Glossary of Insurance Terms
P - W Terms
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Back A - G H - OPACKAGE POLICY
A combination of two or more individual policies or coverages into a single policy. A homeowner’s policy, for example, is a package combining property, liability and theft covereges for the homeowner.
PERIL
The cause of a possible loss, such as fire, windstorm, theft, explosion, or riot.
PERSISTENCY
A term used to refer to the length of time insurance remains continuously in force.
PERSONAL ARTICLES FLOATER
A form of coverage designed to meet the needs for insurance on property of a moveable nature. The coverage usually protects against all physical loss, subject to special exclusions and conditions. Examples of property covered include jewelry, furs, silverware, fine arts.
PERSONAL INJURY PROTECTION (PIP)
First-party no-fault coverage in which an insurer pays, within the specified limits, the wage loss, medical, hospital and funeral expenses of the insured.
PHYSICAL DAMAGE
Damage to or loss of the auto resulting from collision, fire, theft or other perils.
PREMIUM TAX
A tax assessed at the state level usually on gross premiums written. The tax rate varies from state to state.
PRIMARY INSURANCE
Insurance that pays compensation for a loss ahead of any other insurance coverages that policyholder may have.
PRODUCTS LIABILITY INSURANCE
Protection against financial loss arising out of the legal liability incurred by a manufacturer, merchant or distributor because of injury or damage resulting from the use of a covered product.
PROOF OF LOSS
Documentation presented to the insurance company by the insured in support of a claim so that the insurer can determine its liability under the policy.
PROPERTY DAMAGE COVERAGE
An agreement by an insurance carrier to protect an insured against legal liability for damage by an insured automobile to the property of another.
PROPERTY INSURANCE
Provides financial protection against loss or damage to the insured's property caused by such perils as fire, windstorm, hail, etc.
PROXIMATE CAUSE
The dominating cause of loss or damage; an unbroken chain of events between the occurrence and damage.
RATING TERRITORY
A geograchical grouping in which like hazards tend to equalize and permit the establishment of an equitable rate for the territory.
REINSURANCE
The purchase of insurance by an insurance company from another insurance company (reinsurer) to provide it protection against large losses on cases it has already insured.
REINSURANCE FACILITY
An alternative mechanism to service those insureds that cannot obtain insurance in the voluntary market. Premiums and losses for the business ther is ceded to the facility are pooled and all insurers share according to their proportion of the voluntary market.
RENTER'S POLICY
A package type of insurance that includes coverage similar to a homeowner’s policy to cover the liability exposure and the personal property of a renter of tenant in a building.
REPLACEMENT COST
The cost to repair or replace property at costs prevailing at time of loss; the cost to replace, repair or rebuild property without considering depreciation. (see Actual Cash Value)
RESIDUAL MARKET
A source of insurance available to applicants who are unable to obtain insurance through ordinary methods in the voluntary market. (see AIP, JUA, FACILITY)
RETENTION
The net amount of risk retained by an insurance company for its own account or that of specified others, and not reinsured.
RETROSPECTIVE RATING
Rating procedure which allows adjustment of an insured's final rate on the basis of the insured's own loss experience.
SALVAGE
Recovery made by an insurance company by the sale of property which has been taken over from the insured as a part of loss settlement.
SELF-INSURANCE
A form of risk financing through which a firm assumes all or a part of its own losses.
SPECIAL DAMAGES
Compensation awarded for actual economic losses, such as medical expenses and lost wages. (see GENERAL DAMAGES)
STATUATORY ACCOUNTING PRINCIPLES (SAP)
Principles required by statute which must be followed by an insurance company when submitting its financial statements to the various state insurance departments. Such principles differ form the Generally Accepted Accounting Principles (GAAP).
STOCK COMPANY
A company organized and owned by stockholders, as distinguished from the mutual form of company which is owned by its policyholders.
SUBROGATION
Process by which one insurance company seeks reimbursement from another company or person for a claim it has already paid.
SURETY BOND
An agreement providing for monetary compensation should there be a failure to perform specified acts within a stated period. The surety company, for example, becomes responsible for fulfillment of a contract if the contractor defaults.
SURPLUS
The net worth of a company, i.e. the amount by which assets exceed liabilities. Adequate net worth is necessary for the protection of policyholders against unforeseen losses.
TERM INSURANCE
Life or health insurance protection during a limited number of years but expiring without value if the insured survives the stated period.
THIRD PARTY
The claimant under a liability policy. So called because the person making the claim is not one of the two parties, insured and insurer, to the insurance contract.
THRESHOLD (NO-FAULT)
The point, measured in money, time or other ways, beyond which tort liability can be established. Until that point is reached, reparations must be paid within the provisions of the no-fault plan, with no recourse to the courts.
TORT
A civil wrong, other than a breach of contract, for which a court of law will afford legal relief, such as injuring someone by an act of negligence in driving an auto.
TWISTING
The practice of inducing by misrepresentation, or inaccurate of incomplete comparison, a policyholder in one company to lapse, forfeit or surrender his insurance for the purpose of taking out a policy in another company.
UMBRELLA LIABILITY
A form of insurance protection against losses in excess of amounts covered by other liability insurance policies; also protects the insured in many situations not covered by the usual liability policies.
UNDERWRITE
To determine whether an individual is insurable under the policy for which he has applied and at what premium rate.
UNDERWRITING PROFIT AND LOSS
The profit of loss experienced after deducting from earned premiums that incurred losses and expenses of doing business, but before provision for federal income tax. It excludes investment transactions.
UNEARNED PREMIUM
The portion of a property/casualty insurance premium which applies to the portion of the policy period that has not yet expired.
UNINSURED/UNDERINSURED MOTORIST COVERAGE
Pays the policyholder and passengers in his/her car for losses sustained by reason of bodily injury, caused by the owner or operator of an uninsured of inadequately insured automobile.
VERBAL THRESHOLD
In no-fault auto insurance states with a verbal threshold, victims are allowed to sue in tort only if their injuries meet certain verbal descriptions of he types of injures that render one eligible to recover for pain and suffering.
VOLUNTARY MARKET
The market where one seeking insurance obtains insurance in the open market with no help from the state, through an insurer of his or her own selection.
WHOLE LIFE INSURANCE
A plan of insurance for the whole of life. It includes straight life on which premiums are payable until death.
WORKERS' COMPENSATION
A system (established under state law) which provides payments to employees who are injured in the course of employment, irrespective of fault.