We hope that our extensive glossary of common (and some not-so-common)
insurance terms and phrases proves helpful to you! Simply start
below by choosing the first letter of the word or phrase you want
to learn more about.
Click here for our auto insurance glossary.
Click here for our Health Insurance
Glossary.
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A-SHARE VARIABLE ANNUITY
- A form of variable
annuity contract where the contract holder pays sales charges up
front rather than eventually having to pay a surrender charge.
ACCELERATED DEATH BENEFITS - A life insurance policy option that provides policy proceeds to insured individuals
over their lifetimes, in the event of a terminal illness. This
is in lieu of a traditional policy that pays beneficiaries after
the insured’s death. Such benefits kick in if
the insured becomes terminally ill, needs extreme medical intervention, or must
reside in a nursing home. The payments made while the insured is living are deducted
from any death benefits paid to beneficiaries.
ACCIDENT AND HEALTH INSURANCE - Coverage for accidental injury,
accidental death, and related health expenses. Benefits will pay for preventative
services, medical expenses, and catastrophic care, with limits.
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ACCOUNT RECEIVABLES - See Receivables
ACTUAL CASH VALUE - A form of insurance that pays
damages equal to the replacement value of damaged property minus depreciation.
(See Replacement cost)
ACTUARY - An insurance professional skilled in
the analysis, evaluation, and management of statistical information. Evaluates
insurance firms’ reserves,
determines rates and rating methods, and determines other business and financial
risks.
Additional
Insured or Additional Interest
- A person or an organization, other than the named insured or covered person,
who is protected under the named insured's auto policy. If an auto is leased,
the leasing company may want to be listed as an Additional Insured as well
as a lien holder or loss payee. This protects the leasing company if it's named
in a lawsuit for an accident caused by a policyholder. ADDITIONAL LIVING EXPENSES - Extra charges covered
by homeowners policies over and above the policyholder's customary living expenses.
They kick in when the insured requires temporary shelter due to damage by a
covered peril that makes the home temporarily uninhabitable.
ADJUSTER
- An individual employed by a property/casualty
insurer to evaluate losses and settle policyholder claims. These adjusters
differ from public adjusters, who negotiate with insurers on behalf of policyholders,
and receive a portion of a claims settlement. Independent adjusters are independent
contractors who adjust claims for multiple insurance companies.
ADMITTED ASSETS - Assets recognized and accepted
by state insurance laws in determining the solvency of insurers and reinsurers.
To make it easier to assess an insurance company’s financial position,
state statutory accounting rules do not permit certain assets to be included
on the balance sheet. Only assets that can be easily sold in the event of liquidation
or borrowed against, and receivables for which payment can be reasonably anticipated,
are included in admitted assets. (See Assets)
ADMITTED COMPANY
- An insurance company that is licensed
and authorized to do business in a particular state.
ADVERSE SELECTION - The tendency of those exposed
to a higher risk to seek more insurance coverage than those at a lower risk.
Insurers react either by charging higher premiums or not insuring at all, as
in the case of floods. (Flood insurance is provided by the federal government
but sold mostly through the private market.) In the case of natural disasters,
such as earthquakes, adverse selection concentrates risk instead of spreading
it. Insurance works best when risk is shared among large numbers of policyholders.
AFFINITY SALES - Selling insurance through groups
such as professional and business associations.
AFTERMARKET PARTS - See Crash
parts; Generic auto parts
AGENCY COMPANIES - Companies that market and sell
products via independent agents.
AGENT
- Insurance is sold by two types of agents:
independent insurance agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent
only one insurance company and are either salaried or work on commission. Insurance
companies that use exclusive or captive agents are called direct writers.
ALIEN INSURANCE COMPANY - An insurance company
incorporated under the laws of a foreign country, as opposed to a foreign insurance
company that does business in states outside its own.
ALLIED LINES - Property insurance that is usually
bought in conjunction with fire insurance; it includes wind, water damage,
and vandalism coverage.
ALTERNATIVE DISPUTE RESOLUTION / ADR - Alternative
to going to court to settle disputes. Methods include arbitration, where disputing
parties agree to be bound to the decision of an independent third party, and
mediation, where a third party tries to arrange a settlement between the two
sides.
ALTERNATIVE MARKETS - Mechanisms used to fund
self-insurance. This includes captives, which are insurers owned by one or
more non-insurers to provide owners with coverage. Risk-retention groups, formed
by members of similar professions or businesses to obtain liability insurance,
are also a form of self-insurance.
ANNUAL ANNUITY CONTRACT FEE - Covers the cost
of administering an annuity contract.
ANNUAL STATEMENT - Summary of an insurer’s or reinsurer’s
financial operations for a particular year, including a balance sheet. It is
filed with the state insurance department of each jurisdiction in which the
company is licensed to conduct business.
ANNUITANT - The person(s) who receives the income
from an annuity contract. Usually the owner of the contract or his or her spouse.
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ANNUITIZATION - The conversion of the account
balance of a deferred annuity contract to income payments.
ANNUITY - A life insurance product that pays
periodic income benefits for a specific period of time or over the course
of the annuitant’s
lifetime. There are two basic types of annuities: deferred and immediate:
Deferred annuities allow assets to grow tax deferred over time before being
converted to payments to the annuitant. Immediate annuities allow payments
to begin within about a year of purchase.
ANNUITY ACCUMULATION PHASE OR PERIOD - The period
during which the owner of a deferred annuity makes payments to build up assets.
ANNUITY ADMINISTRATIVE CHARGES - Covers the
cost of customer services for owners of variable annuities.
ANNUITY BENEFICIARY - In certain types of annuities,
a person who receives annuity contract payments if the annuity owner or annuitant
dies while payments are still due.
ANNUITY CONTRACT - An agreement similar to an
insurance policy for other insurance products such as auto insurance.
ANNUITY CONTRACT OWNER - The person or entity
that purchases an annuity and has all rights to the contract. Usually, but
not always, the annuitant (the person who receives incomes from the contract).
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ANNUITY DEATH BENEFITS - The guarantee that
if an annuity contract owner dies before annuitization (the switchover
from the savings to the payment phase) the beneficiary will receive the
value of the annuity that is due.
ANNUITY INSURANCE CHARGES - Covers administrative
and mortality and expense risk costs.
ANNUITY INVESTMENT MANAGEMENT FEE - The
fee paid for the management of variable annuity invested assets.
ANNUITY ISSUER
- The insurance company that
issues an annuity.
ANNUITY PROSPECTUS - Legal document providing
detailed information about variable annuity contracts. Must be offered
to each prospective buyer.
ANNUITY PURCHASE RATE - The cost of an annuity
based on such factors as the age and gender of the contract owner.
ANTITRUST LAWS
- Laws that prohibit insurance companies
from working as a group to set prices, restrict supplies or stop competition
in the marketplace. The insurance industry is subject to state antitrust
laws but has a limited exemption from federal antitrust laws. This exemption,
set out in the McCarran-Ferguson Act, permits insurers to jointly develop
common insurance forms and share loss data to help them price policies.
APPORTIONMENT - The dividing of a loss proportionately
among two or more insurers that cover the same loss.
APPRAISAL - A survey to determine a property’s
insurable value, or the amount of a loss.
ARBITRATION - Procedure in which an insurance
company and the insured or a vendor agree to settle a claim dispute by
accepting a decision made by a third party.
ARSON - The deliberate setting of a fire.
ASSET-BACKED SECURITIES - Bonds that represent
pools of loans of similar types, duration and interest rates. Almost
any loan with regular repayments of principal and interest can be securitized,
from auto loans and equipment leases to credit card receivables and mortgages.
ASSETS - Property owned, in this case by
an insurance company, including stocks, bonds, and real estate. Insurance
accounting is concerned with solvency and the ability to pay claims.
State insurance laws therefore require a conservative valuation of assets,
prohibiting insurance companies from listing assets on their balance
sheets whose values are uncertain, such as furniture, fixtures, debit
balances, and accounts receivable that are more than 90 days past due.
(See Admitted assets)
ASSIGNED RISK PLANS - Facilities through
which drivers can obtain auto insurance if they are unable to buy it
in the regular or voluntary market. These are the most well-known type
of residual auto insurance market, which exist in every state. In an
assigned risk plan, all insurers selling auto insurance in the state
are assigned these drivers to insure, based on the amount of insurance
they sell in the regular market. (See Residual market)
AUTO INSURANCE POLICY
- There are basically six different types of coverages. Some may
be required by law. Others are optional. They are:
- Bodily injury liability, for injuries the policyholder causes
to someone else.
- Medical payments or Personal Injury Protection (PIP) for treatment
of injuries to the driver and passengers of the policyholder’s
car.
- Property damage liability, for damage the policyholder causes
to someone else’s property.
- Collision, for damage to the policyholder’s car from
a collision.
- Comprehensive, for damage to the policyholder’s car
not involving a collision with another car (including damage
from fire, explosions, earthquakes, floods, and riots), and theft.
- Uninsured motorists coverage, for costs resulting from an
accident involving a hit-and-run driver or a driver who does
not have insurance.
AUTO INSURANCE PREMIUM - The price
an insurance company charges for coverage, based on the frequency
and cost of potential accidents, theft and other losses. Prices
vary from company to company, as with any product or service.
Premiums
also vary depending on the amount and type of coverage purchased;
the make and model of the car; and the insured’s
driving record, years of driving and the number of miles the car
is driven per year. Other factors taken into account include the
driver’s age and gender, where the car is most likely to
be driven and the times of day – rush hour in an urban neighborhood
or leisure-time driving in rural areas, for example. Some insurance
companies may also use credit history-related information. (See
Insurance score)
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AVIATION INSURANCE
- Commercial airliners hold
property insurance on airplanes and liability insurance for negligent
acts that result in injury or property damage to passengers or
others. Damage is covered on the ground and in the air. The policy
limits the geographical area and individual pilots covered.
Click here for our auto insurance glossary.
Click here for our Health Insurance
Glossary.
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