Glossary of Insurance Terms
A - G Terms
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Back H - O P - WACCIDENTAL DEATH BENEFIT
Provision for payment of an additional amount - usually equal to the face amount of insurance - if the insured is killed in an accident. Popularly known as double indemnity.
ACQUISITION COSTS
Expenses incurred in acquiring new business premiums and conservation of renewal business. Broad in scope, it includes costs of soliciting business, issuance of policies, collection of premium, agents' compensation field supervision, advertising, and any other expense reasonably attributable to acquisition and conservation of written premiums.
ACTUAL CASH VALUE
The cost of replacing or restoring property at prices prevailing at the time and place of the loss, less depreciation, however caused. Another definition: the sum of money required to replace property less depreciation, which includes physical wear and tear, and obsolescence.
ACTUARY
A person whose principal function is to make the technical calculations required for the pricing of insurance policies.
ADJUSTER
A person who investigates the settles and losses for an insurance carrier.
AGENT
An individual who solicits insurance for one or more carriers and may perform other functions such as issuing policies and adjusting losses.
ANNUITY
A contract that provides an income for life or for a specified period of time such as a number of years.
ARBITRATION
When disputes arise between the insured and the company, especially with regard to the amount of the loss, the matter can be referred to arbitration. "Arbitrators," approved by both parties, are appointed to consider the facts and decide the issues.
ARSON
The willful and malicious burning of property, sometimes with the intent of defrauding an insurance company.
ASSURANCE-INSURANCE
These terms are today generally accepted as synonymous, although not originally so. The term "assurance" is used more commonly in Canada and Great Britain than in the United States.
AUTO INSURANCE PLAN
This is a program whereby various risks unable to buy a voluntary insurance policy are assigned to a particular company, usually at a higher rate than the voluntary market. Formerly called "Assigned Risk."
AUTOMOBILE LIABILITY INSURANCE
Protection for the insured against loss arising out of legal liability when his/her car injures others or damages their property.
AUTOMOBILE PHYSICAL DAMAGE INSURANCE
The Collision and Comprehensive coverages in the automobile insurance policy.
AVIATION INSURANCE
Coverage against aviation perils, primarily involving operation of aircraft. Types of coverages include insurance for damage to the aircraft or contents, aircraft owner's liability insurance on passenger bodily injury or death.
BENEFICIARY (LIFE)
The person named in the policy, to whom the insurance money is to be paid upon the death of the insured.
BINDER
A written or oral agreement issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately. A binder is subject to the premium and all the terms of the policy to be issued.
BOILER OR MACHINERY INSURANCE
Coverage for loss arising out of the operation of pressure, mechanical and electrical equipment. It may, among other things, cover loss to the boiler and machinery itself, damage to other property, and business interruption losses.
BURGLARY AND THEFT INSURANCE
Protection for loss of property due to burglary, robbery or theft.
BUSINESS INTERRUPTION INSURANCE
Coverage for loss of earnings in case the policyholder's business is shut down by fire, windstorm, explosion or other insured peril.
CANCELLATION
The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.
CASH SURRENDER VALUE
The amount available in cash upon surrender of a life insurance policy before it matures as a death claim or otherwise.
CASUALTY INSURANCE
A general class of insurance covering liability resulting from accidents and some types of property insurance. It includes among other coverages: automobile, workers compensation, employer's liability, general liability, plate glass, theft and personal liability. It excludes life, fire and marine insurance, but, as ordinarily used, includes health insurance and fidelity and surety bonds.
CATASTROPHE
Event which causes a loss of extraordinary magnitude, such as a hurricane or tornado.
CEDE
To transfer all or part of a risk written by an insurer (the ceding, or primary company) to a reinsurer.
CHOICE NO-FAULT
Allows auto insureds the choice of remaining under the tort system or choosing no-fault at a reduced premium. (See NO-FAULT)
CLAIM
A request for payment of a loss which may come under the terms of an insurance contract. There are two types of claims: first party claim is one made by the policyholder in which the policyholder reports the claim directly to his company. A third party claim is one in which a person makes a claim against a policyholder of another company and the payment, if any, will be made by that company.
COLLISION INSURANCE
Protection against loss resulting from any damage to the policyholder's car caused by a collision with another vehicle or object, or by upset of the insured car, whether it was the insureds fault or not.
CO-INSURANCE
A provision under which and insure promises to maintain a certain percentage of insurance to the value of the property. If the insured carries less than the stipulated percentage of insurance to value, loss payment is limited to the same ratio which the amount of insurance bears to the amount required.
COMPARATIVE NEGLIGENCE
Under this concept a plaintiff (the person bringing suit) may recover damages even though guilty of some negligence. His or her recovery, however, is reduced by the amount or percent of that negligence.
COMPREHENSIVE AUTOMOBILE INSURANCE
Protection against loss resulting from damage to the insured auto, other than loss by collision or upset.
COMPULSORY AUTO LIABILITY INSURANCE
Insurance laws in some states require motorists to carry at least certain minimum auto coverages. This is called "compulsory" insurance.
CONTRIBUTORY NEGLIGENCE
Negligence of the damaged person that helped to cause the accident. Some states bar recovery to the person claiming damages if that person was contributory negligent to any extent. Others apply comparative negligence.
DEDUCTIBLE
A provision in an insurance contract stating that the insurer will pay only that amount of any loss that is in excess of any specified amount. The specified amount is the deductible.
DEPRECIATION
A decrease in the value of property over a period of time due to wear and tear or obsolescence. Depreciation is used to determine the actual cash value of property at time of loss. (See ACTUAL CASH VALUE)
DIRECT PREMIUMS WRITTEN
Property and casualty insurance premiums written (less return premiums), without any allowance for premiums for assumed or ceded reinsurance.
DIRECT WRITER
The industry term for a company which uses its own sales representatives to write its policies. Sometimes refers to companies which contract with exclusive agents.
DIVIDEND
Portion of the premium which is returned to the insured because of favorable experience by the company.
DOLLAR THRESHOLD
In no-fault auto insurance states with the dollar threshold, it prevents individuals from suing in tort to recover for pain and suffering unless their medical expenses exceed a certain dollar amount.
EARNED PREMIUM
The part of the total property/casualty policy premium which applies to the portion of the policy period which has already expired.
ENDORSEMENTS
An additional piece of paper, not a part of the original contract, which cites certain terms and which, when attached to the original contract, becomes a legal part of that contract.
EXCLUSIVE AGENT
An agent who represents one and only one insurance company and who solicits business exclusively for that company.
EXPENSE RATIO
The ratio of a company's operating expenses to premiums.
FACILITY
A pooling mechanism for insureds not able to obtain insurance in the voluntary market. Insurers write and issue policies but cede premium and losses on those policies to a central pool in which all insurers share.
FAIR PLAN
A facility, operating under a government-insurance industry cooperative program, to make fire insurance and other forms of property insurance readily available to persons who have difficulty obtaining such coverage.
FINANCIAL RESPONSIBILITY LAWS
A state law which may require motorists to furnish evidence, either before or after involvement in an auto accident (depending on the individual state's law), of ability to pay for damages up to certain minimum dollar limits. These requirements commonly are met by carrying auto liability insurance with specified minimum limits or more.
FIRST PARTY COVERAGE
An insurance coverage under which the policyholder collects compensation for losses from an insured's own insurer rather than from the insurer of the person who caused the accident.
FLOOD INSURANCE
Coverage against loss resulting from the flood peril, widely available at low cost under a program developed by the private industry and the federal government.
GENERAL DAMAGES
Damages awarded to an injured person for intangible loss which cannot be measured directly by dollars. Popularly known as "pain and suffering." General damages are distinguished from special damages which are awarded for actual economic loss, such as medical costs, loss of income, etc.
GROUP INSURANCE
Insurance written on a group of people under a single master policy, issued to their employer or to an association with which they are affiliated.
GUARANTEED RENEWABLE
A health policy which the company guarantees to renew for life or until the insured reaches a specified age, usually 65.