Insurance Terms & Definitions

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ACCELERATED DEATH BENEFITS
A life insurance policy option that provides policy proceeds to insured individuals over their lifetimes, in the event of a terminal illness. This is in lieu of a traditional policy that pays beneficiaries after the insureds death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.…
ACCIDENT AND HEALTH INSURANCE
Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses and catastrophic care, with limits.…
ACCOUNT RECEIVABLES
See Receivables…
ACTUAL CASH VALUE
A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See Replacement cost)…
ACTUARY
An insurance professional skilled in the analysis, evaluation and management of statistical information. Evaluates insurance firms' reserves, determines rates and rating methods, and determines other business and financial risks.…
ADDITIONAL LIVING EXPENSES
Extra charges covered by homeowners policies over and above the policyholder's customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.…
ADJUSTER
An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.…
ADMITTED ASSETS
Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance companys financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See Assets)…
ADMITTED COMPANY
An insurance company licensed and authorized to do business in a particular state.…
ADVERSE SELECTION
The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.…
AFTERMARKET PARTS
See Crash parts; Generic auto parts…
AGENCY COMPANIES
Companies that market and sell products via independent agents.…
AGENT
Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission; and exclusive or captive agents, who represent only one insurance company and are either salaried or work on commission. Insurance companies that use exclusive or captive agents are called direct writers.…
ALIEN INSURANCE COMPANY
An insurance company incorporated under the laws of a foreign country, as opposed to a foreign insurance company which does business in states outside its own.…
ALLIED LINES
Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage and vandalism coverage.…
ALTERNATIVE DISPUTE RESOLUTION / ADR
An alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.…
ALTERNATIVE MARKETS
Nontraditional mechanisms used to finance risk. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance and selfinsurance, are also included.…
APPORTIONMENT
The dividing of a loss proportionately among two or more insurers that cover the same loss.…
APPRAISAL
A survey to determine a property's insurable value, or the amount of a loss.…
ARBITRATION
Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.…
ARSON
The deliberate setting of a fire.…
ASSETS
Property owned, in this case by an insurance company, including stocks, bonds and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances and accounts receivable that are more than 90 days past due. (See Admitted assets)…
ASSIGNED RISK PLANS
Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market. (See Residual market)…
AUTO INSURANCE POLICY
There are basically six different types of coverages. Some may be required by law. Others are optional. They are:
  • Bodily injury liability, for injuries the policyholder causes to someone else.
  • Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholders car.
  • Property damage liability, for damage the policyholder causes to someone elses property.
  • Collision, for damage to the policyholders car from a collision.
  • Comprehensive, for damage to the policyholders car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
  • Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.
  • AUTO INSURANCE PREMIUM
    The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service. Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured's driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver's age and gender, where the car is most likely to be driven and the times of day's rush hour in an urban neighborhood or leisure time driving in rural areas, for example. Some insurance companies may also use credit history related information. (See Insurance score)…
    AVIATION INSURANCE
    Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.…
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    BALANCE SHEET
    Provides a snapshot of a company's financial condition at one point in time. It shows assets, including investments and reinsurance, and liabilities, such as loss reserves to pay claims in the future, as of a certain date. It also states a company's equity, known as policyholder surplus. Changes in that surplus are one indicator of an insurer's financial standing.…
    BINDER
    Temporary authorization of coverage issued prior to the actual insurance policy.…
    BLANKET INSURANCE
    Coverage for more than one type of property at one location or one type of property at more than one location. Example: chain store…
    BODILY INJURY LIABILITY COVERAGE
    Portion of an auto insurance policy that covers injuries the policyholder causes to someone else.…
    BOILER AND MACHINERY INSURANCE
    Often called Equipment Breakdown, or Systems Breakdown insurance. Commercial insurance that covers damage caused by the malfunction or breakdown of boilers, and a vast array of other equipment including air conditioners, heating, electrical, telephone and computer systems.…
    BOND
    A security that obligates the issuer to pay interest at specified intervals and to repay the principal amount of the loan at maturity. In insurance, a form of suretyship. Bonds of various types guarantee a payment or a reimbursement for financial losses resulting from dishonesty, failure to perform and other acts.…
    BOOK OF BUSINESS
    Total amount of insurance on an insurer's books at a particular point in time.…
    BROKER
    An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance. In life insurance, agents must be licensed as securities brokers/dealers to sell variable annuities, which are similar to stock market-based investments.…
    BURGLARY AND THEFT INSURANCE
    Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners policy and in a business multiple peril policy.…
    BUSINESS INCOME AND EXTRA EXPENSE INSURANCE
    (also known as BUSINESS INTERRUPTION  INSURANCE) Commercial coverage that reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed while the premises are being restored because of physical damage from a covered peril, such as a fire. It also may cover financial losses that may occur if civil authorities limit access to an area after a disaster and their actions prevent customers from reaching the business premises. Depending on the policy, civil authorities coverage may start after a waiting period and last for two or more weeks.…
    BUSINESSOWNERS POLICY / BOP
    A policy that combines property, liability and business interruption coverages for small- to medium-sized businesses. Coverage is generally cheaper than if purchased through separate insurance policies.…
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    CAPACITY
    The supply of insurance available to meet demand. Capacity depends on the industry's financial ability to accept risk. For an individual insurer, the maximum amount of risk it can underwrite based on its financial condition. The adequacy of an insurer's capital relative to its exposure to loss is an important measure of solvency. A property/casualty insurer must maintain a certain level of capital and policyholder surplus to underwrite risks. This capital is known as capacity. When the industry is hit by high losses, such as after the World Trade Center terrorist attack, capacity is diminished. It can be restored by increases in net income, favorable investment returns, reinsuring more risk and or raising additional capital. When there is excess capacity, usually because of a high return on investments, premiums tend to decline as insurers compete for market share. As premiums decline, underwriting losses are likely to grow, reducing capacity and causing insurers to raise rates and tighten conditions and limits in an effort to increase profitability. Policyholder surplus is sometimes used as a measure of capacity.…
    CAPITAL
    Shareholder's equity (for publicly traded insurance companies) and retained earnings (for mutual insurance companies). There is no general measure of capital adequacy for property/casualty insurers. Capital adequacy is linked to the riskiness of an insurer's business. A company underwriting medical device manufacturers needs a larger cushion of capital than a company writing Main Street business, for example. (See Risk-based capital, Solvency, Surplus)…
    CAPTIVE AGENT
    A person who represents only one insurance company and is restricted by agreement from submitting business to any other company, unless it is first rejected by the agent's captive company. (See Exclusive agent)…
    CAPTIVES
    Insurers that are created and wholly owned by one or more non-insurers, to provide owners with coverage. A form of self-insurance.…
    CASE MANAGEMENT
    A system of coordinating medical services to treat a patient, improve care and reduce cost. A case manager coordinates health care delivery for patients.…
    CATASTROPHE
    Term used for statistical recording purposes to refer to a single incident or a series of closely related incidents causing severe insured property losses totaling more than a given amount, currently $25 million…
    CELL PHONE INSURANCE
    Separate insurance provided to cover cell phones for damage or theft. Policies are often sold with the cell phones themselves.…
    CLAIMS MADE POLICY
    A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers' exposure to unknown future liabilities. (See Occurrence policy)…
    COBRA
    Short for Consolidated Omnibus Budget Reconciliation Act. A federal law under which group health plans sponsored by employers with 20 or more employees must offer continuation of coverage to employees who leave their jobs and their dependents. The employee must pay the entire premium. Coverage can be extended up to 18 months. Surviving dependents can receive longer coverage.…
    COINSURANCE
    In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20 percent health insurance coinsurance clause, the policyholder pays for the deductible plus 20 percent of his covered losses. After paying 80 percent of losses up to a specified ceiling, the insurer starts paying 100 percent of losses.…
    COLLISION COVERAGE
    Portion of an auto insurance policy that covers the damage to the policyholder's car from a collision.…
    COMBINED RATIO
    Percentage of each premium dollar a property/casualty insurer spends on claims and expenses. A decrease in the combined ratio means financial results are improving; an increase means they are deteriorating.…
    COMMERCIAL GENERAL LIABILITY INSURANCE / CGL
    A broad commercial policy that covers all liability exposures of a business that are not specifically excluded. Coverage includes product liability, completed operations, premises and operations, and independent contractors.…
    COMMERCIAL LINES
    Products designed for and bought by businesses. Among the major coverages are boiler and machinery, business income, commercial auto, comprehensive general liability, directors and officers liability, fire and allied lines, inland marine, medical malpractice liability, product liability, professional liability, surety and fidelity, and workers compensation. Most of these commercial coverages can be purchased separately except business income, which must be added to a fire insurance (property) policy. (See Commercial multiple peril policy )…
    COMMERCIAL MULTIPLE PERIL POLICY
    Package policy that includes property, boiler and machinery, crime and general liability coverages.…
    COMMISSION
    Fee paid to an agent or insurance salesperson as a percentage of the policy premium. The percentage varies widely depending on coverage, the insurer, and the marketing methods.…
    COMPLETED OPERATIONS COVERAGE
    Pays for bodily injury or property damage caused by a completed project or job. Protects a business that sells a service against liability claims.…
    COMPREHENSIVE COVERAGE
    Portion of an auto insurance policy that covers damage to the policyholder's car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods and riots), and theft.…
    COMPULSORY AUTO INSURANCE
    The minimum amount of auto liability insurance that meets a state law. Financial responsibility laws in every state require all automobile drivers to show proof, after an accident, of their ability to pay damages up to the state minimum. In compulsory liability states this proof, which is usually in the form of an insurance policy, is required before you can legally drive a car.…
    CONTINGENT LIABILITY
    Liability of individuals, corporations, or partnerships for accidents caused by people other than employees for whose acts or omissions the corporations or partnerships are responsible.…
    COVERAGE
    Synonym for insurance.…
    CRASH PARTS
    Sheet metal parts that are most often damaged in a car crash. (See Generic auto parts )…
    CREDIT
    The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.…
    CREDIT SCORE
    The number produced by an analysis of an individual's credit history. The use of credit information affects all consumers in many ways, including getting a job, finding a place to live, securing a loan, getting telephone service and buying insurance. Credit history is routinely reviewed by insurers before issuing a commercial policy because businesses in poor financial condition tend to cut back on safety, which can lead to more accidents and more claims. Auto and home insurers may use information in a credit history to produce an insurance score. Insurance scores may be used in underwriting and rating insurance policies. (See Insurance score)…
    CRIME INSURANCE
    Term referring to property coverages for the perils of burglary, theft and robbery.…
    CROP-HAIL INSURANCE
    Protection against damage to growing crops from hail, fire or lightning provided by the private market. By contrast, multiple peril crop insurance covers a wider range of yield reducing conditions, such as drought and insect infestation, and is subsidized by the federal government.…
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    DECLARATION
    Part of a property or liability insurance policy that states the name and address of policyholder, property insured, its location and description, the policy period, premiums and supplemental information. Referred to as the dec page.…
    DEDUCTIBLE
    The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same coverage.…
    DEREGULATION
    In insurance, reducing regulatory control over insurance rates and forms. Commercial insurance for businesses of a certain size has been deregulated in many states.…
    DIFFERENCE IN CONDITIONS
    Policy designed to fill in gaps in a business's commercial property insurance coverage. There is no standard policy. Policies are specifically tailored to the policyholder's needs.…
    DIMINUTION OF VALUE
    The idea that a vehicle loses value after it has been damaged in an accident and repaired.…
    DIRECT SALES/ DIRECT RESPONSE
    Method of selling insurance directly to the insured through an insurance company's own employees, through the mail, by telephone or via the Internet. This is in lieu of using captive or exclusive agents.…
    DIRECT WRITERS
    Insurance companies that sell directly to the public using exclusive agents or their own employees, through the mail, by telephone or via the Internet. Large insurers, whether predominately direct writers or agency companies, are increasingly using many different channels to sell insurance. In reinsurance, denotes reinsurers that deal directly with the insurance companies they reinsure without using a broker.…
    DIRECTORS AND OFFICERS LIABILITY INSURANCE/D&O
    Directors and officers liability insurance (D&O) covers directors and officers of a company for negligent acts or omissions and for misleading statements that result in suits against the company. There are a variety of D&O coverages. Corporate reimbursement coverage indemnifies directors and officers of the organization. Side-A coverage provides D&O coverage for personal liability when directors and officers are not indemnified by the firm. Entity coverage, for claims made specifically against the company, is also available. D&O policies may be broadened to include coverage for employment practices liability.…
    DIVIDEND
    Money returned to policyholders from an insurance company's earnings. Considered a partial premium refund rather than a taxable distribution, reflecting the difference between the premium charged and actual losses. Many life insurance policies and some property/casualty policies pay dividends to their owners. Life insurance policies that pay dividends are called participating policies.…
    DOMESTIC INSURANCE COMPANY
    Term used by a state to refer to any company incorporated there.…
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    EARNED PREMIUM
    The portion of premium that applies to the expired part of the policy period. Insurance premiums are payable in advance but the insurance company does not fully earn them until the policy period expires.…
    EARTHQUAKE INSURANCE
    Covers a building and its contents, but includes a large percentage deductible on each. A special policy or endorsement exists because earthquakes are not covered by standard homeowners or most business policies.…
    ECONOMIC LOSS
    Total financial loss resulting from the death or disability of a wage earner, or from the destruction of property. Includes the loss of earnings, medical expenses, funeral expenses, the cost of restoring or replacing property and legal expenses. It does not include noneconomic losses, such as pain caused by an injury.…
    ELECTRONIC COMMERCE / E-COMMERCE
    The sale of products such as insurance over the Internet.…
    ELIMINATION PERIOD
    A kind of deductible or waiting period usually found in disability policies. It is counted in days from the beginning of the illness or injury.…
    EMPLOYEE DISHONESTY COVERAGE
    Covers direct losses and damage to businesses resulting from the dishonest acts of employees. (See Fidelity bond)…
    EMPLOYER'S LIABILITY
    Part B of the workers compensation policy that provides coverage for lawsuits filed by injured employees who, under certain circumstances, can sue under common law. (See Exclusive remedy)…
    EMPLOYMENT PRACTICES LIABILITY COVERAGE
    Liability insurance for employers that covers wrongful termination, discrimination and other violations of employees' legal rights.…
    ENDORSEMENT
    A written form attached to an insurance policy that alters the policy's coverage, terms, or conditions. Sometimes called a rider.…
    ENVIRONMENTAL IMPAIRMENT LIABILITY COVERAGE
    A form of insurance designed to cover losses and liabilities arising from damage to property caused by pollution.…
    ERRORS AND OMISSIONS COVERAGE / E&O
    A professional liability policy covering the policyholder for negligent acts and omissions that may harm his or her clients.…
    ESCROW ACCOUNT
    Funds that a lender collects to pay monthly premiums in mortgage and homeowners insurance, and sometimes to pay property taxes.…
    EXCESS AND SURPLUS LINES
    Property/casualty coverage that isn't available from insurers licensed by the state (called admitted insurers) and must be purchased from a nonadmitted carrier.…
    EXCLUSION
    A provision in an insurance policy that eliminates coverage for certain risks, people, property classes, or locations.…
    EXCLUSIVE AGENT
    A captive agent, or a person who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent's company. (See Captive agent)…
    EXCLUSIVE REMEDY
    Part of the social contract that forms the basis for workers compensation statutes under which employers are responsible for work-related injury and disease, regardless of whether it was the employee's fault and in return the injured employee gives up the right to sue when the employer's negligence causes the harm.…
    EXPERIENCE
    Record of losses.…
    EXPOSURE
    Possibility of loss.…
    EXTENDED COVERAGE
    An endorsement added to an insurance policy, or clause within a policy, that provides additional coverage for risks other than those in a basic policy.…
    EXTENDED REPLACEMENT COST COVERAGE
    Pays a certain amount above the policy limit to replace a damaged home, generally 120 percent or 125 percent. Similar to a guaranteed replacement cost policy, which has no percentage limits. Most homeowner policy limits track inflation in building costs. Guaranteed and extended replacement cost policies are designed to protect the policyholder after a major disaster when the high demand for building contractors and materials can push up the normal cost of reconstruction. (See Guaranteed replacement cost coverage)…
    Multi Peril Crop Insurance (MPCI)
    Gregory's Insurance has specialized in the Multi Peril Crop Insurance program for over 15 years. Gregory's represents strong companies backed by sound products. Gregory's Insurance believes that the Multi Peril Crop Insurance program is a risk management tool where family's lifestyle are preserved by avoiding financial interruptions. Gregory’s Insurance has an experienced, knowledgeable staff to help you with all of your MPCI and Stand Alone Hail insurance needs. We understand that your crop insurance needs will differ from year to year as well as from crop to crop. We understand that protecting your crops is protecting your livelihood. Stop in or give us a call and we will be glad to sit down with you and assist you in finding the right crop insurance solution for your individual needs. We are your Hometown Professionals you can trust. Gregory's Insurance has three crop insurance agents available that can offer crop insurance products that will improve profits in good years, provide cash flow, and stabilize long-term business plans. Revenue &a&ield Protection Plans Revenue Protection Plan (RP) The Revenue Protection Plan replaces RA and CRC. This policy guarantees an amount of revenue (based on the individual producers actual production history (APH) x commodity price) called the final guarantee. The coverage and exclusions of RP are similar to those for the standard Yield Protection Plan (YP) policy. This guarantee is based on the greater of the spring-time generated price (projected price) or the harvest-time generated price (harvest price). While the guarantee may increase, the premium will not. Premium will be calculated using the projected price. Since the protection of producer revenue is the primary objective of RP, it contains provisions addressing both yield and price risks. RP covers revenue losses due to a low price, low yield, or any combination of the two. A loss is due when the calculated revenue (production to count x harvest price) is less than the final guarantee for the crop acreage. Revenue Protection Plan with the Harvest Price Exclusion (RPHPE) This coverage is similar to RP in that the RP-HPE policy covers revenue losses due to a low price, low yield, or any combination of the two. In the event that the harvest price is higher than the projected price, the harvest price is not used to increase the revenue guarantee. The harvest price will only be used to calculate the final revenue. Yield Protection Plan (YP) YP pro…
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    FAIR ACCESS TO INSURANCE REQUIREMENTS PLANS / FAIR PLANS
    Insurance pools that sell property insurance to people who can't buy it in the voluntary market because of high risk over which they may have no control. FAIR Plans, which exist in 28 states and the District of Columbia, insure fire, vandalism, riot and windstorm losses, and some sell homeowners insurance which includes liability. Plans vary by state, but all require property insurers licensed in a state to participate in the pool and share in the profits and losses. (See Residual market)…
    FARMOWNERS-RANCHOWNERS INSURANCE
    Package policy that protects the policyholder against named perils and liabilities and usually covers homes and their contents, along with barns, stables and other structures.…
    FEDERAL INSURANCE ADMINISTRATION / FIA
    Federal agency in charge of administering the National Flood Insurance Program. It does not regulate the insurance industry.…
    FIDELITY BOND
    A form of protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest acts of its employees.…
    FIDUCIARY BOND
    A type of surety bond, sometimes called a probate bond, which is required of certain fiduciaries, such as executors and trustees, that guarantees the performance of their responsibilities.…
    FIDUCIARY LIABILITY
    Legal responsibility of a fiduciary to safeguard assets of beneficiaries. A fiduciary, for example a pension fund manager, is required to manage investments held in trust in the best interest of beneficiaries. Fiduciary liability insurance covers breaches of fiduciary duty such as misstatements or misleading statements, errors and omissions.…
    FINANCIAL RESPONSIBILITY LAW
    A state law requiring that all automobile drivers show proof that they can pay damages up to a minimum amount if involved in an auto accident. Varies from state to state but can be met by carrying a minimum amount of auto liability insurance. (See Compulsory auto insurance)…
    FIRE INSURANCE
    Coverage protecting property against losses caused by a fire or lightning that is usually included in homeowners or commercial multiple peril policies.…
    FIRST-PARTY COVERAGE
    Coverage for the policyholder's own property or person. In no-fault auto insurance it pays for the cost of injuries. In no-fault states with the broadest coverage, the personal injury protection (PIP) part of the policy pays for medical care, lost income, funeral expenses and, where the injured person is not able to provide services such as child care, for substitute services. (See No-fault, Third-party coverage)…
    FLOATER
    Attached to a homeowners policy, a floater insures movable property, covering losses wherever they may occur. Among the items often insured with a floater are expensive jewelry, musical instruments and furs. It provides broader coverage than a regular homeowners policy for these items.…
    FOREIGN INSURANCE COMPANY
    Name given to an insurance company based in one state by the other states in which it does business.…
    FRAUD
    Intentional lying or concealment by policyholders to obtain payment of an insurance claim that would otherwise not be paid, or lying or misrepresentation by the insurance company managers, employees, agents and brokers for financial gain.…
    FREQUENCY
    Number of times a loss occurs. One of the criteria used in calculating premium rates.…
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    GAP INSURANCE
    An automobile insurance option, available in some states, that covers the difference between a car's actual cash value when it is stolen or wrecked and the amount the consumer owes the leasing or finance company. Mainly used for leased cars. (See Actual cash value)…
    GENERIC AUTO PARTS
    Auto crash parts produced by firms that are not associated with car manufacturers. Insurers consider these parts, when certified, at least as good as those that come from the original equipment manufacturer (OEM). They are often cheaper than the identical part produced by the OEM. (See Crash parts, Aftermarket parts, Competitive replacement parts, Original equipment manufacturer parts / OEM)…
    GLASS INSURANCE
    Coverage for glass breakage caused by all risks; fire and war are sometimes excluded. Insurance can be bought for windows, structural glass, leaded glass and mirrors. Available with or without a deductible.…
    GRADUATED DRIVER LICENSES
    Licenses for younger drivers that allow them to improve their skills. Regulations vary by state, but often restrict nighttime driving. Young drivers receive a learner's permit, followed by a provisional license, before they can receive a standard driver's license.…
    GRAMM-LEACH-BLILEY ACT
    Financial services legislation, passed by Congress in 1999, that removed Depression era prohibitions against the combination of commercial banking and investment banking activities. It allows insurance companies, banks and securities firms to engage in each others' activities and own one another.…
    GROUP INSURANCE
    A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents. Coverage occurs under a master policy issued to the employer or association.…
    GUARANTEED REPLACEMENT COST COVERAGE
    Homeowners policy that pays the full cost of replacing or repairing a damaged or destroyed home, even if it is above the policy limit. (See Extended replacement cost coverage)…
    GUARANTY FUND
    The mechanism by which solvent insurers ensure that some of the policyholder and third-party claims against insurance companies that fail are paid. Such funds are required in all 50 states, the District of Columbia and Puerto Rico, but the type and amount of claim covered by the fund varies from state to state. Some states pay policyholders' unearned premiums'the portion of the premium for which no coverage was provided because the company was insolvent. Some have deductibles. Most states have no limits on workers compensation payments. Guaranty funds are supported by assessments on insurers doing business in the state.…
    GUN LIABILITY
    A legal concept that holds gun manufacturers liable for the cost of injuries caused by guns. Several cities have filed lawsuits based on this concept.…
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    HACKER INSURANCE
    A coverage that protects businesses engaged in electronic commerce from losses caused by hackers.…
    HARD MARKET
    A seller's market in which insurance is expensive and in short supply. (See Property/casualty insurance cycle)…
    HOMEOWNERS INSURANCE POLICY
    The typical homeowners insurance policy covers the house, the garage and other structures on the property, as well as personal possessions inside the house such as furniture, appliances and clothing, against a wide variety of perils including windstorms, fire and theft. The extent of the perils covered depends on the type of policy. An all-risk policy offers the broadest coverage. This covers all perils except those specifically excluded in the policy. Homeowners insurance also covers additional living expenses. Known as Loss of Use, this provision in the policy reimburses the policyholder for the extra cost of living elsewhere while the house is being restored after a disaster. The liability portion of the policy covers the homeowner for accidental injuries caused to third parties and/or their property, such as a guest slipping and falling down improperly maintained stairs. Coverage for flood and earthquake damage is excluded and must be purchased separately. (See Flood insurance, Earthquake insurance)…
    HURRICANE DEDUCTIBLE
    A percentage or dollar amount added to a homeowner's insurance policy to limit an insurer's exposure to loss from a hurricane. Higher deductibles are instituted in higher risk areas, such as coastal regions. Specific details, such as the intensity of the storm for the deductible to be triggered and the extent of the high risk area, vary from insurer to insurer and state to state.…
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    IDENTITY THEFT INSURANCE
    Coverage for expenses incurred as the result of an identity theft. Can include costs for notarizing fraud affidavits and certified mail, lost income from time taken off from work to meet with law-enforcement personnel or credit agencies, fees for reapplying for loans and attorney's fees to defend against lawsuits and remove criminal or civil judgments.…
    INCURRED BUT NOT REPORTED LOSSES / IBNR
    Losses that are not filed with the insurer or reinsurer until years after the policy is sold. Some liability claims may be filed long after the event that caused the injury to occur. Asbestos-related diseases, for example, do not show up until decades after the exposure. IBNR also refers to estimates made about claims already reported but where the full extent of the injury is not yet known, such as a workers compensation claim where the degree to which work-related injuries prevents a worker from earning what he or she earned before the injury unfolds over time. Insurance companies regularly adjust reserves for such losses as new information becomes available.…
    INCURRED LOSSES
    Losses occurring within a fixed period, whether or not adjusted or paid during the same period.…
    INDEMNIFY
    Provide financial compensation for losses.…
    INDEPENDENT AGENT
    Agent who is self-employed, is paid on commission, and represents several insurance companies. (See Captive agent)…
    INFLATION GUARD CLAUSE
    A provision added to a homeowners insurance policy that automatically adjusts the coverage limit on the dwelling each time the policy is renewed to reflect current construction costs.…
    INLAND MARINE INSURANCE
    This broad type of coverage was developed for shipments that do not involve ocean transport. Covers articles in transit by all forms of land and air transportation as well as bridges, tunnels and other means of transportation and communication. Floaters that cover expensive personal items such as fine art and jewelry are included in this category. (See Floater)…
    INSOLVENCY
    Insurer's inability to pay debts. Insurance insolvency standards and the regulatory actions taken vary from state to state. When regulators deem an insurance company is in danger of becoming insolvent, they can take one of three actions: place a company in conservatorship or rehabilitation if the company can be saved or liquidation if salvage is deemed impossible. The difference between the first two options is one of degree , regulators guide companies in conservatorship but direct those in rehabilitation. Typically the first sign of problems is inability to pass the financial tests regulators administer as a routine procedure. (See Liquidation, Risk-based capital)…
    INSURABLE RISK
    Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable. The insurance company also must be able to come up with a reasonable price for the insurance.…
    INSURANCE
    A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.…
    INSURANCE REGULATORY INFORMATION SYSTEM / IRIS
    Uses financial ratios to measure insurers' financial strength. Developed by the National Association of Insurance Commissioners. Each individual state insurance department chooses how to use IRIS.…
    INSURANCE SCORE
    Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. It does not include information about income or race. Studies have shown that people who manage their money well tend also to manage their most important asset, their home, well. And people who manage their money responsibly also tend to handle driving a car responsibly. Some insurance companies use insurance scores as an insurance underwriting and rating tool.…
    INSURANCE-TO-VALUE
    Insurance written in an amount approximating the value of the insured property.…
    INTEGRATED BENEFITS
    Coverage where the distinction between job-related and non-occupational illnesses or injuries is eliminated and workers compensation and general health coverage are combined. Legal obstacles exist, however, because the two coverages are administered separately. Previously called twenty-four hour coverage.…
    INTERNET INSURER
    An insurer that sells exclusively via the Internet.…
    INTERNET LIABILITY INSURANCE
    Coverage designed to protect businesses from liabilities that arise from the conducting of business over the Internet, including copyright infringement, defamation, and violation of privacy.…
    {tab=J}
    JOINT UNDERWRITING ASSOCIATION / JUA
    Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program. JUAs may be set up to provide auto and homeowners insurance and various commercial coverages, such as medical malpractice. (See Assigned risk plans, Residual market)…
    {tab=K}
    KEY PERSON INSURANCE
    Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss.…
    {tab=L}
    LAW OF LARGE NUMBERS
    The theory of probability on which the business of insurance is based. Simply put, this mathematical premise says that the larger the group of units insured, such as sport-utility vehicles, the more accurate the predictions of loss will be.…
    LIABILITY INSURANCE
    Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.…
    LIFE INSURANCE
    See Ordinary life insurance; Term insurance; Variable life insurance; Whole life insurance…
    LIMITS
    Maximum amount of insurance that can be paid for a covered loss.…
    LINE
    Type or kind of insurance, such as personal lines.…
    LIQUOR LIABILITY
    Coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the policyholder.…
    LLOYD'S OF LONDON
    A marketplace where underwriting syndicates, or mini-insurers, gather to sell insurance policies and reinsurance. Each syndicate is managed by an underwriter who decides whether or not to accept the risk. The Lloyd's market is a major player in the international reinsurance market as well as a primary market for marine insurance and large risks. Originally, Lloyd's was a London coffee house in the 1600s patronized by shipowners who insured each other's hulls and cargoes. As Lloyd's developed, wealthy individuals, called Names, placed their personal assets behind insurance risks as a business venture. Increasingly since the 1990s, most of the capital comes from corporations.…
    LONG-TERM CARE INSURANCE
    Long-term care (LTC) insurance pays for services to help individuals who are unable to perform certain activities of daily living without assistance, or require supervision due to a cognitive impairment such as Alzheimer's disease. LTC is available as individual insurance or through an employer-sponsored or association plan.…
    LOSS
    A reduction in the quality or value of a property, or a legal liability.…
    LOSS ADJUSTMENT EXPENSES
    The sum insurers pay for investigating and settling insurance claims, including the cost of defending a lawsuit in court.…
    LOSS COSTS
    The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.…
    LOSS OF USE
    A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.…
    {tab=M}
    MALPRACTICE INSURANCE
    Professional liability coverage for physicians, lawyers, and other specialists against suits alleging negligence or errors and omissions that have harmed clients.…
    MANAGED CARE
    Arrangement between an employer or insurer and selected providers to provide comprehensive health care at a discount to members of the insured group and coordinate the financing and delivery of health care. Managed care uses medical protocols and procedures agreed on by the medical profession to be cost effective, also known as medical practice guidelines.…
    MARINE INSURANCE
    Coverage for goods in transit, and for the commercial vehicles that transport them, on water and over land. The term may apply to inland marine but more generally applies to ocean marine insurance. Covers damage or destruction of a ship's hull and cargo and perils include collision, sinking, capsizing, being stranded, fire, piracy, and jettisoning cargo to save other property. Wear and tear, dampness, mold, and war are not included. (See Inland marine insurance, Ocean marine insurance)…
    MEDIATION
    Nonbinding procedure in which a third party attempts to resolve a conflict between two other parties.…
    MEDICAID
    A federal/state public assistance program created in 1965 and administered by the states for people whose income and resources are insufficient to pay for health care.…
    MEDICAL MALPRACTICE INSURANCE
    See Malpractice insurance…
    MEDICAL PAYMENTS INSURANCE
    A coverage in which the insurer agrees to reimburse the insured and others up to a certain limit for medical or funeral expenses as a result of bodily injury or death by accident. Payments are without regard to fault.…
    MEDICAL UTILIZATION REVIEW
    The practice used by insurance companies to review claims for medical treatment.…
    MEDICARE
    Federal program for people 65 or older that pays part of the costs associated with hospitalization, surgery, doctors' bills, home health care, and skilled-nursing care.…
    MEDIGAP/MEDSUP
    Policies that supplement federal insurance benefits particularly for those covered under Medicare.…
    MINE SUBSIDENCE COVERAGE
    An endorsement to a homeowners insurance policy, available in some states, for losses to a home caused by the land under a house sinking into a mine shaft. Excluded from standard homeowners policies, as are other forms of earth movement.…
    MORTGAGE INSURANCE
    A form of decreasing term insurance that covers the life of a person taking out a mortgage. Death benefits provide for payment of the outstanding balance of the loan. Coverage is in decreasing term insurance, so the amount of coverage decreases as the debt decreases. A variant, mortgage unemployment insurance pays the mortgage of a policyholder who becomes involuntarily unemployed. (See Term insurance)…
    MULTIPLE PERIL POLICY
    A package policy, such as a homeowners or business insurance policy, that provides coverage against several different perils. It also refers to the combination of property and liability coverage in one policy. In the early days of insurance, coverages for property damage and liability were purchased separately.…
    MUNICIPAL LIABILITY INSURANCE
    Liability insurance for municipalities.…
    MUTUAL HOLDING COMPANY
    An organizational structure that provides mutual companies with the organizational and capital raising advantages of stock insurers, while retaining the policyholder ownership of the mutual.…
    MUTUAL INSURANCE COMPANY
    A company owned by its policyholders that returns part of its profits to the policyholders as dividends. The insurer uses the rest as a surplus cushion in case of large and unexpected losses.…
    {tab=N}
    NAMED PERIL
    Peril specifically mentioned as covered in an insurance policy.…
    NATIONAL FLOOD INSURANCE PROGRAM
    Federal government-sponsored program under which flood insurance is sold to homeowners and businesses. (See Adverse selection, Flood insurance)…
    NEGLIGENCE
    Failure to act with the legally required degree of care for others, resulting in harm to them.…
    NO-FAULT
    Auto insurance coverage that pays for each driver's own injuries, regardless of who caused the accident. No-fault varies from state to state. It also refers to an auto liability insurance system that restricts lawsuits to serious cases. Such policies are designed to promote faster reimbursement and to reduce litigation.…
    NO-FAULT MEDICAL
    A type of accident coverage in homeowners policies.…
    NO-PAY, NO-PLAY
    The idea that people who don't buy coverage should not receive benefits. Prohibits uninsured drivers from collecting damages from insured drivers. In most states with this law, uninsured drivers may not sue for noneconomic damages such as pain and suffering. In other states, uninsured drivers are required to pay the equivalent of a large deductible ($10,000) before they can sue for property damages and another large deductible before they can sue for bodily harm.…
    NON-ADMITTED INSURER
    Insurers licensed in some states, but not others. States where an insurer is not licensed call that insurer non-admitted. They sell coverage that is unavailable from licensed insurers within the state.…
    NOTICE OF LOSS
    A written notice required by insurance companies immediately after an accident or other loss. Part of the standard provisions defining a policyholder's responsibilities after a loss.…
    NURSING HOME INSURANCE
    A form of long-term care policy that covers a policyholder's stay in a nursing facility.…
    {tab=O}
    OCCUPATIONAL DISEASE
    Abnormal condition or illness caused by factors associated with the workplace. Like occupational injuries, this is covered by workers compensation policies. (See Workers compensation)…
    OCCURRENCE POLICY
    Insurance that pays claims arising out of incidents that occur during the policy term, even if they are filed many years later. (See Claims-made policy)…
    ORDINANCE OR LAW COVERAGE
    Endorsement to a property policy, including homeowners, that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built. For example, a building severely damaged in a hurricane may have to be elevated above the flood line when it is rebuilt. This endorsement would cover part of the additional cost.…
    ORDINARY LIFE INSURANCE
    A life insurance policy that remains in force for the policyholder's lifetime.…
    ORIGINAL EQUIPMENT MANUFACTURER PARTS / OEM
    Sheet metal auto parts made by the manufacturer of the vehicle. (See Generic auto parts)…
    OVER-THE-COUNTER (OTC)
    Security that is not listed or traded on an exchange such as the New York Stock Exchange. Business in over-the-counter securities is conducted through dealers using electronic networks.…
    {tab=P}
    PACKAGE POLICY
    A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.…
    PERIL
    A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.…
    PERSONAL ARTICLES FLOATER
    A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.…
    PERSONAL INJURY PROTECTION COVERAGE / PIP
    Portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder's car.…
    PERSONAL LINES
    Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies. (See Commercial lines)…
    POINT-OF-SERVICE PLAN
    Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed.…
    POLICY
    A written contract for insurance between an insurance company and policyholder stating details of coverage.…
    POLLUTION INSURANCE
    Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the policy or within a specified time frame after the policy expires. (See Claims-made policy)…
    PREFERRED PROVIDER ORGANIZATION
    Network of medical providers which charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.…
    PREMISES
    The particular location of the property or a portion of it as designated in an insurance policy.…
    PREMIUM
    The price of an insurance policy, typically charged annually or semiannually. (See Direct premiums, Earned premium, Unearned premium)…
    PRODUCT LIABILITY
    A section of tort law that determines who may sue and who may be sued for damages when a defective product injures someone. No uniform federal laws guide manufacturer's liability, but under strict liability, the injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault.…
    PRODUCT LIABILITY INSURANCE
    Protects manufacturers' and distributors' exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product.…
    PROFESSIONAL LIABILITY INSURANCE
    Covers professionals for negligence and errors or omissions that injure their clients.…
    PROOF OF LOSS
    Documents showing the insurance company that a loss occurred.…
    PROPERTY/CASUALTY INSURANCE
    Covers damage to or loss of policyholders' property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.…
    PROPERTY/CASUALTY INSURANCE CYCLE
    Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent.…
    {tab=Q}{tab=R}
    RATE
    The cost of a unit of insurance, usually per $1,000. Rates are based on historical loss experience for similar risks and may be regulated by state insurance offices.…
    RATE REGULATION
    The process by which states monitor insurance companies' rate changes, done either through prior approval or open competition models. (See Open competition states, Prior approval states)…
    RATING AGENCIES
    Six major credit agencies determine insurers' financial strength and viability to meet claims obligations. They are A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Moody's Investors Services; Standard & Poor's Corp.; and Weiss Ratings, Inc. Factors considered include company earnings, capital adequacy, operating leverage, liquidity, investment performance, reinsurance programs, and management ability, integrity and experience. A high financial rating is not the same as a high consumer satisfaction rating.…
    RATING BUREAU
    The insurance business is based on the spread of risk. The more widely risk is spread, the more accurately loss can be estimated. An insurance company can more accurately estimate the probability of loss on 100,000 homes than on ten. Years ago, insurers were required to use standardized forms and rates developed by rating agencies. Today, large insurers use their own statistical loss data to develop rates. But small insurers, or insurers focusing on special lines of business, with insufficiently broad loss data to make them actuarially reliable depend on pooled industry data collected by such organizations as the Insurance Services Office (ISO) which provides information to help develop rates such as estimates of future losses and loss adjustment expenses like legal defense costs.…
    RECEIVABLES
    Amounts owed to a business for goods or services provided.…
    REDLINING
    Literally means to draw a red line on a map around areas to receive special treatment. Refusal to issue insurance based solely on where applicants live is illegal in all states. Denial of insurance must be risk-based.…
    REINSURANCE
    Insurance bought by insurers. A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer's capital and therefore its capacity to sell more coverage. The business is global and some of the largest reinsurers are based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don't pay policyholder claims. Instead, they reimburse insurers for claims paid. (See Treaty reinsurance, Facultative reinsurance)…
    RENTERS INSURANCE
    A form of insurance that covers a policyholder's belongings against perils such as fire, theft, windstorm, hail, explosion, vandalism, riots, and others. It also provides personal liability coverage for damage the policyholder or dependents cause to third parties. It also provides additional living expenses, known as loss-of-use coverage, if a policyholder must move while his or her dwelling is repaired. It also can include coverage for property improvements. Possessions can be covered for their replacement cost or the actual cash value that includes depreciation.…
    REPLACEMENT COST
    Insurance that pays the dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.…
    RESERVES
    A company's best estimate of what it will pay for claims.…
    RESIDUAL MARKET
    Facilities, such as assigned risk plans and FAIR Plans, that exist to provide coverage for those who cannot get it in the regular market. Insurers doing business in a given state generally must participate in these pools. For this reason the residual market is also known as the shared market.…
    RETENTION
    The amount of risk retained by an insurance company that is not reinsured.…
    RETROSPECTIVE RATING
    A method of permitting the final premium for a risk to be adjusted, subject to an agreed-upon maximum and minimum limit based on actual loss experience. It is available to large commercial insurance buyers.…
    RIDER
    An attachment to an insurance policy that alters the policy's coverage or terms.…
    RISK
    The chance of loss or the person or entity that is insured.…
    RISK MANAGEMENT
    Management of the varied risks to which a business firm or association might be subject. It includes analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize loss. These options typically include reducing and eliminating the risk with safety measures, buying insurance, and self-insurance.…
    RISK RETENTION GROUPS
    Insurance companies that band together as self-insurers and form an organization that is chartered and licensed as an insurer in at least one state to handle liability insurance.…
    RISK-BASED CAPITAL
    The need for insurance companies to be capitalized according to the inherent riskiness of the type of insurance they sell. Higher-risk types of insurance, liability as opposed to property business, generally necessitate higher levels of capital.…
    {tab=S}
    SALVAGE
    Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have the right to recover sunken treasures. Salvage charges are the costs associated with recovering that property.…
    SCHEDULE
    A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.…
    SECURITIZATION OF INSURANCE RISK
    Using the capital markets to expand and diversify the assumption of insurance risk. The issuance of bonds or notes to third-party investors directly or indirectly by an insurance or reinsurance company or a pooling entity as a means of raising money to cover risks. (See Catastrophe bonds)…
    SELF-INSURANCE
    The concept of assuming a financial risk oneself, instead of paying an insurance company to take it on. Every policyholder is a self-insurer in terms of paying a deductible and co-payments. Large firms often self-insure frequent, small losses such as damage to their fleet of vehicles or minor workplace injuries. However, to protect injured employees state laws set out requirements for the assumption of workers compensation programs. Self-insurance also refers to employers who assume all or part of the responsibility for paying the health insurance claims of their employees. Firms that self insure for health claims are exempt from state insurance laws mandating the illnesses that group health insurers must cover.…
    SEVERITY
    Size of a loss. One of the criteria used in calculating premiums rates.…
    SEWER BACK-UP COVERAGE
    An optional part of homeowners insurance that covers sewers.…
    SOFT MARKET
    An environment where insurance is plentiful and sold at a lower cost, also known as a buyers' market. (See Property/casualty insurance cycle)…
    SOLVENCY
    Insurance companies' ability to pay the claims of policyholders. Regulations to promote solvency include minimum capital and surplus requirements, statutory accounting conventions, limits to insurance company investment and corporate activities, financial ratio tests, and financial data disclosure.…
    SPREAD OF RISK
    The selling of insurance in multiple areas to multiple policyholders to minimize the danger that all policyholders will have losses at the same time. Companies are more likely to insure perils that offer a good spread of risk. Flood insurance is an example of a poor spread of risk because the people most likely to buy it are the people close to rivers and other bodies of water that flood. (See Adverse selection)…
    STACKING
    Practice that increases the money available to pay auto liability claims. In states where this practice is permitted by law, courts may allow policyholders who have several cars insured under a single policy, or multiple vehicles insured under different policies, to add up the limit of liability available for each vehicle.…
    STOCK INSURANCE COMPANY
    An insurance company owned by its stockholders who share in profits through earnings distributions and increases in stock value.…
    STRUCTURED SETTLEMENT
    Legal agreement to pay a designated person, usually someone who has been injured, a specified sum of money in periodic payments, usually for his or her lifetime, instead of in a single lump sum payment. (See Annuity)…
    SUBROGATION
    The legal process by which an insurance company, after paying a loss, seeks to recover the amount of the loss from another party who is legally liable for it.…
    SURETY BOND
    A contract guaranteeing the performance of a specific obligation. Simply put, it is a three-party agreement under which one party, the surety company, answers to a second party, the owner, creditor or obligee, for a third party's debts, default or nonperformance. Contractors are often required to purchase surety bonds if they are working on public projects. The surety company becomes responsible for carrying out the work or paying for the loss up to the bond penalty if the contractor fails to perform.…
    SURPLUS
    The remainder after an insurer's liabilities are subtracted from its assets. The financial cushion that protects policyholders in case of unexpectedly high claims. (See Capital, Risk-based capital)…
    SURPLUS LINES
    Property/casualty insurance coverage that isn't available from insurers licensed in the state, called admitted companies, and must be purchased from a non-admitted carrier. Examples include risks of an unusual nature that require greater flexibility in policy terms and conditions than exist in standard forms or where the highest rates allowed by state regulators are considered inadequate by admitted companies. Laws governing surplus lines vary by state.…
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    TERM LIFE INSURANCE
    A form of life insurance that covers the insured person for a certain period of time, the term that is specified in the policy. It pays a benefit to a designated beneficiary only when the insured dies within that specified period which can be one, five, 10 or even 20 years. Term life policies are renewable but premiums increase with age.…
    TERRITORIAL RATING
    A method of classifying risks by geographic location to set a fair price for coverage. The location of the insured may have a considerable impact on the cost of losses. The chance of an accident or theft is much higher in an urban area than in a rural one, for example.…
    TERRORISM COVERAGE
    Included as a part of the package in standard commercial insurance policies before September 11, 2001 virtually free of charge. Since September 11, terrorism coverage prices have increased substantially to reflect the current risk.…
    THIRD-PARTY ADMINISTRATOR
    Outside group that performs clerical functions for an insurance company.…
    THIRD-PARTY COVERAGE
    Liability coverage purchased by the policyholder as a protection against possible lawsuits filed by a third party. The insured and the insurer are the first and second parties to the insurance contract. (See First-party coverage)…
    TITLE INSURANCE
    Insurance that indemnifies the owner of real estate in the event that his or her clear ownership of property is challenged by the discovery of faults in the title.…
    TORT
    A legal term denoting a wrongful act resulting in injury or damage on which a civil court action, or legal proceeding, may be based.…
    TORT LAW
    The body of law governing negligence, intentional interference, and other wrongful acts for which civil action can be brought, except for breach of contract, which is covered by contract law.…
    TORT REFORM
    Refers to legislation designed to reduce liability costs through limits on various kinds of damages and through modification of liability rules.…
    TOTAL LOSS
    The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.…
    TRANSPARENCY
    A term used to explain the way information on financial matters, such as financial reports and actions of companies or markets, are communicated so that they are easily understood and frank.…
    TRAVEL INSURANCE
    Insurance to cover problems associated with traveling, generally including trip cancellation due to illness, lost luggage and other incidents.…
    TREATY REINSURANCE
    A standing agreement between insurers and reinsurers. Under a treaty each party automatically accepts specific percentages of the insurer's business.…
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    UMBRELLA POLICY
    Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.…
    UNBUNDLED CONTRACTS
    A form of annuity contract that gives purchasers the freedom to choose among certain optional features in their contract.…
    UNDERINSURANCE
    The result of the policyholder's failure to buy sufficient insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy.…
    UNDERWRITING
    Examining, accepting, or rejecting insurance risks and classifying the ones that are accepted, in order to charge appropriate premiums for them.…
    UNDERWRITING INCOME
    The insurer's profit on the insurance sale after all expenses and losses have been paid. When premiums aren't sufficient to cover claims and expenses, the result is an underwriting loss. Underwriting losses are typically offset by investment income.…
    UNEARNED PREMIUM
    The portion of a premium already received by the insurer under which protection has not yet been provided. The entire premium is not earned until the policy period expires, even though premiums are typically paid in advance.…
    UNINSURABLE RISK
    Risks for which it is difficult for someone to get insurance. (See Insurable risk)…
    UNINSURED MOTORISTS COVERAGE
    Portion of an auto insurance policy that protects a policyholder from uninsured and hit-and-run drivers.…
    UNIVERSAL LIFE INSURANCE
    A flexible premium policy that combines protection against premature death with a type of savings vehicle, known as a cash value account, that typically earns a money market rate of interest. Death benefits can be changed during the life of the policy within limits, generally subject to a medical examination. Once funds accumulate in the cash value account, the premium can be paid at any time but the policy will lapse if there isn't enough money to cover annual mortality charges and administrative costs.…
    UTILIZATION REVIEW
    See Medical utilization review…
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    VALUED POLICY
    A policy under which the insurer pays a specified amount of money to or on behalf of the insured upon the occurrence of a defined loss. The money amount is not related to the extent of the loss. Life insurance policies are an example.…
    VANDALISM
    The malicious and often random destruction or spoilage of another person's property.…
    VIATICAL SETTLEMENT COMPANIES
    Insurance firms that buy life insurance policies at a steep discount from policyholders who are often terminally ill and need the payment for medications or treatments. The companies provide early payouts to the policyholder, assume the premium payments, and collect the face value of the policy upon the policyholder's death.…
    VOID
    A policy contract that for some reason specified in the policy becomes free of all legal effect. One example under which a policy could be voided is when information a policyholder provided is proven untrue.…
    VOLATILITY
    A measure of the degree of fluctuation in a stock's price. Volatility is exemplified by large, frequent price swings up and down.…
    VOLCANO COVERAGE
    Most homeowners policies cover damage from a volcanic eruption.…
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    WAIVER
    The surrender of a right or privilege. In life insurance, a provision that sets certain conditions, such as disablement, which allow coverage to remain in force without payment of premiums.…
    WAR RISK
    Special coverage on cargo in overseas ships against the risk of being confiscated by a government in wartime. It is excluded from standard ocean marine insurance and can be purchased separately. It often excludes cargo awaiting shipment on a wharf or on ships after 15 days of arrival in port.…
    WATER-DAMAGE INSURANCE COVERAGE
    Protection provided in most homeowners insurance policies against sudden and accidental water damage, from burst pipes for example. Does not cover damage from problems resulting from a lack of proper maintenance such as dripping air conditioners. Water damage from floods is covered under separate flood insurance policies issued by the federal government.…
    WEATHER INSURANCE
    A type of business interruption insurance that compensates for financial losses caused by adverse weather conditions, such as constant rain on the day scheduled for a major outdoor concert.…
    WHOLE LIFE INSURANCE
    The oldest kind of cash value life insurance that combines protection against premature death with a savings account. Premiums are fixed and guaranteed and remain level throughout the policy's lifetime.…
    WRITE
    To insure, underwrite, or accept an application for insurance.…

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    GREGORY'S INSURANCE
    ALLIANCE OFFICE
    (308) 762-5200
    (800) 658-3288
    (308) 763-2165 (fax)
    124 West 3rd Street,PO Box 910
    Alliance NE 69301
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    GREGORY'S INSURANCE
    CHADRON OFFICE
    (308) 432-8050
    (308) 432-8022
    (308) 432-0497 (fax)
    1413 West 6th Street
    Chadron, NE 69337
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