Insurance Terms

Abandonment – A relinquishing of ownership of lost or damaged property by the insured to the insurer so that a total loss may be claimed. Abandonment is prohibited in most other types of property insurance.

Abandonment Clause – A clause in fire insurance policies and other property forms that prohibits the insured from abandoning partially damaged property to the insurer in order to claim a total loss.

Absolute Assignment – Assignment by a policy-owner of all control of and rights in the policy to a third party.

Absolute Liability – A type of liability that arises from extremely dangerous operations. An example would be in the use of explosives: A contractor would almost certainly be liable for damages caused by vibrations of the earth following an explosive detonation. With absolute liability it is usually not necessary for a claimant to establish that the operation is dangerous.

Acceptance – In insurance acceptance occurs when an applicant for insurance receives the policy from the company and, in the case of general insurance, pays the premium. In life insurance, since the initial premium is almost always submitted with the application, issuance of the policy by the company constitutes acceptance.

Accident – A sudden unintentional event or happening that occurs unexpectedly, which may cause bodily injury or property damage.

Accident and Health Insurance – Coverage for accidental injury, accidental death or sickness. Benefits may include paid hospital expenses, medical expenses, surgical expenses, and income payments.

Accident and Sickness Insurance – An older name for health insurance.

Accident Frequency – The rate of the occurrence of accidents, often expressed in terms of the number of accidents over a period of time. It is one method used for measuring the effectiveness of loss prevention services. Contrast with Accident Severity.

Accident Insurance – A form of insurance against loss by accidental bodily injury to the insured.

Accident Medical Expense – Written to cover injuries suffered by a person engaged in a covered activity or event. May be written as excess of valid and collectible coverage or as primary coverage.

Accident Severity – A measure of the severity or seriousness of losses, rather than the number of losses. It is measured in terms of time lost from work rather than the number of individual accidents. It is another way of measuring the effectiveness of loss prevention services. Contrast with Accident Frequency.

Accident Year – A term used to describe the accounting of claims by the year in which the claim occurred. It is a much better way of analyzing how a particular prior year is developing than the calendar year method that measures claim activity during a given year, regardless of the year the claim occurred.

Accident Year Experience – Measures premiums and losses relating to accidents which occurred during a 12-month period.

Accidental Bodily Injury – Traumatic damage to the body, of external origin, unexpected and undesigned by the injured person. Contrast with Accidental Means.

Accidental Death and Dismemberment – A form of accident insurance which indemnifies or pays a stated benefit to the insured or their beneficiary in the event of bodily injury or death due to accidental means. A predetermined schedule of payment is used to compensate the insured or the beneficiary for their loss

Accidental Means – Unexpected or undesigned cause of an accidental bodily injury. Under a definition of accidental means, the mishap itself must be accidental, not just the resulting injury. An example would be an individual chopping wood: If the axe slipped out of his hand and cut his foot, it would have been accidental means. However, if his finger got in the way of the axe, it would not have been.

Accommodation Line – Business accepted from an agent or broker which would normally be rejected according to strict underwriting standards but which is accepted because of the overall profitability of the agent’s or customer’s other business. As an example, an insurer might accept coverage on property that would not normally meet its underwriting standards, if the other lines of insurance which it carries for the customer were profitable.

Account Analysis – The Account Analysis is an expert system advises underwriters of the risks associated with an account’s financial and business profile. Trend analysis, market comparisons and review of several accounting schedules make up the knowledge base of rules designed to identify undesirable or unprofitable accounts. The existing knowledge base is tailored to Surety Bond Underwriting. Most of the financial analysis is standard accounting practice and may be applied as a base for other underwriting lines.

Account Current – A monthly financial statement provided to an agent by an insurer showing premiums written, cancellations, endorsements, and commissions.

Accounts Receivable Insurance – Insurance against the loss that occurs when an insured is unable to collect outstanding accounts because of damage to or destruction of the accounts receivable records by a peril covered in the policy.

Acquisition Cost – The expenses incurred by an insurer or reinsurance company that are directly related to putting the business on the books of the company, including clerical work, medical examiners fees, inspection costs, etc. The largest portion of this cost is usually the agent’s or sales representative’s commission or bonus.

Act of God – An event arising out of natural causes with no human intervention which could not have been prevented by reasonable care or foresight. Examples are floods, lightning, and earthquakes.

Action – A lawsuit involving the right of one party to recover from another person in a court of law.

Active Malfunction – A products insurance term. If the product, instead of bringing a benefit to the user, actually damages the user’s property, it is an active malfunction. An example is bug killer which, when applied to a crop, damages the crop. Active malfunctioning is covered.

Activities of Daily Living Standards – Used to assess the ability of an individual to live independently, measured by the ability to perform unaided such activities as eating, bathing, toiletry, dressing, and walking. ADL standards are sometimes discussed as a way to measure or define eligibility for long-term care.

Actual Cash Value – The cost of repairing or replacing damaged property with property of the same kind and quality and in the same physical condition; commonly defined as replacement cost less depreciation.

Actuarial – Having to do with insurance mathematics.

Actuarial Asset Value – The value assigned by the actuary to the assets of a plan for the purposes of an actuarial valuation.

Actuarial Equivalence – Two different series of payments or values are in actuarial evidence when they have an equal actuarial present value under a given set of actuarial assumptions.

Actuarial Experience Gain or Loss – The effect on the unfunded supplemental actuarial value of deviations between the past events that would have occurred according to the actuarial assumptions and those which actually occurred.

Actuarial Present Value – The single amount as of a given evaluation date that results from applying actuarial assumptions to an amount or series of amounts payable or receivable at various times; with the amount(s) referred to being adjusted where appropriate to reflect expected changes from the valuation date to the date of expected payment or receipt by reason of expected salary changes, cost of living adjustments, or other changes; and adjusted to reflect the time value of money (through discounts for interest) and the probability of payment (by means of decrements such as for death, disability, withdrawal or retirement) between the valuation date and the expected date of payment or receipt.

Actuarial Valuation Method – A procedure, using actuarial assumptions, for measuring the expected value of benefits and assigning such value to time periods.

Artisan Contractors – A contractor who specializes in one or more trade operations performing work for hire/bid for building owners or general contractors. Subletting of operations is usually less than 25%.

Back-End Load Fund – An open- or closed-end investment company that charges a fee upon the redemption or sale of its fund shares. Typically, loads are reduced based on the value of the shares and/or the passage of time.

Backdating – A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age at issue lower than it actually was in order to get a lower premium. State laws often limit to six months the time to which policies can be backdated.

Bail Bond – A form of bond given to guarantee that a person released from legal confinement will appear as required in court, or the penalty of the bond will be forfeited to the court. In insurance policies, bail bond fees are covered under an automobile policy.

Bailee – A person or concern having possession of personal property entrusted to that person by the owner. An example would be a laundry which has custody of customers’ clothing for washing or dry cleaning. Bailees are required to exercise the same care with the property of others as they would with their own property.

Bailees Customer Insurance – Insurance purchased by a bailee to protect the personal property of customers against loss caused by specific perils. An example would be a carpet cleaner who buys coverage to protect customers against loss or damage to their carpets while in the store’s care.

Bailees Liability Coverage – Coverage that meets the needs of a bailee’s liability. The bailee’s legal responsibility is to exercise care appropriate to the circumstances of the bailment. In addition, most bailees want to carry enough insurance to make good any loss to property in their custody whether or not they are legally liable.

Bailment – The personal property of one person being held by another with the intent of its being returned to the original owner. Cars in a garage for repairs would be an example of a bailment.

Bailor – A person who owns property which has been entrusted to another. The owner of a fur coat who has entrusted it to a furrier for storage would be a bailor.

Balance Sheet – An accounting term which refers to a listing of the assets, liabilities, and surplus of a company or individual as of a specific date.

Balanced Mutual Fund – A mutual fund that purchases common stock, preferred stock, and bonds. Such funds tend to be less volatile than all-equity funds, outperforming them in a declining market but under-performing them in a rising market.

Bank Owned Life Insurance – This product enables banks to purchase single premium policies on the lives of its officers, specifically to fund benefits. The policies are owned by the bank and the policy cash value is shown on the bank’s balance sheet as a long-term tax deferred asset.

Bankers Blanket Bond – A type of insurance coverage purchased by banks to pay for losses to the dishonesty of employees as well as losses caused by people other than employees due to burglary, robbery, larceny, theft, forgery, and mysterious disappearance.

Barratry – A fraudulent breach of duty on the part of a master of a ship causing loss to the owner of the ship or the owner of the cargo.

Base – Describes a Campaign resulting in the issuance of new policies, rather than Campaigns which involve the solicitation of existing policy holders (e.g., an up-sell or cross-sell) in any line of business.

Base Capitation – The total amount which covers the cost of health care per person, minus any mental health or substance abuse services, pharmacy, and administrative charges.

Base Rate – In loss cost states, the rate prior to modification for expense load and profit margin.

Baseline Performance – Process performance as it is/was operating at the initiation of an improvement project (prior to solutions).

Basic – The basic premium factor in a retro is the sum of three components: expenses, the net insurance charge, and profit and contingencies. It is expressed as a percentage of the standard premium.

Basic AD&D – The double indemnity portion of a life policy. Also known as carve out AD&D.

Basic Auto Policy – Once used to insure commercial vehicles, motorcycles, motorscooters, and a variety of substandard risks. This policy had broad eligibility rules, but the scope of coverage was narrower than modern auto policies. Most automobile risks today are insured by business or personal auto policies, with appropriate endorsements.

Basic Coverage Form – Any of the commercial or personal lines property forms which provide basic coverages. These forms generally provide the most limited coverage, which is surpassed by broad forms and special forms.

Basic Extended Reporting Period – An automatic “tail” for reporting claims after expiration of a “claims-made” liability policy. It is provided without charge and consists of two parts: a mini-tail covers claims made within 60 days after the end of the policy; a midi-tail covers claims made within five years after the end of the policy period arising out of occurrences reported not later than 60 days after the end of the policy.

Basic Form – For Commercial Property policies written under the Basic Form, covered causes of loss include the following: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse and volcanic action.

Basic Form Rates – Under the latest commercial lines program, Basic Form Rates are arrived at by adding Group I and Group II rates together. Refer to Group I Rates and Group II Rates.

Basic Hospital Expense Insurance – Hospital coverage providing benefits for room and board and miscellaneous hospital expenses for a specified number of days during hospital confinement.

Basic Limit – Usually refers to liability policies and indicates the lowest amount for which a policy can be written. This amount is either prescribed by law or company policy.

Basic Limits Coverage – For Commercial Property policies written under the Basic Form, covered causes of loss include the following: fire, lightning, explosion, windstorm or hail, smoke, aircraft or vehicles, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse and volcanic action.

Basic Limits of Liability – Minimum amounts of insurance. The term is usually used in reference to bodily injury and property damage limits that are either the lowest amounts which can be written at the published or manual rates, the minimum amount of insurance an insurer is willing to underwrite, or the minimum amount of insurance required by law, e.g., automobile insurance financial responsibility laws.

Basic Medical Insurance – Insurance that provides coverage for normal hospital expenditures, surgical expenses, and other miscellaneous expenses. Only expenses that are incurred while the insured is in the hospital are covered.

Basic Rate – The manual rate from which discounts are taken or to which charges are added to reflect the individual circumstances of a risk.

Basis of Acceptance – A crucial feature of every reinsurance agreement, the Basis of Acceptance defines how a reinsurer will participate in covered losses and allocated expenses. There are a number of variations, but all fall under two basic concepts, Pro-Rata (or Proportional) and Excess of Loss (Non-Proportional).

Bed Days/1,000 – The number of inpatient hospital days per 1,000 members of the health plan.

Below Market Loan – A demand loan with interest paid below the federal rate; typically, part of an executive loan program provided by an employer.

Bench Error – A term used in products insurance which describes a loss that occurs in the production process. For instance, if production workers mistakenly use the wrong ingredients in a chemical formula, a bench error has occurred. Bench errors are covered.

Beneficiary – A person who may become eligible to receive or is receiving benefits under an insurance policy other than a participant.

Benefit – The amount to be paid to a participant of a retirement plan or to the participant’s beneficiary at retirement, at death, or at termination of service.

Benefit Levels – The maximum amount a person is entitled to receive for a particular service or services as spelled out in the contract with a health plan or insurer.

Benefit Package – A description of what services the insurer or health plan offers to those covered under the terms of a health insurance contract.

Benefit Period – Defines the period during which a Medicare beneficiary is eligible for Part A benefits. A benefit period is 90 days which begins the day the patient is admitted to a hospital and ends when the individual has not been hospitalized for a period of 60 consecutive days.

Benefit, Flat Dollar – A certain monthly benefit which is given to all employees regardless of length of service or standard of living. Everybody receives the same amount.

Benefit, Flat Percentage – A monthly pension benefit which is determined by a fixed percentage of compensation. Although recognizing the employee’s standard of living, it still ignores the employee’s length of service.

Benefits – The financial reimbursement and other services provided insureds by insurers under the terms of an insurance contract. An example would be the benefits listed under a life or health insurance policy or benefits as prescribed by a workers compensation law.

Beta Coefficient – Measure of a stock’s relative volatility. The beta is the covariance of a stock in relation to the rest of the stock market. The Standard & Poor’s 500 Stock Index has a beta coefficient of 1. Any stock with a higher beta is more volatile than the market, and any with a lower beta can be expected to rise and fall more slowly than the market.

Bid Bond – A bond filed with a bid for a construction or other project which guarantees that if the contractor has the low bid and is awarded the job, the required performance bond will be furnished.

Billed Claims – The amounts submitted by a health care provider for services provided to a covered individual.

Binder – An agreement executed by an agent or insurer (usually the latter) putting insurance into force before the contract has been written or the premium paid. This term is not usually used in life insurance.

Binder of Reinsurance – A record of reinsurance arrangements pending the issuance of a formal reinsurance contract (which then replaces the binder).

Birth Rate – The number of births related to the total population in a given group during a period of time. It is usually expressed as births per 100,000 people in one year.

Birthday Rule – One method of determining which parent’s medical coverage will be primary for dependent children: the parent whose birthday falls earliest in the year will be considered as having the primary plan.

Blackout Period – The period of time during which a surviving spouse no longer receives survivors benefits (after the youngest child is no longer eligible) and before he or she is eligible for retirement benefits.

Blanket – Coverage for a whole group of persons without identifying each individual. Or insuring a whole category of risks, or one hazard in a number of locations, without identifying each. For example, a policy issued to cover a number of individuals such as an athletic team, passengers in a certain airplane, etc.

Blanket Average Rate – Rate established for blanket coverage. It is computed by multiplying the rate for each risk location by the value at that location declared by the insured, and then dividing the sum of the results by the total value.

Blanket Bond – A type of fidelity bond which covers losses caused by the dishonesty of all employees as opposed to bonds which specifically identify only certain employees to be covered.

Blanket Coverage – Coverage under a single amount of insurance for two or more properties or exposures; i.e., a single amount of insurance applies to two or more building risks, or a building and contents of one or more building risks.

Blanket Crime Policy – A policy that once provided a package of coverages for employee dishonesty, loss of money and securities inside and outside the premises, depositor’s forgery, loss of money orders, and loss due to counterfeit paper currency. This has been replaced by modern commercial crime coverage forms.

Blanket Insurance – A contract of health insurance that covers all of a class of persons not individually identified in the contract.

Blanket Medical Expense – A policy or provision in a health insurance contract that pays all medical costs, including hospitalization, drugs, and treatments, without limitation on any item except possibly for a maximum aggregate benefit under the policy. It is often written with an initial deductible amount.

Blanket Position Bond – A Blanket Fidelity Bond in which the amount of coverage applies separately to each position covered. Contrast with Commercial Blanket Bond, which provides a single amount of coverage for any one loss, regardless of the number of employees involved in the loss.

Blanket Rated Risks – Those risks for which blanket coverage is provided. A single rate is calculated based on a Statement of Values, or by use of the highest rate applicable to any individual item.

Blasting and Explosion Exclusion – Exclusion of liability for damages from blasting or explosions. Rates for the types of construction work followed by the letter “X” in the manual exclude this coverage. If it is desired, an additional rate must be charged.

Block Policy – An open perils (all risk) policy which derives its name from the French term en bloc meaning “all together.” It provides coverage on stock, property being transported, property in bailment, and the property of the insured on the premises of others.

Blowout and Cratering – These are industry terms having to do with accidents that can arise from drilling operations. Generally, they are either excluded under the liability policy or can be added by endorsement for an additional premium, depending upon the judgment of the underwriter.

Blue Chip Stock – The common or preferred stock of well-known, major corporations that is traded on a national stock exchange. Blue chip status is derived from long periods of earnings growth, dividend payments, and financial stability.

Blue Cross – An independent, non-profit membership corporation providing protection on a service basis against the cost of hospitalization in a limited geographical area.

Blue Cross – Blue Cross plans are hospital expense prepayment plans designed primarily to provide benefits for hospitalization coverage, with certain restrictions on the type of accommodations to be used.

Blue Plan – A generic designation for those companies, usually writing a service rather than a reimbursement contract, who are authorized to use the designation Blue Cross or Blue Shield and the insignia of either.

Blue Shield – An independent, non-profit membership corporation providing protection on a service basis against the cost of surgical and medical care in a limited geographical area.

Blue Shield – Blue Shield plans are prepayment plans offered by service organizations covering medical and surgical expenses.

Board Certified – A physician or other professional who has passed an examination which certifies him or her as a specialist in a particular medical area.

Board Eligible – A professional person or physician who is eligible to take a specialty examination.

Bobtailing – Using the truck-tractor after unloading the trailer and not driving for trucking purposes.

Bodily Injury – Typically means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

Bodily Injury Liability – A legal liability that may arise as a result of the injury or death of another person.

Bodily Injury Liability Insurance – Protection against loss arising out of the liability of the insured for damages because of bodily injury, sickness, disease or death suffered by another person or persons.

Boiler and Machinery Insurance – Insurance against the sudden and accidental breakdown of boilers, machinery, and electrical equipment. Coverage is provided on (1) damage to the equipment, (2) expediting expenses, (3) property damage to the property of others, and (4) supplementary payments; and (5) automatic coverage is provided on additional objects. Coverage can be extended to cover consequential losses and loss from interruption of business.

Boiler and Machinery Policy – Insurance against loss due to accidents to boilers, pressure vessels or other machinery including the equipment itself as well as liability arising out of the accident.

Bond – An evidence of debt issued by corporations, municipalities and the federal government. Bonds represent the borrowing of money by a corporation or government. It is a legal obligation of the issuing company or government to repay principal in accordance with the terms and conditions of the bond.

Bond – A three-party contract guaranteeing that if one person, the principal, fails to perform as specified or proves to be dishonest, the person to whom the duty is owed, the obligee, will be financially protected by the issuer of the bond, the surety.

Bond Fund – A fund that holds corporate, municipal, or U.S. Treasury bonds, or a combination of those in the attempt to earn as much income as possible while maintaining a high degree of security.

Book of Business – A total of all insurance accounts written by a company or agent. It may be treated in different ways. For example: an insurer’s book of automobile business, or an agent’s overall book of business, or an agent’s book of business with each insurer.

Cafeteria Plans – An employee benefit which provides a series of flexible health care benefits from which an employee may choose, including a cash only option.

Calendar Year – Used to describe all of the premium and loss activity during a given year, i.e. 1994. Many loss ratios shown for a given policyholder are based on calendar year results and may reflect claim activity on claims from prior years as well as the current year.

Calendar Year Experience – This measures the premiums and losses entered on accounting records during the 12-month calendar.

Call For Statistics – Annual publication of ISO that provides various details and guidelines concerning the reporting of data. Such information includes due dates, changes in eligibility requirements and technical requirements as to the reporting of data.

Cancellation – The termination of a policy before its normal expiration date. Cancellation may be flat, pro rata or short rate.

Cancellation (Flat) – Cancellation as of the inception date of the policy, with a return of all premiums received.

Cancellation (Pro Rata) – Cancellation whereby the premium returned to the insured is directly proportional to the unexpired portion of the policy period.

Cancellation (Short Rate) – Cancellation whereby the premium returned to the insured in the first year of a policy, as calculated from the applicable short rate provision, is less than the proportional or pro rata portion of the policy period that remains.

Capacity – The largest amount of insurance or reinsurance available from a company. In a broader sense, it can refer to the largest amount of insurance or reinsurance available in the marketplace.

Capital – Wealth in the form of money or property, which is usually available for investment.

Capital Appreciation – An increase in the market value of an investment.

Capital Asset – Any asset held and used for the production of goods and services, including fixed assets, such as land, plant, raw materials sources, and reserves; investments in owned and affiliated companies; and some long-term intangibles, such as patents.

Capital Ratio – The ratio for a financial guaranty insurer of aggregate net exposure to statutory capital.

Capital Stock – The shares of ownership in a corporation.

Capital Sum – The maximum lump sum payable in the event of accidental death or dismemberment.

Capital Transaction – The sale of a capital asset, such as stock, which results in the transaction being taxed as ordinary income and not as a dividend.

Capital Value – The worth of capital.

Capitation – A rate paid, usually monthly, to a health care provider. In return, the provider agrees to deliver the health services agreed upon to any covered person.

Captive Agent – One who sells insurance for only one company as opposed to an agent who represents several companies.

Captive Insurer – A legally recognized insurance company organized and owned by a corporation or firm whose purpose is to use the captive to write its own insurance at rates lower than those of other insurers. Usually it is a nonadmitted insurer that has the right, under special circumstances, to reinsure with an admitted insurer.

Care, Custody and Control – Most liability insurance policies exclude coverage for damage to property in the care, custody, or control of the insured. In some cases this type of coverage is not available; in other cases it can be purchased through certain forms of inland marine insurance, like installation floaters, and in some cases this exclusion can be made less restrictive by adding a Broad Form Property Damage Endorsement.

Cargo Insurance – A policy covering the cargo being transported by a carrier.

Carrier – Any organization that provides insurance. A carrier may be a company, corporation, association or facility.

Carrier (G) – Sometimes used to designate the insurer. The term “insurer” is preferred because of the possible confusion of “carrier” with transportation.

Carrier (H) – Usually a commercial insurer contracted by the Department of Health and Human Services to process Medicare Part B claims payments.

Carrier Replacement – This refers to a situation where one carrier replaces one or more carriers.

Carryover Provision – In major medical policies, allowing an insured who has submitted no claims during the year to apply any medical expenses incurred in the last three months of the year toward the new calendar year’s deductible.

Case Management – The assessment of a person’s long-term care needs and the appropriate recommendations for care, monitoring and follow-up as to the extent and quality of services to be provided.

Case Manager – A person, usually an experienced professional, who coordinates the services necessary under the case management approach.

Cash Flow Plans – Premium payment schemes which allow the insured to retain a large part of the premium and pay it out over a time period such as a year.

Cash Flow Statement – A listing of the sources and uses of the cash receipts and cash outlays of a person or business.

Cash Flow Underwriting – Willingness to lose money on the underwriting side, which will be made up on the investment side.

Cash Refund Annuity – A form of annuity contract which provides that if at the death of the annuitant installments paid out have not totaled the amount of the premium paid for the annuity, the difference will be paid to a designated beneficiary in a lump sum.

Casualty Actuarial Society – A professional society for actuaries in areas of insurance work other than life insurance. This society grants the designation of Associate and Fellow of the Casualty Actuarial Society (ACAS and FCAS).

Casualty Insurance – Insurance concerned primarily with the insured’s legal liability for injuries to others or for damage to other persons’ property; also encompasses such forms of insurance as plate glass, burglary, robbery and aviation.

D Ratio – The D (discount) ratio is the factor used in experience rating to determine the amount of expected loss for each classification that are expected primary losses.

Daily Report – An abbreviated statement of pertinent policy information with copies for the insurer, the agent, and others. It is usually the top page of a policy.

Damages – The amount required to pay for a loss.

Data Processing Coverage – A special form providing protection for loss due to the breakdown of data processing systems. It also includes coverage for the additional expense of putting the system back into operation.

Date of Issue – The date stated in a policy as the date on which the contract was issued by the insurer. This is not necessarily the effective date of the policy.

Date of Service – The date that the health service was provided.

DBG General Ledger – The DBG General Ledger system records all the accounting transactions so as to provide data for management and regulatory reporting. All DBG profit center premiums, losses and expenses flow through this system.

Death Benefit – The amount stated in a policy contract as payable upon the death of the person whose life is being insured (cesti que vie).

Debenture – A bond that is backed only by the general credit of the issuer.

Debit – (1) The amount of premium charged or debited to an agent to be collected. (2) The book of business represented by such premiums. (3) The territory where most of the insureds are located. (4) The total number of individual or home service insureds assigned to a given agent for collection of weekly or monthly premiums and for servicing, commonly referred to as “people in my debit.”

Debit Agent – An agent who works on the debit system.

Debit System – The system of collecting insurance premiums weekly or monthly by an agent.

Debris Removal Clause – A provision that may be included in a Property policy contract to provide the insured with indemnification for expenditures incurred in the removal of debris produced by the occurrence of an insured peril. Ordinarily a property policy covers only the direct damage caused by an insured peril.

Debt – The amount owed to creditors.

Debt Securities – Securities that provide interest payments as compensation for the use of an investor’s (i.e., lender’s) funds. These payments usually last for a specific period. The principal (original loan amount) is usually paid at the end of this period. Some debt securities are backed by the credit of the issuer (i.e., Treasury bonds are backed by the credit of the U.S. government). However, other debt securities are backed by specific assets of the issuer. These securities are known as asset-backed bonds.

Debtor – One who owes a legal obligation or money to another.

Decedent – Same as Deceased.

Declaration – (Liability & Property) A term used in insurance other than Life or Health to denote that portion of the contract in which is stated such information as the name and address of the insured, the property insured, its location and description, the policy period, the amount of insurance coverage, applicable premiums, and supplemental representations by the insured.

Declaration – (Legal) A formal written statement in which an individual avows under oath certain facts as personally known to him or her specifying of the facts constituting the plaintiff’s cause of action against the defendant.

Declarations Page – The ‘dec page’ or that part of the property or liability policy which includes the name and address of the insured, the property insured, its location and description, the policy period, the amount of coverage, applicable premium and supplemental information provided by the insured.

Declination – Rejection of an application for insurance by the insurer.

Decreasing Term – A form of life insurance that provides a death benefit which declines throughout the term of the contract, reaching zero at the end of the term.

Decreasing Term Insurance – A term life insurance policy where the death benefit decreases but the premium remains level for the policy term.

Deductible – An amount of a loss a policyholder agrees to pay, per claim or per accident, toward the total loss. Insurance is written on this basis at reduced rates.

Deductible Calendar Year – A deductible that specifies that one deductible needs to be satisfied for a calendar year regardless of the number of claims.

Deductible Carryover Credit – During the last three months of a calendar year, charges incurred for health services can be used to satisfy the deductible for the following calendar year. These credits may be applied whether or not the prior calendar year’s deductible had been met.

Deductible Clause – A contract provision that sets forth the deductible.

Deductible Per Cause – A deductible that must be satisfied for each separate claim.

Defamation – Under insurance law an unfair trade practice involving false, maliciously critical or derogatory statement intended to injure a person engaged in the insurance business.

Defamation – (Legal) Any derogatory statement which is designed to injure a person’s business or reputation. Defamation can be accomplished as libel (written) or slander (spoken).

Defendant – The person being sued in a court action.

Defense Base Act – The Defense Base Act extends the provisions of the U.S.L. & H.W. Act to employers and their employees on overseas military bases and on other overseas locations under public works contracts being performed by contractors with agencies of the United States Government.

Deferred Annuity – An annuity providing for income payments to begin at some future date.

Deferred Annuity – An annuity in which payments to the annuitant (or named beneficiary) are to begin either at a stated number of years in the future or when the annuitant reaches a certain age. During the accumulation period, the cash values of the annuity accumulate on a tax-deferred basis.

Deferred Compensation – A plan which may be qualified or non-qualified which allows a key person to defer receipt of current income in accordance with a written agreement with the employer. Deferral is usually until death, disability, or retirement.

Deferred Compensation Administrator – This refers to a company that provides services under a deferred compensation plan. Services may include administration of self-insured plans, compensation planning, salary surveys, retirement planning, etc.

Deferred Group Annuity – A group annuity contract providing for the purchase each year of a paid-up deferred annuity for each person covered in the group. The total amount of the annuity payments starts at a deferred date, usually retirement, and is the sum of the individual paid-up annuities.

Deferred Premium – The unpaid and yet undue premiums on life insurance, paid on other than an annual premium basis.

Deferred Premium Payment Plan – A method for payment of premium in installments.

Deferred Vesting – That form of vesting under which rights to vested benefits are acquired by a participant commencing upon a fulfillment of specified requirements, usually, reaching a certain age or number of years of service or membership.

Deficit – Any excess of debits over credits at the end of a given accounting period.

Deficit Carried Forward – The transfer of a debit balance from one accounting period to another.

Defined Benefit Pension Plan – A qualified retirement plan where the employer makes contributions on behalf of all eligible employees in order to provide a specific retirement benefit. The amount of the contribution is not specifically defined, but the amount of the retirement benefit is defined.

Defined Contribution Pension Plan – A type of pension plan under which contributions are fixed as flat amounts or flat percentages of an employee’s salary. Benefits consist of whatever amounts the accumulated contributions will produce.

Defined-Benefit Plan – A pension plan under which the benefit the employee is to receive in the future is predetermined. (Example: $10 per month income at retirement for each year employed.) The amount of the required annual employer contributions depends on the level of benefits to be provided and the estimated number of years in the accumulation period.

Defined-Contribution Plan – A pension plan under which the amount of the employee’s retirement benefit is determined by contributions, not a pre-determined formula. The amount of the employee’s benefit equals the accumulated contributions plus earnings the fund will produce in terms of a retirement income or lump-sum payment.

Deflation – An economic period characterized by falling prices, high unemployment and a generally sluggish or slow economy.

Degree of Care – A duty owed to others which depends on circumstances. Persons who invite others on their premises, those who invite children on their premises and those who sell what might be considered inherently dangerous products are all required to take different degrees of care to prevent harm to others.

Degree of Risk – The amount of uncertainty that exists in a given situation. For instance, if you’ve chosen heads in the flip of a coin, the degree of risk present is 50%, since there is a 50% chance any flip of the coin will come up tails.

Delay Clause – A contract provision permitting the insurer to defer granting a loan on the sole security of the policy for any other purpose than that of paying premiums on the policy for a stated interval of time, usually six months.

Delay Clause – (Ocean Marine) A contract provision that excludes liability as a result of damage or loss of market arising out of delayed voyages.

Delayed Payment Clause – In life insurance, a clause deferring payment to the beneficiary for a specified period after the death of the insured with proceeds to be paid to contingent beneficiaries or the estate if the primary beneficiary does not survive the delay. It is used as one method of handling common-disaster situations, such as the death of the insured and the death of the primary beneficiary occurring in the same accident. The clause usually states that the beneficiary has to survive the death of the insured by a certain period of time in order to collect.

Delivered Business – Contracts issued by an insurer and delivered to an insured but not yet paid for.

Delivery – The actual placing of a life or health insurance policy in the hands of an insured.

Demand Loan – Any loan with an indefinite maturity.

Demolition Clause – A provision that excludes liability for costs incurred in demolishing undamaged property, often necessitated by building ordinances requiring that structures must be demolished after a certain degree of damage has been sustained.

Demolition Insurance – Insurance written to cover the cost of demolition excluded by a demolition clause. It may be endorsed to property insurance for an additional premium.

Early Return to Work – A loss reducing program whereby the employer agrees to modified work for an injured employee in order to return the employee back to work in a shorter period of time thus reducing costs.

Earned Exposure – The pro rata portion of the total exposure. It corresponds to the earned premium and to that part of the policy period that has already elapsed.

Earned Income – The money individuals earn as a result of working at some job or occupation for which they are paid a salary.

Earned Premium – The part of an insurance premium that pays for the protection the insurance company has already provided on a policy. Thus, insurance on which a premium has been paid one year in advance will, at the end of six months, be half earned by the insurance company.

Earnings – Something earned, especially wages. As a financial term, earnings also refers to the balance of revenue after deducting costs and expenses.

Earnings Income – Interest or dividends that are credited or paid to an investor.

Earnings Insurance – A form of gross earnings business interruption insurance, whose principal feature is the lack of a coinsurance clause. It is designed for small risks, and the maximum amount of loss the insured can collect in any 30-day period is established when the policy is written.

Earth Movement – A peril including landslide, mudflow, earth sinking, rising or shifting, and earthquake. Usually excluded on homeowners’ and commercial property policies.

Earthquake Insurance – Insurance covering damage caused by an earthquake as defined in the contract.

Easement – An interest in land owned by another that entitles its holder to specific uses.

Economic Risk – A risk experienced by those who invest in securities identified as the uncertainty of the economy.

Economies of Scale – Reduction in unit cost (e.g. cost to issue a policy) as fixed costs (e.g. general operating expenses or GOE) are spread over increasingly more units. It enables the organization to process more volume at a declining unit cost per transaction.

Educational Assistance Plan – An employee benefit whereby certain educational expenses incurred by the employee is reimbursed on a tax-favorable basis by the employer.

Educational Fund – One of the uses of life insurance. It is designed to provide money for a child’s education should the breadwinner of the family die.

Effective Date – The date on which the protection of an insurance policy goes into effect.

Efficiency – Measures related to the quantity of resources used in producing the output of a process (e.g. cost of a process such as policy issuance, total cycle time, costs of defects); links primarily to the organization’s profitability. It is reflected in the number of units produced in a shorter time at the same or decreasing cost.

Efficient Portfolio – A portfolio that minimizes historical portfolio risk for a given potential return, or maximizes portfolio potential return for a given level of historical risk.

Elective Benefits – Lump sum payments which the insured may generally choose in lieu of periodic payments for certain injuries, such as fractures and dislocations.

Elective Deferral Plan – A type of qualified plan (401(k) or TSA) whereby participants voluntarily elect to defer current amounts of compensation and these amounts are placed in a retirement plan on a tax favorable basis.

Electrical (or Electrical Apparatus) Exemption Clause – A clause providing that damage to electrical appliances caused by artificially generated electrical currents is recoverable only if fire ensues and then only for the damage caused by the fire.

Electronic Data Processing Coverage – A specialized type of insurance designed to cover risks associated with computer equipment, data systems, information storage media, and expenses or income loss related to EDP losses.

Elevator Collision Coverage – Coverage for damage caused by collision of an elevator without regard to fault. This includes damage to personal property, the building, and the elevator itself. Liability coverage is usually provided automatically by business liability policies.

Eligibility Date – The date that a person is eligible for benefits.

Eligibility Period – (1) The period of time during which potential members of a group life or health program may enroll without providing evidence of insurability. (2) The period of time under a Major Medical policy during which reimbursable expenses may be accrued.

Eligibility Requirements – Requirements imposed for eligibility for coverage, usually in a group insurance or pension plan.

Eligible Dependent – A dependent of an insured person who is eligible for coverage according to the requirements set forth in the contract.

Eligible Employee – An employee who is eligible based on the requirements as indicated in the group contract.

Eligible Expenses – Expenses as defined in the health plan as being eligible for coverage. This could involve specified health services fees or “customary and reasonable charges.”

Eligible Person – Similar to eligible employee except it could be a contract covering people who are not employees of a specified employer. An example might be members of an association, union, etc.

Elimination Period – A loosely used term, sometimes designating the probationary period, but most often designating the waiting period in a health insurance policy.

Embezzlement – Fraudulent use of money or property which has been entrusted to one’s care.

Emergency – An injury or disease which happens suddenly and requires treatment within 24 hours.

Emergency Accident Benefit – A group medical benefit which reimburses the insured for expenses incurred for emergency treatment of accidents.

Emergency Fund – One of the uses of life insurance which provides money for the emergency expenses of a deceased’s family prior to the final settlement of the estate.

Employee Benefit Program – Benefits offered an employee at work by the employer, covering such contingencies as medical expenses, disability, retirement, and death, usually paid for wholly or in part by the employer. These benefits are usually insured.

Employee Certificate of Insurance – The employee’s evidence of participation in a group insurance plan, consisting of a brief summary of plan benefits. The employee is provided with a certificate of insurance rather than the actual insurance policy.

Employee Contribution – (Health) The employee’s share of the premium costs.

Employee Contribution – (Pension) Deduction from employee’s pay to apply toward the cost of a retirement plan.

Employee Dishonesty – Any dishonest act of an employee which may contribute to a loss for the employer. Fidelity bonds are usually used to protect against such losses.

Employee Leasing – The practice of paying another company to hire, train, insure, and administer benefits for staff used in business operations.

Employee Pension Benefit Plan or Pension Plan – Any program established and maintained by an employer or an employee organization providing retirement benefits to employees or deferred income until employment is terminated.

Employee Retirement and Income Security Act of 1974 – A federal statute governing U.S. pension plans.

Employee Retirement Income Security Act – This act prescribes federal standards for funding, participation, vesting, termination, disclosure, fiduciary responsibility, and tax treatment of private pension plans.

Employee Stock Ownership Plan – A qualified employee plan which provides eligible employees with part ownership in the corporation for which they work. Stock is issued and held in trust for the benefit of the employees.

Employee Welfare Benefit Plan – Any program established or maintained by an employer or an employee organization to provide its participants or their beneficiaries with medical, surgical, or hospital care, or benefits in the event of sickness, accident, disability, death or unemployment.

Employees’ Trust – One way for a pension or profit-sharing plan to be financed and given effect.

Employer Contribution – The portion of the cost of a health insurance plan which is borne by the employer.

Employers Liability – Part 2 of the standard workers compensation policy which provides coverage for situations in which an employee or dependent could sue for injuries suffered under common law liability. For example, failure to maintain a safe workplace.

Employers Liability Coverage – A section of the Workers Compensation policy (Part Two of the policy) which provides coverage against the common law liability of an employer for injuries to employees, as distinguished from the liability imposed by a Workers Compensation law (Part One of the policy).

Employers Liability Coverage – This is coverage B of the standard workers compensation policy. It provides coverage against the common law liability of an employer for injuries to employees as distinguished from the liability imposed by a workers compensation law. Employers liability applies in situations where a worker does not come under these laws.

Employers Nonownership Liability Insurance – Protects the employer for liability arising from the use by employees of their own cars on company business.

Employment Benefit Plan – Any plan which is both an employee welfare plan and an employee pension plan.

Encounter – Each time a person meets with a health care provider to receive services, is a separate “encounter.”

Encumbrance – A claim on property, such as a mortgage, a lien for work and materials, or a right of dower. The interest of the property owner is reduced by the amount of the encumbrance.

Endemic Disease – Any disease ordinary (endemic) to the place of an employee’s employment outside of the United States, its territories or possessions, or Canada, and as such, is considered a covered occupational disease and a compensable injury in most states.

Endorsement – A document used to amend, change or modify the coverages in an otherwise complete policy.

Endorsement Extending Period of Indemnity – An endorsement attached to business interruption policies which extends coverage to the period during which a business has reopened for business but have not reached the level of business activity which existed prior to the business interruption loss.

Endorsement Premium – The change in premium that results from an endorsement. Such a change may be either a ‘Return Premium’ or an ‘Additional Premium’.

Endorsement Split Dollar – A split dollar plan in which the employer owns and controls a life policy on the life of an employee. The employee’s rights to certain policy benefits are protected by an employer endorsement.

Endowment – Life insurance payable to the policy-holder on the maturity date stated in the policy, or to a beneficiary, if the insured dies before the date.

Endowment Insurance – A form of life insurance where the face amount is payable to the insured at the end of the contract period or to a beneficiary if the insured dies before that. An example would be an insured purchasing an endowment payable at age 65. Upon reaching that age, the proceeds would be payable to the insured. If the insured dies prior to that age, the proceeds would be payable to the designated beneficiary as a life insurance benefit.

Engineer – An insurer’s staff member who is charged with the responsibility of loss prevention and who assists in the securing of underwriting and rating information.

Enrollee – An eligible individual who is enrolled in a health plan – does not include an eligible dependent.

Enrolling Unit – The organization (such as an employer) that contracts for participation in a health insurance plan.

Enrollment – Used to describe the total number of enrollees in a health plan. It may also be used to refer to the process of enrolling people in a health plan.

Enrollment Period – The amount of time an employee has to sign up for a contributory health plan.

Entire Contract Clause – A provision in an insurance contract stating that the entire agreement between the insured and the insurer is contained in the contract, including the application if it is attached, declarations, insuring agreements, exclusions, conditions and endorsements.

Entity Agreement – A buy-sell agreement usually used with a partnership in which the partnership agrees to purchase the interest of a deceased or disabled partner.

Entry Age – The age when an employee satisfies all the age, service, and other eligibility requirements for participation in a pension plan.

Entry Date into Claims-Made – Initial effective date of a “claims-made” liability policy. An entry date is used to determine extent of maturity for rating purposes. If claims-made coverage is interrupted and reestablished, or if a retroactive date is changed on renewal, the entry date will change.

Environmental Impairment Liability – Insurance coverage used to pay claims arising out of negligent acts, errors or omissions of an insured, resulting in third party bodily injury or property damages for losses caused by sudden and accidental or gradual pollution/contamination.

Environmental Restoration – Restitution for the loss, damage or destruction of natural resources arising out of the accidental discharge or escape of any commodity transported by a motor carrier, including the cost of removal and measures to minimize damage to human health, the natural environment, fish, shellfish and wildlife. Federal regulations require common carriers of hazardous materials to maintain minimum liability coverages for BI, PD and environmental restoration.

Equipment Floater – A form which covers various types of equipment, e.g., construction equipment, against specified perils or occasionally on an all-risk basis subject to exclusions.

Equity – The money value of an insurance company that is over and above its liabilities. Liabilities include almost all of its reserves.

ERISA Liability – Liability imposed by law upon officers or other employees operating in a fiduciary capacity for the proper handling of pension funds and other employee benefits. It is excluded from most general liability policies.

ERM-14 – This form, titled “Confidential Request for Information”, is filed by the insurance carrier to the appropriate rating organization when an ownership change occurs.

Errors and Omissions Clause – A clause usually found in an obligatory reinsurance treaty which provides that if an error is made or an omission takes place in describing a risk that falls within the automatic reinsurance coverage of the treaty, it shall not invalidate the liability of the reinsurer for the risk.

Errors and Omissions Insurance – A form of professional liability insurance that provides coverage for negligent acts or omissions by a professional.

Fac Oblig. – Fac Oblig is a form of reinsurance which is a cross between facultative and treaty reinsurance. The risk to be ceded is submitted to the reinsurer, which has limited rights to decline individual risks. In the case of AIU Fac Oblig reinsurance arrangements are generally dealt with as in the same manner as treaties.

FAC Payables – The FAC (Facultative) Payables system is a LAN-based data capture of payables data for entry into the corporate FAC Payables system.

Face – The first page of a life insurance policy.

Face Amount – That amount stated on the face of the policy that will be paid in case of death or at the maturity of the policy. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends.

Facility-of-Payment Clause – A contract provision found in industrial life policies which permits the insurer to pay a portion of the proceeds of the policy to any relative or person who has possession of the policy and who appears equitably entitled to such payment. This provision is designed to facilitate payment when some doubt may exist as to who the beneficiary is and to save legal expenses in the settling of an estate.

Factory Mutual – A mutual insurer specializing in large risks, with special emphasis on loss prevention.

Factory Mutuals – Member insurers of the Factory Mutual System, which is a group of mutual coinsurers formed to provide member insurers with insurance and engineering services.

Facultative – (“Fac”) The reinsurance of part or all of (the insurance provided by) a single policy, with separate negotiation for each cession. 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 obligation to cede and accept, to which the parties agree in treaty reinsurance).

Facultative (or Specific) Reinsurance – Reinsurance by offer and acceptance of individual risks, wherein the reinsurer retains the “faculty” to accept or reject each risk offered by the ceding company. Contrast with Treaty Reinsurance.

Facultative Certificate of Reinsurance – A document formalizing a facultative reinsurance policy.

Facultative Reinsurance – A procedure by which insurance companies reinsure risks on an individual basis, with the reinsurer having the option to accept or decline each risk.

Fair Access to Insurance Requirements Plan – A pooling plan reinsured by the United States Government that makes insurance available to those in inner-city or other high risk areas who cannot obtain insurance through normal channels. Coverages for fire and allied perils is available, with considerably high limits, after inspection of the premises.

Fair Credit Reporting Act – Public Law 91-508 requires that an applicant be advised if a consumer report may be requested and be told the scope of the possible investigation. Should the request for insurance be declined because of information contained in that report, the applicant must be given the name and address of the reporting agency.

Fair Rental Value Coverage – Insurance that pays the loss of rental value, minus expenses which do not continue, when property rented to others or held for rental is damaged by a peril insured against.

Fallen Building Clause – A provision in certain property insurance contracts which specifies that if a material part of an insured building collapses from causes other than fire or explosion, the fire coverage becomes void.

Family Automobile Policy – A form which was once widely used to write automobile insurance for individual car owners. It is a package policy which provides protection against legal liability for bodily injury and property damage to others, injury to the insured and other occupants of the vehicle, and damage to the vehicle itself. It has largely been replaced by the more modernized Personal Auto policy.

Family Dependent – A person entitled to coverage because he or she is: (1) The enrollee’s spouse, or (2) A single dependent child of either the enrollee or the enrollee’s spouse (including stepchildren or legally adopted children), and (3) A resident of the enrollee’s home.

Family Expense Policy – A policy which insures the medical expenses of all members of a family.

Family Income Policy – A policy that pays an income up to some future date designated in the policy to the beneficiary after the death of the insured. The period of payment is measured from the date of the inception of the contract, and at the end of the income period the face amount of the policy is paid to the beneficiary. If the insured lives beyond the income period, only the face amount is payable in the event of the insured’s death.

Family Maintenance Policy – A policy that pays an income to the beneficiary starting after the death of the insured and continuing for a stated period of time. At the end of the income period, the face amount of the policy is paid to the beneficiary.

Family Policy – This policy typically consists of whole life insurance for the head of the household with smaller amounts of term insurance on other family members.

Farm Coverage Part – One of the coverage parts available under the Commercial Package Policy program. Coverages may be included for farm property, agricultural equipment, livestock, and farm liability.

Farm Liability Coverage Form – A commercial liability form attached to a Farm Coverage Part to provide coverage for bodily injury, property damage, personal injury, advertising injury and medical payments for farm exposures.

Farm Personal Property – Scheduled or unscheduled classes of farm property which may be covered by the Farm Property Coverage form. It may include grain, feed, supplies, livestock, farm machines and farm vehicles. Contrast with Household Personal Property.

Farm Property Coverage Form – A farm coverage form which may be used to cover residential dwellings, other private structures, household personal property, farm personal property, and other farm structures.

Farmers Comprehensive Personal Liability – Similar to the Comprehensive Personal Liability policy but adapted to cover farm hazards, such as damage caused by grazing animals.

Farmowners-Ranchowners Policy – A package policy providing property coverage on farm dwelling buildings and contents, as well as barns, stables, and other farm outbuildings. Liability coverage is also included. It is similar to a homeowners policy adapted to cover farm properties.

Fast-track Technical Underwriting Unit – The organizational unit within the Customer Service Group that handles the technical underwriting of all business that is basic to medium in terms of underwriting complexity.

FC&S Bulletins – A service, published by the National Underwriter Company, explaining coverages, forms, underwriting, and rating procedures for the various property, casualty, and surety lines of insurance.

FCII – Fellow of the Chartered Insurance Institute, whose designation is gained by the completion of examinations and other requisites.

Federal Crime Insurance Program – A federally administered program under which pooling companies write crime insurance for those unable to secure it in the open market. Available for residential and commercial risks in various states.

Federal Crop Insurance Corporation – An agency within the U.S. Department of Agriculture which provides insurance on growing crops.

Federal Deposit Insurance Corporation – An agency of the federal government which insures bank deposits up to a stated maximum.

Federal Emergency Management Agency – A government agency that provides disaster relief during emergencies, such as floods, fire, earthquakes, etc.

Federal Employees Compensation Act – Under this Act, workers compensation benefits are provided to civilian federal government employees. The U.S. government administers and operates the system, as well as provides the benefits. Therefore, no private insurance is involved.

Federal Employer Identification Number – A tax identification number for businesses that has serves a tax-tracking function similar to the social security number for individuals.

Federal Employers Liability Act – Passed by Congress in 1908 before there were worker compensation statutes and benefits in this country, this Act applies to railroad workers only. It puts injured workers in a favorable position in terms of liability claims, allowing them to sue the employer for negligence. Because railroad workers and their unions were unwilling to trade their favorable positions for statutory benefits, they remain exempt from compensation laws in many states. Cases are decided on the issue of employer liability.

Federal Employers’ Liability Act – Applies to employees of interstate railroads. Such employees are not subject to state workers compensation laws. This federal law imposes liability on the railroad if the injured railroad employee can show any negligence on the part of the railroad.

Federal Estate Tax – The federal tax which is imposed on the deceased’s estate which includes the total assets comprising a person’s estate at death.

Federal Home Loan Mortgage Corporation – A publicly chartered agency that buys qualifying residential mortgages from lenders, packages them into new securities backed by those pooled mortgages, provides certain guarantees, and then resells the securities on the open market. The corporation’s stock is owned by savings institutions across the U.S. and is held in trust by the Federal Home Loan Bank System. The corporation, nicknamed Freddie Mac, has created a secondary market, which provides more funds for mortgage lending and allows investors to buy high-yielding securities backed by federal guarantees.

Federal Insurance Administration – A government office, part of HUD, which oversees the handling of FAIR plans, Federal Crime Insurance plans, and the Flood program.

Federal National Mortgage Association – A publicly-owned, government-sponsored corporation chartered in 1938 to purchase mortgages from lenders and resell them to investors. The agency, known by the nickname Fannie Mae, mostly packages mortgages backed by the Federal Housing Administration, but also sells some non-governmentally backed mortgages. Shares of FNMA itself, known as Fannie Maes, are traded on the New York Stock Exchange.

Federal Officials Bond – A bond which provides reimbursement to the federal government for loss occasioned by the dishonest acts of its employees or their lack of faithful performance.

Federal Qualification – Approval of any HMO made by the HCFA after conducting their evaluation of methods of doing business, documents, contracts, facilities, and systems.

Fee Maximum – The maximum amount available to a provider for specific health care services under a contract.

Fee Schedule – A list of maximum fees for providers who are on a fee-for-service basis.

Fee Simple – Complete ownership of property with the unconditional right to dispose of it. Compare with Joint Tenancy and Tenancy in Common.

Fee Simple Form of Ownership – The ownership of property where the owner is entitled to the entire property without conditions or limitations.

Fee-for-Service Equivalency – The difference between the amount a provider receives from a reimbursement system such as capitation (a flat charge per month, for instance) compared to fee-for-service reimbursement.

Fee-for-Service Reimbursement – A health care system where physicians and other providers receive payment based on their billed charge for each service provided.

Fellow of the Casualty Actuarial Society – This designation is gained by the completion of a series of examinations and other requirements.

Fellow of the Society of Actuaries – A designation which is gained by the completion of a series of examinations, as well as other experience requirements.

Fellow Servant Rule – A common law defense used by employers before the passage of compensation laws. It held that if an employee was injured due to the carelessness of a fellow employee, the right of action was against the fellow worker and not against the employer.

Fellow, Life Management Institute – A professional management designation earned by passing 10 national examinations on life and health insurance subjects including insurance, finance, marketing, law, information systems, accounting, management and employee benefits. Examinations and course materials are prepared and administered by the Life Office Management Association.

Fictitious Groups – Groups formed primarily for the purpose of buying insurance. Under the law such groups may not be underwritten.

Fidelity – A form of insurance that reimburses an employer under agreed upon terms and conditions for losses caused by dishonest or fraudulent acts of employees.

Fidelity Bond – A bond that will reimburse an employer, the insured, for loss due to the dishonest acts of a covered employee.

Fidelity Insurance – A liability insurance coverage for loss caused by dishonest or fraudulent acts committed by persons covered by the policy.

Fiduciary – A person holding the funds or property of another in a position of trust, and who is obligated to act in a prudent and ethical manner. An example would be an attorney, bank trustee, the executor of an estate, etc.

Fiduciary Bond – A bond which guarantees the faithful performance of a fiduciary.

Gain and Loss Exhibit – The portion of the convention blank which represents an analysis of gains, losses, and surplus during an accounting period.

Gambling – The creation of a situation where there is a chance of either loss or gain. This is the opposite of insurance, which either eliminates or reduces the risk of loss and presents no chance of gain.

Garage Coverage Form – A commercial automobile insurance coverage form used to insure automobile dealers, repair shops, service stations, and garage risks. Garage liability, garagekeepers coverage, and physical damage coverages may be included.

Garage Keepers Legal Liability Insurance – An insurance contract that protects a garage keeper against liability for damage to vehicles in the keeper’s care, custody, or control caused by specific perils.

Garage Liability Insurance – Insurance to protect garage owners or automobile dealers for liabilities arising out of their business operations.

Garagekeepers Insurance – An insurance contract that protects a garagekeeper against liability for damage to vehicles in his care, custody, or control caused by specified perils.

Gatekeeper Model – Under this model of HMO and PPO organizations, the primary care physician (the gatekeeper) is the initial contact for the patient for medical care and for referrals. This is also called a closed access or closed panel.

Gender Rule – One method of determining which parent’s medical coverage will be primary for dependent children: the father’s coverage will automatically be considered primary and will pay first.

General Account – All assets of an insurer other than assets held in separate accounts.

General Account – An investment portfolio used by the insurer for investment of premium income. This portfolio generally consists of safe, conservative, guaranteed investments, such as real estate and mortgages.

General Adjustment Bureau, Inc. – An independent company which adjusts claims of all types for insurance companies. GAB also provides training programs for adjusters.

General Agency System – The marketing of life insurance through general agents.

General Agent – An individual appointed by a life or health insurer to administer its business in a given territory. General agents are responsible for building their own agency and service force and are compensated on a commission basis, with possibly some additional expense allowances.

General Agents and Managers Conference – An association of insurance general agents and managers affiliated with the National Association of Life Underwriters.

General Aggregate Limit – A Commercial General liability limit that applies to all damages paid for bodily injury, property damage, personal injury, advertising injury, and medical expenses, except damages included in the products-completed operations hazard.

General Average – A partial loss incurred to save the total venture from destruction. Any such losses are prorated among all parties to the venture, including the parties whose interests first suffered such loss. An example would be throwing cargo overboard in order to save a ship from a particular peril.

General Liability – Coverage for bodily injury or property damage losses for which the insured is legally liable as a result of negligence.

General Liability Insurance – Form of coverage that pertains to claims arising out of the insured’s liability for injuries or damage caused by ownership of property, manufacturing operations, contracting operations, sale and distribution of products as well as professional services. General Liability is sometimes referred to as ‘Liability Other Than Auto’.

General Liability Insurance – A form of insurance designed to protect owners and operators of businesses from a wide variety if liability exposures. These exposures could include liability arising out of accidents resulting from the premises or the operations of an insured, products sold by the insured, operations completed by the insured, and contractual liability.

General LTC Rider – A LTC rider which is attached to a life insurance policy but stands alone or is independent of the life policy. Any LTC benefits paid do not reduce any of the life insurance benefits.

General Operating Expense – The expense of an insurer other than commissions and taxes. Called “General and Insurance Expense” in the convention statement blank.

General Operating Expenses – The company’s operating costs, fees for medical examinations and inspection reports, underwriting, commissions, advertising, agency expenses, premium taxes, salaries, rent etc. Such costs are important in determining premium rates.

General Partnership – A business enterprise owned and operated by two or more persons for the purpose of generating business income and profits.

General Power of Appointment – A donee is given the authority to pass on a property interest to whomever he or she pleases.

General Property Form – This form commonly in use for coverage on the property of commercial risks from whatever perils are specified in the contract.

Generally Accepted Accounting Principles – These principles have substantial authoritative support for use in the insurance business. They are intended to produce financial results consistent with those of other industries and to assure consistency in financial reporting. Contrast with Statutory Accounting Principles.

Generation Skipping Transfer – A transfer of property due to death or by gift, to a person who is two or more generations below the grantor.

Generic Drug – A drug which is exactly the same as a brand name drug and which is allowed to be produced after the brand name drug’s patent has expired. It is also called a “generic equivalent.”

Geographical Limitation – A contractual provision which is specifically names geographical areas outside of which the insurance is not effective.

Gift – A sale, exchange, or transfer of property without adequate consideration.

Gift Tax – Both federal and state governments have gift tax laws which tax gifts made by one person to another.

Glass Coverage Form – A commercial property form used to insure plate glass, lettering, frames and ornamentation. It has replaced earlier commercial glass insurance forms.

Going & Coming Rule – This rule stipulates that while en route to and from work, an employee is not considered as being on the job.

Good Driver Discount – A system which entitles good drivers (as defined by driving safety record, number of miles driven annually, number of years driving experience, and other factors related to the risk of loss) to discounts on automobile insurance rates and premiums.

Good Student Discount – A discount granted to students with high scholastic ratings. There is a proven 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 – The classification, which carries the highest amount of payroll exclusive of the Standard Exceptions–This describes the principal work activity of the employer’s business.

Government National Mortgage Association – A government-owned corporation, nicknamed Ginnie Mae, which is an agency of the U.S. Department of Housing and Urban Development. The GNMA purchases mortgages from private lenders, such as banks and savings and loans, packages them into securities called Ginnie Maes, and sells the certificates to investors. The agency guarantees the timely payment of principal and interest to the Ginnie Mae holders.

Government Savings Bond – A bond issued by the United States Treasury at a discount equal to the present value of a future interest payment. The amount paid at maturity is the face amount which, in this case, is principal and interest.

Government Securities – Bonds and other debt instruments issued by federal agencies. Although government securities have high credit ratings, they are not backed by the full faith and credit of the federal government.

Grace Period – A prescribed period, usually 30 to 31 days from the premium due date, during which an insurance contract is in force and the premium may be paid.

Graded Commission – A compensation scale for agents which provides for varying commission rates depending upon the class, type, or volume of insurance written. Contrast with Flat Commission.

Graded Death Benefits – A provision in life insurance contracts for death benefits that, in the early years of the contract, are less than the face amount of the policy but that increase with the passage of time. Most commonly found in juvenile policies issued at or near age zero.

Graded Premium – A modified life insurance policy for which the initial premium is low, and then increases in steps over a period of time (usually five years), after which it becomes a level premium.

Grading Schedule for Cities and Towns – A schedule prepared by the National Board of Fire Underwriters for the purpose of determining which of ten grades to assign to a city for fire rating purposes, based on such factors of fire protection as water supply.

Graduated Life Table – A mortality table in which the experience has been smoothed out by formula.

Grantee – The buyer of real estate.

Grantor – The seller of real estate.

Grantor Retained Annuity Trust – A trust in which the grantor substitutes retention of a right to payment of a fixed income in exchange for a fixed period of time.

Grantor Retained Interest Trust – An irrevocable trust in which the grantor of the trust property receives an income for a fixed period of time. Usually, a personal residence is used as the trust property.

Grantor Retained Unitrust Trust – A trust in which a grantor substitutes retention of a right to a fixed percentage of the trust value in exchange for a fixed period of time.

Grievance Procedure – A procedure which allows a member of a health plan or a provider of benefits to express complaints and seek remedies.

Gross Earnings – An accounting term which is arrived at by subtracting the cost of goods sold from the total sales. Traditionally, the term was used primarily in business interruption insurance as the basis for determining how much insurance a policyholder should carry. The latest business income insurance forms have dropped this term.

Gross Earnings Form – A form once used widely in the writing of business interruption insurance. Coverage was written on either the Gross Earnings Form or the Earnings Form. The latest business income coverage forms no longer refer to gross earnings.

Gross Estate – Consists of all property owned directly by the decedent; property transferred during the decedent’s lifetime, but with certain strings attached, annuities and life insurance benefits receivable by the beneficiary and jointly owned property over which the decedent had certain controls.

Gross Line – The total limit accepted by an insurer on an individual risk, including the amount to be reinsured.

Gross Negligence – Willful and wanton negligence or misconduct.

Gross Premium – Premium as calculated before deducting any reinsurance ceding commission. See net premium.

Gross Premium – The net premium plus operating expenses, commissions and other expenses.

Gross Premium – (Life) The premium for participating life insurance. If an insured elects to use dividends to pay premiums, this becomes the net premium when dividends are subtracted from it. Contrast with Net Premium.

Hail Insurance – Insurance against loss of crops caused by hail.

Hand In Hand – Common name for the first fire insurance company created in the ‘New World’ by Benjamin Franklin in 1752. The actual name is the ‘Philadelphia Contributorship for the Insurance of Houses from Loss by Fire’.

Hangarkeepers Legal Liability Insurance – Insurance which the owner of an airplane hanger buys to protect against liability for damage or injury to others arising out of the ownership, maintenance, or use of the premises for an aircraft hanger.

Hazard – Condition which creates or increases the chances of a loss arising from a peril. Examples of hazards include: slippery floors, congested traffic, unguarded premises and uninspected boilers.

Hazard – A specific situation that increases the probability of the occurrence of loss arising from a peril, or that may influence the extent of the loss. For example, accident, sickness, fire, flood, liability, burglary, and explosion are perils. Slippery floors, unsanitary conditions, shingled roofs, congested traffic, unguarded premises, and uninspected boilers are also hazards.

HCFA 1500 – A form used by providers of health services to bill their fees to health carriers. It was developed by the government agency known as Health Care Financing Administration.

Head Office – The term “head office” is primarily used in British insurance operations, whereas “home office” is used for American operations.

Health Benefits Package – The coverages offered by a health plan to an individual or group.

Health Care Financing Administration – Part of the Department of Health and Human Services, responsible for administration of the Medicare and Medicaid programs. The HCFA establishes standards for medical providers which must be complied with if the provider is to meet certification requirements.

Health History – A form used by underwriters to assist in evaluating groups or individuals to determine whether they are acceptable risks.

Health Insurance – Insurance against loss by sickness or bodily injury. The generic form for those forms of insurance that provide lump sum or periodic payments in the event of loss occasioned by bodily injury, sickness or disease, and medical expense. The term health insurance is now used to replace such terms as accident insurance, sickness insurance, medical expense insurance, accidental death insurance, and dismemberment insurance. The form is sometimes called accident and health, accident and sickness, accident, or disability income insurance.

Health Insurance Association of America – An association supported by life and health insurers to provide the research, public relations, education, and legislative base for the promotion of voluntary private health insurance.

Health Insurance Quality Award – An award granted annually by the International Association of Health Underwriters or the National Association of Life Underwriters for high persistency of health insurance policies written by agents.

Health Maintenance Organization – An HMO is a prepaid medical service plan which provides services to plan members. Medical providers contract with the HMO to provide medical services to plan members. Members must use contracted providers. The emphasis is on preventive medicine, and it is an alternative to employee benefit plans. Employers of more than 25 persons are required to offer the alternative of HMO to employees, but not if the cost exceeds that of present employee benefit plans.

Health Plan – This refers to any kind of plan that covers health care services such as HMOs, insured plans, preferred provider organizations, etc.

Health Service Agreement – The agreement between employer and the health plan which outlines a description of benefits, enrollment procedures, eligibility standards, etc.

Health Services – The benefits covered under a health contract.

Hearsay – Testimony based on what someone else has said or told a witness.

Hedge – An investment undertaken to offset the risk entailed by another investment.

High Pressure Tactics – An illegal method of marketing insurance policies (often associated with Medicare supplement policies) employing tactics having the tendency to induce the purchase or to recommend the purchase of coverage through force, fright, explicit or implied threat, or undue pressure.

Highly Protected Risk – Refers to property risks which meet the standards required for lower rates. Risks of this type are usually protected by sprinklers and have better-than-average construction and occupancy. The term is most often used in connection with the factory mutuals, factory insurance association, and the improved risk mutuals.

Hired Automobile – Autos the insured leases, hires, rents, or borrows, but not autos owned by employees or members of their households.

Historical Loss Risk – The likelihood of experiencing a loss, a return less than zero measured in a probability.

Historical Mean Return – The statistical average return provided by an asset, asset category, or portfolio mix over a specified time period. Also referred to as Average Annual Return.

Historical Variation Ranges - A statistical measure of the historical variation of asset class returns that shows the minimum and maximum returns at a given confidence level. This gives the investor a broad view of the historical characteristics of asset classes and provides a valid method for comparison of portfolio allocations.

Hold Harmless Agreement – A contractual arrangement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of responsibility. Such agreements are typically found in contracts like leases, sidetrack agreements, and easements. For example, a typical lease may provide that the lessee must “hold harmless” the lessor for any liability from accidents arising out of the premises. The effect of such an agreement is that the lessee must provide a defense for the lessor, and if any judgment is rendered against the lessor, the lessee would have to pay.

Hold-Up – A form of robbery.

Holding Period – The length of time that an investor has owned a capital asset. The Tax Reform Act of 1984 shortened the capital gains holding period from a year and a day to six months and a day.

Holographic Will – A valid will which is completely handwritten and signed by the testator.

Home Health Agency – A certified facility approved by a health plan to provide services under contract.

Home Health Care – Care received at home as part-time skilled nursing care, speech therapy, physical or occupational therapy, part-time services of home health aides or help from homemakers or choreworkers.

Home Health Services – Health care services provided by a licensed home health agency in the patient’s home which is a covered expense under Part A of Medicare.

Home Office – Generally the corporate headquarters of insurers and the location where the chief officers of the organization are housed.

Home Office Life Underwriters Association – An organization offering a course of study for home office life underwriters.

Home Service Insurance – A variation in the industrial life concept, home service life insurance policies are usually modest in size, ranging from $10,000 to $15,000 in face value, and are typically sold on a monthly debit plan (automatic bank draft) or payments by mail.

Homeowners Policy – A package policy for the homeowner that includes coverages ranging from fire and extended coverage, theft, and personal liability, to “all risk” coverages.

Homeowners Policy – A property and liability insurance contract that provides insurance against any of the property and liability perils to which a homeowner or renter is exposed.

Honorable Undertaking – This is stated in the reinsurance contract: “This agreement is considered by the parties hereto as an honorable undertaking, the purpose of which is not to be defeated by a strict or narrow interaction of the language thereof.”

Hospice – An organization which is primarily designed to provide pain relief, symptom management and supportive services for the terminally ill and their families. Hospice care is covered under Part A of Medicare.

Hospital Affiliation – A contract whereby one or more hospitals agrees to provide benefits to members of a specific health plan.

Hospital Alliances – A group of hospitals that work together to share common services and thereby reduce health costs. By grouping together, they are better able to compete with other alliances or chains.

Hospital Benefits – Benefits payable for hospital room and board, plus miscellaneous charges resulting from hospitalization.

Hospital Confinement Rider – An optional disability income rider that results in the elimination period being waived when the insured is hospitalized as an inpatient.

Hospital Income Insurance – A form of insurance that provides a stated weekly or monthly payment while the insured is hospitalized, regardless of expenses incurred and regardless of whether or not other insurance is in force. The insured can use the weekly or monthly benefit as he chooses, for hospital or other expenses.

Hospital Indemnity – Coverage that pays based on daily, weekly, or monthly limits regardless of the amount of actual hospital expenses.

Hospital Insurance – Also identified as Part A of Medicare. HI provides inpatient hospital care, skilled nursing care home health and hospice care subject to a benefit period deductible and copayments for certain services.

Hospital Tax – A Social Security tax of 1.45% on an unlimited amount of income, paid by both the employee and employer to prepay for Part A of Medicare.

Hospitalization Expense Policy – A policy which covers daily hospital room and board charges and also covers miscellaneous hospital expenses (such as X-ray, etc.). It also often covers emergency treatment charges and many times will also include a surgical benefit.

Hospitalization Insurance – A form of insurance that provides reimbursement within contractual limits for hospital and specific related expenses arising from hospitalization caused by injury or sickness.

House Confinement – A provision in some health insurance contracts which requires an insured to be confined to the house in order to be eligible for benefits. This provision is most commonly found in policies providing loss of income benefits.

Household Personal Property – The term given to household goods, furniture and personal belongings of residents of a farm dwelling. The Farm Property Coverage Form uses the term “household” to distinguish it from the separate coverage for “farm” property. Contrast with Farm Personal Property.

Housekeeping – The general care, cleanliness and maintenance of an insured’s property. It is an important underwriting consideration in many forms of insurance, such as workers compensation and property.

HR-10 – A qualified retirement plan for the self employed. Also known as a Keogh Plan.

Hull Policy – A contract that provides indemnification for damage sustained to or loss of an insured vessel or airplane.

Hull Syndicates – A group of companies which agree to share or prorate insurance on oceangoing vessels or aircraft. Coverage on the ship or plane itself is called hull insurance.

Human Life Value – A method of determining life insurance needs by considering a person’s income, expenses, remaining years of earning capacity, and depreciation in the value of the dollar over time.

ICC – A business information provider, specializing in UK company data.

ICPI – Insurance Crime Prevention Institute

Identification Card – A card given to each person covered under the plan which identifies him or her as being eligible for benefits.

Identification of Benefits – A provision that the cost of putting a disabled insured in touch with and in the care of relatives will be reimbursed, usually up to a maximum amount.

If Clauses – Clauses which terminate coverage “if” certain conditions are created or discovered. An example is the concealment or misrepresentation provision which states that if this is discovered, the coverage is void. Contrast with “While” Clauses.

Illegal Occupation Provision – A health insurance policy provision that voids liability if the loss results from the insured’s committing or attempting to commit a felony or from the insured’s engaging in an illegal occupation.

Illness – A loss which is sustained due to sickness or disease usually due to an organic cause.

Immature Policies – Claims-made coverage which has not been in effect, on an uninterrupted basis, for at least five years. For rating purposes, a discount applies to manual rates for immature policies.

Immediate Vesting – A term used in pension or retirement plans. With immediate vesting an employee’s right to benefits begin as soon as he enters the plan.

Impaired Insurer – An insurer which is in financial difficulty to the point where its ability to meet financial obligations or regulatory requirements is in question.

Impaired Property – Tangible property which cannot be used or has become less useful because it incorporates the insured’s product or work which is defective or inadequate, or because the insured has failed to fulfill a contractual obligation.

Impaired Risk – A risk, or subject of insurance, with insurable qualifications below the standard of risks on which the premium for the coverage was based. For example, a life insurance prospect with heart disease would be an impaired risk.

Impairment of Capital – A condition in which the surplus account of a stock insurer has been exhausted so that it must invade the capital account (amounts contributed by stockholders) to meet liabilities. Some jurisdictions allow a percentage invasion of capital; some do not.

Impeach – Evidence which tends to detract from the credibility of the witness.

Implied Authority – Authority of an agent that the public may reasonably believe the agent to have. If the authority to collect and remit premiums is not expressly granted in the agency contract, but the agent does so on a regular basis and the insurer accepts, the agent has implied authority to do so.

Implied Seaworthiness – Seaworthiness of a vessel insured in an ocean marine contract is an implied warranty. The assumption is that the vessel, its equipment, and its crew are in good condition and prepared to make the voyage.

Implied Warranty – In certain cases the law says that one has given a warranty to another even though the warranty is not in writing. An example would be in sales: A seller implies that the product is fit for the purpose it purports to serve.

Import – Goods or services purchased from another country and brought into one’s own country.

Improvements and Betterments – Additions or changes made by a lessee at his or her own cost to a building which he or she is occupying which enhance its value. These become part of the realty and require special insurance consideration.

Imputed – Occurs when actions of one party, usually the agent, are deemed to be actions of the other party, usually the principal.

In Kind – An expression relating to the insurer’s right in many property contracts to replace damaged objects with new or equivalent (in kind) material, rather than to pay a cash benefit.

In-Area Services – Services which are provided within the “authorized” service area as designated in the plan.

In-Force – The aggregate amount of insurance policies that are paid up (or are being paid), which a life or health insurance company has on its books.

In-Force Business – The aggregate amount of insurance policies that are paid up (or are being paid), which a life or health insurance company has on its books.

In-Patient – A patient admitted to a hospital or other similar medical facility as a resident patient.

Incentive Stock Option Plans – A type of stock plan whereby executives are granted options to purchase company stock without incurring a tax liability at the time the option is granted or subsequently exercised.

Inception Date – The beginning date of a period of coverage, as defined for reporting by Commercial Statistical Plan (CSP). The inception date may refer to policies which are new, renewed, continuous, installment, installment (re-rated), audit, endorsed, or canceled. CSP provides detailed instructions for the reporting of this date.

Inchmaree Clause – A provision which provides reimbursement to an insured in the event of a loss which is due to the negligence of the master or crew of a vessel.

Incidents of Ownership – Various rights that may be exercised under the policy contract by the policyowner. Some of the incidents of ownership would be: (1) the right to cash in the policy, (2) to receive a loan on the cash value of the policy, and (3) to change the beneficiary.

Income – Earnings, generally from interest or dividends, that are credited or paid to an investor.

Income Bond – A type of bond on which interest is paid only when earned by the issuing entity.

Income Fund – A fund whose investment objective is current income rather than capital growth. Income funds are often invested in bonds and other fixed-income securities.

Income Investments – Interest-bearing corporate or government bonds. The issuer must pay the bondholder a specified sum of money on a specified maturity date and pay periodic interest until that time. Bondholders have no corporate ownership privileges.

Income Policy – A life insurance contract which provides income on a monthly basis, as opposed to a policy which pays proceeds in a lump sum.

Incompetent – A person who cannot manage his or her own affairs. One who is legally declared insane would be an example of an incompetent. Children under a certain age are also considered incompetents for some purposes.

Incontestable Clause – A clause in a policy providing that after a policy has been in effect for a given length of time (two or three years), the insurer shall not be able to contest the statements contained in the application. A health insurance provision also states that after that time no claim shall be denied or reduced on the grounds that a condition not excluded by name at the time of issue existed prior to the effective date. In life policies, if an insured lied as to the condition of his or her health at the time the policy was taken out, that lie could not be used to contest payment under the policy if death occurred after the time limit stated in the incontestable clause.

Increased Cost of Construction Insurance – Insurance that covers the additional cost of reconstructing a damaged or destroyed building where ordinances require rebuilding with more expensive materials, services, or techniques.

Increased Hazard – Property insurance policies provide that coverage shall be suspended when the hazard in a risk is increased beyond that contemplated when the insurance was written. For example, if a dwelling owner commences manufacturing dynamite in his home, the hazard is extremely increased, and coverage could be denied by the insurer if there were a loss.

Increased Limits Coverage – Those limits provided in a policy in excess of the basic limits of insurance.

Increased Limits Factor – The factor used for increasing the rate when increased limits are purchased by the insured. The basic limits rate is multiplied by an increased limits factor.

Increasing Term Insurance – A term life insurance policy where the death benefit increases but the premium remains level for the policy term.

Incurred But Not Reported – The insurance company will establish a loss reserve for claims that have occurred but have not yet been reported to the company.

Incurred Expense – Expenses not yet paid. Can also include paid expenses in some accounting systems.

Incurred Loss Ratio – The percentage of losses incurred to premiums earned.

Incurred Losses – Amount of money paid out for claims, and monies in reserve for known outstanding losses and incurred but not reported losses (IBNR).

Indemnify – To restore the victim of a loss to the same position as before the loss occurred.

Indemnitor – An entity or person who enters into an agreement with a surety to hold the surety harmless from loss incurred as a result of issuing a contract bond to an applicant who falls just short of acceptability. If the principal defaults, the indemnitor, rather than the surety, assumes the obligation.

Indemnity – Restoration to the victim of a loss by payment, repair, or replacement.

Indemnity Bond – A bond that indemnifies an obligee against loss which may arise as the result of failure to perform on the part of the principal.

Indemnity Business – The reimbursement practice of paying cash benefits to the insured individual following submission of a claim. The term is used more generally to refer to the traditional group insurance business.

Indemnity Loss – The amount payable by the carrier to the insured, or to some third party on behalf of the insured, for reimbursement of actual damages sustained. Such losses, therefore, do not include adjustment expenses.

Independent Adjuster – An adjuster who works as an independent contractor, hiring out to insurance companies or other organizations for the investigation and settlement of claims. Independent adjusters represent the interests of insurance companies. Contrast with Public Adjuster.

Independent Agency System – The method of sales, service and distribution of insurance through agents who own their ‘renewals’ and are compensated on a commission basis. The agents usually represent more than one insurer and have binding authority.

Independent Agency System – An insurance distribution system within which independent contractors, known as agents, sell and service property liability insurance solely on a commission or fee basis under contract with one or more insurers that recognize the agent’s ownership, use, and control of policy records and expiration data.

Independent Agent – An agent operating as an independent contractor under the independent agency system.

Independent Bureau – A state rating bureau that promulgates rates and experience modifications based on its own state’s rules and regulations using its own data and that is not part of the National Council on Compensation Insurance (NCCI).

Independent Contractor – An individual performing a service on behalf of a business based on specific criteria, but not considered an employee.

Independent Insurance Agents of America – An association of independent insurance agents historically known to represent stock insurance companies more than mutual companies. Members are also members of their state associations.

Index – A tool that is used to measure the performance of the economy, a particular market, or a group of investments (i.e., the S&P 500 Index).

Index Bureau Experience – A measure of losses relating to claims reported through a claim office during a 12-month period.

Jettison – The act of throwing overboard part of a vessel’s cargo or hull in hopes of saving the ship from sinking.

Jewelers Block Insurance – An open perils (all risk) insurance contract which provides jewelers with coverage on most types of losses to which they are exposed. A contract covering both owned property and property in their care, custody, and control.

Jewelry Floater – An all-risk policy covering listed jewelry. Usually each item is described and insured for a specific amount.

Joint and Several Liability – A legal doctrine permitting recovery from any of several co-defendants based on ability to pay, rather than the degree of negligence.

Joint and Survivor Annuity Option – An option under which an employee may elect to receive a reduced amount of an annuity with a specified amount continuing after the employee’s death to another person(s) designated as the contingent annuitant.

Joint and Survivorship Annuity – An annuity which is payable to the named annuitants during the period of their joint lives which will continue to the survivor when the first annuitant dies.

Joint and Survivorship Option – An option in a life insurance contract which permits the cash value of the policy to be paid out as a joint and survivorship annuity.

Joint Annuity – An annuity which is paid to the two named persons until the first one dies, at which time the annuity ceases. An example might be an annuity payable to a husband and wife which would cease upon the death of the first spouse.

Joint Committee on Interpretation and Complaint – A committee formed to rule on what types of insurance can come within the standard definition of marine insurance.

Joint Control – Control of the handling of an estate by both the surety (bonding company) and the fiduciary (administrator, executor, etc.). Funds are kept in joint accounts, and disbursements made only with both signatures so the surety can assure itself that the affairs of the estate are being handled properly.

Joint Insurance – Insurance written on two or more persons with benefits usually payable only at the first death.

Joint Insured – One whose life is insured by a joint insurance contract.

Joint Liability – Liability which rests upon more than one person.

Joint Life and Survivorship Annuity – A contract which provides income to two or more people and continues in force as long as any one of them survives.

Joint Life Annuity – This policy pays a benefit which continues throughout the joint lifetime of two people but terminates at the first death.

Joint Tenancy – Ownership of property shared equally by two or more parties under which the survivor assumes complete ownership. This is different from a tenancy in common where the heirs of a deceased party to the tenancy inherit his or her share. Compare with Fee Simple and Tenants in Common.

Joint Underwriting Association – An unincorporated association of insurance companies formed to provide a particular form of insurance to the public. Those who insure with a JUA pay assessments in addition to their premiums which provide monies for the operation of the association. JUAs are usually free to set their own rate levels and use whatever coverage forms are deemed proper, subject to approval by state authorities.

Joint Venture – This expression is applied most often to construction ventures where several contractors agrees to combine together on a construction project rather than to act as separate contractors. Under the joint venture agreement, they share profits and losses in some agreed-upon proportion.

Joint-Survivor Option – An annuity option which provides for a guaranteed income to the annuitant and upon death of the annuitant, a continued income to the annuitant’s survivor.

Joisted Masonry Construction – A building which has exterior walls constructed of masonry materials, such as adobe, brick, concrete, gypsum block, hollow concrete block, stone, tile, or other similar materials, and a roof and floor constructed of combustible materials. A floor which rests directly on the ground is an exception and may be disregarded.

Jones Act – Masters and members of the crews of vessels are not covered under state workers compensation laws or under the U.S.L. & H.W. Act. They are subject to admiralty law and, if injured, have the right to sue their employers for damages in the Admiralty Courts where the proceeding is in the nature of an employers’ liability suit. They also have the right to transportation, wages, maintenance and cure. Such seamen are subject to a Federal law, the Merchant Marine Act of 1920, known as the Jones Act (46 U.S. Code, section 688, 1970) which applies the provisions of the Federal Employers’ Liability Act to seamen. Every person employed on board a vessel is deemed to be a seaman if connected with the operation or welfare of the vessel while in navigable waters.

Judgment Rates – Rates established by the judgment of the underwriter with or without the application of a formal set of rules or a schedule.

Judgment – The formal decision by a judge or court. Also known as Decree.

Judicial Bond – A bond required in civil and criminal court actions.

Jumping Juvenile – A popular name for a life insurance contract written on the life of a child, usually in units of $1,000. When the child reaches a prescribed age, generally 21, the face of the policy is increased automatically without the imposition of either an additional premium charge or a medical examination. Hence the term “jumping” juvenile.

Jurisdiction – Authority of the court to decide cases of a particular type or in a particular area.

Juvenile Insurance – Life insurance written on a child.

KEOGH – A plan under which self-employed persons have the right to establish retirement plans for themselves and their employees that permit them the same tax advantages available to corporate employees covered by qualified pension plans.

Keogh Act Plan – A plan under the Self-Employed Individual’s Tax Retirement Act which permits a self-employed individual to establish a formal retirement plan and to obtain tax advantages similar to those available in qualified corporate pension plans.

Key Employee Insurance – (1) Insurance on the life or health of a key employee, the loss of whose services would cause an employer financial loss. The policy is owned by and payble to the employer. (2) In health insurance the term is also used to designate salary continuation insurance or a medical benefit plan payable to the key employee, with the employer paying all or part of the premium.

Key Person Insurance Policy – An insurance policy on the life of a key employee whose death would cause the employer financial loss, owned by and payable to the employer. In health insurance, the term is also used to designate salary continuation insurance payable to a key employee or to a medical benefits plan, payable to that employee paying all or part of the premium.

Land Contract – A type of instrument used in connection with the sale of real estate. It differs from a mortgage in that title to the land remains with the seller until the buyer has completed the payments, though possession rests with the buyer. Specifically, a land contract is the instrument that conveys the deed of land from one person to another upon full payment of the stated purchase price.

Landlords Protective Liability – Coverage provided to the owner of property who leases the entire premises to another. This coverage is very reasonable because the full control of the premises rests with the lease.

Lapse – Policies canceled during a period as a percent of policies in-force at the beginning of that period.

Lapse Rate – Lapse Rate = [Policies Canceled / Beginning Policies In-Force] * 100

Lapse Ratio – The ratio of the number of life insurance contracts lapsed within a given period to the number in force at the beginning of that period.

Lapsed Policy – One which has been allowed to expire because of nonpayment of premiums.

Larceny – The unlawful taking of the personal property of another without the person’s consent and with intent to deprive him or her of ownership or use thereof. It is a broader term than burglary or robbery, largely synonymous with theft.

Large Capitalization – A company with a relatively high total stock market value. Large-cap companies usually compete in mature markets. They will utilize competitive advantages (i.e., production capabilities or low costs) to sustain consistent earnings growth.

Large Claim Pooling – A system designed to help stabilize premium fluctuations in smaller groups. Large claims (those over a stated amount) are charged to a pool contributed to by many small groups who belong and share in that pool. The smaller the group of groups, the lower the pooling level. Larger groups will have a larger pooling level.

Large Deductible – Insureds who choose to assume some of the risk from losses under a workers compensation policy can select a deductible policy. Generally the insurer handles claims the same as a non-deductible policy. However when loss payments are made the carrier obtains reimbursement from the insured. A large deductible is generally considered to be $100,000 or greater. Large deductible plans are filed by individual insurance companies.

Laser Beam Endorsement – An endorsement to a “claims made” liability form used to exclude specific accidents, products, work or locations. It earned its nickname because it allows an insurer to zero in with a sharp focus to exclude specific exposures.

Last Clear Chance – A doctrine that liability may attach to a person who, immediately before an accident, had a last clear chance to avoid it and did not.

Last In, First Out – Refers to a method of keeping inventory records for accounting purposes where the last item purchased for inventory is the first item used.

Latent Defect – A defect which is not immediately apparent.

Law of Large Numbers – This law states that the larger the number of exposures considered, the more closely the losses reported will match the underlying probability of loss. The simplest example of this law is the flipping of a coin. The more times the coin is flipped, the closer it will come to actually reaching the underlying probability of 50% heads and 50% tails.

Leader Location – A location which attracts customers to the insured’s business. One of the four types of dependent properties for which business income coverage may be written.

Lease – Contract whereby the owner or user of property (the lessor) agrees to let another party (the lessee) use the property for a consideration (money or rent).

Leasehold – An agreement which gives a person the right to use and occupy property.

Leasehold Interest Coverage Form – Commercial property coverage form used to insure an insured tenant’s interest in a favorable lease under which the rent paid is less than the rental value of alternative premises. Pays the difference between rent paid and the rental value for remainder of the lease if the lease is cancelled because of property damage caused by a peril insured against.

Leasehold Interest Insurance – A form of property insurance that provides protection against the loss of a favorable lease if it should be terminated as a result of damage to the property by a peril covered by the contract. A leasehold value is determined by finding the difference between the rental value of the property at current rates and the rent payable under the terms of the lease. This amount is multiplied times the remaining term of the lease.

Ledger Cost – The net cost of a life insurance contract which is found by subtracting the cash value of the contract at the end of a given year from the premiums paid, less all dividends.

Legacy – A gift of personal property in accordance with the provisions of a will.

Legal Expense Insurance – A group form of insurance which provides members with legal services paid for on a schedule basis. Similar to dental insurance.

Legal Hazard – An increase in the likelihood that a loss will occur because of court actions.

Legal Liability – Liability under the law as opposed to liability arising from contracts or agreements. In insurance, it is most often used to refer to the liability that an individual has if he or she should negligently injure another party. For example, an owner of an automobile may be held legally liable if he or she is negligent in the operation of the automobile and injures another person or damages another person’s property as a result of that negligence.

Legal Reserve – The minimum reserves required to be established for a life insurance contract under the laws of the jurisdiction within which an insurer operates.

Legal Reserve Life Insurance Company – A life insurer that maintains the reserves required by the jurisdiction within which it operates.

Legend Drug – A drug which has on its label “caution: federal law prohibits dispensing without a prescription.”

Legislated Coverages – Coverages provided through creation of facilities legislated into existence by federal or state law. FAIR Plans, the Flood Insurance Program and the assigned risk pools are examples.

Legislative Risk – A risk faced by investors whereby changes in tax laws can result in adverse effects on the individual’s investment results.

Length of Stay – The total number of days a participant stays in a facility such as a hospital.

Lessee – The person to whom a lease is granted. Commonly called the “tenant.”

Lessee’s Safe Deposit Box Coverage Form – A commercial crime coverage form that protects against loss of property other than money while it is in the insured’s safe deposit box inside a depository premises.

Lessor – The person granting a lease. Also known as the “landlord.”

Level Annual Premium Funding Method – A method of accumulating money for payment of future pensions under which the level annual charge is payable each year until retirement so that the benefit is fully funded.

Level Commission System – A system of commissions in which the first year and all renewal commissions are the same percentage of the premium.

Level Death Benefit Option – Under Universal life insurance, the level death benefit option provides the greater of (1) the face amount of the policy at the time of death, or (2) a stipulated percentage of the accumulation value.

Level Funding – The dollar amount required to purchase a particular medical care program. Usually measured by the premium rate for an insured program, or an amount assessed for expected claim loss and related fees under a self-funded program.

Level Premium Insurance – That form of insurance for which the premium remains the same throughout the life of the contract. Most whole life insurance is paid for in this way. The amount of a level premium is higher than needed for the protection afforded in the early years of the contract but less than needed for protection in the later years. It is a method of leveling off the cost of insurance so as not to have it increase each year until it becomes inaffordable.

Level Term Insurance – A type of term policy where the face value remains the same from the effective date until the expiration date.

Leverage – The use of borrowed money or other senior capital to increase business and earnings opportunities.

Leveraged Coli – Under this arrangement, groups of selected employees are insured. The policies purchased are owned and paid for by the corporation or a grantor trust for the benefit of the corporation’s employees. The corporation fully borrows the cash value of the policies and pays interest on the borrowed cash value. Premiums are generally not tax deductible, however, as long as the policyowner complies with the applicable tax laws, the loan interest is deductible by the corporation subject to certain limits.

Liabilities – Money owed or expected to be owed. Insurance company financial statements, for instance, show assets and liabilities.

Liability – A debt or obligation.

Liability Insurance – Provides protection for the insured against loss on agreed upon terms and conditions arising out of his/her legal liability resulting from injuries to other persons or damage to their property.

Liability Insurance – That insurance which pays and renders service on behalf of an insured for loss arising out of his or her responsibility to others imposed by law or assumed by contract.

Liability Limits – The maximum amount for which a liability insurance company provides protection in a particular policy.

Liability Risk – Any operations, premises, products, or completed operations located or conducted in a single rating territory, which are described by a single classification code. Stated simply, it is any risk to which liability coverage is attached by means of an insurance contract.

Libel – A written statement about someone which is personally injurious to that individual. In maritime law it means legal action brought against the owner of another ship.

Libel Insurance – A form of liability insurance that protects the insured against legal liability for libelous statements he may write.

Liberalization Clause – A clause in property insurance contracts which provides that if policy or endorsement forms are broadened by legislation or ruling from rating authorities and no additional premium is required, then all existing similar policies will be construed to include the broadened coverage.

License – A certification of authority for an agent or insurer to operate, given by the appropriate jurisdiction.

License and Permit Bonds – Bonds often required by jurisdictions to be posted by persons performing certain services, such as security dealers and plumbers. It provides indemnification in the event that the licensee fails to conform to pertinent regulations of the jurisdiction.

Licensee – (1) One who is licensed. (2) A person who goes on the premises of another for his or her own interests. The owner of the premises must use ordinary care not to injure a licensee. A person using another’s land for a shortcut, as long as he had the permission of the owner, would be an example.

Lien – A claim against property which then serves as security for the payment of that claim.

Lien Plan – (1) A plan for issuing coverage on substandard risks under which a standard premium is paid but less than the full face amount of the policy is payable if death occurs within a certain period of years. It is rarely used and is even illegal in some states. (2) A plan under which an impairment of the insurer’s assets if offset by pro rata liens against policies to be deducted from the face amount when paid as a claim.

Life Annuity – A contract that provides a stated income for life, payable annually or more frequently.

Life Conservation – The administration of efforts to preserve human life through research, legislation, and appeals to society.

Life Estate – Ownership of land for an individual’s lifetime.

Life Expectancy – The average number of years remaining for a person of a given age to live as shown on the mortality or annuity table used as a reference.

Maintenance Bond – A bond guaranteeing against defects in workmanship or materials for a stated time after the acceptance of completed work. Two years is a common term for a construction bond.

Maintenance, Care and Wages – An admiralty law provision for coverage for injured seamen. Maintenance refers to providing food, shelter, and rehabilitation while the seaman is injured. Care refers to the medical treatment necessary for recovery. Wages, of course, refers to the usual seaman’s wages, which under this law, must be paid even during an illness or after an accident.

Major Hospitalization Policy – The same as major medical insurance, except that it applies to expenses incurred only when the insured is hospitalized.

Major Medical Insurance – A type of health insurance that provides benefits up to a high limit for most types of medical expenses incurred, subject to a large deductible. Such contracts may contain limits on specific types of charges, like room and board, and a percentage participation clause sometimes called a coinsurance clause. These policies usually pay covered expenses whether an individual is in or out of the hospital.

Malicious Mischief – Similar to vandalism. Purposely damaging the rights or property of another.

Malicious Mischief Management and Regulatory Reporting – The willful damaging or destruction of another person’s property. The Management and Regulatory Reporting system encompasses various systems, files and reports to address profit and loss reporting, expense reporting, Annual Statements and Tort Reform. The source of this data is CRS and the General Ledger.

Malinger – To feign a disability for the purpose of continuing to collect benefits longer than actually necessary.

Maloney Act – A 1938 amendment to the Securities Exchange Act of 1934. The Maloney Act established the National Association of Security Dealers (NASD) as a self regulatory organization (SRO) for those involved in the sale of securities.

Malpractice – Professional misconduct or lack of ordinary skill in the performance of a professional act which renders the practitioner liable to suit for damages.

Malpractice Insurance – Insurance on a professional practitioner that will (1) defend suits instituted against the insured professional for malpractice, and/or (2) pay any damages set by a court, subject to policy limits.

Managed Care – A system of health care where the goal is a system that delivers quality, cost effective health care through monitoring and recommending utilization of services, and cost of services.

Managed Care Organization Program – A loss reduction incentive plan in certain states, which allows a premium credit for post-claim loss control activities designed to minimize claim expenses.

Managed Health Care Plan – A plan which involves financing, managing, and delivery of health care services. Typically, it involves a group of providers who share the financial risk of the plan or who have an incentive to deliver cost effective, but quality, service.

Management Expense – A charge deducted in a contingent commission formula to cover the reinsurer’s overhead expenses.

Management Fee – The charge made by an investment adviser for supervision of a portfolio. Frequently includes various other services and is usually a fixed or declining percentage of average assets at market value.

Manager – A common title for the head of an agency that is operated as a branch office, as opposed to being operated as a general agency. The manager is a salaried employee, usually with an incentive bonus based on the agency’s volume.

Managing General Agent – The MGA will appoint any number of General Agents (already defined in text) or individual agents to sell business which they administer.

Mandated Benefits – Benefits required by state or federal law.

Mandated Providers – Types of providers of medical care whose services must be included by state or federal law.

Mandatory Retirement – A specified age in a pension plan when the member must retire even if he or she does not wish to do so.

Mandatory Valuation Reserve – A reserve required by a state law to offset any declines in the valuation of securities listed as admitted assets.

Manual – A book giving rates, classifications, and underwriting rules for some line of insurance. An example would be the Automobile Manual which gives such information for automobile insurance.

Manual Excess – The premium for an amount of insurance in excess of the basic limit of liability. This premium is determined by referring to a table of rate factors which are multiplied by the manual rate in order to arrive at a premium for the higher limit selected.

Manual Premium – That premium based on ISO rates. The ISO monoline manual premium is the premium that would result from the use of ISO rates and rules prior to the application of any rating modifications.

Manual Rate – That rate which appears in ISO manuals. It is the rate which exists prior to the application of any rating plan modifications. Manual rates do not exist for all classes of risks; such ‘nonmanual’ risks are subject to an ‘A’ or ‘Judgement’ rating.

Manual Rates – Usually the published rate for some unit of insurance. An example is in the Workers Compensation Manual where the rates shown apply to each $100 of the payroll of the insured, $100 being the “unit.”

Manual Rates – (Health) Rates based on average claims data for a large number of groups. These rates are then adjusted for specific groups based on that group’s characteristics, such as the type of industry, changes in benefits from the standard, etc.

Manufacturer’s Selling Price Clause – Values unsold finished goods at the price at which they could have been sold at the time of a loss.

Manufacturers and Contractors Liability Insurance – A form of premises and operations liability insurance designed to cover manufacturing or contracting risks. The basis of premiums for this coverage is the payroll.

Manufacturers Output Policy – A policy covering the personal property of a manufacturer on an open perils (all risk) basis. Coverage is usually restricted to property away from the premises. Its original use was for manufacturers who send some of their products out to be processed by other companies.

Manufacturers’ Output Policy – A contract that provides coverage for personal property of the manufacturer on an all-risk basis, while the property is away from the premises of the insured.

Manufacturing Location – A location which manufactures products for delivery to the insured’s customers under a sales contract. One of the four types of dependent properties for which business income coverage may be written.

Manuscript Policy – A policy written to include specific coverages or conditions not provided in a standard policy. It is often prepared by a large brokerage house for a large account, and it must conform to state laws. In the event of a dispute over policy language, the contract of adhesion doctrine is modified.

Map – A geographical map is used by a property insurance underwriter to locate the area and character of a risk, especially in a large city. Maps may also be used to keep track of the number of insureds in a particular area so that an insurer does not subject itself to a possible catastrophic loss.

Map Clerk – A junior underwriter who enters such essential data as policy numbers, amounts of coverage, and property covered on maps to enable an insurer to determine its liability or exposure in a given area.

Margin – The amount of money paid by investors when they use their broker’s credit to buy a security.

Marine Insurance – A form of insurance primarily concerned with means of transportation and goods in transit. Marine used alone refers to ocean transportation, and inland marine refers to transportation and goods in transit by land.

Marital Deduction – An unlimited amount of qualifying property which can be passed or transferred upon the death of one spouse to the surviving spouse.

Marital Deduction Trust – An arrangement whereby the surviving spouse is provided with full use of the family’s wealth while minimizing the impact of federal estate taxes.

Market – A public place where goods and services are traded, purchased and sold.

Market Assistance Plan – A plan promulgated by the Department of Insurance to assist buyers to obtain certain types of insurance when they are limited in availability.

Market Conduct – Used to measure how insurance companies and insurance agents comply with state laws regulating the sales and marketing, underwriting, and issuance of insurance products. Proper market conduct means conducting insurance business fairly and responsibly.

Market Conduct Examination – When state insurance department investigators examine the business practices and operations of an insurer and its agents in order to determine their authority to conduct insurance business in the state.

Market Risk – A risk experienced by those who invest in securities which is the risk of possible loss of investment since there are no guarantees associated with such investments.

Market Risk – The market as a whole for an asset may decline, as in the financial crises of 1929 and 1987 and in other economic recessions.

Market Timing – A strategy, based on various economic or stock market indicators, for deciding when to buy or sell securities.

Market Value – The price for which something would sell, especially the value of certain types of assets, such as stocks and bonds. It is based on what they would sell for under current market conditions. For example, common stock market value would be the price of the stock as of a specified date.

Market Value Clause – A provision that may be used in certain property insurance forms which obligates an insurer to pay the established market price of destroyed or damaged stock rather than its cost to the insured, as is usually provided in the Standard Fire policy. This coverage is only available to manufacturers with finished products, not to wholesalers or retailers.

Marketability – The ability to buy or sell a security quickly, without consideration for loss.

Marketing Test – A Campaign component used as an indicator of the future performance of a new offer or product, a new marketing kit, or a particular list segment.

Masonry Noncombustible Construction – A building which has exterior walls constructed of masonry materials, such as adobe, brick, concrete, gypsum block, hollow concrete block, stone, tile, or other similar materials, with floors and roof constructed of metal or other noncombustible materials.

Master – The admiralty law term for the captain of a ship.

Master Contract – In group insurance, the master contract is given to the employer. Individuals insured under the plan receive certificates to evidence their coverage under the plan.

Master Policy – (1) The policy contract issued to an employer or other entity authorized by state law for a group insurance plan. See also the first definition of Certificate of Insurance. (2) A property insurance policy issued to an insured who can issue certificates of coverage to cover the property of others.

Master-Servant Rule – The rule that all employers are obligated to protect the public from the acts of their employees. Courts hold employers liable for torts committed by employees in the course of their employment.

Masters and Members of Crew – For the purposes of general maritime law, the term “seamen” applies to the master and crew members of a vessel who are primarily on board for the function of its navigation or its operation on a permanent basis.

Matching Deductible Plan – (See Fronting Policy) This is a device wherein the primary insurer sets a deductible equal to the entire limit of liability and then transfers the amount to one or more reinsurers.

Material Fact – In insurance, it refers to a fact which is so important that the disclosure of it would change the decision of an insurance company, either with respect to writing coverage, settling a loss, or determining a premium. Usually, the misrepresentation of a material fact will void a policy.

Mature – In insurance, a policy matures when its face amount becomes payable. This could occur upon the death of the insured, or in some forms of insurance such as endowments, as of a specified date.

Name Position Bond – A type of fidelity bond which covers losses caused by the dishonesty of only those employees holding positions specifically named in the bond. Contrast with Name Schedule Bond and Blanket Bond.

Name Schedule Bond – A type of fidelity bond which covers losses caused by the dishonesty of only those employees specifically named in the bond. Contrast with Name Position and Blanket Bond.

Named Insured – That person, partnership, or organization for whom an insurance contract is written, and who is specifically designated as being ‘insured’ in the contract.

Named Insured – Any person, firm, or corporation, or any member thereof, specifically designated by name as the insured(s) in a policy. Others may be protected as insureds even though their names do not appear on the policy. A common application of this latter principle is in automobile policies where, under the definition of insured, protection is extended to cover other drivers using the car with the permission of the named insured.

Named Non-Owner Policy – An automobile insurance policy issued to someone who does not own an automobile, but who drives borrowed or rented autos.

Named Perils – Perils specified in a policy as those against which the policyholder is insured.

Named Perils – Perils specifically covered on property insured. Contrast with Open Perils (All Risk) Insurance, which covers all losses not specifically excluded.

National Association of Independent Insurers – An association comprised of fire, casualty, and surety insurers which do not belong to large rating bureaus. The association distributes considerable information about legislation and litigation.

National Association of Insurance Brokers, Inc. – A voluntary association of insurance brokers which exists to exchange information and make recommendations to state legislatures.

National Association of Insurance Commissioners – An association of state insurance commissioners active in discussions of regulatory problems and in the formation and recommendation of uniform insurance practices and legislation.

National Association of Life Companies – Membership organization primarily of medium and small life and health insurance companies.

National Association of Life Underwriters – Organization of local life underwriter associations representing life and health insurance agents on practices of selling and servicing life and health insurance products.

National Association of Mutual Insurance Companies – A voluntary intercompany organization of mutual property and liability insurers formed for the exchange of information and discussion.

National Association of Securities Dealers – An organization of brokers and securities dealers in the over-the-counter market regulated by the Securities and Exchange Commission.

National Auto Theft Bureau – An organization engaged in the prevention and reduction of motor vehicle fire and theft losses.

National Council on Compensation Insurance – The National Council on Compensation Insurance is an independent service organization of the insurance industry which provides a wide range of advisory, rating, actuarial, statistical and other services relating to Workers Compensation Insurance.

National Crop Insurance Association – A sister organization to the Crop Hail Insurance Actuarial Association (CHIAA). In 1989 these two organizations were consolidated to become National Crop Insurance Services (NCIS).

National Crop Insurance Services – A voluntary, nonprofit organization made up of more than 140 member companies that compiles research and statistics in order to develop crop insurance rates and forms.

National Drug Code – A system for identifying drugs.

National Flood Insurance Program – Federal program providing flood insurance for fixed property. Under a “dual” program coverage may be written directly by the NFIP or by private carriers whose losses may be reimbursed by the NFIP.

National Fraternal Congress of America – A federation of fraternal benefit societies.

National Insurance Association, Inc. – An intercompany association of insurers formed to exchange information and ideas on common problems unique to the black community.

National Safety Council – A nonprofit organization chartered by Congress in 1913. It is made up of approximately 12,000 industry members nationwide. The purpose of the council is the dissemination of safety education material.

National Service Life Insurance – Life insurance made available by the federal government for members of the United States armed forces from 1940 to 1951.

Nationwide Definition of Marine Insurance – A statement recommended by the National Association of Insurance Commissioners which indicates the types of insurance which are to be written under ocean or inland marine policies. Most states use this definition, subject to some individual exceptions.

Natural Death – Death by means other than accident or homicide.

Natural Premium – The pure mortality cost of life insurance for one year at any given age.

Negative Correlations – Investments that react in generally opposite ways to changes in the economy are said to have negative correlations. For example, as one investment gains value, the other tends to lose value.

Negligence – Failure to use the degree of care, which a person of reasonable prudence would use, under given or similar circumstances. A person may be negligent by acts of omission or commission, or both.

Negligence – Failure to use that degree of care which an ordinary person of reasonable prudence would use under the given or similar circumstances. A person may be negligent by acts of omission or commission or both.

Net Amount At Risk – A term which refers to the differences between the face amount of a policy and the reserve or cash value which has been built up under that policy.

Net Asset Value – Used by investment companies to measure net assets. It is calculated by subtracting liabilities from the value of a fund’s securities and other items of value and dividing this by the number of outstanding shares. Net asset value is popularly used in newspaper mutual fund tables to designate the price per share for the fund.

Net Cost – Premiums paid minus cash value and any policy dividends paid as of the date the calculation is being made. In the life business, it is common to draw up net cost comparisons at the end of ten and twenty years.

Net Increase – The increase in the total amount of business an insurer has to force over a given period of time. It is figured as the total of new policies issued plus those renewed less policies lapsed and canceled.

Net Interest Earned – The average interest earned by an insurer on its investments after investment expense but before federal income taxes.

Net Level Premium – The pure mortality cost of a life insurance policy from its inception to its maturity date, divided by the number of years the policy is to be in force.

Net Level Premium Reserve – The reserve needed by an insurer to cover net level policies which are in their later years. Loosely speaking, the level premium system of paying for a long-term life or health policy involves overpayment in the early years and underpayment in the later years.

Net Line – The amount of coverage retained by the ceding company on an individual risk in a surplus reinsurance treaty. This term can also be used to mean the maximum amount of loss on a particular risk to which an insurer will expose itself without reinsurance.

Net Loss – The amount of loss sustained by an insurer after giving effect to all applicable reinsurance, salvage, and subrogation recoveries.

Net Premium – (1) The amount of premium minus the agent’s commission. (2) The premium necessary to cover only anticipated losses, before loading to cover other expenses. (3) The original premium minus dividends paid or anticipated in participating life insurance when the insured elects to use dividends toward payment of the premiums. Contrast with Gross Premium.

Object – In boiler and machinery insurance, the name of the vessel insured; the object of insurance.

Obligee – Broadly, anyone in whose favor an obligation runs. This term is used most frequently in surety bonds where it refers to the person, firm, or corporation protected by the bond. The obligee under a bond is similar to the insured under an insurance policy. In the case of a construction bond, the person for whom the building is being built is the obligee.

Obligor – Commonly called the principal. One bound by an obligation. In the case of a construction bond, the contractor is the principal.

Occupancy – Refers to the activity or property of the insured, i.e., what the building is used for or the nature of its contents.

Occupancy – This refers to the type or character of use of the property in question. The type of occupancy has a bearing on its desirability and also effects the rate for the policy.

Occupational Accident – An accident arising out of or occurring in the course of one’s employment and caused by hazards inherent in or related to it.

Occupational Disease – This is normally meant to include the sustaining of a disease common to the workplace, such as black lung. An injury arising out of employment and due to causes or conditions characteristic of, and peculiar to, the particular trade, occupation, process or employment and excluding all ordinary diseases to which the general public is exposed. This definition is changing rapidly as the workplace changes and courts continue to interpret coverage.

Occupational Disease – (Health) Impairment of health caused by continued exposure to conditions inherent in a person’s occupation or a disease caused by an employment or resulting from the nature of an employment.

Occupational Disease – (Workers Comp) Sickness or disease arising out of or in the course of employment. State compensation laws provide coverage for this type of loss.

Occupational Hazard – A condition in an occupation that increases the peril of accident, sickness, or death.

Occupational Manual – A book listing occupational classifications for various types of work.

Occupational Safety and Health Act – A federal statute which establishes safety and health standards on a nationwide basis. The act is enforced by Labor Department safety inspectors and also provides for the record-keeping of statistics relevant to work injuries and illnesses.

Occurrence – (a) An event that results in an insured loss. In some lines of insurance, such as liability, it is distinguished from accident in that the loss does not have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected nor intended by the insured. (b) Liability insurance written on an ‘occurrence’ basis that applies to bodily injury or property damage which occurs during the policy period, regardless of how far into the future such claims are filed or reported.

Occurrence Coverage – Liability coverage which protects the insured against claims arising from all occurrences that take place during the policy period, regardless how far into the future such claims are filed or reported.

Occurrence Coverage – A policy form providing liability coverage only for injury or damage that occurs during the policy period, regardless of when the claim is actually made. For example, a claim made in the current policy year could be charged against a prior policy period, or may not be covered, if it arises from an occurrence prior to the effective date. Contrast with Claims-Made Coverage.

Ocean Marine – Coverage for seagoing vessels, including liabilities connected with them and their cargoes.

Ocean Marine Insurance – A general term used to indicate all types of insurance associated with coverage on vessels and their cargoes.

Odds – The probable frequency of incidence of a given occurrence in a statistical sample. It is expressed as a ratio to the probable number of nonoccurrences or as a decimal fraction of the total occurrences. For example, a probability of .25 equals odds of three to one against. A probability of .75 equals odds of three to one for.

Off Premises – A clause in a property insurance contract extending coverage away from the premises described in the policy. The amount of coverage away from the premises is usually restricted to a percentage of the total coverage on the premises, e.g., 10%.

Offer – The terms of a contract proposed by one party to another. In property and casualty insurance, submitting an application to the company is usually considered an offer. In life insurance, the application plus the initial premium constitutes an offer.

Offeree – One to whom an offer is made.

Offeror – One who makes an offer.

Office Burglary and Robbery Policy – A special policy designed for offices. It usually consists of several crime coverages on office equipment and supplies which are purchased as a package. There is relatively low limit for each coverage and very little flexibility in that the policyholder must buy the complete package.

Office Visit – Services provided in the physician’s office.

Officers and Directors Liability Insurance – A type of insurance which protects the officers and directors of a corporation against damages resulting from negligent or wrongful acts which may harm the corporation or its stockholders.

Offset Plan – A retirement plan in which each employee’s standard benefit is reduced by a portion of the Social Security benefits he or she will receive.

Offset Rider – A rider in a health insurance policy designed to reduce the benefit by a portion of the Social Security benefits received.

Old Age Assistance – A form of public assistance.

Old Age, Survivors, Disability, and Health Insurance – The system of social insurance benefits for the aged, surviving dependents, and disabled workers set up by the Social Security Act of 1935, plus amendments and additions.

Old Line – A term without a precise meaning but generally applied to nonfraternal insurers operating on a legal reserve basis. The origin of the term is in doubt but it seems to have come into use at the time of the competition between the “new” fraternal insurers and the commercial insurers to indicate the fact that the fraternals were “newcomers.”

Omnibus Budget Reconciliation Act – A federal law which extends the minimum COBRA continuation of group health care coverage from 18 to 29 months for qualified beneficiaries who are disabled at the time of qualification.

Omnibus Clause – An agreement in most automobile liability policies and some others that, by its definition of insured, extends the protection of the policy to others within the definition without the necessity of specifically naming them in the policy. An example would be a policy which covers the named insured and “those residing with him or her.”

Omnibus Risk – A structure housing a number of tenants engaged in a variety of businesses.

One Step – A Campaign where an application for insurance goes to the customer in “one” step or solicitation. See also Two Step.

Open Access – Allows a participant to see another participating provider of services without a referral. Also called Open Panel.

Open Cover – A reinsurance facility under which risks of a specified category and declared and insured.

Open Debit – A life and health insurance debit (territory) currently without an agent.

Open End Investment Company – An investment company managed by professional investment advisers who invest in stocks and bonds on behalf of shareholders. Also known as a mutual fund.

Open Perils – Insurance against loss of or damage to property arising from any cause except those that are specifically excluded.

Open Policy – An insurance contract in which the terms of the policy are not fixed at the inception nor is an expiration date specified, but limits of liability are set forth for the protection it offers. No deposit premium is required, but monthly reports are made and sent with premiums due at that time, and certificates of insurance are issued to indicate the property covered. An open policy is commonly used to cover goods in transit.

P.S. 58 Charges – An IRS table which identifies the cost of pure death protection. The taxable economic benefit to an employee under a split dollar plan and certain other plans is equal to the P.S. 58 charges less any employee contributions.

Package Policy – A single insurance policy that includes several coverages. For example, a Homeowners Policy includes both property and liability coverages.

Paid Business – Insurance for which the application has been signed, the medical examination completed, and the settlement for the premium tendered.

Paid Claims – Amounts paid to providers based on the health plan.

Paid Claims Loss Ratio – Paid claims divided by total premiums.

Paid Losses – Loss payments that have been made on a claim at the same time of accounting or reporting.

Paid-For – Insurance on which the premium has been paid.

Paid-In Capital – The amount paid for the stock sold by a corporation.

Paid-In Surplus – Surplus paid in by stockholders, as contrasted with surplus earned through the operations of a business.

Paid-Up Insurance – Insurance on which all required premiums have been paid. The term is frequently used to mean the reduced paid-up insurance available as a nonforfeiture option.

Paid-Up Insurance – Insurance on which all premiums are paid but which has not yet matured by either death or endowment. An example would be a limited payment life policy for which the premium-paying period is over.

Pair and Set Clause – A clause which states that if a part of a pair or set is lost or damaged the measure of the loss shall be a reasonable and fair proportion of the total value of the set, giving consideration to the importance of the article. The insurer is under no obligation to pay for the total loss of a set when one part is lost, damaged, or destroyed.

Par – Abbreviation for participating.

Parasol Policy – Another name for the Difference in Conditions policy.

Parcel Post Insurance – Coverage to protect an insured against damage to or loss of parcels while they are in the care of the United States Post Office Department. Packages can be insured by either the United States Post Office or by private insurance companies.

Parent Company – The senior company in a group or fleet of insurers.

Parol – A legal term which refers to oral statements as distinguished from written statements.

Parol Evidence Rule – This rule states that a written instrument or contract cannot be modified by an oral agreement. It is based on the concept that written contracts should contain all of the facts and agreements between the parties and, therefore, prevents contemporaneous oral declarations from being included in the contract.

Part I – Provides coverage for the statutory obligation of an employer to provide benefits for employees as required by: a. Workers compensation law or occupational disease law of any state or territory of the United States, including the District of Columbia b. United States Longshoremen’s and Harbor Workers’ Compensation Act (if endorsed).

Part II – Employers liability insurance–Provides coverage for the legal obligation of an employer to pay damages because of bodily injury by accident or disease, including resulting death, sustained by an employee. Employers liability coverage applies only if the injury or death of an employee arises out of and in the course of employment and is sustained in the United States or while temporarily outside the United States.

Part III – Employers liability insurance and, where permitted by law, workers compensation insurance are provided in other states not listed in item 3.A. of the Information Page by listing the states in Item 3.C. the Information Page. If workers compensation insurance does not apply because the insured or carrier is unable to take the necessary action to bring the insured under a workers compensation law, the carrier will reimburse the insured for all compensation and other benefits required of the insured under such law.

Partial Disability – A condition in which, as a result of injury or sickness, the insured cannot perform all of the duties of his or her occupation but can perform some. Exact definitions vary from policy to policy.

Partial Hospitalization Services – Additional services provided to mental health or substance abuse patients which provides outpatient treatment as an alternative or follow-up to inpatient treatment.

Partial Loss – A loss covered by an insurance policy which does not completely destroy or render worthless the insured property.

Participant – An employee or former employee who is eligible to receive benefits from an employee benefit plan or whose beneficiaries may be eligible to receive benefits from the plan.

Participating – (1) Insurance that pays policy dividends. In other words, it entitles a policyowner to participate in allocations of the insurer’s surplus. In life insurance there are several options available for the use of such dividends. (2) Insurance that contributes proportionately with other insurance on the same risk.

Participating Provider – A health care provider approved by Medicare to participate in the program and receive benefit payments directly from carriers or fiscal intermediaries.

Participation – The number of employees enrolled compared to the total number eligible for coverage. Many times, a minimum participation percentage is required.

Particular Average – Refers to a partial loss which must be borne entirely by the individual owning the property which is damaged or lost. In many cases, it is used synonymously with the term Partial Loss.

Partnership – Business entity that is owned by two or more persons (can be a corporate entity) who are jointly and severally responsible for the business assets and liabilities.

Partnership Entity – The partnership considered as an entity and not in terms of its individual part-owners.

Partnership Insurance – Life or health insurance sold to a partnership, usually for guaranteeing business continuity in case of the death or disability of one of the partners. For instance, two partners might buy life insurance on each other so that in the event of one partner’s death, the other can use the insurance proceeds to purchase the deceased partner’s share of the business from the heirs.

Party Wall – A common wall between two buildings.

Party-In-Interest – Any of the parties to an employee benefit plan, including individuals serving as a fiduciary or counsel, or employees of an employee benefit plan; or any person providing service to the plan; or the employer who establishes the plan; or an employee organization whose members are covered by the plan; or an owner of 50% or more of a company that establishes an employee benefit plan.

Passive Fund Management Style – Fund manager seeks to emulate the performance of a particular market index. Generally more passive than the active fund management style.

Past Service Benefit – A term used in pension or retirement insurance policies to refer to credit given an employee for the amount of time the person was employed prior to the effective date of the retirement plan. Example: An insured starts a pension plan on January 1, 1980. It states that all eligible employees will be given credit for their length of service or employment prior to that date.

Past Service Liability – The monetary value at the start of a pension plan of all annuity credits vested prior to the effective date.

Paul Versus Virginia – The 1869 United States Supreme Court decision holding that insurance is not commerce and, hence, not subject to regulation by the federal government. This was the ruling decision with respect to insurance regulation until the SEUA case in 1944 which reversed that decision, but which was later modified by Public Law 15.

Pay – An abbreviation for payment as in “20-Pay Life policy.”

Payee – The person receiving money.

Q Schedule – A schedule of the business expenses of a life insurer required by the New York State Code to be filed to determine compliance with the state’s limitation on total expenses. This limitation has the effect of setting a ceiling on commissions.

Quadruple Indemnity – A multiple indemnity form similar to double indemnity and triple indemnity.

Qualified Medicare Beneficiary – This is a person whose income is below the federal poverty guidelines. In these cases, the state is required to pay the Medicare Part B premiums, plus any deductibles or copayments.

Qualified Plan – A retirement plan under which contributions by the employer are allowed as a deduction from taxable income, and which provides that the deposits for employees’ future benefits are not to be considered as taxable income to them in the year in which they are made.

Qualified Retirement Plan – Plan that meets the qualification requirements set out in detail in Internal Revenue Code sections 401 and 403(a), and as such, are plans established, operated and supported by employers, which have been submitted to and formally approved and “qualified” by the Internal Revenue Service.

Qualified Self-Insured – A business entity that qualifies to be self-insured based on the state laws applicable.

Qualifying Event – An occurrence (such as death, termination of employment, divorce, etc.) that triggers an insured’s protection under COBRA, which requires continuation of benefits under a group insurance plan for former employees and their families who would otherwise lose health care coverage.

Qualifying Terminal Interest Property – A trust which may contain marital deduction property as determined by the executor at some future time. All trust income goes to the surviving spouse.

Quality Assurance – Activities involving a review of quality of services and the taking of any corrective actions to remove any deficiencies.

Quantity – The number of solicitations mailed or contacts made, using any media.

Quantity Discount – A premium discount given for the purchase of a policy with a larger face amount.

Quarantine Benefit – A benefit paid for loss of time resulting from the quarantining of an insured by health authorities.

Quasi-Contract – A legal doctrine for situations in which there is no specifically drawn contract. It prevents unjust enrichment or injustice by treating the situation as if a contract actually had been in effect.

Quasi-Insurance Institutions – A term sometimes applied to government institutions created to carry out social insurance arrangements that have some, but not all, the characteristics of insurers. An example is the United States Department of Health and Human Sevices.

Quick Assets – Assets that are quickly convertible into cash.

Quid Pro Quo – Latin for “this for that,” or “one thing for another.” In insurance it could refer to the consideration in an insurance contract which calls for the exchange of values by both parties to the contract in order for it to be a valid contract.

Quota Share – (Also known as “Contributing Excess”) A variation of the Pro Rata reinsurance basis, whereby insurer and reinsurer(s) share all premiums and losses according to a fixed percentage(s) expressed in the Declarations.

Quota Share Insurance – Property insurance which shares according to some percentage, or quota, with other policies covering the same risk.

Quota Share Reinsurance – A form of pro rata reinsurance indemnifying the ceding company with a fixed percentage of any loss on each risk covered in the contract and paid for with the same percentage of the premium, with an allowance made for the writing company’s expenses.

Rabbi Trust – An irrevocable trust often used with an informally funded non-qualified deferred compensation whereby plan assets are subject to the claims of creditors and thus current taxation to the employee is avoided.

Radioactive Contamination Insurance – Coverage which may be added to a property policy to cover certain risks where there is neither a nuclear reactor nor nuclear fuel on the premises but which might occasionally be exposed to contamination damage from other material on the insured’s premises. Liability losses caused by nuclear reaction and radioactive contamination are excluded from most insurance contracts and are usually covered under policies issued by pools created for this purpose.

Radius of Operation – Usually used to determine rates for automobiles owned by a business. Beyond a certain number of miles in radius, e.g., 50, the rate is increased.

Railroad Protective Liability – A protective liability coverage written in favor of a railroad on behalf of those who are conducting operations on or adjacent to railroad property.

Railroad Retirement – A system which provides retirement and other benefits, including eligibility for Medicare, for railroad workers.

Railroad Subrogation Waiver Clause – A provision in a property insurance contract that the contract shall be valid even though the insured has an agreement with the railroad waiving subrogation against the railroad. Usually used in connection with a railroad sidetrack agreement.

Railroad Travel Policy – A form of accident insurance policy sold in railroad stations by ticket agents or by vending machines. See also Travel Accident Insurance.

Rain Insurance – A type of coverage which protects an insured against losses caused by cancellation of an outdoor event due to rain. The policy usually covers loss of income. The rain, hail, snow or sleet usually must exceed a certain amount and must occur during a stated period of time, either before or during the event.<<br />

Rate – The cost of a given unit of insurance. For example, in ordinary life insurance, it is the price of $1,000 of the face amount. In disability income insurance, it is usually the price per $10 or per $100 of monthly benefits. In property insurance, it is the rate per $100 of value to be insured. The premium, then, is the rate multiplied by the number of units of insurance purchased.

Rate – (Reinsurance) The percent or factor applied to the ceding company’s subject premium to produce the reinsurance premium or the percent applied to the reinsurer’s premium to produce the commission.

Rate Card – A pocket size card issued by an insurer giving rates for various coverages. It is carried by an agent or sales representative for quotation purposes.

Rate Departure Factor – A three-digit factor which reflects the relationship of the company monoline manual premium to the ISO monoline manual premium (SAA monoline manual premium for fidelity). This factor combines with the rating modification factor to provide ISO overall premium modification information.

Rate Deviation – Some insurers compare their experience to that of NCCI and the independent rating bureaus. To the extent their experience is better or worse, they may file deviations in states to recognize this difference (normally as a percentage off the NCCI or bureau filed rates). These are referred to as deviations.

Rate Discrimination – The use of different rates for insureds or risks of the same class and general characteristics. Rate discrimination is prohibited by all state insurance laws.

Rate Improvement Loan – A fixed rate loan that includes a provision that gives the borrower a one-time option to reduce the interest rate (without refinancing) during the early periods of the loan term.

Rate Manual – A manual containing rates for various coverages, information and instructions for field underwriting, insurer’s rules for the guidance of agents, and, in the case of life insurance rate manuals, cash amount forfeiture values and dividend scales (if any).

Rate of Natural Increase (Or Decrease) – The birth rate minus the death rate. If there were no migration, this would equal the rate of population increase (or decrease).

Rate of Return – For a stock, the annual dividend divided by the purchase price; for a bond, the coupon rate divided by the purchase price; for a mutual fund, total return is capital appreciation (increase in the price of an asset) plus income return (dividend paid to the shareholder).

Rated – Coverages issued at a higher rate than standard because of impairment of the insured. Usually used as an adjective in such expressions as “rated risk,” “rated policy,” and “rated up.”

Rating Bureau – A private organization that classifies and promulgates manual rates and in some cases, compiles data and measures the hazards of individual risks in terms of rates in geographic areas.

Rating Bureau – A private organization that classifies and promulgates manual rates and in some cases compiles data and measures the hazards of individual risks in terms of rates in geographic areas, the latter being true especially in connection with property insurance.

Rating Class – The rate class into which a risk has been placed.

Rating Group – A sub-group or sub-groups designated by the insured within a state, usually for premium allocation purposes.

Rating Process – The steps used to determine a premium rate for a particular group based on the amount of risk that group presents. Items that generally go into the rating process include age, sex, type of industry, benefits, and administrative costs.

Ratio Test – A coverage test for a qualified plan in which a percentage of lower paid employees benefiting from the plan must equal 70% of the higher paid employees from the plan.

Readjustment Income – (1) The income needed after the death or disability of a wage earner to allow the family time to adjust to a new, lower standard of spending. (2) The insurance coverage that provides readjustment income.

Real Estate Investment Trust – An organization similar to an investment company but concentrating its holdings in property or real estate investments. Real estate investment trusts are required to distribute as much as 90% of their income so the yield is generally very attractive.

Real Estate Owned – Real property owned by the lender as a result of a foreclosure or acceptance of a deed-in-lieu of foreclosure.

Realty – Real property such as land, buildings, mineral rights, etc., as opposed to personalty, such as movable personal property items.

Reasonable and Customary Charges – The charge for medical services which refers to the amount approved by the Medicare carrier for payment. Customary charges are those which are most often made by a provider for services rendered in that particular area.

Reassured – The company that purchases reinsurance.

Rebalancing – Adjusting a portfolio, through fund transfers or sales or purchases, to re-establish the initial allocation of assets.

Rebate – A portion of the agent’s commission returned to an insured or anything else of value given an insured as an inducement to buy. The payment of policy dividends, retroactive rate adjustments, and reduced premiums that reflect the savings of direct payment to an agent or home office are not usually considered to be rebates. In most cases rebates are illegal, both for the agent or insurer to give a rebate and for an insured to receive one.

Rebating – Returning part of the commission or giving anything of value to the “policyholder” as an inducement for buying the policy. Rebating is cause for license revocation in many places and illegal in others.

Recapture – The action of a ceding company taking back from a reinsurer insurance previously ceded.

Receipt – A written document showing money was paid. A receipt need not be a “Conditional Receipt.”

Recidivism – This term refers to how often a patient returns to an inpatient hospital status for the same reason.

Recipient – Anyone designated by Medicaid as being eligible to receive Medicaid benefits.

Recipient Location – A location which accepts the insured’s products or services. One of the four types of dependent properties for which business income coverage may be written.

Reciprocal Exchange – Unincorporated association with each insured insuring the other insureds within the association. Thus, each participant in the pool is both an insurer and an insured.

Reciprocal Insurance Exchange – An unincorporated group of individuals, called subscribers, who mutually insure one another, each separately assuming his or her share of each risk. Its chief administrator is an attorney in fact.

Reciprocal Rate Exchange – The pricing factor upon which the insurance buyer’s premium is based. Unincorporated association with each insured insuring the other insureds within the association. Thus, each participant in the pool is both an insurer and an insured.

Reciprocity – A system of placing reinsurance on a reciprocal basis so that a ceding company will give a share of its reinsurance to a reinsurer who is able to offer reinsurance in return.

Recording Agent – The name by which a policywriting agent is known in the property insurance business.

Recoveries – Amounts collected from borrowers subsequent to determination of deficiency balance (i.e., the write-off amount).

Recruiting – The hiring of insurance agents, or the process of looking for, interviewing, and hiring agents. It is also used to mean the process of locating and hiring any type of employee.

Recurrent Disability – A relapse. After going back to work, the disability returns.

Recurrent Disability – Disability resulting from the same or a related cause as a prior disability.

Recurring Clause – A health insurance policy provision defining the duration of a period of time during which the recurrence of a condition will be considered a continuation of a prior period of disability or confinement.

Recurring Disease – A disease characterized by recurrence, such as malaria.

Red-Lining – Discriminating unfairly against a risk solely because off its location. An example would be refusing to insure a risk because the building is located in a depressed area or location. Sometimes these areas are referred to as blackout areas.

Sacrifice – That cargo which is thrown overboard in order to save the rest of the cargo and the ship.

Safe Burglary – The taking of property from within a locked safe or vault by a person unlawfully entering the safe or vault as evidenced by visible marks of forced entry upon its exterior, or the complete removal of a safe from the premises.

Safe Depository Coverage – Two commercial crime coverage forms are available for firms other than financial institutions that rent safe deposit boxes to others. One covers an insured’s legal liability for loss or damage, while the other covers direct losses regardless of liability. Both cover customers’ property on the insured’s premises while in a safe deposit box or vault, or while being deposited or removed from such containers.

Safe Driver Plan – A system in which points are assigned for traffic violations and certain accidents, and each point adds a percentage surcharge to the rating factor. It is similar to merit rating. Also called a Safe Driver Incentive Plan.

Salary Budget System – The Salary Budget System is a comprehensive windows-based system that allows users to easily update salary budget information and view actual vs. budget information. You can generate detailed reports from any point in the system.

Salary Savings Insurance – Insurance issued to an individual employee whose employer agrees to deduct the premiums from the insured’s paychecks and submit them to the insurer.

Sales Report – The Sales Report allows a user to view booked premium based on four different views: Region/Branch, Division/Department and Division/Region. The report displays booked premium for prior month, week-to-date, current month and year-to-date.

Sales Volume – The total currency amount of loans originated during the month.

Salvage – The value of property after it has been damaged by fire or other perils. It may also be considered to be the property itself, which an insurance company secures after making payment on a claim.

Salvage – The portion of property that is taken over by an insurance company after payment of a claim for the loss. The insurance company may deduct the salvage value from the amount of the claim paid and leave the property with the insured. For example, on a Baggage and Personal Effects claim, an insured loses one earring. If we are unable to replace the missing earring and have to pay for a new pair, we have the right to obtain the other earring that was not lost. That “salvage” can be sold by AIG and the recovery credited to the claim file. Likewise, if we pay a Baggage loss and later the items are recovered, we are legally entitled to the property which can either be sold by us or given to the insured person with them giving back all or part of the loss payment.

Salvage – Property taken over by an insurer to reduce its loss.

Salvage – (Ocean Marine) Property recoverable by salvagers under maritime law.

Salvage Corps – An organization whose duties are limited to preventing further damage to property during or after a fire. They are established by property insurance companies.

Sample – A body of accounts that are statistically analyzed to construct a credit scoring system. Both good and bad accounts are used in the sample, along with some applications that were rejected.

System Savings Bank Life Insurance – Life insurance sold by mutual savings banks. Allowed only in a few states, such as New York, Connecticut, and Massachusetts.

Schedule – A part of the policy or application that indicates specific amounts or limits or a listing of rates used for computing premium.

Schedule – A list of the items covered by an insurance policy with their descriptions and valuations.

Schedule Policy – An insurance contract that lists separate kinds of property, separate locations, or separate insurance coverages with the amount of insurance applying to each.

Schedule Rating – Under Liability and Automobile Insurance, the schedule rating plan allows credits and debits for various good or bad features of a commercial risk. An example in automobile schedule rating would be allowing credits for driver training classes or fleet maintenance programs. Within established limits, modifications depend entirely on the judgement or the underwriter. Schedule Rating in liability is usually more flexible and is frequently used for competitive leverage.

Schedule Rating Plan – (1) Applying debits or credits within established ranges for various characteristics of a risk which are either below or above average according to an established schedule of items. (2) Under liability and automobile insurance, the schedule rating plan has been designed to allow credits and debits for various good or bad features of a particular commercial risk. An example in automobile schedule rating would be allowing credits for driver training classes or fleet maintenance programs.

Scheduled Interest – Periodic interest scheduled to be paid in accordance with the terms of the loan’s amortization schedule.

Scheduled Premium Variable Life Insurance – A whole life policy which features a fixed, level premium and a minimum guaranteed face amount. The performance of the policy is dependent on the separate account.

Scheduled Principal – Periodic principal scheduled to be paid in accordance with the terms of the loan’s amortization schedule.

Scopes Manual – A publication of the NCCI developed to aid in the understanding and assignment of rating classifications. This publication describes the basic scope of a classification assignable to a given set of exposure characteristics.

Score Card – A table listing the characteristics that provide predictive information in the scoring system, the attributes of each characteristics and the point values associated with each attribute.

Scoring – Empirically derived and statistically sound risk/reward ranking techniques. Excludes judgmental approval systems. Common terms include: -APPLICATION SCORE -ATTRIBUTE -BADS -BEHAVIOR SCORE -CHARACTERISTIC -CREDIT BUREAU SCORE -CRITICAL SCORE ERROR RATE -CUT-OFF SCORE -FINAL SCORE -GOODS -OVERRIDE -POPULATION -SAMPLE -SCORE CARD -VALIDATION

Search Engine – A program which allows a user to type keywords into a space provided, and returns a list where the keywords were found. Example: Yahoo.

Seasonal Risk – A risk which is present only during certain parts of the year. Examples might be manufacturing concerns such as canners who have operations only during the summer and seasonal dwellings such as cottages used for vacations.

Seasoned Loan – A loan that has been closed for more than one year.

Second Injury Fund – As an employment incentive, these funds were developed to pay the extra costs arising when a pre-existing injury combines with a second to produce disability greater than that caused by the latter alone.

Second Injury Fund – Special funds set up by each state to pay all or part of the compensation required when a partially disabled employee suffers a subsequent injury. Because the compound effect of two injuries can be greater than the effect of the same two injuries in isolation, employers might be reluctant to hire the handicapped if they had to bear the full burden for a second injury. Second injury funds relieve employers of some of this burden.

Second Mortgage – A mortgage lien which is subordinate only to the lien of the first mortgage.

Second Surgical Opinion – A cost containment technique to help patients and insurance companies determine whether a recommended procedure is necessary, or whether an alternative method of treatment could accomplish the same result. Some health policies require a second surgical opinion before specified procedures will be covered, and many policies pay for the second opinion.

Second Surplus Reinsurance – Reinsurance accepted by a second reinsurer in a surplus treaty. It is that amount which exceeds the total of the original insurer’s net retention and the full limit of the first surplus treaty.

Secondary Beneficiary – The second person named to receive benefits upon the death of an insured if the first-named beneficiary is not alive or does not collect all the benefits before his or her own death.

Secondary Care – Medical services provided by physicians who do not have first contact with patients. Examples would be specialists such as urologists, cardiologists, etc.

Secondary Coverage – Coverage which provides payment for charges not covered by the primary policy or plan.

Secondary Residence – Residential property physically occupied by an owner. Among the criteria that should be considered in evaluating whether a property is a second domicile are the following: -It is occupied by the owner during regular intervals throughout the year (e.g., weekends, seasonal vacation home). -It is in a recreational location relatively distant to the owner’s principal place of residence. -Not used for rental purposes. -The borrower states an intention to occupy the property as a secondary residence.

Section 125 Plan – A plan which provides flexible benefits. This plan qualifies under the IRS code which allows employee contributions to meet with pre-tax dollars.

Section 302 Stock Redemption – A total stock redemption which qualifies as a capital transaction and not a dividend distribution.

Secular Trust – An irrevocable trust which provides for current taxation of deferred compensation assets and a degree of security in an informally funded plan.

Securities – Evidences of a debt or of ownership, as stocks, bonds, and checks.

Securities and Exchange Commission – A federal agency that regulates the securities markets. The independent five member commission was created under the Securities Exchange Act of 1934. Members are appointed by the President and serve five year terms. The SEC has the responsibility to regulate the securities exchanges and markets, set disclosure and accounting rules for most issuers of corporate securities and to oversee securities firms, investment companies and investment advisors.

Securities Act of 1933 – A federal law which requries full and fair disclosure and the use of a prospectus in the sale of securities.

Securities Deposited With Others Coverage Form – A commercial crime coverage form that protects against loss by theft, disappearance or destruction of securities which have been deposited with others, such as a bank, trust company, or stock broker.

Securities Exchange Act of 1934 – A federal law which requires the registration of companies and agents with the federal government if they are selling securities.

Security – Evidence of direct ownership (stock), creditorship (bond), or indirect ownership (rights, warrants, and options).

Security Documents – Documents which legally evidence a debt and, for collateralized debts, the lender’s security interest in the collateral.

Security Instrument – The instrument (e.g., mortgage, deed of trust, deed to secure debt) creating a valid lien on collateral property.

Segregation of Payroll – When any location of an employer’s business is written on a divided payroll basis, an employees payroll may be split between more than one classification provided the employer maintains accurate payroll records and this payroll split does not conflict with any other rules.

Selection – The choosing by an underwriter of risks acceptable to an insurer.

T Tables – The factors used to properly fund retirement benefits for employees of varying types of industries incorporating the ideas of interest, mortality, and turnover.

Table M – This is a table of data used in retrospective rating. Historical data is gathered through the unit statistical plan, which shows loss distributions by size of risk. Table M is used to determine the appropriate insurance charge for the retrospective rating formula.

Table-Funding – Loans for which a TPO takes the loan application and processes the documents. The lender may underwrite or approve the loan and fund the loan, but the loan is closed in the TPO’s name. The closed loan is subsequently transferred to the lender.

Tabular – NCCI, or independent rating bureau, retrospective plan where the factors used to develop the basic premium are derived from filed tables of expected loss ratios, expense ratios, excess loss premium factors, hazard group differentials, tax multipliers and retrospective development factors. Note NCCI has discontinued tabular rating plans.

Tabular – Of or pertaining to a table. Tabular cost is the cost of mortality, morbidity, or other claims, according to the valuation tables and assumptions used by the insurer.

Tabular Plan – A retrospective rating plan, which uses tables to furnish the various values for the rating formula.

Tabular Retro Plan – These are retro plans that do not permit the flexibility of setting the plan parameters. Tabular retro plans are actually printed tables showing the pre-set plan parameters based on premium size. These were withdrawn in most states in 1991.

Tactical Asset Allocation – Uses periodic assumptions about asset classes and the economy in general. The fund manager tries to improve portfolio performance by making “mid-course” changes in the long-term strategy based on near-term expectations.

Tail – This term has been used to describe both the exposure that exists after expiration of a policy and the coverage that may be purchased to cover that exposure. On “occurrence” forms a claims tail may extend for years after policy expiration, and the losses may be covered. On “claims made” forms tail coverage may be purchased to extend the period for reporting covered claims beyond the policy period.

Tailored Loan – A loan which falls outside the parameters of a product program.

Take Ones – These are printed pieces to be taken away. They are usually made available in a freestanding counter box with an elevated backboard.

Take Out Credit – Take Out Credit programs are available in a number of states. Take Out Credit is a plan to provide an incentive for insurers to take risks out of assigned risk pools. Carriers report premiums of risks taken out of assigned risk pools and receive a credit against their assessment base.

Target Benefit Plan – A qualified plan which is a combination of a defined benefit and defined contribution plan whereby an employer is required to fund a specific targeted benefit for plan participants. Target benefit palns impose defined contribution limitations for plan funding.

Target Rate of Return – This return is the starting point for the optimization program to search for more efficient portfolios and may be based on the client’s required return to meet an investment goal.

Target Risk – (1) Certain high-value bridges, tunnels, and fine art collections that are excluded from an automatic reinsurance contract to permit specific handling of the capacity problem and to release the reinsurer from the potential heavy accumulation of liability on any one risk. (2) A large, hazardous risk on which insurance is difficult to place. (3) A large, attractive risk that is considered a target for competing insurance companies.

Targeted Software Deployments – Installing software on all PC’s at one time – a software rollout.

Tariff Rate – A rate established by a rating organization, which comes from the tables, schedules and rules found in the tariff of rates.

Tax Basis – Money which has yet to be taxed, usually
part of a qualified plan benefit or distribution.

Tax Equity and Fiscal Responsibility Act – A federal law intended to prevent group term life insurance plans from discriminating in favor of “key” employees, and which amends the Social Security Act to make Medicare secondary to group health plans.

Tax Factor – A factor applied in retrospective rating to an insurance premium to increase it to cover state premium taxes.

Tax Multiplier – A factor in the retro rating formula which covers licenses, fees, assessments and taxes which the insurance carrier must pay on the premium which it collects.

Tax Sheltered Annuity – An annuity program under which contributions reduce the taxable income of participating employees, and the benefits are not taxable until distributed.

Tax-Deferred – Description of an investment whose earnings are not taxed until they are distributed to an investor. For example, funds placed in an individual retirement account (IRA) or Keogh plan are not taxed until withdrawal or when annuity payments begin.

Tax-Deferred Annuity – A tax-favored plan that permits an employee of a qualifying organization to enter into an agreement with his or her employer to have a portion of his or her earnings set aside for retirement. Income tax is deferred on the contributions, provided the amounts are used to purchase an annuity contract or regulated investment company’s shares, as well as the interest and earnings. Contribution amounts are limited by tax law and taxes are due on all contributions and interest and earnings upon withdrawal or when annuity payments begin, usually at retirement.

Tax-Exempt Securities – Bonds offering income payments that are not subject to taxation. These securities are issued by various state and local governments and are often called “municipals” or “munis.”

Tax-Free Rollover – The tax-free transfer of assets from one qualified retirement plan to an IRA or annuity, and vice versa.

Taxable Estate – Is equal to the adjusted gross estate less the marital deduction property and any charitable deductions.

Teachers Insurance and Annuity Association – An organization selling life and health insurance and annuities to college and university staff members.

Technical Progress Tracking – A method of ensuring technical progress is being made towards completion of planned work; also know as earned-value project scheduling.

Technical Request – An artifact that documents a user-related problem, change, or enhancement.

Technical Underwriting – The process of selecting risks and classifying them according to their degrees of insurability so that the appropriate premium rates may be assigned. The process also includes the rejection of those risks that do not qualify.

Tele – The use of telecommunications as a sales vehicle.

Tele-marketing – Tele-marketing is a method used to assertively promote an organization’s products, via the telephone and to answer questions from prospective customers, address their concerns, and overcome their objections. Inbound telemarketing activities include order taking, customer service, taking credit card orders, inquiry service, handling direct response from customers to print advertisements.

Tele-marketing Unit – The organizational unit within the Customer Service Group that is responsible for inbound / outbound telephone selling and cross-selling.

Telecom Related – Staff, LAN & WAN costs, network management related, telecom maintenance, etc.

Telephony – The science of telephones.

Temporary Agent – A person who is licensed to act as an agent for a brief period of time (usually 90 days) without taking a written examination. Temporary licenses are commonly granted to allow someone to continue the business of an agent who has died, become disabled, or entered active military service.

Temporary Disability Benefits – Legislated benefits payable to employees for nonoccupational disabilities under TDB laws in certain states.

Temporary Indulgence – A relief provision that allows the borrower an additional 30 days before more formal action is taken to cure a delinquency.

Temporary Partial Disability – This type of injury is considered temporary in terms of time and partial in terms of disabling injury.

Temporary Partial Disability – A condition where an injured party’s capacity is impaired for a time, but he is able to continue working at reduced efficiency and is expected to fully recover.

Temporary Total Disability – A condition where an injured party is unable to work at all while he is recovering from injury, but he is expected to recover.

Temporary Total Disability Claim – This type of injury is temporary in terms of time, but during the temporary period of time the injury is total as respects its impact on the claimant.

Ten Day Free Look – A notice, placed prominently on the face page of the policy, advising the insured of his or her right to examine a health policy, and if dissatisfied return the policy within ten days for a full refund of premium and no further obligation.

Ten Year Funding – Primarily for older individuals, this type of funding requires that premiums be payable for 10 years even though retirement is permitted within 10 years.

Tenancies for Years – Ownership of real property for a specific period of time.

Tenancy by the Entirety – A form of property ownership similar to joint tenancy, but which carries no rights of survivorship, no exclusions from the probate process and no protection from lawsuits and creditors.
U.S.

Government Securities – Securities issued by the U.S. government (i.e., Treasury bills, notes and bonds).

U.S. Longshoremen’s and Harbor Workers’ Compensation Act Coverage – A Federal law which provides for payment of compensation and other benefits to employees such as longshoremen, harbor workers, ship repairmen, shipbuilders, shipbreakers and other employees engaged in loading, unloading, repairing or building a vessel. It applies to such employees while working on navigable waters of the United States and also while working on any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other area adjoining such navigable waters customarily used for loading, unloading, repairing or building a vessel. It does not cover masters or members of the crew of a vessel.

Ultimate Net Loss – The total sum that the insured or any company as its insurer, or both, become legally obligated to pay either through adjudication or compromise, including among others, legal, medical, and investigative costs.

UL – Universal Life (Insurance)

ULIAS – Universal Life Administration System

Umbrella Insurance Policy – A policy with its own grant of coverage which provides limits of liability over specified underlying policies and/or self-insured retentions, in areas not covered by such underlying insurance.

Umbrella Liability – Covers 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.

Umbrella Liability Policy – A coverage basically affording high limit coverage in excess of the limits of the primary policies as well as additional liability coverages. These additional coverages are usually subject to a substantial self-insured retention. The term “umbrella” is derived from the fact that it is a separate policy over and above any other basic liability policies the insured may have.

Umbrella Policy – An insurance policy that provides excess liability coverage for both homeowners and automobile insurance, as well as coverage in some areas not provided for in either of these policies.

Umpire – For property coverage, if a company and a claimant fail to agree on the amount of loss, each may appoint an appraiser, and these in turn select an umpire. A decision by any two of the three is binding.

Unallocated Benefit – A reimbursement provision, usually for miscellaneous hospital and medical expenses, which does not specify how much will be paid for each type of treatment, examination, dressing, or the like, but only sets a maximum which will be paid for all such treatments.

Unallocated Benefit – A benefit providing reimbursement of expenses up to a maximum but without any schedule of benefits as such.

Unallocated Claim (or Loss) Expense – Expenses of loss adjustment that cannot be charged specifically to any claim. Examples would be claim department salaries and office overhead.

Unallocated Funds – Plan contributions are made or pooled for the benefit of all plan participants collectively.

Unapproved Forms – Any contractual form (policy or endorsement), election form, notice to insureds, proof of coverage form, certificate of insurance, and the like which do or may impose legal obligations on the Company, which have not been either: 1. Filed with and approved by the insurance department of the state in which it applies, or 2. Approved for use by the DBG legal division and the SWC Chief Underwriting Officer.

Unapproved/Overlined Reinsurance above Captive – This is the captive retrocession that is in excess AIG Reinsurance Security’s approved lines and without special approval.

Unbundling – Many surgeries involve incidental procedures, which are considered part of the overall procedure and should be included within the global price for that procedure. Unbundling dissects each incidental procedure and bills separately for it, thereby inflating the bill.

Underground Property Damage – Refers to damage to underground property, such as wires, conduits or pipes, sewers, etc., beneath the surface of the ground caused by the use of mechanical equipment for the purpose of grading land, paving, excavating, drilling, burrowing, filling, backfilling, or pile driving.

Underinsurance – A condition in which not enough insurance is carried to cover the insurable value.

Underinsured Motorist Coverage – A coverage in Business Auto Policy (BAP) under which the insurer pays damages to the insured up to specified policy limits, for bodily injury caused by another driver who is not adequately insured.

Underinsured Motorists Coverage – A coverage in an automobile insurance policy under which the insurer will pay damages up to specified limits for bodily injury damages, if the limits of liability under the liable motorist’s policy are exhausted and he cannot pay the full amount he is liable for.

Underlying – The amount of insurance or reinsurance on a risk that attaches before the next higher excess layer of insurance or reinsurance attaches.

Underwriter – A person trained in evaluating and selecting risks and determining the rates and coverages that will be used for them. The underwriter also will participate in the marketing, auditing and product development functions within specific lines of business.

Underwriter – A technician trained in evaluating risks and determining rates and coverages for them. The term derives from the practice at Lloyd’s of each person willing to accept a portion of the risk writing his or her name under the description of the risk.

Underwriter – A technician trained in evaluating risks and determining rates and coverages for them. The term derives from the practice at Lloyd’s of each person willing to accept a portion of the risk writing his or her name under the description of the risk.

Underwriter Processing System – Used by underwriters to process policies for many line of insurance. UPS processing includes rating, quoting, billing, binding and reinsurance. It provides automated rating for the simplified lines of insurance. After the policy is bound through batch processing, the EDI (Electronic Document Issuance) produces complete copies of the policy the next day via the local printers. UPS includes the following: General Liability, Commercial Property, Inland Marine, Builders’ Risk, Umbrella, Excess Workers Compensation, Crime, Commercial Package Policies, Renewals/Cancellations/Endorsements/Reinsurance Revisions, and Stats/Layoffs.

Underwriters Laboratories, Inc. – A testing laboratory for manufactured items to determine their safety propensities.

Underwriting – The process of selecting risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk.

Underwriting – The process of selecting risks and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify.

Underwriting – The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.

Underwriting Authority – The limit on decisions an underwriter can make without receiving approval from someone at a higher level.

Underwriting Limit – The maximum benefit amount which can be approved by the local underwriter without prior approval of a Regional Underwriting Manager or Head Office. Applications can be taken for amounts above the underwriting limit; however, the review and approval of the Regional Underwriting Manager or Head Office, is required prior to policy issuance.

Underwriting Loss – Loss Ratio and Expense Ratio is less than 100%.

Underwriting Profit – Loss Ratio and Expense Ratio is greater than 100%.

Underwriting Profit (or Loss) – (1) The profit or loss realized from insurance operations, as contrasted with that realized from investments. (2) The excess of premiums over losses and expenses (profit) or the excesses of losses over premiums (loss).

Underwriting Profit or Loss – The amount of money that an insurance company gains or loses as a result of its underwriting operations. A net gain or loss on underwriting operations represents a company’s statutory underwriting profit less any amount it may pay to its policyholders in the form of dividends.

Undiscounted Standard Premium – Premium before the application of premium discount, but after the experience and schedule modification.

Unearned Premium – That portion of the written premium applicable to the unexpired or unused part of the period for which the premium has been paid. For example, if the one year premium is $1200, at the end of the first month of the policy period, the company will have an earned premium of $100 and have an unearned premium of $1100.

Unearned Premium – That portion of the written premium applicable to the unexpired or unused part of the period for which the premium has been paid. Thus, in the case of an annual premium, at the end of the first month of the premium period eleven-twelfths of the premium is unearned.

Unearned Premium Reserve – The proportion of Written Premium that has yet to be earned over the policy period.

Unearned Premium Reserve – The amount shown in the insurance company’s balance sheet which represents the approximate total of the premiums which have not yet been earned as of a specific point in time.

Unearned Reinsurance Premium – That part of the reinsurance premium applicable to the unexpired portion of the policy reinsured.

Unemployment Compensation Disability Insurance – Health insurance that covers off-the-job accidents and sickness. It does not cover disability resulting from an injury or sickness covered by workers compensation insurance.

Unemployment Insurance – Insurance against loss of income due to unemployment. It is funded by payroll taxes and subject to control by both the federal and state governments. Individuals who are willing and able to work qualify for this insurance by working at a job in an eligible classification, earning a minimum amount of money, and being subject to involuntary unemployment.

Unfair Claim Settlement Practices Law – State laws designed to protect the consumer against unfair practices in the reporting, investigation, payment, and final resolution of insurance claims.

Unfair Trade Practices Law – State laws designed to protect the consumer against misleading, deceptive, monopolistic, or otherwise unfair practices in the business of insurance.

Unfunded Plan – Any pension plan which follows a “pay-as-you-go” method.

Unfunded Supplemental Actuarial Value – The excess of the Supplemental Actuarial Value over the Actuarial Asset Value.

Vacant – A term used in property insurance to describe a building that has neither occupants nor contents. Contrast with Unoccupied.

Validation – A procedure comparing the rank ordering of the quality of accounts of the accepted applicants to the rank ordering predicted by the system at development time. As long as the rank orderings remain substantially the same, the scoring system remains valid.

Valuable Papers and Records Coverage – An open perils (all risk) coverage for physical loss or damage to valuable papers and records of the insured. It includes practically all types of printed documents or records except money.

Valuation – A report that sets forth an estimate or opinion of value of collateral, usually proved for an individual qualified or certified as capable by a professional or governmental authority.

Valuation – (Life) Calculation of the policy reserve in life insurance.

Valuation – Estimation of the value of an item, usually by appraisal.

Valuation – (Pension) A mathematical analysis of the financial condition of a pension plan.

Valuation Assumption – An actuarial estimate of probable future experience of a pension plan with respect to rates of mortality, disability, turnover, age at hiring, age at retirement, investment yield, etc.

Valuation Clause – A clause stating the value of items for insurance purposes, making it a valued policy.

Valuation Reserve – A reserve against the contingency that the valuation of assets, particularly investments, may be higher than what can be actually realized or that a liability may turn out to be greater than the valuation placed on it.

Value Reporting Form – Commercial form designed for businesses that have fluctuating merchandise values during the year. As values are reported (monthly, quarterly or annually) the amount of insurance is adjusted. Reporting forms help eliminate problems of overinsurance and underinsurance, as well as the need to continually endorse a policy.

Value-Adding Activities – Steps/tasks in a process that meet all three criteria defining value as perceived by the external customer: 1.) the customer cares; 2.) the thing moving through the process changes; and 3.) the step is done right the first time.

Valued – Relating to an agreement by an insurer to pay a specified amount of money to or on behalf of the insured upon occurrence of a defined loss.

Valued Policy – A policy which states that in the event of a total loss, a specific amount will be paid, that being the amount stated in the policy. The effect is to eliminate the need for determining the actual cash value of an item of property in the event of a total loss. It is generally used with certain more valuable items, such as fine arts, antiques, and furs.

Valued Policy Law – A law passed by a state legislature which requires that in the event of a total loss to a building, the insurance company must pay the face amount of a valued policy, regardless of the actual cash value of the property which was destroyed. It can have the effect of allowing the insured to recover an amount much greater than the actual cash value of the property. The intent of the law is to guard against unscrupulous insurers purposely writing in excess of the value of property in order to collect greater premiums.

Values – Used in life insurance terminology as a shortened term for nonforfeiture values.

Vandalism – The malicious or ignorant, often random, destruction or spoilage of another person’s property.

Vandalism and Malicious Mischief – Damage or destruction to property which is willful. Traditionally VM&M coverage was optional on many forms or added by endorsement, but today it is automatically covered by basic commercial and homeowner forms.

Variable Annuities – Investment contracts whose issuer pays a periodic amount linked to the investment performance of underlying portfolios. The contract’s returns vary with the performance of the underlying investments. Variable annuities are one of the most popular types of annuities.

Variable Annuity – An annuity contract in which the amount of the periodic benefit varies, usually in relation to security market values, a cost-of-living index, or some other variable factor in contrast to a fixed or guaranteed return annuity. As a hedge against inflation, the variable annuity presents investment risks to the annuitant.

Variable Contracts – Contracts such as variable annuities or variable life insurance which contain an element of risk for the investor depending on the performance of the separate account backing the contract. Generally, these contracts are products of insurers but regulated by both state insurance departments and the federal government.

Variable Life Insurance – Any individual policy that provides life insurance, the face amount or duration of which varies according to the investment performance of the separate account established and maintained by the insurer for such a policy.

Variable Universal Life – A policy combining features of Universal Life and Variable Life Insurance in that excess interest credited to the cash value account depends on investment results of separate accounts (equities, bonds, real estate, etc.). The policyowner selects the accounts into which the premium payments are to be made. However, since this is security, filing with the Securities and Exchange Commission (SEC), an annual prospectus, an audit of separate accounts, and agent registration with the National Association of Securities Dealers (NASD) are required.

Variable Universal Life Insurance – A form of life insurance within which the benefits, payable upon death or surrender and/or the premium vary with the investment performance of the assets backing the contract. These contracts usually include a choice of investments, such as stocks, bonds, money market accounts, etc. Earnings from variable life policies are tax-deferred until distributed.

Variance – The difference by which cost and schedule vary from the plan. Negative variances are unfavorable indicators, such as behind schedule or over cost. Positive variances are favorable indicators, such as ahead of schedule or under cost.

Vendee – A person who purchases property.

Vendor – A person who sells property.

Vested Commissions – Commissions on renewal business which are paid to the agent whether or not he or she still works for the insurance company with which the business is placed.

Vested Interest – A person has a right to either the present or future enjoyment of personal property.

Vested Liability – The present value of a participant’s retirement benefits which are non-forfeitable.

Vesting – The attainment of a benefit right by a participant, attributable to employer contributions, that is not contingent upon a participant’s continuation in specified employment.

Viatical Settlement – A written contractual agreement under which the policyholder of a life insurance contract covering the life of a terminally ill person assigns, transfers ownership, or otherwise irrevocably designates all control and rights in the contract to another person or entity in exchange for the advance payment of a portion of the death benefits. Under these arrangements, a portion of the proceeds is paid to the insured or policyholder prior to the actual death of the insured person.

Viatical Settlement Company – A company or firm that specializes in negotiating viatical settlements with policyholders of life insurance contracts covering the lives of terminally ill persons.

Vicarious Liability – The law says that under certain circumstances a person is liable for the acts of someone else. For example, in matters related to an automobile a parent might be held responsible for the negligent acts of a child. In such a case the parent would be vicariously liable.

Vintage/Life Cycle Analysis – Tracking performance of specific portfolio segments from first booking through maturity (term loans) or steady state (revolving credits). This technique allows comparison of different portfolios at comparable points in the credit cycle. For example, a group of accounts approved in one year can be compared to others approved in another year (both at 12 months from the booking date). Managers can then relate policy decisions and process changes made during the credit cycle to performance variations from past vintages and identify the need for policy and/or process adjustments.

Vis Major – An accident for which no one is responsible, an act of God.

Vision Care Coverage – A health care plan usually offered only on a group basis which covers routine eye examinations, and which may cover all or part of the cost of eyeglasses and lenses.

W Factor – The W (weighting) Factor is used in the experience rating formula to adjust for the mathematical credibility of the insured’s loss history. This value is a ratio that determines the percentage of excess losses to enter the experience rating calculation. It is applied to both actual excess losses and expected excess losses.

Wage Indexing – A cost of living increase applied to Social Security benefits after a worker has achieved eligibility for benefits.

Waiting Period – The period of time between the beginning of a disability and the start of disability insurance benefits. Also called Elimination period.

Waiver – A DBG/ISG PIF exception is applied for at the inception of a project when it is recognized that during the Initiate phase all the required entrance and exit criteria for one or more activities of the DBG/ISG PIF can not be adhered to while meeting the mandated project deliverable dates. Re-negotiation of dates, additional staffing, phased implementation and other alternatives should be sought instead of a DBG/ISG PIF Waiver. Note: A Risk Notice is not used for waiver; a risk is created to manage a project slip.

Waiver – (1) A rider waiving (excluding) liability for a stated cause of injury or sickness. (2) A provision or rider agreeing to waive premium payments during a period of disability of the insured. (3) The act of giving up or surrendering a right or privilege that is known to exist. In property and liability fields, it may be effected by an agent, adjuster, company, employee, or company official, and it can be done either orally or in writing.

Waiver of Coinsurance – A provision in a property policy that the coinsurance clause will not apply if the total loss does not exceed a stated amount, such as 2% of the sum insured or the amount of $2,500, whichever is greater. The reason for such a provision is to eliminate having to do a large inventory in order to determine whether or not the insured has complied with the coinsurance clause, especially where very small losses are involved.

Waiver of Premium – In life insurance, action by the insurance company canceling premium payments by an insured who has been disabled for at least six months. The policy remains in force and continues to build cash values and pay dividends (if it is a participating policy), just as if the insured was still making premium payments.

Waiver of Restoration Premium – (1) An agreement or decision to forego any premium for reinstatement of the face amount of coverage under an insurance policy after it has been reduced by the amount of a loss payment. (2) A provision, especially in bonds, for automatic restoration of the full amount of protection without cost to the insured.

Wall Street Journal Symbol – The symbol under which an investment option is listed in The Wall Street Journal. This symbol may be different in other newspapers.

War Clause – A provision excluding liability of an insurer if a loss is caused by war.

War Risk Coverage – Special coverage to insure against one or more of the hazards normally listed in the “War” exclusion of a Personal Accident policy.

War Risk Insurance – Insurance covering damage caused by war. Most often written by ocean marine insurance companies covering vessels.

Warehouse and Custom Bond – A bond guaranteeing the payment of custom duties.

Warehouse Line of Credit – An agreement that covers the short-term lending of funds by a commercial bank or other institution to extend credit up to a certain amount for a certain time to an entity using the loans funded by the warehouse line as collateral. This form of interim financing is used until the loans are sold to a permanent investor.

Warehouse-to-Warehouse Coverage – A clause sometimes found in inland marine coverages extending the policy to cover from the shipper’s warehouse to the consignee’s warehouse.

Warehousemens Legal Liability – Coverage protecting warehousemen from liability claims, common to the business of warehousing, for loss or damage to property in storage.

Warranties – Statements made on an application for insurance, which are warranted to be true; that is, that they are exact in every detail as opposed to “Representations.”

Warrants – Warrants are long term call options. Generally, a warrant holder has the right, but not the obligation, to buy common shares of a company at a given price during a specified period.

Warranty – A statement made on an application for most kinds of insurance that is warranted as true in all respects. If untrue in any respect, even though the untruth was not known to the applicant, the contract may be voided without regard to the materiality of the statement. By contrast, statements in life and health applications are not warranties except in cases of fraud, and the trend in more recent court decisions in other lines has tended to modify the doctrine of warranty to an application only when the statement is material to a risk or the circumstances of a loss.

Warranty Policy – A policy written by a reputable company. The term is used in cases where additional coverage is needed: The additional policies all state that the reputable company’s warranty policy will stay in force and that they provide coverage exactly like that of the warranty policy.

Warsaw Convention – An international agreement setting limits of liability on international flights with respect to payments for bodily injury and death.

Watchman Warranty Clause – A provision often found in a burglary or fire policy providing for a reduced premium if there is a watchman on duty.

Watchperson – Under commercial crime insurance coverages, any person retained to have care and custody of the insured’s property inside the premises, and who has no other duties.

Water Damage Clause – A provision affording coverage for certain specified causes of water damage, e.g., damage caused by water leakage, overflow of heating or air-conditioning systems, or plumbing.

Water Damage Legal Liability Insurance – Coverage for an insured who suffers a water damage loss which also damages the property of others on the floor below or in adjoining premises.

Wave Damage Insurance – Coverage against damage to property resulting from high waves or tides.

We/Us/Our – These words are used to refer to the insurer in many of the modernized/personalized policy forms recently introduced.

Wear and Tear Exclusion – An exclusion found in many inland marine policies. It excludes loss resulting from wear and tear, which means normal usage over a period of time which reduces the value of the property insured.

Wedding Presents Floater – A form which provides temporary coverage for wedding presents, usually starting shortly before the wedding and ending shortly thereafter.

Weekly Premium Insurance – (1) A policy the premium on which is collected weekly by an agent calling at the door. It is usually sold in small face amounts. (2) A form of debit or industrial life insurance.

Weighted Average Coupon – The WAC of any group of loans is calculated by -Multiplying the unpaid principal balance of each loan by its coupon rate (resulting in a “product” for each loan); then -Adding the products so obtained for all of the loans; then -Dividing the sum of the products by the aggregate unpaid principal balance of all the loans in the group.

Weighted Average Remaining Maturity – The WARM of any group of loans is calculated by -Multiplying the gross receivable of each loan by the number of months remaining to maturity (resulting in a “product” for each loan); then -Adding the products so obtained for all of the loans; then -Dividing the sum of all the products by the aggregate unpaid principal balance of all the loans in the group.

Wet Marine Insurance – Insurance provided on ocean marine forms, covering ships and their cargos.

While Clauses – Clauses which suspend coverage “while” certain conditions exist, such as vacancy.

Whole Dollar Premium – In many insurance contracts today, the premiums are rounded to the nearest dollar, rather than carrying them out to the nearest cent. An amount of 51 cents or more is usually rounded up to the next dollar, and any cents amount less than that is dropped.

Whole Life Insurance – Insurance which may be kept in force for a person’s whole life and which pays a benefit upon the person’s death, whenever that may be. All whole life policies build up nonforfeiture values, but they are paid for in 3 different ways. Under a straight or ordinary life policy, premiums are paid for as long as the insured lives. A single premium policy is paid for at one time in one premium. Between these two types there are many limited-payment plans, under which the insured pays premiums for a certain period or until reaching a certain age. Contrast with Term Insurance.

Widow(er)’s Benefit – An early retirement benefit, at age 60, under Social Security for the surviving spouse of a covered worker.

Will – A legally enforceable declaration of an individual’s plan for the disposition of property.

Windstorm – Wind of sufficient violence to be capable of damaging insured property. Windstorm coverage has traditionally been part of extended coverage (EC), but today it is usually included automatically as part of basic coverages.

Wireless Fidelity – A high-speed, wireless networking standard.

Wisconsin Life Fund – The system of state underwritten and issued life insurance established by the state of Wisconsin and providing life insurance for citizens who apply. Wisconsin is unique among the 50 states in this respect.

Work and Materials Clause – This is a provision found in many property insurance policies which states that the insured is allowed to have the typical types of work and materials for his or her business. The clause makes this clear so that the policy cannot be voided later because of the “increased hazard” provision of the Standard Fire policy.

Work Life Cycle – An approach to performing project management and related tasks according to a predefined phased approach such as start-up, planning, agree to proceed and tracking.

Work Product – Work products are work effort deliverables; any output created as part of defining, maintaining or using a software process.

Work Program – In Contract Bond Reinsurance, a clause specifying that reinsurance attached at a specified level of a principal’s total volume of work, rather than on the conventional basis of individual contract or bond amount.

Workers Compensation – (1) A schedule of benefits payable to an employee by the employer without regard to liability, required by state law in the case of injury, disability, or death as the result of occupational hazards. (2) Insurance agreeing to pay workers compensation law benefits on behalf of the insured employer.

Workers Compensation Catastrophe Policy – Excess of Loss Reinsurance purchased by primary insurers to cover their unlimited medical and compensation liability under the compensation laws of the several states.

Workers Compensation Insurance – Insurance coverage which has a schedule of benefits providing for the cost of medical care and weekly payments for injury, disability, dismemberment or death of employees sustained in the workplace, regardless of blame.

Workers Compensation Policy Information – This is a weekly mainframe process that generates tapes containing policy level information to report compliance. It extracts workers compensation data from the Green database (which contains WCPC and AIWCS workers compensation policy data) and formats it into various state record types according to NCCI and independent State Bureau reporting requirements. It also includes Unit Stat reporting, Detailed Claim Reporting (DCI) and Individual Claim Reporting (ICR).

Workers Compensation/Profit Center – A complete rating system that incorporates all state regulations for the Worker Comp line of insurance. All policy processes (rating, reinsurance, billing, blinding, as well as renewals, cancellations and endorsements) are handled by WC/PC. Accounts must be reserved in SPARS first. WC is a PC system and is resident on the LANS (Local Area Networks). WC/PC supports full EDI.

Workers’ Compensation Insurance – A method of providing for the cost of medical care and weekly payments to injured employees or to dependents of those killed in industry, regardless of blame.

Workers’ Compensation Insurance – A method of providing for the cost of medical care and weekly payments to injured employees or to dependents of those killed in industry, regardless of blame.

Working Cover – A contract covering an area of excess reinsurance in which loss frequently is anticipated.

Workout – A permanent alternative to legal action such as repossession or foreclosure.

Workplan – A spreadsheet inventory of implementable software units, modules, or Change Requests that are scheduled for a release. Development as a spreadsheet is preferable to placing the information in the Project Plan, because it is more easily managed.

World Wide Risk Analysis – Provides accurate and timely risk analysis reporting for AIU and PCRM.

World-class service – Service that would be considered best-in-class by its customers.

Worldrisk – The Windows-based WorldRisk underwriting system provides foreign commercial risk coverage for middle market companies.

Worldwide Engineering and Loss Control Services – Created to address worldwide environmental, health and safety issues, using e-service technology to disseminate information and knowledge to the global marketplace.

Yacht Insurance – Insurance providing hull coverage and protection and indemnity liability coverage on pleasure boats. It is usually written on an open perils (all risk) basis for hull coverage, although named-perils forms are sometimes used.

Year Plan – A calendar, policy, or fiscal year on which the records of the plan are kept.

Yearly (or Annual) Renewable Term – (1) Term life insurance that may be renewed annually without evidence of insurability until some stated age. (2) A form of life, and sometimes health, reinsurance in which the reinsurer assumes only the mortality risk, which is usually calculated as the face amount of reinsurance minus the terminal reserve.

Yearly Renewable Term – Coverage that is renewable at the option of the insured, who is not required to take a medical examination. Regardless of physical condition, the insured must be allowed to renew the policy and the premium cannot be increased to reflect any adverse physical condition. However, the premium of each renewal increases to reflect the life expectancy of the individual at that particular age.

Yield Equivalence – The rate of interest at which a tax-exempt bond and a taxable security of similar quality provide the same return. To calculate the yield that must be provided by a taxable security to equal that of a tax-exempt bond for investors in different tax brackets, the tax-exempt yield is divided by the reciprocal of the tax bracket (100 less 28%, for example) to arrive at the taxable yield. To convert a taxable yield to a tax-exempt yield, the formula is reversed, that is, the tax-exempt yield is equal to the taxable yield multiplied by the reciprocal of the tax bracket.

Yield to Maturity – The yield of a bond were it held to maturity, including purchase price, coupon rate and present value.

York Antwerp Rules – A set of rules by which ocean marine general average losses are adjusted.

You/Your – These words are used to refer to the named insured in many of the modernized/personalized policy forms.

Z Table – A mortality table showing ultimate experience on insured lives computed from the experienced mortality on life policies issued by major companies from 1925 to 1934. The Z Table was a step in the development of the Commissioners’ Standard Ordinary (CSO) Table of Mortality.

Zero Coupon Bonds – Debentures and/or guaranteed debt securities issued at a discount of their redemption price. The investor’s return is equal to the difference between the face amount of the bond (which is paid to the investor at maturity) and the purchase price.

Zone-Rated Risk – Any commercial motor vehicle (other than a light truck) which travels on a regular and frequent basis a distance of more than 200 miles from its place of principal garaging. Rates for long-distance trucks, therefore, are based on ‘zone pairs’, i.e., the endpoints of the straight-line distance from the truck’s principal garage to the place of its farthest operation.