves existing at the end of the year, minus loss reserves existing at the beginning of the year.

• losses occurring

  One way of defining coverage under a per-risk excess reinsurance agreement. Under a "losses occurring" cover, a loss is covered if it occurred during the term of the reinsurance, no matter when the policy suffering the loss was issued. (See policies attaching.)

• losses outstanding

  Losses which have been incurred but which are not yet paid.

• losses paid

  The sum of losses for which money has been disbursed, as opposed to losses incurred, which includes losses outstanding but still unpaid.

• lost instrument bond

  A bond given by the owner of a valuable security such as stock, bond, certified check, etc., which has been lost or destroyed.

• lost or not lost

  A clause used in ocean marine insurance which states that the insurer will pay even if the loss insured against has occurred prior to the effecting of the insurance. The company would, of course, not be liable if the policyholder knew that the loss had occurred when ordering the insurance. A ship could easily be lost or damaged and the owner not know until later, during which time the owner might want to insure it, which is possible with this clause.

• lost policy release (LPR)

  An agreement signed by the policyholder relieving the insurer from liability under an insurance contract which has been lost, misplaced or is otherwise unavailable. The lost policy release form is used to fulfill the requirement that a policy be returned when the insured requests that coverage be canceled.

• LPR--lost policy release

  An agreement signed by the policyholder relieving the insurer from liability under an insurance contract which has been lost, misplaced, or is otherwise unavailable. The lost policy release form is used to fulfill the requirement that a policy be returned when the insured requests that coverage be canceled.

• LRRA

  (See Liability Risk Retention Act.)

• lump sum or lump sum distribution

  One method of payment of benefits, most often occurring in life insurance, where the beneficiary receives the entire face value or payout of the policy at once, rather than in installments, monthly income, or various other options.

• LUST

  (See Leaking Underground Storage Tank Trust Fund.)
• Back to Top

• M&C--manufacturers and contractors liability insurance

  Liability insurance arising from business operations, including ownership and maintenance of premises. Applicable primarily to persons or corporations engaged in manufacturing, construction and installation work. Policies always exclude automobile liability. This coverage is now included in the Simplified CGL.

• machinery breakdown insurance

  Protection against loss from disruption of boilers and machinery by an insured cause of loss, consisting of loss to the boiler and machinery itself, damage to other property, business interruption losses, or all three. Also known as breakdown insurance.

• magnitude

  The measure of an earthquake's severity which expresses the level of energy that is released during a shift along a fault line. Each unit of 1 on the magnitude scale equals an increase of 30 times the power of the previous level.

• MAIF--Maryland Automobile Insurance Fund

  In the State of Maryland, it is a state agency created to provide automobile liability insurance for those who have been rejected by at least two private insurance carriers.

• MAIIF

  (See Marine Accident Investigator's International Forum.)

• mail-order insurance

  Purchasing insurance in response to solicitation by mail from insurers, a practice used by some insurers in marketing life, health and automobile insurance.

• maintenance bonds

  maintenance bonds A device to insure the quality and efficiency level for a given project. It applies to the quality of labor as well as materials.

• major hospitalization insurance

  A health insurance coverage for injuries, sickness, accidents or illnesses that would otherwise result in major or catastrophic hospital costs for the insured. Deductibles for this insurance are usually higher than for other health insurance policies.

• major medical insurance

  A policy designed to reimburse the insured for excess medical expenses in and out of the hospital. The policy usually includes a deductible, a coinsurance clause and an aggregate limit.

• make

  Associated with automobile insurance. The make is the manufacturer, e.g., Ford, Toyota, Chevrolet. (See also model.)

• make book

  Slang for specializing in certain types of insurance that are expected to produce unstable losses, such as airline insurance or medical malpractice insurance.

• malicious mischief

  Intentional and willful vandalism and destruction of property. In most property policies, it is linked with the vandalism cause of loss.

• malpractice

  Improper actions or failure to exercise proper skill by a professional or others involved with the care of the human body, such as a physician, dentist, blood bank, etc. Malpractice insurance is a form of liability coverage against such mistakes. (See errors and omissions insurance.)

• managed care

  A type of insurance protection or plan associated with health and workers compensation programs, that manages the services provided to an insured or member by placing limits on the number and type of services covered. Included are limits on such items as the number and type of treatments offered, which doctors, hospitals, clinics and other service providers an insured or member can use. Should the insured or member use services or providers not covered by the plan, that insured or member must bear a larger portion of the fee--if not the entire fee. The concept of managed care is that cost reductions are realized if the participating service providers are under specially negotiated contracts and that waste and redundancy can be reduced if the overall services covered are carefully monitored.

• managing general agent (MGA)

  An individual or organization granted authority to act as an insurer or reinsurer in performing certain functions for it, such as, underwriting, inspection or adjusting. Functions may include the appointment of sales agents or intermediaries. Most MGAs also operate as wholesale excess and surplus lines brokers.

• managing physician

  In an HMO or PPO, the managing physician is also called the primary physician or the primary health care provider. He/she is the program-approved physician whom the insured must consult first for all medical needs. The managing or primary physician will handle all medical needs and services that fall within that person's own area of expertise. If additional services or specialists are needed that are outside the primary care physician's area, he/she must concur the need and approve such additional services or specialists in order for coverage to be in effect for those additional costs.

• mandatory rate law

  The state law under which insurance rates are set by a state agency or rating bureau; all licensed insurers are then required to use those rates.

• manifestation

  When an event is recognized as a loss that is possibly subject to insurance coverage. (See continuous trigger theory, exposure theory, injury-in-fact theory and manifestation theory.)

• manifestation theory

  An event is recognized as an insurable loss (or occurrence) when damage first makes an appearance (manifests). The loss (both initial and subsequent damage) should be covered by the policy that is in effect at the time of manifestation. (See continuous trigger theory, exposure theory, and injury-in-fact theory.)

• manual

  A book or series of books which contain rules and other information necessary for local offices of insurers, agents and brokers to write and service policies of insurance: underwriting rules, rates, tables for return premiums, deductibles, relativity tables, minimum premiums, etc.

• manual excess

  In liability insurance, rates and loss costs are based upon a standard or manual liability limit, usually $25,000. Should the insured request higher limits, the rates are increased by an increased limits factor, developed in table format to determine the additional charge that should be made to address the exposure of the higher limit. For the purposes of a higher limit of insurance, the portion of the additional premium that is charged above and beyond the basic or manual is called the manual excess.

• manual rate

  A charge for a unit of insurance set forth in a manual of instructions.

• manufacturers and contractors liability insurance (M&C)

  Liability insurance arising from business operations, including ownership and maintenance of premises. Applicable primarily to persons or corporations engaged in manufacturing, construction and installation work. Policies always exclude automobile liability. This coverage is now included in the simplified CGL.

• manufacturers output policy (MOP)

  All-risk property coverage for personal property of industrial firms away from the insured's own manufacturing premises.

• manufacturers penalty insurance

  Acting much like a surety bond to cover supply contracts, this commercial insurance is designed specifically to cover the insured's inability to supply or manufacture a given product that the insured has contractually agreed to deliver, due to a covered cause of loss.

• manufacturers selling price clause

  A property insurance coverage designed to provide the insured manufacturer with a valuation option to insure the goods manufactured at the price the manufacturer would have received for delivery of the finished goods to a customer. This valuation option includes sales costs, commissions and profits the insured would have earned if the goods were sold at the going price.

• manuscript policy

  A nonstandard policy specifically designed to meet the needs of the individual insured. Normally, this type of policy contains nonstandard forms or a combination of standard and nonstandard forms and nonstandard wording which have been developed and tailored to the coverage needs of the client. Usually this type of approach is used for large insureds or specialty exposures.

• map

  Maps of cities and towns giving details of construction and fire protection, made by the Sanborn Map Company--formerly used more commonly than today. Fire insurers kept such map records in their offices to indicate the location and other details of their insured risks in order to prevent undue concentration in a given building, city block, or area. (See map clerk.)

• map clerk

  One who records the company's property lines on the Sanborn Map or on other records of the company's liability. In the past, being a map clerk was the first step to becoming a fire underwriter, but now the daily practice of mapping fire insurance liability has almost ceased. (See map, and Sanborn Map.)

• MAP--Multicoverage Account Plan

  A program providing favorable rate treatment for large risks written on an account basis. The plan applies to a combination of property and liability policies written by one insurer for one insured and having common expiration or anniversary dates. Not to be confused with the Individual Risk Premium Modification Plan, which relates to package policies of the special multiperil program. Lower rates are developed in the MAP program based on risk and expense modification and also the use of deductibles.

• mapping

  (See geocoding.)

• margin account insurance

  A form of credit life coverage, usually written on a group basis, to protect both stock broker and stock purchaser against loss from the death of the purchaser while moneys are owed for stock acquired on margin (or with partial payment).

• Marine Accident Investigator's International Forum

  An Internet-based association that shares information on various marine insurance issues including loss investigation, risk management, settlement, safety, and environmental concerns. Membership is international in scope. Web address (as of this writing): www.maiif.net

• marine definition

  The 1953 NAIC recommendations, since adopted by most states, of those subjects which should be considered as marine insurance for regulatory purposes: insurance covering domestic shipments being transported or subject to transportation, insurance on instrumentalities of transportation and communication, and property floaters covering property being transported or subject to being transported. While the definition does not differentiate between ocean and inland marine insurance, its scope is primarily inland.

• marine insurance

  One of major divisions of insurance (life, health, property, marine, casualty, surety), primarily written for property in transit. If by sea, "ocean" marine or "wet" marine; otherwise, "inland" marine.

• marine law

  Section of the federal or national court system which deals with matters pertaining to vessels, crew, and their cargoes navigating on interstate or international waters. Maritime procedures, precedents and rules are different in admiralty courts than in other courts. Also called admiralty court.

• marine perils

  The perils which are insured against in a policy of ocean marine insurance. The wording of the marine policy is the result of several hundred years of careful study, judicial interpretation and precedent, and thus such perils have maintained an exact definite meaning in marine insurance.

• marine syndicates

  Groups of insurance underwriters that act through a manager to insure certain ocean marine classes of business. (See syndicate.)

• maritime employers liability coverages

  (See Jones Act, U.S. Longshore and Defense Base Coverage Acts.)

• market assistance program

  A plan originated in Connecticut with the product liability crisis of 1975 to assist in the finding of available insurance through local committees of companies and producers. Recommended at that time by NAIC Advisory Committee and used later in a number of states for municipal liability insurance, day care centers, liquor liability risks, and more recently for commercial general liability insurance. Not considered a cure for limited availability of insurance, the plan(s) eased and reduced the impact.

• market conduct regulation

  Regulation of the practices of insurers in regard to four areas of operation: sales practices, underwriting practices, claim practices, and bad-faith actions.

• market value clause

  A clause in which the insurer agrees that the amount it will pay in the event of loss shall be the value of the destroyed merchandise "on the market," which is the amount which could have been realized by selling the merchandise. Obviously, this includes the seller's profit; therefore, the clause is used with caution to avoid the creation of a moral hazard.

• market, tight

  1) Scarcity of insurance. 2) Widespread reluctance of insurers to insure certain risks.

• marketable security

  An item that may be freely traded among interested parties (investors) according to an agreed upon, generally fluctuating price.

• marketing representative

  The field, sales or marketing representative of the insurer to the agency plant whose purpose is to offer the insurer's products and services to the agent.

• Maryland Automobile Insurance Fund--MAIF

  In the State of Maryland, it is a state agency created to provide automobile liability insurance for those who have been rejected by at least two private insurance carriers.

• mass marketing

  A marketing plan or technique whereby a group of persons insure with one company, usually at lower than standard premiums because of expense economy to the insurer. Premiums are usually collected and remitted to the insurer by a controlling body, such as an employer, a labor union, or a trade association. Also known as mass merchandising. (See mass merchandising.)

• mass merchandising

  A marketing plan or technique whereby a group of persons insure with one company, usually at lower than standard premiums because of expense economy to the insurer. Premiums are usually collected and remitted to the insurer by a controlling body, such as an employer, a labor union, or a trade association. Also known as mass marketing. (See group merchandising.)

• mass underwriting

  Underwriting that contemplates the overall criteria and characteristics of the group rather than the individual. The group qualities and results are evaluated versus any one specific insured.

• master

  The commander of a commercial vessel. Popularly the "captain," but the term in admiralty law and marine insurance is "master."

• master contract (policy)

  In health insurance the master contract is the policy sold to the group, e.g., if the group is an employer, then the employer receives the master contract and employees receive certificates of coverage.

• master policy

  An insurance policy used in group insurance that covers a group of persons to whom certificates of insurance are issued as their evidence of individual coverage under the policy. The two parties to the master policy are the sponsor of the group and the insurer.

• master-servant rule

  A tort liability theory that makes the employer responsible for the actions of employees at the workplace or while performing the duties and responsibilities of an employee at any location. This rule comes into play when the employer is in the position of directing the activities and the results of the employee.

• matching contributions

  A 401(k) plan can be set up so that an employer will match the contributions made by the employee. The match is usually capped at a percentage of the employee's contribution or a percentage of the employee's salary.

• material duty(ies)

  The core responsibility(ies) for a given job which can?t be changed or skipped without substantially affecting the job?s purpose. With regards to disability insurance, the inability to perform a material duty means an injured worker is unable to perform the applicable job.

• material fact

  Information having objective reality which influences an insurer in granting or not granting insurance coverage. (See concealment.)

• material misrepresentation

  A misrepresentation in a policy application that is material to the insurance and, in many policies, can void coverage. Misrepresenting the house color is probably not material in a homeowners application. Misrepresenting the number of claims the insured has filed could be material.

• maternity benefit

  Benefits provided in a health insurance contract for coverage for both maternity and childbirth expenses. While some policies pay only a flat limit, others provide the actual expenses incurred by the insured. Still others pay only childbirth expenses and not well-baby care. Many coverage variations are available.

• mature

  The term mature refers to life insurance coverages where the benefits and face value of the policy are fully available to pay benefits either at the time of the insured's death or at a specified date set in the policy.

• maxi-tail

  An endorsement available to claims-made policies, which for additional premium will extend the period of time in which the insured must report a claim after the policy has been terminated. Most maxi-tails allow an unlimited period of time for a premium that may be up to 200% of the annual premium charged.

• maximum disability income policy

  A type of disability policy with a stated maximum limit that is available for any one single claim, but which has no maximum or aggregate limit cap for multiple claims.

• maximum foreseeable loss (MFL)

  The anticipated maximum property fire loss that could result, given unusual or the worst circumstances with respect to the nonfunctioning of protective features (e.g., firewalls, sprinklers, and a responsive fire department, among others), as opposed to probable maximum loss (PML), which is a similar valuation, but which is made under the assumption that such protective features function normally. (See probable maximum loss (PML), and shock loss.)

• maximum period of indemnity

  An option available to the business income coverage form, where the coinsurance requirements are removed and replaced with coverage for the actual loss sustained during the first 120 days of loss, not to exceed the stated limit of liability.

• maximum plan limit

  Within a health insurance plan, the maximum plan limit is the most or aggregate amount of benefits available for payment to insureds.

• maximum possible loss (MPL)

  The largest percentage of the insured property which could possibly be destroyed by the insured perils. Normally this amount would be all the property within the four walls of a structure, plus loss to adjacent property due to its proximity. An MPL estimate is invariably the ultimate in pessimism, but it is a most important concept in underwriting large risks in order to compute rates and to understand the need for capacity, as well as to appreciate all exposures. Two other expressions used from time to time, amount subject and maximum foreseeable loss (MFL), have substantially the same meaning as MPL. (See probable maximum loss (PML).)

• McCarran-Ferguson Act

  Enacted on March 9, 1945, a law by which Congress granted authority to the states to continue to tax and regulate the business of insurance (after the insurance business had been held by the Supreme Court to be commerce in a landmark case in 1944, and, therefore, subject to federal regulation whenever subject to interstate regulation). The act provided further that the antitrust laws should not apply to the extent the business of insurance is regulated by the states, except for coercion, intimidation and boycott. Also known as Public Law 15 (79th Congress, 1945. McCarran-Ferguson Regulation Act: 15 U.S.C. 1011-15). (See Southeastern Underwriters Association (SEUA).)

• mean

  The average of the accumulation of data, statistics and their results for a given topic.

• mechanics permit

  A clause in a policy granting permission to employ workers such as mechanics, in and around the risk, since their work may increase the exposure. Permission is usually automatically included for such repairs and alterations which are necessary for the maintenance of the premises.

• media professional liability

  A form of errors and omissions coverage that protects operations involved in communications against allegations of third parties that the operations media activities caused them harm. Allegations generally involve communication hazards such as libel, slander, defamation, disparagement, invasion of privacy, product disparagement, etc.

• mediation

  Where disputing parties agree to discuss their grievance with a mediator to help resolve an argument over the amount of damage suffered in a loss. The mediator should have special training and experience and it is critical that he or she is a disinterested party.

• Medicaid

  Federal government assistance to states providing medical care for the needy, created by the 1965 amendments to the Social Security Act.

• medical expense insurance

  Insurance providing for payment of medical, surgical, and hospital expenses.

• Medical Information Bureau

  A not-for-profit association of life insurers that collects medical and other pertinent information about individual life insurance applicants from its members. A member insurer wishing to insure Jane Jones will query the MIB database to see whether there is any information on Jane in the database that would affect its underwriting decision. Information from MIB, Inc. is strictly confidential and is available only to member insurers.

• medical malpractice

  See medical professional liability and errors and omissions coverage.

• medical payments insurance

  Protection to pay the cost of medical care to an injured party regardless of whether the policyholder is liable. Written in conjunction with general and personal liability policies. A similar coverage, automobile medical payments insurance, is available in automobile liability policies.

• medical professional liability

  A form of coverage against allegations of improper actions or failure to exercise proper skill by a professional or others involved with the care of the human body, such as a physician, dentist, blood bank, etc. See errors and omissions insurance.

• medical review panels

  Medical advisory panels that are established by individual states to review and affirm the validity of medical malpractice claims prior to the filing of such actions.

• medical service plan

  A type of health plan designed to offer physicians' services, as well as other medical services. These plans are formed by groups of participating physicians and medical services providers. Insureds are limited to the services of participating physicians and medical services providers.

• Medicare

  The hospital insurance system and the supplementary medical insurance system created by the 1965 amendments to the Social Security Act.

• Medicare supplement policy

  An optional type of private health insurance policy designed to supplement or pick up the costs of medical services not covered by Medicare. A type of gap coverage.

• Medigap

  A type of health insurance supplement offered by private insurers, designed to bridge the gap caused by the expenses and services not covered by Medicare and other federal programs.

• mercantile open stock burglary policy

  This form (now obsolete) provided an alternative to providing theft coverage under a commercial property form. It provided coverage of merchandise, furniture, fixtures and equipment against loss by burglary or robbery of a watchperson while the premises are not open for business and included coverage for damages to the premises. This coverage is now called Inside the Premises-Robbery and Burglary of Other Property in the Commercial or Governmental Crime Policies.

• mercantile report

  A report on an individual's personal characteristics, credit standing, habits, and similar facts which might influence the decision to insure that individual, as well as a visual or physical examination of a property to determine whether it is an acceptable risk for insurance.

• mercantile risk

  A property location used for the selling of merchandise, as distinguished from a habitational risk or a manufacturing risk in which goods are processed.

• merchandise

  Goods for sale.

• merit rating

  A system of rating in which the experience of the individual risk is a factor in determining the rate. (See experience rating.)

• messenger and interior robbery insurance

  This form (now obsolete) has been replaced by the Commercial Crime coverage form. Three different insuring agreements would need to be selected in order to provide this single coverage.

• MFL--maximum foreseeable loss

  The anticipated maximum property fire loss that could result, given unusual or the worst circumstances with respect to the nonfunctioning of protective features (e.g., firewalls, sprinklers, and a responsive fire department, among others), as opposed to probable maximum loss (PML), which is a similar valuation, but which is made under the assumption that such protective features function normally.

• MGA--managing general agent

  An individual or organization granted authority to act as an insurer or reinsurer in performing certain functions for it, such as, underwriting, inspection or adjusting. Functions may include the appointment of sales agents or intermediaries. Most MGAs also operate as wholesale excess and surplus lines brokers.

• MIB

  MIB (Medical Information Bureau) A not-for-profit association of life insurers that collects medical and other pertinent information about individual life insurance applicants from its members. A member insurer wishing to insure Jane Jones will query the MIB database to see whether there is any information on Jane in the database that would affect its underwriting decision. Information from MIB, Inc. is strictly confidential and is available only to member insurers.

• midi-tail

  A claims-made liability policy endorsement or coverage option that may be purchased for an additional premium, which will allow the insured an extended reporting period to make claims to the insurer after the expiration of the policy. Often known by the acronym ERPs, which stands for extended reporting period endorsements. This option often ranges from 60 to 120 days in length.

• military service exclusion

  A provision or exclusion found in many life and health insurance policies that excludes coverage for any injury, illness, accident, or death that results from or is caused during the performance of military service during a period of war or other related military action.

• mill construction

  Before the regular use of steel or concrete in building construction, many brick manufacturing buildings were built with floor and wall construction of an unusually heavy timber. This type of building, which is frequently found in the cotton and woolen mills of New England, was called "mill" construction. It is considered to be superior in fire-resistive qualities to ordinary brick or masonry construction with wood joists.

• mini-tail

  A claims-made policy provision that allows additional time to the insured for the reporting of claims, should the claims-made policy be replaced with an occurrence policy or another claims-made policy with a different retroactive date. Usually, the period of time available is limited; up to 60 days after policy expiration is common. There is often no charge for this coverage, but it must be requested within a given period of time.

• mini-wrap-up

  A wrap-up for smaller construction projects developed to satisfy coverage concerns by the sponsor due to the inability of subcontractors to provide required coverages, such as construction defects coverage for condominium projects in California.

• minimum age requirement

  A pension eligibility requirement, i.e., a plan participant must be at least 21 years of age to enroll.

• minimum coverage clauses

  Provisions within some policies that the coverage or limits provided by that policy will be at least the minimums required by the state in which the policy has been issued, no matter what the other policy terms, limits, or conditions state.

• minimum premium

  The lowest flat or earned policy charge for which a policy will be issued or for which coverage will be provided.

• minimum rate

  1) The minimum or lowest rate that the insurer will charge for the coverage, policy or endorsement. 2) The lowest rate available for the least hazardous exposures within a given classification or coverage.

• miscellaneous bonds

  A category of bonds which does not fit into any recognized division or category of fidelity or surety bonding, so is thus placed in an all-encompassing miscellaneous category.

• misrepresentation

  Misleading the company as to material facts affecting a policy or the settlement of a loss, either by directly or indirectly lying. Misrepresentation as to material facts voids policies.

• misstatement of age provision

  While age misstatement might be considered material, in most life insurance policies it is not. In individual life, if the applicant misstates the insured's age, the policy limit is adjusted up or down to reflect the correct age. In group life, the premium is adjusted.

• mobile equipment

  Vehicles not normally designed for use on public roads and not normally required to be licensed. (See contractors' equipment.)

• mobile home insurance

  A special policy has been designed to meet the needs of mobile home owners or occupants, covering physical damage to the home, contents and personal liability while the home is used as a permanent residence.

• mode of premium payment

  In life or health insurance: weekly, monthly, annual, semiannual, quarterly or by automatic deduction.

• model

  Associated with automobile insurance. The type of vehicle from the manufacturer, e.g., Ford Taurus or Chevy Monte Carlo. (See also make.)

• model bill

  Proposed legislation from a national organization for use by states choosing to do so.

• modification rating

  Rating plans that allow for the modification of the stated or base rate by the application of credits or debits. These rate modifications may be available for such factors as loss experience, size, classification peculiarities, multiple location premium dispersion, or other individual risk modification plans.

• modified life insurance

  A life insurance program giving standard coverages, where the premiums for the initial three to five years are lower than the average needed. They are then raised after that time to levels above the needed average.

• modified no-fault insurance

  modified no-fault insurance In reality, all no-fault programs are modifications. Such programs use either a verbal (description of sustained injuries) or a monetary threshold. All accidents falling within the described type of loss or below a certain value are paid by each person's own insurer. A driver may sue other parties for damages arising from all other claims.

• modular policy

  An insurance policy that consists of several different documents, none of which by itself forms a complete policy.

• monetary threshold

  A term used in states with no-fault insurance laws to describe the dollar limit in damages an injured person must exceed before he or she can sue the party that caused the injuries. Otherwise, the injured party must collect payment under his or her own policy?s no-fault provision.

• money and securities broad form policy

  Insures a business against "all risks" of loss or destruction of money and securities other than employee dishonesty and forgery. Applies both inside and outside the policyholder's premises. Also covers loss of other property and damage to the premises by safe burglary and robbery. This policy has been replaced with the Commercial Crime Coverage Form.

• money market fund

  A mutual fund that invests in low-risk securities, i.e., high grade bonds. Often considered to be the most liquid of the various categories of mutual funds.

• money orders and counterfeit paper insurance

  This form (now obsolete) provided coverage when fraudulent money orders or counterfeit paper currency was accepted by an insured. The Money Orders and Counterfeit Money Insuring Agreement in the Commercial and Governmental Crime policies replace it and expand it to include counterfeit money - not just currency.

• money purchase pension plan

  A defined benefit pension plan does not accumulate a separate benefit for each participant. The benefit is a formula based upon income and years of service and is calculated at retirement. A money purchase pension plan accumulates a fixed amount of dollars (usually a percentage of annual salary/compensation) in a separate account for the individual. Interest earnings/losses from investments are also added to/subtracted from the employee's account.

• monitoring competition

  Measuring the degree of economic rivalry or striving among sellers of insurance within a market for a given type of insurance.

• monoline policy

  A policy that covers only one line of insurance.

• monopolistic state fund

  A state-controlled workers compensation plan which writes insurance on such risks within the state and prohibits private insurers from doing so.

• monopolistic states

  As used in workers compensation contracts, monopolistic refers to those states that do not allow competition within the workers compensation insurance arena. Only a single state fund is available and all insurance is placed with or through that state fund.

• monthly debit ordinary life insurance

  Ordinary life insurance policies with the premiums collected monthly.

• Montrose Provision

  (See non-cumulation clause.)

• MOP--manufacturers output policy

  All-risk property coverage for personal property of industrial firms away from the insured's own manufacturing premises.

• moral hazard

  A condition or characteristic by which an insured intends to profit from an insured loss. (See hazard, morale hazard, and physical hazard.)

• morale hazard

  The condition which exists when an insured becomes lax in matters of safety and fire prevention because insurance is in force to pay for a loss which may occur. (See hazard, moral hazard, and physical hazard.)

• morbidity rate

  Rates that have been developed based on the accumulation of statistics and data and that are used to show the percentage or ratio of how often certain types of sickness or illness occur within a given period of time to the classification or a specific group of insureds.

• morbidity table

  A listing of data showing the accident or sickness rates of persons of each sex at each age.

• mortality charge

  The cost (expense) of death associated with a life insurance policy at the original age of the individual. The term is used in universal life insurance to represent one of the unbundled expense charges.

• mortality rate

  Rates that have been developed based on the accumulation of statistics and data and that are used to show the percentage or ratio of how death will occur within a given period of time to the classification or a specific group of insureds.

• mortality table

  A listing of data showing the death rates of persons of each sex at each age.

• mortgage (or mortgagee) clause

  Language attachable to an insurance policy covering mortgaged property which affords the mortgagee certain rights (e.g., that loss payments shall be payable to mortgagor and mortgagee as their interests may appear, that the mortgagee's right of recovery from the insurer shall not be adversely affected by any act or failure to act by the mortgagee, etc.).

• mortgage holder

  The company that holds the mortgage note on real property and in insurance is listed on the policy as mortgagee.

• mortgage insurance

  A life, credit life, or disability insurance policy designed to pay off the balance due or make the monthly payments on a mortgage if the insured should be injured, become ill, or die.

• motel-hotel program

  A package policy combining the various coverages applicable to the operation of motels, hotels and similar establishments. Basically it covers fire, allied lines, liability, burglary, and robbery insurance, and sometimes fidelity insurance for employees.

• motor truck cargo [carriers form]

  This inland marine form indemnifies an owner or operator of a motor truck, on which is carried property of others, against what the owner or operator may become liable to pay to the owners of the property carried as the result of loss or damage occurring while transporting the property. The Interstate Commerce Commission (as well as the laws of many states) requires a common carrier to have such insurance before being licensed. (See motor truck cargo [owners form].)

• motor truck cargo [owners form]

  Insures the owner of a truck against loss to owned property while being transported. (See motor truck cargo [carriers form].)

• Motor Vehicle Accident Indemnification Corporation (New York)

  This corporation exists to pay certain claims of innocent victims of New York motor vehicle accidents caused by uninsured motorists, when the victim is not an insured under family protection coverage.

• Motor Vehicle Report (MVR)

  A record usually kept by an individual state's bureau of motor vehicles (or similar department). MVRs are frequently used by insurance companies to verify the underwriting and rating information on their current and prospective insureds. The record shows (minimally) a licensed motor vehicle operator's identifying information (name, address, age, physical attributes, SSN, etc,) date of license issue or renewal, and dates of any traffic violations or license suspensions, revocations or reinstatements. Further, depending on the state, the record may include the dates of vehicular accidents. Accident information (when provided) usually depends upon whether it was the operator's fault and if it exceeded some monetary or verbal threshold. States also vary on the length or time it will keep records of driving incidents and the "points" they assign to such incidents.

• motorcycle and motor scooter insurance

  Physical damage and/or liability insurance specifically to cover the exposures of motorcycles, motor scooters and motor bikes.

• MPL--maximum possible loss

  The largest percentage of the insured property which could possibly be destroyed by the insured perils. Normally this amount would be all the property within the four walls of a structure, plus loss to adjacent property due to its proximity. An MPL estimate is invariably the ultimate in pessimism, but it is a most important concept in underwriting large risks in order to compute rates and to understand the need for capacity, as well as to appreciate all exposures. Two other expressions used from time to time, amount subject and maximum foreseeable loss (MFL), have substantially the same meaning as MPL.

• MSO

  MSO (Mutual Services Office) Originally begun as an association of mutual insurers, it is now a corporation which provides a variety of services including rating, statistical, actuarial, and policy form services for multiple lines of property and casualty business. The association operates in seven Eastern and Midwestern states. MSO also assists member companies with product development and customization. It was established in 1944. Headquarters: Glen Rock, NJ.

• MSPA

  Member, Society of Pension Actuaries designation sponsored by the American Society of Pension Actuaries. Headquarters: Fairfax, VA.

• Multi-Coverage Account Plan (MAP)

  Multicoverage Account Plan (MAP) A program providing favorable rate treatment for large risks written on an account basis. The plan applies to a combination of property and liability policies written by one insurer for one insured and having common expiration or anniversary dates. Not to be confused with the Individual Risk Premium Modification Plan, which relates to package policies of the special multiperil program. Lower rates are developed in the MAP program based on risk and expense modification and also the use of deductibles.

• multi-hazard mapping

  Tracking the occurrence of natural and man-made losses on a geographical basis to assist in risk management, loss mitigation and loss recovery planning.

• multi-seller conduit

  A trust that receives assets from more than one originating firm and issues various types of debt, backed by those assets. Each originating firm's assets are kept in separate, securitized accounts.

• multiline insurance

  A package of coverages within one policy that provides for more than one line of insurance such as property and liability. Not the same as multiperil which is a contract that insures more than one peril or cause of loss within the policy. For example, an "all-risk" property policy is multiperil.

• multiperil insurance

  A contract that insures more than one peril or cause of loss within the policy. For example, an "all-risk" property policy is multiperil. Not the same as multiline, which is coverage for more than one line of insurance, such as property and liability.

• multiple employer trust (MET)

  This arrangement allows employers who are too small to qualify for group health or life coverage to obtain it by joining together as members of a trust.

• multiple indemnity

  A type of life insurance policy that increases the benefits paid the beneficiary by specified multiples, should death be a result of certain stated accidents or injuries. Most policies state that the increased coverage applies only in limited, very specific circumstances. (See accidental death benefit.)

• multiple location policy

  A policy covering real or personal property subject to a single common interest (owner, tenant, or one holding a financial interest or title) at a number of different locations. Such policies are rated under a special plan.

• multiple protection life insurance

  A combination term and whole life insurance policy designed to pay one, usually higher, limit for the first stage of the policy and which then converts to a lower whole life policy after a specified time period for the remainder of the policy.

• municipal insurance

  Commercial insurance programs designed specifically to cover cities, towns, states, or other types of municipalities.

• musical instrument floater

  An inland marine form designed to insure musical instruments against many different kinds of loss or damage.

• Mutual Atomic Energy Reinsurance Pool

  A pool formed by mutual casualty and fire companies to provide bodily injury and property damage insurance for private nuclear reactor installations. Similar to the stock company syndicate, American Nuclear Insurers.

• mutual fund insurance

  A specialty insurance designed for financial investments, whereby coverage is guaranteed for the repayment of the principal amount that was invested in the fund.

• mutual holding companies

  Mutual insurance companies cannot sell stock to increase investment capital. Mutual insurance companies can demutualize, but this can be expensive because policyholders have to be paid for their ownership interest. With a mutual holding company, two things happen. First, a new mutual company is established as a holding company. The existing mutual company is converted to a stock company which then becomes a wholly owned subsidiary of the mutual holding company. Policyholders retain ownership interests in both the mutual holding company and the stock company, but the stock company is now responsible for the contract rights. The stock company may sell stock to raise capital, but the mutual holding company policyholders still maintain their membership rights including the return of value for loss of ownership interest should the mutual holding company ever be demutualized. (See demutualization).

• mutual insurance

  Protection written by an incorporated insurer having no capital stock and directed by policyholders who are its owners. Mutual insurers are required by law to maintain surplus funds as an operating cushion for solvency. Such surplus funds parallel the capital and surplus funds required by capital stock insurers as margins for solvency. (See capital stock insurance, and stock insurance company.)

• mutual insurance companies

  A type of insurance company that is owned by its insureds or policyholders instead of stockholders. A board of directors or trustees are elected by the insured and policyholders to run the business operations. Mutual insurers are bound by the same state regulations regarding the maintenance of funds and reserves as a stock insurer, although the names of the required types of funds may be slightly different. The same types of solvency requirements exist. (See capital stock insurance.)

• Mutual Services Office (MSO)

  Originally begun as an association of mutual insurers, it is now a corporation which provides a variety of services including rating, statistical, actuarial, and policy form services for multiple lines of property and casualty business. The association operates in seven Eastern and Midwestern states. MSO also assists member companies with product development and customization. It was established in 1944. Headquarters: Glen Rock, NJ.

• mutualization

  The process where a stock company converts itself to a mutual company. (See also demutualization.)

• MVR--Motor Vehicle Report

  A record usually kept by an individual state's bureau of motor vehicles (or similar department). MVRs are frequently used by insurance companies to verify the underwriting and rating information on their current and prospective insureds. The record shows (minimally) a licensed motor vehicle operator's identifying information (name, address, age, physical attributes, SSN, etc.), date of license issue or renewal, and dates of any traffic violations or license suspensions, revocations or reinstatements. Further, depending on the state, the record may include the dates of vehicular accidents. Accident information (when provided) usually depends upon whether it was the operator's fault and if it exceeded some monetary or verbal threshold. States also vary on the length or time it will keep records of driving incidents and the "points" they assign to such incidents.

• mysterious disappearance

  The vanishing of insured property in an unexplained manner. Previously there were disputes under theft policies as to whether property mysteriously lost had or had not been stolen. To avoid contention, insurers stated in such policies that mysterious disappearance was presumed to be due to theft. Mere disappearance of property, such as an article dropped from a boat, is not covered, since the disappearance is not mysterious.
• Back to Top

• N.E.C.

  (See Not Elsewhere Classified.)

• N.O.C.

  (See Not Otherwise Classified.)

• NAAIA

  NAAIA (National African American Insurance Association) An association of minority insurance professionals established to promote professional development, encourage entrepreneurship and create a greater level of appreciation within the insurance industry for the expertise and contributions made by its minority participants. Headquarters: Cincinnati, OH.

• NAFTA (North American Free Trade Agreement)

  This is a historic agreement between Canada, Mexico and the U.S. Briefly, the agreement?s purpose is to foster regulations, procedures and working groups to facilitate the flow of goods, services and resources between the countries including more regulatory uniformity.

• NAHU

  (See National Association of Health Underwriters.)

• NAIA--National Association of Insurance Agents

  A large trade association whose purpose is to protect the business interests of its members, who are also members of state associations. Headquarters: Washington, DC.

• NAIB--National Association of Insurance Brokers, Inc.

  An organization which represents brokers and presents their views before company bureaus, boards, and government agencies, proposes studies and current state and national legislation, supports the interests of brokers and the insurance-buying public, and informs the public of functions and responsibilities of the insurance broker. Headquarters: Washington, DC.

• NAIC Insurance Regulatory Information System (IRIS)

  Formerly known as Early Warning System or Early Warning Tests, financial ratio and performance criteria designed by the National Association of Insurance Commissioners to identify insurance companies which may need close surveillance by state insurance departments.

• NAIC--National Association of Insurance Commissioners

  A voluntary organization of state insurance commissioners, superintendents and directors. NAIC focus upon research studies that often lead to model bills that are recommended to states as uniform laws and regulations. Also provided are valuations of securities held by insurance companies. Annual statements are required by the NAIC from all licensed insurance companies.

• NAICS

  This is replacing the U.S. Standard Industrial Classification (SIC) system. NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America.

• NAII

  (See Property Casualty Insurers Association of America.)

• NAII--National Association of Independent Insurers

  A trade association with a membership of hundreds of fire and casualty companies of all types throughout the U.S., NAII acts as an advisory organization and statistical agent for independent insurers. Headquarters: Des Plaines, IL.

• NAILBA

  (See National Association of Independent Life Brokerage Agencies.)

• NAIW--National Association of Insurance Women

  An organization designed to broaden its members' knowledge of insurance, promote public safety, and conduct public service programs. Headquarters: Tulsa, OK.

• name schedule bonds

  name schedule bonds A list of persons (typically public officials) along with their respective bond amounts.

• named insured

  The person designated in the policy as the insured, as opposed to someone who may have an interest in a policy but who is not shown by name. (See insured.)

• named perils policy

  One which specifies the exact causes of loss for which the insurer will pay, as contrasted with a policy which insures against "all risks" and then lists only exclusions, modifications, and conditions.

• NAMIC--National Association of Mutual Insurance Companies

  A trade association representing more than 1,000 member property-liability insurers (75% of which are farm, county or township mutuals, and 25% of which are advanced premium mutuals) in gathering and analyzing information on all matters relating to insurance and the prevention of losses. Headquarters: Indianapolis, IN.

• NAPSLO

  (See National Association of Professional Surplus Lines Offices, Ltd.)

• NASP

  See National Association of Subrogation Professionals.

• NATARI

  (See National Association of Traffic Accident Reconstructionists and Investigators.)

• National African American Insurance Association (NAAIA)

  An association of minority insurance professionals established to promote professional development, encourage entrepreneurship and create a greater level of appreciation within the insurance industry for the expertise and contributions made by its minority participants. Headquarters: Cincinnati, OH.

• National Alliance for Insurance Education and Research

  An organization founded in 1969 for the purpose of offering practical continuing education to insurance and risk management personnel. This group developed the CIC (Certified Insurance Counselor) Designation. Headquarters: Austin, TX.

• National Association of Casualty and Surety Agents

  A trade organization of insurance agents who represent and sell for stock insurers. Its purpose is to foster the growth of its members through cooperation with the insurers its members represent. Headquarters: Chevy Chase, MD.

• National Association of Casualty and Surety Executives

  The insurance company organization which cooperates with the National Association of Casualty and Surety Agents in discussing common problems. Headquarters: New York, NY.

• National Association of Health Underwriters

  An organization that represents health insurance professionals (including carriers), represents their views before boards and government agencies. It proposes studies and current state and national legislation, supports the interests of its members, and informs the public of functions and responsibilities of health insurance professionals. Headquarters: Arlington, VA.

• National Association of Independent Insurers

  (See Property Casualty Insurers Association of America.)

• National Association of Independent Insurers (NAII)

  A trade association with a membership of hundreds of fire and casualty companies of all types throughout the U.S. NAII acts as an advisory organization and statistical agent for independent insurers. Headquarters: Des Plaines, IL.

• National Association of Independent Life Brokerage Agencies

  A nationwide organization that acts as a source of networking, education and advocacy for insurance professionals who provide life, health and other similar products to the insurance consuming public. Headquarters: Fairfax, VA.

• National Association of Insurance Agents (NAIA)

  A large trade association whose purpose is to protect the business interests of its members, who are also members of state associations. Headquarters: Washington, DC.

• National Association of Insurance Brokers, Inc. (NAIB)

  An organization which represents brokers and presents their views before company bureaus, boards, and government agencies, proposes studies and current state and national legislation, supports the interests of brokers and the insurance-buying public, and informs the public of functions and responsibilities of the insurance broker. Headquarters: Washington, DC.

• National Association of Insurance Commissioners (NAIC)

  A voluntary organization of state insurance commissioners, superintendents and directors. NAIC focus upon research studies that often lead to model bills that are recommended to states as uniform laws and regulations. Also provided are valuations of securities held by insurance companies. Annual statements are required by the NAIC from all licensed insurance companies.

• National Association of Insurance Women (NAIW)

  An organization designed to broaden its members' knowledge of insurance, promote public safety, and conduct public service programs. Headquarters: Tulsa, OK.

• National Association of Mutual Insurance Agents

  Now the Professional Insurance Agents (PIA), formerly the National Association of Mutual Insurance Agents, a trade association whose purpose is to protect the business interests of its members, who also are members of state associations. Headquarters: Alexandria, VA.

• National Association of Mutual Insurance Companies (NAMIC)

  A trade association representing more than 1,000 member property-liability insurers (75% of which are farm, county or township mutuals, and 25% of which are advanced premium mutuals) in gathering and analyzing information on all matters relating to insurance and the prevention of losses. Headquarters: Indianapolis, IN.

• National Association of Professional Surplus Lines Offices,

  Ltd. Ltd. (NAPSLO) A trade association of major surplus lines producers and surplus lines companies, headquartered in Roswell, GA.

• National Association of Securities Dealers (NASD)

  A self-regulating arm of the securities industry.

• National Association of Subrogation Professionals

  A nonprofit association formed in 1992 to promote professionalism, educational development and career growth for persons involved in securing insurance company recoveries (subrogation). Headquarters; Pittsburgh, PA

• National Association of Surety Bond Producers, Inc.

  A trade association of the leading surety bond producers in the United States, Canada and Puerto Rico. Headquarters: Chevy Chase, MD.

• National Association of Traffic Accident Reconstructionists and Investigators

  A national association of accident professionals who share their expertise in accident analysis and investigation via networking, seminars, newsletters, education and training. The group also sponsors expert accreditation. Headquarters: Chester, PA.

• National Automobile Theft Bureau

  A nationwide organization engaged in prevention and reduction of motor vehicle fire and theft losses, and cooperating with law enforcement officers in performing these functions. Acts as an information clearinghouse and recordkeeping organization. Headquarters: Palos Hills, IL.

• National Board Schedule

  A 10-category ranking or schedule of public fire protection of cities and towns established in 1916. The grading is currently maintained by the Insurance Services Office for use in making fire insurance rates and to encourage local governments to maintain better fire fighting equipment and personnel. A city or town is ranked in one of the categories by receiving deficiency points for failing to meet established standards under each of these major headings: water supply, fire department, fire service communications, fire safety control, climate, and divergence between fire department and water supply. Town Class I is the best class for a city or town having fewer than 501 points, and Town Class 10 is the worst for a city or town having more than 4,500 points.

• National Building Code

  National safety standards that were developed by the American Insurance Association, in the hopes they would be adopted by the various state and local governments to encourage uniformity in building construction, design and overall improved standards.

• National Conference of Insurance Guaranty Funds

  This nonprofit association was established in December 1989. Its purpose is to assist the nationwide network of property and casualty guaranty funds. Specifically, it shares information on insurer insolvencies that affect more than one state. Headquarters: Indianapolis, IN.

• National Council on Compensation Insurance

  An association of insurance companies providing workers compensation insurance. Its main functions are rate making, collecting related statistics, and developing rating plans relative to compensation insurance. Operates through administrative bureaus located in many states. Headquarters: New York, NY.

• National Crop Insurance Services

  The NCIS is an advisory organization that was formed in 1915. It provides a variety of services to crop insurers and their industry including forms development, loss statistics, regulatory and compliance, underwriting rules, product development, training, and lobbying. Headquarters: Overland Park, KS.

• National Fire Protection Association

  An organization of those interested in the prevention of damage by fire. Its membership includes insurance companies, rating bureaus, manufacturers of fire prevention and extinguishing equipment, and officers of corporations in charge of fire prevention and safety work on land and at sea. Sets standards and issues constructive literature on the subject. Headquarters: Quincy, MA.

• National Flood Insurance Act of 1968

  An act establishing a basis for flood insurance as a joint venture between the private insurance industry and the federal government. The federal government has since taken over the entire program.

• national health insurance

  A national or federal government sponsored and administered health insurance program, not found in the United States, but used in various other countries such as Canada and Great Britain. In this type of program, the health insurance needs of all citizens are covered, with the premiums paid or financed by taxes.

• National Organization of Life and Health Guaranty Associations (NOLHGA)

  A national association of state guaranty associations. (See also guaranty association.)

• National Risk Retention Association (NRRA)

  A trade group form by purchasing groups (PGs) and risk retention groups (RRGs). Headquarters: Minneapolis, MN.

• National Safety Council

  An association chartered by Congress to carry out a national program for reducing accidents of all kinds. The council disseminates information on accident prevention, offers a public information and publicity program for newspapers, radio, television, etc., cooperates with public officials at federal, state and local levels, and, in general, provides national leadership in the field of safety. Headquarters: Chicago, IL.

• National Workers Compensation Reinsurance Pool

  A reinsurance organization in which hazardous workers compensation risks assigned to insurers under various insurance plans are reinsured into a pool in which all companies participate proportionately, distributing losses so that undue loss to any one company may be avoided. At this time, the pool operates in 30 states. Headquarters: New York, NY.

• nationwide definition

  Defines the classes of risks that can be written under inland marine, marine or transportation insurance, such as domestic shipments, exported/imported goods, floater property instrumentalities of transportation (i.e,. bridges) and communication (i.e., satellites).

• Nationwide Inter-Company Arbitration Agreement

  An arrangement where insurance companies settle automobile physical damage subrogation issues among themselves without the delays and expenses of litigation. All companies subject to this agreement bind themselves to submit disputed subrogation claims against another signatory company. Disputes are settled by local arbitration committees from a study of the claim files, usually without the need to call witnesses. The agreement is administered by the Insurance Arbitration Forum, headquartered in New York, NY.

• Nationwide Marine Definition

  The 1953 NAIC recommendations, since adopted by most states, of those subjects which should be considered as marine insurance for regulatory purposes: insurance covering domestic shipments being transported or subject to transportation, insurance on instrumentalities of transportation and communication, and property floaters covering property being transported or subject to being transported. While the Definition does not differentiate between ocean and inland marine insurance, its scope is primarily inland.

• natural perils

  One of the three categories of perils commonly considered by insurance, the other two being human perils and economic perils. This category includes such perils as injury and damage caused by natural elements such as rain, ice, snow, typhoon, hurricane, volcano, wave action, wind, earthquake, or flood. (See economic perils, human perils, and peril.)

• natural premium

  In life insurance, the base premium or manual premium that is calculated through the use of a mortality table for one year's worth of insurance at a specific age, for $1,000 worth of insurance.

• Natural Resource(s) Damages

  natural resource(s) damages Refers to damages that may be claimed only by certain entities (typically, federal agencies and state governments). The damages reflect the economic loss caused by a given party's injury to an area's resources, such as land, fish, wildlife, air, water (including groundwater) and others.

• naturopathy

  Treatment of disease or injury by strengthening the body's natural healing ability through food, exercise and heat.

• NCCI (National Council on Compensation Insurance)

  An association of insurance companies providing workers compensation insurance. Its main functions are rate making, collecting related statistics, and developing rating plans relative to compensation insurance. Operates through administrative bureaus located in many states. Headquarters: New York, NY.

• NCIGF

  (See National Conference of Insurance Guaranty Funds.)

• NCIS (National Crop Insurance Services)

  The NCIS is an advisory organization that was formed in 1915. It provides a variety of services to crop insurers and their industry including forms development, loss statistics, regulatory and compliance, underwriting rules, product development, training, and lobbying. Headquarters: Overland Park, KS.

• negative film insurance

  Pays a producer of commercial films the cost of re-shooting should the film suffer damage in the course of production.

• negligence

  The failure to exercise the care that an ordinary prudent person would exercise: either doing that which a prudent person would not do, or failing to do that which a prudent person would do.

• NEL--noneconomic loss

  A loss that is not monetary in nature. Nor is it based upon financial (economic) standards. For example: a person whose finger is cut off in a piece of machinery while performing that normal job will have a financial loss associated with medical costs, but a noneconomic loss also occurs resulting from the loss of use of the finger. A loss has occurred because of the reduction in the quality of the employee's life. This is a noneconomic loss.

• net amount at risk

  In life insurance, the net amount at risk is the difference between the limit of insurance or face amount of the policy and the reserve or cash value that has accumulated.

• net cash value

  The amount that will be paid the insured or the insured's beneficiary at the time of the insured's death, or the amount paid should the insured surrender the policy for its cash value. It is calculated by taking the cash value and subtracting any loans that may still be outstanding, and adding any dividends that may have accumulated which have not been used for premium payment on other options.

• net increase

  The premium amount an insurer has increased over the prior period of time, such as the amount of premium increase this annual period over the prior annual period. It is calculated by adding together the total of all new business premiums and renewal premiums, then subtracting lapsed or canceled policy premiums.

• net level premium reserve

  With respect to life insurance, it is a premium reserving method used to keep reserves level. Basically, the premium reserves are set higher than needed in the early years of a policy to compensate for the inadequate premiums in its later years.

• net line

  The amount of insurance the company carries or retains on a risk after deducting reinsurance from its "gross" line. (See net retention, and retention.)

• net loss

  The actual net or final total amount of the loss experienced, calculated by adding the sum of all the amounts paid and subtracting reinsurance, salvage, and other recoveries such as subrogation.

• net premium

  1) The gross (paid) premium less any return premium or dividend. 2) The premium less the commission.

• net premiums written

  The total sum of all types of premiums written by an insurer, minus any premiums ceded to reinsurers.

• net profit

  1) In accounting, the difference between all income and all outgo, including reserves provided for expected outgo. 2) A subject of insurance if a loss of net profit is caused by an insurable peril.

• net retained lines clause

  The clause in an excess of loss reinsurance contract which explains that the excess of loss reinsurance applies only to those losses that apply to the ceding insurer's net retentions. The excess of loss contract does not apply to losses otherwise covered by other reinsurance or above the insured's net retention.

• net retention

  The amount for which a company is liable for its own account for example, the gross amount less any reinsurance it may have secured. (See net line, and retention.)

• net underwriting loss

  1) Money lost by an insurer in its underwriting operations, as distinguished from money earned or lost in the investment of assets. 2) Earned premiums less losses, loss adjustment expenses incurred and other underwriting expenses incurred, usually determined monthly for managerial purposes, that show a loss.

• net underwriting profit

  1) Money earned by an insurer in its underwriting operations, as distinguished from money earned or lost in the investment of assets. 2) Earned premiums less losses, loss adjustment expenses incurred and other underwriting expenses incurred.

• neutral coverage evaluation

  A form of alternate dispute resolution where disputing parties agree to submit their positions to a subject expert in order to evaluate whether coverage exists for a given situation. The evaluator is, typically, a disinterested party with a high level of expertise in the form of coverage under dispute.

• new for old

  An expression in marine insurance which means that when repairs are made, new parts or equipment are supplied in place of old ones that have been lost or damaged. An insurance policy may stipulate that the difference between the old and new costs are either excluded or included in its coverage.

• New York Board of Fire Underwriters

  An organization of companies operating in New York state, this body supervises loss adjustments and adjusters, carries on the inspection of electrical wiring throughout the state, operates the New York City Salvage Corps, and interests itself in the welfare of the business in the state.

• New York Insurance Exchange

  A property-liability underwriting exchange formed in 1980, patterned after the syndicate type of operation of Lloyd's of London. The chief differences between the Exchange and Lloyd's are that the New York Exchange permits corporate as well as individual members, and their liability is limited to the amount of funds invested. (See insurance exchanges.)

• NILS

  Stands for National Insurance Laws Service, a reference work from NILS Publishing Company. This publisher specializes in tracking individual state insurance laws and regulations. The information assists insurers with complying with state insurance laws and with making filings with insurance authorities.

• no-fault automobile insurance

  Coverage designed to compensate victims of automobile accidents via their own insurance carriers, regardless of fault and without the necessity of proving negligence on anyone's part. No-fault laws passed by different states vary greatly in their scope and application. Most provide that a victim's own insurance will allow a victim to sue in tort, once expenses or injuries have passed a stipulated threshold (monetary or otherwise). (See Keeton-O'Connell plan and personal injury protection (PIP).)

• no-load fund

  A mutual fund without a sales charge.

• nominal damages

  A negligible sum awarded to a plaintiff in an action where there is no substantial loss or injury that requires compensation (technical award) or in instances where an aggrieved party fails to present evidence to prove significant damages.

• non-cumulation clause

  It is a type of aggregate limit condition. It typically refers to any policy provision that is designed to restrict or limit payments for losses that arise out of a continuous condition (that itself qualifies for coverage). The clause acts to reduce the amount of coverage available by deducting previous payments made under one policy from subsequent policy terms.

• non-waiver agreement

  nonwaiver agreement A signed agreement in which the insured stipulates that the continuance of a loss adjustment process by the insurer shall not be construed as an admission of liability by the insurer. Used when there are substantial questions as to the amount of the claim or whether the policy affords coverage at all. (See without prejudice.)

• nonadmitted assets

  Those assets of an insurance company which under state insurance laws or regulations are not recognized as assets for statutory reporting purposes, e.g., uncollected premiums over 90 days old, fixtures, etc. (See admitted assets.)

• nonadmitted company

  nonadmitted company If an insurer is not licensed to write insurance in a specific state, then the insurer is a nonadmitted insurer for that state.

• nonadmitted insurance

  Protection written by an insurer on a risk located in a state in which the insurer is not licensed. Such an insurer is referred to as a nonadmitted insurer.

• nonadmitted insurer

  If an insurer is not licensed to write insurance in a specific state, then the insurer is a nonadmitted insurer for that state.

• nonadmitted reinsurer

  A reinsurer that is not licensed in a particular state or country.

• nonassessable mutual

  With respect to mutual insurers, nonassessable mutuals are those insurers that do not assess their insureds for losses experienced by the insurer that are higher than anticipated. Normally, the decision to become a nonassessable mutual is a written part of the insurer's charter or bylaws. In order to be a nonassessable mutual, the insurer must have sizable surplus to cover losses.

• nonassessable policy

  Insurance coverage in which the policyholder cannot be required to contribute in the event the insurer becomes unable to pay its losses. The large majority of policies in force in this country are nonassessable. Moreover, guaranty funds exist in most states to cover insolvency losses. (See assessable insurance.)

• nonbinder risk

  A risk that falls outside of the classes of risk that an agent has been authorized to bind by an insurer.

• noncancelable or noncancelable/guaranteed renewable policy

  A provision in some policies (crop-hail insurance and ocean marine insurance) that neither policyholder nor insurer may terminate the contract during its term nor make changes or amendments to the provisions of the policy while it is in force.

• noncancellable policy

  Found in individual disability and individual health insurance plans. The premiums cannot be increased during the term of the policy or until a specific age has been reached.

• noncertified act of terrorism

  noncertified act of terrorism Any terrorist act that falls outside of the parameters described in the Terrorism Risk Insurance Act (TRIA) of 2002. Damages from such acts do not qualify for coverage under the act.

• noncontributory plan

  In a noncontributory pension plan, the employee is not required to and is not permitted to make contributions to the plan. The employer pays all contributions. (See also contributory plan.)

• noncurrent

  The condition existing when two or more policies on a risk do not cover identically (a condition to be avoided because of difficulty in adjusting, as well as the possibility that the insured will recover less than anticipated).

• nonduplication of benefits

  Often called coordination of benefits or COB, this is a health insurance clause that prevents duplicate benefit payments. The benefits of one policy are reduced by the benefits paid in another policy.

• noneconomic loss (NEL)

  A loss that is not monetary in nature. Nor is it based upon financial (economic) standards. For example: a person whose finger is cut off in a piece of machinery while performing that normal job will have a financial loss associated with medical costs, but a noneconomic loss also occurs resulting from the loss of use of the finger. A loss has occurred because of the reduction in the quality of the employee's life. This is a noneconomic loss.

• nonfleet automatic

  A business automobile provision that covers newly acquired vehicles by the insurer as long as the insured reports those vehicles to the insurer within a specified period of time.

• nonforfeiture benefit

  The provision in some life insurance contracts which specifies the benefits that cannot be forfeited even if premium payments are not made. These types of benefits may include the paid-up insurance value, the loan value, or the cash surrender value.

• nonforfeiture value

  A benefit to a life insurance policyholder which provides the amount of money (cash surrender value), the amount of extended term insurance, or the amount of paid-up insurance available from a life insurance policy to its owner when terminated by that person before the policy matures.

• noninsurance

  The handling of an exposure and its resultant losses through means other than insurance. Alternative methods are self-retention, alternative financing, loss prevention, elimination of the exposure or in some cases if there is no method at all, it remains uninsured. Normally, when alternative methods are used, losses are handled as business expenses.

• nonmedical application

  A life or health insurance policy that is applied for without the requirement of a medical exam. The applicant will, most probably, be required to answer health-related questions.

• nonowned automobile liability insurance

  Coverage for the policyholder against liability incurred while driving an automobile not owned or hired by the policyholder or resulting from the use of someone else's automobile on the insured's behalf, such as an employee using a personal car for the employer's business purposes. This coverage is automatically included in personal and most commercial automobile policies.

• nonparticipating insurance

  Policies which do not share in any policyholder dividends declared by the company. (See participating insurance.)

• nonprofit insurers

  Insurers that were created to provide comprehensive, reasonably priced insurance as a service rather than to make a profit. Some jurisdictions allow tax exemptions for these organizations.

• nonproportional reinsurance

  Reinsurance in which the reinsurer's response to a loss depends on the size of the loss rather than to its proportion to the underlying policy limits.

• nonrecording chattel mortgage policy

  An insurance contract protecting a lender (usually a bank or small loan company) from loss arising from not having recorded a mortgage given as security for a loan. With such a policy, time and expense to record numerous mortgages are avoided. (See errors and omissions insurance.)

• nonrenewal

  When an insurer chooses not to provide an additional period of policy coverage due to poor loss experience; a decision to stop offering a type of coverage, or other reason (as long as the reason complies with applicable state law).

• nonrenewal laws

  When an insurer chooses not to offer to renew a policy, the insurer must comply with state regulation regarding the reasons which are permitted for nonrenewal, the type of notice that must be sent and to whom regarding the nonrenewal and the amount of time that must be given the insured prior to the cessation of coverage.

• nonresident agent

  Insurance agents must be licensed in each state where they write business. When an agent is domiciled in one state but also writes business in another, the agent is considered a nonresident in all states except the state of domicile.

• nonsmoker discount

  Because of the data and statistics available showing that non-tobacco users have fewer health problems, credits are offered in some life and health insurance programs for those insureds who commit to not using tobacco products.

• nonstandard insurance

  Insurance coverages that are outside those considered "standard" with respect to the coverages, forms and endorsements provided. Standard insurance is those policies and forms that share common policy language and verbiage as well as same or similar clauses and provisions. Standard also refers to business types and the exposures that the business represents. Businesses that pose only commonly expected exposures are considered standard while businesses that pose unique, unusually or very high exposures are considered nonstandard and thus require nonstandard insurance.

• nonvalued policy

  A policy which when written does not state the amount to be paid is not valued. Most property policies are nonvalued--a maximum amount available is shown but the amount of any one claim or loss is not (unless total).

• normal retirement age

  In a pension plan, the age at which a person can retire and receive full benefits, i.e., age 65.

• North American Free Trade Agreement (NAFTA)

  This is a historic agreement between Canada, Mexico and the U.S. Briefly, the agreement?s purpose is to foster regulations, procedures and working groups to facilitate the flow of goods, services and resources between the countries including more regulatory uniformity.

• North American Industry Classification System (NAICS)

  This is replacing the U.S. Standard Industrial Classification (SIC) system. NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America.

• Not Elsewhere Classified

  Another term for Not Otherwise Classified, it refers to any category of business that has not been assigned a specific code under the standard industrial classification.

• Not Otherwise Classified

  This term refers to any category of business that has not been assigned a specific code under the standard industrial classification.

• not taken

  Policies applied for and issued, but rejected and not paid for by the proposed insured.

• notary public bond

  notary public bond A bond that a state requires to handle losses created by notary mistakes.

• notice of loss

  The notice submitted by an insured to the insurer regarding the occurrence of a loss. Policy conditions specify how long the insured has to notify the insurer of the loss, in what format, and the information the loss notice must contain.

• notice of occurrence

  The notice of the occurrence of a loss that must be submitted by an insured to the insurer in a liability contract. Policy conditions specify when the insured should notify the insurer of the loss, in what format, and the information the notice should contain.

• notice to company

  Written notice to an insurer of the occurrence of an event which may result in a claim or loss.

• NRRA (See National Risk Retention Association.)

  A trade group form by purchasing groups (PGs) and risk retention groups (RRGs). Headquarters: Minneapolis, MN.

• Nuclear Energy Insurance Association

  A pool or association of insurers who have combined to provide nuclear energy liability insurance. (See nuclear energy liability insurance.)

• nuclear energy liability insurance

  Specialty insurance coverage designed to offer liability protection for third-party bodily injury and property damage losses that may occur as a result of the insured's ownership, use or transport of nuclear material. This type of loss is normally excluded by most standard liability policies, thus the need for specialty protection. (See nuclear energy insurance association.)

• nuisance value

  An amount that an insurer will pay to settle a claim not because it is a valid claim or covered by the policy contract, but because the insurer considers it worth that amount to settle and close.

• numerical rating system

  A system used in the underwriting of a risk, where numerical values are assigned to the attributes of the risk to assist the underwriter in evaluating the acceptability of the risk. Once the sum of the numerical values is calculated, the risk is classed into the appropriate acceptability category based on the final value. Categories range from highly desirable to unacceptable.

• numismatic property

  numismatic property Refers to coins, medals, tokens and similar property.

• nurse case manager

  A case manager acts as a bridge between an injured person and all of that person?s health-care providers. He or she assists in coordinating care, handling information, making inquiries, and creating a health care program or plan on behalf of an ill or injured person or his or her family.

• nursing home professional liability policy

  Protects a nursing home against claims for injury resulting from negligence of the nursing home staff.

• nursing liability

  nursing liability A policy that protects against being held legally liable for loss or damage that arises out of the insured's nursing duties. A form of professional liability.
• Back to Top

• OASDHI

  (See Old Age, Survivors, Disability, and Health Insurance.)

• obligatory treaty

  An agreement between a primary insurer and a reinsurer that obligates the former to pass on (cede) and the reinsurer to accept all risks that fit the guidelines established by the agreement. For instance, an automatic treaty may require Insurer A to automatically cede any homeowner policy with a dwelling limit at or above $300,000.

• obligee

  The party in whose favor a bond runs, such as the party protected from loss under the bond.

• obligor

  One bound by the obligation covered by a bond. Also called the principal.

• OCC

  This position was originally created in 1863 and it oversees the chartering and supervision of all national banks, as well as foreign banks. Among its various duties, the office conducts bank audits and issues as well as interprets rules governing banking operations. The OCC, due to the effect of the Gramm-Leach Bliley Act, is beginning to have an influence on insurance regulation. Since banks, through holding companies, have increased their involvement in selling insurance, the OCC has increased its interest in the supervision and regulation of insurance activity. Headquarters: Washington, DC.

• occupancy

  1) The use to which a building is put. 2) The type of contents a building contains.

• occupation class

  In life and disability insurance, the hazard of occupation can mean an additional premium charge. Occupations are lumped into various different classes with clerical occupations being the least hazardous.

• occupational accident

  Injury or accident occurring at or because of an employee's job, usually caused by a condition resulting from that job or occupation.

• occupational disease

  Impairment of health due to continuous exposure to hazards inherent in a person's occupation. Compensable under most workers compensation laws.

• occupational hazard

  A condition or hazard that occurs during or as a result of an employee's occupation or job that increases the potential for certain types of accidents, sicknesses, illnesses, or death.

• Occupational Safety and Health Act (OSHA)

  A federal statute establishing requirements for safe and healthy working conditions on a nationwide basis. Enforced by Labor Department safety inspectors and providing compilation of relevant statistics on work injuries and illnesses.

• occupational upper extremity cumulative trauma disorders

  occupational upper extremity cumulative trauma disorders Skeletal and muscular problems such as carpal tunnel and thoracic outlet syndromes that typically arise from poor office ergonomics.

• occurrence

  1) In a non-insurance sense, an incident, event or happening. In insurance, the term may be defined as continual, gradual or repeated exposure to an adverse condition, which is neither intended nor expected to result in injury or damage as contrasted with an accident, which is a sudden happening. In reinsurance, per-occurrence coverage permits all losses arising out of one event to be aggregated instead of being handled on a risk-by-risk basis. 2) One basis or determinant for calculating the amount of loss or liability in insurance or reinsurance when an aggregation of related losses is to constitute a single subject of recovery. For example, in property catastrophe reinsurance treaties, occurrence is usually defined so that all losses within a specified period of time involving a particular peril are deemed an occurrence.

• occurrence policy

  The traditional occurrence liability insurance method provides coverage for losses from liability-imposing causes which occurred during the policy period, regardless of when the claim is asserted. Once the policy period is over in a claims-made form, the approximate extent of the underwriter's liability is known. With the traditional occurrence liability coverage method, the underwriter may not discover the extent of liability for years to come from losses claimed to have occurred within the policy period.

• ocean cargo insurance

  A type of marine insurance that provides property protection for cargo that is being shipped by sea or over water.

• ocean marine insurance

  The protection of ships, their cargoes, and the freight, including protection and indemnity insurance to cover shipowners' liabilities for loss of life to any person, illness or injury to crew, damage to cargoes carried, and damages to fixed or floating objects.

• OCIP (owner-controlled insurance program)

  (See Owner Controlled Insurance Program, also see Wrap.)

• OCP--owners and contractors protective liability insurance

  A policy which provides liability coverage for the insured for the negligent acts of contractors and subcontractors hired by the insured. May also cover for their own negligent supervision of the work performed.

• OCSLA

  (See Outer Continental Shelf Lands Act.)

• odd time

  odd time The portion of a policy period that extends beyond 12 months, typically used in order to allow one policy to conform to another policy's effective dates.

• odds

  A ratio used to express the predicted chance that an event will occur.

• OEM

  Commonly used with the automobile industry, it refers to a manufacturer that originally made the auto parts used in the auto construction. It also refers to the perception that OEM parts consists of more quality than "aftermarket" parts.

• off-premises clause

  Language which may be added to a policy indicating that personal property is covered when elsewhere than on the premises described in the policy.

• off-premises services coverage

  Property and time element endorsements designed to cover the insured for losses that result from the interruption of services by an insured cause of loss. The current endorsements allow the insured to select coverage for off-premises services, whether supplied by a private or public utility. Protection may be purchased for the following options: water suppliers, communication suppliers, or power supplies.

• office burglary and robbery policy

  This form (now obsolete) provided one blanket limit of insurance for loss of money, securities, office equipment, and fixtures by robbery, either inside or outside, and burglary. The same coverage is available but on an ala carte basis through the Commercial Crime Policy.

• Office of the Comptroller of Currency (OCC)

  This position was originally created in 1863 and it oversees the chartering and supervision of all national banks, as well as foreign banks. Among its various duties, the office conducts bank audits and issues as well as interprets rules governing banking operations. The OCC, due to the effect of the Gramm-Leach Bliley Act, is beginning to have an influence on insurance regulation. Since banks, through holding companies, have increased their involvement in selling insurance, the OCC has increased its interest in the supervision and regulation of insurance activity. Headquarters: Washington, DC.

• officers and directors liability insurance

  Protects officers and directors of a corporation against damages from claims resulting from negligent or wrongful acts in the course of their duties. Also covers the corporation (and even the officers and directors in some cases) for expenses incurred in defending lawsuits arising from alleged wrongful acts of officers or directors. These policies always require the insured to retain part of the risk uninsured.

• Offshore/ Space and Transportation Insurance

  Offshore/ Space and Transportation Insurance Another term for marine and aviation insurance.

• Old Age, Survivors, Disability, and Health Insurance

  This is the formal name for Social Security, the federal plan that pays benefits to workers who reach a mandated retirement age. The benefits are based upon the person?s contributions made via the federal government?s income withholding tax.

• OLT--owners, landlords and tenants liability insurance

  Insurance of the liability arising from the ownership, occupancy, operation or maintenance of premises. This is part of the commercial general liability coverage.

• omissions clause

  A provision that applies to treaty reinsurance agreements. In those cases where the reinsurance treaty would have normally applied to a risk, but the ceding insurer unintentionally omitted the risk from the Bordereau (the report of ceded risks), the omitted risk is still covered.

• omnibus clause

  A part of an automobile or yacht liability policy which extends coverage to persons and organizations other than the named insured, such as members of the insured's family, servants and others using the automobile with the owner's permission. When these extensions were introduced, the policy was said to have an "omnibus clause."

• open cargo policy

  A marine coverage, inland or ocean, protecting cargo during its entire transit period. Open policies are contracts designed to cover shipments fluctuating in number and value with varying amounts of insurance, requiring the insured periodically to report details of those shipments to the insurer. An initial deposit premium is required at the inception of the policy, with premiums due calculated after the reports are received by the insurer. The open policy does not specify an expiration date, which is another feature of its open and continuous nature. Ocean marine cargo policies are generally written on this basis. (See endorsement in blank.)

• open competition

  An insurance system under which rates do not have to be filed with the state insurance department.

• open cover

  A reinsurance placement arrangement, where the ceding insurer may declare and insure specific types of risks on an open basis, as they become known or are identified by the insurer.

• open enrollment

  A period of time during which new subscribers may elect to enroll in a health insurance plan or prepaid group practice. In the Health Maintenance Organization Act of 1973 (P. L. 93-222), the term refers to periodic opportunities for the general public, on a first-come, first-served basis, to join an HMO.

• open penalty

  open penalty A bond with an unlimited liability (surety).

• open perils

  A version or type of "all-risk" property insurance in which all perils or causes of loss not otherwise excluded are covered.

• open pilot provision

  (See Open Pilot Warranty.)

• open pilot warranty

  An aircraft liability policy clause (often found on the declarations page) which extends coverage to situations where the aircraft owner/pilot permits other qualified pilots to operate his or her insured plane.

• open policy

  An insurance contract designed to cover shipments fluctuating in number and value with varying amounts of insurance, requiring the insured periodically to report details of those shipments to the insurer. An initial deposit premium is required at the inception of the policy, with premiums due calculated after the reports are received by the insurer. The open policy does not specify an expiration date, which is another feature of its open and continuous nature. Ocean marine cargo policies are generally written on this basis. (See reporting policy (or form).)

• open slip

  A Lloyd's of London mechanism which gives a type of blanket prior approval to a broker for coverage of any account that meets the requirements set forth on the "slip."

• open stock burglary policy

  (See definition for mercantile open stock.)

• operating income/profit

  The algebraic sum of the net investment income and net underwriting income for any reporting period.

• operating ratio

  operating ratio The addition of the ratio of losses incurred to earned premiums, and the ratio of underwriting expenses to written premiums.

• operation of building laws

  (See ordinance or law exclusion.)

• operations liability

  The exposures related to the normal ownership, maintenance, and use of a commercial premises, including the conduct of the risk's business activities. This exposure does not include products or completed operations liability.

• option

  A life insurance concept applying to those policies that offer the insured or beneficiary a selection of the ways or methods to be used for the payment of benefits. Each of the different selections available is an option.

• Option A - universal life

  The death benefit remains level and the cash value builds separately. Upon death the death benefit is paid. (See also Option B.)

• Option B - universal life

  The death benefit and cash value are combined to produce an increasing death benefit. Upon death the combination of the two are paid.

• optional life insurance settlement modes

  A life insurance concept applying to those policies that offer the insured or beneficiary a selection of the ways or methods to be used for the payment of benefits. Each of the selections available is an option or mode.

• optionally renewable contract

  A group health contract that gives the insurer the express right to determine if the contract is to be renewed or terminated upon each renewal period. Not a continuous contract.

• or so deemed

  or so deemed An agreement to treat a condition or circumstance in a given manner, regardless of any specific details.

• ordinance or law coverage

  A property endorsement that provides the insured the option to purchase coverage for three types of common building ordinance or law requirements that apply after an insured has suffered a physical damage loss such as fire. These ordinance or law damages are normally excluded in standard property coverage forms. The coverages available in this endorsement are cost to demolish the undamaged portion of the building, cost to replace with superior construction as required by law, and cost to clear the land of debris after demolition.

• ordinance or law exclusion

  An exclusion found in most standard property coverage forms that clarifies that there is no coverage for loss or damage that occurs as a direct result of the enforcement of any law or ordinance regarding construction, use, or repair of property. Nor does it cover any property that has to be torn down as required by ordinance or law, after a fire or other physical damage loss, even if that damage is a result of an otherwise covered cause of loss.

• ordinary life insurance

  Standard or ordinary whole life insurance coverages that cover the lifetime of the insured, usually available in multiples of $1,000. Premiums are collected annually or in some type of annual payment plan and continue for a significant period of time until the policy is paid in full, normally at an age close to retirement.

• original age conversion

  A term life insurance policy that converts to a higher form of premium paying policy (whole life) at the original age (age at application).

• original conditions

  original conditions All of the insurance policy provisions (including any modifications) that are referenced and incorporated (as is) into a reinsurance agreement (either facultative or treaty).

• original cost

  The purchase price of the covered property.

• original equipment manufacturer (OEM)

  Commonly used with the automobile industry, it refers to a manufacturer that originally made the auto parts used in the auto construction. It also refers to the perception that OEM parts consists of more quality than "aftermarket" parts.

• originator firm

  The entity that is the original owner of the securitized property. This firm makes the initial decision to go through the asset securitization process.

• OSHA--Occupational Safety and Health Act

  A federal statute establishing requirements for safe and healthful working conditions on a nationwide basis. Enforced by Labor Department safety inspectors and providing compilation of relevant statistics on work injuries and illnesses.

• other insurance clause

  Language in many policies which states the method for apportioning the loss between two or more policies covering the same property at the time of loss.

• other than collision coverage

  (See comprehensive automobile coverage.)

• OUECTD (occupational upper extremity cumulative trauma disorders)

  OUECTD (occupational upper extremity cumulative trauma disorders) Skeletal and muscular problems such as carpal tunnel and thoracic outlet syndromes that typically arise from poor office ergonomics.

• outage insurance

  A contingent property or time element coverage to protect an insured from loss of income that occurs as a result of damage to machinery that is not operable, due to direct damage cause of loss. Currently, it may be covered by a boiler and machinery or machinery and equipment policy.

• outboard motor and boat policy

  A class of inland marine business covering boats, motors and equipment for named perils (fire, collision and theft) or, at a higher premium, for "all risks." Some policies include liability coverage for property damage to other vessels.

• Outer Continental Shelf Lands Act

  This is an extension of the U.S. Longshore and Harbor Workers Compensation Act which provides Workers Compensation protection to a special class of workers. It protects persons (such as miners and oil rig drillers) who work on the submerged land (outer shore) that rings the U.S. and its possessions.

• outservant

  In workers compensation, insurance written to protect a domestic servant whose principal duties are outside, such as a gardener or chauffeur.

• outside employee

  An employee such as a salesperson, messenger or inspector whose duties keep the employee away from headquarters. Frequently used in bonding.

• outside holdup insurance

  This form (now obsolete) provided coverage for robbery outside of the premises. It is now called Outside the Premises insuring agreement under the Commercial Crime policy and covers theft and robbery of a messenger.

• outsourcing coverage

  May be thought of any insurance product used to address a tangible loss related to contracting the performance of certain company operations to outside service providers. Note that such exposures are typically handled via other risk management techniques.

• overhead expense insurance

  overhead expense insurance Refers to form that responds to the need to handle an operation?s continuing business expenses during the time that the business owner is suffering a temporary disability.

• overinsurance

  Coverage in amounts greater than the value of the property insured or the amount of loss sustainable by the insured; for example, several policies of hospitalization insurance for a total amount in excess of daily room charges.

• overlapping insurance

  When two or more different kinds of policies cover the same loss, the insurance is said to be "over-lapping," as opposed to two or more policies of the same kind, which is "contributing" insurance. Contributing insurance is illustrated by two fire insurance policies covering the same loss. However, if an inland marine policy and a fire policy cover the same loss, they are overlapping insurance. (See contribution clause, and guiding principles.)

• overline

  1) The amount of coverage or the limit that is in excess of the insurer's set retained line limit or capacity. 2) A commitment or agreement by an insurer or reinsurer to provide coverage in excess of normal capacity or its set line limit.

• overriding commission

  That portion of a commission received and retained by a general agent after paying the other portion to a producing agent whose business is supervised by that general agent. Also known as overwriting commission.

• overtraded

  The acceptance of more insured risks by an underwriter than permitted by underwriting rules of the insurer.

• own occupation

  A level of disability, meaning that an injured person is unable to perform a specific job that he or she had the training and /or skill to do if he or she were not disabled.

• owner's equity

  1) The ownership, financial interest or property rights of owners in an enterprise. 2) The excess of assets over liabilities of an enterprise.

• owner-controlled insurance program (OCIP)

  An insurance program for larger construction projects that, typically, is purchased and administered by the project's owner which may be either a private or a public entity. Also see wrap.

• owners and contractors protective liability insurance (OCP)

  A policy which provides liability coverage for the insured for the negligent acts of contractors and subcontractors hired by the insured. May also cover for their own negligent supervision of the work performed.

• owners, landlords and tenants liability insurance (OL&T)

  Insurance of the liability arising from the ownership, occupancy, operation, or maintenance of premises.

• ownership of expirations

  In the operation of the American agency system, the independent agent's right to have or hold as property the records of customers secured and served by that agent (dates and details of expiring policies). Such ownership is contrasted with an exclusive agent's records of policyholders served by the exclusive agent which are owned by the insurer represented by the exclusive agent. (See expiration.)

• ownership provision

  A life insurance contract provision permitting ownership of the policy by a party other than the insured.
• Back to Top

• P & I insurance

  Protection and indemnity insurance for shipowners, contractors, and charterers against liabilities arising out of the operation of the vessel for loss of life to any person, illness or injury to passengers and crew, damage to cargo while loading, carrying or unloading cargo, damage to piers and docks, and removal of wreckage as required by law.

• P.I.V.--post indicator valve

  When water mains are buried around industrial plants protected by automatic sprinklers, the flow of water in a buried pipe may be controlled by a valve which projects above the ground and has an indicator showing whether it is open or closed. Such valves are post indicator valves, abbreviated on diagrams as "P.I.V."

• package policy

  A combination of property-liability coverages of two or more separate policies in one contract with one premium. The development of package policies is a move toward economy and efficiency in giving the policyholder one document instead of several.

• paid business

  A life and health insurance term used to designate the business that has been underwritten and accepted, and for which an initial premium has been received, and the policy issued but not yet been delivered to the insured.

• paid-up additions

  A life insurance option allowing the insured to use policy dividends to purchase additional limits of whole life coverage that are paid in full (paid-up).

• paid-up insurance or paid-up at age life insurance

  A whole life insurance policy giving standard lifetime protection, but where the policy becomes paid in full at a certain age, such as a policy paid in full at age 60. (See limited-payment life insurance.)

• paid-up policy

  A life policy that requires no more premium payments. Death benefits are not paid, however, until death.

• pair-and-set clause

  An inland marine policy provision which requires the insurer, at the insured's option, to restore or pay for the entire pair or set of jewelry or fine arts when only a part has been lost, destroyed or damaged.

• PAMIC

  (See Pennsylvania Association of Mutual Insurance Companies.)

• pandemic coverage

  A new form of business interruption coverage. Typically, it is a nonstandard form that provides coverage against loss directly related to a government declaration of a pandemic (global or widespread epidemic). Coverage responds to substantial income loss from adverse effects on employees (absenteeism), customers (spread of public fear) and actions by government units that affect tourism and similar issues.

• panel wall

  In building construction, a panel wall is normally an exterior, one-story, nonbearing panel. In multistory buildings, the panel must be anchored at each story.

• paramedics professional liability

  Specially designed professional liability coverage for the exposures experienced by paramedics who have quasi-medical malpractice loss potential.

• parapet

  A division wall or fire wall which, if it is to be accepted as a standard division, must extend through the roof and usually several feet above it. It (if brick or concrete) is usually topped with tile. The part above the roof is the "parapet."

• parcel post insurance

  An inland marine form that insures against the loss of merchandise in transit by government parcel post.

• parent company

  The organization which owns or controls one or more subsidiaries.

• PARMA

  (See Public Agency Risk Managers Association.)

• parol

  Oral statements.

• Parol Evidence Rule

  This rule preserves the intent of written agreements by prohibiting their content from being affected by any oral statements concerning such agreements. In other words, oral statements may not become part of a written agreement.

• partial disability

  Usually defined as inability caused by a covered illness to perform one or more of the functions of one's regular job. (See permanent and total disability, and total disability.)

• partial disability benefit

  Most disability insurance plans pay only when a person is totally disabled (as defined by the policy). A person may be able to work part-time or at another less demanding job during recovery. Policies that provide partial disability benefits pay a percentage of the total benefit for these partial disabilities. (See also residual disability benefit.)

• partial disability insurance

  Insurance coverage for insureds who may suffer a partial disability. Partial disability is defined as the inability caused by a covered accident, injury, or illness to perform one or more of the functions of one's regular job but which does not, however, limit the person's ability to perform other forms of employment. Often this insurance is called on to provide rehabilitation benefits and job retraining.

• partial loss

  One involving less than all of the values insured or calling on the policy to pay less than its maximum amounts.

• participant

  An individual who is eligible to be covered by a pension or group insurance plan.

• participate

  To share in the writing of a risk; the assumption of liability.

• participating insurance

  A designated class of insurance which shares in the dividends declared by the company to policyholders. While mutual insurers primarily issue participating policies, and stock insurers usually issue nonparticipating policies, either type of insurer may seek authorization from its domiciliary state insurance department to issue the other type of policy. (See dividend, and nonparticipating insurance.)

• participating reinsurance

  Any form of reinsurance where the reinsurer participates with another on a pro rata basis. For example, in a quota share arrangement, primary insurer agrees to share 50/50 with reinsurer. If a $100,000 policy is involved, both primary and reinsurer pay $50,000. (See pro rata reinsurance.)

• particular average

  In ocean marine insurance, a loss either partial or total, which falls on one or more property(ies) or interest(s) being shipped, as opposed to a general average. (See general average.)

• partner controlled insurance program

  An insurance program for larger construction projects that is purchased and administered by a collaboration of the project's owner and its general contractor. Also see wrap.

• partnership insurance

  Life and health insurance coverages available for partnerships. These policies are used when the partnership needs protection for the continuation of the operation should one of the partners die or become disabled.

• party wall

  A wall separating, but common to two buildings.

• passenger bodily injury

  Injury, sickness, disease, or death sustained by a passenger. Most aircraft liability contracts do not provide coverage for bodily injury to passengers. This coverage must be purchased separately.

• passenger hazard exclusion

  An exclusion in motorcycle liability policies that removes coverage for bodily injury suffered by passengers of the insured.

• past service

  The number of years an employee worked for the company before the company instituted a pension plan. Some plans give credit for past service.

• patent insurance

  1) Insurance coverage for losses the insured may suffer as a result of another party's infringing upon the insured's patent rights. 2) Insurance coverage for allegations against the insured of infringements upon the rights of a patent holder.

• Paul vs. Virginia

  A famous lawsuit decided in 1869 by the U.S. Supreme Court, in which the court held that insurance was not commerce and, therefore, not interstate commerce; thus, insurance was not subject to federal control. This was upset by the Supreme Court in 1944 in an equally famous case brought against the Southeastern Underwriters Association, usually referred to as the S.E.U.A. case. The citation is Paul vs. Virginia, 8 Wall. 168, 19 L. Ed. 35T (1868).

• pay-at-the-pump

  A proposed auto liability protection program designed to reduce inadequate, uninsured, underinsured, unavailable, or unequal auto insurance coverage. The proposed program calls for state or federally mandated insurance with set, standard coverages available to all licensed drivers. The program would be funded by a combination of gasoline surcharges, taxes, licensing fees, and fines.

• payback period

  Used in reinsurance rating to describe the number of years it would take for a policy's premium to equal the amount of indemnification.

• paymaster robbery insurance

  This form (now obsolete) covered payroll moneys against loss by robbery inside or outside the insured's premises. While there is no coverage specific to paymaster, coverage for loss of money and securities can be purchased in the Commercial Crime policy.

• payment bond

  A bond given by a principal, usually a contractor, to guarantee payment for labor or materials used in the work under a contract.

• payor disability

  A life insurance provision or rider that waives premium payments should the party paying the premium die or become disabled. Often attached to juvenile life or health insurance policies.

• payroll audit

  An examination and verification of an insured's records for the amount of payroll for classes of employees which is used in determining the premium for certain lines of insurance, such as workers compensation. The company sends out auditors to determine the accuracy of the figures provided by the insured. (See auditor.)

• PCI

  (See Property Casualty Insurers Association of America.)

• PCIP

  (See Partner Controlled Insurance Program, also see wrap.)

• PCLA

  Property Claim Law Associate designation sponsored by the American Educational Institute. Headquarters: Basking Ridge, NJ.

• PD

  A form of "third-party" protection covering the insured's legal liability for damage to property of others caused by the insured's negligence. (See Liability insurance.)

• peak season endorsement

  A property endorsement that allows an insured to purchase additional property damage insurance for specified cyclical periods occurring on a regular basis. The insured purchases an underlying limit that remains constant throughout the entire year. Additional limits are purchased to increase the underlying limits for specified periods of time. Both the amounts and the dates of the increase are indicated in the endorsement. This type of endorsement provides protection for risks that are seasonal or have significantly higher inventories at set times each year, such as the holidays.

• penalty of the bond

  In a surety bond, the amount guaranteed or the limit of the company's liability.

• Pennsylvania Association of Mutual Insurance Companies

  The Pennsylvania Association of Mutual Insurance Companies (PAMIC) consists of mutual P&C insurers operating and/or located in Pennsylvania. This trade association sponsors education seminars, holds annual conventions, monitors and informs members about insurance-related legal activity and performs other services. Headquarters: Wormleysburg, PA.

• Pension

  In the general sense, a life income provided to an individual. In the formal sense, a plan established to provide such benefits to individuals (employees) usually in a format that meets IRS guidelines for being a qualified pension plan.

• Pension Benefit Guaranty Corporation (PBGC)

  A federal agency. Defined benefit pension plans pay a fee to the PBGC that goes into an insurance fund to pay benefits to participants of insolvent pension plans.

• pension trust liability insurance

  Protection for those who administer pension and welfare funds, profit-sharing and other employee benefit programs against loss for errors and omissions by the administrator. The need for this coverage was created by the Employee Retirement Income Security Act (ERISA) of 1974.

• PEO

  PEO (professional-employer organization) A commercial firm that contracts with employers, allowing the latter to outsource functions such as employee benefits, human resources and payroll, reducing their payroll and operating expenses.

• pep plan

  See personal emergency preparedness plan.

• per capita

  A life insurance beneficiary designation meaning "by head." The designation per capita by a mother (insured) with a father and two children would divide up the proceeds three equal ways: father - child 1 - child 2. (See also per stirpes.)

• per diem business interruption insurance

  Coverage which provides that the amount recoverable is limited to a fixed amount per day or part thereof in which the manufacture of goods is prevented by an insured loss. This coverage has now been replaced by the business income coverage form.

• per occurrence limit

  This refers to the cap amount an insurance company will pay for all claims arising from a single incident. In an automobile policy, it applies to bodily injuries suffered by all parties. When Bodily Injury coverage is purchased in split limits, the second limit is the "per occurrence" limit, e.g. $100,000 (per person) / $300,000 (per occurrence)

• per person limit

  This refers to the maximum amount an insurance company will pay for any one person's injuries related to a single incident. In an automobile policy, it applies to bodily injuries suffered by each person. When bodily injury coverage appears in split limits, the first limit is the "per person" limit, e.g., $100,000 (per person) / $300,000 (per occurrence)

• per risk excess reinsurance

  A reinsurance term, it refers to excess coverage that applies to each given risk rather than on an occurrence or an aggregate basis. For example, Alpha Re agrees to reinsure Regular Fire & Casualty's losses on four-family dwellings only if a loss per risk exceeds $50,000. So if a city block containing five Regular Fire & Casualty four-family dwellings was lost in a fire, Alpha Re must pay the first $50,000 on each of the five dwellings ($250,000).

• per stirpes

  Means "by stock" or family line or branch. A beneficiary designation in life insurance that is used to designate a family line of individuals. Grandfather has a policy on his life with his son as beneficiary. Grandfather dies and the policy begins paying benefits to the son. The son dies before all benefits are paid. Any remaining benefits accrue to the grandchildren. (See also per capita.)

• per-cause deductible

  A deductible in health insurance that pays per illness, e.g., Mary has a heart attack, then later has a stroke. Each of these is a separate cause and would incur a separate deductible.

• per-cause maximum

  The most a health insurance plan will pay for a single accident or illness.

• percentage of loss deductible

  A type of deductible that does not specify the exact amount that will be subtracted from each loss, but rather sets a percentage of loss that will be retained by the insured. Often, this type of deductible is subject to a minimum amount and capped by a maximum.

• percentage of value deductible

  A type of deductible that does not specify the exact amount that will be subtracted from each loss, but rather sets a percentage of the value of the property that is to be retained by the insured. Often, this type of deductible is subject to a minimum amount and capped by a maximum.

• percentage participation

  In health insurance, a contract provision making the insured responsible for a specified percent of covered expenses. For example, if 80%-20% participation is designated, the insurer will cover 80% and the insured will be responsible for 20% of covered expenses.

• performance bond

  In general terms, a surety bond guaranteeing the performance of a contract, usually associated with construction work, but possible for almost any kind of contract. Sometimes called a performance bond.

• peril

  The cause of loss, for example, fire, wind, vandalism, or accident. (See economic perils, human perils, and natural perils.)

• perils of the sea

  Causes of loss unique to the operation of ships and their cargoes, such as sinking, stranding, heavy weather, etc., but not fire, lightning or theft.

• period certain

  In a life insurance settlement option or annuity, the period of time benefits will be paid even if the insured dies before the end of the period certain, e.g., 10 years. The remainder will be paid to the contingent payee.

• period of restoration

  In time element or business income insurance, it is the period of time in which coverage is in effect. It starts at the occurrence of the direct physical damage loss and continues until the damaged property has been rebuilt, restored or replaced, as long as that period of time is reasonable, or until the limit has been exhausted.

• periodic payments

  The practice of spreading payment of an obligation over an extended period, instead of paying the obligation in a lump sum; often referred to as a structured claim settlement.

• permanent and total disability

  Inability to perform one's own and sometimes any occupation, which lasts for a stated period of time and is caused by a covered illness or injury. (See partial disability, and total disability.)

• permanent partial disability

  Usually defined as the permanent inability, caused by accident or illness, to perform one or more of the functions of one's regular career or occupation.

• permanent total disability

  The permanent inability, caused by accident or illness, to perform the functions of one's regular career or occupation. In many cases, the inability to perform any job or occupation.

• permit or license bond

  A surety bond often required by municipalities and other public authorities to indemnify them against loss from breach of any regulation or ordinance under which the license or permit is issued.

• perpetual insurance

  A form of insurance, principally property or inland marine, written without an expiration date, which originated in Philadelphia and is largely confined to that city and its surroundings. The policyholder makes a deposit with the insurance company, and the interest earnings from the funds collected pay the losses suffered.

• Persistency

  A life insurance term used to describe how many customers of an agency or a company actually pay their renewal premiums. Usually listed as percentage of premium or accounts.

• personal accident insurance

  Protection of an individual against loss caused by an accident.

• personal articles floater

  Worldwide coverage on an "all-risk" basis for scheduled, valuable personal property.

• personal auto policy

  Coverage designed to replace both the family auto policy and the special package auto policy as the "standard" form for insuring private passenger autos and certain types of nonbusiness trucks.

• personal effects floater

  An inland marine policy which insures articles, usually accompanying travelers, against "all-risks" while away from home.

• personal emergency preparedness plan

  A plan used by a family for responding when either natural or manmade emergencies occur. Such plans should include steps on how separated family members should re-establish contact, advise each other on location/status, and maintaining personal safety and procedures for securing and preserving most valued property when a home needs to be evacuated.

• personal injury

  Injury, other than bodily injury, resulting from false arrest, false detention, false imprisonment, malicious prosecution, wrongful eviction, wrongful entry, or the invasion of privacy of a premises. It also includes injury caused by oral or written material that slanders a person, goods, products, services, or which violates the right of privacy.

• personal injury protection (PIP)

  Also known as no-fault insurance, PIP provides insurance for medical costs, loss of earnings, additional living expenses, and funeral costs for occupants of the insured automobile and pedestrians other than those insured under other policies. (See no-fault automobile insurance, and automobile medical payments insurance.)

• personal insurance

  Insurance that covers the financial consequences of losses to individuals and families caused by injury, illness, death, disability and unemployment.

• Personal Insurance Federation of California (PIFC)

  A trade association of insurers, operating in California, who specialize in writing personal lines (private vehicle and homeowners) coverage in that state. Headquarters, Sacramento, CA.

• personal liability coverage

  Coverage for damages, plus the cost of any defense, that are related to a claim or suit brought against the insured resulting from bodily injury or property damage caused by an occurrence covered under the policy.

• personal lines

  Types of insurance written for individuals rather than businesses, for which the term commercial lines applies.

• personal property

  Property other than real (fixed, structural) property.

• personal property floater (PPF)

  A broad form of inland marine policy issued to householders, insuring all furniture and household effects wherever they may be, on an "all-risk" basis.

• personal property of others

  Contents, business personal property, and any other property excluding real property, that is not owned by the insured.

• personal surety

  Surety furnished by an individual, as distinguished from surety furnished by a surety company, called a "corporate surety." (See surety.)

• personal theft insurance

  Coverage of personal property and household goods against loss by theft in and out of residential premises. Issued in the ordinary form and in a broad form, the latter including mysterious disappearance and certain more liberal provisions.

• personal umbrella liability insurance

  A form of liability insurance protecting policyholders for claims in excess of the limits of their primary personal automobile, residential liability and recreational (boat, RV, motorcycle, etc.) liability policies. It also provides coverage for some sources of loss that are not covered by their primary policies. Such cases are subject to a deductible (or self-insured retention).

• pesticide applicator coverage

  This coverage supplements the protection of a Commercial General Liability policy by providing protection against loss or damage an insured causes by a pesticide or herbicide application. The loss must involve accidental introduction of a substance at a site that is not owned or controlled by the insured. Typically, the loss must occur in relation to an operation that complies with all government regulations.

• pet insurance

  Life and health insurance for animals, pets, or livestock.

• PF&M

  A reference manual published by The Rough Notes Company, Inc. that provides analysis of property and casualty coverage forms and endorsements. Headquarters: Carmel, IN

• pharmacists professional liability insurance

  Protects pharmacists and their professional staff against claims for personal injury arising from malpractice, error or mistakes in the performance of their professional services.

• philatelic property

  philatelic property Refers to postal or revenue (tax) stamps and related material.

• PHS

  (See policyholder surplus.)

• physical damage

  1) As used in property or liability insurance, physical injury to tangible property. 2) As used in automobile insurance, actual damage or loss to the vehicle itself caused by collision, overturn, fire, theft, vandalism, or malicious mischief.

• physical hazard

  Danger of loss or liability arising from the condition, occupancy or use of property, as opposed to such danger arising from the character of the policyholder. (See moral hazard, hazard, and morale hazard.)

• physicians and surgeons professional liability insurance

  Protects physicians and surgeons against claims for personal injury arising from malpractice, errors or mistakes in rendering professional services. Presently, a most expensive coverage due to high jury awards against the medical profession.

• PIA--Professional Insurance Agents

  Formerly National Association of Mutual Insurance Agents, a trade association whose purpose is to protect the business interests of its members, who also are members of state associations. Headquarters: Alexandria, VA.

• pilferage

  Theft in small quantities; for example, not limited to the taking of a whole package or all of the property insured.

• PIP--personal injury protection

  Also known as no-fault insurance, PIP provides insurance for medical costs, loss of earnings, additional living expenses and funeral costs for occupants of the insured automobile and pedestrians other than those insured under other policies. (See no-fault automobile insurance.)

• piracy

  1. Robbery on the high seas; typically, the unlawful seizure of vessels and/or cargo. 2. Describes the unauthorized duplication (and redistribution) of copyrighted materials, particularly music, movies, game software, etc.

• placed business

  A life and health insurance term used to designate the business that has been underwritten and accepted, an initial premium has been received, and the policy has been issued and delivered (placed) to the insured.

• placer

  The person in an insurance broker's office who directly negotiates with insurance companies for the acceptance or rejection of business.

• plaintiff

  plaintiff Any party who initiates a lawsuit.

• plaintiff bonds

  plaintiff bonds A bond required by law that guarantees that a plaintiff can pay any damages that may be determined by a court. The bond must be posted before a lawsuit begins.

• plan determination letter

  A pension plans must be filed with the IRS to determine if it meets the requirements for the qualified plan. This ruling is called a determination letter. Each year, the plan must meet continuing requirements to retain its classification as a qualified plan. For example, a plan must avoid "top heaviness" where too much of the pension funding or benefit accrues to top officers and other highly compensated employees.

• plan participant

  The person in a health, employee benefit or pension plan to whom the benefits accrue. (See also plan sponsor.)

• plan sponsor

  The business or entity that adopts a pension, health or employee benefit plan for the plan participants. (See also plan participant.)

• plate glass insurance

  Coverage against the breakage of glass.

• platform insurance

  A special type of ocean marine insurance designed to cover off-shore oil or gas platforms and drilling barges.

• pleasure use

  A rating classification term used in auto insurance that indicates the vehicle is not used for business and does not have commercial exposures, other than to drive back and forth from work.

• PLRB

  See Property Loss Research Bureau.

• PLUS

  PLUS (Professional Liability Underwriters Society) An organization begun in 1986 by industry professionals specializing in the field of professional liability. The society is a forum for education and discussion on addressing various aspects of complex insurance issues involving professional liability. Headquarters: Minneapolis, MN.

• PML--probable maximum loss

  The anticipated maximum property fire loss that could result, given the normal functioning of protective features (firewalls, sprinklers, and a responsive fire department, among others), as opposed to maximum foreseeable loss which is a similar valuation, but on a worst-case basis with respect to the functioning of the protective features. Underwriting decisions would typically be influenced by PML evaluations, and the amount of reinsurance ceded on a risk would normally be predicated on the PML valuation. (See maximum foreseeable loss (MFL), and maximum possible loss (MPL).)

• points or surcharge points

  1) When referring to motor vehicle reports (MVRs), it is a grading system assigned by each state, where points are assessed against a driver based upon a combination of the number of violations and the degree of seriousness of those violations. When a specified point total is reached or exceeded within a stated period of time, the suspension of the driver's license usually results. 2) With respect to automated underwriting systems (AUS), it usually refers to deficiency points assessed against a risk being run through the system. When a specified number of points accumulate, the risk either receives a rating surcharge, is declined, or triggers a manual review of the account by an actual underwriter.

• policies attaching

  One way of defining coverage under a per-risk excess reinsurance agreement. Under a "policies attaching" cover, a loss is covered if the policy suffering the loss was issued during the term of the reinsurance, no matter when the loss actually occurred. (See losses occurring.)

• policy

  The formal written contract of insurance.

• policy fee

  A charge made by an agent on small premium policies, in addition to the premium set forth in the policy, which is kept by the agent. The practice is made illegal under the insurance laws of most states.

• policy loan

  A life insurance policy nonforfeiture benefit, whereby the insured may borrow from or take a loan from the insurer based on the cash surrender value of the policy.

• policy proof of interest, full interest admitted

  In marine insurance, a provision whereby the insurer agrees not to deny coverage for lack of insurable interest. This creates an honorable rather than legally enforceable agreement.

• policy provision

  Any phrase or clause in an insurance policy that describes the policy's coverages, limits, exclusions, conditions, or other features.

• policy reserve

  The percent of premium that an insurer must set aside in a reserve to pay claims and fulfill the obligations of insurance contracts. On an individual policy basis, each policy has its own pro rata share of the total accumulated policy reserve covering the insured's entire book of business.

• policy writing agent

  An agent who has been extended the authority to prepare policies.

• policy year

  The year commencing with the effective date of a policy or with the renewal date of that policy, to be distinguished from the calendar year, which always starts from January 1. A term of particular importance in the collection of loss statistics.

• policy year experience

  The statistical segregation of all premiums and losses attributable to policies having an inception or renewal date within a given 12-month period. Accident year experience is the statistical matching of all losses occurring (regardless of when the losses are reported) during a given 12-month period of time, with all premium earned (regardless of when the premium was written) during the same period of time. Calendar year experience, on the other hand, is the statistical matching of all losses incurred (not necessarily occurring) within a given 12-month period, usually beginning on January 1, with all premium earned within the same period of time. (See accident year experience, and calendar year experience.)

• policyholder

  The party to whom a policy is issued and who pays a premium to an insurer in consideration of the latter's promise to provide insurance protection. (See insured.)

• policyholder surplus

  As reported on a statutory basis, the sum of all unassigned surplus of a mutual insurer, or for a stock insurer, the sum of all unassigned surplus and capital.

• Policyowner

  In life insurance, the person who owns the policy. It could be the applicant or the insured. Incidents of ownership can be assigned to others. (See also policyholder.)

• political risk insurance

  A highly specialized property coverage for risks with foreign or international exposures that provides protection against loss or damage to the covered property as a result of such acts as nationalization, expropriation, deprivation, confiscation and, at times, war and terrorism.

• pollution cleanup indemnity

  A specialty type of ocean marine coverage that was designed to protect vessel owners and operators for liability exposures imposed by the Federal Water Pollution Control Act, not only to third-parties, but also to the EPA or other federal or state agencies.

• pollution insurance

  Insurance designed to provide protection for the liability exposures that may result from damage, injury and, in some cases, clean-up costs caused by pollution. This coverage is excluded in the standard CGL, and the attempt has been to make the CGL exclusion as broad or absolute as possible.

• pool

  A joint insurance or underwriting operation in which the participant insurers assume a predetermined interest in all business written. Pools are managed by professionals with expertise in the classes of business undertaken. The members share proportionately in the premiums, losses, expenses, and profits. An "association" or a "syndicate" is synonymous with a pool. (See syndicate.)

• Pooling

  A term used in group health insurance where the experience and premiums of smaller groups are aggregated to form a larger and more credible group.

• port

  A place from which goods are sent out of a country or are received from abroad. The location of customs officials will usually determine what is called a port.

• port risk insurance

  An ocean marine insurance designed to protect a vessel that is portside for a lengthy period of time. Coverage terminates as soon as the vessel leaves port.

• Portability

  The ability of a pension plan participant to take the benefits from one plan and roll it over without incurring immediate taxation. Portability is a key feature to the 401(k) plan.

• portfolio

  A defined body of: 1) insurance policies in force or a premium portfolio 2) outstanding losses or a loss portfolio or 3) company investments or an investment portfolio. (See book of business.)

• portfolio reinsurance

  A term used in reinsurance generally to define the situation where the reinsurer is insuring all risks in a particular line of business for a primary insurer, e.g., in commercial property insurance the reinsurer may pay all commercial property claims in excess of $50,000.

• portfolio transfer

  A term used to indicate the transfer of an entire portfolio of business. This may be done either by an agent in transferring a book of business or portfolio from one insurer to another, or, as it applies to reinsurance, by transferring the book of business from a primary insurer to a reinsurer.

• position schedule bond

  A bond that guarantees the honesty of those holding named positions in a firm, as opposed to a bond that refers to named individuals.

• post indicator valve (P.I.V.)

  When water mains are buried around industrial plants protected by automatic sprinklers, the flow of water in a buried pipe may be controlled by a valve which projects above the ground and has an indicator showing whether it is open or closed. Such valves are post indicator valves, abbreviated on diagrams as "P.I.V."

• post judgment interest

  post-judgment interest After a court makes an award, the losing party is required to pay a set amount of interest that accrues until the amount is paid. Insurance policies often specify whether this is an expense that is paid by the policy.

• post-mortem dividend

  postmortem dividend For a participating life insurance policy, it is the dividend paid after the death of the insured which includes the earnings owed since the last dividend payment up to the date of the insured's death.

• poultry insurance (chickens)

  A broad, often "all-risk" version of animal mortality insurance designed specifically to protect poultry farmers and other residual industries that have vested interest in poultry operation, such as food processors and feed. (See animal insurance, and livestock mortality insurance.)

• power interruption insurance

  Property and time element endorsements designed to cover the insured for losses that result from the interruption of services by an insured cause of loss. The current endorsements allow the insured to select coverage for off-premises services, whether supplied by a private or public utility. Protection may be purchased for the following options: water suppliers, communication suppliers, or power supplies.

• power of attorney

  A document which authorizes a person to act for another within the limitations it contains. A subscriber to an interinsurance exchange executes such a document in favor of the person who operates the exchange.

• power plant insurance

  Formerly used as a substitute title for boiler and machinery insurance.

• PPF--personal property floater

  A broad form of inland marine policy issued to householders, insuring all furniture and household effects, wherever they may be, on an "all-risk" basis.

• PPO--preferred provider organization

  A group of health care providers, each of whom agrees to offer services to a given employer or insurer at a lower cost in return for a stable volume of patients or other incentive(s).

• practice program

  A term used to describe the non-wrap-up-based insurance coverage carried by the entities enrolled in a wrap-up.

• pre-existing condition

  Injuries from accidents which occur earlier than, and sicknesses which begin earlier than, the date on which insurance becomes effective. Individual health insurance policies and some group policies generally cover only injuries from accidents which occur after the individual's coverage becomes effective, and only sicknesses that begin or are first manifested after the individual's coverage has been in effect for a period of time, often 15 days.

• pre-licensing education requirement

  State requirements mandating that applicants seeking an insurance license must first complete a specified education program before being eligible to obtain an insurance license.

• preadmission review

  One of the managed care features in health insurance that requires the plan participant to have the attending physician call the insurer to discuss a nonemergency hospital admission. If this is not done or is not acceptable to the insurer, the insurer (depending upon contract provisions) can deny or pay reduced benefits for the admission.

• predecessor firm

  Refers to a partnership or professional corporation that has been dissolved and where at least 50 percent of its lawyers are still affiliated with the named insured under a professional liability policy.

• predictive modeling

  Based on behaviors and events, the process in which historical data are blended with multiple variables and used to construct models of anticipated future outcomes.

• preferred provider organization (PPO)

  A group of health care providers, each of whom agrees to offer services to a given employer or insurer at a lower cost in return for a stable volume of patients or other incentive(s).

• preferred risk

  The subject matter of an insurance policy considered to be particularly desirable.

• prejudgment interest

  An additional amount that an insurer may be required to pay as part of a court settlement. The amount basically represents an interest charge on the disputed settlement. The intent is to provide compensation for any settlement gap related to the payment delay caused by the lawsuit and trial process.

• prejudice

  prejudice A condition that adversely affects a party's legal rights and that in an insurance contract could endanger coverage.

• premises

  The building or section of a building, insured or containing the insured property. Depending on policy conditions, it may also include an adjacent area.

• premises liability insurance

  Insurance protection for the liability exposure that develops from the normal ownership, maintenance, and use of a premises, and from the conduct of the risk's business operations, not including products or completed operations liability which is treated separately.

• premium

  The amount of money an insurance company charges to provide coverage.

• premium adjustment provision

  Policies for which a deposit or estimated premium is charged at inception but recalculated at expiration, based on the actual exposure covered during the policy period.

• premium audit

  Detailed examination of a policyholder's operations, records, and books of account in order to determine the actual exposure units and premium for insurance coverages already provided.

• premium base

  premium base The written or earned premium that a reinsurer uses to develop its reinsurance premium.

• premium deficiency

  When the premiums on a policy or a book of business are inadequate to pay losses and all types of expenses.

• premium discount

  A percentage reduction based upon the size of the premium. Justification for this is that the proportionate cost for issuing and servicing a policy often becomes less as the premium increases. Not available in all states.

• premium dispersion credit plan

  A plan for large commercial fire insurance accounts, with two or more locations providing premium credits for: 1) size of premium, to reflect savings in expenses in handling a substantial account, and 2) number of locations and dispersion of values to reflect spread of risk.

• premium earned

  The portion of the policy premium allocable to the expired portion of the policy term. (See unearned premium.)

• premium load

  In life insurance, the premium load is either the percent that is loaded onto or the amount that is added to premiums for expenses.

• premium payment mode

  With respect to an individual policy, it is the payment method that has been selected from the payment options offered by the insurer. Some of the options that may be available are whether the agency or insurer bills, as well as how often the premium payment is to be made, for example, monthly, quarterly, semiannually, or annually.

• premium receipt

  A receipt given to the premium payor when the first mode of life insurance premium is given to the agent or insurer prior to policy issuance.

• premiums in force

  A figure in the standard form of the annual financial report of an insurance company, representing the initial premium on all policies which have not expired or been canceled, for example, those which are still in force.

• prepaid legal expense insurance

  Insurance covering legal costs, written generally on a group basis. Includes the indemnification through providing agreed legal services, as well as the payment of money to compensate the insured for costs. Also referred to as prepaid legal insurance.

• preretirement survivor annuity

  If a pension plan participant dies before retirement, the plan is required to provide the surviving spouse a benefit that can be all of or a portion of the deceased participant's vested benefit.

• present value

  The current or present worth of a future account receivable or benefit payment.

• presimplified

  Refers to policies that existed before the mid-1980s trend to simplify the wording found in both commercial and personal lines contracts. Such policies have a more legalistic-styled format and wording.

• pressure vessel

  Something designed to contain gas or vapor such as steam under pressure. A steam boiler is an excellent example.

• presumptive disability

  When an insurer is able to presume that a disability is permanent or for the life of the insured, based upon the type of injury experienced such as loss of sight or limb.

• primary beneficiary

  In a life insurance policy, the individual named to be first to receive the policy benefits and proceeds. If any others should be listed, they are considered contingent or secondary and will collect only if the primary is deceased.

• primary insurance

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

• primary layer

  The initial layer or amount of insurance applying to loss; the underlying or level of coverage that will respond first.

• principal

  In suretyship, the principal is the one whose honesty, fidelity or ability to perform is guaranteed.

• principal sum

  The stated amount that a policy of health or accident insurance will pay in the event of a certain happening, such as accidental death, dismemberment or loss of eyesight.

• principals protective liability insurance

  Insurance against claims which arise out of some secondary cause, such as the negligent acts of an independent contractor engaged by an organization or principal contractor, or an employer for the act of an employee.

• prior acts coverage

  A provision that, under defined circumstances, protects against loss involving acts or events (typically professional) that occurred before the effective date of a given policy. Usually applies with either professional liability/errors or omissions coverage. The protection is usually available as optional coverage requiring additional premium.

• prior acts limitation date

  (See Retroactive Date.)

• priority company

  An insurer needing special regulatory attention as determined by a review of financial ratio reports produced under the NAIC Insurance Regulatory Information System.

• prison guard captivity coverage

  A specialty life or health insurance coverage designed to provide benefits for prison guards or their families, should an incident or riot occur and the guard is injured, killed, taken prisoner, abducted or held hostage.

• private passenger automobile

  Any auto, car, station wagon, pickup or van type of vehicle not used for business purposes.

• private passenger car

  An automobile primarily operated by the owner for personal use, as distinguished from commercial use, such as a truck or taxicab.

• private/nonprofit professional liability insurance

  private/nonprofit professional liability insurance A form of errors and omissions coverage designed for executive boards that oversee private and nonprofit operations. They differ from public corporation coverage in the area of acts of volunteers and the fact that there is no exposure to actions brought by shareholders.

• privatization

  Transfer of ownership and control of a government asset to a nongovernment owner.

• prize indemnification insurance

  A specialty insurance designed to provide coverage or indemnification for large prize giveaways, based on the odds faced by the insured.

• pro rata cancellation

  Termination of a policy by the insurer, for which the return premium due the policyholder is the full proportion for the unexpired term based upon the calculation of the number of days of coverage provided to the premium charge per day. In other words, the pro rata refund is not a "short-rate" return. (See short rate cancellation.)

• pro rata clause

  An insurance policy provision that limits an insurer's obligation for a loss to a proportional basis that is determined by the other source(s) of protection that applies to that loss. (Also see excess clause and escape clause.) (See average clause.)

• pro rata distribution clause

  A provision in a property policy that states that the insurance which has been written "blanket," or as one amount covering several items, shall be limited on each item to the proportionate amount which the value of the particular item bears to the total value of all insured items. (See average clause.)

• pro rata liability clause

  Most standard coverages now place this clause within the other insurance clause to clarify which policy will respond should there be more than one insurer on a risk and all the policies are primary or excess. The amount of loss is proportioned among the insurers based on the percent of their limits of coverage to the total limits provided.

• pro rata liability formula

  A formula used to determine the amount of coverage each insurer pays when more than one source of insurance is available to handle a given loss. Take the coverage written by Company A, divide that amount by the total coverage written by all sources and multiply the resulting percentage by the actual loss amount.

• pro rata reinsurance

  Reinsurance arrangements by which the reinsurer agrees to take a specified percent of each covered loss for the same percent of premium.

• probable maximum loss (PML)

  The anticipated maximum property fire loss that could result, given the normal functioning of protective features (firewalls, sprinklers, and a responsive fire department, among others), as opposed to maximum foreseeable loss which is a similar valuation, but on a worst-case basis with respect to the functioning of the protective features. Underwriting decisions would typically be influenced by PML evaluations, and the amount of reinsurance ceded on a risk would normally be predicated on the PML valuation. (See maximum foreseeable loss (MFL), shock loss, and maximum possible loss (MPL).)

• probate bond

  probate bond A fidelity bond that protects a dependent party (such as a legal estate) against the dishonest acts of a fiduciary.

• probationary period

  When a health insurance policy is issued, it is the period of time between when the policy goes into effect and when coverage actually becomes available to the insured, usually for periods of 30, 60, or 90 days. This is done to preclude any pre-existing conditions.

• proceeds

  Another name for the policy benefits that are payable upon maturity of the policy or death of the insured.

• processor

  As distinguished from a manufacturer, one who changes the condition of merchandise without changing its fundamental character such as a dyer, a printer of patterns on fabric, or one who hardens metal parts for the owner.

• processors policy

  An inland marine form which insures the property of a policyholder when it is on the premises of another for processing (such as dyeing or finishing), as well as while in transit to and from the premises of the processor.

• producer

  The person who solicits insurance from the buyer and places it with the insurer. A broker, an agent or a salaried solicitor.

• producer commission

  The fees paid to a broker for getting reinsurance coverage placed and for related services.

• product recall exclusion

  A policy exclusion that prevents coverage for any cost, loss or expense to an insured who has to recall a product due to a defect that is either known or suspected.

• product recall insurance

  Pays the expense associated with government-dictated recall of a product suspected of being defective and dangerous to consumers. Pharmaceutical, automobile and aircraft manufacturers are types of risks that often are affected. This expense is not covered by the standard general liability policy.

• product tampering insurance

  Specialty coverage designed to protect a product seller or manufacturer to cover the cost of recalling items that may have been tampered with, as well as loss of income, and related expenses. One condition often found in this type of policy is that an actual occurrence of tampering or a valid threat must occur before coverage would be available.

• product warranty inefficacy insurance

  A highly specialized performance surety or guarantee insurance designed originally for investors or manufacturers of alternative energy sources. The coverage provides financial protection should a system not perform as engineered or designed. This type of insurance encourages investment and development not only of alternative energy sources, but also of other types of manufactured products.

• product-completed operations insurance

  Coverage designed to protect against the liability for injury, loss, or damage that a merchant or a manufacturer may incur as the result of some defect in the product sold or manufactured.

• products liability

  The liability that a merchant or a manufacturer may incur as the result of some defect in the product sold or manufactured.

• Professional

  professional A class of insurance policies that indemnifies the insured for third-party liability claims due to negligence in the performance of professional services. Professionals include doctors, lawyers, engineers, insurance agents and others.

• Professional Insurance Agents (PIA)

  Formerly National Association of Mutual Insurance Agents, a trade association whose purpose is to protect the business interests of its members, who also are members of state associations. Headquarters: Alexandria, VA.

• professional liability

  A class of insurance policies that indemnifies the insured for third-party liability claims due to negligence in the performance of professional services. Professionals include doctors, lawyers, engineers, insurance agents and others.

• Professional Liability Underwriters Society (PLUS)

  An organization begun in 1986 by industry professionals specializing in the field of professional liability. The society is a forum for education and discussion on addressing various aspects of complex insurance issues involving professional liability. Headquarters: Minneapolis, MN.

• professional reinsurer

  A term used to designate an organization whose business is primarily reinsurance and related services as contrasted with other insurance organizations, which may operate reinsurance assuming departments in addition to their basic primary insurance business.

• Professional-employer organization

  professional-employer organization A commercial firm that contracts with employers, allowing the latter to outsource functions such as employee benefits, human resources and payroll, reducing their payroll and operating expenses.

• profit commission

  Found in reinsurance and involves a profit-sharing agreement between the ceding company and the reinsurer after expenses and losses are calculated. Formulas vary and are normally individually negotiated.

• profit sharing plan

  profit-sharing plan Profit-sharing plans can take many forms. An informal plan pays a portion of profits to employees. A formal qualified profit-sharing plan pays a portion of profits in the form of cash or stock into a plan that meets IRS guidelines as a qualified profit sharing plan.

• profit-sharing commission

  A type of commission paid to an agent, based upon the profit the company has realized from the agency's operations.

• profits insurance

  Coverage for the loss of profit that the policyholder could have earned if the merchandise destroyed in a fire or by a covered cause of loss could otherwise have been sold. A fire insurance policy on a stock of merchandise pays only for the value of damaged or destroyed merchandise, hence the need for profits insurance. Such insurance is generally provided by adding a selling price clause to a policy covering stock. (See selling price clause.)

• prohibited list

  A list of those risks which a company is not willing to write.

• prohibited risk

  A risk which a company will not insure.

• project insurance

  project insurance See wrap-up policy.

• proof of loss

  A written statement of a claim giving the pertinent facts and data which may be in the form of an affidavit. (See protest.)

• property and casualty insurance

  Non-life insurance. Basically there is a broad insurance distinction between companies writing life and health insurance and those writing the property insurance or "non-life" lines of fire, marine, casualty and surety. Numerous descriptive titles have been employed to describe this "non-life" area of operation. Although no one definition has yet been firmly established, some use the generic title "property and casualty" insurance, while others use "property and liability" insurance.

• Property Casualty Insurers Association of America

  A trade association of more than 1,000 U.S. P&C insurers. It began in 2004 from a merger between the National Association of Independent Insurers and the Alliance of American Insurers. The combined organization performs numerous functions, focusing on advocating membership concerns from the national to the local level. It also acts as an advisory organization and statistical agent for independent insurers. Headquarters: Des Plaines, IL.

• property damage liability insurance

  A form of "third-party" protection covering the insured's legal liability for damage to property of others caused by the insured's negligence. (See liability insurance.)

• property insurance

  First-party insurance of real and personal property against physical loss or damage, not to be confused with property damage liability insurance.

• Property Insurance Plans Service Office (PIPSO)

  An advisory organization formed in 1972 to provide technical and administrative services to state property or fair plans and windstorm pools. Headquarters: Boston, MA.

• property loss exposure

  A condition that presents the possibility that a person or an organization will sustain a loss resulting from damage (including taking, destruction, or loss of use) to property in which that person or organization has a financial interest.

• Property Loss Research Bureau

  A trade association consisting of insurance professionals and organizations dedicated to increasing the efficiency and effectiveness of claims handling, share research on claims issues, and to increase awareness regarding claims issues within the insurance industry. Headquarters: Downers Grove, IL

• proportional reinsurance

  proportional reinsurance Reinsurance arrangements by which the reinsurer agrees to take a specified percent of each covered loss for the same percent of premium.

• proposal

  In life insurance and, to a limited extent, in property-liability insurance, a written plan prepared by an agent or insurer proposing to a prospective insured that insurance be applied for; thus, the proposal is not an offer, but rather an invitation to negotiate in the form of a sales brochure.

• proration of benefits

  When two or more health insurers provide coverage or benefits for the same insured loss, the obligation of each insurer is calculated proportionally between the responding insurers.

• prospect

  One to whom insurance may be sold as a prospective purchaser or insured.

• prospective loss costs

  Loss data modified by loss development, creditability processes and trending, but without taking into consideration profits and expenses.

• protected cell captive

  A form of rent-a-captive company where the assets, reserves, dividends (if applicable) and liabilities are assigned to separate accounts (cells) along with a general or core cell. This variant is designed to protect each participant's assets from having to respond to another participant's liability, a substantial financial advantage over a regular rent-a-captive where liabilities are shared.

• protection

  1) Water supplies and fire departments to fight fires. Real property is referred to as protected property when located in an area served by a public fire department. (See town grading.) 2) The insurance afforded by a policy.

• protection and indemnity insurance (P & I insurance)

  Protection and indemnity insurance for shipowners, contractors, and charterers against liabilities arising out of the operation of the vessel for loss of life to any person; illness or injury to passengers and crew; damage to cargo while loading, carrying or unloading cargo, damage to piers and docks; and removal of wreckage as required by law.

• protection class

  A 10-category ranking or schedule of public fire protection of cities and towns established in 1916. The grading is currently maintained by the Insurance Services Office for use in making fire insurance rates and to encourage local governments to maintain better fire fighting equipment and personnel. A city or town is ranked in one of the categories by receiving deficiency points for failing to meet established standards under each of these major headings: water supply, fire department, fire service communications, fire safety control, climate, and divergence between fire department and water supply. Protection Class I is the best class (a city or town having fewer than 501 points), and Protection Class 10 is the worst (more than 4,500 points). Also known as fire protection class or town class.

• protective liability insurance

  Insurance against claims which arise because of some secondary cause, such as the negligent act of some subcontractor engaged by a principal contractor or against an employer for the act of an employee. (See contingent liability.)

• protective safeguards clause

  In property insurance, a clause or provision that clarifies that coverage was granted or a premium credit given based on the existence of, continual maintenance of, and operation of a specified protective device by the insured. The insurer has the right, in some jurisdictions, to void the coverage should a loss occur as a direct result of the lack of maintenance or operation of the specified device. Common examples are sprinkler systems and fire or theft alarms.

• protest

  The master's statement of the facts regarding an accident as a part of the ocean marine proof of loss. The protest is so named, because the master is "protesting" that it was not the master's fault. (See proof of loss.)

• Protist

  Any member of the Protista family of organisms. Also see toxic mold.

• Protista

  Refers to the entire body of organisms (animal or plant) that are single-celled (unicellular), including fungi and molds. Also see toxic mold.

• provisional premium

  A provisional or deposit premium charged at the start of a policy term, with the final premium determined after the policy has expired.

• provisions

  The clauses within an insurance policy that clarify exclusions, conditions, terms, or benefits essential to the contract.

• proximate cause

  That which brings about a result without the intervention of any other force. Important in insurance since it establishes which policy(ies) will pay for a loss, i.e., the one(s) insuring the peril which was the proximate cause of the loss.

• psychology of entitlement

  Refers to the expectation of people that their desires and legitimate needs which society can and must fulfill. The expectation affects insurance when the law expands to permit more plaintiffs to recover from insurers in cases of questionable coverage. For example, when courts rule that insurance coverage exists if there is any indication that the insured expected such coverage to exist, or when jury awards increase beyond economic justification.

• public adjuster

  An insurance professional that represents insureds (policyholder) in the preparation, presentation and conclusion of insurance claims for insured property damage and any associated coverages, with the policyholder paying a fee for these services.

• Public Agency Risk Managers Association

  The Public Agency Risk Managers Association focuses on providing resources to assist risk management professionals who manage government agencies. Headquarters: San Jose, CA.

• public and institutional property plan

  Insurance against fire and allied perils specially designed for property such as hospitals, schools, churches, etc. Rates are reduced for fire prevention and fire safety programs by the insured and lower acquisition and handling expenses to the insurer.

• Public Company Accounting Reform and Investor Protection Act

  (See Sarbanes-Oxley (SOX) Act.)

• public entity insurance

  Insurance contracts specifically designed to meet the coverage needs of the various city, state, township, county or other municipalities. Normally offered by specialists in the industry and tailored to meet the hazards and exposures of this type of entity.

• Public Law 15

  Enacted on March 9, 1945, a law by which Congress granted authority to the states to continue to tax and regulate the business of insurance after the insurance business in 1944 had been held by the Supreme Court in a landmark case to be commerce and, therefore, subject to federal regulation whenever subject to interstate regulation. The act provided further that the antitrust laws should not apply to the extent the business of insurance is regulated by the states, except for coercion, intimidation and boycott. Also known as Public Law 15, 79th Congress, 1945. McCarran-Ferguson Regulation Act: 15 U.S.C. 1011-15. (See Southeastern Underwriters Association (SEUA).)

• public liability insurance

  Protection which pays sums that an insured is legally obligated to pay, or that the insurer has agreed to pay, as damages to others as a result of the insured's negligence. May cover bodily injury to another or damage to the property of another.

• public livery conveyance

  A motor vehicle used for the transport of persons or goods for hire. Also known simply as livery.

• public official bond

  public official bond Refers to a government unit requirement to carry a bond guaranteeing that a given public official will perform his or her required job.

• puffback

  Refers to a furnace, boiler or similar equipment that releases soot, smoke, vapors or fumes onto the covered property and causes damage.

• punitive damages

  Damages awarded separately and in addition to compensatory damages, usually on account of malicious or wanton misconduct, to serve as a punishment for the wrongdoer and, possibly, as a deterrent to others. Sometimes referred to as "exemplary damages" when intended to "make an example" of the wrongdoer. (See exemplary damages.)

• purchasing group

  A coverage alternative to using the traditional insurance market, it refers to a number of parties with similar coverage needs who incorporate into a group to buy liability insurance. Such arrangements are authorized by the Federal Liability Risk Retention Act of 1986.

• pure annuity

  A straight annuity policy or contract designed to make specified installment payments at specified intervals for the life of the annuity holder.

• pure captive

  An insurance company formed by a parent company to provide coverage only for that parent company.

• pure mortality cost

  In life insurance, it is the base premium developed for the coverage, which is calculated by taking the factor from the mortality table, based on the insured's age and sex, times the amount of coverage. To this base factor, other charges and factors are added to achieve a final premium.

• pure no-fault insurance

  pure no-fault insurance A theoretical concept in which no party would sue another for injury or damage from an automobile accident. Each party's insurer would pay the loss without considering who was at fault. In practice, only modified versions of this concept are actually used.

• pure premium

  1) That part of the premium which is sufficient to pay losses and loss adjustment expenses only, but not other expenses. 2) The premium developed by dividing losses by exposure, disregarding any loading for commission, taxes and expenses.

• pure risk

  Involves only the possibility of loss; gain is not a possible outcome. Insurance is designed to protect against pure risks such as fire, earthquake, or windstorm.

• PWCCLA

  Property-Workers Compensation Claim Law Associate designation sponsored by the American Educational Institute. Headquarters: Basking Ridge, NJ.
• Back to Top

• Q Schedule

  A New York specific regulation that schedules (and limits) the types of expenses that can be charged against new business by an insurer. The insurer must file the schedule to verify compliance. The overall effect of the Q Schedule in New York is to reduce commissions.

• QPA

  Qualified Pension Administrator designation sponsored by the American Society of Pension Actuaries. Headquarters: Fairfax, VA.

• QQS

  (See qualifying quota share.)

• qualified annuity

  Can be part of a pension plan, an IRA or other retirement vehicle. Qualified deposits made to the plan are not taxed, but withdrawals are taxed.

• qualified impairment insurance

  A health insurance rider that eliminates the policy exclusion for impairment, making that impairment acceptable or "qualified" with respect to coverage.

• qualified plan

  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.

• qualified retirement plan

  A retirement plan that has been formed to comply with the IRS federal tax regulations, whether the plan is a pension plan, a profit-sharing plan or a savings plan. Funds to the plans will accumulate but taxes are deferred until actual retirement and the distribution of benefits. Employee contributions may be made to qualified plans on a pretax earnings basis. Contributions to the plans by employers are treated as current business expenses for tax deduction purposes.

• qualified terminable interest property trust

  A type of trust for married couples in which an annual income payout is made to the surviving spouse from trust assets. In effect, this reduces estate taxes assessed against the surviving spouse while providing annual income for the survivor.

• qualifying event

  (See coverage trigger.)

• qualifying power

  The largest net amount of risk that may be carried by a surety company on a bond . (See treasury listing.)

• Qualifying quota share

  Regarding operations at Lloyd's of London, refers to a quota share treaty which, if approved by Lloyd's governing board, a syndicate may use in order to expand its underwriting capacity.

• quantity discount

  Premium credits given in certain life insurance policies that have high benefit payout amounts.

• quasi-insurance institutions

  Federal, state, or local government institutions which implement and run compulsory government programs that give the appearance of acting in a way similar to the insurance mechanism. Unemployment compensation is an example.

• quick assets

  Highly liquid assets that can be converted to cash very quickly. Cash, checks, certain stocks, bonds, and Treasury Bills are all examples. Real and personal property are not.

• quid pro quo

  Latin term meaning "this for that," or "one thing for another." As it applies to insurance, it is when the consideration in an insurance contract is an exchange of values between both parties to the contract; the exchange must be approved for it to become a valid contract. (See consideration.)

• quota share

  When more than one policy, insurer, or reinsurer is obligated to respond to a property loss for a risk according to a percentage or its proportionate share of the total limits applicable. Premiums are usually shared in the same proportion as the limits.

• quota share reinsurance

  A form of pro rata reinsurance (proportional) in which the reinsurer assumes an agreed percentage of each insurance policy being insured and shares all premiums and losses accordingly with the reinsured.

• quote

  A price estimate given to a party who is seeking insurance coverage. Quotes are given before any applications are submitted.
• Back to Top

• R.O.R.

  (See reservation of rights.)

• Racketeering-Influenced Corrupt Organizations Act

  This Act was introduced as a tool to combat organized crime; however, its wording is flexible to the point that it has been used for prosecuting corporate fraud. Since it affects a company's chartered officers, it could be an exposure under certain specialty and directors and officers contracts.

• radioactive contamination insurance

  Coverage against loss caused by radioactive contamination. Such coverage is excluded from most insurance contracts and is usually covered under policies issued by pools created for this purpose. Other risks which might occasionally be exposed to damage can obtain this insurance as an additional coverage to an existing policy. The endorsement may be used with a fire form and on inland marine insurance policies, such as transit coverage for truckers or shippers.

• Railroad Insurance Rating Bureau (RIRB)

  A rating bureau which rates railroad property and files with state insurance departments on behalf of its member companies and subscribers.

• railroad protective liability

  The standard commercial general liability policy excludes liability for construction or demolition operations on or near railroad property, such as tracks, trestles, sidetracks, etc. In order to provide coverage for this exposure, the railroad protective liability policy is available to provide protective liability coverage for railroad owners, property owners, or contracts from the vicarious acts of contractors or subcontractors who are working on their behalf. The policy is purchased by the subcontractor or contractor in the name of the party needing protection. For example, a contractor demolishing a building near a railroad track may need to purchase a railroad protective liability policy for the property owner, the railroad, or both.

• railroad travel policy

  A type of life or accident policy sold at railroads to provide coverage for bodily injury, accident or death suffered by passengers while traveling on the railroad. The coverage may be sold by railroad ticket agents or in vending machines.

• rain insurance

  Insurance against loss due to the fall of rain, which may result in reduced profits or earnings. Also available to vacationers, paying the insured amount if rain occurs on specific days.

• ranchowners personal liability form

  An endorsement available in the ranchowners program to purchase non-automobile personal liability protection.

• ransom insurance

  This coverage was originally created for financial institutions, primarily banks. It was tailored to meet the standard kidnap premise, i.e., forcing the bank to withdraw the ransom money from its vaults and deliver it to a designated place before release of the banker or family. Typically, the insurance covers named employees for individual or aggregate amounts, with deductibles requiring the insured to participate in about 10% of any loss.

• rate

  The price for a unit of insurance; all units in a given policy, multiplied by the rate per unit, produce the premium. In fire insurance, the price per $100 of insurance for one year. The basis for pricing other types of insurance varies greatly; for example, payroll is used in workers compensation insurance, area of retail floor space or sales volume is used in certain types of general liability insurance, and so forth.

• rate adequacy

  An insurance regulator's requirement that a carrier's premiums be reasonable as well as sufficient to cover its operating expenses, claims obligations and result in a reasonable profit.

• rate card

  Written records on file with rating bureaus showing the rate to be charged a risk following inspection or application of a schedule. (See ISO--Insurance Services Office.)

• rate class

  Rates for various insurance policy forms are segmented into classes based upon the exposure to loss. In one policy form, a class I rate may be the lowest rate. In another, the class I rate may be the highest rate.

• rate discrimination

  To rate or calculate the premium charged an applicant for insurance differently than other insureds of the same class or with the same characteristics, because of any factor not related to the applicant's loss producing or expense producing qualities, such as charging a higher premium than the loss producing or expense producing qualities would justify. Factors such as a person's race, color, creed, or national origin that are unrelated to the chance of loss should not affect the writing of insurance. While making distinctions is essential in any insurance system to match individual risks with the rates appropriate for their class, unfair discrimination is illegal. All states prohibit rate discrimination.

• rate filing

  A document, furnished to a state insurance department by an insurer or a rating bureau, providing detailed information on an insurance rate used or proposed. Some rate filings are made to inform insurance departments about rates already in use in file-and-use states, or in use-and-file states. Some are made in prior-approval states to seek the department's approval prior to using the rate.

• rate of benefit

  The percentage of employee income that a disability program has been designed to replace. This rate is generally expressed as a range.

• rate regulation

  In the insurance industry, each state has its own state insurance department that determines the type and degree of control or regulation that state will have in the rate making process of the insurers licensed for business in that state. Some states require prior approval, while others are at the opposite end of the spectrum requiring only that the insurer file-and-use.

• rate suppression

  Refers to rates that are held low artificially by an act of state rate regulation. Such rates are insufficient to support writing the applicable line of business such as personal auto or workers compensation.

• rated policy

  A person with less than average health or who has a high-risk occupation may receive a rated life insurance policy. The rating may be an additional percent of the total premium or a flat extra amount of premium per $1,000 of death benefit.

• rating agencies

  Refers to the various organizations (such as A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Moody's Investors Services; Standard & Poor's Corp.; and Weiss Ratings, Inc.) that evaluate an insurer's financial strength and ability to meet claims obligations. Factors considered include company earnings, capital adequacy, operating leverage, liquidity, investment performance, reinsurance programs, and management ability, integrity and experience.

• rating bureau

  An association of insurers which makes rates for the use of its affiliated insurers; devises territorial classifications, rating plans, schedules, manuals, policy forms, and building inspections; and performs related functions for companies. Also known as advisory organizations. (See advisory organization, and trade association.)

• re-entry term life insurance

  An endorsement or rider found most often in term life insurance coverage that allows the insured to request increases in coverage periodically at a stable or favorable premium.

• re-underwriting

  Reviewing a risk that has already been issued an in-force to determine if it is still acceptable.

• readjustment income

  The calculation on the change in the amount of income a family unit would need to have following the death or disability of the primary income producer.

• real estate agents errors and omissions insurance

  A type of professional liability or errors and omissions protection designed for real estate agents. It covers damages or losses from negligence caused by the rendering or failing to render of services, or negligence caused by other errors and omissions that may be committed during the performance of duties as a real estate agent.

• real property

  The earth and all attached to it; land and buildings. Also known as real estate.

• reasonable and customary charge

  Health insurers look to see what the average medical professional will charge for a particular procedure in a particular geography. A reasonable and customary benefit will pay for this average charge, but if the physician or other medical care provider wants to charge more, the patient may have to pay the difference.

• reasonable repairs

  A provision in most property polices which agrees to pay for the reasonable repairs made solely to protect covered property form further damage.

• rebate

  Anything of value given or promised a prospective insured or unlicensed party by an agent or broker as an inducement to purchase insurance, including part or all of the commission. Rebating is usually illegal for all parties involved, except in Florida where it has been held to be legal.

• Rebating

  An inducement to purchase an insurance policy that is not in the insurance contract.

• REBC

  Registered Employee Benefits Consultant designation sponsored by the National Association of Health Underwriters. Headquarters: Washington, DC.

• recall insurance

  See product recall insurance.

• recapture

  As it applies to reinsurance treaties or placements, it is when the ceding insurer takes back or retains business previously ceded to a reinsurer.

• receivables

  Amounts owed to a business for goods or services provided.

• reciprocal exchange

  A group of persons who agree to share each other's losses. An unincorporated mutual. Also known as an interinsurance exchange.

• Reciprocal Risk Retention Group

  An unincorporated group of entities which, via use of a managing attorney-in-fact, exchange insurance agreements with each other, agreeing to cover types of losses specified in the agreements. Profits/savings are distributed back to each member of the reciprocal.

• reciprocity

  When insurers mutually agree to provide each other with reinsurance protection. One insurer accepts the reinsurance cessions of the other insurer who, in return, accepts the cessions of the first.

• reclamation bond

  A bond to assure that a contractor will restore the land that surrounds a project to its original state when the project is complete.

• recoupment

  recoupment A party that is confronted by a legal action responds by filing a separate action, alleging a different set of circumstances.

• recovery

  Loss money which an insurance company gets back from reinsurance, salvage or by subrogation against a third party at fault.

• recurrent disability

  Any subsequent disablement that arises from the same incident. It generally allows for the re-injured employee to immediately receive disability payments.

• recurring clause

  A health insurance clause that sets a specific time period that must elapse between the occurrence and reoccurrence of the same illness or injury in order for the policy to respond with coverage for the reoccurrence.

• Red book/Blue book

  A publication that has become a standard and that is used to determine the physical value of both automobiles and trucks.

• redlining

  The designation by an insurer of a certain geographical area considered unacceptable for the writing of insurance, usually illegal because it is considered to be unfair discrimination. Redlining is refusing to insure, refusing to renew, canceling, charging a higher rate, or limiting the amount or type of property insurance solely because of the geographic location of a risk. Further, redlining involves risk selection criteria that are not based on sound underwriting and actuarial principles, reasonably related to actual or anticipated loss experience of risk(s) having similar characteristics. (See unfair discrimination.)

• reduced paid-up insurance option

  One of the whole life nonforfeiture options. The company purchases a paid-up life insurance policy for whatever limit the cash value in the original policy will fund. (See also nonforfeiture options.)

• reduced rate average clause

  1) In property insurance, a clause requiring the insured to maintain insurance at least equal to a stipulated percentage of value in order to collect partial losses in full. If the insurance is less than the minimum required, that proportion of the loss will be paid which the amount of insurance carried bears to the amount which should have been carried. Symbolically: Insurance Carried x Loss = Payment (subject to policy limit) Insurance Required 2) In major medical insurance, the clause which specifies the percentage of a loss that the company will pay and the percentage that the insured will bear (such as 80%?20%, 75%?25%).

• reduction

  1) To lower or reduce limits, coverage or benefits in order to reduce premium, or as a result of a hazard, exposure or condition. 2) To lower premium charges to reflect reduced coverage, hazard or exposure controls, or better than average loss experience.

• reefer

  A refrigerated transportation container used in hauling cargo.

• reference

  In certain states, arbitration is called "reference." (See arbitration clause.)

• reformation

  An act involving a court's decision to reform (revert) a contract to adhere to the proper intent of the contracting parties. The dispute brought before the court that resulted in the reformation is resolved according to that altered language.

• refund annuity

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

• registered (mutual fund) representative errors and omissions

  A professional liability or errors and omissions coverage specially designed to meet the needs of registered representatives of mutual fund or variable annuities. Protection is for damages caused by the rendering or failing to render of services or from errors and omissions while performing occupational duties of the sale of mutual funds or variable annuities.

• registered mail insurance

  An inland marine form which insures money and securities for banks and brokers while in transit by registered mail.

• registered representative

  A person who is licensed by the NASD and a specific broker-dealer to sell equities. (See also NASD.)

• registered tonnage

  The cargo capacity of commercial ships measured in tons, figuring each ton to occupy 100 cubic feet.

• regression analysis

  A statistical method of measuring or predicting working relationships between dependent variables and one or more independent variables that is based upon observing actual data.

• regulation of insurance

  Governmental control of the business of insurance by federal, state or local law.

• rehabilitation

  1) When used in workers compensation insurance, it includes the various types of medical treatment, mental and physical therapy, education, vocational training, and retraining necessary to return an injured employee to work. 2) When used in reference to an insurer with solvency concerns, it is the action mandated by the applicable state insurance department in an attempt to restore and rehabilitate, or salvage a financially impaired company and return that insurer to solvency.

• reinstatement

  1) Restoration of the amount of insurance depleted from a policy by payment of loss. Most fire policies contain an automatic reinstatement clause. 2) Reinstituting or putting coverage back into effect under a policy in which coverage has been suspended or canceled for a part of the policy term.

• reinstatement petition

  reinstatement petition A formal request (generally to a workers compensation board) to have benefits resume after they have been terminated. The request must be due to a reoccurrence of the original injury that justified the workers comp claim.

• reinsurance

  1) The transaction whereby an insurance company (the reinsurer), for a consideration, agrees to indemnify another insurance company known as the ceding company (the reinsured) against all or part of a loss which the latter may sustain under a policy or policies it has issued. 2) When referred to as "a reinsurance," the term means the relationship between reinsured(s) and reinsurer(s).

• Reinsurance Association of America

  A group of property-casualty professional reinsurers formed to undertake programs designed to create a national awareness of the role and function of the reinsurer to the public, governmental bodies and the insurance industry in general. Founded in 1968 with headquarters in Washington, DC.

• reinsurance capacity

  1) With respect to an individual account, insurer, or a book of business, it is the amount a reinsurer has available to commit to that risk, that insurer, or that book of business. 2) On a broader scale, this term is also used to express the total amount available in the national or worldwide basis for reinsurance offerings.

• reinsurance commission

  reinsurance commission The commission paid by the reinsurer to the ceding company (primary insurer) on reinsurance agreements as compensation to place the business with the reinsurer and to cover the ceding company's acquisition expenses.

• reinsurance exchange

  A reinsurance operation designed to facilitate the ceding, assumption, offering, or exchange of reinsurance between its members.

• reinsurance premium

  The premiums a ceding insurer must pay the reinsurer for the reinsurance coverage provided.

• reinsurance ticket

  A notation in the form of a separate piece of paper attached to the daily report of an insurer, setting forth the details of reinsurance that has been effected.

• reinsurance treaty

  A reinsurance agreement between an insurance company and a reinsurer, usually for one year or longer, which may be divided into two broad classifications: 1) the participating type which provides for sharing of risks between the ceding company and the reinsurer; and 2) the excess type which provides for indemnity by the reinsurer only for loss which exceeds some specified predetermined amount.

• reinsurer

  An organization which assumes the liability of an insurer by way of reinsurance.

• release

  A written acknowledgment that policy obligations have been fulfilled.

• remainder

  The remaining premium a reinsurer is actually able to retain after deducting any commissions paid to the ceding insurer.

• remedial investigation

  A thorough study for collecting information in order to determine the scope of contamination at a Superfund site. It is also used to create remediation alternatives, including an analysis of related costs.

• remediation

  The act of affording a remedy, of righting wrongs and abuses. To compensate or indemnify. As it refers to pollution-related losses, it describes the obligation to restore the damaged property (usually land or body of water) to the condition it enjoyed prior to the escape of the pollutant.

• removal

  The taking of property to some place other than where it was insured. The standard fire insurance policy used in most states insures against damage done in removing the insured property from the path of the fire.

• renewable term life insurance

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

• renewal

  A policy issued to replace one which has expired.

• renewal certificate

  A document issued by an insurance company to its policyholder indicating that the insurance policy to which the certificate refers is being renewed for another policy term.

• rent insurance

  Insurance which reimburses a building owner for lost rental income due to a covered hazard making the building unusable by a tenant. Rent insurance is usually offered as part of a business income coverage form.

• rent-a-captive

  Companies may not want to incur the expense, time and effort necessary to establish their own captive insurers. With a rent-a-captive, a business rents space within a larger captive that provides access to the license, surplus, management and other services of the captive for a fee that may be much less than it would cost for the business to begin its own captive insurer. The captive may also have access to quality reinsurers and other expertise that the business does not.

• rental reimbursement coverage

  An optional personal auto coverage endorsement to provide reimbursement for the expenses incurred by an insured when a temporary replacement vehicle is needed following a covered accident to the insured's vehicle.

• rental value insurance

  (See rent insurance.)

• renters insurance

  In personal lines insurance, it is a package of property and liability coverages designed to protect apartment or dwelling renters. Although renters do not own the building, physical damage losses could occur to owned contents, and liability coverage is needed for personal and premises exposures. It is a self-contained package with endorsements available to add or increase coverages, much the same as a homeowners policy.

• Replacement

  When a life insurance policy is surrendered in order to purchase another life insurance policy (or similar product), this is considered replacement. Each state has laws requiring agents and companies to inform customers of their rights under their old policy to prevent unscrupulous replacement.

• replacement cost

  When used in property insurance contracts, this is the amount it would take to replace the property with like property of the same quality and construction. No deduction is made for depreciation or obsolescence.

• replacement cost insurance

  Protection which pays the cost to restore or replace damaged or destroyed property without deduction for depreciation. Automatically included in homeowners forms. (See actual cash value.)

• replacement ratio

  A calculation used by agents and insurers to determine how many new business premiums need to be written to replace premiums lost by cancellation, placement with another carrier, nonrenewal, and attrition.

• replevin

  replevin Describes a legal action that is initiated in order to make a claim for personal property.

• reporting policy (or form)

  A policy in which the policyholder is required to report the values of a property insured to the company at certain intervals. A provisional premium is charged initially, and the final premium is determined by applying the rate to the average of the values reported. (See open policy, and adjustable policy.)

• representation

  Information communicated by the prospective insured to an insurer which will influence the latter's underwriting decision.

• reproduction cost

  The amount it would cost to replace or reproduce damaged property or goods with the same type and quality. This may apply to both real and personal property.

• reputational risk

  The threat of loss of a company's goodwill or positive public image due to incidents that result in or involve poor crisis-management, mishandled public relations, regulatory noncompliance and/or a failure to meet expectations of delivery or goods and/or services.

• res ipsa loquitur

  A Latin term meaning "the thing speaks for itself." As the term relates to liability insurance, it suggests that the act or occurrence causing injury or damage would most likely not have happened except for the negligence of the tortfeasor.

• Rescission

  The action taken by an insurer to void an insurance contract. Most often fraud or material misrepresentation is the impetus for the rescission action.

• Reservation of Rights

  Describes a notice that a company sends to a client. It allows a company to investigate a claim or being defending an insured, without forfeiting its right to deny coverage or a legal defense if it later finds that the claim does not qualify protection.

• reserve

  An amount representing a liability of an insurer. (See unearned premium reserve, and loss reserve.)

• reserve premium

  The portion of each premium collected by the insurer that must be set aside in reserves to pay claims. Reserve requirements are set by the state jurisdictions of the states the insured is licensed in.

• residence employee

  An employee whose duties are in and around the insured premises.

• residual disability benefit

  Most disability insurance plans pay only when a person is totally disabled (as defined by the policy). A person may be able to work part-time or at another less demanding job during recovery. Policies that provide partial disability benefits pay a percentage of the total benefit for these partial disabilities. (See also partial disability benefit.)

• residual disability income policy

  A health or disability policy providing income protection for insureds that experience reduced income when returning to work after an accident or illness, either because they are unable to return to work on a full-time basis or are unable to fulfill the duties of the previous occupation and must take a lesser paying position.

• residual market mechanism

  An arrangement, either voluntary or required by law, among participating insurers in which applicants for a certain type of insurance who are unable to secure protection in the open market (hard-to-place risks) may be covered by such participating insurers.

• residual value insurance

  A type of business risk faced by leasing parties which involves the property being returned at the end of a lease having less market value than assumed when the agreement was written. Example: A car leasing agreement assumed that, after one year, the vehicle would be worth $10,000 but it ends up with a value of $7,200. Residual value insurance protects a lessor against such value shortfalls.

• respondentia

  The lending of money on cargo being shipped overseas at a higher rate of interest than otherwise, the difference to compensate the lender for the provision that no repayment was expected if the voyage failed. If the loan was on the vessel, the arrangement was called bottomry. Thus, respondentia was an early form of cargo insurance, and bottomry was an early form of hull insurance. (See bottomry.)

• restoration premium

  Once a policy has exhausted its full or aggregate annual limits in claims and benefit payments, some policies will allow the option of restoring the limits for an additional premium charge, called the restoration premium.

• results

  1) Money earned or lost by an insurer in its underwriting operations, as distinguished from money earned or lost in the investment of assets. 2) Earned premiums less losses, loss adjustment expenses incurred and other underwriting expenses incurred, usually determined monthly for managerial purposes.

• retail store policy

  A package policy for commercial accounts containing four principal sections of coverage: property, liability, crime, and boiler and machinery. The basic policy contains declarations, general provisions, and definitions applicable to these sections; and the specific coverage requirements for each section are handled by separate forms. The types of accounts eligible for this policy can be grouped into eight categories: motel/ hotel, apartment house, office, mercantile, service, industrial, and processing, institution and contractors.

• retainer clause

  A clause in reinsurance agreements between ceding insurer and reinsurer which outlines the amount and conditions of the ceding insurer's retention.

• retaliatory laws

  Laws, usually referring to taxes, which provide that State A will charge a citizen or a corporation of State B doing business in State A not less than State B would charge one of the citizens or corporations of State A doing business in State B.

• retention

  1) The amount which an insured or an insurer assumes as its own liability and which is not insured otherwise. 2) In reinsurance, the amount which a primary insurer assumes for its own account. In pro rata reinsurance contracts, the retention may be a percentage of the policy limit. In excess of loss contracts, the retention is a dollar amount of loss. (See net retention, and net line.)

• retention clause

  A clause in a policy of reinsurance by which the ceding company agrees to retain for its own account a certain part of the line.

• retention group

  An insurance company organized by a group of businesses or institutions in the same line of business to provide liability insurance for the owners or organizers. As permitted by federal legislation passed in 1986, such a group is eligible to provide insurance for its members in any state after being licensed in any one state. Also known as insurance retention group or IRG.

• retention ratio

  The percentage of insurance policies that are renewed.

• retirement annuity

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

• retirement income policy

  A specific type of income/annuity policy designed to provide the annuitant retirement income once a specific retirement age has been reached.

• retiring from a line

  The act of an insurer in canceling an existing line or declining to renew it.

• retroactive conversion

  A provision in some term life insurance policies that allows the use of the original date of the term when converting to a whole or permanent cash value life policy.

• retroactive date

  The earliest date for which coverage is afforded under a claims-made form. Usually the effective date of the first year of such policy form provided to the insured. (See claimsmade.)

• retroactive insurance

  The promise of an insurer, made after the occurrence of bodily injury and/or property damage, to pay up to a specified maximum legal liability of the insured ensuing from such injury or damage.

• retrocedent

  In reinsurance transactions, when a reinsurer cedes all or a portion of assumed insurance to another reinsurer, the ceding reinsurer is known as the retrocedent.

• retrocession

  The transaction whereby a reinsurer cedes to another reinsurer all or part of the insurance it has assumed. (See specific retrocession, and blanket retrocession.)

• retrocessionaire

  The name given a reinsurer who assumes reinsurance cessions from another reinsurer.

• retrospective rating

  A plan under which the premium is determined after the policy has expired based on contractual factors, chiefly the loss experience of the insured during the policy term. Designed to encourage safety by the insured and to compensate the insurer if larger than expected losses are incurred.

• return commission

  When a policy is canceled, the company returns the unearned premium to the insured. An agent is under contractual obligation to refund the unearned portion of the commission and, as a matter of business practice, a broker does likewise.

• return for no claim

  Certain policies, for example, marine insurance covering yachts, provide for a refund of part of the premium in the event that the policyholder makes no claim for loss during the term of the policy. In the standard yacht policy, the refund may be a percent, such as 20%.

• return on equity

  A ratio derived by dividing an operation's net income by its total equity. Measures profitability by showing how efficiently invested capital is being used.

• return premium

  That part of a premium returned to an insured upon cancellation or partial cancellation of a policy, when rate adjustments are necessary, or when an advance premium is in excess of the actual premium.

• reverse competition

  Intensive competition among insurers for the services or influence of insurance intermediaries in an insurance transaction, such as the agent, broker, finance companies, or banks. Since insurers are forced to pay higher compensation for these services, reverse competition generally results in higher insurance costs for consumers.

• revocable beneficiary

  Unless an irrevocable beneficiary is named, the owner of a life insurance policy can change (revoke) any beneficiary designation at any time. (See also beneficiary.)

• RHU

  Registered Health Underwriter designation sponsored by the National Association of Health Underwriters. Headquarters: Washington, DC.

• RICO

  (See Racketeering-Influenced Corrupt Organizations Act.)

• rider

  Another word for endorsement. (See attachment, and endorsement.)

• right of salvage

  A right an insurance company acquires to property for which it has paid an insured in full for its loss or destruction. Sale of the salvaged property helps an insurer recover some of its costs.

• RIMS--Risk and Insurance Management Society, Inc.

  Previously known as American Society of Insurance Management, Inc. (ASIM). Formed in 1950, a nonprofit association dedicated to the advancement of professional standards of risk management. RIMS sponsors educational programs and maintains relationships with insurers, brokers, rating organizations, and regulatory and governmental bodies. Headquarters: New York, NY.

• riot

  Violent and tumultuous actions by a number of people, coverage for which is included in the extended coverage endorsement.

• riot and civil commotion insurance

  Insurance against damage done by rioters or those engaged in civil commotion, included in the extended coverage endorsement to the standard fire policy. (See civil commotion.)

• riparian property

  riparian property Structure or building that's located over water, connected to a bank or shoreline, such as a wharf, dock or boathouse; the property owner does not own the area (water space) over which the property is situated.

• riparian rights

  riparian rights A person who has the right to use a waterway because he or she owns the property located on the bank or shore.

• RIRB--Railroad Insurance Rating Bureau

  A rating bureau which rates railroad property and files with state insurance departments on behalf of its member companies and subscribers.

• risk

  1) Defined variously as uncertainty of loss, chance of loss, or the variance of actual from expected results. However defined, its existence is the reason people buy insurance. 2) The subject matter of an insurance contract such as the building, cargo or liability exposure insured.

• Risk and Insurance Management Society, Inc. (RIMS)

  Previously known as American Society of Insurance Management, Inc. (ASIM). Formed in 1950, a nonprofit association dedicated to the advancement of professional standards of risk management. RIMS sponsors educational programs and maintains relationships with insurers, brokers, rating organizations, and regulatory and governmental bodies. Headquarters: New York, NY.

• risk avoidance

  (See avoidance of risk.)

• risk management

  The active identification, evaluation and management of all of the potential hazards and exposures to loss a risk may experience. The handling of those exposures is not limited to insurance options, but includes a variety of methods such as alternative financing, retention, reduction, elimination, transfer, and/or any combination of methods.

• risk manager

  The person or manager in charge of the active identification, evaluation, and management of all of the potential hazards and exposures to loss a risk may experience. The handling of those exposures is not limited to insurance options, but includes a variety of methods such as alternative financing, retention, reduction, elimination, transfer, and/or any combination of methods.

• risk mapping

  A method (inherently subjective) of identifying and ranking various kinds of risks (or loss exposures) that are faced by a given organization. Typically, such risks are evaluated by organizational leadership and it should include the likelihood of risk occurrence as well as its impact on business operations.

• risk purchasing group

  A coverage alternative to using the traditional insurance market, it refers to a number of parties with similar coverage needs who incorporate into a group to buy liability insurance. Such arrangements are authorized by the Federal Liability Risk Retention Act of 1986.

• risk retention group

  An insurance company organized by a group of businesses or institutions in the same line of business to provide liability insurance for the owners or organizers. As permitted by federal legislation passed in 1986, such a group is eligible to provide insurance for its members in any state after being licensed in any one state.

• risk-based capital

  A method for determining adequacy of capital created by the National Association of Insurance Commissioners. It requires insurers to determine their proper amount of capitalization according to the level of risk found in their investments and the lines of business written.

• road hazard

  In reference to automobile insurance, it means losses that are typically caused by the routine operation of a motor vehicle that are not covered, such as damage to tires caused by potholes.

• road rage

  Refers to violence associated with the anger and stress generated by modern traffic conditions. It typically involves one driver aggressively pursuing, shooting at, colliding with or otherwise insulting or abusing another vehicle, person or object.

• roadside assistance

  Refers to supplemental or optional insurance coverage against the cost of handling vehicle breakdowns, particularly roadside repairs, towing, and related extra expense (taxis, vehicle rental, emergency lodging, etc.).

• robbery

  The taking of property by violence or threat of violence.

• rolling stores

  Vehicles that have been either specially built or customized in order to act as a mobile, retail food or specialty product site. Typically, they are subject to restrictive underwriting and/or rating since, by their nature, they are heavily exposed to contact with pedestrians (shoppers, etc.)

• rolling wrap-up

  A wrap-up covering many projects for a single sponsor.

• rollover

  1) When an agent moves a book of business from one carrier to another. 2) When an individual transfers his/her vested interest and funds from one retirement plan to either an IRA or to another plan. In order to avoid taxes or IRS penalties, rollovers must be between qualified plans and must conform to specific guidelines regarding when, how, how much and how often such rollovers may occur.

• RPG (Risk Purchasing Group)

  RPG (risk purchasing group) A coverage alternative to using the traditional insurance market, it refers to a number of parties with similar coverage needs who incorporate into a group to buy liability insurance. Such arrangements are authorized by the Federal Liability Risk Retention Act of 1986.

• RPLU

  Registered Professional Liability Underwriter designation sponsored by the Professional Liability Underwriting Society. Headquarters: Minneapolis, MNw.

• Ruin Theory

  A concept describing an insurer's vulnerability to insolvency, caused from too much growth in premium writings in relation to its policyholder surplus. Because an insurer must use its policyholder surplus (the difference between its assets and liabilities) to put new business on the books, the amount of its policyholder surplus is a limit to its growth.

• running down clause

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

• runoff

  In a reinsurance contract, there may be a termination provision to require a reinsurer to continue the liability for any losses that may occur to policies still in force at the time the contract terminates, until those policies expire.

• RVI (Residual Value Insurance)

  RVI (residual value insurance) A type of business risk faced by leasing parties which involves the property being returned at the end of a lease having less market value than assumed when the agreement was written. Example: A car leasing agreement assumed that, after one year, the vehicle would be worth $10,000 but it ends up with a value of $7,200. Residual value insurance protects a lessor against such value shortfalls.
• Back to Top

• S.E.U.A. Case

  The defendant in U.S. v. Southeastern Underwriters Association (S.E.U.A.), 322 U.S. 533 (1944), in which the Supreme Court held that insurance is commerce. (See interstate commerce, and SEUA--Southeastern Underwriters Association.)

• sacrifice

  In marine insurance, acts done for the welfare of all interests, such as the throwing overboard (jettison) of part of a cargo to keep the ship from sinking. (See jettison, and general average.)

• safe burglary insurance

  This form (now obsolete) protects against loss of property caused by forcible entry into a safe or vault. Damage to safes, vaults and other property on the premises resulting from burglary is also covered unless damaged by fire. This very limited coverage can be purchased through an insuring agreement and endorsement within the Commercial and Governmental Crime Policies.

• safe driver rating plan

  A merit rating program for private passenger cars where insureds with clean driving records qualify for lower automobile insurance premiums, and insureds who have an accident or moving traffic violation history pay higher premiums. The amount of premium is regulated by a point system, which assigns a certain number of points for accidents and traffic violations in which the insured is involved during a stated period, usually three years.

• safe harbor

  safe harbor A generic reference to organizational activity that bears little or no risk of violating any law or regulation. The term is used more actively when new laws and regulations appear and affected persons begin to interpret their impact.

• safe-harbor provisions

  Legal or regulatory conditions, the compliance with which insulates a taxpayer from unfavorable tax consequences.

• safety engineering

  Loss control, inspection and safety engineering work that is performed by an account in an attempt to prevent losses from occurring. Loss prevention work applies to property, liability, automobile, workers compensation, and most other P&C insurance. It is also known as loss or accident prevention.

• safety responsibility laws

  A statute (in force in most states) which requires a motorist to provide evidence of the ability to pay for negligence in causing losses to others from the operation of a motor vehicle. Typically, the evidence furnished is an insurance policy, although most states also permit a bond or cash deposit to be used in lieu of a policy. Also called financial responsibility laws.

• salary continuation plan

  A disability or life insurance program designed to provide comparable income to an employee and/or family should that employee die or become disabled. Most often this is an employee benefit provided by the employer through a group insurance program.

• salary reduction plan

  Pays for some employee benefits through the use of salary deductions from a participant's paycheck.

• salespersons sample floater

  An inland marine policy to protect against theft and other property damage for valuable samples carried by salespersons.

• salvage

  Property in a loss saved from further loss.

• salvage corps

  Certain big cities have organizations similar to fire departments, the duties of which are limited to the prevention of damage to property during and after a fire, rather than the extinguishing of the fire. Such organizations are maintained by the fire insurance companies and are called salvage corps.

• salvors

  General reference to parties who, through their own expense and effort, gain ownership rights to property that has been abandoned or that has been saved from loss or destruction.

• Sanborn Map

  Maps of cities and towns giving details of construction and fire protection, made by the Sanborn Map Company. Formerly used more frequently than today. Fire insurers kept such map records in their offices to indicate the location and other details of their insured risks in order to prevent undue concentration in a given building, city block, or area. (See map clerk.)

• SAP--statutory accounting principles

  Those principles required by state law which must be followed by insurance companies in submitting their financial statements to state insurance departments. Such principles differ from generally accepted accounting principles (GAAP) in some important respects. For example, SAP requires that expenses must be recorded immediately and cannot be deferred to track with earned premiums. (See GAAP--generally accepted accounting principles.)

• Sarbanes-Oxley Act

  This act, created in response to a host of recent corporate scandals (i.e., Enron, WorldCom, Arthur Anderson, et al) created a new set of financial reporting requirements, established a public company accounting oversight board, mandates the use of independent auditors and it substantially tightened the accountability standards for directors and officers, auditors, securities analysts and legal counsel.

• satellite and space vehicles insurance

  Highly specialized property insurance designed to protect satellites, space vehicles, and related equipment against physical damage losses. Coverage options and endorsements may include protection for loss of income and expenses. Four types of coverage are available: pre-ignition, launch, in-orbit, and ground support.

• savings bank life insurance (SBLI)

  Life insurance sold by savings banks in New York, Massachusetts and Connecticut.

• schedule

  1) The plan or formula applied to arrive at a fire insurance rate. 2) A list of insured properties, and the amount of insurance on each, which is attached to a "schedule" policy, as distinguished from a "blanket" policy. In the latter, one amount of insurance applies to the total of all insured properties. (See schedule rating.)

• schedule bond

  A fidelity bond covering a number of named individuals or positions irrespective of who occupies them, as contrasted with a blanket bond, which covers all.

• schedule policy

  A listing of two or more items of property in a policy, with specified amounts of insurance applying to each item. On the other hand, if a policy were to provide one amount of insurance on several items of property, the policy would be known as a blanket policy.

• schedule rating

  A system of making fire insurance rates for commercial properties, determined by a physical inspection of each risk. Such rates are made by modifying the class rates applying to a given classification, to the extent of the good or bad features of the individual risk, according to the schedule. For example, a certain commercial building may receive a credit because it is sprinklered, a debit because it is protected only by a volunteer fire department. (See schedule.)

• scheduled coverage

  Insurance for property scheduled (specifically listed) on a policy, with a limit of liability for each item.

• scheduled personal property endorsement

  An endorsement to a homeowners policy allowing the insured to schedule both the coverage and the value on specific items.

• SCLA

  Senior Claim Law Associate designation sponsored by the American Educational Institute. Headquarters: Basking Ridge, NJ.

• SCLA

  SCLA Refers to the Society of Claim Law Associates. This organization's members are those who have received designations from the American Educational Institute (AEI). It is a not-for-profit corporation that provides educational and networking opportunities for its members and promotes professionalism in the claims profession. Headquarters: Basking Ridge, N.J.

• Scopes Manual

  Scopes Manual Produced by NCCI, it contains information on classifying occupational loss exposures into Workers Comp classification codes.

• seasonal risk

  An insured risk which is occupied for part of the year only, such as a summer dwelling. In the case of a manufacturer, it may be a plant which is operated only a part of a year according to the season, such as a cannery.

• SEC liability

  The liability that those parties who offer and sell publicly traded stock expose themselves to as a result of the Federal Securities Act of 1933 and the Federal Securities Exchange Act of 1934. These acts place strict obligations on parties offering stock, specifically regarding the issues of disclose of information on the offering. Any misrepresentations, intentional or not, can result in liability.

• Second Injury Fund

  Refers to a special (state) reserve that is used to pay for workers who need increased compensation when they suffer an additional work injury that complicates a previous disability. The fund pays for the increased portion of necessary financial relief. Usually such funds only respond in cases of severe and/or permanent disability.

• second to die life insurance

  In a life insurance contract, a clause which states that the beneficiary must survive the insured by X number of days for the beneficiary to be paid the proceeds. Otherwise, the benefits will defer to the contingent beneficiary or the estate of the insured if no contingent beneficiary is designated.

• Section 403(b)

  A form of employee retirement plan for not-for-profit, governmental or charity organizations. (See also section 403(b).)

• Section 79

  That part of the IRS tax code that gives favorable tax treatment to both the group life employer and the individual plan participant if the group life plan meets certain minimum requirements.

• securities valuation

  The valuation method used by state insurance department regulators when setting or confirming the values used on the securities of an insurer.

• Securities Valuation Office

  A department of the NAIC (National Association of Insurance Commissioners). Among its duties it monitors the (market) values of securities that comprise the investment portfolios of state-regulated insurers.

• securitization

  An alternative risk transfer tool, refers to use of a special financial entity to take a block of similar assets, such as a loan portfolio and convert them into assets that can be sold and traded as securities. It is an increasingly popular method to gain direct access to the capital market.

• securitization vehicle

  (See special purpose vehicle.)

• securitized asset

  Any property that, via a financial transaction, is transformed into a marketable security.

• security bond

  A written agreement wherein one party (the surety) obligates itself to a second party (the obligee or beneficiary) to answer for the default of a third party (the principal) in failing to perform specified acts within a stated time. Such obligations include payment of debts and responsibility for defaults.

• segregated cell insurer

  A variation of a captive insurer where each company?s asset and liabilities are kept separate. While the combined companies can take advantage of shared operating staff and costs, they only have to deal with the consequences of their own underwriting decisions and liabilities.

• seismic wave

  The field of force that radiates outward from the epicenter at several miles per second. This is the most destructive component of an earthquake.

• selection

  The process of accepting and rejecting risks in the attempt to produce a profit in underwriting. (See classification, discrimination, and unfair discrimination.)

• self insurance

  self-insurance The retention of sufficient exposure units by an entity to permit the operation of the law of large numbers. Self insurance is a term often mistakenly used to describe the situation when an entity decides to retain its own risks. The mistake arises when the exposure units are too few in number to permit the application of the law of large numbers. When the exposure units are too few, a better and less misleading term of such a practice is "self-assumption of risk."

• self-administered plan

  When an employer decides to fund and administer his/her own employee benefit plan instead of using outside sources. Employee benefit plans are regulated by the U. S. Government by means of the Employees' Retirement Income Security Act (ERISA) of 1974.

• self-contained policy

  A single document that contains all the agreements between the insured and the insurer, forming a complete insurance policy.

• self-insured retention

  The portion of each loss that an insured retains by setting aside funds or by possibly using alternative types of financing to meet losses. It acts very similar to a deductible although normally, on a much larger scale. It is also considered to be a form of self-insurance.

• self-reported

  Under disability insurance, this refers to a worker reporting his or her own injury or symptom. Due to difficulty of verifying the incident, such instances are typically subject to only partial benefits.

• self-storage risks

  Facilities designed to provide public rental of storage space for one's own goods while allowing the property owner access and control of the rental space. Mini-warehouses are common examples.

• selling agents commission insurance

  Protection to indemnify an independent sales agent, sometimes known as a manufacturer's representative, for lost commissions on orders already received due to the inability of the manufacturer to produce the goods because of fire or other insured cause of loss.

• selling price clause

  An endorsement which can be added to a fire policy covering a stock of merchandise, which extends the policy to cover beyond the actual value of the stock. One form, covering only stock already sold, is available to both mercantile and manufacturing risks and pays the price for which the stock had been sold. The other form, covering unsold stock, is available for manufacturers only and pays the price for which the owner expected to sell the stock. (See profits insurance.)

• SEMCI--Single Entry Multiple Company Interface

  An ultimate goal in agency/company automation where one client such as an agency or broker can enter data and information in their own agency system, (coverage application information) and, without human intervention in conversion or manipulation, transmit that data to multiple insurers. A common interface between agencies, brokers, insurers and reinsurers as well as state insurance regulatory agencies.

• semiautomatic treaty

  A reinsurance treaty that allows the reinsurer to select certain cases for individual reinsurance consideration within with the provisions of an automatic reinsurance treaty.

• SEP--simplified employee pension

  A type of retirement plan that was designed for small businesses. It is easier to administer than other plans because a minimal amount of paperwork is required. In this plan, an employer makes contributions to the employees IRA. In one form of SEP call SEP-IRA, the contributions are limited to 15% of the employee's salary up to a specified cap.

• separate account

  A term usually associated with variable annuities, variable life and variable universal life insurance to define the portion of the assets of the policy invested in nonguaranteed products, e.g., equities.

• SERFF

  (See System for Electronic Rate and Form Filing.)

• Servicemen's Group Life Insurance (SGLI)

  A group life insurance program developed specifically for members of the armed services who often have difficulty obtaining life insurance at affordable rates in the open market.

• setoff

  setoff A party that is confronted by a legal action responds by filing a separate action, alleging a different set of circumstances.

• settlement option

  The choice of payment method and frequency available to the beneficiary of a matured life insurance policy.

• settlement or settlement offer

  In liability cases, it is the amount of compensation offered or made by the tortfeasor or the insurer of the tortfeasor, to the injured party(ies), to resolve (settle) the claim or legal action.

• settling agent

  In marine insurance, a person authorized to pay losses out of funds provided by the marine underwriter. Such agents have broader powers than the claim agent, whose authority is limited to surveying and certification of losses.

• SEUA--Southeastern Underwriters Association

  The defendant in U.S. v. S.E.U.A., 322 U.S. 533 (1944), in which the Supreme Court held that insurance is commerce. Also known as the S.E.U.A. Case. (See interstate commerce, and S.E.U.A. Case.)

• sex-based harassment

  Actions or conduct which, while nonsexual, humiliate or denigrate a person due to that person?s gender (example, derogatory statements to or treatment of a female auto mechanic or a male registered nurse).

• sexual harassment

  When one employee is subjected to unsolicited, unwarranted, and unwanted physical or verbal advances, innuendoes, comments, or conditions from either the employer or another employee.

• sexual harassment defense coverage

  An insurance coverage providing claims-made coverage for the legal defense and costs for alleged charges of sexual harassment. Sexual harassment is when one employee is subjected to unsolicited, unwarranted, and unwanted physical or verbal advances, innuendoes, comments, or conditions from either the employer or another employee.

• SFAA

  (See Surety and Fidelity Association of America.)

• ship repairers' liability

  ship repairers' liability Comprehensive liability insurance that protects ship repair operations against their legal liability for their activities (renovations, repairs, movement of property before or after projects) that may cause damage or injury to third parties.

• shock loss

  A much larger loss than anticipated. Usually a loss large enough to have an impact on a company's underwriting results in any given territory. (See probable maximum loss (PML), and maximum foreseeable loss (MFL).)

• short rate cancellation

  Termination of a policy by the policyholder before its stated expiration, with the insurer refunding to the policyholder a return premium an amount less than the pro rata part that is still unearned to compensate the insurer for expenses incurred to that point, since the termination is at the request of the policyholder. (See pro rata cancellation.)

• short term

  A policy period of less than one year.

• short-tail

  A term used to designate those types of claims that become known and are made within a short period of time. Short-tail is usually considered to be those claims that become known within the policy period or within one year of expiration. Property claims are a common example.

• short-term disability income insurance

  Usually less than one year, often 13-, 26- or 52-week plans frequently sold as part of an employee benefits plan. Also known as weekly income plans.

• SIA--Society of Insurance Accountants

  An organization devoted to the discussion of accounting and statistical and management problems and to the interchange of ideas with the objective of fostering the value of the accounting and statistical functions to the insurance industry. Headquarters: New York, NY.

• SIAA (Strategic Independent Agents Alliance)

  Founded in 1983, it is a national alliance of independent insurance agencies that operate in regional networks. The networks allow agencies to preserve independent ownership while enjoying economies of scale and shared expenses. Headquarters: Swanzey, NH.

• SIC

  The standard industrial classification. A government classification of businesses used in various statistical programs and by insurance companies to place businesses in proper rating classes. (See also rating classes.)

• sickness insurance

  A form of health insurance against loss by illness or disease. (See accident & sickness insurance.)

• side car

  An alternative, highly customized reinsurance arrangement, similar to a short-term, retrocession or fully collateralized quota share agreement. In essence, a private party agrees to fund a selected line or book of business at an agreed layer of loss. In exchange, that party is able to participate in the profits and fees earned by that line or book. Among the advantages is that a reinsurer gains access to more capital without the obligation of reporting a traditional reinsurance arrangement or debt obligation.

• sidetrack agreement

  An agreement between the owners of a premises and a railroad with respect to a railroad sidetrack (transfer or access track) on the premises of the insured. The railroad will allow use of the sidetrack as long as the property owner guarantees access by the railroad to the sidetrack and agrees to certain conditions of property maintenance. It may also contain specified conditions of hold-harmless between the railroad and property owner.

• SIGFA

  SIGFA Self-Insurance Guaranty Funds of America. This organization assists state guaranty funds and other organizations that provide safety net protection for businesses that self-insure their workers' compensation exposure. The group also acts as a lobbyist and provides networking opportunities for its members. Headquarters, Chicago, IL

• silverware floater

  An inland marine form designed to insure silverware worldwide against all risks, usually by endorsement to a homeowners policy.

• Simplified

  In the mid-1980s, standard property and casualty insurance contracts, both personal lines and commercial lines, were rewritten. The intent was to modify the legalistic-style language that most ordinary insureds had difficulty understanding, and make the provisions and wording of the contracts easier to comprehend. Simplified refers to the contract language resulting from the conversion to the easy-to-read and easy-to-understand format and verbiage. Pre-simplified policies are those that existed before the conversion to simplification and contain a more legalistic-styled format and wording.

• simplified employee pension (SEP)

  A type of retirement plan that was designed for small businesses. It is easier to administer than other plans because a minimal amount of paperwork is required. In this plan, an employer makes contributions to the employees IRA. In one form of SEP call SEP-IRA, the contributions are limited to 15% of the employee's salary up to a specified cap.

• simultaneous death acts

  When both the life insured and the beneficiary die in the same accident it may be impossible to determine who expired first. States that have this legislation provide that the beneficiary died first unless the policy states otherwise. This permits the policy to pass the proceeds onto the insured's contingent beneficiary.

• Single Entry Multiple Company Interface (SEMCI)

  An ultimate goal in agency/company automation where one client such as an agency or broker can enter data and information in their own agency system, (coverage application information) and, without human intervention in conversion or manipulation, transmit that data to multiple insurers. A common interface between agencies, brokers, insurers and reinsurers as well as state insurance regulatory agencies.

• single interest cover (or insurance)

  Used in connection with property sold on the installment plan, it protects the lender of money advanced to purchase a property, but does not protect the borrower or purchaser directly. (See credit insurance, and floor plan insurance.)

• single limit basis

  One coverage limit that applies to all damages arising from bodily injury or property damage or both, which results from a single accident.

• single premium deferred annuity (SPDA)

  An annuity where the premium is paid in a lump sum and benefits will be paid out at a future date.

• single premium life insurance

  A type of life insurance coverage in which the entire premium is paid at one time at policy inception.

• single risk reinsurance

  single risk reinsurance Reinsurance effected item by item and accepted or declined by the reinsuring company after scrutiny, as opposed to reinsurance effected by treaty. The word facultative connotes that both the primary insurer and the reinsurer have the faculty or option of accepting or rejecting the individual submission, as distinguished from the preset obligation to cede and accept already agreed upon by the parties in treaty reinsurance.

• sinkhole insurance

  Occurs notably in Florida, but is found in other limestone areas, covering physical damage to dwellings and personal property caused directly by sinkhole collapse. Sinkhole collapse is the sudden settlement or collapse of earth resulting from subterranean voids created by the action of water on limestone or similar rock formations. All licensed insurers writing property insurance in Florida were required at one time to join the Florida Sinkhole Reinsurance Association, which assumed all sinkhole policies written by members who shared through the association equitably in the total premiums, losses and expenses. After a five-year operation without a loss, the insurers in Florida were required to insure sinkholes under the extended coverage endorsement. The association was then dissolved, although it was reborn shortly thereafter as the Florida Windstorm Association.

• SIO

  (See Surety Information Office.)

• sistership exclusion

  sistership exclusion An old term for product recall exclusion.

• SITE--Society of Insurance Trainers and Educators

  An organization of education and training directors from all sections of the insurance industry. The society's aim is to improve training methods and techniques for both company personnel and agents.

• SIU--Special Investigative Unit

  Special insurance company fraud units created for investigating and reporting fraudulent claims.

• slander

  Refers to an oral distribution of false information that harms another party?s character or reputation.

• sliding scale commission

  Used in pro rata reinsurance treaties, this arrangement allows a ceding insurer to pay ceding premiums that are inversely proportional to the treaty's ultimate loss ratio.

• slip

  A piece of paper submitted by a Lloyd's of London broker on which underwriters record their participation in a risk. In broader terms, it applies to any list of insurers or reinsurers providing the capacity for a risk.

• smoke damage

  Damage caused by smoke other than smoke which accompanies a hostile fire. One of the extended coverage endorsement perils, but subject to certain restrictions.

• SMP--special multi-peril package

  SMP--special multiperil package A package policy for commercial accounts containing four principal sections of coverage: property, liability, crime and boiler and machinery. The basic policy contains declarations, general provisions and definitions applicable to these sections, and then the specific coverage requirements for each section are handled by separate forms. The types of accounts eligible for this policy can be grouped in eight categories: motel/ hotel, apartment house, office, mercantile, service, industrial and processing, institution, and contractors. This policy is rarely used. It has been replaced in most jurisdictions by the commercial package policy (CPP).

• snowmobile insurance

  Covers snowmobiles against physical damage to the equipment, and legal liability for their use and operation.

• SOAR

  (See Society of Accident Reconstructionists.)

• social host liability insurance

  See dram shop liability insurance.

• social inflation

  The increased jury awards, increased liberal treatment of claims by workers compensation boards, legislated increases in benefit levels (in some cases retroactively), and new concepts of tort and negligence that emerge to increase insurance losses.

• social insurance

  Insurance provided by government.

• Social Security

  Federal government programs provided in the Social Security Act of 1935 (including all amendments and additions). It is sometimes called Old Age, Survivors, Disability, and Health Insurance and provides economic security for the elderly, the disabled and certain persons who have lost the income of the primary wage earner through death.

• Social Security Disability Income

  That portion of the OASDHI or social security act that provides disability income benefits to persons who are unable to engage in any substantially gainful occupation and who are or are expected to be disabled for more than one year.

• Society for Risk Analysis (SRA)

  Society for Risk Analysis (SRA) An international forum of persons from a variety of professional backgrounds. Its members share information, ideas and network opportunities in the world of risk management. Headquarters: McLean, VA.

• Society of Accident Reconstructionists

  An international association of persons who are experts in evaluating the circumstances surrounding accidents. Its objectives are to share information, network, provide additional education and training to its members, and to promote safety. Headquarters: Wheat Ridge, CO.

• Society of Actuaries

  An organization formed to promote actuarial and statistical knowledge applicable to life and health insurance. Headquarters: Chicago, IL. Its property-liability insurance counterpart is the Casualty Actuarial Society.

• Society of Chartered Property & Casualty Underwriters

  (CPCU) (CPCU) (CPCU) Professional society of those who have been awarded the designation of Chartered Property Casualty Underwriter (CPCU). Fosters research and continuing education of its members. Headquarters: Malvern, PA.

• Society of Insurance Accountants (SIA)

  An organization devoted to the discussion of accounting and statistical and management problems and to the interchange of ideas with the objective of fostering the value of the accounting and statistical functions to the insurance industry. Headquarters: New York, NY.

• Society of Insurance Research

  Stimulates research affecting all lines of insurance and fosters exchange on research methodology among society members. Headquarters: Appleton, Wl.

• Society of Insurance Trainers and Educators (SITE)

  An organization of education and training directors from all sections of the insurance industry. The society's aim is to improve training methods and techniques for both company personnel and agents.

• Society of Risk Management Consultants

  An international organization of risk management consultants who provide advice on insurance, risk and related matters and are compensated exclusively by their clients. The Society's stated mission is to advance the profession of risk management consulting and to promote the benefits to be derived from the use of independent consultants. Headquarters: Milwaukee, WI.

• soft market

  The capacity and availability of insurance is said to progress in cycles of hard market and soft market. The soft market period is the portion of the cycle in which capacity is high, and coverage is readily available at affordable, competitive and even artificially low prices.

• software

  All documents, manuals, and written instructions which guide a computer operation. (See hardware.)

• solvency

  As it applies to the insurance industry, solvency is whether or not an insurer has the funds to pay insured claims. State insurance departments are directly responsible for assuring the solvency of the insurers licensed to write business in their state and are charged with periodic review and evaluation of those insurers. The minimum reserve, surplus and capital requirements mandated in each jurisdiction for insurers will vary by state.

• solvency surveillance

  The process, conducted by state insurance regulators, of verifying the solvency of insurers and determining whether their financial condition enables them to meet their financial obligations and to remain in business.

• sonic boom

  The shock waves, pressure blasts, and noise that occur when an aircraft or missile exceeds the speed barrier. Most standard property policies will cover this cause of loss.

• Southeastern Underwriters Association (SEUA)

  The defendant in U.S. v. S.E.U.A., 322 U.S. 533 (1944), in which the Supreme Court held that insurance is commerce. Also known as the S.E.U.A. Case. (See Interstate Commerce, McCarran-Ferguson Act, S.E.U.A. Case, and Public Law 15.)

• SOV--Statement of Values

  SOV (statement of values) A statement signed by an insured or applicant that attests to the value of real and/or other property to be covered under an insurance policy. Typically used for policies that provide coverage on a blanket basis.

• sovereign immunity

  In order to act in the best interest of the people represented, at one time governmental authorities were protected from lawsuits or other legal remedy by parties alleging injury or damage as a consequence of the actions or lack of action of the governmental body. This immunity has eroded significantly in the last few years and may continue to deteriorate, thus opening up the possibility of a myriad of lawsuits against governmental bodies.

• SOX

  (See Sarbanes-Oxley Act.)

• special acceptance

  A facultative reinsurance treaty provision that, as an exception, permits coverage for a submission that does not qualify for automatic protection.

• special automobile policy

  A combination private passenger automobile policy designed to provide basic coverage at minimum cost. The lower premium is due to economies in acquisition and handling expenses, as well as to reduced uniform coverage.

• special conditions

  (See self-reported.)

• special damages

  In liability insurance, refers to awards which may fall into either compensatory or punitive. Compensatory consists of either general damages, which include pain and suffering, and special damages, which are out-of?pocket expenses. Punitive (or exemplary) are amounts that are awarded as a form of punishment or to act as an example.

• special form

  A property coverage form protecting insureds from all causes of physical damage loss unless otherwise limited or excluded.

• special hazard

  A hazardous risk, or more generally, a risk with manufacturing occupancy.

• Special Investigative Unit (SIU)

  Special insurance company fraud units created for investigating and reporting fraudulent claims.

• special multi-peril policy (SMP)

  special multiperil policy (SMP) A package policy for commercial accounts containing four principal sections of coverage: property, liability, crime and boiler and machinery. The basic policy contains declarations, general provisions and definitions applicable to these sections. The specific coverage requirements for each section are handled by separate forms. The types of accounts eligible for this policy can be grouped in eight categories: motel/ hotel, apartment house, office, mercantile, service, industrial and processing, institution, and contractors. This policy is rarely used. it has been replaced in most jurisdictions by the commercial package policy (CPP).

• special purpose vehicle

  Refers to the entity (typically an association, corporation partnership or a trust) that acquires the ownership rights to property that is undergoing securitization. It is the SPV that sells securities that are backed by the income flow generated by the securitized property.

• specific insurance

  A single amount of insurance covering a single type of insurable property, e.g., building or contents, used in contrast with blanket insurance. Thus, a policy providing one amount of coverage on building and contents would be blanket insurance, whereas one providing a certain amount on the building and another amount on the contents would be specific insurance.

• specific rate

  A fire insurance rate which applies to specific insurance.

• specific retrocession

  Retrocession protecting a particular reinsurance, as opposed to blanket retrocession, which deals with a portfolio of reinsurance. (See retrocession.)

• specified disease insurance

  A health insurance policy designed to provide benefits for the services, expenses and fees for treatment if the covered person(s) contract the disease or diseases specifically addressed by the policy. Common examples are cancer or AIDS.

• specified perils

  An insurance contract that covers only those causes of loss (otherwise known as perils) that are specifically indicated as being covered.

• speculative risk

  Any risk or event that includes the possibility of either a gain or a loss, so that a party can speculate (gamble) on the outcome.

• spendthrift clause

  Pays life insurance settlement benefits to the beneficiary in installments. While the money is with the insurer, creditors cannot attach the proceeds. Once paid out, creditors may attach the benefits.

• split limits

  A limits concept used in general liability and automobile liability policies whereby separate limits are set for each coverage. The most common example is one limit for bodily injury and another for physical damage, with still another for medical payments.

• spoilage coverage

  Insures damage to perishable personal property and stock caused by a change in temperature or humidity resulting from power failure or equipment failure. The coverage may also include damage caused by contamination.

• sponsor

  Another term for originator firm.

• spread loss reinsurance

  A type of excess of loss property reinsurance which provides for a periodic adjustment of the reinsurance premium rate based on the reinsured's experience for preceding years (usually three or five) plus a loading for the purpose of compensating the reinsurer for: its expenses the possibility of unusual losses those losses occurring at the end of the period of the treaty, which the reinsurer might not have a chance to recoup if the treaty is not renewed a catastrophe possibility and the reinsurer's profit. In casualty reinsurance, adjustments to the above may be required for such other factors as economic and social inflation. Also known as Carpenter plan. (See Carpenter plan.)

• spread of risk

  A property insurance philosophy where the accumulation of property risks in a given area, and subject to the same catastrophic loss such as tornado or major conflagration, are monitored by the insurer to make sure the accumulation is either within the insurer's capacity or has been properly reinsured.

• sprinkler head

  A valve on an automatic sprinkler system which opens when subject to excessive heat from a fire, permitting water to flow in a circular fashion from overhead pipes, thus localizing the fire.

• sprinkler leakage insurance

  Insurance against the damage done by the accidental discharge of water from automatic sprinklers and similar fire prevention devices.

• SPV

  (See special purpose vehicle.)

• SR filings

  Refers to documents used in many states after an individual has been involved in an auto accident without having insurance. The forms must be regularly filed with a state's insurance authorities to prove that a given driver is now carrying insurance or has some other authorized method to prove he or she can meet their financial obligations.

• SR forms

  SR forms Refers to documents used in many states after an individual has been involved in an auto accident without having insurance. The forms must be regularly filed with a state's insurance authorities to prove that a given driver is now carrying insurance or has some other authorized method to prove he or she can meet their financial obligations.

• SR-22 Form

  SR-22 Form Refers to documents used in many states after an individual has been involved in an auto accident without having insurance. The forms must be regularly filed with a state's insurance authorities to prove that a given driver is now carrying insurance or has some other authorized method to prove he or she can meet their financial obligations.

• SR-26 Form

  SR-26 Form Refers to documents used in many states after an individual has been involved in an auto accident without having insurance. The forms must be regularly filed with a state's insurance authorities to prove that a given driver is now carrying insurance or has some other authorized method to prove he or she can meet their financial obligations.

• SRMC

  (See Society of Risk Management Consultants.)

• staff underwriter

  An underwriter who performs such staff functions as research, rule and form preparation, analyses of problems, interpretation of company rules, and conduct audits.

• stamping bureau

  An office which checks rates and forms of issued policies for accuracy of rates and rules. Sometimes called audit bureau because the daily report is stamped with a rubber stamp if correctly prepared.

• standard form

  A form, a policy or other document used to write insurance, which has been adopted and is used by a large number of companies or has been promulgated by a rating bureau or legislature. The use of standard forms does away with much of the need to scrutinize every word of a policy form for meaning, since the standard has been examined and adjudicated by courts. (See standard policy.)

• standard policy

  A policy generally in use, and in some lines of insurance, prescribed by law. (See standard form.)

• standard provisions

  Those provisions within an insurance contract that use similar wording and contain the same types of terms as do the provisions in contracts of most other insurers of the same type of business or that are mandated in that jurisdiction. For example, cancellation and nonrenewal conditions, other insurance conditions, or duties in the event of loss, and so forth.

• standard risk

  The type of risk that an insurer defines as average or standard for class as far as size, quality and acceptability. The baseline set by the insurer as the proverbial company normal. Also known as average risk. (See average risk.)

• State Association of Insurance Agents

  In each state, insurance agents have formed organizations to discuss their problems and promote the best interests of the American Agency System. Together these state associations make up the national Independent Insurance Agents of America or the Professional Insurance Agents. IIAA is mostly stock agents and PIA is mostly mutual, but both support the American Agency System.

• state funds

  An amount of money assessed certain insurers in a given state to reimburse policyholders and claimants of an insolvent insurer in that state. The fund may be created before an insolvency occurs (pre-assessment, as in New York) or afterward (post-assessment), and virtually all states now have such protection. Also called insolvency funds and guaranty associations.

• state responsibility filings

  state responsibility filings Refers to documents used in many states after an individual has been involved in an auto accident without having insurance. The forms must be regularly filed with a state's insurance authorities to prove that a given driver is now carrying insurance or has some other authorized method to prove he or she can meet their financial obligations.

• state-of-the-art defense

  state-of-the-art defense A defense strategy typically used in cases involving product liability. The concept argues that, at the time a loss occurred, the technology that may have prevented the loss did not exist (or was not readily available). Therefore, the loss or damage was an assumption of risk.

• stated amount

  When the value of property, either real or personal, is agreed upon at the issuance of the contract and, therefore, coinsurance and any other valuation clauses will not apply at the time of a loss.

• statement of values

  A statement signed by an insured or applicant that attests to the value of real and/or other property to be covered under an insurance policy. Typically used for policies that provide coverage on a blanket basis.

• statistical agent

  An organization authorized by the laws of most states to prepare the statistics required for the administration of rating laws. Company associations compiling statistics in a given state are subject to appointment by its individual commissioner.

• statute

  A written law passed by a legislative body, at either the state or federal level.

• statute of limitations

  A statute limiting the time within which a legal action may be brought.

• statutory accounting principles (SAP)

  Those principles required by state law which must be followed by insurance companies in submitting their financial statements to state insurance departments. Such principles differ from generally accepted accounting principles (GAAP) in some important respects. For example, SAP requires that expenses must be recorded immediately and cannot be deferred to track with earned premiums. (See GAAP--generally accepted accounting principles.)

• statutory damages

  Damages resulting from causes of actions that are created by laws passed by authorized governmental bodies.

• statutory disability benefits insurance

  A limited form of longer term disability insurance that is mandated by several states. It provides various levels of coverage for employees who are losing income due to a nonjob-related injury or sickness.

• statutory reserve

  An insurance company reserve required by state law.

• statutory underwriting profit or loss

  1) Money earned or lost by an insurer in its underwriting operations, as distinguished from money earned or lost in the investment of assets. 2) Earned premiums less losses, loss adjustment expenses incurred and other underwriting expenses incurred, usually determined monthly for managerial purposes.

• stevedore's legal liability

  stevedore's legal liability Stevedores unload and load cargoes from ships, railroad cars, trucks, etc. Stevedore's liability is a form of insurance that assists with claims related to their operations, whether they are connected to transportation terminals or do business as independent contractors.

• stock

  Merchandise for sale or in the process of manufacture, as distinguished from furniture, fixtures or machinery.

• stock insurance company

  Insurance business transacted by an insurer whose ownership element is divided into shares of stock represented by certificates, as opposed to a mutual insurer which does not have capital stock and whose ownership element is divided among its policyholders. While a stock insurer has both stockholders (its owners) and policyholders (its customers), a mutual insurer has only policyholders (its owners and customers). (See mutual insurance.)

• STOLI

  (See Stranger Originated Life Insurance.)

• stop loss excess aggregate

  A company wishing to protect itself in the event aggregate losses exceed an agreed upon amount of self-retention in any one year may purchase this type of coverage or reinsurance for the excess. This type of approach is most often used in the liability lines.

• stop loss reinsurance

  stop-loss reinsurance A company wishing to protect itself in the event its net loss ratio for a given year rises above a certain percentage may buy reinsurance which pays in excess of that figure up to a higher agreed percentage, beyond which the company is once more liable. In short, a plan which takes the sting out of an above-average net loss ratio. (See excess of loss reinsurance.)

• stop-loss provision

  Health insurance policies that have coinsurance provisions require the insured to pay a portion of the loss after the deductible, e.g., 20% while the insurer pays the rest. In a large claim the insured could have a large out-of-pocket expense. The stop loss provisions will state that the insured will not have to pay any more of the loss once his/her out-of-pocket expense (including the deductible or not) has reached a certain limit, say $1,000.

• storekeepers burglary and robbery policy

  This form (now obsolete) provided a single limit of insurance for a variety of burglar and robbery coverage. The limits options were low and designed for the small retail store. Money and securities options in Businessowners policies provide more enhanced versions of this coverage.

• storekeepers liability policy

  A package policy designed for retail store operators, insuring against claims for bodily injury and property damage arising from their business operations. Excludes automobile liability. This policy is now basically obsolete and rarely used, replaced by current versions of the businessowners policy.

• straight life annuity

  Pays the benefit for the life of the annuitant. No refund or period certain is paid if the annuitant should die even after one payment.

• straight life income option

  A life insurance settlement option where a beneficiary receives periodic payments which end immediately upon the beneficiary's death.

• straight life insurance

  A cash value insurance policy that requires premium payments for the life of the insured.

• stranding

  Running aground, such as a vessel may do in shallow water.

• Stranger Originated Life Insurance

  An evolving term typically references any arrangement for a life insurance contract to benefit a third party who, at the time that coverage is applied for or purchased, does not have an insurable interest in the subject (person) being insured.

• Strategic Independent Agents Alliance (SIAA)

  Founded in 1983, it is a national alliance of independent insurance agencies that operate in regional networks. The networks allow agencies to preserve independent ownership while enjoying economies of scale and shared expenses. Headquarters: Swanzey, NH.

• strategic risk management

  Described in a variety of ways, the term it refers to implementing an integrated process for continually assessing risks that are obstacles to an organization's financial and operational goals. Under this concept, risks are viewed in two ways: as threats and as opportunities.

• strict liability

  Strict liability is a legal doctrine applying to tort law that basically holds the manufacturer, wholesaler and/or retailers (or in the case of property--the owner) liable for injuries that may be caused by defective or dangerous products or premises conditions. It does not require the injured party to prove negligence. Negligence can be assumed because of the inherent danger of the product, defect or premises condition. Strict liability, however, is not absolute liability.

• structured claim settlements

  The practice of spreading payment of an obligation over an extended period, instead of paying the obligation in a lump sum.

• sub-agents

  subagents Agents who sell insurance through other agents or through general agents.

• Subchapter S Corporation

  A form of corporate entity where all profits and losses are shared by the stockholders. The stockholders are taxed on an individual basis as opposed to corporate tax.

• subcontract bond

  A bond often required by the general contractor of a subcontractor, that guarantees to the general that the subcontractor will fully perform the subcontract in accordance with the terms. It also specified that the subcontractor will pay for certain labor and material incurred during the process of the subcontracted work

• subdivision bond

  A bond required of a subdivision guaranteeing to construct or finance improvements such as streets, sidewalks, curbs, gutters, sewers and drainage

• subject premium

  The generic term to describe the rating base for excess of loss reinsurance: 1) the ceding company's premium income as opposed to premium receipts 2) measured net, meaning after cancellations, refunds and premiums paid for reinsurance protecting the cover being rated 3) gross, meaning before deducting any expenses. Also known as gross net premium income (GNPI). Note: GNPI may be written premiums (GNWPI) or earned premiums (GNEPI). (See GNWPI--gross net written premium income.)

• subprime crisis

  A problem faced by financial entities that had a substantial position in either making or investing in private mortgage loans to classes of borrowers who represented a high exposure to loan default. The crisis created by widespread default has resulted in an additional, serious liability exposure for directors and officers.

• subrogation

  In insurance, the substitution of one party (insurer) for another party (insured) to pursue any rights the insured may have against a third party liable for a loss paid by the insurer.

• subrogation manager

  subrogation manager Individual responsible for overseeing an organization's effort to recoup money it has paid out for liability claims when a separate party is responsible for injury or loss. Duties include investigating loss liability and pursuing collection, including litigation.

• subrogation release

  A release signed by the insured once the insurer has paid the insured for a claim submitted. The release allows the insurer to subrogate the rights of recovery of the insured against the party responsible for the loss.

• subscribers

  The policyholders of a reciprocal insurance exchange that agree to insure each other.

• subscription policy

  A policy shared by or subscribed to by two or more insurers. The amount of each insurer's share must be clearly indicated in the policy.

• subsidence

  Damage due to land movement, e.g., a house on a hill may slide down the hill due to heavy rains. Not earthquake damage.

• subsidiary

  In regards to business, refers to an organization that (traditionally) is smaller and either partially or fully owned by another (larger) organization, or a firm, regardless of ownership percentage, whose operations are controlled by another firm. A subsidiary firm's operations often complement that of the parent firm, such as a manufacturer purchasing a supplier or distributor.

• substandard premium rate

  Higher life insurance premiums charged because of insured health, lifestyle and/or occupation. Often issued by companies that specialize in substandard life insurance.

• substandard risks

  Risks which do not meet minimum underwriting criteria.

• success ratio

  The ratio of insurance policies actually written to those that have been quoted to applicants for insurance.

• sudden death clause

  A provision in some reinsurance treaties permitting or requiring termination of the contract under certain conditions.

• sue and labor clause

  Language in marine and inland marine policies requiring the policyholder, in event of loss, to take all necessary means to save the property from further loss and recover from others who caused the loss. The insurer agrees to pay the costs, even if they exceed the policy's limit of liability.

• suicide clause

  Most life insurance policies will not pay the proceeds of the policy but will return premiums paid if the insured should commit suicide within the first two years of the policy period.

• suit

  A civil proceeding alleging damages for injuries or offenses committed by one party against another.

• summary plan description

  Required by the federal ERISA act of 1978. Employers must provide pension plan participants with a summary plan description on a periodic basis. The description details basic information about the plan itself, the administrator and certain rights the participant has to benefits.

• sunset clause

  A clause in a casualty excess of loss reinsurance cover that provides that the reinsurer will respond only to losses reported before some predetermined future date (sunset). The clause is used to limit the reinsurer's exposure to the "long-tail" of liability exposure, particularly in the U.S.

• sunset provision

  Language in a licensing statute or regulation stating that the licensing authority granted is for a specified period of time, and not until revoked, as is customary.

• Superfund

  A government program under the auspices of the Environmental Protection Agency (EPA), set up to identify toxic and hazardous waste dump sites. Once the sites are identified, an attempt is made to identify the responsible parties, effect the cleanup of the sites, and assess the responsible parties with the costs incurred.

• superintendent of insurance

  The official of a state charged with the duty of enforcing its insurance laws. Called the superintendent of insurance (in three states) and director of insurance (in eight states). The official is elected in 11 states, appointed by a governor or state agency in 38 states, and is a civil service appointee in Colorado.

• superseded suretyship rider

  Fidelity losses often occur over a considerable period of time. Renewal or replacement of a fidelity bond includes this clause which states that the new bond pays all losses that would have been recoverable under the previous bond, except that the discovery period under that bond had expired. This provision would apply to any losses which occurred prior to the inception of the current bond.

• supplemental benefit rider

  In life and health insurance, a rider to the policy that provides additional benefits, e.g., accidental death, weekly income, waiver of premium.

• supplemental executive retirement plan (SERP)

  A nonqualified (no tax deferrals) supplemental retirement benefit given to one or more executives. Since the plan is not qualified, it does not have to integrate with any other benefits plan or pension plan.

• supplemental group life insurance

  Usually an optional form of group life insurance (over and above the existing group life plan) that an employee can elect and most probably will have to pay all the premiums for.

• supplemental major medical coverage

  Supplemental health insurance designed to provide coverage for medical expenses not covered by the primary policy or by Medicare.

• supply bond

  A bond between a supplier and purchaser which guarantees the supplier will furnish supplies or materials as contracted. Should the supplier default, the surety will indemnify the purchaser of the supplies against any loss sustained as a result.

• surcharge points

  1) When referring to motor vehicle reports (MVRs), it refers to additional rating factors (or points) that insurance companies add to the premiums charged to drivers who accumulate traffic violations or accidents. The surcharges are typically assessed for a defined period (such as 36 months) from the date of the violation or accident. 2) With respect to automated underwriting systems (AUS), it usually refers to deficiency points assessed against a risk being run through the system. When a specified number of points accumulate, the risk either receives a rating surcharge, is declined or triggers a manual review of the account by an actual underwriter.

• surety

  1) The guarantee given for the fulfillment of an obligation. 2) The person or organization guaranteeing the fulfillment of an obligation. 3) The underwriter who guarantees something under a bond. (See personal surety.)

• Surety and Fidelity Association of America (SFAA)

  A form and rate-making organization of fidelity and surety bond underwriting companies. The organization also prepares manuals, collects and disseminates statistical data, provides a forum for the discussion of common problems of members, and engages in educational activities. Headquarters: Iselin, NJ.

• Surety Association of America

  (See Surety and Fidelity Association of America.)

• surety bond

  A written agreement wherein one party (the surety) obligates itself to a second party (the obligee or beneficiary) to answer for the default of a third party (the principal) in failing to perform specified acts within a stated time. Such obligations include payment of debts and responsibility for defaults.

• Surety Information Office

  A nonprofit organization that operates as an expert resource for information concerning surety bonding in the construction industry (both private and public projects). The SIO is supported by the major surety associations (Surety and Fidelity Association of America and National Association of Surety Bond Producers) since its work directly benefits their members. Headquarters: Washington, D.C.

• suretyship

  The function of being a surety.

• surface water

  Surface water is rain, rain run-off or melting snow that accumulates or pools on top of the ground--not below the surface of the ground--which is temporary in nature, following no definite course and having no substantial or permanent existence. Surface water is considered to be something that is naturally occurring, as in melting snow, versus something that artificially occurs such as when a water tank bursts. Surface water loses its characteristics when it flows into a natural channel, such as a defined river or stream or when it flows into an artificially created system such as a storm drain or sewer. Damage by surface water is usually excluded.

• surgeons professional liability insurance

  Protects physicians and surgeons against claims for personal injury arising from malpractice, errors or mistakes in rendering professional services. At this time a most expensive coverage due to high jury awards against the medical profession.

• surgical schedule

  A list of how much a health insurance contract will pay for each type of surgical procedure covered under the plan.

• surplus

  The remainder after a company's liabilities are deducted from its assets.

• surplus line

  A line of insurance provided by insurers not licensed in the states where the risks are located and placed under the surplus line laws of the various states. Before such placements can be made through specially licensed surplus line agents and brokers, state laws generally require evidence that placements could not be readily made in licensed insurers. Broadly referred to as being all lines of insurance placed with nonadmitted insurers. (See excess line.)

• surplus lines insurance

  Insurance written by insurers not licensed in the states where the risks are located and placed with such insurers under the surplus line laws of the various states. Before such placements can be made through specially licensed surplus line agents and brokers, state laws generally require evidence reported before some predetermined future date ("sunset").

• surplus lines tax

  The tax levied on a surplus lines placement, payable by the licensed surplus lines producer placing the risk under the law of a particular state, and charged to the insured. Not to be confused with the direct placement tax, which is applicable in approximately half the states in taxing the insured directly for placement of insurance with a nonadmitted insurer where no surplus lines tax is paid.

• surplus share

  A reinsurance term. With quota share both the ceding company and the reinsurer share the loss on a pro rata basis from dollar one of the loss. With surplus share, a retained limit is introduced. For example, in surplus share, the ceding company will pay the first $100,000 of any loss and the cening company and reinsurer will share above that retained limit to the limit of insurance.

• surplus to policyholders

  As reported on a statutory basis, the sum of all unassigned surplus of a mutual insurer, or for a stock insurer, the sum of all unassigned surplus and capital.

• surrender charge

  Found in backloaded life and other policies where expenses are taken out of the contract when surrendered for cash.

• survey

  The description of a subject of insurance made for the information of the insurer by an inspector or surveyor.

• surveyor

  One who determines either the condition of insured marine property or the amount of loss or damage in ocean marine practice.

• survivorship benefits

  Life insurance benefits designated in a policy to be paid to survivors as scheduled in the policy.

• survivorship clause

  In a life insurance contract, a clause which states that the beneficiary must survive the insured by X number of days for the beneficiary to be paid the proceeds. Otherwise, the benefits will defer to the contingent beneficiary or the estate of the insured if no contingent beneficiary is designated. (See also simultaneous death act.)

• sustainability risk management

  A relatively new term. The concept involves a formal approach an entity takes to handling the loss exposure represented by environmental (particularly pollution liability) and social justice (particularly employee issues) risks.

• SVO

  (See Securities Valuation Office.)

• Symbol

  The numerical identification used by private passenger auto insurers to determine the damageability of the vehicle. The symbol combines the cost new of the vehicle with its accident history or expected accident history.

• syndicate

  In insurance, usually a group of companies or underwriters who join together to insure property. (See Lloyd's syndicate, marine syndicates, hull syndicate, and pool.)

• syndicate policy

  A policy issued on behalf of a number of companies which share a risk or a class of risks. It lists the name of the participating companies and the liability assumed by each company, thus replacing a large number of policies, one from each company.

• System for Electronic Rate and Form Filing

  A plan introduced by the National Association of Insurance Commissioners in 2001. It allows insurers to electronically file their requests for rates and forms changes with insurance regulators.
• Back to Top

• T-filing

  T-filing Using an automated (computer) system to file an organization's documents by their transaction date rather than alphabetically by customer and to substitute paper with electronic records.

• Taft-Hartley Law

  The 1935 National Labor Relations Act was passed in an attempt to prevent unfair labor practices. In order to strengthen, further define, and amend the National Labor Relations Act, Congress passed the Taft-Hartley Law in 1947.

• tail

  Liability that exists for losses that are not discovered or reported, or claims made and settled until some time after the policy has expired. Tail exposures may be found in almost all of the liability lines.

• tail coverage

  Insurance coverage available to provide protection for tail exposures. The present occurrence version of the commercial general liability (CGL) form already provides protection for losses that occurred during the policy period, regardless of when they are reported or claims made. The claims-made version of the CGL must be endorsed to provide coverage for claims that are not made during the policy period.

• take-all-comers

  A proposal (or requirement in a few states) that an insurer must accept all applicants for a given type of insurance. Also called all-comers.

• takeover defense insurance

  Protection to reimburse a corporation for expenses incurred, such as legal, investment advisory, communications, accounting, and similar types of expenses, in successfully resisting an attempt to assume its ownership or control by a stock tender offer. Corporations eligible are those whose stock is either traded on public exchanges or which are registered under Section 12 of the Securities Exchange Act of 1934.

• tankerman's legal liability

  tankerman's legal liability Tankerman operations involve loading and unloading all types of cargo transported by tanker vessels. Many types of cargo they handle are inherently dangerous. Tankerman's legal liability insures these operations from damage or injury to third parties. The damage or injury must be related to their loading/unloading activities.

• target (or target risk)

  1) A risk which because of its large size, or another characteristic, must be offered to many insurers in order to be placed. Everybody "takes a shot at it." 2) A large risk sought after by virtually all large brokers.

• target benefit pension plan

  A hybrid between a true defined benefit pension plan and a money purchase pension plan. In the target benefit pension plan a target amount of retirement benefit is selected, i.e. 50% of salary at age 65. However, unlike the defined benefit plan, that target benefit is not guaranteed. Like the money purchase plan, the target benefit plan hopes to create the benefit through effective investment, but performance is not guaranteed.

• target cancellation date

  Selected date for terminating a policy as part of a premium refund calculation.

• target commodities

  With regards to transportation risks (particularly trucking), refers to any products that are highly vulnerable to theft. Examples include electronics, clothing, tobacco and alcohol.

• target marketing

  Sales efforts (that typically includes product design) that focus on a specific category or class of business.

• tariff

  The rate made and published by a rating bureau. Also refers to the rules and schedules which are used to make the rates.

• tax audit insurance

  A type of specialty insurance coverage that provides funds to reimburse taxpayers for any additional expenses which may be incurred should the Internal Revenue Service (IRS) audit their tax returns. It does not pay for fines or penalties. Coverage is for reproductions, costs of records and related types of expenses.

• tax preparers errors and omissions

  A professional liability or errors and omissions insurance coverage designed specifically to meet the needs of accountants, bookkeepers, and similar professionals involved in the preparation of tax returns for other parties. Designed to cover negligence, errors, and omissions that may occur during the rendering or failing to render of those services. One feature frequently found in this type of policy is that both the tax preparation service and the individual tax preparers may be covered in one policy.

• technical reserves

  A British term that refers to insurer reserves such as unearned premium, outstanding claims and other types of reserves.

• telemetrics

  A technology involving tools that permit the automatic measurement and transmission of data from remote sources. Telemetrics (aka telemetry) is commonly used in weather tracking, oceanographical studies, collecting flight (including space flight) data, geographical tracking/mapping, and similar uses.

• template language

  template language An older term that refers to any policy or form that consists entirely of standard provisions, absent any special or custom features.

• temporary disability benefits

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

• temporary insurance agreement

  A life insurance term used to describe the amount of insurance provided by the insurer between the period of time when the application is taken and the first mode of premium is made and the time the policy is issued. The limit of insurance on the temporary agreement may be less than the policy limit applied for. Most often the temporary insurance agreement is designed to pay if the insured dies before the policy is issued only if that company would have issued the policy except for the prior death of the insured.

• temporary worker

  A person furnished to an employer to substitute for a permanent employee on leave or to meet a seasonal or short-term workload condition. This does not include leased workers. (See leased worker.)

• ten-day examination period

  In health insurance, a notice on the first page of a policy that the policyholder has 10 days in which to examine the policy and return it for full refund of premium if not satisfied. Often known as the "ten-day free look," the provision is now required in many states.

• tenants policy

  A form of homeowners policy sold to persons who rent their living quarters or who are co-op apartment owners.

• tender offer defense expense insurance

  Protection to reimburse a corporation for expenses incurred such as legal, investment advisory, communications, accounting, and similar types of expenses, in successfully resisting an attempt to assume its ownership or control by a stock tender offer. Corporations eligible are those whose stock is either traded on public exchanges or which are registered under Section 12 of the Securities Exchange Act of 1934.

• term

  The length of time for which a policy or bond is written.

• term insurance

  A type of life insurance policy that is not whole life or written to cover the whole remainder of the insured's lifetime, but instead is written to cover only a period of time. Often that period of time is a set number of years, such as 1 year, 10 years or 20 years. At other times, the policy is written for a term that expires at a specified age, for example, when the insured turns 65. (See level term life insurance.)

• term policy

  A policy written for longer than one year. If for less than a year, it is a short-term policy.

• term rate

  The insurance rate for a policy period longer than one year. If for less than a year, it is a short-term rate.

• term rule

  The provision which stipulates the length of time for which a policy may be written and the discount, if any, applying to the rate or premium of policies issued for more than one year.

• terminal operator's liability

  Typically refers to a type of liability policy that protects a terminal operator against claims by third parties. The claims involve damage or loss to property owned by third parties that was under the care, control or custody of the terminal operator. Terminal may mean any number of things such as piers, wharves, docks, etc.

• termination

  The cessation of coverage caused either by the expiration of the policy or by cancellation or nonrenewal. Cancellation may be either at the insured's request (coverage no longer needed or replaced elsewhere) or at the request of the insurer (for cause such as higher than expected hazards or losses, lack of compliance with safety recommendations, or for nonpayment of premium).

• territorial rating

  When an insurer develops insurance classifications and rates based on the physical, environmental, political, and overall loss potential of geographic locations.

• Terrorism Exclusion

  terrorism exclusion Policy wording that typically defines what acts are considered to be the result of actions by terrorists and then an explanation of which acts are barred from coverage under the applicable insurance policy. The specific wording varies since standard wording is evolving.

• terrorism insurance

  Refers to either property or liability protection against certain types of loss associated directly to terrorist attack.

• terrorist insurance

  Property insurance coverages or policies designed to protect an insured against physical damage caused by terrorist acts.

• testamentary disposition

  Using a will to distribute the proceeds of a life policy.

• theatrical floater

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

• theft

  A broad term meaning the wrongful taking of the property of another.

• third party administrator

  third-party administrator Used with self-insurance programs. The self-insurer outsources the plan administration paperwork, enrollment, check handling, etc. to a specialty firm.

• third-party

  The claimant under a liability policy, so called because the first two parties are the insured and insurer, who enter into the insurance contract, which pays the third- party's claim.

• third-party insurance

  Protection against liability to a third party. The first two parties are the insured and the insurer.

• third-party over action (or suit)

  third-party over action (or suit) A suit filed by a third party against an employer in order to recover damages that were levied against that party.

• threshold level

  This term applies to no-fault automobile liability provisions. No-fault was designed to reduce the time and litigation involved when two or more parties are involved in an auto accident by providing coverage with the insured's own insurer, regardless of who was actually at fault in the accident. Some states have a modified no-fault to allow an insured to take legal action against the negligent party who caused the accident when the accident exceeds a specified amount called the threshold level, or when serious bodily injury, disfigurement or death occurs. The threshold level is different by jurisdiction.

• thrift plan

  Common before 401(k) plans. A voluntary plan sponsored by an employer to give the employees a place to invest funds for retirement. Some employers match employee contributions, some do not.

• ticket, reinsurance

  A notation in the form of a separate piece of paper attached to the daily report of an insurer, setting forth the details of reinsurance that has been effected.

• tiering

  Regarding insurance rating in which a substantial number of different price classes or tiers are created via the use of modern computing to identify and analyze newer rating variables (such as credit scores).

• tight market

  In the property and liability insurance business, underwriting philosophies fluctuate between periods called the tight or hard market and the soft market. The tight or hard market is the period when underwriting standards are very tight and the rates are high. Normally the hard market closely follows a soft market period where the underwriting standards had been soft and the price or rates are very low, resulting in substantial underwriting losses. The cycle swings back and forth between soft underwriting with low rates and heavy losses, to the hard market with subsequent tightening of standards and dramatic increases in price.

• time element insurance

  A coverage which pays for loss of earnings or income when business operations are interrupted, curtailed or suspended due to property loss as a result of an insured cause of loss. Also covered are loss of rents and rental value. The current commercial time element coverage forms are business income and extra expense. Extra expense covers costs incurred to continue operations at another location.

• time limit

  A specified time period or the time limit stated in the conditions section of a policy, within which a notice or proof of loss must be filed to be covered.

• title insurance

  Protection which indemnifies the purchaser of real estate against loss occasioned from defects in the legal title. A title insurance policy extends for the lifetime of the insured while owning the insured property. Largely written by insurers specializing in this class alone.

• top-heavy plan

  A pension plan or employee benefit plan that discriminates in favor of officers or highly compensated employees. Top heaviness puts limits whether a plan can remain qualified according to IRS rules. Curing top heaviness may require that limits be placed on voluntary and other contributions made to the accounts of officers and highly compensated employees.

• tornado

  A destructive and whirling wind of extreme violence which is accompanied by a funnel-shaped cloud moving rapidly over land in a narrow path. The barometric pressure may drop so severely and rapidly that buildings actually explode from within.

• tornado insurance

  Protection against damage done to property by unusually high-speed winds.

• tort

  A legal wrong arising from a breach of duty fixed by law, except under contract, causing injury to persons or property and redressible by legal action for damages.

• tort feasor

  One who commits a tort.

• tort law

  The area of civil law that involves tort actions, which are defined as: a legal wrong arising from a breach of duty fixed by law, except under contract, causing injury to persons or property and redressible by legal action for damages.

• tort liability

  A legal responsibility to pay a third party (claimant) because an insured's action or inaction directly caused injury or damages to that person or that person's property.

• total disability

  Inability to perform any functions of any occupation, caused by a covered illness or injury. (See partial disability, and permanent and total disability.)

• total loss

  1) Loss of all the insured property. 2) Under a given policy, a loss involving the maximum amount for which that policy is liable.

• tourist floater

  An inland marine form which insures the baggage and other possessions of a traveler or tourist.

• towing charges

  An extension of an automobile damage policy which covers the cost of towing the insured car or providing emergency road service.

• town class or town grading

  A 10-category ranking or schedule of public fire protection of cities and towns established in 1916. The grading is currently maintained by the Insurance Services Office for use in making fire insurance rates and to encourage local governments to maintain better fire fighting equipment and personnel. A city or town is ranked in one of the categories by receiving deficiency points for failing to meet established standards under each of these major headings: water supply, fire department, fire service communications, fire safety control, climate, and divergence between fire department and water supply. Town Class 1 is the best class (a city or town having fewer than 501 points), and Town Class 10 is the worst (more than 4,500 points).

• town grading or town class

  A 10-category ranking or schedule of public fire protection of cities and towns established in 1916. The grading is currently maintained by the Insurance Services Office for use in making fire insurance rates and to encourage local governments to maintain better fire fighting equipment and personnel. A city or town is ranked in one of the categories by receiving deficiency points for failing to meet established standards under each of these major headings: water supply, fire department, fire service communications, fire safety control, climate, and divergence between fire department and water supply. Town Class 1 is the best class (a city or town having fewer than 501 points), and Town Class 10 is the worst (more than 4,500 points).

• toxic mold

  A general reference to a variety of single-cell organisms (such as stachybotrys atra, toxic black mold) which grow in moist areas. When these molds or fungi grow in areas of a home or business, they may release spores which may create minor to severe reactions in humans. In severe cases, an infested home may have to be abandoned.

• tractor/trailer

  In insurance terms, not a farm tractor, but rather a motor truck type and the trailer to which it is attached.

• trade association

  One of the three basic forms of insurance organizations: rating bureaus, advisory organizations, and trade associations. Rating bureaus make and file rates, loss costs, rating plans, schedules, manuals, and forms for members, subscribers and service purchasers who choose to use them. Advisory organizations perform advisory functions for insurers relative to these rating bureau activities and, like rating bureaus, are licensed by state insurance departments and subject to examination and other regulation. Trade associations are cooperative organizations to protect the business interests of their member insurers, producers, adjusters, attorneys, or other groups. Either a rating bureau or an advisory organization can function as a statistical organization, and the function of advisory organizations and trade associations can overlap. Distinctions in functions can best be appreciated by understanding that, historically, rating and advisory organizations were licensed and regulated under state rating laws because of the public interest in the cooperative activities of insurers, relative to pricing and the need for regulation, in order to replace application of antitrust laws. (See rating bureau, and advisory organization.)

• trade ratio

  trade ratio The addition of the ratio of losses incurred to earned premiums, and the ratio of underwriting expenses to written premiums.

• trading dollars

  trading dollars A term for describing reinsurance premium payments that are roughly equal to reinsurance loss reimbursements.

• traditional-bond form

  traditional-bond form A type of bond used to handle workers compensation losses. The company issuing the bond (the surety) is obligated to pay any workers comp claim that is filed during the bond's term. This obligation remains even after the bond is terminated.

• traffic detection devices

  As it relates to business or personal auto coverage, it is defined as equipment designed to detect or defeat speed or traffic control or detection devices including both radar and laser.

• transactional filing

  transactional filing Using an automated (computer) system to file an organization's documents by their transaction date rather than alphabetically by customer and to substitute paper with electronic records.

• transfer of coverage

  Normally, this term applies to employee benefit plans or group insurance coverages and refers to those occasions when the benefit plan or group insurance is moved, sold, or transferred from one insurer to another.

• transfer of risk

  When the hazards of, exposures, or financial responsibility for loss is transferred or shifted from the risk to another entity. Various types of risk transfer or risk management methods are available and may include insurance policies, hold harmless and other contractual agreements, leasing mechanisms, or other alternative financing.

• transportation insurance

  Insurance on merchandise and/or cargo while it is being moved and is subject to loss or damage during transportation. This insurance may also protect while in a warehouse. Coverage is also available for property serving as either an instrument of transportation or of communication, such as bridges, tunnels and television transmission towers. The writing of this type of protection is usually within the province of marine or inland marine underwriters.

• traumatic injury

  A physical injury caused by an accident or inflicted by an outside source; other than sickness or disease.

• travel accident insurance

  A type of life or accident policy sold at airports, bus stations and railroads to provide coverage for bodily injury, accidents or death suffered by passengers while traveling on the aircraft, bus or railroad. The coverage may be sold by ticket agents or in vending machines.

• travel agents errors and omissions insurance

  Specially designed professional liability or errors and omissions insurance to protect travel agent from losses caused by negligent acts, rendering or failing to render services, and errors and omissions of not only the named insured errors, but often, employees, tour guides, and tour operators contracted by the insured.

• treasury listing

  A list that shows the maximum liability (surety) that can be written for a federal bond.

• treaty, reinsurance

  A reinsurance agreement between an insurance company and a reinsurer, usually for one year or longer, which may be divided into two broad classifications: 1) the participating type which provides for sharing of risks between the ceding company and the reinsurer; and 2) the excess type which provides for indemnity by the reinsurer only for loss which exceeds some specified predetermined amount.

• trend factor

  A trend factor is applied to the latest year of historical experience to reflect changes in insurance costs and usage that are expected to take place between that year and the year during which rates will be in effect. Insurance costs fall into two broad categories, each which may experience different trends: Costs associated with policyholder claims: medical and vehicle damage losses, lost wages, damages to property, legal costs and expenses incurred by companies in the ordinary course of business: wages, rents, costs of new technology.

• trending

  In order to make informed and credible predictions of future statistics, past historical data as it relates to economic and demographic influences is evaluated and then used to project results.

• Tri-national Insurance Working Group

  A semiofficial group of insurance experts created as a result of the North American Free Trade Agreement. The group?s focus is upon developing practices to allow for the uniform application of insurance protection throughout Canada, Mexico and the U.S.

• triangle

  An actuarial illustration that display's an insurer's historical loss development, which is shaped like a triangle due to earlier underwriting loss years have longer development than later loss years.

• triennial examination

  Refers to the regulatory financial examination that should be performed on every insurer in order to determine whether the insurer is financially solvent to continue to serve its policyholders and claimants. The examination is, under NAIC guidelines, required every three years.

• trigger

  The event which determines when coverage of a liability policy applies. In an "occurrence" policy, the event is the occurrence of the injury or damage. In a "claims-made" policy, the event is the notification to the insurer or the insured, whichever comes first, of the happening of the injury or damage.

• trigger theory

  An event is recognized as an insurable loss (or occurrence) along a timeline from when damage first appears until it terminates. The continuous damage is eligible for coverage under every policy in existence during the period that damage occurred. Under this theory, each policy would cover its share of damage that occurred during the time the policy was in effect. (See exposure theory, injury-in-fact theory and manifestation theory.)

• trip insurance

  Insurance written to cover a single shipment of household furniture, personal effects, merchandise, and livestock against loss by specified perils or "all risk."

• trip transit insurance

  Insurance written to cover a single shipment of household furniture, personal effects, merchandise, and livestock against loss by specified perils or "all risk."

• triple bottom line

  A fairly recent concept that replaces the narrower concept of a corporation's single bottom line of financial results. The newer concept views final financial results from a corporation's philosophy of its financial performance, the manner in which its operations affects the environment and its acting equitably towards other parties (such as customers and workers).

• truckers liability

  Auto liability exposures experienced by owners and operators of businesses designed to transport the goods of others by land motor vehicles for a fee. Subject to regulations by the Department of Transportation (DOT). The Insurance Services Office (ISO) has designed a special business automobile insurance for this purpose, called the truckers liability coverage form. Also available is the motor truck carriers liability coverage form.

• true group insurance

  A group insurance program is one in which an entire related group of people is offered access to the same insurance coverage, normally life, health, accident, and/or disability. In a true group, coverage is offered regardless of their past medical history or current medical conditions. Because coverage is offered to an entire group, marketing and other insurer expenses are not as great, so savings are passed onto the group in the form of lower premiums. In those cases where the group insurance is being offered as an employee benefit by an employer, employers often will subsidize a portion of the premium.

• trust

  A legal document that allows one party to handle another party's property for the benefit of that party.

• trustee

  trustee A person who is appointed to manage another party's finances, particularly in dealing with that party's creditors.

• TSA (tax-sheltered annuity)

  A form of employee retirement plan for not-for-profit, governmental or charity organizations. (See also section 403(b).)

• turnkey insurance

  A specially designed professional or errors and omissions liability insurance which includes coverage for engineering, design, products, and completed operations for contractors, architects, and/or engineers on specific construction projects.

• twenty-four hour coverage

  An emerging theory aimed at providing medical and health insurance protection in one format for both work-related and nonwork-related coverage. In theory, this would eliminate the need for workers compensation coverage and would evolve the current traditional medical or health insurance program into 24-hour or around-the-clock protection, and would possibly set the venue for national health insurance coverage.

• twisting

  When an agent or broker uses misrepresentation to convince an insured to change insurance providers by canceling an existing policy in order to purchase a new one. The agent or broker may benefit from this via higher commissions, bonuses or incentives with the new carrier while the insured may suffer coverage gaps or inconsistencies and short-rate cancellation charges. This is considered to be an unfair trade practice.

• typhoon

  A hurricane-type storm originating in the Pacific Ocean, China Sea and the Philippines.
• Back to Top

• uberrimae fidie

  Literally, of the utmost good faith. The basis of all insurance and reinsurance contracts. Both parties to the contract are bound to exercise good faith and do so by fully disclosing all information material to the proposed contract.

• UL--Underwriters Laboratories, Inc.

  A nonprofit organization which maintains an extensive laboratory for testing the safety of electrical products and other devices, authorizing the use of the "UL" symbol on the device to indicate approval. Headquarters: Northbrook, IL.

• ultimate mortality table

  A type of mortality table or listing of data showing the death rates of persons of each sex at each age used, which is used in life insurance to calculate the premiums charged. This particular type of table has been manipulated to correct or compensate for any possible adverse selection by eliminating the use of incredible or undeveloped data.

• ultimate net loss

  In liability insurance, the amount an insured is obligated to pay because of settlement or adjudication.

• ultralight aircraft

  A gasoline powered aircraft weighing 160 pounds or less resembling in appearance its motorless cousin, the hang glider. Humorously referred to as an airborne lawnmower.

• umbrella liability insurance

  See personal umbrella and commercial umbrella.

• umpire

  1) A person selected by two appraisers to help settle disputes in property insurance claims. The appraisers are chosen by the disputing company and claimant, and a decision of any two of the three is binding. For example, if a company and claimant fail to agree on actual cash value of property destroyed or the amount of the loss, many policies provide that these be determined by appraisal. 2) A similar person in an arbitration proceeding under a reinsurance contract.

• unallocated benefit

  When referring to unallocated benefits in a health insurance policy, they are those benefits that are not scheduled or limited by individual types of expenses. All reasonable expenses are covered up to a specified amount.

• unallocated claim expense

  General expenses that are not a result of any one particular claim but, rather, are a part of the administrative or overall business costs of a claims operation.

• unallocated funding

  The insurance company does not allocate employer contributions to any one employee account. At retirement of an individual, the insurer takes a lump sum out of the general account and purchases an annuity to fund the individual's retirement benefit.

• unauthorized insurance

  Insurance written by an insurer not licensed by the country or state in which the risk is located.

• unauthorized insurer

  Insurer that is not licensed by the country or state where the risk is located.

• unbundled services

  A range of services related to insurance that some insurers or their subsidiaries offer their policyholders but that can be separated (or unbundled) from the insurance transaction. Examples: management services for captives, pools and self-insurers, claim services, actuarial services and statistical information, and loss control services.

• underground storage tank (UST)

  The EPA has developed financial responsibility requirements with respect to owners and users of specific types of underground storage tanks that contain petroleum products or other hazardous chemicals.

• underinsurance

  Insurance which is insufficient in amount to cover a loss which the policyholder may suffer.

• underinsured motorists coverage

  Coverage an insured may purchase to protect his or her own self from damage or injury caused by a negligent party who does not have adequate limits of insurance to cover the loss.

• underlying insurance policy

  The basic or primary layer of coverage, the initial policy that will respond to the covered loss. Only when the limits of the underlying policy have been exhausted, will the other respective layers of insurance respond, as with the case of an excess or umbrella policy in liability insurance.

• underlying limits

  1) In the case of liability excess or umbrella policies, it refers to the limits of the primary (underlying) policy below the excess or umbrella policy which will respond first to loss. Many excess or umbrella policies have established minimum limits for underlying policies. Should the underlying policy not meet the minimum limit requirements, the excess or umbrella will not be offered. 2) With respect to reinsurance, it is the amount that must be exhausted on the underlying coverages or policies before the reinsurance coverage will go into effect.

• underwriter

  One who accepts or rejects risks for an insurer (originally, by writing the person's name under the contract of insurance being issued).

• Underwriters Adjusting Company

  A large company-owned adjustment bureau operating on a countrywide basis. Headquarters: Picataway, NJ.

• Underwriters Laboratories, Inc. (UL)

  A nonprofit organization which maintains an extensive laboratory for testing the safety of electrical products and other devices, authorizing the use of the "UL" symbol on the device to indicate approval. Headquarters: Northbrook, IL.

• Underwriters Salvage Company of Chicago

  Appraises damaged, insured merchandise, including disposal, for the benefit of insurers. Headquarters: Elk Grove Village, IL.

• Underwriters Salvage Company of New York

  Assists insurance companies in adjustment of losses through the reclamation, reconditioning and disposition of damaged merchandise. Headquarters: Clifton, NJ.

• Underwriters Service Association

  A group of insurers banded together to write industrial risks on a pool basis, supplying the needed engineering services and inspections jointly. Similar to the Factory Insurance Association, but normally writing risks less highly protected than those in the F.I.A. Headquarters: Chicago, IL.

• underwriting

  The process of selecting, classifying, evaluating, rating, and assuming risks.

• underwriting association

  underwriting association A joint insurance or underwriting operation in which the participant insurers assume a predetermined interest in all business written. Pools are managed by professionals with expertise in the classes of business undertaken. The members share proportionately in the premiums, losses, expenses, and profits. An "association" or a "syndicate" is synonymous with a pool. (See syndicate.)

• underwriting capacity

  This is the maximum amount of financial risk an insurer or a reinsurer is willing to assume in the event of a single loss or for a given period of time. With respect to the insurance industry, underwriting capacity may not necessarily be at the discretion of the insurance company but may be influenced or controlled by the regulations that apply to the insurance industry based on the capacity of the insurance company.

• underwriting cycle

  The capacity, degree of underwriting, and availability of insurance is said to progress in cycles of hard market and soft market. The soft market period is the portion of the cycle in which capacity is high, underwriting is loose or not as strict, and coverage is readily available at affordable, competitive and even artificially low prices. The hard or tight market is the opposite.

• underwriting department

  The department or group of employees responsible for the process of selecting, classifying, evaluating, rating, and assuming risks.

• underwriting edits

  Account or risk elements selected by an insurer as evaluation points. Most often associated with automated underwriting systems (AUS).

• underwriting expenses

  The costs incurred by an insurer for expenses, taxes, fees and the acquisition of new policies.

• underwriting income

  Money earned or lost by an insurer in its underwriting operations, as distinguished from money earned or lost in the investment of assets.

• underwriting margin

  A computation used predominantly by property and casualty insurers to determine the amount of underwriting loss or gain--based on 100% being the break-even point. Any time the total loss ratio and expense ratio versus the amount of premium written is less than 100%, it is indicative of an underwriting profit. If over 100%, it shows an underwriting loss. For example, an insurer with an expense ratio of 32% and a loss ratio of 66% or a total underwriting expense of 98% shows a 2% underwriting profit.

• underwriting profit or loss

  1) Money earned or lost by an insurer in its underwriting operations, as distinguished from money earned or lost in the investment of assets. 2) Earned premiums less losses, loss adjustment expenses incurred and other underwriting expenses incurred, usually determined monthly for managerial purposes.

• underwriting reserves

  (See unearned premium reserve and loss reserves.)

• underwriting year

  underwriting year The year commencing with the effective date of a policy or with the renewal date of that policy, to be distinguished from the calendar year, which always starts from January 1. A term of particular importance in the collection of loss statistics.

• underwriting year experience

  underwriting year experience The statistical segregation of all premiums and losses attributable to policies having an inception or renewal date within a given 12-month period. Accident year experience is the statistical matching of all losses occurring (regardless of when the losses are reported) during a given 12-month period of time, with all premium earned (regardless of when the premium was written) during the same period of time. Calendar year experience, on the other hand, is the statistical matching of all losses incurred (not necessarily occurring) within a given 12-month period, usually beginning on January 1, with all premium earned within the same period of time.

• unearned premium

  The portion of the premium representing the unexpired portion of the policy term.

• unearned premium reserve

  The sum of all the premiums representing the unexpired portions of the policies which the insurer has on its books as of a certain date. It is usually calculated by a formula of averages of issue dates and the length of term. The reserve is equivalent to the amount of return premium due policyholders if the insurer should terminate the insurance. (See equity in unearned premium reserve, and reserve.)

• unemployment compensation

  Federal and state programs designed to provide income compensation for a limited period of time for employees who are temporarily out of work. The program is financed by a combination of mandatory employer and employee payroll taxes.

• unemployment insurance

  A federally designed option available to finance the employer's portion of the cost of unemployment compensation for specific, qualified operations. This option allows the employer either to self-insure and/or to purchase available specialty insurance, usually available on a stop loss or excess of loss basis.

• unfair claims practice

  Illegal and intentional claims handling practices used by insurers in order to avoid a claim, reduce the amount of a claim, or delay payment of a claim for an unreasonable period of time. Insureds have recourse through their state insurance departments in addition to legal action, should this occur.

• unfair discrimination

  Treating an applicant for insurance differently than other insureds because of any factor not related to the applicant's loss producing or expense producing qualities, such as charging a higher rate, among other possibilities, than the loss producing or expense producing qualities would justify. Factors such as a person's race, color, creed, or national origin that are unrelated to the chance of loss should not affect the writing of insurance. While making distinctions is essential in any insurance system to match individual risks with the rates appropriate for their class, unfair discrimination is illegal. (See classification, redlining, anti-discriminatory laws, discrimination, and selection.)

• Uniform Building Code

  A code established by the International Conference of Building Officials that specifies acceptable/approved building processes, materials and structural designs.

• uniform forms

  A form, a policy or other document used to write insurance, which has been adopted and is used by a large number of companies or which has been promulgated by a rating bureau or legislature. The use of standard forms does away with much of the need to scrutinize every word of a policy form for meaning, since the standard has been examined and adjudicated by courts. Also known as standard forms.

• uniform premium

  When the same set of rates or premiums applies to all insureds; a program with no differences based on age, sex, or occupation. Often found in group life and health insurance programs.

• unilateral contract

  A unilateral contract is one where the entire context and content of the contract is drawn by one party. The second party has only the option to accept or not accept the contract as written. The insurance policy is considered to be this type of contract. Any unclearness or ambiguity in such contracts is construed to be the fault of the party drawing the contract; and, therefore, legal interpretations of such will go against the drawer of the contract (the insurer) and in favor of the other party (the insured).

• uninsurable risk

  Those cases where a risk cannot be insured because the possibility of or frequency of loss is so high, or the cause of loss considered illegal, criminal, or against public policy.

• uninsured motorists coverage

  Under an auto policy, protection for the insured against bodily injury or property damage (in some states) caused by the negligence of an uninsured or underinsured motorist.

• union liability insurance

  A form of errors and omissions (E&O) coverage that protects against loss triggered by the action(s) of a union (as an entity and that appears on the policy) and its authorized representatives.

• unisex legislation

  In some jurisdictions, legislation has been passed which prohibits the use of an individual's gender when developing insurance classifications, rates, or coverages. All persons falling into a category must be given the same rates and coverages.

• United States Aircraft Insurance Group (USAIG)

  A multi-company aviation pool writing a substantial volume of most types of aviation coverages, both domestic and international. Founded in 1928. Headquarters: New York, NY.

• universal life insurance

  A combination of monthly term life insurance plus possible savings in an arrangement that provides limited flexibility as to death benefits and premium payment.

• Universal Mercantile Schedule

  A method of making fire insurance rates which is the basis of many of the methods in use, particularly in the east.

• universal variable life insurance

  A type of life insurance program that combines coverage, options, and/or benefit features of both universal life and variable life insurance policies. The insurer may select options regarding the investment of both the policy premium and any interest or dividends earned.

• unlevel commission system

  A commissions payout system where first year commissions are a higher percentage of the premium than renewal commissions.

• unlicensed insurer or nonadmitted insurer

  An insurer not authorized by the state insurance department to transact business in the insured's state.

• unoccupied building

  A building whose occupant(s) is temporarily absent, but in which the occupant's furniture and personal effects remain, as opposed to a vacant building, which has neither occupants nor contents.

• unreported claims

  Unreported claims are those where the damage or injury has already occurred, but an actual claim has not been made or reported to the insurer. Occurs often in the liability lines. Insurers have set up designated funds to handle these claims called incurred but not reported (IBNR) reserves.

• Unsatisfied Judgment Fund

  Refers to those states that have created and maintained funds to compensate auto accident victims that have been unable to collect from the responsible party.

• unscheduled personal property

  Refers to any and all covered contents which are not itemized on a list with specific amounts of insurance assigned.

• unscheduled premium payments

  A universal life program option in which an insured may make additional, unscheduled premium payments to the policy which will be used to increase investment income for the insured.

• unscheduled property floater

  A primarily personal inland marine insurance designed to provide blanket special or "all-risk" property coverage on all related property of a certain type.

• Untitled

  Industrial Risk Insurers A consortium of major stock property and casualty insurers formed to write large, highly protected risks and to provide fire laboratory facilities and engineering services. The organization was formed in 1975 by the merger of the Factory Insurance Association and the Oil Insurance Association. Headquarters: Hartford, CT.

• Untitled

  adverse underwriting decision Any underwriting decision that either rejects the request for coverage or offers coverage that is less than what was originally requested. It includes decisions that in any way restrict or limit coverage, call for higher pricing or increased deductibles, apply substandard classifications or places in residual markets, or assign risk pools or state pools.

• Untitled

  client The customer (person or entity) who buys insurance through an agent or other intermediary.

• usage

  Means the primary purpose for which a given vehicle is operated. Such as pleasure use (all use is personal), commuting (traveling to and from work) or for business.

• USAIG--United States Aircraft Insurance Group

  A multi-company aviation pool writing a substantial volume of most types of aviation coverages, both domestic and international. Founded in 1928. Headquarters: New York, NY.

• use and occupancy

  A term used to describe some time element coverages that pay for loss of earnings when business operations are curtailed or suspended due to property loss as a result of an insured cause of loss. This coverage is now obsolete and has been replaced by a more comprehensive and generic business income insurance. (See time element insurance, and business income insurance.)

• use-and-file law

  An insurance rating law which requires that rates be filed within a specified period after they are first used in the state.

• UST--underground storage tank

  The EPA has developed financial responsibility requirements with respect to owners and users of specific types of underground storage tanks that contain petroleum products or other hazardous chemicals.

• usual ranges

  The measurements within which the key financial ratios of an insurer may fluctuate and still pass the tests of the NAIC Insurance Regulatory Information System.

• usual, customary and reasonable fees

  A term used in health and dental insurance programs to designate what the insurer has determined to be the fair and reasonable cost of a given service in the territory in which the insured is located.

• utility services coverage

  Insures against loss to a building, personal property or of business income caused by an interruption to power, water or communication services that are supplied by an off-site entity.

• utilization review

  Part of the managed care process in health insurance where an individual person's case is reviewed to determine whether the treatment was adequate or excessive. This review can be conducted prospectively, e.g., in an AIDS case to set parameters for future treatment, or retrospectively to determine how efficiently the treatment was handled.

• utmost good faith

  Insurance policies are called "contracts of utmost good faith" because they depend upon each party being completely honest. Insurance applicants must tell the insurer every fact that is relevant to their seeking insurance. This information is needed to determine whether an applicant qualifies for insurance and how much premium should be charged.
• Back to Top

• vacancy

  Refers to a building which is unfurnished and not being used as a dwelling or for business. However, some insurance policies often contain their own definition of vacancy.

• vacancy or unoccupancy permit

  An endorsement added to a property policy by the insurer which permits or agrees to continue coverage on a building that has been vacant or unoccupied for more than the limitation period specified in the policy.

• vacant building

  A building with nothing in it. If the furniture is in the building and the owner intends to return, the building is unoccupied.

• validation period

  With respect to life insurance, it is the time it takes for the premium on a policy to cover the commissions paid, the cost of investigation, medical exams, and other reports on the insured, as well as policy issuing expenses.

• valuable papers and records insurance

  Provides coverage for the replacement of a commercial operation's valuable papers, records and forms, including electronic media. Typically, coverage is limited to the cost of recreating or restoring the lost or damaged documentation.

• valuation

  The act of determining the worth (or value) of an item of real or personal property most often done by means of an appraisal.

• valuation method

  The method used by an appraiser or a claims adjusters to determine or establish value of an item of real or personal property at the time of loss. For example, a building may be valued at replacement cost (undepreciated), market value, actual cash value, and so forth.

• valuation of loss

  The method used to determine or establish the value of an item of real or personal property at the time of loss.

• valuation premium

  A life insurance term. It is the amount of the premium that is set aside for state mandated reserves.

• Value at Risk (VaR)

  value at risk A new measurement concept used in risk management. It describes determining a worst-case scenario regarding the maximum loss exposure, expressed in dollars, an entity may face during a given time period.

• value bill of lading

  The receipt issued by the transportation company for goods being shipped and which describes the specifics of carriage, including freight and value of goods. (See ad valorem.)

• valued policy

  A policy in which the company agrees that the property insured is worth the amount of insurance and, therefore, in the event of total loss, pays the face value of the policy without need for proof of the value at that time.

• valued policy law

  In certain states, a law which requires that in the event a building is totally destroyed by fire, the company insuring it must pay the face amount of its policy irrespective of the actual value of the building destroyed.

• vandalism

  Damage done maliciously, included in the extended coverage endorsement. Also called "malicious mischief."

• VaR (Value at Risk)

  VaR A new measurement concept used in risk management. It describes determining a worst-case scenario regarding the maximum loss exposure, expressed in dollars, an entity may face during a given time period.

• variable annuity

  A type of annuity where payout or benefits are not a fixed amount, but rather are variable depending on the investment earnings accumulated. The insured is allowed the investment option and/or the stock portfolio desired.

• variable life insurance

  A type of life insurance where payout or benefits are not a fixed amount, but rather are variable depending on the investment earnings accumulated. The insured is allowed the investment option and/or the stock portfolio desired. The cash surrender value or benefits are tied directly to the income earned by the investments.

• variable premium life insurance

  Life insurance programs most commonly found in universal life, in which the premium due is variable. The variation in premium will depend on the investment earnings from earned dividends that may be reinvested and used to pay premiums.

• variable universal life insurance

  A universal life insurance contract invested in equities. The VUL policy retains the features of universal life insurance but can be more volatile because of the equities investments. The VUL contract is considered a security and must be registered with the SEC as well as the state insurance department and agents must have both a life and NASD securities license to sell the product.

• VCIA

  (See Vermont Captive Insurance Association.)

• Vehicle Recovery Assistance

  A U.K. term for roadside assistance coverage.

• vendors coverage

  A commercial general liability endorsement that extends additional insured coverage to designated vendors for both bodily injury and property damage losses that may be a result of the insured's and vendor's products.

• venture

  In ocean marine insurance, the undertaking, such as one voyage of a vessel.

• verbal threshold

  No-fault automobile laws are applicable in some states. In a portion of the states with no-fault laws, when the injuries of the victim meet or exceed specifically described criteria, the victim is compensated under the no-fault system but is also allowed the option to take legal action against the negligent tortfeasor under the tort system for injury and loss such as pain, suffering and, where allowed, punitive damages. The specifically described criterions, or verbal description of injuries are called the verbal threshold.

• Vermont Captive Insurance Association

  An association of captive insurers and related organizations that promotes the captive insurance mechanism through education, lobbying, communication and sponsoring annual meetings and seminars. Headquarters: Burlington, VT.

• vested benefit

  That portion of the employer contribution to a pension plan that the employee owns. Employee contributions are always 100% vested.

• vested commissions

  In certain types of life and health lines of insurance, if an agent/broker writes an account that renews or remains with a carrier past the initial policy term, the commissions derived from subsequent renewals are vested or owned by the agent/broker. These commissions are payable to that agent/broker or his/her estate even if that agent/broker is no longer writing for or contracted with the carrier.

• vesting

  The point in time in which an employee who is a participant in a retirement or pension plan becomes eligible to receive any or all of the employer's contributions to the plan. The contributions of the employee are always fully or 100% vested from the point of contribution; however, the employer's portion of the contributions are not fully invested at the time of contribution, but become earned over a scheduled period of time.

• veterinarian professional liability insurance

  Specially designed professional liability insurance to protect veterinarians from claims alleging injury or loss that may result from the rendering or failing to render, errors or mistakes in professional veterinarian services.

• vexatious litigant

  Refers to a plaintiff who files a lawsuit (or continues a lawsuit) with the understanding that the legal action is not logically justified (is meritless). In other words, any party that knowingly and repeatedly files frivolous lawsuits.

• viatical

  From the Latin word "viaticum" which loosely translated means provisions for a journey, viatical is often used in reference to the sale of the rights to a life insurance policy. Recently, it is used in reference to obtaining or selling the rights to insurance benefits (either in whole or in part) to provide for the needs of terminally ill insureds such as those with cancer or AIDS.

• viatical settlement

  When part or all of the proceeds from a life insurance policy are provided or paid out to an insured who is terminally ill.

• viaticate

  The process of selling the rights to a life insurance policy.

• viator

  The person such as an agent or broker who sells rights to life insurance coverage.

• vicarious

  When one party is held responsible for the actions or conduct of another party based solely on the relationship of the two parties.

• VIN or vehicle identification number

  The number that the manufacturer assigns each vehicle that comes off of the assembly line. The number is used to identify the vehicle style and construction and is also used to identify the vehicle on the title and in insurance policies.

• virtual insurance

  An evolving term that typically refers (theoretically) to any form of insurance coverage that is sold, delivered and serviced electronically, specifically via the Internet. Another term is e-insurance.

• vis major

  Latin term meaning "a greater or superior force." An accident for which no one is responsible; an act of God.

• voidable

  A policy contract that can be made void at the option of one or more of the parties to it. An example would be a property insurance policy which is voidable by the insurer if the insured commits certain acts.

• voided policy

  When important information related to seeking insurance coverage has been concealed, misrepresented or is fraudulent, the insurer may have the right to dissolve a policy's coverage as though the policy never existed.

• voluntary compensation coverage

  Protection which an employer may purchase to cover employees not otherwise included in the scope of workers compensation laws.

• voluntary insurance

  Insurance coverage offered by voluntary insurers, that is, not required to be purchased by any federal or state requirement.

• voluntary insurer

  Any insurer offering coverages that are voluntary or not required by any federal or state law.

• voluntary market

  The segment of the insurance market where insureds are able to obtain the desired or necessary coverages from available insurance carriers voluntarily, without state or governmental intervention in forcing placement either with a private carrier or a state-mandated plan.

• voluntary property damage

  This protection allows a named insured to compensate a client for damage caused by the named insured or its employees (but NOT subcontractors) without requiring proof of legal liability. Generally, limits are modest and a deductible applies.

• voluntary reserve

  A reserve or allocation of surplus that is not required by law. These types of reserves are often used by insurers to strengthen their financial standing.

• voyage

  With reference to marine insurance, it is the entire trip undertaken by the covered vessel starting from the time it leaves its home port until it returns.

• voyage charter

  As used in marine insurance, it is the charter or hiring of a vessel and crew for a one-time trip or voyage. Most often done to transport cargo.
• Back to Top

• wage loss benefits

  Most often mentioned with workers compensation, the term refers to amounts sought in damages that represent income a person has lost (or possibly will lose) due to an injury or loss preventing the person from performing his/her job.

• waiting period

  1) In health insurance, the duration of time between the start of a disability and the start of benefits, as provided in the policy. Also known as elimination period. 2) In some business interruption insurance policies, a deductible clause.

• waiver

  1) In property-liability insurance, the intentional relinquishment of a known right. To illustrate, an insurance policy may set forth certain conditions with which a policyholder must comply under penalty of voiding the insurance, e.g., maintain a watchperson on the premises or keep a sprinkler system in working condition. The company may voluntarily give up this right to void the policy. Such a waiver may be conveyed by implication or by direct statement. Estoppel is a term sometimes used interchangeably with waiver in the law of insurance. 2) A waiver-of-premium provision in a life or health insurance policy that the policy will be kept in force by the insurer without payment of further premiums if the insured becomes permanently and totally disabled as defined in the policy.

• waiver of collision deductible

  This option pays your collision deductible when you carry collision coverage on a vehicle that is damaged by an uninsured or hit-and-run motorist who is at fault. Coverage applies only when there is actual physical contact and when you can identify the uninsured driver or vehicle.

• waiver of premium for payor benefit rider

  Used in juvenile policies or policies where the premium payor is different from the insured to pay for premiums if the payor should become disabled or die. The payor is the insured under the rider.

• waiver of subrogation

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

• war exclusions or war risk clause

  Language exempting the insurer from liability for claims arising out of war or warlike operations.

• war risk insurance

  Insurance against loss or damage to property due to war. It is freely written on marine risks but not on property or land. During World War II, the government insured war risks on land.

• warehouse to warehouse clause

  Language in a policy of marine cargo insurance which extends the protection from the warehouse at which the shipment originates to the one at which it terminates. Marine policies originally covered only on shipboard, leaving the property without insurance in between unless specifically arranged.

• warehousepersons legal liability policy

  Covers responsibility for loss or damage to property in the insured's warehouse.

• warranted no known or reported losses (WNKORL)

  This term has application to the excess or catastrophic reinsurance market. When a reinsurer is asked to back date a contract or agreement, the ceding company is asked to sign a statement or warrant in the application that no known or reported losses exist, to protect the reinsurer from providing coverage for known losses.

• warranty

  A statement by the insured about the literal truth on which the insurance contract depends. Warranties may relate to matters existing at or before the issuance of the policy (affirmative warranties) or may be undertakings by the insured that something be done or omitted after the policy takes effect and during its continuance (promissory warranties). Many states have restricted by statute the common law rule that "any breach of warranty avoids an insurance policy"; for example, under the New York law, a breach of warranty to avoid the policy must have "materially increased the risk of loss, damage or injury within the coverage of the contract." (See condition.)

• warranty fire

  Fire insurance made available for high exposure, difficult to place, and substandard properties which are either unable to find coverage in the standard market or where there is a capacity problem. The coverage is a joint pro rata arrangement between a domestic insurer and the London market. The policy is designed by the domestic, which is otherwise known as the warranty company.

• Warsaw Convention

  An agreement reached in 1929 between a number of countries to establish uniform legislation affecting the legal responsibility of international air carriers. The convention (or laws enacted in conformity) limits the liability of air carriers of signatory countries to specific amounts for each passenger claim for bodily injury and also provides limits for damage to luggage or other cargo. This agreement relates only to international flights.

• watchman warranty clause

  A policy condition that permits application of a reduced premium for covered property (premises) that is protected by a guard.

• watchperson

  Any person the insured retains specifically to have custody of property inside a covered premises.

• water damage insurance

  Insurance against loss due to the accidental presence of water (other than flood or surface water) in places it is not supposed to be.

• watercraft exclusion

  An exclusion in most standard personal and commercial liability coverages regarding watercraft. Often excluded is liability from the ownership, use, maintenance, rental, or loan of watercraft.

• wave damage insurance

  Insurance against damage done by the action of waves, as opposed to damage done by the wind alone. Wave damage is excluded by policies covering wind damage and must be insured by a special policy or clause attached to a policy.

• WCCLA

  Workers Compensation Claim Law Associate designation sponsored by the American Educational Institute. Headquarters: Basking Ridge, NJ.

• weather derivative

  (See weather hedge.)

• weather hedge

  Currently, a non-insurance financial agreement that allows a firm to protect itself from the impact of adverse weather conditions (particularly temperatures) on firm profitability.

• weather insurance

  A specialty insurance that provides coverage for loss of income and/or expenses when an outdoor special event must be canceled or postponed due to weather conditions. Usually written on a per-event basis.

• Web-related risks

  A recent term for the set of loss exposures related to an entity's personal and/or business activities on the World Wide Web. The loss exposures may include (but are not limited to) loss of income, fraud, business interruption, or liability losses involving personal injury or even copyright infringement.

• wedding insurance

  wedding insurance A special event policy that protects against loss from an unforeseen circumstances that affects wedding plans such as the cost to cancel and reschedule, having to replace a caterer or band, loss of wedding attire or rings, etc.

• wedding presents floater

  An "all-risk" inland marine form designed to insure wedding presents before and for a limited time after a wedding.

• weekly indemnity plan

  Pays short term disability benefits. Usually associated with a group employee benefits program.

• Wellington Agreement

  Wellington Agreement A chapter of the massive asbestos litigation, this was an agreement between key asbestos producers and insurers to create a special asbestos claim-handling center to deal with claim payments, arbitration and related issues.

• wellness programs

  Activities by certain employers to enhance the health of their employees. (See health promotion.)

• wet marine

  (See ocean marine insurance.)

• wharfinger's liability

  A type of insurance that protects parties who own wharves. The insurance applies to damage suffered by cargo, ships and other property that is located on a covered party's wharf (dock) or that occurs to a vessel that breaks away from the dock. Such losses occur during docking, loading/unloading and/or when a vessel is being refueled or re-supplied.

• while clauses

  A policy provision that is in effect contingent upon some other policy condition occurring, such as a coverage suspension on a fire policy until an extinguishing system is repaired.

• whole dollar premium

  Generally, insurance premiums are rounded to the nearest dollar; an amount of 51 cents or more being rounded up to the next dollar, and any amount less than that being dropped.

• whole life insurance

  A common type of life insurance coverage providing a face value death benefit for the entire or whole life of the insured, unless the insured should cancel or not pay premiums.

• will ride

  Coverage that remains in effect regardless of the geographical location where the loss occurs.

• willful injury

  Depending upon the type of insurance, 1) injuries that are caused intentionally or with intent to harm or injure; or 2) self-inflicted injuries, either of which is usually considered excluded by its respective policy type.

• windstorm (including tornado and cyclone) insurance

  Protection against damage done to property by unusually high winds, cyclones, tornadoes, or hurricanes. Today windstorm insurance is not available except under an extended coverage endorsement.

• without prejudice

  An action taken during claims negotiations designated as "without prejudice" is intended to be without detriment to the existing rights of the parties. (See nonwaiver agreement.)

• WNKORL--warranted no known or reported losses

  This term has application to the excess or catastrophic reinsurance market. When a reinsurer is asked to back date a contract or agreement, the ceding company is asked to sign a statement or warrant in the application that no known or reported losses exist, to protect the reinsurer from providing coverage for known losses.

• work and materials clause

  This clause gives the insured permission to perform those operations, and to keep on the premises those materials that are usual to the occupancy of the insured. Standard fire insurance policies provide that they shall be suspended if the hazard is increased within the knowledge or control of the insured.

• work-on-hand reports

  work-on-hand reports A financial document that tracks the progress of a contractor's on-going projects.

• workers compensation insurance

  Protection which provides benefits to employees for any injury or contracted disease arising out of and in the course of employment. All states have laws which require such protection for workers and prescribe the length and amount of such benefits provided.

• Workers Compensation Self-Insurers Bond

  Workers Compensation Self-Insurers Bond A bond that acts as an alternative to buying workers compensation insurance to pay workers for on-the-job injuries.

• working capital

  The funds or capital that a risk can access quickly, sometimes called net quick assets. The simplified formula used to compute the working capital available is current assets minus current liabilities.

• working excess

  working excess A type of per risk reinsurance that addresses accounts with the potential of experiencing loss frequency rather than severity, so the reinsurance coverage would attach at a much lower level than traditional reinsurance.

• working layer

  A reinsurance term involving multiple layers of reinsurance. The first layer is the insurer's retention. The second layer is usually called the working layer because this is where most claims that pierce the retention limit will occur. There may be layers of reinsurance above the working layer.

• worldwide coverage

  Endorsements or policy provisions that broaden the coverage territory to worldwide, thus giving the insured the applicable insurance protection anywhere in the world.

• wrap

  A general contractor is typically the party responsible for providing primary insurance coverage on the contract. This coverage must include protection for the work done by and the exposures resulting from the use of subcontractors. This includes coverages such as general liability and workers compensation but may also include business auto exposures. In order to obtain the necessary coverage, insurers may have to develop special programs and manuscript or tailoring endorsements to clarify the extent of the protection and who/what it encompasses. It is sometimes referred to simply as a "wrap."

• wrap-up-policy

  One policy, covering all involved interests for big construction projects, i.e., the owner, the contractor, subcontractor, suppliers, etc., providing general liability and workers compensation insurance.

• write

  To insure, underwrite, or to accept an application.

• written premiums

  The premiums on all the policies which a company has issued in a period of time, as opposed to earned premium.

• wrongful abstraction

  A term typically found in crime policies, referring to an unauthorized or illegal taking of money or securities.

• wrongful death act

  A law in some states that permits the possible recovery by a legal representative of a deceased such as the executor, administrator, widow, widower, dependent children or next of kin from the party causing the death, of legally recoverable special and/or general damages.

• wrongful eviction

  Physically evicting a party from a public place in violation of his or her civil rights.
• Back to Top

• XCU

  A term used in commercial general liability insurance to designate that three hazards exist for the classification under review. Those three hazards are explosion, collapse and underground. The current CGL includes those coverages automatically in the basic form, but they may be deleted by endorsement.

• XL

  Shorthand for excess liability.

• XXPL

  XXPL A reinsurance term for a loss in excess of policy limits.
• Back to Top

• yacht

  A larger vessel used for pleasure purposes, as distinguished from a motorboat, sailboat or commercial vessel.

• yacht insurance

  A marine insurance designed to provide property damage or hull coverage for yachts, cabin cruisers, and sailing vessels. Some will also cover small inboard motors and other personal vessels.

• year

  Also known as the model year in auto insurance. For the most part, the year the auto was produced. Car model years usually run from October to October.

• yearly (annual) renewable term insurance

  A term life insurance policy that the insured can renew for a specific number of years without proving insurability. Each year the premium on the policy rises. (See also annual renewable term.)

• York Antwerp Rules

  Revised in 1974, a set of rules adopted by the representatives of all the leading maritime nations to govern the method of applying the general average.
• Back to Top

• zero coupon bond

  A certificate evidencing private or public indebtedness that provides no periodic interest payments to the bondholder (such as by annual coupons) during the life of the bond but that, instead, provides for a maturity value that is largely relative to the cost of the bond so as to reflect the absence of annual interest payments.

• zone examination

  Refers to an insurance department examination (audit) of an insurance company's operation among several states and involves more than one state's regulators.

• zone rating

  In commercial automobile insurance, those risks that have a radius of operation of over 300 miles, and fall into the long-haul category, are rated on the zone they travel in using the city of origin and the city of destination to determine the zone category.

• Zone System

  zone system A system developed by the NAIC (National Association of Insurance Commissioners) to be used to exam the solvency of insurers. The examination is conducted every three years by teams of examiners. These teams are formed by geographical zones. Results of NAIC exams are usually accepted by states where insurers are licensed, so that each state does not have to conduct its own exams.