Industry Terms

Accident Insurance

Insurance for unforeseen bodily injury.

Accumulation Period

Period of time insured must incur eligible medical expenses at least equal to the deductible amount in order to establish a benefit period under a major medical expense or comprehensive medical expense policy.

Actuary

Business professional who analyzes probabilities of risk and risk management including calculation of premiums, dividends and other applicable insurance industry standards.

Adjuster

A person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.

Agent

An individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.

Aggregate

The maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single project.

Appraisal

An estimate of value.

Arbitration

A binding dispute resolution tactic whereby a conciliator with no interest in the outcome intercedes.

Automobile Liability Insurance

Coverage for bodily injury and property damage incurred through ownership or operation of a vehicle.

Broker

An individual who receives commissions from the sale and service of insurance policies. These individuals work on behalf of the customer and are not restricted to selling policies for a specific company but commissions are paid by the company with which the sale was made.

Builders' Risk Policies

Typically written on a reporting or completed value form, this coverage insures against loss to buildings in the course of construction. The coverage also includes machinery and equipment used in the course of construction and to materials incidental to construction.

Business Auto

Coverage for motor vehicles, other than those in the garage business, engaged in commerce. Business auto filings include singularly or in any combination coverage such as the following: Auto Liability, PIP, MP, Uninsured Motorist and/or Underinsured Motorists (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.

Captive Agent

An individual who sells or services insurance contracts for a specific insurer or fleet of insurers.

Captive Insurer

An insurance company established by a parent firm for the purpose of insuring the parent's exposures.

Casualty Insurance

A form of liability insurance providing coverage for negligent acts and omissions such as workers compensation, errors and omissions, fidelity, crime, glass, boiler, and various malpractice coverages.

Claim

A request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.

Copay

A cost sharing mechanism in group insurance plans where the insured pays a specified dollar amount of incurred medical expenses and the insurer pays the remainder.

Credit Risk

Part of the risk-based capital formula that addresses the collectability of a company's receivables and the risk of losing a provider or intermediary that has received advance capitation payments.

Deductible

Portion of the insured loss (in dollars) paid by the policy holder.

Disability Income

A policy designed to compensate insured individuals for a portion of the income they lose because of a disabling injury or illness.

Dual Interest

Insurance that protects the creditor's and the debtor's interest in the collateral securing the debtor's credit transaction. "Dual Interest" includes insurance commonly referred to as "Limited Dual Interest."

Earned Premium

Portion of insured's prepaid premium allocated to the insurance company's loss experience, expenses, and profit year-to-date.

Employee Benefit Liability

Liability protection for an employer for claims arising from provisions in an employee benefit insurance plan provided for the economic and social welfare of employees. Examples of items covered are pension plans, group life insurance, group health insurance, group disability income insurance, and accidental death and dismemberment.

Endorsement

An amendment or rider to a policy adjusting the coverages and taking precedence over the general contract.

Excess and Umbrella Liability

Liability coverage of an insured above a specific amount set forth in a basic policy issued by the primary insurer; or a self insurer for losses over a stated amount; or an insured or self insurer for known or unknown gaps in basic coverages or self insured retentions.

Exposure

Risk of possible loss.

Fidelity

A bond or policy covering an employer's loss resulting from an employee's dishonest act.

Fire

Coverage protecting the insured against the loss to real or personal property from damage caused by the peril of fire or lightning, including business interruption, loss of rents, etc.

Flood

Coverage protecting the insured against loss or damage to real or personal property from flood.

Fraternal Insurance

A form of group coverage or disability insurance available to members of a fraternal organization.

Fronting

An arrangement in which a primary insurer acts as the insurer of record by issuing a policy, but then passes the entire risk to a reinsurer in exchange for a commission. Often, the fronting insurer is licensed to do business in a state or country where the risk is located, but the reinsurer is not.

Gross Premium

The net premium for insurance plus commissions, operating and miscellaneous commissions. For life insurance, this is the premium including dividends.

Group Annuity

A contract providing income for a specified period of time, or duration of life for a person or persons established to benefit a group of employees.

Guaranty Fund

Funding mechanism employed by states to provide funds to cover policyholder obligations of insolvent reporting entities.

Health Insurance

A generic term applying to all types of insurance indemnifying or reimbursing for losses caused by bodily injury or illness including related medical expenses.

Homeowners Insurance

A package policy combining real and personal property coverage with personal liability coverage. Coverage applicable to the dwelling, appurtenant structures, unscheduled personal property and additional living expense are typical. Includes mobile homes at a fixed location.

Hospital Indemnity Coverage

Coverage that provides a pre-determined, fixed benefit or daily indemnity for contingencies based on a stay at a hospital or intensive care facility.

Hull Insurance

Coverage for damage to a vessel or aircraft and affixed items.

Incurred Claims

Paid claims plus amounts held in reserve for those that have been incurred but not yet paid.

Independent Adjuster

Freelance contractor paid a fee for adjusting losses on behalf of companies.

Independent Agent

A representative of multiple insurance companies who sells and services policies for records which they own and operate under the American Agency System.

Insurance

An economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.

Insured

Party(ies) covered by an insurance policy.

Irrevocable Beneficiary

A life insurance policy beneficiary who has a vested interest in the policy proceeds even during the insured's lifetime because the policy owner has the right to change the beneficiary designation only after obtaining the beneficiary's consent.

Joint and Last Survivor Annuity

Retirement plan that continues to payout so long as at least one, of two or more, annuitants is alive.

Joint Underwriting Association

A loss-sharing mechanism combining several insurance companies to provide extra capacity due to type or size of exposure.

Joint-Life Annuity

An annuity contract that ceases upon the death of the first of two or more annuitants.

Key-Persons Insurance

A policy purchased by, for the benefit of, a business insuring the life or lives of personnel integral to the business operations.

Kidnap/Ransom Insurance

Coverage for ransom or extortion costs and related expenses.

Lapse

Termination of a policy due to failure to pay the required renewal premium.

Limited Benefit

Policies that provide coverage for vision, prescription drug, and/or any other single service plan or program. Also include short-term care policies that provide coverage for less than one year for medical and other services provided in a setting other than an acute care unit of the hospital.

Loss

Physical damage to property or bodily injury, Including loss of use or loss of income.

Malpractice

Alleged misconduct or negligence in a professional act resulting in loss or injury.

Medicaid

Policies issued in association with the Federal/State entitlement program created by Title XIX of the Social Security Act of 1965 that pays for medical assistance for certain individuals and families with low incomes and resources.

Mortgage Insurance

A form of life insurance coverage payable to a third party lender/mortgagee upon the death of the insured/mortgagor for loss of loan payments.

Mutual Insurance Company

A privately held insurer owned by its policyholders, operated as a non-profit that may or may not be incorporated.

Named Insured

The individual defined as the insured in the policy contract.

Negligence

Failure to exercise reasonable consideration resulting in loss or damage to oneself or others.

Nonadmitted Insurer

Insurance company not licensed to do business within a given state.

Nuclear Energy Liability

Coverage for bodily injury and property damage liability resulting from the nuclear energy material (whether or not radioactive) on the insured business's premises or in transit.

Occurrence

An accident, including injurious exposure to conditions, which results, during the policy period in bodily injury or property damage neither expected or intended from the standpoint of the insured.

Other Liability

Coverage protecting the insured against legal liability resulting from negligence, carelessness, or a failure to act resulting in property damage or personal injury to others.

Other Underwriting Expenses

Allocable expenses other than loss adjustment expenses and investment expenses.

Owner Occupied

Homeowners insurance sold to owners occupying the described property.

Personal Auto Policy

Coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or husband and wife.

Policy

A written contract ratifying the legality of an insurance agreement.

Policy Reserve

The amount of money allocated specifically for the fulfillment of policy obligations by a life insurance company; reserves are in place to safeguard that the company is able to pay all future claims.

Premium

Money charged for the insurance coverage reflecting expectation of loss.

Property

Coverage protecting the insured against loss or damage to real or personal property from a variety of perils, including but not limited to fire, lightening, business interruption, loss of rents, glass breakage, tornado, windstorm, hail, water damage, explosion, riot, civil commotion, rain, or damage from aircraft or vehicles.

Provisions

Contingencies outlined in an insurance policy.

Public Adjuster

Independent claims adjuster representing policyholders instead of insurance companies.

Qualified Actuary

A person who meets the basic education, experience and continuing education requirements of the Specific Qualification Standard for Statements of Actuarial Opinion, NAIC Property and Casualty Annual Statement, as set forth in the Qualification Standards for Actuaries Issuing Statements of Actuarial Opinion in the United States, promulgated by the American Academy of Actuaries, and is in good standing of the American Academy of Actuaries who has been approved as qualified for signing casualty loss reserve opinions by the Casualty Practice Council of the American Academy of Actuaries.

Rate

Value of insured losses expressed as a cost per unit of insurance.

Reserve

A portion of the premium retained to pay future claims.

Retention

A mechanism of internal fund allocation for loss exposure used in place of or as a supplement to risk transfer to an insurance company.

Risk

Uncertainty concerning the possibility of loss by a peril for which insurance is pursued.

Salvage

Value recoverable after a loss.

Self-Insurance

Type of insurance often used for high frequency low severity risks where risk is not transferred to an insurance company but retained and accounted for internally.

Social Insurance

Compulsory insurance plan administered by a federal or state government agency with the primary emphasis on social adequacy.

Standard Risk

A person who, according to a company's underwriting standards, is considered a normal risk and insurable at standard rates. High or low risk candidates may qualify for extra or discounted rates based on their deviation from the standard.

Subrogation

Situation where an insurer, on behalf of the insured, has a legal right to bring a liability suit against a third party who caused losses to the insured. Insurer maintains the right to seek reimbursement for losses incurred by insurer at the fault of a third party.

Subrogation Clause

Section of insurance policies giving an insurer the right to take legal action against a third party responsible for a loss to an insured for which a claim has been paid.

Surplus

Insurance term referring to retained earnings.

Term Insurance

Life insurance payable only if death of insured occurs within a specified time, such as 5 or 10 years, or before a specified age.

Third Party

Person other than the insured or insurer who has incurred losses or is entitled to receive payment due to acts or omissions of the insured.

Title Insurance

Coverage that guarantees the validity of a title to real and personal property. Buyers of real and personal property and mortgage lenders rely upon the coverage to protect them against losses from undiscovered defects in existence when the policy is issued.

Treaty

A reinsurance agreement between the ceding company and reinsurer.

Unauthorized Reinsurance

Reinsurance placed with a company not authorized in the reporting company's state of domicile.

Underwriter

Person who identifies, examines and classifies the degree of risk represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate.

Unearned Premium

Amount of premium for which payment has been made by the policyholder but coverage has not yet been provided.

Unpaid Losses

Claims that are in the course of settlement. The term may also include claims that have been incurred but not reported.

Valued Policy

An insurance contract for which the value is agreed upon in advance and is not related to the amount of the insured loss.

Variable Life Insurance

Life insurance whose face value and/or duration varies depending upon the value of underlying securities.

Viatical Settlements

Contracts or agreements in which a buyer agrees to purchase all or a part of a life insurance policy.

Warrant

An agreement that gives the holder the right to purchase an underlying financial instrument at a given price and time or at a series of prices and times according to a schedule or warrant agreement.

Whole Life Insurance

Life insurance that may be kept in force for the duration of a person's life and pays a benefit upon the person's death. Premiums are made for same time period.

Workers' Compensation

Insurance that covers an employer's liability for injuries, disability or death to persons in their employment, without regard to fault, as prescribed by state or federal workers' compensation laws and other statutes.

Written Premium

The contractually determined amount charged by the reporting entity to the policyholder for the effective period of the contract based on the expectation of risk, policy benefits, and expenses associated with the coverage provided by the terms of the insurance contract.