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ACCIDENT An event or occurrence which is unforeseen and unintended, and occurs suddenly and at a definite place. ACCIDENTAL DEATH BENEFIT Provides for additional benefit in case of death by accidental means. ACQUISITION COST The immediate cost of issuing a new policy, Including cost of clerical work, agent's commission, and medical inspection fees. ACTUAL CASH VALUE The cost of repairing or replacing damaged property with other of like kind and quality in the same physical condition; commonly defined as replacement cost less depreciation. ACTUARY A person trained in mathematics, statistics, and accounting who is responsible for determining premium rates, reserves, and dividends as well as conducting various other statistical studies. ACCELERATED DEATH BENEFIT policy in which a portion
of the death benefit (normally 25%) becomes payable
to the insured for a specified medical condition prior to
death in order to extend the life of the insured. Upon ACCEPTANCE agreement to an offer, in contract law, thus forming a contract. For insurance contracts, the insurer usually acknowledges willingness to underwrite a risk by issuing a policy in exchange for a premium from an applicant. ADDITIONAL INSURED person added to a life insurance policy other than the primary insured. ADJUSTABLE LIFE POLICY A participating life insurance contract that offers the insured flexibility to change: (1) premium payments, (2) the face amount, and (3) the mix of whole life and term insurance. ADJUSTABLE PREMIUM A premium which an insurance company may modify under certain special conditions in accordance with a policy provision. Also may refer to an option by the owner to elect a change in premium amount. ADJUSTER A person who represents an insurance company who seeks to determine the extent of the firm's liability for a loss when a claim is submitted. ADMITTED COMPANY An insurance company licensed and authorized to do business in a particular state. ADVANCED FUNDED PLAN A retirement plan that accumulates funds during the time employees are actively working. AGENT One who solicits, negotiates or effects contracts of insurance on behalf of an insurer. AGE CHANGE the date on which a person becomes
one year older. Insurance companies use either AGE LIMITS the maximum age which an insurance company will underwrite risk or continue to insure it. AGENCY a group of individuals with common management whose goal is to sell insurance. AGGREGATE The maximum dollar amount which may be collected for a single occurrence, during the policy period or during the insured's lifetime. ALLIED LINES A term for forms of insurance allied with property insurance, covering such perils as sprinkler leakage, water damage, and earthquake. ALLOCATED BENEFITS Benefits for which the maximum amount payable for specific services is itemized in the contract. AMENDMENT provisions added to the original insurance policy which alters or modifies the original ANNUITY A contract that provides an income for a specific period of time, such as a number of years or for life. The person receiving the payment is called an annuitant. Annuity payments are usually made monthly but can be quarterly, semi-annually, or annually. APPLICATION A signed statement of facts requested by the company on the basis of which the company decides whether or not to issue a policy. This becomes a part of the contract; places reliance on statements by the applicant. APPLICATION Written statements on a form by a prospective insured about him/herself. ARSON The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent. ASSESSABLE A policy which gives the insurer the right to require policyholders to pay additional premium. ASSETS The items on the balance sheet of the insurer which show the book value of property owned. Under state regulations, not all property or other resources can be admitted in the statement of the insurer. This gives rise to the term "nonadmitted assets." See also Nonadmitted Assets. ASSIGNMENT Transfer of the ownership or benefits of a policy. AUTOMATIC PREMIUM LOAN PROVISION Provides that if a life
insurance premium is not paid, a policy loan in the amount of the premium due
will automatically be made at the end of the grace period, provided there is AVIATION EXCLUSION Indicated that coverage does not apply unless the insured is a passenger on a regularly scheduled airline. If the insured is killed while on a private aircraft the beneficiary does not receive the death benefit.
BUSINESS LIFE AND HEALTH INSURANCE coverage providing funds for maintenance of a business in the event of a key person, owner, or partner.
CAPACITY The financial ability of an insurer to under-write new insurance. It is generally measured by the relation-ship of premiums written to surplus (net worth) and is modified by access to reliable reinsurance. CATASTROPHIC LOSS A loss (or related losses) that is unbearable in that CEDING COMPANY An insurance company that shifts part or all of a risk it has assumed to another insurance company. The latter is the insurer. CHARTERED LIFE UNDERWRITER A professional designation offered by the American College to persons who: CLAIM A demand to the insurer by the insured person for the payment of benefits under a policy. CLASS RATING A premium rate determination in which all risks with similar characteristics are charged the same rate. COINSURANCE CLAUSE A clause under which the insured shares in losses to the extent that he is underinsured at the time of loss or in a proportion agreed to in advance. COMISSION fee paid to an insurance salesperson as a percentage of the premium.
COMPREHENSIVE MEDICAL Provides benefits of both a basic and a major medical health insurance policy. It is characterized by a low deductible amount, a coinsurance (participation) clause, and high maximum benefits. CONDITIONAL BINDING RECEIPT A receipt given for a premium payment accompanying the application for life insurance. This binds the company if the applicant is insurable to make the policy effective from the CONFINING SICKNESS An illness which confines an insured person to their home or a hospital. CONSEQUENTIAL LOSS An indirect loss arising from the policyholder's inability to use the property over a period of time. CONVERSION PRIVILEGE Right to change from term to permanent insurance without insurability. COORDINATION OF BENEFITS A method of integrating benefits payable under more than one health insurance plan so that the insured's benefits from all sources do not exceed 100 percent of allowable medical expenses. COST OF LIVING ADJUSTMENT A retirement plan provision that increases benefits during retirement years in accordance with a cost-of-living or wage index. Usually subject to a maximum increase of 4 or 5 percent per year. CONDITIONAL RECEIPT evidence of a temporary contract obliging a life or health insurance company to provide coverage as long as a premium accompanies an acceptable application. CONTINGENT BENEFICIARY a person designated by the policy owner to whom the death benefit is paid in the event of both the insured and primary beneficiaries simultaneous death. CONVERTIBLE TERM INSURANCE coverage that can be converted to a permanent life insurance policy regardless of the insured's physical condition and without a medical examination. COVERAGE the amount of living and death benefits.
DATE OF ISSUE
date on which an insurance company issues a policy. This may be different from the date the coverage becomes effective. DEATH BENEFIT
the amount payable upon the death of the insured. DEDUCTIBLE A provision that requires the policyholder to contribute up to a specified sum per claim or accident toward the amount of insured loss. DEFERRED ANNUITY An annuity under which payments will begin at some definite future date, such as in a specified number of years or at a specified age. DEFINED BENEFIT PLAN Clearly defines, by its benefit formula, the amount of retirement income available at retirement. DEFINED CONTRIBUTION PLAN A plan which provides for an individual account for each participant based solely on the amount contributed to the account- plus earnings and forfeitures. DEPENDANT a person who relies on another for economic support.
DIRECT LOSS A loss that results directly from a peril such as fire. DISMEMBERMENT Loss of, or loss of use of, specific members of the body resulting from accidental bodily injury. DIVIDEND Policyholder's share in the insurer's divisible surplus funds apportioned for distribution. May take the form of a refund of part of the premium of a participating policy. DIVIDEND ADDITION Paid-up life insurance purchased with policy dividend and added to the face amount of the policy. DOUBLE INDEMNITY Life insurance policy provision which doubles the death benefit when death is caused by accident.
EFFECTIVE DATE date which an insurance policy goes into force. EMPLOYEE BENEFITS Employer-sponsored programs to increase the economic security of employees. Both insurance and non-insurance benefits are included. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) A profit-sharing plan where employer contributions are not a function of profits. Contributions are in the form of the employer's common stock. ENDORSEMENT A document which modifies the protection of a policy, either expanding or decreasing its benefits, or adding/excluding certain conditions from the policy. ENDOWMENT Life insurance contract that pays the face amount if the insured dies during the premium paying period or at the end of this period. EVIDENCE OF INSURABILITY Any statement or proof of a person's physical condition and/or other factual information affecting his/her acceptance for insurance. May also include medical exam or records. EVIDENCE OF INSURABILITY documentation of physical fitness by an applicant for insurance, usually taking the form of a medical examination.
EXCLUSIONS Specific perils or losses listed in the policy which will not provide benefit payments. EXCLUSIONS a provision in an insurance policy that indicates what is denied coverage.
EXPOSURE The state of being subject to the possibility of loss. EXTRA PERCENTAGE TABLES form of substandard ratings which shows additions to standard premiums to reflect physical impairments of applicants.
FACE AMOUNT sum of insurance provided by a policy at death. The amount state in a life insurance to be paid upon death of insurance
FAMILI HISTORY background information used to by underwriting to determine the probability of hereditary disease.
FINAL EXPENSE FUND amount of life insurance required to purchase burial, probate, medical, and other costs associated with death.
FIXED PREMIUM payment for coverage that remains constant througout the same premium-payment period.
FLAT EXTRA PREMIUM certain fixed payment made in addition to regularly scheduled premium.
GRACE PERIOD A period after a premium payment is due, in which the policyholder may make payments and during which the policy remains in force. GROUP INSURANCE Insurance plan under which a number of persons and their dependents are insured by a single policy, issued to their employer or an association with which they are affiliated. Individual certificates are given to each insured person. GUARANTEED COST POLICY Life insurance policy which does not pay dividends. Also called non-participating. GUARANTEED INSURABILITY Allows the periodic purchase of additional amounts of life insurance without proof of insurability. GUARANTEED RENEWABLE A policy the insured has the right to continue in force by the timely payment of premiums to a specified age. During this period the insurer has no right to make changes in any provision of
insurance policy renewable at the option of the insured for a specific number of years or until a certain age without a physical examination or evidence of insurability. Nothing can be changed except for the premium rate.
HAZARD A condition that increases the probability or severity of loss. HEALTH MAINTENANCE ORGANIZATION An organization that provides for wide comprehensive health care services for a specified group at a fixed periodic payment. HOLD-HARMLESS CLAUSE A contractual provision which transfers risk from one party such as a property owner to another party such as a tenant.
JOINT LIFE POLICY A special contract that insures two lives (such as husband and wife) and pays upon the first or last death.
JOINT LIFE INSURANCE
Coverage of two or more persons with the death benefit payable at the time of the first death.
KEY-PERSON INSURANCE Life or health insurance to protect the firm from the loss caused by the death or disability of an employee who makes significant contributions.
LAPSE Termination of a policy caused by the policyholder's failure to pay the premium within the time required. LEVEL PREMIUM A premium which remains unchanged throughout the life of a policy. LEVEL TERM INSURANCE coverage in which the face amount of a policy does not increase or decrease as long as the policy is in force.
LICENSE legal authority obtained by an insurance company, agent, broker, or consultant which permits them to do business in a particular state.
The average number of years of life remaining for a group of persons of a given age according to a particular mortality table. LIFE EXPECTANCY probability of a person living to a specific age based on a mortality table
LIVERY In automobile insurance, the carrying of passengers for hire. LOSS CONTROL Activities that reduce the severity of a loss that has occurred.
MALPRACTICE INSURANCE Liability insurance policy for professionals, such as physicians and surgeons, to protect them against the risk of claims for damages in connection with professional services. MEDICAID State programs of public assistance to persons regardless of age whose income and resources are insufficient to pay for health care. MEDICAL EXAMINATION physical checkup required for
life and health insurance to determine if the applicant
meets the companies underwriting standards.
Physicals are administered by medical personnel
selected by the insurance company at its expense. MEDICARE Hospital and medical insurance provided by Social Security. MODE frequency of premium payment, for example annually, semi-annually, quarterly, or monthly.
MORTGAGE PROTECTION A term life insurance contract in which the amount of insurance decreases at the same pace as the principal on a mortgage loan.
MORTALITY TABLE Shows the number of persons living, dying and the death rate starting at a certain age by year. It is used to calculate the probability of dying in, or surviving through any period. MORTALITY TABLE chart showing the rate of death at each age in terms of number of deaths per thousand.
NAIC – Model Life Insurance Solicitation Regulation National Association of Insurance Commissioners
governs the method of selling life insurance to prevent fraud and misrepresentation by agents or insurers. NET WORTH
total assets minus total liabilities. NON CONFINING SICKNESS An illness which prevents the insured person from working but which does not confine him or her to a hospital or home. NON RESIDENT AGENT agent who is licensed and who markets and services insurance policies in a state in which he or she is not domiciled.
OCCUPATIONAL RISK relationship between the
occupation of an insured and the degree of risk
involved for the insurance company. OFFER the insurance application accompanied by the first premium.
OPTIONALLY RENEWABLE A contract of health insurance in which the insurer reserves the right to terminate the coverage at any anniversary or, in some cases, at any premium-due date, but does not have the right to terminate coverage of the insured between such policy dates. ORDINARY LIFE POLICY Whole life insurance on which premiums are paid for life. Also called straight life.
PAID-UP POLICY A policy that will remain in force with further premium payments. PARAMEDICAL EXAMINATION medical check of an applicant for life or health insurance by a medical professional who is not a physician.
PARTICIPATING INSURANCE Insurance that allows the insured to share in the profits of the insurance operation. Profits are shared in the form of dividends which may also include the refund of part or all of an initial increase or overcharge in premium. PARTICIPATION CLAUSE Requires the insured to pay for a specified percentage of the cost or health care services covered by a health insurance policy. PERIL The cause of a possible loss. PERSONAL HISTORY insurance applicant's life and health record, financial standing, driving record, general character, vocation, and habits. These factors are used by the underwriter to determine the risk associated with each case.
POLICY LOAN A loan made by the insurer to the owner of a life insurance policy, using its surrender value as collateral. POLICY TERM The period for which an insurance policy provides coverage. POLICY FEE flat amount added to the basic premium rate to reflect the cost of issuing a policy, establishing the required records, sending premium notices, and other related expenses.
POLICY OWNER
individual or other entity who owns an
insurance policy. PORTABILITY The transfer of pension rights and credits when a worker changes jobs. PRE-EXISTING CONDITION A physical and/or mental condition of an insured which existed prior to the issuance of his or her policy. PREEXISTING CONDITION
illness or disability for which
the insured was treated for or advised within the
stipulated time period before applying for life
insurance. PRE-AUTHORIZED CHECK SYSTEM (PAC) arrangement where the insured authorizes the insurance company to draft his/her checking account for the premiums due on an insurance policy.
PREFERRED RISK
an insured or applicant for which the
insurance company has a lower risk of incurring a loss
than the standard applicant. PREMIUM The payment made of insurance policy. PREMIUM
rate that the insured is charged based on
the risk and loss associated. PREMIUM NOTICE
a message to the policy owner that
the premium is due on a specified date. PROBATIONARY PERIOD A specified number of days after the date of the issuance of the policy during which there is no coverage for sickness. The purpose of this type of provision is to eliminate or to reduce adverse selection. PRO RATA LIABILITY CLAUSE If a loss covered by this policy is also covered by other insurance, the insurer will pay only the proportion of the loss that the limit of liability that applies under this policy bears to the total amount of insurance covering the loss. PROXIMATE CAUSE The cause actually responsible for the loss; the one that set in motion the events that led to a loss. PUNITIVE DAMAGES: Damages awarded separately and in addition to compensatory damages as punishment for the wrongdoer.
QUALIFIED PLAN An employee benefit plan which the Internal RevenueService approves as meeting the requirements of ERISA and is entitled to certain tax advantages.
SERVICE BENEFIT
An insurance benefit in the form of hospital or medical care services rather than money. SPLIT FUNDING
An arrangement whereby a portion of the contributions to a retirement plan are paid to a life insurance company and the remainder invested through a corporate trustee, mostly in equities. An insurer created to make a profit for stockholders. STANDARD RISK one that is regarded by underwriters as normal and insurable at standard rates. Other risk classifications are given credits or debits based on their deviation from the standard.
Gives the insurer whatever right against third parties you may have as a result of the loss for which the insurer paid you. SUBSTANDARD RISK a person whose physical condition
is less than standard or who has a hazardous
A provision that precludes the payment of life insurance death benefits for a specified period of one or two years after which suicide is paid the same as death from natural causes. SUICIDE CLAUSE
limitation in all life insurance policies
stating that no death payment will be made if the SURVIVOR LIFE INSURANCE coverage on more than one person that pays a benefit after all of the insureds die.
An agreement providing for monetary compensation should there be a failure to perform specified acts within a stated period. SURRENDER COST INDEX A measure of the cost, including interest foregone, of a life insurance policy if you keep it in force for a specified period and then surrender it for the cash surrender value.
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