PreNeed Glossary
Insurance Company
(1) Every person or company engaged in the business of making contracts of insurance. (2) The party to an insurance arrangement who undertakes to indemnify for losses, provide other pecuniary benefits, or render service.
Written
(1) Insurance for which the application has been taken and the policy has been issued. (2) The entire amount of insurance premium on contracts issued by the insurance company.
Participating
(1) Insurance that pays policy dividends. (2) Insurance or reinsurance which contributes proportionately with other insurance on the same risk.
Limits
(1) Maximum amount of benefit payable for a given situation or occurrence. (2) Ages below or above which the insurance company will not issue a new policy or above which it will not continue a policy in force.
Insurance
A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to assume, to a specified extent, the losses suffered by the insured.
Proof of Loss
A formal statement made by the insured to the insurance company regarding a loss. The purpose of the proof of loss is to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy or bond.
Accident
A fortuitous event, unforseen and unintended.
Fraternal
An insurance company organized under a special section of the state insurance code, characterized by a lodge or social system, and issuing insurance only to members. Also the insurance is sued by such an insurance company.
Carrier
An insurance company that "carries" the insurance. (The terms "insurance company" or "carrier" with transportation terminology)
Direct Writer
An insurance company that sells its policies through salaried employees (licensed agents), who represent it exclusively, rather than through independent local agents, who represent several insurance companies
Legal Reserve Company
An insurance company, which maintains the legal reserve, not required of assessment insurance companies
Cease and Desist Order
An order of the state Insurance Commissioner or of a court requiring that a company or person stop engaging in a particular act or practice, usually involving insurance trade practices
Leading Producers' Round Table
An organization of agents who qualify for membership annually (or on a life basis) by producing certain high levels of health insurance premium volume in a year. Sponsored by the International Association of Health Underwriters
Health Maintenance Organization (HMO)
An organization of health providers. Each member pays a premium, for which he receives medical care when desired. the emphasis is on preventive medicine, and it is an alternative to employee benefit plans. Employers or 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.
Preferred Provider Organization (PPO)
An organization of hospitals and physicians who provide, for a set fee, services to insurance company clients. these providers are listed as preferred, and the insured may select from any number of hospitals and physicians without being limited, as with an HMO. Coverage is 100%, with a minimal co-payment for each office visit or hospital stay. Contrast with Health Maintenance Organization.
Rated Bureau
An organization that classifies and promulgates and in some cases complies data and measures hazards of individual risks in terms of rates in a given territory
Boycott
An unfair trade practice that occurs when someone in the insurance business refuses to have business dealings with another until he or she complies with certain conditions or concessions
Fortuitous Event
An unforeseen accident
Prohibited Risk
Any class of business which an insurance company will not insure under any condition.
Adverse Underwriting Decision
Any decision involving individually underwriting insurance coverage, resulting in termination of existing insurance, declination of an application, or writing them coverage, onl at higher rates. For property and casualty insurance, it also includes placing the coverage with a residual market mechanism or an unauthorized user.
Compulsory Insurance
Any form of insurance that is required by law
Monoline Policy
Any insurance coverage written as a single line policy
Insurable Interest
Any interest in a subject of insurance or any legal relation to it of such a nature that a certain happening might cause monetary loss to the insured
Dividend Option
Any one of several ways to take policy dividends other than in cash, as provided in the policy
Insuring Clause
The clause in a policy that specifies, in brief, the contract's intent
Debit
The collectible premium accounts assigned to one industrial or combination agent
Estoppel
The legal right an insured has if,k an insurer persuades him or her to violate a contract condition and then voids the contract because the contract has been violated
Time Limits
The limits of time within which notice of claim and proof of loss must submitted.
Reinsurance
(1) A contract of indemnity against liability bywhich the insurance company procures another insurance to insure it against loss or liability by reason of the original insurance. (2) Insurance by one insurance company of all or part of a risk accepted by it with another insurance company which agrees to reimburse the insurance company for the portion of the claim reinsured. The insurance company obtaining the reinsurance is called the "ceding insurance company;" the insurance company issuing the reinsurance is called the "reinsurer." A reinsurer may, in turn, seek reinsurance on some portion of the risk it has reinsured, a process known as "retrocession."
Cover
(1) A contract of insurance. (2) To effect insurance. (3) To include within the coverage of a contract of insurance
Underwriter
(1) A person trained in evaluating risks and determining the rates and coverages that will be used for them. (2) An agent, especially a life insurance agent, who might qualify as a "field underwriter." In theory, the agent is supposed to do some underwriting before submitting the case to the home office underwriter; i.e., to make a decision on the basis of facts known to him on whether or not the risk is sound and to report all facts known to him that might affect the risk.
Waiver
(1) A rider waiving (excluding) liability for a stated cause of accident or (especially) sickness. (2) A provision or rider agreeing to waive (forego) premium payment during a period of disability. (3) The giving up or surrender of a right or privilege that is known to exist. It may be effected by the agent, adjuster, or insurance company employee or official orally or in writing.
Annuity
(1) An amount of money payable yearly, or by extension, at other regular intervals; (2) An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.
Reserve
(1) An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion a reserve may be an asset, such as a reserve for taxes not yet due.
Pro Rata
(1) Distribution of the amount of insurance in one policy, among the several objects or places covered, in proportion to their value or to the amounts shown. (2) The distribution of liability among the several insurance companies having policies on the risk
Premium
(1) Part of the consideration for the insurance, by whatever name called. (2) The periodic payment made to keep a policy in force. Premium and rate are sometimes incorrectly used interchangeably. Technically, rate is the amount charged for a given unit of insurance coverage, and premium is the sum of the unit rates for a given policy. (3) In annuities, the purchase payment
Reinstatement
(1) Putting a lapsed policy back in force. (2) The payment of a claim under some forms of insurance reduces the principal amount of the policy by the amount of the claim. Provision is usually made for a method of reinstating the policy to its original amount. This may be done automatically either with or without premium consideration or at the request of the insured.
Protection
(1) Term used interchangeably with the word "coverage" to denote the insurance provided under the terms of a policy. (2) Term used to indicate the existence of fire-fighting facilities in an area known as a "protected" area.
Retention
(1) The amount of liability assumed but not reinsured by an insurance company. (See Net Line and Reinsurance). (2) A risk management form which means to retain a risk rather than insuring or transferring it.
Contribution
(1) The share of a loss payable by an insurer when contracts with two or more insurers cover the same loss. (2) The insurer's share of a loss under a coinsurance or similar provision. (3) The amount of the premium for group insurance or a pension plan paid by the employee
Release
(1) To give up, abandon, and discharge a claim or an enforceable right to one as against another. (2) Name of the instrument or form evidencing such an act.
Conversion
(1) Wrongful use of property by one in lawful possession of it. (2) The change of one policy form to another, usually without evidence of insurability.
Risk
(1) a chance of loss. (2) a person or thing insured (impaired or substandard risk: an applicant whose physical condition or moral habits do not meet the standard on which the rate is based)
Lifetime Policy
(1) a policy guaranteed renewable or non-cancelable to age 65 (or sometimes later). (2) A policy paying disability benefits for life
Ordinary Life
(1) all life insurance policies not classifiable as Industrial or Group, and (2) a continuous premium, whole life policy (also sometimes called Straight Life)
Trust Agreement
(1) in connection with a Life Insurance policy, a supplemental agreement to pay the proceeds in a manner specified in the agreement. (2) In the field of Trusts, an agreement under which a trustee manages and distributes property for the beneficiaries of the Trust
Term
(1) relating to a contract of health insurance that makes no provision for renewal or termination, other than by expiration of the policy term. (2) Life insurance issued for a term of years, after which it expires without value. (3) The period for which the coverage runs, which is usually the period for which the premium is paid in a Health Insurance Policy. Usually used as policy term. (4) A period of time for which a policy or a bond is issued
Exposure
(1) state of being subject to the possibility of loss; (2) extent of risk as measured by payroll, gate receipts, area, or otherwise; (3) possibility of loss to a risk being caused by its surroundings
Net Premium or Rate
(1) the pure insurance premium. (2) In life insurance, a participating premium after subtracting dividends paid or anticipated. (3) In property/liability insurance, the gross premium less the commission.
Power of Agency
(See Agent's Authority)
Provisional Premium
(See Deposit Premium)
Revival
(See Reinstatement)
Non-Par
(See non-participating)
Level Premium Insurance
(life insurance) the premium which remains at the same level (amount) throughout the life of the insured
Assessment Company
(or Society or Insurer) -- an insurance company that retains the right to assess additional amounts the policyowner must pay if premiums are insufficient for operations. In some cases, an assessment company may not charge a fixed or stipulated premium at all, but merely assesses participants in the pan a pro rata share of each claim filed and expesnes
Variable Life Insurance
A form whose face value varies, depending upon the value of the dollar or securities or other equity products at the time payment is due
Non-Admitted Insurance Company (Insurer)
An insurance company not licensed to do business in a given state.
Experience
The loss record of an insured, a class of coverage, or of an insurance company
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
Accidental Death Insurance
A form of health insurance, that provides payment if death of the insured results from accident. Accidental death insurance is often combined with dismemberment insurance in a form called Accidental Death and Dismemberment.
Time Limit on Certain Defenses
A Uniform Provision specifying that after a given number of years (usually two or three) no statements (except fraudulent misstatements) made in the application shall be used to deny a claim or void the policy,and that no claim shall be denied or reduced on the group that a disease or physical condition not excluded at time of issue existed prior to effective date
Tertiary Beneficiary
A beneficiary designated as third in line to receive proceeds or benefits, if the primary and secondary beneficiaries do not survive to drawn them
Irrevocable Beneficiary
A beneficiary that cannot be changed without his or her permission
Incontestability Clause
A clasue in a health insurance policy, providing that after the policy has been in force for a given length of time (two or three years), the insurance company shall not be able to contest it as to statements, contained in the application and 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. A clause usually found in policies guaranteeing renewability. Other policies usually use a variation of the clause entitled "(See Time Limit on Certain Defenses). Both are contained in the mandatory Uniform Provisions.
Automatic Reinstatement
A clause providing for automatic reinstatement of the full value of the policy, after payment of a loss
Living Need Benefits
A combination or life insurance and long-term care insurance, which allows life insurance benefits to generate long-term care benefits. Up to a certain percentage of the life insurance policy's death benefit may be used in advance to offset nursing home or medical expenses, reducing the face amount of the life policy
Pre-Existing Condition
A condition of health or physical condition (and sometimes moral condition) that existed before the policy was issued
Moral Hazard
A condition of morals or habits that increase the probability of a loss from a peril
Non-Cancellable ("Non-Can")
A contract of Health Insurance that the insured has a right to continue in force by payment of premiums, as set forth in the contract, for a substantial period of time, also as set forth in the contract. during that period of time, the insurer has no right to make any change in any provision of the contract. The NAIC recommends that the term "non-cancelable" not be permitted to be used to designate any form that is not renewable to at least age 50, or for at least 5 years if issued after age 44. Note that this is in contrast to Guaranteed Renewable, on which the premium may be increased by classes. The premium for non-cancelable policies must remain as stated in the policy at the time of issue
Individual Contract
A contract of health insurance made with an individual that covers him and, in certain instances, specified members of his household. In general, any insurance policy except group or blanket
Conditionally Renewable
A contract of health insurance that provides that the insured may renew the contract to a stated date or an advanced age, subject to the right of the insurance company to decline renewal only under conditions defined in the contract
Group Contract
A contract of insurance made with an employer or other entity that covers a group of persons identified by reference to their relationship to the entity buying the contract. The group contractual arrangement is generally used to cover employees of a common employer, members of a trade association or trusteeship, members of a welfare or employee benefit association. members of a labor union, or members of a professional or other association not formed only for the purpose of obtaining insurance.
Cancellable
A contract of insurance that may be terminated by the insurance company or insured at any time. Virtually every form of insurance is cancellable except life insurance and those health insurance policies designated as "guaranteed renewable" or "noncancellable and guaranteed renewable"
Guaranteed Renewable
A contract that the insured has the right to continue in force by the timely payment of premiums for a substantial period of time, as set forth in the contract. During that period of time, the insurer has no right to make any change in any provision of the contract other than a change in the premium rate for all insureds in the same class
Contract of Insurance
A contract whereby an insurance company agrees to indemnify an insured for losses, provide other benefits, or render services to, or on behalf of, an insured. (The contract of insurance is often called an "insurance policy", but "policy" is merely the evidence of the agreement.)
Adjustable Life
A form of life insurance, which allows changes on the policy face amount, the amount of premium, preiod of protection, and the length of the premium payment period.
Precertification Authorization
A cost containment technique which requires physicians to submit a treatment plan and an estimated bill prior to providing treatment. This allows the insurer to evaluate the appropriateness of the procedures, and lets the insured and the physician know in advance which procedures are covered and at what rates benefits will be paid.
Insured Contract
A definition, which shapes the extent of contractual liability coverage by describing the types of contracts, which are insured. On modern liability forms, "insured contract" includes leases of premises, sidetrack agreements, elevator maintenance agreements, easement agreements, and other agreements related to the insured's business.
Total Disability
A degree of disability from injury or sickness that prevents the insured from performing the duties of any occupation for remuneration or profit. The definition, in any given case, depends on the wording in a covering policy
Brokerage Department
A department of an insurance company, the purpose of which is to aid agents in handling insurance outside of their territory and to aid brokers int he placing of insurance throughout the country
Chartered Property and Casualty Underwriter (CPCU)
A designation, granted by the American Institute for Property and Liability Underwriters, upon successful completion of a series of examinations and experience requirements in the fields of insurance, plus accounting, financing, economics, management, and law.
Direct Selling System
A distribution system within which the insurance company deals with the insureds through employees
Accelerated Endowment
A divided option, allowing dividend accumulations to be applied to convert a life insurance policy into an endowment, or to shorten the endowment term.
Securities Exchange Act of 1934
A federal law that requires the registration of companies and agents with the federal government if they are selling securities
Securities Act of 1933
A federal law which requires full and fair disclosure and the use of a prospectus in the sale of securities
Investment Company Act of 1940
A federal law, which regulates the organization and activities of investment companies and requires the registration of investment companies with the federal government
Loss Constant
A flat amount included in the premium for small Workers' Compensation policies, for dwellings in some jurisdictions, and for some prescribed Inland Marine Insurance lines. The purpose of the Loss Constant is to offset the greater-than-average loss experience, which most small risks have when compared to all other risks in a given classification
Expense Constant
A flat charge added to the premium of small accounts where the premium is so low that the cost of issuing and servicing the policy cannot be recovered. Most often used with Workers' Compensation policies.
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
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: If he reaches that age, the proceeds would be payable to him. If he dies prior to that age, the proceeds would be payable to the designated beneficiary as a Life Insurance benefit
Disability Income Insurance
A form of health insurance that provides periodic payments to replace income, actually
Contributory
A general term used to designate any plan of insurance (usually group or franchise) in which the insured pays at least part of the premium
Insurance Department
A governmental bureau in each state or territory (and federal government in Canada) charged with administration of the insurance laws, including licensing of agents and insurance companies and regulation and examination of them. In some jurisdictions, a division of some other state department or bureau.
Deferred Group Annuity
A group annuity providing for the purchase each year of a paid-up deferred annuity for each covered person, the total amount receivable at retirement being the sum of the individual paid-up annuities
Deposit Administration (DA)
A group annuity, providing for the accumulation of contributions in an undivided fund, out of which annuities are purchased for each individual member of the group when he retires
Non-Occupational
A health insurance policy that covers off-the-job accidents and sickness
Presumption of Agency
A legally binding agency relationship when, in fact, no formal agency agreement is in effect. If an insurer acts to give the appearance of agency, perhaps by furnishing letterhead and applications before a person has been licensed and appointed, an agency relationship exists under the law and the insurer may be legally bound by acts of persons acting as agent
Family Income Policy
A life insurance policy that pays an income after the death of the insured for a stated number of years from date of issue of the policy, and then pays the face amount.
Flexible Premium Policy
A life insurance policy under which the policyholder may vary the amount or timing of premium payments.
Premium Loan
A loan made by the insurance company to the insured, with the cash value of the policy as security to pay a premium due.
Elimination Period
A loosely used term, sometimes designating the waiting period and sometimes the probationary period. (See also Waiting Period and Probationary Period)
Pure Risk
A loss or no-loss situation, as opposed to a situation when a loss or gain is possible
Aggregate Indemnity
A maximum dollar amount that may be collected for any disability, period of disability, or under the policy.
Medicaid
A medical benefits program, administered by states and subsidized by the federal government. Under this plan, various medical expenses will be paid to those who qualify. It is technically referred to as Title XIX Benefits
Annuity Option
A method of liquidating and distributing an annuity;s principal and interest so that is lasts for the lifetime of the annuitant.
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 5 years), after which it becomes a level premium
Account Current
A monthly premium statement between the company and the agent, showing writings, cancelations, endorsements, commissions.
Premium Notice
A notice from the insurance company to the policyowner that a premium is (or will be) due on a given date
Outpatient
A patient who is not a bed patient in the hospital in which he receives treatment
Experience Modification
A percentage increase or reduction in rates produced by application of the experience rating plan, based on the loss history of the insured.
Grace Period
A period of time (commonly 30-31 days) after premium-due date during which a policy remains in force without penalty even though the premium due has not been paid.
Free Look
A period of time (usually 10, 20 or 30 days) during which a policyholder may examine a newly issued individual policy of life or health insurance, and surrender it in exchange for a full refund of premium if not satisfied for ally reason
Waiting Period
A period of time between the beginning of a disability and the date benefits begin (See Elimination Period and Probationary Period)
Probationary Period
A period of time between the effective date of a health insurance policy and the date coverage begins for certain conditions. See Elimination Period and Waiting Period for distinctions.
Principal
A person or organization whose obligations are guaranteed by a bond
Attorney-in-Fact
A person to whom authority is given by an individual to exchange insurance with other persons, as in reciprocal insurance
Beneficiary
A person who may become eligible to receive, or is receiving, benefits under an insurance policy, other than as a participant
Fiduciary
A person who occupies a position of special trust and confidence (for example, in handling or supervising the affairs or funds of another)
Qualified Plan
A plan under which contributions by the employer are allowed as a deduction from taxable income, and which provides that the deposits for his employees' future benefits are not to be considered as taxable income to them in the year in which they are made.
Profit-Sharing Plan
A plan under which some of the profits of a company are set aside for distribution to qualified employees. the plan may provide for immediate distribution, or distribution upon death, disability, termination or attainment of a specific retirement age. Such plans are subject to special tax exemption if they meet the requirements of the Internal Revenue Code.
Simplified Employee Pension Plan (SEP)
A plan where the employer contributes a specific amount into an eligible employee's IRA on behalf of the employee
Non-Occupational Policy
A policy or provision of a policy that excludes accidents occurring on the job, when such employment is covered by workers' compensation
Aviation Accident Insurance
A policy protecting individuals as passengers or pilots (usually on scheduled aircraft) or covering under a master policy the flight travel of employees of a company
Convertible
A policy that may be changed to another form by contractual provision and without evidence of insurability. Usually, this would b ea Term Life Insurance policy that may be changed to a permanent form
Family Maintenance Policy
A policy that pays a stated income for a state number of years from the date of death of the insured and then pays the face amount.
Non-Assignable
A policy that the owner cannot assign to a third party. Most policies are non-assignable unless approval is given by the insurer
Blanket Medical Expense
A policy, or provision in a policy, that pays all medical costs (including hospitalization, drugs, treatments, etc.) without exclusion of any term or maximum on any item, save a maximum aggregate benefit under the policy. Often written with a deductible amount
Dread Disease Policy
A policy, usually offering blanket coverage up to a very high maximum, for certain specified diseases only, such as scarlet fever, smallpox, polio, tetanus, etc.
Other Insurance Clause
A provision found in practically every insurance policy except life and sometimes health, stating what is to be done in case any other contract of protection embraces the same property and/or hazard.
Percentage Participation
A provision in health insurance contracts that states the insurance company will share covered losses in agreed proportions. (Often erroneously called "co-insurance")
Deductible
A provision or clause in an insurance policy that the first given number of dollars or percentage of expense will not be reimbursed
Facility of Payment
A provision permitting the insurance company to pay a portion of the proceeds of a policy to any relative or person who has possession of the policy and appears entitled to such payment
Multiple Indemnity
A provision that the benefit or some benefits under a policy will be increased by a stated multiple (double or triple, for example) if the peril occurs in a specified way or ways (such as double indemnity in a life insurance policy for accidental death, or triple indemnity in a health policy for common carrier accident)
Employee Stock Ownership Plan (ESOP)
A qualified employee plan that 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
Individual Retirement Account (IRA)
A qualified retirement plan for anyone under ate 70 1/2 with earned income. The trust, or custodial account is created for the exclusive benefit of an individual or his or her beneficiaries, who are not otherwise covered by a qualified employee retirement plan. Such accounts may also be established by purchasing individual retirement annuities or individual retirement bonds, issued by the federal government
HR-10
A qualified retirement plan for the self-employed. Also known as Keogh Plan
Class Rate
A rate for risks of similar hazard. Class rates, for example, apply to dwellings
Capitation (Cap)
A rate paid, usually monthly, to a health care provider. In return, the provider agrees to deliver health services agreed upon to any covered person
Register
A record of all policies charged to an industrial debit agent. Also, a record of policies issued
Unauthorized Insurance Company (Insurer)
An insurance company not licenses in the state in which is it termed unauthorized. A nonadmitted insurer.
Investigative Consumer Report
A report ordered on an insured or applicant, under which information about the person's character, reputation, or lifestyle is obtained through personal interviews with the person's neighbors, friends, associates or acquaintances. Contrast with Consumer report.
Consumer Report
A report ordered on an insured or applicant, under which information about the person's credit, character, reputation, personal characteristics or lifestyle is obtained, primarily through institutional sources. Contrast with Investigative Consumer Report
Pension Plan
A retirement income program (related to life insurance because of the use of life insurance and annuities in setting up pension plans)
Economic Risk
A risk experienced by those who invest in securities identified as the uncertainty of the economy
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
Interest Rate Risk
A risk faced by investors who invest in bonds, characterized by an individual being locked into a lower interest rate when interest rates are generally increasing in the economy
Legislative Risk
A risk faced by investors, whereby changes in tax laws can result in adverse effects on the individual's investment results
Speculative Risk
A risk that has the possibility of either gain or loss, such as a business venture
Standard
A risk that meets the same conditions of health, physical condition, and morals as the tabular risks on which the rate is based
Insurable Risk
A risk which meets most of the following requisites: (1) The loss insured against must be capable of being defined. (2) It must be accidental. (3) It must be large enough to cause a hardship to the insured. (4) It must belong to a homogeneous group of risks large enough to make losses predictable. (5) It must not be subject to the same loss at the same time as a large number of other risks. (6) The insurance company must be able to determine a reasonable cost for the insurance. (7) The insurance company must be able to calculate the chance of loss.
Uniform Provisions
A set of provisions relating to the "operating conditions" of a Health Insurance policy that are specified by state law. Uniform Provisions Law is the National Association of Insurance Commissioners model law entitled, "Uniform Individual Accident and Sickness Policy Provisions Law."
Fixed-Amount Installments
A settlement option under which fixed: periodic benefits payments are made until the principal and interest are exhausted
Fixed-Period Installments
A settlement option under which the proceeds are guaranteed to be paid in equal installments for a specified of time.
Cost Sharing
A situation where covered persons pay a portion of the health costs, such as deductibles, coinsurance, or co-payment amounts
Policy Fee
A special, one-time, first-premium charge to offset in whole or part the first-year acquisition cost rather than amortize it over several years. Also sometimes used as a "quantity-discount" device. The policy fee, being the same amount whether the insurance policy is for $1,000 or $1,000,000, means that the insured pays proportionately less as policy size increases - which is equitable in view of the fact that certain costs of acquisition (such as clerical costs) do not vary with policy size
Actuary
A specialist in the mathematics of insurance, who calculates rates, reserves, ect. (Americanism. In most other countries, the individual is known as "mathematician"
Certificate
A statement evidencing that a policy has been written and sating the general coverage
Loss Policy Release
A statement signed by the insured releasing the insurance company from all liability under a lost or mislaid contract of insurance, so that a replacement policy may be issued.
Permanent Life Insurance
A term loosely applied to life insurance policy forms, other than Group and Term, usually cash value life insurance, including Endowment as well as Whole Life
Declarations (Dec Sheet)
A term used in insurance for the portion of the contract which contains information such 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.
Clause
A term used to identify a particular part of a policy or endorsement
Old Line
A term without precise meaning, but generally applied to non-fraternal life insurers operating on a legal reserve basis
Pay
Abbreviation for "Payment" as in "20-Pay (ment) Life Policy"
Paid-Up Adds
Abbreviation for Paid-Up Additions. Additional single premium life insurance paid for by policy dividends and added to the face amount
PAR
Abbreviation for Participating (See participating)
Insurability
Acceptability of an applicant for insurance to the insurance company.
Malpractice
Alleged professional misconduct or lack of ordinary skill in the performance of a professional act. A practitioner is liable for damage or injuries caused by malpractice. Such liability, for some professionals, can be covered by insurance
American College
American College of Life Underwriters, Bryn Mawr, PA., which confers the designation "Chartered Life Underwrited" (CLU)
Blanket A&H Policy
An Accident & Health Insurance policy that covers all of a class of persons not individually identified
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
Limited Agent
An agent authorized to transact only a limited form of insurance, such as travel-accident or credit insurance. In many states, limited agents are exempt from licensing examination and education requirements
Non-Resident Agent
An agent licensed in a state in which he is not a resident.
Life - Only Licensee
An agent that has the authority to transact and service life insurance only
Life Agent
An agent that has the authority to transact and service life, health, disability, and long term care insurance
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.
Deferred Annuity
An annuity contract that provides for the initiation of payments at some designated future date, in contrast to one in which payment begins immediately on purchase
Life with Period Certain
An annuity option, which provides a lifetime income to the annuitant, plus an extra guarantee of income for a specified period of time, such as 5 to 10 years. the period certain provides income to the annuitant or the annuitant's survivor
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
Flexible Premium Annuity
An annuity that allows the contract holder to vary the amount of the premium payment, or stop payments and resume payments at will. A flexible premium annuity is used to find IRA and Keogh retirement plans because it allows the amount of premium to change as wages change
Annuity Certain
An annuity that pays for a fixed number of years. If it pays for life after the certain period, it is called a "annuity certain and for life thereafter."
Annuity Due
An annuity under which the benefits are paid at the beginning of the benefit period, rather than at the end.
Million Dollar Round Table (MDRT)
An association of life insurance agents who produce a million or mroe in face amount of new insurance in a year. Applicants for membership must be members of the National Association of Life Underwriters
Health Insurance Association of America (HIAA)
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
Morale Hazard
An attitude that increases the probability of loss from a peril. The attitude of, "It's insured; so why worry?" is an example of a morale hazard.
Deflation
An economic period characterized by falling prices, high unemployment and a generally sluggish or slow economy
Inflation
An economic period characterized by rising prices, low unemployment, an expanding economy, and general erosion or consumers' purchasing power due to the higher cost of living
Stock Insurance Company (Insurer)
An incorporated insurance company with capital divided into shares and owned by the shareholders.
Mutual Insurance Company (Insurer)
An incorporated insurance company without incorporated capital whose governing body is elected by the policyholders. The policyholders are the shareholders and they share in the success and sometimes the failure of the company
Solicitor
An individual appointed and authorized by an agent to solicit and receive application for insurance as a representative of such agent.
General Agent (GA)
An individual appointed by a Life or Health Insurer to administer its business in a given territory. He is responsible for building his own agency and service force and is compensated on a commission basis, although he possibly has some additional expense allowances
Common Carrier
An individual or corporation, which offers its services to the public for the carrying of persons or property from one place ot another for payment
Adjuster
An individual representing the insurance company and acting for the company in working on agreements as to the amount of a loss and the liability of the company in same.
Health Insurance Institute (HII)
An industry-supported public relations and information organization. Headquarters, New York City.
Non-Disabling Innjury
An injury that does not prevent the insured from the degree of employment specified in the contract to qualify him for total disability or for partial benefits, if the latter is offered
Self-Inflicted Injury
An injury to the body of the insured inflicted by himself
Preferred Risk
An insurance classification indicating a risk that is superior to the average risk on which the rate has been calculated and thus eligible for a reduced rate.
Admitted Company
An insurance company authorized and licensed to do business in a given state.
Alien Insurance Company (Insurer)
An insurance company formed under laws of a country other than the United States.
Form
An insurance policy itself or riders and endorsements attached to it.
Key Man (Key Employee) 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.
Foreign Insurer
An insurer formed under the laws of another state other than the state in which the property is written.
Impaired Insurer
An insurer that is financially difficulty, to the point where its ability to meet financial obligations or regulatory requirements is in question
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 mutual fund.
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.
Guaranteed Insurability
An option in Life or Health Insurance contracts that permits the insured to buy additional prescribed amounts of insurance at prescribed future time intervals, without evidence of insurability
Named Insured
Any person, firm or corporation, or any member thereof, specifically designated by name as insured(s) in a policy as distinguished from the others who, though unnamed, are protected under some circumstances. A common application of this latter principle is in liability policies wherein by a definition of "insured" protection is extended to interests (not designated by name) according to their status or in particular situations or circumstances
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 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
Collateral Assignment
Assignment of a life insurance policy as security for a loan, the creditor to receive the proceeds or values to the extent of his interest
Retention of Risk
Assuming all or part of a risk instead of purchasing insurance or otherwise transferring the risk. One of the four major risk management techniques. See Risk Management
Power of Attorney
Authority given one person or corporation to act for and obligate another, to the extent laid down in the instrument creating the power. In reciprocal insurance each subscriber gives the individual or incorporated manager (attorney-in-fact) authority to exchange insurance for him with other subscribers. A reciprocal contract of insurance cannot be completed without this power of attorney
Apparent Authority
Authority of an agent that is created when the agent oversteps actual authority, and when inaction by the insurer does nothing to counter the public impression that such authority exists
Express Authority
Authority of an agent that is specifically granted by the insurer in the agency contract or agreement.
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
Life Expectancy
Average number of years remaining for a person of a given age to live, as shown on the mortality or annuity table being used as a reference
Loss-Of-Income Benefits
Benefits paid for inability to work for remuneration because of disability resulting from accidental bodily injury or sickness. The loss of income may be real or presumptive
Medicare Benefits
Benefits provided by a Federal program, as part of the Social Security program. It applies to persons over 65 years of age and certain disabled beneficiaries under the Social Security program. Benefits provide hospital insurance and supplementary medical insurance
Insurance Policy
Broadly, the entire written contract of insurance. More narrowly, the basic written or printed document, as distinguished from the forms and endorsements added thereto
Elements of a Contract
By law, a valid contract must contain the following four essential elements: Consideration, Legal purpose, Agreement (an offer& acceptance or mutual consent), Competent parties.
Custodial Care
Care that is primarily for meeting personal needs, such as help in bathing, dressing, eating or taking medication. It can be provided by someone without professional medical skills or training but must be according to doctor's orders
Peril
Cause of a possible loss
Exclusions
Causes, conditions or property listed in the policy which are not covered and for which no benefits are payable
Non-Admitted Assets
Certain insurance company assets, such as accrued interest on bonds in default, the excess of market values over ledger values, furniture, supplies, etc., that are not allowed as assets in filling the state requirements for a legal reserve
CLU
Chartered Life Underwriter, a designation granted after examination and experience requirements by the American College of Life Underwriters
CSO Table 1958
Commissioners Standard Ordinary Table. A standard mortality table used in life insurance premium calculations
Insurance Commissioner
Common title for the head of a state department of insurance. (In some states, called "superintendent" or "director")
Collusion
Cooperation between two or more persons secretly to defraud another
Natural Death
Death by means other than accident
Mortality
Death. A mortality table shows the incidence of occurrence of death as a morbidity table shows the incidence or occurrence of sickness (or disability)
Adjustment
Determining the cause and amount of a loss, the indemnity recoverable by the insured, and amount to be paid under the terms of the policy
FINRA
Financial Industry Regulatory Authority is the largest non-governmental regulator for all securities firms doing business in the United States. Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services
Loss Prevention Service
Engineering and inspection work done by insurance companies or independent organizations, with a view to removing any dangerous conditions which would augment the probability of loss or damage
Electronic Data Processing (EDP) Coverage
Specialized type of insurance designed to cover computer equipment, data systems, information storage media and expenses or income loss related to EDP losses.
Rent Insurance (Rental Income)
For loss by the owner-landlord of the *REPLACEMENT COST - The cost of replacing a property without deduction for depreciation
Tax Base
For tax purposes, this is money that has yet to be taxed
Industrial
Insurance, usually in small amounts or low benefits, the premium for which is collected at the door by an agent on a weekly or monthly basis. In the life insurance business, many large insurance companies have replaced industrial with weekly or monthly-premium ordinary
Limitations
Exclusions, exceptions, or reductions of coverage contained in a health policy
Negligence
Failure to use that degree of care which an ordinary person of reasonable prudence would use under the given circumstances. Negligence may be constituted by acts of either omission or commission or both
Computer Fraud
Fraudulent theft or transfer of money, securities or other property, resulting from the use of any computerized equipment or systems
Loss
Generally refers to (1) the amount of reduction in the value of an insured's property caused by an insured peril, (2) the amount sought through an insured's claim, or (3) the amount paid on behalf of an insured under an insurance contract.
Blue Plan
Generic term for those insurers (usually on a service rather than reimbursement basis) who are authorized to use the designation "Blue Cross" or "Blue Shield" and the insignia of either
Rebate
Giving to the policyowner some part of the agent's commission (or something of value) as an inducement to buy, which is an illegal action
Fixed Dollar Annuity
Guarantees a fixed, minimum dollar payout, during each payout period.
Over-Age Insurance
Health insurance issued at ages above those which such insurance is normally issued, mainly above age 65
Face Amount
In a Life Insurance policy, the death benefit stated on the first page of the policy
Forgery
In general, any false writing with intent to defraud
Policy Reserve
In health insurance, same as unearned premium reserve. In life insurance, the erroneous concept that an individual policy has a pro rata share of the total reserve for all policies
Write
In insurance terms, to insure, to underwrite or to sell
Franchise
In life and health insurance, a plan for covering groups of persons with individual policies uniform in provisions (although they may differ in benefits). Usually used for groups too small to qualify for true group or in association-group cases. In life insurance, the term wholesale is sometimes used instead of franchise
Mortgage Insurance Policy
In life and health insurance, a policy the benefits from which are intended to pay off the balance due on a mortgage or meet the payments on a mortgage as they fall due upon or after the death or disability of the insured.
Binder (or Binding Receipt)
In lines other than life and (usually) health, a binder is an acknowledgement (usually from the agent) that insurance applied for is in force, whether or not premium settlement has yet been made or the policy issued. In life and health insurance, binders are not issued, but if premium settlement is made with the application, what is often erroneously referred to as a binder or "binding receipt" is issued. Actually, this is a conditional binding receipt
Carry Over 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
Transacting Insurance
Includes a solicitation and inducement, preliminary negotiations, effecting a contract of insurance and transaction of matters subsequent to effecting the contract and arising out of it.
Joint and Survivor Life Annuity
Income is payable through the joint lifetimes of two or more annuitants and continues throughout the lifetime of the last survivor
Inspection
Independent checking on facts about an applicant or claimant, usually by a commercial inspection agency.
Accident and Sickness
Insurance against bodily injury, disability, or death by accident or accidental means, or expense thereof, or against disability or expense resulting from sickness, and the insurance relating thereof. (See Health Insurance.)
All Risk
Insurance against loss or damage to property arising from any fortuitous cause, except such as may be specifically excluded.
Non-Profit Insurance Companies (Insurers)
Insurance companies, organized under special state laws (usually exempting them from some taxes imposed on regular insurers), to supply medical expense insurance, usually on a service basis. Blue plans, in most states, are an example
Non-Ledger Assets
Insurance company assets due and payable in the current year, but not yet received
Salary Savings or Deduction
Insurance issued to individual employees whose employer agrees to deduct the premiums from their paychecks and remit to the insurance company
Non-Medical
Insurance issued without a medical examination
Credit Insurance
Insurance on a debtor in favor of a lender, intended to pay off a loan or the balance due thereon if the insured dies or is disabled (usually Credit Life policy)
Life Insurance
Insurance on human lives, including endowment benefits, additional benefits in event of death or dismemberment by accident or accidental means, additional benefits for disability, and annuities
Paid-For
Insurance on which the premium has been paid
In-Force
Insurance on which the premiums are being paid or have been fully paid. In life insurance, usually refers to insurance by face amount. In health, usually refers to premium volume being paid to insurance company or insurance companies in aggregate
Loss-of-Income Insurance
Insurance paying loss-of-income
Single Interest Policy
Insurance protecting the interest of only one of the parties having an insurable interest in certain property, as that protecting a mortgagee but not the mortgagor, or protecting the seller but not the buyer of merchandise.
Non-Participating
Insurance that does not pay policy dividends
Excess Interest
Interest credited in excess of the minimum guaranteed by the life insurance policy
Policy
The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986
Legislation providing for a continuation of group health care benefits under the group plan for a period of time when benefits would otherwise terminate. Continuation rights apply to enrolled persons and their dependents. Coverage may be continued for up to 18 months if the insured person terminates employment or is no longer eligible. Coverage may be continued for up to 36 months in nearly all other cases, such as loss of dependent eligibility because of death of the enrolled person, divorce, or attainment of the limiting age
Sub-Standard
Less than standard (see also Standard)
Risk Retention Groups
Liability insurance companies owned by their policyholders. Membership is limited to people in the same business or activity, which exposes them to similar liability risks. The purpose is to assume and spread liability exposure to group members and to provide an alternative risk financing mechanism for liability.
Professional Liability Insurance
Liability insurance to indemnity professionals, doctors, lawyers, architects, etc. for loss or expense resulting from claim on account of bodily injuries because of any malpractice, error, or mistake committed or alleged to have been committed by the insured in his profession.
LOMA
Life Office Management Association - An organization of companies striving for improved life insurance management and office employee programs through sharing their experiences and research data
LUTC
Life Underwriting Training Council. An organization offering nationally standardized courses in life and health insurance, taught at local level by agents and leading to nationally standardized examinations for certification of completion
Paid-Up
Life insurance on which all premiums have been paid, but that has not yet matured by death or endowment, such as a Limited Payment policy on which the premium-paying period has been completed or the insurance paid for by using the cash value under the paid-up Non-forfeiture option
Business Insurance
Life or health insurance written to cover business situations, such as key man, sol proprietor, partnership, corporations, etc.
Policyholder
Literally, the person who has possession of the policy. Thus the term is non-functional as commonly used. See comment under Insured.
Loss Exposure
Loss exposure is the potential for incurring a loss. The amount of loss exposure, expressed in dollars or units is a major guideline for determine the cost of insurance. the price of insurance for each unit of exposure is called the rate and is used to calculate the premium.
Dismemberment
Loss, or loss of use of specified members of the body, resulting from accidental bodily injury
Incurred Loses
Losses occurring within a fixed period, whether adjusted and paid or not
Self-Insurance
Making financial preparations to meet pure risks by appropriating sufficient funds in advance to meet estimated losses, including enough to cover possible losses in excess of those estimated. Few organizations are large or dispersed enough to make this a sound alternative to insurance
Risk Management
Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.
MIB
Medical Information Bureau - an organization serving as a a clearinghouse of medical information on impaired risks reported to it by insurance companies that are members of the service and reported to them as a source of underwriting information on applicants
Installment Settlement
Payment of the proceeds of a life insurance policy (of the cash value) in installments in contrast to lump sum. Any of the income settlement options in a policy
Double Indemnity (DI)
Payment of twice the basic benefit in even to floss resulting form specified causes or under specified circumstances
Bordereau
Memorandum containing detailed information concerning the passing of reinsurance from one insurance company to another under a reinsurance agreement
Cost Base
Money that has already been taxed; used in reference to taxation of investment dollars
NAIC
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 practices and legislation
NALU
National Association of Life Underwriters. An organization of life insurance agents having state and local associations throughout the country
Agent's Appointment
Official authorization from an insurance company granting an agent the authority to act as its agent. In most states, agents must be appointed by at least one insurer, in addition to being licensed by the state.
Representations
On an application, facts that the applicant represents as true and accurate to the best of his or her knowledge and belief. In contrast to warranty (see Warranty).
Independent Contractor
One who agrees to perform according to a contract and who is not an employee
Broker
One who represents an insured in the solicitation, negotiation or procurement of contracts of insurance, and who may render services incidental to those functions. By law, the broker may also be an agent of the insurer for certain purposes, such as delivery of the policy or collection of the premium
Tabular
Or or relating to a table. Tabular mortality: mortality, as shown on a mortality table. Tabular morbidity: rate of morbidity as shown on a morbidity table.
Dividend Addition
Paid-up life insurance purchased with policy dividends
Reimbursement
Payment of an amount of money related to the amount of the loss to or on behalf of the insured upon the occurrence of a defined loss
qAllocaed Benefits
Payments for specific purposed, up to a macimum specified for each. For example, in some hospital policies, the scheduled benefits for X-rays; drugs;dressings; ect...
Purchase Payment
Payments into an Annuity (See also Premium)
Joint Life Policy
Pays the insurance when the first of two or more covered persons die
Accumulations
Percentage additions to policy benefits made upon continuous renewal.
Contingent Beneficiary
Person or persons named to receive benefits if the primary beneficiary is not alive
Contract Law
Pertain to legal contracts that are subject to general law of contracts. A contract is a legal binding agreement, that creates an obligation that courts will enforce
Target Risks
Policyholders, or prospects for insurance, whose values require large premiums are considered targets for insurance agents. Also used to describe risks of large value and severe hazards that are difficult to insure.
Installment Refund Annuity
Promises to continue the periodic payments after the death of the annuitant, until the combined benefits paid to the annuitant and his beneficiary have equaled the purchase price of the annuity
Level Term Policy or Rider
Provides a level or constant amount of insurance throughout its term
Payor Clause
Provides that the premiums on a child's insurance will be waived in the event the premium payor (usually a parent of the insured child) dies or becomes totally disabled prior to the child's attainment of a specified age.
Interest Sensitive Provision
Provisions in variable and flexible premium policies, which guarantee certain interest earnings plus an additional interest percentage, should the current interest rate rise above a specified percentage
Fair Credit Reporting Act
Public Law 91-508 requires that an applicant be advised that a consumer report may be requested, if such be the case, and the scope of the investigation which may be requested and the name and address of the reporting agency, should the request for insurance be declined: because of information contained in that report.
Judgment Rates
Rates established by the judgment of the underwriters with or without the application of a forma set of rules or a schedule
Rescission
Repudiation of a contract for cause
Additional Monthly Benefit
Riders added to disability income policies to provide additional benefits during the first year of a claim, while the insured is waiting for Social Security benefits to begin.
Assurance
Same as "insurance"
Assured
Same as "insured"
Assurerr
Same as "insurer" (insurance company)
Miscellaneous Expenses
Same as Ancillary benefits, usually hospital chargers other than board and room, such as X-ray, drugs, lab fees, etc.
Coverage
Scope of the protection provided under a contract of insurance.
Contribution Clause
See Coinsurance Clause. Both are similar in effect, but the term Contribution Clause is identified mostly with Business Interruption forms
Specified Disease Insurance
See Dread Disease
Optional Benefits
See Elective Benefits
Whole Life
See Franchise
Insurer
See Insurance Company
LPRT
See Leading Producers' Round Table
Straight Life
See Ordinary Life
Non-Can
See non-Cancellable
Adverse Selection
Selection against the insurance company; the tendency of more poor risks to buy and maintain insurance than good risks.
SGLI
Servicemen's Group Life Insurance - Group Life insurance issued to members of the armed forces while in the service. Convertible, after separation, to individual coverage in participating or eligible private insurance companies.
Transfer of Risk
Shifting all or part of a risk to another party. Insurance is the most common method of risk transfer, but other devices, such as hold harmless agreements, also transfer risk. One of the four major risk management techniques. See Risk Management
Preliminary Term
Short term insurance issued to cover the risk to a date which the policyowner wishes to establishes the premium-paying date for future mode premiums
Morbidity
Sickness. A morbidity table shows the incidence of occurrence of sickness as a mortality table show the incidence of occurrence of death
Countersignature
Signature of licensed agent or representative on a policy necessary to validate the contract.
Uniform Simultaneous Death Act
State law which states that if the insured and (primary) beneficiary die in the same accident and it cannot be determined which died first, it will be assumed that the beneficiary died first and all proceeds will then pass to the insured's contingent beneficiary.
Reduction of Risk
Taking steps to reduce the probability or severity of a possible loss. For example, installing alarms and sprinkler systems to reduce the risk of fire loss to a building. One of the four major risk management techniques. See Risk Management
Avoidance or Risk
Taking steps to remove a hazard, engage in an alternative activity, or otherwise end a specific exposure. One of the four major risk management techniques. See Risk Management
Producer
Team commonly applied to an agent, solicitor, or other person who sells insurance, producing business for the company and for a commission (if so paid) for himself.
Association Group
Technically, group insurance issued to an association, ion contrast to an employer or a union
Renewable Term
Term Life Insurance that may, upon expiry of the term for which issued, be renewed for another term without evidence of insurability
Expiry
Termination of a Term policy at the end of the term period
Lapse
Termination of a policy because of failure to pay the premium. In life insurance, the term is sometimes confined to non-payment before the policy has developed any non-forfeiture value, being called termination if premium failure is after non-forfeiture values develop, or surrender if cash value is withdrawn
Cancellation
Termination of contract of insurance in force by voluntary act of the insurance company or insured, in accordance with provisions in the contract or by mutual agreement
Nonrenewal
Termination of insurance coverage at an expiration date or anniversary date. This action may be taken by an insurer who refuses to renew, or by an insured who rejects a renewal offer.
Earned Premium
That portion of a premium for which the policy protection has already been given during the now-expired portion of the policy term
Unearned Premium
That portion of an advance premium that has not yet been used for coverage written. Thus in the case of an annual premium, at the end of the first month of the premium period, 11 months of the premium would still be "unearned," etc.
Expectation of Life
The average number of years of life remaining for persons of a given age according to a particular mortality table. Also called life expectancy
Survivor
The beneficiary of an annuity contract, i.e. the annuitant's survivor
Attained Age
The age an insured has reached on a given date
Age Limits
The ages below or above which the insurance company will not issue a given policy in force.
Return Premium
The amount due the insured if a policy is cancelled, reduced in amount or reduced in rate (See Pro Rata and Short Rate)
Cash Surrender Value
The amount of cash that is due the insured who surrenders cash value life insurance. Such surrender, with termination of all insurance benefits, is often called "cashing out"
Net Line
The amount of liability the insurance company is prepared to expose to loss for its own account
Benefit
The amount to be paid to a participant of a retirement plan or his beneficiary at retirement, at death, or at termination of service
Annual Statement
The anual report made by an insurance company at the close of the fiscal year, stating the company's receipts and disbursements, assets and liabilities.
Agent's Authority or Power
The authority and power granted to an agent by his agency contract, plus "apparent agency." (See also Apparent Agency.)
Renewal
The continuation in full force and effect of something that is about to expire. With an insurance policy it is made either by the issuance of a new policy or renewal receipt or certificate, to take effect upon the expiration of the old policy.
Effective Date
The date on which an insurance policy or bond goes into effect, and from which protection is furnished.
Expiration
The date upon which a policy will cease to cover, unless previously cancelled
Claim
The demand for benefits as provided by the policy
Consideration
The exchange of value on which a contract is based. In life and health insurance, the Consideration is usually the premium and the statements in the application
Aviation Hazard
The extra hazard of death or injury resulting from participation in aeronautics -- usually as other than a fare-paying passenger in licensed aircraft. Usually the cause of an extra premium rating or a waiver of certain benefits or certain causes of disability or death
Federal Estate Tax
The federal tax that is imposed on the deceased's estate that includes the total assets comprising a person's estate at death
"First" Named Insured
The first named insured appearing on a commercial policy. The latest forms permit the insurer to satisfy contractual duties by giving notice to the "first" named insured rather than requiring notice to all named insured's.
Face
The first page of a policy
College Retirement Equities Fund (CREF)
The first variable annuity company in the United States, established in 1952
Acquisition Cost
The immediate cose to an insurer of putting a policy on the books- clerical work, medical examiner's fee, inspections cost, commission, ect.
Agent
The individual appointed by an insurance company to colicit, negotiate, effect or countersign insurance contracts on its behalf.
Basic Rate
The manual rate, from which are taken discounts or to which are added charges, to compensate for the individual circumstances of the risk
Physical hazard
The material, structural, or operational features of the risk itself, apart from the morale or moral hazards of the persons owning or managing it.
Limit of Liability
The maximum amount which an insurance company agrees to pay in case of loss.
American Agency System
The method of slaes, service and distribution of insurance through agents who own thei "renewals" and are compensated on a commission basis, in contrast to the system of selling insurance through salaried compan reps.
Legal Reserve
The minimum reserves required under the laws of the jurisdiction in which an insurer operates
Conditional Receipt
The more exact term for what is often called a "binding receipt" in life and health insurance. It provides that, if premium settlement accompanies the application, the coverage shall be in force from the date of application (whether the policy has yet been issued or not), provided the insurance company would have issued the coverage on the basis of facts, as revealed by the application and other usual sources of underwriting information
Experienced Mortality
The mortality that actually occurs to a group of insureds of a given insurance company in contrast to expected mortality. (See Expected Mortality)
Insured
The party to an insurance arrangement to whom, or on behalf of whom, the insurance company agrees to indemnify for losses, provide benefits, or render service. In pre-paid hospital service plans, the insured is called the subscriber
Rate
The per unit cost of insurance. (See also Premium).
Loss Ratio
The percentage of losses to premiums - usually losses incurred to premiums earned
Expense Ratio
The percentage of the premium used to pay all the costs of acquiring, writing and servicing business.
Accumulation Period
The period of time, prior to retirement, during which an annuitant is making payments or investments in an annuity. Such payments will accumulate on a tax-deffered basis.
Annuity Period
The period of time, usually at retirement, during which theannyuitant begins to recieve annuity payments of benefits from the insurance company.
Annuitant
The person who is covered by an annyuity and who will normally receive the benefits of the annuity.
Age Change
The point, in the 12 monhs between natural birthdays that the individual in considered being of the next higher age for the purposes of insurance rates. Most life insurance companies consider that point as halfway between birthdays. Health insurance companies frequently use age last birthday until the next birthday is actually reached. Age change can be last birthday, nearer birthday, or next birthday, depending on the way the rate was constructed.
Deposit Premium
The premium deposit required by the company on those forms of insurance subject to periodical premium adjustment
Pure Premium
The premium necessary to cover the pure cost only, without expense loading
Underwriting
The process of evaluating a risk for the purpose of issuing insurance coverage on it.
Mortality Guarantee
The provision that an annuitant is guaranteed an income for life, regardless of changes in the mortality of the population
Accumulation Units
These are issued to owners of variable annuities during the accumulation period, as evidence of the annuitant's participation in the separate account.
Exclusion Ratio
The relationship or ratio of cost base to total expected return from an annuity: used to calculate the percentage of each annuity payment which is considered to be a return of cost base
Insurance Examiner
The representative of a state insurance department assigned to participate in the official audit and examination of an insurance company
Secondary Beneficiary
The second person named to receive benefits upon the death of the insured, if the first name (Primary Beneficiary) is not alive or does not collect all benefits before his or her own death (See also Contingent Beneficiary)
Administrative Services Only
The services provided by an insurer, such as providing claim forms, processing claims, and making payments to health care providers.
Minimum Premium
The smallest premium which an insurance company will accept for writing a particular policy or bond for a designated period.
Persistency
The staying quality of insurance policies, that is, the renewal quality. "High" persistency means that a high number of policies stay in force; "low" persistency means that many lapse for nonpayment of premium
Pro Rata Cancellation
The termination of an insurance contract or bond, premium charge being adjusted in proportion to the exact time the protection has been in force. (See Short Rate).
Accidental Means
The unexpected or undersigned cause4 of an accidental bodily injury. Under an accidental means definition, the mishap, itself, must be accidental.
Misrepresentation
The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverages, benefits, privileges or estimated future dividends of any policy.
Settlement Options
The various methods of settlement of the proceeds or values of a Life Insurance policy that the insured or beneficiary may choose in lieu of immediate lump sum
Incident of Ownership
The various rights that may be exercised under the policy contract by the policyowner (who may or may not be the insured)
Business
The volume of premiums written
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
This act defines the primary and secondary coverage responsibilities of the Medicare program and also the provisions to be used by health plans in their contracts with the HCFA (Health Care Financing Administration)
Automatic Reinsurance
This form of reinsurance, also known as "Treaty Reinsurance," is one whereby an insurer must cede that portion of a risk that is above the limit established by contract, and the reinsurer must accept all risks ceded to it.
Non-Forfeiture Values
Those values in a life (and rarely, health) insurance policy that the policyowner does not forfeit, even if he ceases to pay premiums: cash value, loan value, paid-up value, extended term value
Indemnify
To restore the victim of a loss, in whole or in part, by payment, repair, or replacement
Permanent & Total Disability
Total disability, from which the insured does not recover. When used as a definition in a policy (usually a life insurance policy rider), "permanent" is presumed after a stated period of time, commonly six months
App
Trade abbreviation for application. (See Application.)
Agency
When one person acts on ehalf of another person, an agency is created, with the first person being the agent and the second person being the principal. The principal generally can be held responsible for acts of its agents.
War Clause
Usually inserted into life policies during periods of war or impending war, and on the lives of young men of draft age. Clauses vary in type and may exclude death resulting from war or go so far as to exclude death while in the military service.
Rated
Usually used in combination, rated-up or rated policy. A policy issued with an extra premium charge because of physical or moral impairment. A form of substandard.
Adjustable Premium
Usually used in connection with guarunteed renewable health policies, in which the premium may be changed by classes of insureds.
Partial Disability
a condition in which, as a result of injury or sickness, the insured cannot perform all of the duties of his occupation but can perform some. Exact definitions vary from policy to policy
Life Annuity
a contract that provides a stated income for life, payable annually or more frequently
Reduced Paid-Up Insurance
a form of insurance available as a non-forfeiture option that provides the cash value of the policy may be used as the single premium for paid-up insurance in whatever amount it will provide (which will be a lesser or reduced amount than the policy face amount in most cases)
Application (App)
a form on which the prospective insured states facts requested by the insurance company and on the basis of which (together with any information from other sources) the insurance company decides whether or not to accept the risk, modify the coverage offered, or decline the risk.
Approved Pension Plan
a pension plan qualifying for tax exemptions under provisions of the Internal Revenue Code
Automatic Premium Loan
a provision in a life policy authorizing the insurance company to use the loan value to pay any premium not paid by the end of the grace period
Average Rate
a rate for a policy, established by multiplying the rate for each location by the value at that location and dividing the sum of the results by the total value
Return of Premium
a rider or provision (a) in a Life Insurance policy, that agrees to pay, in addition to the face amount, a supplemental amount equal to the total of premiums paid to date of death; or (b) in a Health Insurance policy agreeing that if claims over a stated period of time (usually ten years) are less than a certain percentage of total premiums paid, the policyowner will be paid an amount equal to a percentage of premiums paid to date
Discounted (Commuted) Value Table
a table showing the discounted or present value, for several interest rates, of dollars payable at various times in the future
Limited Pay Life Policy
a whole life contract with premium limited until the expiration of a stated (limited) period
Policy Proceeds
amount actually paid on a life insurance policy at death or when the insured receives payment at surrender or maturity. It includes any dividends left on deposit and the value of any additional insurance purchased with dividends; It excludes any loans not repaid, plus unpaid interest on those loans
Principal Sum
amount payable in one sum in the event of accidental death or certain accidental dismemberments. When a contract provides benefits for both accidental death and accidental dismemberment, each dismemberment benefit is an amount equal to the principal sum or some fraction thereof. Examples would be half the principal sum for loss of one arm, half the principal sum for the loss of one leg, etc.
Rider
an amendment attached to a policy that modifies the conditions of the policy by expanding or decreasing its benefits or excluding certain conditions from coverage
Refund Life Annuity
an annuity paying installments as long as the insured lives and paying installments after death to the beneficiary until the amount paid equals the principle sum of insurance
Assumed Interest Rate (AIR)
an assumed value that is assigned to the annuitant's account during the annuity period. It is an estimated return for the separate account. Monthly annuity payments are based on the AIR in relation to the actual rate of return experienced by the separate account of a variable annuity
Domestic Insurance Company (Insurer)
an insurance company formed under the laws of the state where the insurance is written
Capital Stock Insurance Company
an insurance company having, in addition to surplus and reserve funds, a capital fund paid in by stockholders
Mixed Insurance Company (Insurer)
an insurance company in which the vote for the board of directors is distributed between stockholders and policyowners. The term is often erroneously applied to an insurance company, issuing both participating and non-participating forms, and sometimes to an insurance company, issuing both life and health insurance. Sometimes the meaning intended can be decided only from the context
Non-Contributory
any plan or program of insurance (usually group) for which the employer pays the entire premium
Absolute Assignment
assignment by the policyowner of all control and rights to a third party
Primary Beneficiary
beneficiary named first to receive proceeds or benefits, if living when proceeds from benefits are due
Other Insurance
existence of another contract covering the same interest and perils
Optionally Renewable
contract of health insurance in which the insurer reserves the unrestricted right to terminate the coverage at any anniversary or, in some cases, at any premium due date, but does not have the right to terminate coverage between such dates
Surplus Line
coverage procured in an unlicensed insurance company because of its unavailability in the licensed market
Maturity
date at which the face amount of a life insurance policy comes due either by reason of death or endowment
Exclusive Agency System
distribution system within which agents function under contracts that limit representation to one or more insurance companies under common management and that reserve to the insurance company the ownership, use, and control of policy records and expiration data.
Retirement Income Endowment Policy
endowment policy used to accumulate savings for retirement income. Policies usually mature at retirement age (e.g. 55-70)
Medical Examination
examination by a physician on behalf of an application for insurance or in substantiation of a claim
Mode Premium
he premium paid according to the mode of payment selected by the policyowner; that is, monthly, quarterly, semi-annually (or any other mode acceptable to the insurance company).
Juvenile Policies
in life insurance, policies modified to meet the needs of young children (usually under age 15)
Twisting
inducing or seeking to induce a policyowner by misrepresentation to terminate an existing policy to take a new policy
Health Insurance (HI)
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
Reciprocal Insurance
insurance resulting from an interchange among persons known as subscribers of the reciprocal agreements of indemnity, the exchange being made through an attorney-in-fact common to all such persons, and the group of such subscribers being a reciprocal insurance company
Universal Life
is a combination flexible premium, adjustable life insurance policy. The premium payer may select the amount of premium he or she can pay.
Policy Loan
loan made by the insurance company to the policyowner with the cash value of the policy as security or collateral. This is one of the usual non-forfeiture options
Partial Loss
loss under an insurance policy which does not either (1) completely destroy or render worthless the insured property; or (2) exhaust the insurance applying thereto
Expense Guarantee
one of the guarantees of all annuities; that is. the guarantee that expenses, cost of doing business, will not be increased or exceed a certain percentage of the annuity contributions
Limited Policy
one that pays only for specified contingencies other than those excluded
Temporary Agent
person who is licensed to act as an agent for a brief period of time (usually 180 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 who has entered active military service
Master Policy
policy contract issued to the employer (or other entity) under a group insurance plan
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
Tax Sheltered Annuity (TSA)
qualified annuity for employees of certain non-profit organizations as described in the Internal Revenue Code, such as school system employees, church employees, etc.
Declination
rejection of an application for insurance by the insurer
Qualified Plan
retirement plan that qualifies for special tax advantages due to filing with and approval by the IRS. Qualified plans must meet certain IRS requirements to be classified as qualified
Policy Dividend
return of the overcharge in a participating premium. It represents the difference between the premium charged and actual experience
Payor Benefit
rider or provision, usually in juvenile polices, under which premiums are waived if the Payor (usually parent) of the premium becomes disabled or dies while the child is still a minor
Accelerated Benefits
riders on life insurance policies that allow the life insurance policy's death benefits to be used to offset expenses incurred in a convalescent or nursing home facility
Apparent agency
see presumption agency
Warranty
statement made on an application for insurance that is warranted to be true in all respects. If untrue in any respect, even though the person giving the warranty may not have known the untruth, the contract may be voided whether or not the untruth or inexactness is material to the risk. Statements on life and health insurance applications are, in the absence of fraud, not warranties but representations. (See also Representations)
Commission
that portion of the premium retained by the agent or broker as compensation for sales, service, and distribution of insurance policies by him
Policy Year
the 365-366 days between annual premium rates
Loading
the amount added to the pure insurance cost to cover the cost of the operations of an insurer, the possibility that losses will be greater than statistically expected, and fluctuating interest rates on the insurer's investments. The "pure" insurance cost is that portion of the premium estimated to be necessary for losses
Proceeds
the amount payable by a policy; usually used in reference to the face amount (plus any paid-up adds) of a life insurance policy, payable at death of the insured
Disability Benefit
the benefit payable for disability under a Disability Income policy or provision
Apportionment
the division of loss among insurance companies, when two or more cover the same loss
Embezzlement
the fraudulent use of money or property which has been entrusted to one's care.
Assets
the funds, property goods, securities, rights of action, or resources of any kind, owned by an insurance company, less such items as are declared non-admissable by state laws. These non-admissible items include deferred or overdue premiums, among other types of property, usually reported as assets by other types of business.
Capital Sum
the maximum amount payable in one sum in event of accidental dismemberment
Assignee
the person to whom the policy rights are assigned, in whole or in part, by the original policy owner
Dividend
the return of part of the premium paid for a participating policy
Appeal
the right of a party, who has received an adverse decision, to take the case to a higher court for review
Commissioner
the title of the head of the department of insurance, in most states. (See also Superintendent)
Concealment
the withholding of facts by an applicant for insurance that affects an insurance risk or loss
Policyowner
this is the person who has the right to exercise the rights and privileges in the policy contract. Such person may or may not be the insured, depending on policy ownership and assignment, if any
Assignment
transfer of rights in a policy to other than the policyowner
Old Age and Survivors Disability Insurance Benefits (OASDI)
true name for Social Security
Surrender
withdrawing the cash value of a policy and surrendering the policy form to the insurer (usually a requirement when the cash value is withdrawn)
