ACCIDENTAL DEATH
BENEFIT: Provides for additional benefit in case of death by
accidental means.
ACQUISITION COST: The
immediate cost of issuing a new policy, including cost of clerical
work, agent's commission, and medical inspection
fees.
ACTUAL CASH VALUE: The
cost of repairing or replacing damaged property with other of like
kind and quality in the same physical condition; commonly defined as
replacement cost less depreciation.
ACTUARY: A person
trained in mathematics, statistics, and accounting who is
responsible for determining premium rates, reserves, and dividends
as well as conducting various other statistical
studies.
ADJUSTABLE LIFE POLICY:
A participating life insurance contract that offers the insured
flexibility to change: (1) premium payments, (2) the face amount,
and (3) the mix of whole life and term insurance.
ADJUSTABLE PREMIUM: A
premium which an insurance company may modify under certain special
conditions in accordance with a policy provision. Also may refer to
an option by the owner to elect a change in premium
amount.
ADJUSTER: A person who
represents an insurance company who seeks to determine the extent of
the firm's liability for a loss when a claim is
submitted.
ADMITTED COMPANY: An
insurance company licensed and authorized to do business in a
particular state.
ADVANCED FUNDED PLAN: A
retirement plan that accumulates funds during the time employees are
actively working.
AGENT: One who
solicits, negotiates or effects contracts of insurance on behalf of
an insurer.
AGGREGATE: The maximum
dollar amount which may be collected for a single occurrence, during
the policy period or during the insured's
lifetime.
ALLIED LINES: A term
for forms of insurance allied with property insurance, covering such
perils as sprinkler leakage, water damage, and
earthquake.
ALLOCATED BENEFITS:
Benefits for which the maximum amount payable for specific services
is itemized in the contract.
ANNUITY: A contract
that provides an income for a specific period of time, such as a
number of years or for life. The person receiving the payment is
called an annuitant. Annuity payments are usually made monthly but
can be quarterly, semi-annually, or annually.
APPLICATION: A signed
statement of facts requested by the company on the basis of which
the company decides whether or not to issue a policy. This becomes a
part of the contract; places reliance on statements by the
applicant.
ARSON: The willful and
malicious burning of, or attempt to burn, any structure or other
property, often with criminal or fraudulent
intent.
ASSESSABLE: A policy
which gives the insurer the right to require policyholders to pay
additional premium.
ASSIGNMENT: Transfer of
the ownership or benefits of a policy.
AUTOMATIC PREMIUM LOAN
PROVISION : Provides that if a life insurance premium is not paid, a
policy loan in the amount of the premium due will automatically be
made at the end of the grace period, provided there is enough
available cash value to cover the loan and its interest for one
year.
BASIC HEALTH CARE
POLICIES: Provide first-dollar coverage for hospital, surgical, and
non surgical doctor's care, usually subject to relatively low
maximum dollar amounts or days of service.
BENEFICIARY: A person
designated by the policyholder to receive a specified payment upon
the insured's death.
BENEFIT DURATION: The
maximum period during which the disability income benefits are to be
payable.
BINDER :A temporary
insurance contract made by an agent of an insurance
company.
BOND: A three-party
contract in which one party (the surety) guarantees the specific
performance of a contract or an agreement between a second party
(the principal) and a third party (the obligee). The surety makes
the guarantee to the obligee on behalf of the
principal.
BROKER: One who
represents an insured in the solicitation, negotiation or
procurement of contracts of insurance.
BUSINESS INTERRUPTION:
Provides coverage for a loss of INSURANCE earnings in the event that
the policyholder's business is shut down by fire, windstorm,
explosion, or other insured peril.
CAPACITY: The financial
ability of an insurer to under-write new insurance. It is generally
measured by the relation-ship of premiums written to surplus (net
worth) and is modified by access to reliable
reinsurance.
CATASTROPHIC LOSS: A
loss (or related losses) that is unbearable in that it causes severe
consequences such as bankruptcy to a family, organization, or
insurer.
CEDING COMPANY: An
insurance company that shifts part or all of a risk it has assumed
to another insurance company. The latter is the
insurer.
CHARTERED LIFE
UNDERWRITER: A professional designation offered by the American
College to persons who:
(1) pass a series of
ten professional examinations on subjects related to life-health
insurance,
(2) have at least three
years of life-health insurance experience, and
(3) subscribe to a code
of ethics.
CLAIM: A demand to the
insurer by the insured person for the payment of benefits under a
policy.
CLASS RATING: A premium
rate determination in which all risks with similar characteristics
are charged the same rate.
COINSURANCE CLAUSE: A
clause under which the insured shares in losses to the extent that
he is underinsured at the time of loss or in a proportion agreed to
in advance.
COMPREHENSIVE MEDICAL:
Provides benefits of both a basic and a major medical health
insurance policy. It is characterized by a low deductible amount, a
coinsurance (participation) clause, and high maximum
benefits.
CONDITIONAL BINDING
RECEIPT: A receipt given for a premium payment accompanying the
application for life insurance. This binds the company if the
applicant is insurable to make the policy effective from the date of
receipt. If you die while your application is being processed, a
claim for the death benefit will be paid only if you are
insurable.
CONFINING SICKNESS: An
illness which confines an insured person to their home or a
hospital.
CONSEQUENTIAL LOSS: An
indirect loss arising from the policyholder's inability to use the
property over a period of time.
CONVERSION PRIVILEGE:
Right to change from term to permanent insurance without
insurability.
COORDINATION OF
BENEFITS: A method of integrating benefits payable under more than
one health insurance plan so that the insured's benefits from all
sources do not exceed 100 percent of allowable medical
expenses.
COST OF LIVING
ADJUSTMENT: A retirement plan provision that increases benefits
during retirement years in accordance with a cost-of-living or wage
index. Usually subject to a maximum increase of 4 or 5 percent per
year.
DEDUCTIBLE :A provision
that requires the policyholder to contribute up to a specified sum
per claim or accident toward the amount of insured
loss.
DEFERRED ANNUITY: An
annuity under which payments will begin at some definite future
date, such as in a specified number of years or at a specified
age.
DEFINED BENEFIT PLAN:
Clearly defines, by its benefit formula, the amount of retirement
income available at retirement.
DEFINED CONTRIBUTION
PLAN: A plan which provides for an individual account for each
participant based solely on the amount contributed to the account-
plus earnings and forfeitures.
DIRECT LOSS: A loss
that results directly from a peril such as fire.
DISMEMBERMENT: Loss of,
or loss of use of, specific members of the body resulting from
accidental bodily injury.
DIVIDEND:
Policyholder's share in the insurer's divisible surplus funds
apportioned for distribution. May take the form of a refund of part
of the premium of a participating policy.
DIVIDEND ADDITION:
Paid-up life insurance purchased with policy dividend and added to
the face amount of the policy.
DOUBLE INDEMNITY: Life
insurance policy provision which doubles the death benefit when
death is caused by accident.
EMPLOYEE BENEFITS:
Employer-sponsored programs to increase the economic security of
employees. Both insurance and non-insurance benefits are
included.
EMPLOYEE STOCK
OWNERSHIP PLAN (ESOP): A profit-sharing plan where employer
contributions are not a function of profits. Contributions are in
the form of the employer's common stock.
ENDORSEMENT: A document
which modifies the protection of a policy, either expanding or
decreasing its benefits, or adding/excluding certain conditions from
the policy.
ENDOWMENT: Life
insurance contract that pays the face amount if the insured dies
during the premium paying period or at the end of this
period.
EVIDENCE OF
INSURABILITY: Any statement or proof of a person's physical
condition and/or other factual information affecting his/her
acceptance for insurance. May also include medical exam or
records.
EXCLUSIONS: Specific
perils or losses listed in the policy which will not provide benefit
payments.
EXPOSURE: The state of
being subject to the possibility of loss.
FACE AMOUNT: The amount
stated in a life insurance policy to be paid upon death of the
insured or the maturity date of an endowment
policy.
FAMILY INCOME POLICY: A
combination of decreasing term and ordinary life insurance that, in
the event of the insured's death within a specified period such as
twenty years, pays a monthly income of $10 per $1000 of ordinary
life face amount for the remainder of the specified period, and the
face amount of ordinary life at the end of this
period.
FAMILY MAINTENANCE
POLICY: A combination of level term and ordinary life insurance
that, in the event of the insured's death within a specified period
such as twenty years, pays a monthly income of $10 per $1000 of
ordinary life face amount for a specified number of years from the
date of your death and the face amount of ordinary life at the end
of the monthly payments.
FIDELITY BOND: A
contract which indemnifies an employer for losses caused by
dishonest or fraudulent acts of employees.
FIDUCIARY: One who
exercises discretionary authority or control over a retirement plan
or disposition of its assets; renders investments advice for a fee
with respect to moneys or property of a plan or has authority or
responsibility to do so; or has discretionary authority or
responsibility in the administration of a plan.
FIRST-DOLLAR INSURANCE:
Contracts that start paying losses without any retention, perhaps in
the form of a deductible by the insured.
FLOATER POLICY: A
property insurance policy in which the protection follows the
property wherever it may be located.
FORTUITOUS LOSSES:
Losses that occur as a matter of chance. Losses are not controlled
or influenced by the insured.
GRACE PERIOD: A period
after a premium payment is due, in which the policyholder may make
payments and during which the policy remains in
force.
GROUP INSURANCE:
Insurance plan under which a number of persons and their dependents
are insured by a single policy, issued to their employer or an
association with which they are affiliated. Individual certificates
are given to each insured person.
GUARANTEED COST POLICY:
Life insurance policy which does not pay dividends. Also called
non-participating.
GUARANTEED
INSURABILITY: Allows the periodic purchase of additional amounts of
life insurance without proof of insurability.
GUARANTEED RENEWABLE: A
policy the insured has the right to continue in force by the timely
payment of premiums to a specified age. During this period the
insurer has no right to make changes in any provision of the
contract while it is in force, other than a change in the premium
rate for classes of insureds.
HAZARD: A condition
that increases the probability or severity of
loss.
HEALTH MAINTENANCE
ORGANIZATION:An organization that provides for wide comprehensive
health care services for a specified group at a fixed periodic
payment.
HOLD-HARMLESS CLAUSE: A
contractual provision which transfers risk from one party such as a
property owner to another party such as a tenant.
INCONTESTABLE CLAUSE: A
clause which provides that the insurer may not contact the validity
of the contract after it has been in force for a specified period,
such as two years.
INDEMNITY: A principle
that says an insured should not collect more from insurance than the
amount of loss.
INDEPENDENT ADJUSTER: A
person who represents an insurer in settling loss claims but is not
an employee of the insurer or of the insured.
INDEPENDENT AGENT: An
agent who represents several companies as an independent contractor
rather than an employee.
INDIRECT LOSS: A loss
that arises out of a direct loss but not caused directly and
immediately by that peril.
INSURABLE INTEREST: If
the occurrence of a loss, such as destruction of a house by fire,
willaffect you adversely, you have an insurable
interest.
INSURED: In life
insurance, the person on whose life a policy is issued; the subject
of insurance. In property and liability insurance, the person to
whom, or on whose behalf, benefits are payable.
INSURING CLAUSE: The
clause which sets forth the type of loss being covered by the policy
and the parties to the insurance contract.
JOINT LIFE POLICY: A
special contract that insures two lives (such as husband and wife)
and pays upon the first or last death.
KEY-PERSON INSURANCE:
Life or health insurance to protect the firm from the loss caused by
the death or disability of an employee who makes significant
contributions.
LAPSE: Termination of a
policy caused by the policyholder's failure to pay the premium
within the time required.
LEVEL PREMIUM: A
premium which remains unchanged throughout the life of a
policy.
LIFE EXPECTANCY: The
average number of years of life remaining for a group of persons of
a given age according to a particular mortality
table.
LIVERY: In automobile
insurance, the carrying of passengers for hire.
LOSS CONTROL:
Activities that reduce the severity of a loss that has
occurred.
MALPRACTICE INSURANCE:
Liability insurance policy for professionals, such as physicians and
surgeons, to protect them against the risk of claims for damages in
connection with professional services.
MEDICAID: State
programs of public assistance to persons regardless of age whose
income and resources are insufficient to pay for health
care.
MEDICARE: Hospital and
medical insurance provided by Social Security.
MORTALITY TABLE: Shows
the number of persons living, dying and the death rate starting at a
certain age by year. It is used to calculate the probability of
dying in, or surviving through any period.
MORTGAGE PROTECTION: A
term life insurance contract in which the amount of insurance
decreases at the same pace as the principal on a mortgage
loan.
NON CONFINING SICKNESS:
An illness which prevents the insured person from working but which
does not confine him or her to a hospital or home.
OPTIONALLY RENEWABLE: A
contract of health insurance in which the insurer reserves the right
to terminate the coverage at any anniversary or, in some cases, at
any premium-due date, but does not have the right to terminate
coverage of the insured between such policy dates.
ORDINARY LIFE POLICY:
Whole life insurance on which premiums are paid for life. Also
called straight life.
PAID-UP POLICY: A
policy that will remain in force with further premium
payments.
PARTICIPATING
INSURANCE: Insurance that allows the insured to share in the profits
of the insurance operation. Profits are shared in the form of
dividends which may also include the refund of part or all of an
initial increase or overcharge in premium.
PARTICIPATION CLAUSE:
Requires the insured to pay for a specified percentage of the cost
or health care services covered by a health insurance
policy.
PERIL: The cause of a
possible loss.
POLICY LOAN: A loan
made by the insurer to the owner of a life insurance policy, using
its surrender value as collateral.
POLICY TERM: The period
for which an insurance policy provides coverage.
PORTABILITY: The
transfer of pension rights and credits when a worker changes
jobs.
PRE-EXISTING CONDITION:
A physical and/or mental condition of an insured which existed prior
to the issuance of his or her policy.
PREMIUM: The payment
made of insurance policy.
PROBATIONARY PERIOD: A
specified number of days after the date of the issuance of the
policy during which there is no coverage for sickness. The purpose
of this type of provision is to eliminate or to reduce adverse
selection.
PRO RATA LIABILITY
CLAUSE: If a loss covered by this policy is also covered by other
insurance, the insurer will pay only the proportion of the loss that
the limit of liability that applies under this policy bears to the
total amount of insurance covering the loss.
PROXIMATE CAUSE: The
cause actually responsible for the loss; the one that set in motion
the events that led to a loss.
PUNITIVE DAMAGES:
Damages awarded separately and in addition to compensatory damages
as punishment for the wrongdoer.
QUALIFIED PLAN: An
employee benefit plan which the Internal Revenue Service approves as
meeting the requirements of ERISA and is entitled to certain tax
advantages.
RECIPROCAL: An
insurance organization in which each insured assumes a share of the
risk brought to the organization by other
insureds.
RECURRING CLAUSE: A
provision in some health insurance policies which specifies a period
of time during which the recurrence of a condition is considered
continuation of a prior period of disability or hospital
confinement.
REINSTATEMENT: The
resumption of coverage under a policy which has been
lapsed.
REINSURANCE: Assumption
by one insurance company of all or part of a risk undertaken by
another insurance company.
RENEWAL: The
continuation of coverage under a policy beyond its original term by
the acceptance of a premium for a new policy.
RIDER: A document which
modifies the protection of policy, either expanding or decreasing
its benefits or adding/excluding certain conditions from the
policy.
RISK MANAGEMENT: An
organized, formal approach to dealing with pure
risks.
SERVICE BENEFIT: An
insurance benefit in the form of hospital or medical care services
rather than money.
SPLIT FUNDING: An
arrangement whereby a portion of the contributions to a retirement
plan are paid to a life insurance company and the remainder invested
through a corporate trustee, mostly in equities. An insurer created
to make a profit for stockholders.
SUBROGATION: Gives the
insurer whatever right against third parties you may have as a
result of the loss for which the insurer paid you.
SUICIDE CLAUSE: A
provision that precludes the payment of life insurance death
benefits for a specified period of one or two years after which
suicide is paid the same as death from natural
causes.
SURETY BOND: An
agreement providing for monetary compensation should there be a
failure to perform specified acts within a stated
period.
SURRENDER COST INDEX: A
measure of the cost, including interest foregone, of a life
insurance policy if you keep it in force for a specified period and
then surrender it for the cash surrender value.
TERM LIFE INSURANCE: A
type of life insurance that pays if you die during a specified time
such as a year. Term insurance usually has an increased pattern of
premiums over time and is pure protection (no
savings).
TRADITIONAL NET COST: A
measure of the surrender cost of a life insurance policy which
ignores the cost of interest foregone.
UMBRELLA LIABILITY
POLICY: A form of insurance protection against losses in excess of
amounts covered by other liability insurance policies; also protects
the insured in many situations not covered by the usual liability
policies, subject to a deductible.
UNDERWRITING: The
process by which the insurer decides whether or not and on what
basis it will issue a policy.
UNISEX MORTALITY
FACTORS: A weighed average of male and female mortality rates.
Required for employer-sponsored employee benefit plans, after August
1, 1983.
UNIVERSAL LIFE
INSURANCE: A flexible life insurance contract that clearly separates
its insurance, investment, and expense elements.
VARIABLE LIFE
INSURANCE: An ordinary life policy in which the face amount of
insurance changes in relation to the performance of its investment
elements subject to a guaranteed minimum face
amount.
VESTING: A provision
concerning the right of pension and profit-sharing plan participants
to contributions made by the employer.
WAITING PERIOD: Time
between the beginning of an insured's disability and the beginning
of benefit payments.
WAIVER: An agreement
attached to a policy which excludes from coverage certain
disabilities or injuries which are normally covered by the
policy.
WARRANTY: A statement
made by the applicant for insurance which, if false, provides the
basis for voiding of the policy.
WHOLE LIFE POLICY: A
life insurance policy which remains in force throughout the life of
the insured.
