INTRODUCTION

		Insurance professionals use specialized, industry specific terminology in their business every day.   Insurance can be a difficult concept to understand, interpret, and implement.  The terminology and jargon used in the insurance industry are often seen as confusing, even intimidating.  Therefore, it is necessary to have more than a fundamental understanding of insurance terms.  It is essential to have a comprehensive understanding of insurance terms and definitions as they are found in the industry today.

	“Insurance Terminology A-Z” is a compilation of general insurance terms.  These terms and the added explanations found in this course are intended to be general in nature.  The terms are defined briefly but concisely.  After completion of this course, you will have a greater understanding and comprehension of the meanings of words regularly found in insurance documents, publications, texts, and transactions.

	Insurance policies were originally written in a way that was sometimes difficult to understand for those not in the insurance or legal profession. Fortunately, most insurance policies today are written in "plain English".   Even now, however, some important terms can be unfamiliar to many of us. For this reason, “Insurance Terminology A-Z” has been created.  This course explains meaningful insurance terms, many of which are familiar, as well as some unfamiliar and less often used terms. 

	This, of course, is not a complete list of all terms found in all policies.  However, the material found within the course will prove useful on a daily basis.  It is an excellent source of reference. 

		Since the terms and definitions found in “Insurance Terminology A-Z” are general in nature, they should not be construed as specific recommendations or as substitutes for the advice of an insurance professional who is familiar with a particular client’s exposures or set of circumstances.

A    A   A   A    A   A   A   A
A   A   A   A   A   A   A   A

“A” option
A choice in selecting death benefit options. The “A” option states that the amount of life insurance will go down as the account value goes up.  The insurance company will have less net amount at risk, since it will be providing the insured with less life insurance as the policy account value increases.  The greater the account value, the smaller the net amount at risk.  Also referred to as 
Option I.

ABANDONMENT  
The act of relinquishing title to damaged or lost property by the insured to an insurance company for the purpose of claiming a total loss. However, some policies provide that there can be no abandonment to the company.

ABATEMENT  
The refund of duties on damaged imported goods.  The goods may be damaged during importing or damaged in a bonded warehouse.  Also, the diminishing or the entire doing away of anything, as the abatement of taxes.

ABOVE NORMAL LOSS (ANL)  
A loss made greater than normal by conditions such as weather, delayed alarm, etc. 

ABSOLUTE ASSIGNMENT
An assignment of all control and rights in a policy to someone other than the person on whose life the policy is written.

ABSOLUTE LIABILITY 
Liability which occurs where one has a duty to fill, no matter what the circumstances.  Under many automobile laws, an insurance company may be responsible to a third party regardless of any statutory breaches on the part of the insured.

Accelerated Benefits     
An early payment of life insurance death benefits to a terminally ill policy holder by the insurance company.   

ACCELERATED OPTION  
The use by the insured of accumulated policy dividends, as well as the cash value of a life insurance policy, in order to pay up the contract or to create an endowment.

ACCEPTANCE 
The act of receiving something by another with the purpose of retention, as indicated by the receiver.  In the case of a contract, for example, acceptance implies agreement to its terms and conditions, as well as proposals by which a contract is made.  

ACCIDENT 
An unforeseen or unintended event.  Something which could not be considered as a foreseeable occurrence or a consequence of an undertaking

ACCIDENT AND HEALTH INSURANCE 
A type of coverage that pays benefits, sometimes including reimbursement for loss of income, in case of sickness, accidental injury, or accidental death.

ACCIDENT AND HEALTH PREMIUM A premium paid by a borrower for an insurance policy which insures continuance of mortgage payments in the event of a mortgagor’s disability or illness.

ACCIDENT FREQUENCY 
The rate of occurrence of accidents.  For example, the number of accidents per million man hours worked.
ACCIDENT, INDUSTRIAL 
An unforeseen or unintended event arising out of one's employment.

ACCIDENT INSURANCE 
Insurance to replace a considerable part of earned income lost through disability caused by accidental injury.  Accident insurance may also provide for payment of medical expenses occasioned by accidental injury and indemnity for death or loss of limbs or sight sustained through an accident.

ACCIDENT POLICY 
A type of business insurance coverage and personal insurance coverage which insures against loss resulting directly and independently of all other causes from bodily injuries effected during the term of the policy solely through accidental means.

ACCIDENT RATE 
Accident experience relative to a base unit of measure, such as with motor vehicle, railroad, etc.  For example, the number of accidents compared to the miles operated or the passengers carried.  Occupational accident experience is sometimes expressed in an injury rate relative to the number of accidents per 100,000 employee days worked, per 100 employees, or employee years. 

ACCIDENT SEVERITY 
A measurement of the seriousness of the results of accidents. For example, days lost per 1000 man hours worked. 

ACCIDENT YEAR STATISTICS 
A method of gathering data on losses, especially liability insurance claims, which charges the total costs of the accidents to a given calendar, regardless of when the costs are incurred.  Also referred to as calendar accident year statistics.

Accidental Bodily Injury  
Injury to the body as the result of an accident.   As this term is used in insurance policies, it assumes that the assured could not reasonably foresee that his actions would naturally and probably result in his injury or death.

ACCIDENTAL CAUSE 
Accidental causes where human action is involved directly or indirectly, such as the careless disposal of smoking materials.

ACCIDENTAL DEATH AND  DISMEMBERMENT INSURANCE
Accidental death insurance plus dismemberment insurance which is brought together into one policy.

Accidental Death Benefit  
A benefit in addition to the face amount of a life insurance policy, payable if the insured dies as the result of an accident. Sometimes referred to as double indemnity.

ACCIDENTAL DEATH INSURANCE 
A form of insurance that provides payment if the death of the insured results from accident.  Accidental death insurance is sometimes combined with dismemberment insurance in a form called Accidental Death and Dismemberment Insurance.  (See above).

ACCIDENTAL MEANS  
An unintended, unexpected, and unforeseeable cause of an injury.  This term appears in life and health insurance policies affording special benefits for death or injury suffered in accidents.

ACCOMMODATION LINE 
A term used to describe an insurance company’s  acceptance of business which would ordinarily be rejected on a strict underwriting basis. Insurance that normally would not be acceptable to the insurer, written as an accommodation where the possibility of securing other desirable business seems to justify it.

ACCOUNT CURRENT 
A monthly statement to companies by the agent showing premiums written, return premiums, commissions, and net amount due to balance.

ACCOUNTS RECEIVABLE BOND 
A bond which guarantees that an agent or an employee will pay incoming accounts to the individual carrying the bond.  An accounts receivable bond provides protection against dishonest acts which are related to money matters.

ACCOUNTS RECEIVABLE INSURANCE  
This type of insurance pays for loss of accounts receivables records of the insured.  Also, insurance against loss due to the inability to collect outstanding accounts receivable because of damage to or destruction of records by an insured peril.

ACCOUNTS RECEIVABLE POLICY 
A type of business insurance coverage that is "all risk".  It may be written under the valuable papers and records form or the accounts receivable form.

ACCRUAL OF BENEFITS (PENSION PLANS)  
With respect to defined benefit plans, the process of accumulating pension credits for years of credited service, expressed as an annual benefit, to begin payment at normal retirement age.  With respect to defined contribution plans, the process of accumulating funds in the individual employee's pension account.

ACCRUE  
To accumulate or have due after a period of time.

ACCRUED FUTURE SERVICE BENEFIT  
The portion of a participant's retirement benefit relating to his period of credit service after the effective date of the plan and before a specified current date.

ACCRUED INTEREST   
The interest earned for the period of time that has elapsed since interest was last paid.

ACCUMULATION  
A percentage addition to policy benefits as a reward to the insured for his continuous renewal of his policy.

Accumulation period  
The time between the first premium payment and the first benefit payout under a deferred annuity. A specified period of time, such as 90 days, during which the insured person 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. 

Accumulation units  
The mechanism used to account for "deposits" in a variable annuity contract during the premium paying period. The number of units purchased depends upon the current valuation of a unit in dollars. 

ACID AND CHEMICAL DAMAGE POLICY 
A type of business insurance coverage against loss caused by acids and chemicals.

Acquisition Costs 
The insurer's cost of putting new business in force, including the agent's commission, the cost of clerical work, fees for medical examinations and inspection reports, sales promotion expense, etc. 

ACT OF GOD  
An act of God is a flood, earthquake or any other accident or event arising purely from natural causes and beyond human origin or control. Acts of God cannot be foreseen or prevented by reasonable care or foresight. Contrary to popular belief,  acts of God are covered by most home owners’ policies. Coverage from damage from flood and earthquakes require additional and separate coverage. 

ACT OR OMISSION   
Act: An action by a person, group, animal(s), or mechanical or electrical part or device which causes a loss.  The failure to design, construct, or install safely or the misuse of equipment and personal goods.  Omission:  The lack of action by a person or group such as the lack of maintenance or neglect of personal equipment or goods which causes a loss to occur.

ACTIONS  
Refers to legal actions or proceedings in court.  Actions under an insurance policy for claims against the insurer are generally restricted by the policy and must be commenced within one year from the date of the occurrence of the loss or damage or one year after the cause of action arises.

ACTIVE LIFE RESERVE  
A type of reserve of company accident and sickness policies. Also referred to as policy reserve.

Activities of Daily Living
Activities normally including mobility, dressing, bathing, toileting, transferring, and eating which are used to assess the degree of impairment and determine eligibility for some types of insurance benefits. 

ACTUAL CASH VALUE (ACV) 
Usually considered to be the cost of replacing or restoring property at prices prevailing at the time and place of the loss, less depreciation.

ACTUAL CASH VALUE POLICY 
Primarily automobile physical damage policies which are issued to insure the actual cash value of the property, as opposed to a fixed dollar amount.  Premiums are based on an estimate of the value of insured and similar property.  Also referred to as no amount policies since they show no fixed amount of insurance.

ACTUAL DAMAGES 
Damage which truly exists in fact, as opposed to potential or possible damage.  Actual damages are such things as cost of repair, diminished value, mental anguish, out of pocket expense, loss of bargain, interest or finance charges, and consequential economic loss.  Actual damages may be offset, resulting from a countersuit by the defendant.

ACTUAL DIVIDENDS  
Dividends paid on a policy during a previous period.

ACTUARIAL ASSUMPTIONS
Assumptions which are made by actuaries in estimating pension costs, for example, investment yield, mortality rate, employee turnover, etc.

Actuarial Cost Method  
One of several systems for determining either the contributions to be made under a retirement plan or level of benefits when the contributions are fixed. In addition to forecasts of mortality, interest, and expenses, some of the methods involve estimates of future labor turnover, salary scales, and retirement rates. 

ACTUARIAL EQUIVALENT 
Given that the present values of two series of payments are equal and taking into account a given interest rate and mortality according to a given table, the two series are said to be actuarially equivalent on this basis.

Actuarially Fair  
The price for insurance which exactly represents the expected losses. 

ACTUARY 
A person involved with the application of probability and statistical theories to the practical problems of insurance and its related fields.  The actuary may specialize in certain types of insurance, pension work, government programs, etc.  The actuary calculates premiums, evaluates reserves, and forecasts the financial results on long-term and short-term bases.

ADDENDUM 
An addition to a written contract or document.

ADDITIONAL DEATH BENEFIT 
A relatively new term often used in place of "double indemnity".  Refers to the sum of insurance payable in addition to the face amount of the policy, but not more than a stated amount.

ADDITIONAL EXTENDED COVERAGE 
An endorsement for policies covering dwellings and similar property which extend the coverage to include insurance against direct loss caused by water damage from plumbing and heating systems, bursting of steam or hot water heating systems, vandalism and malicious mischief, vehicles owned or operated by the insured or by a tenant, glass breakage, ice, snow, and freezing, and the fall of trees and collapse.  $50 deductible is typically required.  

ADDITIONAL INSURANCE
Insurance added to an already existing policy.

Additional insured
An insured party specifically named under an insurance policy other than the one in whose name the policy is written. 

ADDITIONAL INTEREST 
The interest of an additional insured.  Also referred to as additional insured.

ADDITIONAL LIVING EXPENSE 
Extra expense insurance on dwellings which provides additional funds to compensate for the extra costs caused by the interruption, for example, the extra cost of living in a hotel.

ADDITIONAL PROVISIONS 
Additional insuring and benefit provisions to the standard or uniform provisions which define and limit the coverage.  Also referred to as general provisions.

Adhesion, Contract of 
A contract that is drafted by one party and accepted or rejected by the other with no opportunity to bargain over its terms. 

ADJUSTABLE LIFE
A type of insurance that allows the policy holder to change the plan of insurance, raise or lower the face amount of the policy, increase or decrease the premium, and lengthen or shorten the protection period .

ADJUSTABLE PREMIUM 
The right to change the table of premium rates applying to classes of insureds as a condition of the renewal of the contract.

ADJUSTED EARNINGS 
Net earnings from the operation plus the value of insurance in force for growth in written premiums.

Adjusted gross estate
The approximate the net worth of a deceased insured, the beginning point for the computation of estate taxes. 

ADJUSTED NET WORTH 
An insurance company's capital, surplus, and reserves plus the value of existing insurance on the books and any unrealized capital gain minus estimated income taxes and other adjustments.

ADJUSTER 
A person who investigates and settles losses, usually for an insurance carrier. An adjuster acts for the company or the insured in the settlement of claims. Adjusters may be salaried employees of adjusting organizations operated by insurance companies, independent individuals, or special agents or staff adjusters employed by the company.  Also referred to as a claim representative. 

ADJUSTER, AVERAGE 
An adjuster who specializes in the adjusting of marine losses.

ADJUSTER, INDEPENDENT 
An independent professional person or organization that settles claims on a fee basis.

ADJUSTER, PUBLIC 
One who represents the insured in settling claims with insurers on a fee basis.  (Does not refer to attorneys).

ADJUSTING
The process of investigating and settling losses with or by an insurance carrier.

ADJUSTMENT 
Determining the cause and amount of a loss, the amount of indemnity an insured may recover after all proper allowances and deductions have been made, and the proportion that each company is required to pay if there is more than one insurance company involved.

ADJUSTMENT BUREAU 
An organization with a staff of adjusters to which the companies refer their losses.

ADJUSTMENT EXPENSES 
Expenses which result from the settlement of a claim.

ADMINISTRATION BOND 
A bond which must be given by a person or company in order to guaranty matters of administration.  Frequently used in wills to guaranty the fidelity of the executor or administrator of the estate.

Administrative Services Only (AS0) Plan
An arrangement by which an insurance carrier or an independent organization, for a fee, handles the administration of claims, benefits, and other administrative functions for a self-insured group.

ADMINISTRATOR 
A person appointed by the court to manage and settle the estate of a deceased person who has left no will.

ADMINISTRATOR’S DEED 
The legal instrument given by a person who is legally vested with the right of administration of an estate, especially of an estate such as that of a minor, an incompetent such as a lunatic, or of a testator having no competent executor.

ADMIRALTY 
The court which has jurisdiction on maritime questions and offenses.  This includes suits involving marine insurance contracts and general average adjustments. 

ADMIRALTY BOND 
A bond used to cover maritime matters, for example, to assure the release of a vessel or property under libel or security of payment of costs.

ADMITTED ASSETS 
Assets of an insurer to be taken into account in determining its financial condition.

ADMITTED COMPANY 
A company which has been granted permission within a particular state by means of a license to do business in that state.

ADMITTED LIABILITY 
Liability toward nonpaying guests in an aircraft who can recover damage for bodily injury without having to prove that the aircraft owner or operator was at fault.

ADVANCE COMMITMENT 
A written promise to make an investment at some time in the future if some specified conditions are met.

ADVANCE DISCOUNTING FOR MORTALITY 
Consideration for the number of persons covered by an insurance plan, such as a pension or retirement plan, who will die before reaching the age that the benefits will begin.

ADVANCE DISCOUNTING FOR SEVERANCE 
Consideration of the number of employees who will terminate their employment before retirement, permitting lower contribution by the employer to the plan.

Advance Funding
A pension funding method in which the employer systematically and periodically sets aside funds prior to the employee's retirement.

ADVANCED MARKETS
The term “advanced markets” in the insurance industry generally refers to unique and specialty risks in quality specialty markets.  This includes insurers operating in the excess and surplus lines arena.

ADVANCED PAYMENTS 
Payments by the insurance company to cover the insured's expenses as a result of fire, losses, or medical treatment and deducted from the final settlement of the claim.

ADVANCE PREMIUM 
The premium payment made at the beginning of the period covered by the insurance policy.

Advance Premium Mutual 
A mutual insurance company owned by the policy owners that does not issue assessable policies but charges premiums expected to be sufficient to pay all claims and expenses. 

Adverse Selection
The tendency of persons who present a poorer than average risk to apply for, or to continue, insurance to a greater extent than persons with average or better than average expectations of loss.  Also there is a tendency of insureds to take advantage of favorable options insurance contracts.

ADVISORY ORGANIZATIONS 
Rating bureaus and similar groups that advise, but do not require members to follow their recommendations.

AERO INSURANCE 
Coverage against the risks of flying.

AFFIDAVIT 
A sworn statement or affirmation before some officer who has authority to administer oaths or affirmations.

AFFIDAVIT OF CLAIM 
A form required when a claim is filed containing the facts on which the claim is based.

AFFILIATED COMPANIES 
Companies between which there is some relationship, for example, common stock ownership. 

AFFINITY
With respect to life insurance and insurable interest, the close and spiritual relationship  based upon the presumption that love and affections normally exist between family members and, therefore, insurable interest exists.

AFFIRMATIVE WARRANTY 
A warranty that something is true at the time the application for insurance is made.

AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967 (ADEA)
Federal legislation providing that employees between ages 40 and 65 are a protected class.  Amendments to this act raised the minimum age limit for mandatory retirement from 65 to 70 for most nonfederal employees and removed mandatory retirement age for most federal employees.

AGE CHANGE 
For the purpose of life insurance rating, the date midway between natural birth dates when the age of an individual changes to the next higher age.

Age Limits
Stipulated minimum and maximum ages below and above which the company will not accept applications or may not renew policies. 

AGENCY EXPERIENCE
A record of the profitability or unprofitability of business which an insurance company writes for a particular agent.

AGENCY PLANT 
All of an insurance company's brokers, agents, or sales people.

AGENCY SYSTEM
Holding insurance companies responsible for their acts, as well as for the acts of their agents who served as legal representatives of these companies.

AGENT
An insurance company representative licensed by the state who solicits, negotiates, or effects contracts of insurance and provides service to the policy holder for the insurer. 

AGENT, GENERAL 
The company representative in a given territory who is entrusted with supervising the company's business within that territory.  The general agent may appoint local agents whom he services.  The general agent is an independent contractor who is compensated on a commission basis.

AGENT, INDEPENDENT 
An independent businessman representing insurance accompanies under contract in a sales and service capacity and who is paid on a commission basis. The independent agent is sometimes referred to as a local agent.

AGENT, POLICY-WRITING 
A local agent authorized to write and sign insurance contracts for his company.

AGENT, RESIDENT 
A licensed agent who is a resident of the state in which he is licensed.

AGENT, SURVEYING 
A local agent who does not write policies for his company, but submits business to the company by means of applications.  (A fire term).

AGENT'S AUTHORITY
The agent's authority or power which is granted in his agency contract. The authority which the public may reasonably expect the agent to have such as express authority, apparent authority, or implied authority.

AGENT’S COMMISSION 
The payment by a company to the agent who places and services insurance, usually expressed as percentage of premium.

AGENT’S LICENSE 
A license of authority granted by the state or province entitling the agent to solicit and sell insurance.

AGENTS’ QUALIFICATION LAWS
State laws which establish minimum qualification requirements for insurance agents.

AGGREGATE CONTRACTUAL LIABILITY 
The total amount of money which the insurer pays under the terms of a liability policy for liability claims.

Aggregate Deductible
Deductible in some property and health insurance contracts in which all covered losses during a year are added together and the insurer pays only when this aggregate deductible amount is exceeded. 

AGGREGATE INDEMNITY 
A maximum dollar amount which may be collected for any period of disability or under the policy.

AGGREGATE OPERATIONS LIABILITY 
The total amount of money which an insurer  pays under the terms of a liability policy for claims for damages caused by the insured or his agents in the operation of a business, usually applying only to property damage liability.

AGGREGATE PRODUCTS LIABILITY
The total amount of money which an insurer pays under the terms of a liability policy for claims which arise out of the distribution or use of the products covered by the insurance contract.

AGGREGATE PROTECTIVE LIABILITY 
The total amount which the insurer pays under the terms of a liability policy for claims which may arise from acts of independent contractors. 

AGREED AMOUNT CLAUSE 
A policy provision in which the policy holder agrees to carry a stated amount of insurance specified in the contract as sufficient to void the effect of coinsurance, average, or contribution clause of the contract.

AGREED AMOUNT ENDORSEMENT
A property policy provision under which the insured and the insurer agree that the amount of insurance specified in the endorsement automatically satisfies the coinsurance clause.  This endorsement eliminates the necessity for determining whether or not the insurance carried is at least equal to the stated percentage of the value indicated in the coinsurance clause.

ALEATORY CONTRACT 
An insurance contract used when all parties agree that the values given up by each party will not be equal.

Alien Insurer
An insurance company domiciled in another country.

ALL EXCESS TO ANOTHER RULE
Under the all excess to another rule, the insurer pays to the insured an amount not exceeding his net loss.  It pays all of any excess insurance benefits to other persons or entities who sustained a loss.

all line underwriting
A broad approach to multiple line underwriting, all line underwriting embraces all of the three main classes of insurance.

ALL LINES 
Refers to the writing of life and health lines with the property liability lines through the same company.  Suggests a limitless form of protection, although all lines protection does not protect against a full range of loss.

ALL RISK 
This approach states that the policy covers all risks of loss.  Despite its name, there are some limitations on the scope of coverage in all risk policies.  Coverage restrictions are usually stated as conditions, exclusions, exceptions, limitations, etc.  Most of these restrictions relate to the persons or the interests protected.

ALL RISK INSURANCE 
The term for a policy which covers against the loss caused by all perils except those which are specifically excluded by the terms of the policy.  On the other hand, specified risk policies name the peril or perils which are specifically covered in that policy.
ALL RISK POLICY 
Coverage by an insurance contract that promises to cover all risks of direct physical loss or damage except those specifically excluded in the policy.

ALLIED LINES 
A term for forms of property insurance allied with fire insurance, covering such perils as windstorm, hail, explosion, sprinkler leakage, water damage, and riot. 

ALLIGATORING 
The charring of wood, characterized by relatively wide and smooth blisters which are separated by deep grooves between the blisters.

ALLOCATED BENEFIT 
Benefits for which the maximum amount payable for specific services is itemized in the contract. 

ALTERATIONS 
Changing the meaning or language of a policy; however, no meaning or language of any policy should be changed except by an endorsement signed by the company.  Without the consent of the insurer, these changes have no effect.

Alternate Delivery Systems
Health services provided in other than an in-patient or acute care hospital. For example, skilled and intermediary nursing facilities, hospice programs, and home health care. These systems are designed to provide needed services in a cost effective manner. 

alternative dispute resolution (ADR)
A procedure which employs traditional negotiating techniques and also utilizes certain novel methods which have been proven successful in helping the disputing parties to reach prompt, rational, and mutually agreeable resolutions to their conflicts.

Ambulatory Care
Medical services that are provided on an outpatient basis. They may include diagnosis, treatment, and rehabilitation. 

AMENDMENT 
A formal document changing the provisions of an insurance policy signed jointly by the insurance company officer and the policy holder or his authorized representative.

AMERICAN COUNCIL OF LIFE INSURANCE (ACLI)
A trade association of life insurers.

AMERICAN LLOYD’S 
A type of insurance organization permitted in some states.  The owners of the organization assume risk as individuals, which generally limits their full liability.

AMERICAN NUCLEAR INSURERS
A voluntary association of stock and mutual insurers that provides property and liability insurance protection for firms in the nuclear power industry.

Amortization
Paying an interest bearing liability by gradual reduction through a series of installments, as opposed to one lump sum payment. 

AMORTIZATION SCHEDULE 
A table showing the amounts of principal and interest due at regular intervals and the unpaid balance of the loan after each payment is made.

AMORTIZED VALUE 
A process by which certain premium bonds may be carried at their amortized value, rather than the customary current market value.

AMOUNT AT RISK 
The amount of insurance effected on any property by a company, regardless of whether or not the amount is equal to the actual value of the property.

AMOUNT OF INSURANCE TO VALUE 
The proportion of the sum to the total value of the property.

AMOUNT SUBJECT 
The value which may reasonably be expected to be lost in one fire or other casualty, depending on the protection and construction of the risk and the distribution of concentration of values.

ANNUAL AGGREGATE LIMIT 
The maximum amount payable under an insurance policy for all losses occurring within a particular calendar or fiscal year.

ANNUAL EXPECTED DOLLAR LOSS The mean amount of loss that a particular organization can expect to suffer from a specified peril or exposure, that is, the mean of the probability distribution developed by combining the distribution of loss frequency and the loss severity for the relevant peril or exposure.

ANNUAL RENEWAL AGREEMENT 
A clause in which an insurance company agrees to renew the covered policy under stated conditions.

ANNUAL REPORT 
The summary of fitting financial information along with text, which provides share holders or policy holders with a summary of the company’s year's activities.

Annual Statement
The annual report, as of December 31, of an insurer to a state insurance department showing assets and liabilities, receipts and disbursements, and other financial data.

ANNUALIZE 
An accounting and actuarial technique which  reduces data to an annual basis.

ANNUITANT 
The person during whose life an annuity is payable, usually the person to receive the annuity.  Or, one who is entitled to receive payment of an annuity from an insurer.

ANNUITY 
A contract which establishes the right to give or receive a series of payments of an amount of money.   These payments may be made on an annual or other periodic basis.  An annuity contract provides an income for a specified period of time, such as a number of years or for life. 

ANNUITY, APPROTIONABLE  
An annuity which provides for a pro rata payment covering the period from the date of the last regular premium payment to the date of death.

ANNUITY, CASH REFUND 
A life annuity with an agreement that the insurer, upon the death of the annuitant, will pay in a lump sum to the beneficiary any amount by which the consideration paid to the insurer exceeds the payments made to the annuitant.

ANNUITY CERTAIN 
A contract that provides an income for a specified number of years, regardless of life or death.

ANNUITY CONSIDERATION 
The payment, or one of the regular periodic payments, made to purchase an annuity.

ANNUITY, DEFERRED
An annuity payment commencing more than one year after the payment of a lump sum or from the commencement of periodic payments. 

ANNUITY, IMMEDIATE LIFE 
A life annuity which begins one month, three months, six months, or one year after its purchase, depending on the frequency of the payments.

ANNUITY INSTALLMENT REFUND 
A life annuity with an agreement that the insurer will, upon the death of the annuitant, continue to make payments to the beneficiary until the total of the payments to the annuitant and beneficiary equals the consideration paid to the insurer.

ANNUITY, JOINT AND SURVIVOR 
An annuity which is payable as long as any one of two or more persons survives.

ANNUITY, LIFE 
An annuity which is payable as long as the annuitant or annuitants live.

ANNUITY, RETIREMENT 
A deferred annuity where the premiums are accumulated with interest and which are used to purchase the annuity at a specified age of retirement.  Prior to that age, the annuitant is entitled to a cash surrender value.  In case of death, the surrender value is paid to the beneficiary.

ANNUITY SURVIVORSHIP 
An annuity payable to the annuitant for the period during which he survives the insured.

ANTI-CANCELLATION LAWS 
State statues which restrict insurers from canceling insurance policies, except for listed specific reasons.
ANTI-COERCION LAWS 
State statutes which contain a provision prohibiting the use of coercion in the sale of an insurance policy.  Or, laws prohibit lending organizations from requiring that the borrower obtain insurance from them as a condition for obtaining the loan.

ANTI-REBATE LAWS 
State statutes which prohibit returning part of part of a premium to the insured.

Anti-selection
The tendency of persons who present a poorer than average risk to apply for or to continue insurance to a greater extent than persons with average or better than average expectations of loss. 

APARTMENT POLICY 
A type of special multi-peril policy that combines coverages such as fire, allied lines, liability, burglary, and robbery, associated with the ownership and operation of an apartment house.

APPLICATION 
A signed statement of facts made by a person applying for life insurance and then used by the insurance company to decide whether or not to issue a policy. The application becomes part of the insurance contract when the policy is issued. 

APPOINTMENT 
The act of authorizing an agent to act for his company.

APPORTIONMENT CLAUSE 
A clause found which distributes the insurance in proportion to the total coverage.

APPRAISAL 
An estimate of quantity, quality, or value of an insured item.  The process through which conclusions of property value are obtained.  Also, the report which sets forth the estimate and conclusion of value.  A survey of property made for determining its insurable value or the amount of loss sustained.

APPRAISAL CLAUSE 
A clause which provides that the insured or the insurance company shall have the right to demand an appraisal in order to determine the amount of damage or loss in monetary terms.

APPRAISAL METHOD
A method of establishing the value of a business, the appraisal method permits having an independent appraiser determine the worth of the business.  Also referred to as the post departure method.

APPRAISEMENT 
The valuation of property by persons selected for this purpose by the interested parties or under direction of law.

APPROVAL 
Used in connection with the filing of policy and certificate forms and rates with the state insurance department.  Or, used in connection with the underwriting process of an insurance company consisting of the acceptance of the risk.  Or, the acceptance of an offer from an applicant or policy holder in the form of a contract for new insurance, a reinstatement of a terminated policy, a request for a policy loan, etc.

APPROVED ROOF 
A roof made of fire resistant material, as opposed to a wood shingle roof.

APPURTENANT STRUCTURES 
Buildings found on the same premises as the main building and insured under a property insurance policy.
ARBITRATION 
A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to the responsibility for or the extent of a loss. 

ARBITRATION CLAUSE 
A clause in an insurance policy which provides that if the policy holder and the company cannot agree on the settlement amount of a claim, they must select a neutral third party with the authority to bind both parties to the settlement.

AREA OF ORIGIN 
The room or general area in which a fire begins.

ARMSTRONG REPORT
A Congressional investigation of the entire life insurance industry in 1905 which related serious financial reporting abuses.

ARREARS 
The status of a policy of which the premiums are past due, but of which grace period is not yet expired.

ARREST BOND 
A type of business insurance.

ARROW THEORY 
The theory based on the fact that fires normally travel by feeding on flammables.  In fires involving exposed and burning wood joists or studs, the fire is usually constant.  The sides exposed to the direction of the fire will be more seriously burned, serving as a pointer or “arrow” in order to trace the fire.

Arson
The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent.
ASSESSABLE INSURANCE 
Insurance under which each loss payment is dependent upon the collection of assessments from policy holders.

ASSESSMENT 
The requirement of a mutual insurance company or a reciprocal exchange that an insured must pay an additional amount in order to meet losses greater than those anticipated.

Assessment Association
An insurer that does not charge a fixed premium for insurance, but rather assesses its members periodically in order to pay its losses. Assessment insurers usually collect an advance premium which is estimated to cover losses and expenses, but reserve the right to make additional assessments whenever the premium collected is insufficient. 

ASSESSMENT INSURANCE 
The type of insurance associated with an assessment association (see above). Any claims are known as assessments and are made because of the insufficiency of the initial payment of the insured to cover his proportionate share of losses.

asset valuation method
A method of valuing a business based on the current net worth of the business, that is, all of the assets of the business minus all of its liabilities.

Assets
Refers to all funds, real estate, bonds, mortgages, stocks, cash, deferred and unpaid premiums, property, goods, securities, rights of action, or resources of any kind owned by an insurance company. Statutory accounting, however, excludes non-admitted assets, such as deferred or overdue premiums, that would be considered assets under generally accepted accounting principles.

ASSIGNED CLAIMS PLAN 
A fund supported and operated by private insurers in order to pay no-fault benefits to those injured in uninsured automobile accidents.

ASSIGNED RISK 
A risk which underwriters prefer not to insure but which, because of state law or otherwise, must be insured.  Therefore, the insurance is handled through a pool of insurers and is assigned to companies in turn.

ASSIGNEE 
A person, firm, or corporation to which an insurance policy is assigned or transferred.

ASSIGNMENT
The legal transfer of one person's interest in an insurance policy to another person,  generally in connection with the sale of property.  Often, assignment is valid only with the consent of the insurer and is usually binding on the insurer only if it is filed with the insurer. 

Association Captive
A type of captive insurer owned by members of a sponsoring organization or group, such as a trade association.

ASSOCIATION GROUP 
A group formed from members of a trade or a professional association for group insurance under one master health insurance contract. 

ASSOCIATION GROUP PLAN
Health insurance plans designed for members of a professional association or trade association.  Members may be protected under a group policy or by individual franchise policies.

ASSUMPTION OF RISK
When an insured places himself in a situation which he realizes is dangerous to him and consents to taking a chance, thereby under certain circumstances, he frees others from liability.

Assumption of Risk Doctrine
A defense against a negligence claim that bars recovery for damages if a person understands and recognizes the danger inherent in a particular activity or occupation. 

Assumptions
Conditions and rules underlying the calculation of a pension benefit, including expected interest, mortality, and turnover. 

ASSURANCE
A term sometimes accepted as synonymous with “insurance”.  Is used more commonly in Canada and Great Britain than in the United States and often restricted to "life assurance".

AT OCCUPATION 
An underwriting term for an occupational accident.

ATTAINED AGE 
The age an insured has reached on a certain date and based on his nearest birthday.

ATTEST 
To witnesses the signing of a contract or the signatures on a will or other matters, “attesting" to the fact that the signatures were properly made before him to affirm them as genuine.

ATTESTATION CLAUSE 
A clause in an insurance policy to which the officers of the company subscribe their names to complete the contract.  Most policies are printed by the company containing the printed signatures of the officers, and only the authorized representative of the company actually signs the contract. 

ATTORNEY IN FACT 
One who has the authority to act for another within the area of the terms of his appointment.  Also referred to as power of attorney.

ATTRACTIVE NUISANCE
A condition which, although normally harmless, may attract those who do not understand its uses and, therefore, may cause injury. Although it may be proper to maintain such condition, the owner is nevertheless required to take such means necessary to prevent its causing injury to innocent people, for example, emptying a swimming pool or not leaving a tractor unattended. 

AUCTIONEER'S BOND  
A type of business insurance coverage.

AUDIT
A survey of the insured's records in order to determine the premium which should be paid to the insurance company for the protection provided.  Audits are frequently made with respect to workers’ compensation policies with the premium to be determined on some basis stated in the policy.

AUTHORIZATION 
The amount of insurance an underwriter will accept on a risk of a given class or on specific property, given for the guidance of agents and in response to requests from producers.

AUTHORIZED COMPANY 
A state insurance department licensed insurance company which is permitted to do business in the licensed states.

AUTHORIZED INSURER 
An insurer approved by the state or legally allowed to do business in the state for the types of insurance for which they are licensed.

AUTO TRAILERS POLICY
Type of business insurance coverage.

AUTOMATIC ASSIGNED RISK PLAN A program under which automobile liability insurance is made available to those who are unable to obtain such insurance in the voluntary market.

AUTOMATIC ASSIGNMENT
Marine insurance policies often provide coverage “for the account of whom it may concern”.  This is a form of automatic assignment which implies an expression of the insurer’s agreement that a future transfer of the insured property carries with it the right to protection in certain cases.

AUTOMATIC COVER 
Provided in many forms of insurance, generally for a specified period and limited amount, to cover increasing values and newly acquired and changing interests.

AUTOMATIC COVERAGE 
Coverage which is subject to contract terms, coverage of additional property or for other perils by an existing contract without 
specific request by the insured.

AUTOMATIC LOSS REINSTATEMENT
The reinstatement, without request by the insured, of coverage of future losses to the extent that its amount has been reduced by payment of a loss.

Automatic Premium Loan
Cash borrowed from a life insurance policy's cash value in order to pay an overdue premium after the grace period for paying the premium has expired. 

AUTOMATIC REINSTATEMENT CLAUSE 
A clause in an insurance policy which provides for the automatic reinstatement of the full face value of the policy after payment for a loss.

Automatic Reinsurance
An agreement that the insurer must cede and the reinsurer must accept all risks within specifically defined limits. The reinsurer undertakes in advance to grant reinsurance to the extent specified in the agreement in every case where the ceding company accepts the application and retains its own limit.

automatic renewal provision
Under an automatic renewal provision, a policy usually states that a termination will only occur upon written notice from the insurer or the insured.  For example, this endorsement may specify that the policy period will continue until the time of surrender or until the effective date and hour of cancellation.

AUTOMOBILE CAR AND LIABILITY POLICY 
A type of personal and business insurance coverage for liability in connection with automobile ownership.
AUTOMOBILE DEATH AND DISABILITY COVERAGE 
An extra premium endorsement which pays a sum in stated amounts for specific injuries or accidental death, as well as for indemnity in case of total disability.

AUTOMOBILE DEATH INDEMNITY
COVERAGE	
Provides limited life insurance protection to insured persons specifically named in the policy in the event of a death that is a direct result of a vehicle accident.  Payment is not contingent upon the establishment of negligence, but death by an intentional act of the insured is not covered.

AUTOMOBILE FLEET 
A group of automobiles under the same ownership and management which justifies a discount in the premium on the insurance.

AUTOMOBILE INSURANCE
Contractual protection against losses in connection with the use of an automobile. Features such as collision, public liability, comprehensive, property damage, theft, fire, lightning, and transportation are typically covered.

AUTOMOBILE INSURANCE, COMPREHENSIVE 
Insurance against any physical loss to an automobile, except by collision.

AUTOMOBILE INSURANCE, DRIVE OTHER CARS 
Insurance against loss due to claims for damages arising out from maintenance or use of automobiles other than the car or cars described in the policy contract.

AUTOMOBILE INSURANCE, HIRED CARS 
Insurance against loss due to claims for damages arising out of the maintenance or use of motor vehicles hired or borrowed from others by the insured.

AUTOMOBILE INSURANCE, NONOWNERSHIP LIABILITY 
Insurance against loss due to claims for damages arising out of the use of motor vehicles not owned or hired by the insured, but used in the conduct of his business.

Automobile Insurance Plan
One of several types of shared market mechanisms where persons who are unable to obtain such insurance in the voluntary market are assigned to a particular company, usually at a higher rate than the voluntary market, formerly known as assigned risk. 

AUTOMOBILE LIABILITY 
Responsibility for bodily injury or property damage resulting from the ownership, maintenance, or use of a car or truck.

Automobile Liability Insurance
Protection for the insured against financial loss because of legal liability for automobile  related injuries to others or damage to their property.

AUTOMOBILE MEDICAL PAYMENTS INSURANCE 
Optional coverage which pays for medical expenses of the passengers and policy holder, regardless of responsibility for the accident.  Sometimes referred to as basic medical payments. 

AUTOMOBILE  PHYSICAL DAMAGE COVERAGE
This type of coverage insures against loss which results from damage to an automobile owned by the insured.  Also provides coverage if the car is stolen.

Automobile Reinsurance Facility
One of several types of shared market mechanisms used to make automobile insurance available to persons who are unable to obtain such insurance in the regular market.

Automobile Shared Market
A program in which all automobile insurers in each state and the District of Columbia participate in order to make coverage available to automobile owners who are unable to obtain auto insurance in the voluntary market. Except in Maryland, which operates a state-funded program and where losses are subsidized by private insurers, each state uses one of three systems to guarantee the availability of automobile insurance:
1.  An automobile insurance plan
2.  A joint underwriting association
3.  A reinsurance facility

AVENUES OF FIRE SPREAD 
The routes taken by fire and heat when spreading from the point and area of origin to other areas of damage.

AVERAGE ADJUSTER
An adjuster who specializes in the adjusting of marine losses.

AVERAGE BLANKET RATE 
A rate for a blanket policy established by multiplying the rate for each location by the value at the location declared by the insured, then dividing the sum of the results by the total value.

AVERAGE CLAUSE 
A term which refers to a pro rata distribution, coinsurance clause.  A clause which provides that the insurer shall be liable in the event of loss for not more than the proportion of the loss which the amount of the insurance under the policy bears to a specified percentage of the actual cash value of the property insured.

Average Indexed Monthly Earnings (AIME)
Under the Old Age Survivor and Disability Insurance (OASDI) program, a person's actual earnings which are indexed in order to determine his primary insurance amount (PIA). 

AVERAGE RATE 
A rate used in fire insurance in order to determine the premium for a policy or policies covering more than one location or more than one type of property.  When several separate risks are insured under a single policy for a single amount of insurance, the rate is determined by taking the weighted average of the rates for the various risks insured separately.  A rate for a blanket policy is established by multiplying the rate for each location by the value at the location declared by the insured and dividing the sum of the results by the total value.

AVERAGE RATE OF RETURN 
The return on an investment calculated by averaging the total cash flow over the years during which this cash flow is received by the investor.

AVERAGE RISK 
The basis of all insurance work based on the law of averages.  In fire underwriting, the "line" is based on the average inherent hazard and conditions of the risk to be written.  An average risk under schedule treatment would be a risk in accordance with the conditions called for in the establishment of the basic rate.

AVERAGE WEEKLY BENEFITS
The amount of benefits payable per week for disability or death as prescribed by law.  This is usually a percentage of the average weekly wage, subject to a minimum and maximum amount.  Usually referred to as weekly compensation in workers’ compensation insurance.

AVERAGE WEEKLY WAGE 
The average rate of pay week, computed as prescribed by law.  Workers’ compensation and disability benefit laws vary considerably in their methods of computation prescribed.

AVIATION CLAUSE 
A clause limiting the liability of the insurer in case death or injury.

AVIATION HAZARD               
The extra hazard of accidental    death    or   injury resulting from participation in aeronautics.

AVIATION INSURANCE 
Aircraft insurance including coverage of aircraft or their contents, the owner's liability, and accident insurance on the passengers.

AVIATION PASSENGER ACCIDENT INSURANCE 
Indemnification for accidental injury during a specific flight or for flights within a certain period.

B   B   B   B   B   B   B   B 
B   B   B   B   B   B   B   B

“B” Option
A choice in selecting death benefit options. The “B” option states that at death, the policy would pay the original face amount, plus the policy account value.  This option is usually recommended for an insured during account building days.  Also referred to as Option II.

back end load
The back end load is the amount of the policy account value forfeited if the policy is surrendered.  It reimburses the insurance company for expenses that have not yet been recovered.

BAGGAGE POLICY 
A type of business insurance coverage.  Also may provide some personal coverage.

BAILEE
A term applied to the person who receives the possession or custody of property, thereby constituting bailment. A bailee is a person or business which, for a consideration, takes care, custody, and control of the public’s goods for some reason. The bailee must under law assume a high degree of responsibility to the public for the safe keeping of its property.  

BAILEE’S Customer’s Policy
A policy which covers the loss or damage to property of customers, regardless of a bailee's legal liability. 

BAILOR
The term given to the person from whom bailment property is received.

BALANCE SHEET 
The tabulated listing of the assets and liabilities of a company or individual as of a given date.

BANKER’S BLANKET BOND 
A type of business insurance coverage which guarantees banks against loss due to dishonest, fraudulent, or criminal acts of their employees and insuring against loss due to robbery, larceny, burglary, theft, hold up, forgery, misplacement, and mysterious disappearance.

BANKER’S FORGERY AND ALTERATION BOND 
A type of business insurance coverage.

BARRATRY 
The illegal handling of a vessel by its crews or officers while at sea.  Any act of the master or mariners of a vessel for a wrongful purpose, causing injury to the owners of a vessel.

BASIC MEDICAL BENEFITS 
A term referring to insurance that reimburses hospital and doctor charges, usually at 100 percent and up to stipulated limits.  Additional coverage can be provided by major medical insurance.

BASIC PREMIUM 
A percentage of the standard premium used to determine the premium for a workers’ compensation risk and using the retrospective rating plan which permits adjustment of the final premium for a risk or the basis of the loss experience of the insured during the period of protection, subject to maximum and minimum limits.

BASIC RATE 
The manual or experience rate, from which discounts are taken or to which charges are added in order to compensate for the individual circumstances of risk.

Basis
An amount attributed to an asset for income tax purposes and used to determine gain or loss on a sale or transfer or to determine the value of a gift.

BASIS POINT 
One one-hundredth of one percent.  Used to describe the amount of change in yield in many debt instruments such as mortgages.

BENEFICIAL INTEREST
The interest which arises from an insurance policy.
	
BENEFICIARY
A person who may become eligible to receive, or is receiving, benefits under and insurance plan or policy other than as a participant. 

BENEFICIARY CHANGE 
A beneficiary change may be made only if the policy gives this right to the policy holder and if the law permits.  In this country, a beneficiary is revocable, and the beneficiary's interest may be eliminated in favor of another beneficiary, if the policy confers this right.

BENEFICIARY, CONTINGENT 
A beneficiary who is entitled to benefits only after the death of the primary beneficiary.

BENEFICIARY, IRREVOCABLE 
A beneficiary for whom another may not be substituted by the insured.

BENEFICIARY, PRIMARY 
A beneficiary who is first entitled to benefits upon the death of an insured.

BENEFIT OF SELECTION 
The advantage afforded an insurance company through careful selection of insurance risks.

Benefit Period
A period of time, typically one to three years, during which major medical benefits are paid after the deductible is satisfied. When the benefit period ends, the insured must then satisfy a new deductible in order to establish a new benefit period.

BENEFITS 
The amount payable by the insurance company to a claimant, assignee, or beneficiary under each coverage. 

BEST’S RATINGS
A measure of a company's ability to pay its claims and obligations and serve its policy holders, as provided by A.M. Best Company, insurance industry financial analysts who independently track statistics relevant to an insurer's operations, performance, and financial condition. A+ is the highest Best rating.

BEST’S REPORTS 
Reports of insurance companies that include their ratings and underwriting results.

BETTERMENT 
An improvement to a property which is considered to add to the investment or capital cost, as distinguished from repairs or replacements where the original character or cost is unchanged.
BID BOND 
A guarantee that a contractor will enter into a contract, if it is awarded to him, and furnish a contract or performance bond.

BIND 
To make a firm commitment.  In insurance, to provide temporary coverage until an actual insurance policy can be issued.

BINDER 
A written or oral contract 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 obligates the several parties of the contract.  A binder is subject to the premium and all the terms of the policy to be issued.  In insurance, the insurance company is obligated to pay, if the loss insured against occurs before the policy is written.  Therefore, a person taking an insurance policy on his home is covered immediately by the insurance representative binding his company. Except for specified differences, the terms of the binder are by implication those of the contract which is intended to replace it.  Also see cover note.

BINDER, INSURANCE 
A written evidence of temporary hazard or title coverage that runs for a limited time only and must be replaced by a permanent policy.

BINDING RECEIPTS 
A receipt given for the payment of premium with the application which binds the company on the contract if the risk is approved as applied for.

Blackout Period
The period during which Social Security benefits are not paid to a surviving spouse, between the time the youngest child reaches age 16 and the widow's 60th birthday. 

BLANKET BOND 
A bond used in banks and other institutions to cover losses caused by robbery, burglary, or the dishonesty of employees and officers of the financial institution.

BLANKET CONTRACT 
A contract of health insurance affording benefits, such as accidental death and dismemberment, for all of a class of persons not individually identified. It is used for such groups as athletic teams, campers, travel policies for employees, etc.

BLANKET CRIME POLICY 
Coverage against employee dishonesty and losses, inside and outside a covered premise.  Also covers counterfeiting and forgery. 

BLANKET EXPENSE POLICY
A policy or provision which pays all expenses for some type of disability including medical, nursing, surgical, hospitalization,   x-ray expenses, and others. 

BLANKET FIDELITY BOND 
A blanket fidelity bond, or fidelity insurance, as the term is usually employed, is a contract whereby, for a consideration, one agrees to indemnify another against a loss arising from the want of honesty, integrity, or fidelity of an employee or other person holding a position of trust.  While the contract may resemble suretyship, it is generally held that guarantying the fidelity of employees or other persons holding positions of trust is, in effect, a form of insurance.  Such a contract is subject to the rules applicable to insurance contracts generally.

BLANKET INSURANCE 
Insurance which covers more than one type of property in one location or one or more types of property at several locations.

BLANKET LIMIT 
In property insurance, the maximum amount which the insurer will pay for any one loss to all items of property covered by, or "blanketed”, under a particular insurance contract. 

BLANKET MEDICAL EXPENSE 
A provision which entitles the insured person to collect up to a maximum established in the policy for all hospital and medical expenses incurred, without any limitations on individual types of medical expenses. 

BLANKET POLICY
Insurance with broad coverage frequently used in burglary and fire insurance.  A policy issued to cover a number of individuals such as an athletic team, passengers in a certain airplane, etc.  An insurance policy which covers several different properties or exposures under one form, instead of under separate items.

BLANKET POSITION BOND 
Protects the employer from loss caused by dishonesty on the part of his employees.  The maximum payable for a single embezzlement, for example, is the face amount of the bond times the number of dishonest employees involved in the embezzlement.

BLANKET RATE 
An insurance rate applied to more than one property or subject of insurance.

BLOCK LIMITS 
The maximum amount of insurance that an insurance company will write in a any one city block, thereby reducing the risk of large losses in case of a fire that might burn the entire block.

BLOCK POLICY 
A policy covering all the property of the insured, usually a merchant, against most perils.  A block policy may also cover property of others held by the insured on consignment, sold but not delivered, for repairs, etc.  A block policy generally offers coverage both on and off the insured's premises.

BLUE CROSS 
An independent non-profit membership corporation providing protection on a service basis against the cost of hospital care in a limited geographical area.

Blue Shield
An independent, non-profit membership corporation providing protection on a service basis against the cost of surgical and medical care in a limited geographical area. 

Boat Owners Package Policy
A special package policy for boat owners that combines physical damage insurance, medical expense insurance, liability insurance, and other coverages in one contract. 

BODILY INJURY 
Injury to the body of a person.  This term is usually very specifically defined in the policy.

BODILY INJURY LIABILITY 
The responsibility which may arise from injury to the life or health of another individual or individuals.

BODILY INJURY LIABILITY INSURANCE 
Protection against loss which arises from liability imposed upon the insured by law for damages because of bodily injury, sickness, or disease sustained by a person or persons other than employees.

Boiler and Machinery Insurance
Coverage for loss arising out of the operation of pressure, mechanical, and electrical equipment. Boiler and machinery insurance covers loss of the boiler and machinery itself, damage to other property, and business interruption losses. 

BOND 
An obligation on the part of the insurance company to protect the insured against financial loss caused by the acts or omissions of another person or persons.  For example, a fidelity bond on employees reimburses the insured up to the limits of the policy for a loss caused by dishonesty.

BOND, BID 
A guarantee that a contractor will enter into a contract on which he has bid if it is awarded to him and that he will furnish a contract bond, as required by the terms of the contract.

BOND, COMPLETION 
A guarantee of performance in the form of a fidelity or guaranty company bond.

BOND, CONTRACT 
A guarantee of the performance of a construction contract.  A contract bond may include the payment of all labor and material bills associated with the contract.  These guarantees may be written separately with the first considered a performance bond and the second considered a payment bond.

BOND, COURT 
A bond required of a litigant as a condition of pursuing his rights in court.

BOND, DEPOSITORY 
A bond which guarantees payment of funds to depositors in accordance with the terms of a deposit in a bank.

BOND, FIDELITY 
A promise to make good any financial loss due to the dishonesty of employees.  A financial guarantee of the performance of an implied obligation.

BOND, FIDUCIARY 
A bond which is executed on behalf of a person appointed by a court to a position of trust.  A fiduciary bond guarantees performance of statutory duties and proper accounting procedures.

BOND, FORGERY 
Insurance against loss due to forgery or alteration in connection with checks or other instruments.

BOND, LICENSE 
A bond which guarantees that the person to whom a license is issued will comply with the laws or ordinances regulating the privilege for which the license is issued.

BOND, MAINTENANCE 
A bond guaranteeing against defects in workmanship or materials for a stated time after the acceptance of work.

BOND, PENALTY 
The face amount of a bond, which is the amount the surety must pay for any loss.

BOND, PERMIT 
A bond which guarantees that the person to whom a permit is issued will comply with the laws or ordinances regulating the privilege for which the permit is issued.

BOND, POSITION
A fidelity bond which covers all persons occupying specifically stated positions.

BOND, PUBLIC OFFICIAL 
A guarantee that a public official will properly account for public funds and will perform other duties as are prescribed by law.  The form of the bond and the performance guaranteed are often prescribed by statute.

BOND, SCHEDULE 
A bond where the names or positions of the employees covered as principals are listed or scheduled.

BOND, SURETY 
A guarantee of the performance of an expressed obligation, usually evidenced by a written instrument.

BOOK COST 
The actual cost of assets purchased or acquired.

BOOK DEPRECIATION 
The amount reserved upon the books of record to provide for the retirement or replacement of an asset.

Book of Business
The number, size and type of accounts, that is, policy holders, that an agent owns.

BOOK VALUE method
A method of valuing a company’s worth, book value is defined as the monetary value of a business interest.  It calculates the value, arrived at by taking the total value of the business assets, as shown on the general ledger and other books of accounting such as stocks, bonds, real estate, etc., and deducting the total business liabilities.
BOOK VALUE PER SHARE 
The value of a company's assets, minus its liabilities, and divided by the number of shares outstanding.

BOOKS 
A record of a business’s financial transactions or its financial condition.

BORDEREAU 
A memorandum which contains detailed information regarding documents that accompany it. A procedure of reporting business to the home office when that business in handled from some branch offices.  Also, refers to passing reinsurance from one company to another.

BORDERLINE RISK 
A risk bordering between those acceptable and those not acceptable to the insurer

BOTH TO BLAME CLAUSE 
With respect to ocean marine insurance, a policy provision that, when ships collide under circumstances where both ships are at fault, all owners and shippers having interests in the voyage of either vessel are to share all losses in proportion to the values of their respective interests prior to the collision.  The both to blame provision replaces other general average and particular average rules for allocating the financial burden of losses arising from ocean marine mishaps.

BOTTOMRY
A method of shifting the burden of risk by pledging a marine vessel as security. 

Branch Office System
A type of life insurance marketing system under which branch offices are established in various areas. Salaried branch managers, who are employees of the company, are responsible for hiring and training new agents. 

breach of warranty
A clear violation of contract law whereby an insurance company does not abide by the terms of a contract.

BREAK IN SERVICE 
A calendar year, plan year, or other consecutive 12-month period during which a plan participant does not complete more than 500 hours of service.

BREEDER’S POLICY
A type of business insurance coverage designed to protect breeders of livestock.

BRICK CONSTRUCTION 
A building or structure with 75 percent or more of the exterior walls constructed of masonry and having a minimum wall thickness of 8” for brick, stone, or hollow masonry tile; 6" for poured reinforced concrete; or 4" of hollow masonry blocks faced with 4" of brick; and with a roof structure of combustible sheathing or combustible roof supports.
BRICK VENEER CONSTRUCTION 
A building with the outside supporting walls constructed of combustible material and faced with a single layer of brick, usually not more than 4" in thickness.  Often, brick veneer construction, for fire insurance purposes, is considered the same as frame construction.
 	
 BRIDGE POLICY (VEHICULAR AND RAIL)
A special type of business insurance for covering bridges  An inland marine policy insuring bridges against stated health hazards and perils.

BRIDGING THE GAP 
A clause which provides coverage for fire damage that may be caused by a windstorm.  Since some fire policies do not provide coverage if a significant part of a building falls, a fire resulting after a windstorm damage under those policies would not be collectible.  This clause corrects this situation.

BROAD FORM PERSONAL THEFT COVERAGE 
A form of theft coverage on property from a private residence.

BROAD FORM STORE KEEPERS INSURANCE
A package of nine specific crime coverages including all risk protection on money and securities.

BROKER 
A marketing specialist who represents buyers of property and liability insurance and who deals with either agents or companies in arranging for the coverage required by the customer.  A licensed, legal representative of the insured who negotiates with underwriters on behalf of the insured. A broker receives a commission from the insurer (underwriter). An insurance broker ordinarily is a solicitor of insurance who does not represent the insurer as an agent, but places orders for coverage with companies designated by the insured or with companies of his own choosing.

BROKER/AGENT
One who operates both as a broker representing the policy holder and as an agent representing the company. Or, one who has an office in one city which operates strictly on a brokerage basis and one in another city in which he is an agent.

BROKER OF RECORD 
A licensed broker who has been designated by the policy holder to represent that policy holder. 

BROKERAGE DEPARTMENT 
A department in an insurance company whose purpose it is to aid agents in handling insurance outside of their territory and to aid brokers in the placing of insurance throughout the country.

BUCKING ARREARS 
Applying advance payments of one policy owner to another policy owner's arrears, a falsification of records and a form of embezzlement.

BUDGET PLAN 
A plan by which large policies of insurance are divided into smaller policies set to expire and be renewed on consecutive years.  These policies are written at pro rata of the long term rates so that the premium payment is spread over several years.

BUILDER’S RISK INSURANCE
Insurance against loss to buildings or ships, including machinery and equipment, in the course of construction and to materials incidental to construction.  Since the value of  construction changes during the building process. a fixed amount policy would not sufficiently cover the risk.

BUILDING RATE 
A fire insurance term referring to the rates on buildings, rather than on the contents of the building.

BUREAU INSURER 
An insurer that is a member of a rate and form advisory service or bureau and uses the bureau's policy forms and premium rates for most of its insurance policies.
BUREAU RATE (STANDARD RATE) 
In connection with hazard insurance and for title insurance in some states, the bureau rate is a standard rate established by a rating bureau for all companies writing policies in a specific area.

Burglary
Burglary at common law is the breaking and entering, in the nighttime, of the dwelling house of another, with the intent to commit a felony therein. Burglary policies cover loss and damage to property occasioned by burglary or attempted burglary.

Burglary and Theft Insurance
Coverage against property losses due to burglary, robbery, or larceny. 

BURGLARY POLICY 
A type of business and personal insurance coverage against loss or damage to property by burglary.  Commonly used to include burglary, theft, and robbery insurance and often insurance against loss of money or securities due to any cause.

BURGLARY SPECIAL COVERAGE INSURANCE 
Special endorsements attached to a policy that provide specific types of burglary coverage, such as office burglary, paymaster robbery, etc. 

BURNING RATIO 
The ratio of actual fire loss to the total value of the property that could burn.  Ratio of loss by fire to insurance in force.

BUSINESS INCOME INSURANCE
Coverage for loss of earnings in case the policy holder's business is shut down by fire, windstorm, explosion, or other insured peril.

Business Insurance
A policy which primarily provides coverage of benefits to a business, as opposed to an individual.  Business insurance is a way, by means of a business continuation plan, to ensure the continuation of a business, in the event of disability or death of the owner or key personnel.  Business insurance stabilizes the business.

BUSINESS INTERRUPTION INSURANCE 
Protection for a business owner against losses resulting from a temporary shutdown because of fire or other insured peril. The insurance provides reimbursement for lost net profits and necessary continuing expenses.

BUSINESS INTERRUPTION INSURANCE, COINSURANCE FORM 
A form under which losses are paid only in the proportion that the amount of insurance bears to a stated percentage of the business interruption value.

BUSINESS INTERRUPTION INSURANCE, CONTINGENT 
Insurance against loss to the insured caused by an accident to the property of one other than the insured, for example, a major supplier.

BUSINESS INTERRUPTION 
INSURANCE, GROSS EARNING FORM 
A form under which the insured's gross earnings are insured.

Business Life Insurance
Life insurance purchased by a business enterprise on the life of a member of the firm. It is often bought by partnerships in order to protect the surviving partners against loss caused by the death of a partner or by a corporation to reimburse it for loss caused by the death of a key employee. 
BUSINESS TRAVEL ACCIDENT INSURANCE 
Insurance to indemnify for an accident while traveling on company business.  It usually covers all accidents occurring while away from home and not just those directly connected with travel.

BUY BACK DEDUCTIBLE 
A deductible under which the insured has the option, by paying an extra premium any time during the policy period, to reduce the amount of a per loss deductible applicable to any future insured losses.

BUY OUT POLICY 
A professional liability policy covering future claims resulting from incidents which occurred during the period that an expired claims made policy was in force.

Buy Sell Agreement
A buy-sell agreement is a binding contractual agreement for a buyer to purchase a business as a going concern and to be carried out upon a business owner’s death.  A buy-sell agreement obligates the designated buyer to purchase the business, and it requires the estate to sell the business to that buyer.

BY LAWS 
Laws made by corporations, trading companies, county councils, railway companies, public libraries, etc. for governing these types of businesses.  By laws are binding unless they are contrary to the law or unreasonable.

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Cafeteria Plan
A generic term for an employee benefit plan that allows employees to select among the various group life, medical expense, disability, dental, and other plans that best meet their specific needs. Also referred to as flexible benefit plans.

Calendar Year Deductible
An amount paid to an insured during a calendar year before a group or individual health insurance policy begins to pay for medical expenses. 

CALENDAR YEAR EXPERIENCE
Experience developed on premium and incurred loss transactions occurring during the twelve calendar months beginning January 1, regardless of the effective dates of the policies on which these transactions arise.

CALENDAR YEAR STATISTICS 

A method of gathering data on losses, particularly liability insurance claims, under which the claims payments made during a particular calendar year are charged to that year, regardless of when the accident giving rise to those payments occurred.

CAMERA FLOATER 
Insurance for camera and related equipment in inland marine form coverage.

CANCEL
To terminate a contract. Usually applied to the termination of a policy before its natural expiration, but may be used to describe the ending of any contract during its natural life, such as an agent's contract. 

CANCELABLE 
A contract of insurance that may be canceled during the policy term by the insurer or insured.  A contract, terminable by either the insured or insurer upon notification to the other party in accordance with the provisions of the contract.

CANCELLATION
The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.  The termination of an insurance policy or bond before its expiration.  The notice necessary before such cancellation becomes effective is typically stated in the insurance contract.

CANCELLATION EVIDENCE
A canceled policy or any legal notice of cancellation.

CANCELLATION, FLAT 
The cancellation of a policy as of its effective date without a premium charge.

CANCELLATION, PRO RATA 
The termination of insurance contract or bond with the premium charge being adjusted in proportion to the time the protection has been enforced.

CANCELLATION, SHORT RATE
The termination of an insurance contract at the request of the insured prior to the expiration date where the contract provides for a premium larger than the charge applicable for the period.  Therefore,  if the insured cancels the policy before the expiration date, an increased charge is made because of the fixed expenses incurred by the company.

CAPACITY 
The amount of capital available to an insurance company or to the industry as a whole for underwriting general insurance coverage or coverage for specific perils. 

CAPITAL 
The funds invested with the intention that it be a permanent part of a business.  The aggregate par value of the stock of an insurance corporation, the amount which must be paid in at the time of formation and which must be kept unimpaired.  A portion of wealth set aside for the production of additional wealth. 

Capital Gain
Profit realized on the sale of securities or equities. An unrealized capital gain is an increase in the value of securities or equities that have not been sold.

CAPITAL REQUIREMENT 
The total monetary investment necessary to the establishment and operation of an enterprise.  The appraised investment in plant facilities and normal working capital which may not include appraised cost of business rights such as patents, contracts, and charter.

Capital Retention Approach
A method used to estimate the amount of life insurance to own.  Under this method, the  insurance proceeds are retained and are not liquidated.

CAPITAL STOCK INSURANCE COMPANY 
A company having, in addition to surplus and reserve funds, a capital fund paid in by stock holders.

CAPITAL SUM 
The amount specified in an accident policy for payment in the event of the loss of limb or sight of the insured.

CAPITAL SURPLUS 
Surplus other than earned surplus including paid in surplus, donated surplus, and revaluation surplus.  Surplus not arising from profits of operation, but from sources such as the sale of capital stock at premium, profit on a corporation's own stock, donated stock, appraisal valuations, and surplus shown by the accounts at time of organization.

CAPITALIZATION 
The act or process of converting future incomes into current equivalent capital value.  The amount determined as referring to the capital structure of a corporation.

CAPITALIZATION OF NET EARNINGS
A formula using a numerical multiplier that has been generally defined and accepted in the trade in order to calculate the value of the business.  Capitalization of earnings is a term that determines the worth of a business based on what it makes.

CAPITALIZATION RATE
The rate of interest or return adopted in the process of capitalization, ordinarily assumed to reflect factor of risk to capital invested.

Capitation
A method of payment for health services in which a physician or hospital is paid a fixed, per capita amount for each person served, regardless of the actual number of services provided to each person. 

CAPTIVE AGENT 
A direct writer or an agent who has agreed to sell insurance for only one company or fleet.

Captive Insurance Company
A company owned solely or in large part by one or more non-insurance entities for the primary purpose of providing insurance coverage to the owner or owners.   Some captive insurance companies are owned by more than one corporation, in which case the owners, to some extent, may share each other's losses.

CAPTIVE INSURER 
An insurance company established and owned by a parent firm in order to insure its loss exposures while reducing premium costs, providing easier access to a reinsurer, and perhaps easing tax burdens.

CARE, CUSTODY, OR CONTROL EXCLUSION 
Clauses in liability insurance that restrict the liability for property in the insured's care, custody, or control.

CAREER AVERAGE (PENSION BENEFITS FORMULA) 
A pension plan formula that bases retirement benefits on earnings during all years of service to the employer.
Cargo Insurance
A type of ocean marine insurance that protects the shipper of the goods against financial loss if the goods are damaged or lost. 

CARRIER 
The insurance company which provides the protection for a particular risk.  A transporter of goods, a form of bailee for which insurance is provided.

CASH FLOW 
The spendable income from an investment after subtracting from gross income all operating expenses, loan payments, and the allowance for the income tax attributed to the income.  The amount of cash derived over a certain measured period of time from the operation of income producing property after debt services and operating expenses, but before depreciation and income taxes.

CASH FLOW PLAN 
A generic term for any loss financing plan    designed to minimize an organization's cash outflows for insurance.

CASH FLOW UNDERWRITING 
Making underwriting decisions on the assumption that the insurer's underwriting results are best measured after investment income is taken into account.

CASH MARKET 
A market where mortgages or mortgage-backed securities are bought and sold for immediate or forward delivery.

CASH ON CASH RETURN 
The rate of return on an investment which is measured by the cash returned to the investor, based on the investor's cash investment and regardless of income tax savings or the use of borrowed funds.

CASH REFUND ANNUITY 
A life annuity with an agreement that the insurer, on the death of the annuitant, will pay in a lump sum to a beneficiary any amount by which the consideration paid to the insurer exceeds the payments made to the annuitant.

CASH SURRENDER VALUE 
The amount available in cash upon voluntary termination or surrender of a policy by its owner before it becomes payable by death or maturity.

cash value accumulation test
This test states that the net cash surrender value, that is, the policy owner's current equity in the contract, cannot exceed the discounted value of the net single premium that could compound to the face amount of the policy at age 95.  The discount factor is a percentage or the minimum rate guaranteed in the contract.

cash value corridor
The percentage relationship of the policy's death benefit to the policy owner's equity.

CASUALTY
Casualty generally refers to an accident or to an event which results from a sudden, unexpected, or unusual cause.  In the most broad interpretation, nearly almost all types of insurance could really be regarded as casualty insurance.

Casualty Insurance
Insurance concerned with the insured's legal liability for injuries to others or damage to other persons' property.  Also refers to such forms of insurance as plate glass, burglary, robbery, forgery, and workers' compensation.

CATASTROPHE 
An event which causes a loss of extraordinary magnitude, such as a hurricane or tornado.  A sudden and severe calamity or disaster.

CATASTROPHE HAZARD 
The hazard of loss by reason of a simultaneous peril to which all insureds in a group or a large number of insureds are subject.

CATASTROPHE NUMBER 
The number assigned by the National Board of Fire Underwriters to a severe loss of over $1 million to permit special statistical treatment.

CATASTROPHE POLICY 
Policies which are designed to pay all medical or hospital costs above a certain deductible amount and up to the maximum provided in the policy.  This term refers to the economic catastrophe of enormous medical expenses.  Also referred to as major medical expense policies.

CATASTROPHE REINSURANCE 
An agreement whereby a reinsuring company assumes defined losses above a stated amount that result from a catastrophe.

cause
To bring about a loss.  

CAUSE OF ACTION
A cause of action is a legal, enforceable claim.

cause-event-loss tricotomy
Cause, event, and loss are the elements of insurance policy coverage.

Causes of Loss Form
A form added to commercial property insurance policy that indicates the causes of loss that are covered. There are four cause of loss forms: basic, broad, special, and earthquake.

cease and desist order
A procedure which requires an insurance company to refrain from engaging in unfair insurance practices. 

Cede
To transfer all or part of a risk written by an insurer (the ceding, or primary company) to a reinsurer. 

CEDING COMPANY 
An insurance company that places reinsurance business of its original risk with a reinsuring company.

CENTER OF INFLUENCE 
By definition, centers of influence are simply those influential people an agent knows, who know him favorably, and who agree to introduce or refer him to others.  They lead to new prospects.  The agent is "borrowing" the influence of his center of influence until the stranger personally accepts him for who he is.  Strangers can be converted into prospects by obtaining introductions from centers of influence. 

CENTRAL LOSS FUND 
In a risk retention plan of an organization that charges some retained losses back to its individual departments or other profit centers, a central loss fund is the headquarters account against which losses not absorbed by individual profit centers are charged.  The central loss fund may be charged for losses that exceed a profit center's individual retention level or are caused by perils that are not within a profit center's intended retention.

CERTIFICATE 
A statement that a policy has been written. Also used in evidencing reinsurance between companies.

CERTIFICATE OF AUTHORITY 
A document showing the powers an insurance company grants to a particular agent.

CERTIFICATE OF CONVENIENCE 
A temporary license or permit which permits one to act as an agent.

CERTIFICATE OF DEPOSIT 
A written document issued by a bank or other financial institution that is evidence of a deposit with the issuer's promise to return the deposit plus earnings at a specified rate of interest.

CERTIFICATE OF INSURANCE 
A statement of coverage issued to an individual insured under a group insurance contract which outlines the insurance benefits and principal provisions applicable to the member.  This document evidences the fact that an insurance policy has been written and includes a statement of the coverage of the policy in general terms.

CERTIFICATE OF REINSURANCE 
A short form documentation of a reinsurance transaction.

CERTIFICATE OF TITLE
A certificate of title furnished by a title company is the formally expressed professional opinion of the company’s examiner that the title is complete.  The certificate of title also warrants that the title company is liable only for a want of care, skill, or diligence. 

Certified Financial Planner (CFP) 
A professional who has attained a high degree of technical competency in financial planning and has passed a series of professional examinations by the College of Financial Planning. 

Certified Insurance Counselor (CIC) 
A professional in property and liability insurance who has passed a series of examinations by the Society of Certified Insurance Counselors. 

CESSION 
The amount of the insurance ceded to a reinsurer by the original insuring company in a reinsurance transaction. 

CHANCE OF LOSS
The chance of loss is the probability of loss.  Chance of loss is expressed in fractional terms.  The numerator in the equation is the actual or the expected number of losses.  The denominator is the exposures to loss.

CHANGE IN OCCUPANCY OR USE 
A notice reflecting the purposes for which the premises are described as being used and which increases the risk.  Otherwise, the policy is void.

Change of Occupation Clause
A provision in a health insurance policy stipulating that if the insured changes to a more hazardous occupation, the benefits are reduced based on the amount of benefits the premium would have purchased for the more hazardous occupation. 

CHARGEABLE 
With respect to automobile insurance, accidents not specifically excepted for such reasons are chargeable and become a part of the insured's driving record.  Certain accidents are not considered adverse to the insured's driving record when they occur under specific circumstances such as being legally parked, struck from the rear.
CHART OF ACCOUNTS 
A numerical designation of each asset, liability, and capital account.

CHARTER 
The granting of rights from a state to a business corporation such as the right to incorporate and transact business.

Chartered Financial Consultant (ChFC)
An individual who has attained a high degree of technical competency in the fields of financial planning, investments, and life and health insurance and has passed ten professional examinations. 

Chartered Life Underwriter (CLU)
An individual who has attained a high degree of technical competency in the fields of life and health insurance and who is expected to abide by a code of ethics. A CLU must have a minimum of three years of experience in life or health insurance sales and must have passed ten professional examinations. 

Chartered Property and Casualty Underwriter (CPCU)
A professional who has attained a high degree of technical competency in property and liability insurance and has passed ten professional examinations administered by the American Institute for Property and Liability Underwriters.

Choice No-Fault
Allows auto insureds the choice of remaining under the tort system or choosing no-fault coverage at a reduced premium.

CHOSE IN ACTION 
A right of proceeding in a court of law to recover a debt or money.  A chose in action usually follows a particular cause of action involved in a suit on a contract or negotiable instrument.

CIVIL AUTHORITY CLAUSE 
A provision in a fire policy which provides that the insured is protected against damages which may be caused by firemen, policemen, or other civil authorities in their efforts to check the fire.  For example, sometimes it is necessary to douse neighboring buildings in order to prevent a fire from spreading.

CIVIL COMMOTION 
A disturbance between large numbers of individuals in a community and which is frequently associated with damage to private and public property, for example, an uprising of people who create an extended disturbance.

CLAIM 
A request for payment of a loss which may come under the terms of an insurance contract.  An amount requested of an insurer, by a policy holder or a claimant, for an insured loss. A demand for payment under an insurance contract or bond.  The estimated or actual amount of a loss.

CLAIM DEPARTMENT 
The part of an insurance company that pays and handles claims or losses.  Also referred to as the loss department.

CLAIM EXPENSE 
Those expenses other than the insurance costs for adjusting claims.  These include the cost of an independent adjuster, legal fees, expert fees, etc.

CLAIM FREQUENCY 
The number of claims occurring under a given coverage divided by the number of earned exposures for the given coverage.  Claim frequency is usually expressed as the number of claims paid per 100 of such exposures.
Claims ADJUSTER 
The person who settles claims.  An agent, company adjuster, independent adjuster, adjustment bureau, or public adjuster. 

CLAIMS MADE INSURANCE 
A liability insurance policy under which coverage applies to claims filed during the policy period. 
CLAIMS RESERVE 
Estimated sums of money that are set aside by an insurance company to cover known and unknown claim settlements and verdicts, as well as claim expenses.

CLASS RATE 
The premium rate applicable to a specified class of risk.

CLASS RATING
A rate making method in which similar insureds are placed in the same underwriting class and each is charged the same rate. Also referred to as manual rating. 

CLASS YEAR PLAN 
A provision in a savings, profit sharing, or pension plan in which each year's contributions from the employer vest separately after a specified amount of time. 
CLASSIFICATION
The underwriting or rating group into which a particular risk must be placed.  The classification of insurance by the type of risk.  Classifications are used to identify similarities which warrant the same treatment or differences which justify other treatments.  Classification helps to identify factors which should be evaluated in the application of legal doctrines.  Pertains to type of business, location, and other factors.  Classifying persons, property, or operations as a basis for tabulating statistical experience and determining premium rates.
CLASSIFICATION AND RATING SYSTEM 
Groups all insureds with similar characteristics into the same rating class.  All members of the class are charged the same rate for insurance, although their premiums will be different if they have different numbers of exposure units.

CLAUSE 
A section of a policy contract or of riders which deal with a particular subject in the contract.  A particular part of a policy or endorsement to that policy.

CLEAN UP FUND 
Providing cash to “clean up” expenses associated with the occurrence of the event insured against.  For example, there are expenses for funeral and related charges associated with death.

CLEANER’S INSURANCE POLICY 
A type of bailee’s insurance coverage intended to take care of the particular bailee risks of cleaners.

CLOSE CORPORATION
A common type of corporation. Special statutes have been enacted in many jurisdictions in order to permit single individuals or closely knit groups of individuals to form close corporations.  In doing so, they limit their personal liability, but they carry on business without all of the formality required by corporations such as annual meetings, actions by boards of directors, etc.  Also referred to as a closely held corporation.

CLOSED CONTRACT OF INSURANCE 
An insurance contract under which rates and policy provisions cannot be changed.

CMS RATING COMMITTEE 
Combined Marine Surcharges Committee of the Institute of London Underwriters which maintains statistical records and established British marine insurance rates.

COINSURANCE
A provision under which an insured who carries less than the stipulated percentage of insurance to value will receive a loss payment that is limited to the same ratio which the amount of insurance bears to the amount required.  A policy provision frequently found in medical insurance, by which the insured person and the insurer share the covered losses under a policy in a specified ratio, for example, 80 percent to be paid by the insurer and 20 percent to be paid by the insured. 

COINSURANCE CLAUSE 
A clause requiring the insured to maintain insurance at least equal to stipulated percentage of value in order to collect partial losses in full. If the insurance is less than the minimum required, that proportion of the loss is paid which the amount of insurance carried bears to the amount which should have been carried. 

COINSURANCE LIMIT 
The dollar amount of coverage which, in mercantile open stock burglary insurance, satisfies the coinsurance requirement.  This limit represents the underwriter's estimate of the maximum potential loss from burglary in a single theft.  The coinsurance requirement is the lesser of the coinsurance limit or the coinsurance percentage of the total value of insured merchandise.

COINSURANCE PENALTY 
An amount by which an insured's recovery is reduced because of his failure to comply with a coinsurance requirement.

COINSURANCE PERCENTAGE 
The percentage of the value of insured property that an insured is required to carry in order to avoid a coinsurance penalty.  Coinsurance percentages vary among lines of insurance.

COINSURANCE REQUIREMENT
The amount of insurance which must be carried to avoid a coinsurance penalty.  Stated as a percentage of the value of the insured property at the time of loss or stated as a fixed dollar amount.

COINSURER 
One who shares the loss sustained under an insurance policy or policies.  Usually applied to an owner of property who fails to carry enough insurance to comply with the coinsurance provision and who, therefore, suffers part of the loss himself.  An insured or insurer liable to share losses under a coinsurance arrangement.

COLLATERAL 
Property which is pledged as the security for the satisfaction of a debt.

COLLATERAL ASSIGNMENT 
The assignment of a policy as security for a loan.  The creditor receives proceeds or values as his interest may appear.

Collateral Source Rule
The rule which states that if an injured person receives compensation from a source independent of the tortfeasor (the wrong doer), this payment should not be deducted from the damages he could collect from the tortfeasor.  That is, the liability of a wrongdoer is not diminished.

COLLEGE OF INSURANCE 
An educational institution in New York formed in 1962 and which has been chartered by the Board of Regents of New York State.  The College of insurance grants degrees for individuals studying in the field of insurance.

COLLEGE RETIREMENT EQUITIES FUND 
The organization that introduced the variable annuity.  It sells fixed and variable annuities only to college staff members.

COLLISION 
One vehicle running into or being struck by another vehicle or object.

COLLISION, CONVERTIBLE 
A policy for which the insured pays a smaller premium but is required to make an additional payment on the occasion of his making first claim under the policy.  Losses which may occur thereafter are paid in full, up to the extent of the coverage.
COLLISION COVERAGE 
Protection against loss resulting from any damage to the policy holder's car caused by collision with another vehicle or object or by upset of the insured car, whether it was the insured's fault or not.

COMBINATION AGENCY 
An agency that sells all the policies issued by a life insurance company.

COMBINATION AUTOMOBILE POLICY 
An insurance contract combining coverages under policies of automobile physical damage and automobile liability.

COMBINATION PLAN REINSURANCE 
A form of combined reinsurance which provides that, in consideration of a premium at a fixed percent of the ceding company's subject premium on the business covered, the reinsurer indemnifies the ceding company against the amount of loss on each risk in excess of a specified retention, subject to a specified limit and, after deducting the excess recoveries on each risk, the reinsurer will indemnify the ceding company against a fixed quota share percent of all remaining losses.
COMBINATION RESIDENCE INSURANCE 
A home owners' policy that includes a number of coverages in one policy including personal injury liability; loss of use; glass breakage; personal hold up; burglary, theft and larceny; water damage and explosion of fixtures; tornado; windstorm; cyclone; and others. 

COMBINED LOSS AND EXPENSE RATIO 
The sum of the loss ratio and the expense ratio.  Also referred to as the combined ratio.  (See below.)

COMBINED RATIO 
A measure of the relationship between dollars spent for claims and expenses and premium dollars taken in.  More specifically, the sum of the ratio of losses incurred to premiums earned and the ratio of commissions and expenses incurred to premiums written. A ratio above 100 means that for every premium dollar taken in, more than a dollar went for losses, expenses, and commissions. 

COMBINED SINGLE LIMIT (CSL) 
Single limit of liability coverage for both bodily injury and/or property damage, and opposed to split limits, where specific limits apply to bodily injury and property damage separately.

commencement date
The date an insurance policy begins to provide coverage.

COMMERCIAL BLANKET BOND 
A bond issued for a stated amount on all regular employees of the covered company insuring against loss from employees' dishonest acts.

COMMERCIAL INSURANCE 
Accident and sickness insurance intended to be sold to workers in commerce and business, as opposed to industrial workers.  These workers are exposed to little or no primary occupational hazards, as are industrial workers.

Commercial General Liability Policy (CGL)
Commercial liability policy drafted by the Insurance Services Office containing two coverage forms: an occurrence form and a claims made form. 

COMMERCIAL LINES 
Insurance for businesses, organizations, institutions, governmental agencies, and other commercial establishments. 

Commercial Multiple Peril Policy 
A package type of insurance for commercial establishments, that includes a wide range of essential coverages.

Commercial Package Policy (CPP)
A commercial policy that can be designed to meet the specific insurance needs of business firms. Property and liability coverage forms are combined to form a single policy.

COMMERCIAL PROPERTY FLOATER 
Insurance coverage for property that may be used in several locations.
COMMERCIAL PROPERTY FORM Endorsement of a standard fire policy to increase coverage to all risk.

COMMERCIAL UMBRELLA POLICY A policy which provide excess coverage in the event of a liability claim sufficient to exhaust the limits of a firm's general liability or auto liability policy.

Commission 
The part of an insurance premium paid by the insurer to an agent or broker for his services in procuring and servicing the insurance.

COMMISSION, CONTINGENT 
A commission, the amount of which is dependent on the profitability or some other characteristic of the business written by an agent or reinsurers.

COMMISSION OF AUTHORITY
A document outlining the delegated powers of an agent granted by the insurance company.

COMMISSIONER OF INSURANCE  
A state officer who administers the state's insurance laws and regulations. In some states, this regulator is called the Director or Superintendent of Insurance. 

COMMISSIONER'S DISABILITY TABLE 
Developed by the Health Insurance Association of America, this table is used for valuation of liabilities.  Many companies use information from this table for rate making purposes.

COMMISSIONERS’ VALUES 
An annual list of securities published by the National Association of Insurance Commissioners.  The values shown are those which may be reported by insurance companies on their balance sheets.

COMMISSIONERS 1941 STANDARD ORDINARY TABLE 
Mortality table prepared by the National Association of Insurance Commissioners.  Also referred to as The CSO Table, it has been established by law in most states as the basis for legal minimum standards for the calculating nonforfeiture values and policy reserves. 

COMMON ACCIDENT 
An accident in which more than one person is injured.

COMMON CARRIER 
An individual or corporation which offers its services, for a fee, to the public for carrying persons or property from one place to another.

COMMON CARRIER'S LEGAL LIABILITY POLICY 
A type of business insurance coverage which protects the carrier from liability associated with the business.

COMMON DISASTER CLAUSE 
A clause that provides for an alternative beneficiary in the event both the insured and the first beneficiary die at the same time in an accident.

COMMON LAW 
A system of legal justice. Unlike the civil law system, common law is not a written code.  It is based on written judicial decisions that constitute precedent.  The common law system spread through English colonization and conquest.

COMMON LAW DEFENSES 
Pleas which would defeat an injured worker's suit  against his employer and which are still effective in the absence of workers’ compensation legislation.  Some common law defenses are contributory negligence on employer's part, injury caused by a fellow servant, and the assumption of risk by the employee in the course of his work.

COMMON LAW LIABILITY 
The responsibility for injuries or damage imposed on a party because of his actions  The part of the law based upon custom and usage as established by the courts, as distinguished from statutory law.  Liability of one party to another, other than liability which is covered under a specific legislated law.

Common Stock
Securities that represent an ownership interest in a corporation. 

COMMUNITY PROPERTY 
A special ownership requiring that one-half of all property earned by a husband or wife during marriage belongs to each. Community property laws do not generally apply to property acquired by gift, by will, or by descent.

COMMUNITY RATING 
A means of determining subscribers fees by averaging the charge for the insurance among all insureds according to medical and hospital costs in the community.  No differentiation is made among the insureds in terms of individual risks assumed by the insurer.

COMMUTATION CLAUSE 
A clause which provides for the estimation, payment, and complete discharge of all future obligations for reinsurance loss or losses incurred, regardless of the continuing nature of certain losses.

COMMUTATION RIGHTS 
The right of a beneficiary of a life insurance policy to receive, in a single payment, the remaining unpaid installments of the proceeds or values of the policy.

Company ADJUSTER
A claims adjuster who is a salaried employee representing only one company.

COMPARATIVE NEGLIGENCE 
Under this concept a plaintiff (the person bringing suit) may recover damages even though he is guilty of some negligence. His recovery, however, is reduced by the amount or percent of that negligence.

COMPENSATING BALANCE 
A demand deposit required by a commercial bank as a condition for extending a line of credit or a loan.

COMPENSATING BALANCE PLAN
An insured risk financing plan by which premiums paid by a insured are deposited in a checking account in the insured's bank and used to meet some or all of the compensating balance requirement that the ban imposes on the insured.  Insured losses and related administrative expenses are paid from this checking account.

COMPETITIVE STATE FUND 
A state fund which writes insurance competing with private insurers.

COMPLETED OPERATIONS 
A form of liability insurance	which covers accidents arising out of operations which have been completed or abandoned, provided the accident occurs away from the premises owned, rented, or controlled by the insured.  Applicable to contractors, plumbers, electricians, repair shops, and similar firms.

COMPLETION BOND 
A bond which guarantees the construction of an improvement where a lender has advanced money to the owner.

COMPOSITE RATE 
A special single rate based upon a measure of exposure which reasonably reflects the variations in the insurable hazards covered for a particular insured.  Bases of exposure to which the composite rate is applied include payroll, sales, receipts, contract costs, and others.

COMPOSITION ROOF 
A roof of asbestos shingles, asphalt shingles, or other similar type of material.  The type of roof becomes a factor in determining the rate of a fire insurance policy.

COMPOUND INTEREST
Compound interest is essentially interest on interest, that is, interest payable on the interest of a debt and on accrued interest. The interest paid on the principal sum plus the interest on the interest as it falls due and remaining unpaid is added to the principal.

Comprehensive Automobile Insurance 
Protection against any loss or damage to an automobile except by collision or by upset.

COMPREHENSIVE CRIME ENDORSEMENT 
An endorsement providing up to five separate optional crime coverages including employee dishonesty, loss of money and securities against destruction, disappearance or wrongful distraction, money orders and counterfeit currency, and depositors forgery.

COMPREHENSIVE DISHONESTY, DISAPPEARANCE, AND DESTRUCTION INSURANCE 
A broad form of insurance available to business risks covering one or more of eight separate types of loss: loss caused by dishonesty of employees, loss of money or securities from within the premises, loss of money or securities while being conveyed by a messenger outside the premises, loss of securities from a safe deposit box, loss caused by forgery of outgoing instruments, loss caused by forgery of incoming instruments, loss of merchandise caused by burglary, and loss of merchandise or equipment caused by theft.

COMPREHENSIVE GENERAL LIABILITY INSURANCE (CGL)
A generic term for liability insurance designed to cover an insured's liability for bodily injury and property damage.  Exposures which can be covered include those arising out of its premises, operations, products, completed operations, and certain contracts.

COMPREHENSIVE HEALTH INSURANCE 
A health insurance policy that brings together the coverages of major medical and basic medical expense policies into one policy.  It is characterized by a low deductible amount, a coinsurance feature, and high maximum benefits.

Comprehensive Personal Liability Insurance
Protection against loss arising out of legal liability to pay money for damage or injury to others for which the insured is responsible. It does not include automobile liability, but does include almost every activity of the policy holder except his business operations.

Compulsory Auto Liability Insurance 
Insurance laws in some states require motorists to carry at least certain minimum auto liability coverages for bodily injury and property damage.

Compulsory Insurance
Any form of insurance which is required by law. 

Compulsory Insurance LawS
Laws protecting accident victims against irresponsible motorists by requiring owners and operators of automobiles to carry certain amounts of liability insurance in order to license the vehicle and to drive legally within the state. 

COMPULSORY RETIREMENT 
The date or age at which an employee must retire.

CONCEALMENT 
The deliberate failure of an applicant for insurance to reveal a material fact to the insurer. The withholding of material facts regarding the nature of an insurance risk or loss.  Withholding essential information from the insurer in negotiating an insurance contract or in making a claim. 

CONCURRENCY 
A condition which exists where two or more insurance policies cover the same property in the same manner and subject to identical conditions, although they may differ in amount or policy dates.

Concurrent Causation
A legal doctrine that states when a property loss is due to two causes, one that is excluded and one that is covered, the policy provides coverage. 

CONCURRENT INSURANCE 
Where two or more insurance policies cover the same property in the same manner and are subject to identical conditions, though they may differ in amount or policy dates.

CONDITION PRECEDENT 
A requirement which must be satisfied by a claimant in order to establish liability on the part of the insurer.
CONDITION SUBSEQUENT 
A course of conduct that will defeat or put off rights in existence.  For example, in an insurance contract, if the insured fails to cooperate with the insurance company in defending the law suit, the company may consider its obligations under the insurance contract to defend the insured as terminated.

CONDITIONAL BINDING RECEIPT 
A receipt given for premium payments accompanying an application for insurance. If the application is approved as applied for, the coverage is effective as of the date of the prepayment or the date on which the last of the underwriting requirements, such as a medical examination, has been fulfilled.  The insurance takes effect only on acceptance or approval of the application, under one form, as of the date of acceptance or approval, under the other, as of the date of the application.

CONDITIONAL VESTING 
A form of vesting in a contributory plan under which entitlement to a vested benefit is conditional upon the nonwithdrawal of the participant's contributions.

CONDITIONALLY RENEWABLE  
A continuance provision of a health insurance policy under which the company cannot cancel the policy during its term but can refuse to renew under certain conditions stated in the contract. 

CONDITIONS 
Provisions inserted in an insurance contract that qualify or place limitations on the insurer's promise to perform. Along with the insuring agreement exclusions, conditions complete the contract.  A clause in a liability insurance contract providing that the insured may not incur certain costs except at his own expense.

CONDOMINIUM INSURANCE 
A policy designed for the special needs of condominium owner-occupants to cover personal property and liability.  This type of insurance supplements the insurance normally purchased by the condominium association for the building, structures, and liability.

CONFLAGRATION 
A highly destructive fire extending beyond a single risk and over a wider area.

Confining Sickness
An illness that confines an insured person to his home or to a hospital. 

CONFUSION OF GOODS 
Peril, frequently covered in liability policies written for bailees dealing in others' personal property, such as clothing or jewelry, which results in loss of one's property because it becomes confused with others' similar property and cannot be readily located.

consanguinity
With respect to life insurance and insurable interest, the blood relationship based upon the presumption that love and affections normally exist between family members and, therefore, insurable interest exists.

CONSEQUENTIAL DAMAGE 
The impairment of value which does not arise as an immediate result of an act, but as an incidental result of it. This term applies only in the event that no part of land is actually taken.

CONSEQUENTIAL LOSS
A financial loss occurring as the consequence of some other loss. Often referred to as an indirect loss.

Conservation
The attempt by the insurer to prevent the lapse of a policy.

CONSERVATOR’S BOND                 
Probate bond by a guardian who is handling the subject estate.

CONSERVATORSHIP
If  an  insurer  cannot prove that it has satisfied the actions necessary for release from supervision, a regulatory measure associated with liquidation, the state board may order that the insurer be placed in conservatorship. 

Consideration 
One of the elements for a binding contract. Consideration is acceptance by the insurance company of the payment of the premium and the statements made by the prospective policy holder in the application. 

Consideration Clause
The clause that stipulates the basis on which the company issues the insurance contract. In health policies, the consideration is usually the statements in the application and the payment of premium. 

CONSORTIUM
The companionship of a spouse.  For example, a husband may collect damages for the value of his wife's services lost due to some accidents.

CONSTRUCTION BOND 
A type of business insurance coverage that protects the insured from risks associated with construction.

CONSTRUCTIVE TOTAL LOSS
Constructive total loss is suffered when the cost of repair is more than the property is worth.  Under United States marine law, constructive total loss occurs when the cost of repair exceeds 50 percent of the repaired or salvaged value.  When an insured peril so damages property that, while not completely destroyed, it is not worth repairing.

CONSUMER LAW
An are of legal specialization which is the practice of law dealing with consumer transactions and transactions of business consumers, including insurance consumers.   Consumer law includes matters involving the deceptive trade practices, unfair claims settlement practices, unfair competition, and other federal and state laws which are designed to protect insurance consumers.

"CONTAINED IN”
This phrase confines the liability of the insurer or company to the definite locality or building in which the risk is to be covered.  However, it is common practice to transfer or keep moving many kinds of property such as clothing or a vehicle at a repair shop.  Therefore, these conditions are incidental to the intended uses of the property and are fully covered within the policy terms, even when the phrase "contained in" appears to confine them. 

CONTENTS 
Articles found in a building which are not part of the building’s structure.

CONTENTS RATE 
A fire insurance term which refers to the insurance rate on the contents of the building, rather than on the building.

CONTESTABLE CLAUSE 
A section of an insurance contract that states conditions under which the policy may be contested or voided.  For example, fraud or material misstatement would be grounds for invoking this clause.

CONTINGENCY RESERVE 
That portion of funds which mutual life insurance companies segregate from surplus in order to provide for unforeseen expenses.

CONTINGENT ANNUITY 
An annuity calling for payment of benefits contingent upon the occurrence of an uncertain event.

CONTINGENT ANNUITY OPTION 
An option under which an employee may elect to receive, under certain conditions, a reduced amount of annuity with the same income, or a specified fraction, to be paid after his death to another person designated as his contingent annuitant, for that person's lifetime. The contingent annuitant is usually the husband or the wife.

CONTINGENT BENEFICIARY
The person or persons designated to receive the benefits of a policy or plan if the primary beneficiary dies while the insured is living.

CONTINGENT BUSINESS INSURANCE 
Protection for a business firm that has an insurable interest in the continuous production of another business such as a major supplier or customer.

contingent deferred sales charge
A charge which applies if a policy is terminated or if the insured reduces his policy within a certain period of time.  It is contingent upon how long the contract is owned.

CONTINGENT FUND 
A fund established by an insurance company to cover possible liabilities that may be the result of a chance happening.

CONTINGENT LIABILITY
Liability arising out of work done by independent contractors for a firm. A firm may be liable for the work done by an independent contractor if the activity is illegal, the situation does not permit delegation of authority, or the work is inherently dangerous.

Contingent Owner
The person to succeed as owner of a life insurance policy if the original owner dies. 

CONTINGENT VESTING 
That form of vesting under which entitlement to a vested benefit is conditioned upon the circumstances surrounding the employee's termination of service or his conduct at the time of or after separation of employment.

CONTINUITY OF COVERAGE 
A clause contained in a fidelity bond which takes the place of another bond and agrees to pay the losses that would be recoverable under the first bond, except that the discovery period has expired.

CONTRA PROFERENTEM 
Literally, “against the party who proffers or puts forward a thing”. Since insurance contracts are made up by the insurance companies, any ambiguity would be interpreted in favor of the insured.

CONTRACT 
A binding agreement between two or more parties for the doing or not doing of certain things. A contract of insurance is embodied in a written document called the policy. 

CONTRACT BOND 
A guarantee of the faithful performance of a construction contract and the payment of all resulting labor and material bills.  In those situations where two bonds are required, one to cover performance and the other to cover payment of labor and material, the former is known as a performance bond and the latter as a payment bond.

Contract Holder
The group, entity, or person to whom a group contract is issued. 

CONTRACT OF ADHESION 
A contract that is drafted by one party and accepted or rejected by the other with no opportunity to bargain over its terms.

CONTRACTUAL LIABILITY
The legal liability of another party that the business firm agrees to assume by a written or oral contract.  Liability over and above that which would be imposed by law which a person assumes under the terms of a contract.

CONTRACTUAL LIABILITY INSURANCE
A provision of protection against claims which may arise as the result of contractual liability.

CONTRACTUAL SUBROGATION
Subrogation which is created by a contractual agreement between the subrogee and the subrogor, as opposed to equitable subrogation, which is recognized by common law and does not need to be made explicit in a contract.

CONTRIBUTE TO LOSS STATUTE
Statutes enacted in many states which modify the common law by allowing an insurer to deny payment of an otherwise insured loss because of misrepresentation or breach of warranty, only if that misrepresentation or breach contributed materially to the loss.

Contribution by Equal Shares
A type of other insurance provision often found in liability insurance contracts that requires each company to share equally in the loss until the share of each insurer equals the lowest limit of liability under any policy or until the full amount of loss is paid.

CONTRIBUTIONS 
The payments made specifically by covered persons, employers, or both on behalf of covered persons in order to meet all or a portion of the costs of a social insurance system.

Contributory 
A group insurance plan issued to an employer under which both the employer and employee contribute to the cost of the plan. In order for a plan to be a contributory one, 75 percent of the eligible employees must be insured.

CONTRIBUTORY NEGLIGENCE
Negligence of the damaged person that helped to cause the accident. Some states bar recovery to the plaintiff if the plaintiff was contributorily negligent to any extent. Others apply comparative negligence. 

CONTROL PROVISION 
Generally applies to life insurance contracts covering minors.  Ownership control is exercised by someone other than the minor who is the insured.

CONTROLLED BUSINESS 
When insurance cannot be written because of other competitive practices.

CONVENTION VALUES 
Values at which the Commissioner of Insurance permits certain securities to be carried on insurance companies' books.  These values are used during very unusual business conditions such as in periods of panic and severe depression. Also referred to as commissioner's values.

Conversion 
The exchange of one insurance policy for another policy, for example, when a person ceases working and an individual policy is issued in order to replace employer group coverage. No evidence of medical insurability is required.  

Conversion Period 
The length of time within which a conversion can be elected.

CONVERSION PRIVILEGE
 A privilege granted in an insurance policy to convert to a different plan of insurance without providing evidence of insurability. The privilege granted by a group policy is to convert to an individual policy upon termination of group coverage.

Convertible Bond
A bond that offers the holder the privilege of converting the bond into a specified number of shares of stock.

CONVERTIBLE COLLISION 
Automobile insurance permitting the policy holder to pay part of the full normal premium.  In the event of a claim, he must pay the remaining part of the premium.

CONVERTIBLE INSURANCE 
The right to convert a term policy or the term portion of a combination policy into a permanent form of insurance without evidence of insurability.  Often applies to a change from any form of contract to another.

CONVERTIBLE TERM 
Term insurance which can be exchanged, at the option of the policy holder and without evidence of insurability, for another plan of insurance.
COOPERATIVE INSURANCE 
Refers to mutual associations such as fraternal, employee, industrial, or trade union groups.  

COORDINATION OF BENEFITS (COB)
The mechanism used in group health insurance to designate the order in which the multiple carriers are to pay benefits and to prevent duplicate payments. 

CORPORATE SURETY 
Insurance provided by a surety company as compared to surety provided by an individual.  The writing of bonds by a corporation as the obligor.

CORRIDOR DEDUCTIBLE 
Major medical plan deductible that excludes benefits provided by a basic plan if both a basic and a supplemental group major medical expense policy are in force. 

COST APPROACH TO VALUE 
A method by which the value of a property is determined by estimating the replacement cost of the improvement, deducting the estimated depreciation, and adding the value of the land as estimated by use of the market data approach.  Also referred to as physical indication of value.
Cost Basis
An amount attributed to an asset for income tax purposes and used to determine gain or loss on sale or transfer or used to determine the value of a gift. 

Cost Containment
The reduction of inefficiencies in the consumption, allocation, or production of health care services that contribute to higher than necessary costs. 

Cost of Living Rider
Benefit that can be added to a life insurance policy under which the policy owner can purchase one-year term insurance equal to the percentage change in the consumer price index with no evidence of insurability. 

COST OF RISK 
Expenditures which an entity makes because of its exposures to accidental losses.  Cost of risk can be computed as the sum of retained losses, plus insurance premiums, plus expenditures for loss control, plus the administrative cost of operating a risk management department.
COUNTERSIGNATURE 
Signature of licensed agent or representative on a policy necessary to validate the contract.

COUNTERSIGNATURE LAW 
Statutes regulating the countersigning of insurance policies in a particular state.

COUPON POLICY
A type of policy sold as a 20-payment life policy with attached coupons.  Each coupon is redeemable in cash at the end of each policy year.  Since the coupon is guaranteed, it has a selling feature over dividends. Also referred to as a guaranteed investment policy.

COUPON RATE 
The annual interest rate on a debt instrument or the annual interest rate on any indebtedness.

COURT BONDS 
All bonds and undertakings required of litigants in order to enable them to pursue certain remedies of the courts.

COVER NOTE 
A document issued by an agent or broker which tells the insured that the agent or broker has effected the insurance described therein. Since there are often delays in issuing formal policies, a cover note gives the insured a description of what insurance the agent or broker has put into effect. A cover note is similar to a binder although a binder usually refers to a document given by a company to an agent instead of one given by the agent to a customer.

COVERAGE 
The scope of protection provided under a contract of insurance; any of several risks covered by a policy.  The extent of insurance protection afforded by a policy of insurance. 

COVERAGE PART 
The portion of an insurance policy which contains all provisions relevant to the protection which that coverage part provides.

COVERED EXPENSES 
Hospital, medical, and miscellaneous health care expenses incurred by the insured that entitle him to a payment of benefits under a health insurance policy.

Covered Participant
A person covered by a pension plan is one who has fulfilled the eligibility requirements in the plan, for whom benefits have accrued or are accruing, or who is receiving benefits under the plan. 

CREDIT DISABILITY INSURANCE 
Disability insurance on the borrower, payable to the creditor while the borrower is disabled, to cover a loan payment and issued through the creditor, although credit disability insurance also can be purchased by an individual directly from an insurance company.

Credit Health Insurance
A form of health insurance on a borrower, usually under an installment purchase agreement. The benefits cover the obligations of the borrower and are payable to the creditor. 

Credit Insurance
A guarantee to manufacturers, wholesalers, and service organizations that they will be paid for goods shipped or services rendered. Applies to that part of working capital which is represented by accounts receivable. 

CREDIT LIFE INSURANCE 
Life insurance issued by a life insurance company on the lives of borrowers to cover payment of loans in case of death.  Usually handled through a lending office and written on either a group or an individual basis.

Crop-hail Insurance
Protection against damage to growing crops as a result of hail or certain other named perils.

CROSS LIABILITY 
When two or more insureds are covered under the same liability insurance policy, the liability of one insured for harming other(s).  This clause obligates an insurer to protect each insured separately.

CROSS PURCHASE AGREEMENT 
Upon the death of a stock holder or a partner, this type of agreement binds the surviving stock holders or partners to purchase each other's shares.

CRUDE DEATH RATE 
The ratio of total deaths to the total population occurring during a stated period of time.

CSO (Commissioners Standard Ordinary Mortality Table of 1941) 
Mortality table prepared in by the National Association of Insurance Commissioners. It  has been established by law in most states as the basis for legal minimum standards for the calculating nonforfeiture values and policy reserves. 

CSR (Customer Service Representative) 
One who supports the work of insurance agents with a variety of tasks that must be done within a company or agency to deliver services to and handle requests from clients.

CUMULATIVE COLLUSIVE EXCESS COVERAGE 
Reinsurance in which the ceding company may reduce its exposure data of policy.

CUMULATIVE LIABILITY 
When one bond is canceled and another is issued to take its place and the first bond has a discovery period, the surety company is exposed to the possibility of a loss equal to the aggregate sum of the two bonds. Unless required by statute to afford such cumulative liability, the surety company generally attaches a superseded suretyship rider.

CUMULATIVE TRAUMA 
Any physical or psychological disability that results from the combined effects of repeated injuries or illnesses.

CURRENT ASSETS 
Quick or liquid assets such as cash, accounts receivable, merchandise inventory, and other readily convertible assets that may be converted within a period of one year or less.
Current Assumption Whole Life Insurance
A nonparticipating whole life policy in which the cash values are based on the insurer's current mortality, investment, and expense experience. An accumulation account is credited with a current interest rate that changes over time. Also referred to as interest sensitive whole life insurance.

CURRENT DISBURSEMENT
A means of funding a pension plan sometimes referred to as “'pay as you go".  The distribution and funding of pension benefits as they come due.

CURRENT FUTURE SERVICE BENEFIT 
The amount of pension benefits payable for each period, usually one year, of extra participation beyond the minimum requirement.

CURRENT LIABILITIES 
Short term debts and obligations that must be paid within a period of one year.

CURRENT SERVICE BENEFIT 
The portion of a participant's retirement benefit that relates to his credited service in a contemporary period, usually one year.

CUT OFF 
A termination provision in a reinsurance contract where the reinsurer is not liable for loss due to occurrences taking place after this date.

CUT RATE 
A premium charge below a scheduled rate.  Nonscheduled insurance company’s premiums are at times called cut rate.

CUT THROUGH ENDORSEMENT 
A guarantee of coverage by a reinsurer to a third party who is not a party to the reinsurance contract.

D

DAILY REPORT 
Pertinent policy information, identical copies of which are usually prepared so that the insurance company's home office, branch office, interested agents, and brokers may each have one. 

Damage to Property of Others
Damage covered up to $500 per occurrence for an insured who damages another's property. Payment is made despite the lack of legal liability. Coverage is included in Section II of the home owners’ policy. 

DAMAGES 
The estimated reparation in money for injury sustained.

“damn fool” doctrine
Under the “damn fool” doctrine, recovery is precluded for incredibly foolish conduct, even though the consequences were not intended.

DATE OF POLICY INCEPTION  
Actual date and hour of commencement, at which time the underwriter's liability starts.

DATE OF POLICY SUBSCRIPTION
The actual hour of commencement and the time at which the liability of the underwriter ceases.
DAYS OF GRACE 
Period of time in which premiums may be paid following the premium due date and still have the policy remain in force.  In life insurance policies, most states permit one month or 31 days.

DDD POLICY 
A package policy providing blanket fidelity, forgery, and broad form burglary coverage by specific insuring agreements.

Death Benefit
A payment made to a designated beneficiary upon the death of the employee annuitant.

DEATH CLAIM 
The form which the person entitled to the proceeds must complete giving due proof of the death and establishing the claimant's right to such proceeds.

DEATH RATE 
The proportion of persons who die within a year.  Usually expressed in deaths per thousand.

death taxes
Federal taxes due on an estate at the time of death. In addition, many states impose state death taxes. Also referred to as estate taxes.

Debenture
A bond that is backed only by the general credit of the issuing corporation. No specific property is pledged as security behind the loan.

DEBRIS REMOVAL CLAUSE 
A clause often added to a policy or included in the policy form under which the company assumes liability for the removal of debris resulting from damage to the property covered by the insured peril.

DECEPTIVE TRADE PRACTICES
False, misleading, or deceptive acts or practices, breach of express or implied warranty, any unconscionable act or unfair practice or act.

declaration
A schedule in an insurance contract specifically identifying the persons or entities which are the insureds.

Declination
The insurer's refusal to insure an individual after careful evaluation of the application for insurance and any other pertinent factors. 

DECREASING TERM INSURANCE 
Term insurance of which the death benefit decreases in steps from the date the policy comes into force to the date the policy expires.
DEDUCTIBLE  
The amount which must first be subtracted from the total damage incurred before determining the insurance company's liability. 

Deductible Clause
A clause used to specify the amount to be deducted from each loss payment and assumed by the insured, usually in return for reduced premium. 

DEDUCTIBLE COVERAGE CLAUSE
A provision that, in return for a reduced rate, the insured will assume losses below a specified amount.

DEDUCTIBLE LIABILITY INSURANCE 
A method of coverage under which the insured agrees to contribute up to a specified sum, per claim or per accident, toward the amount paid to claimants as damages.  Insurance on this basis is written at reduced rates.
Defamation
Occurs when false statements, made directly or indirectly, are intended to injure anyone engaged in the business of insurance.

Deferred Annuity
An annuity providing for the income payments to begin at some specified future date.
 
Deferred Compensation
Arrangements by which compensation to employees for past or current services is postponed until some future date. 

DEFERRED DIVIDEND POLICY 
A term applied to various forms of policies on which dividends are not paid annually but are postponed for several years.

Deferred Group Annuity
A type of group annuity providing for the purchase each year of a paid up deferred annuity for each member of the group, the total amount received by the member at retirement being the sum of these deferred annuities. 
DEFERRED VESTING 
A form of vesting under which rights to vested benefits are acquired by a participant commencing upon the fulfillment of specified requirements, usually in terms of attained age, years of service, or plan membership.

DEFICIENCY RESERVE 
A supplemental reserve required by most state insurance laws when the gross premium charged by a life insurance company for a particular class of policies is less than the net premium.

Defined Benefit Plan
A pension plan stating either the benefits to be received by employees after retirement or the method of determining such benefits. The employer's contributions under such a plan are actuarially determined. 

Defined Contribution Plan
A plan under which the contribution rate is fixed and benefits to be received by employees after retirement depend to some extent upon the contributions and their earnings. 

DEGREE OF RISK 
The probability that actual experience will differ from statistically expected experience.

DELAY CLAUSE 
A mandatory provision in life insurance policies designed to protect the companies against losses that might develop as the result of excess demands for cash during an economic crisis.  The clause allows the company to withhold payment of the cash surrender value for six months.

DELAYED PAYMENT CLAUSE 
Similar to the delay clause, normally occurs in common disaster situations.

DELIVERED BUSINESS 
Policies whose applicants have been medically examined and the policies have been made out and delivered to the policy holder, but have not as yet been paid for.

DELIVERY OF POLICY 
The receipt by the insured of the insurance contract.  Actually delivery is determined by the intent of the parties and does not necessarily require the physical policy.

DEMOLITION CLAUSE 
The standard fire policy excludes liability for any loss to the insured property caused by ordinance or law regulating construction or repair.  Insurance against such loss may ordinarily be provided by the demolition clause and an additional premium.

DEMOLITION INSURANCE 
Insurance which covers further loss due to demolition of any part of a building not damaged by primary peril, if the demolition is required by law or ordinance.

Dental Insurance
Individual or group plan that helps pay costs of normal dental care as well as damage to teeth from an accident. 

Dependency Period
Period of time following the readjustment period during which the surviving spouse's children are under eighteen and therefore dependent of the parent. 

DEPENDENCY PERIOD INCOME 
One of the basic uses for life insurance.  Income for the family during the years until the youngest child reaches maturity.

DEPENDENT
A person who relies on someone else for support or existence.

Dependent Benefits
Social Security benefits available to the spouse or children of a Social Security beneficiary. 

Deposit Administration Group Annuity
A type of group annuity providing for the accumulation of contributions in an undivided fund out of which annuities are purchased as the individual members of the group retire. 

DEPOSIT ADMINISTRATION PLAN 
A type of pension plan, usually under a master group annuity contract, providing for the accumulation of contributions in an undivided fund out of which annuities are purchased as the individual members of the group retire.  An insured pension arrangement.

Deposit Premium
The premium deposit paid by a prospective policy holder when an application is made for an insurance policy. It is usually equal, at least, to the first month's estimate premium and is applied toward the actual premium when billed. 

Deposit Term Insurance
A form of term insurance, not really involving a deposit, in which the first-year premium is larger than subsequent premiums. Typically, a partial endowment is paid at the end of the term period. In many cases the partial endowment can be applied toward the purchase of a new term policy or, perhaps, a whole life policy. 
DEPOSITOR'S FORGERY BOND 
A type of business insurance protection against loss due to forgery.

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.

DEPRECIATION ALLOWANCE 
Accounting charge made to allow for the fact that the asset may become economically obsolete before its physical deterioration.  The purpose is to write the original cost by distributing it over the estimated useful life of the asset.

DEPRECIATION INSURANCE 
Insurance under which there is payable in case of loss, the difference between the actual cash value of the loss to the property insured and the cost of replacing or rebuilding it in like size and of similar construction.

DESIGNATION
The means by which those who have interests in an insured property may be indicated, either by name or by a description of their status, as insureds under a single insurance policy.  This type of arrangement is known as designation of insureds or as coverage for a named insured and additional insureds.  

DEVIATING INSURER 
An insurer which offers rates different and generally lower than those of other companies or organizations.

DEVIATION 
A departure from bureau rates.  Deviated rates usually reflect a discount, although they can also add a surcharge.

DEVIATION POLICY 
An insurance contract that differs from a standard policy.

DEVIATION RATE 
A premium charge that differs from a scheduled bureau’s rate.

Diagnosis-Related Groups (DRGs)
System that reimburses health care providers fixed amounts for all care given in connection with standard diagnostic categories. 

DIAGNOSTIC COVERAGE 
Accident and sickness policy that provides expenses up to a stated amount for the expense of x-ray examinations or other laboratory tests.

Difference in Conditions Insurance (DIC)
All risk policy that covers other perils not insured by basic property insurance contracts, supplemental to and excluding the coverage provided by underlying contracts.

DIRECT BILLING 
A method by which the insurance company sends bills directly to the policy holder, and the policy holder makes payments directly to the insurance company.

DIRECT CAUSE 
A cause that sets in motion a series of events which brings about a result without the intervention of any force from a new and independent source.

DIRECT DAMAGE 
Loss caused by the immediate hazard or peril, as compared with indirect damage, which is contingent upon the immediate peril.

Direct Loss
Financial losses that are immediate, directly the result of an insured peril.

Direct Placement
Sale of an entire issue of bonds or stock by the issuer to one or a few large institution customers, such as an insurance company, without trying to market the issue publicly.
 
Direct Premiums Written
Property and casualty insurance premiums written, less return premiums, without any allowance for premiums for assumed or ceded reinsurance. 

Direct Response System
A marketing method where insurance is sold without the services of an agent. Potential customers are solicited by advertising in the mail, newspapers, magazines, television, radio, and other media. 

Direct Writer
The term for a company which uses its own sales employees to write its policies. Sometimes refers to companies which contract with exclusive agents. 

Directors' and Officers' LiabilitY
The exposure of corporate managers to claims from share holders, government agencies, and employees, and others alleging mismanagement. 
Disability
A physical or a mental impairment that substantially limits one or more major life activities of an individual. It may be partial or total.

Disability BenefiT
Periodic payments, usually monthly, payable to participants under some retirement plans, if such participants are eligible for the benefits and become totally and permanently disabled prior to the normal retirement date. 

DISABILITY CLAUSE (WAIVER) 
A benefit provision forming part of a life insurance policy providing for certain benefits in the event of total and permanent disability from accident or sickness.  A benefit providing for the waiver of premiums only is called a Waiver of Premium Disability clause.

Disability Income Insurance
A form of health insurance that provides periodic payments to replace income when an insured person is unable to work as a result of illness, injury, or disease. 

Disability Insured
Status of an individual who is insured for disability benefits under the Old Age  Survivors and Disability Insurance (OASDI) program. The covered person must be fully insured and have at least twenty quarters of coverage out of the last forty, ending with the quarter in which the disability occurs. Fewer quarters are required for persons under age thirty. 

DISABILITY, PARTIAL 
Under accident and health insurance disability, which from the date of an accident or immediately following a period of total disability, prevents the insured from undertaking part of the duties of his occupation.

DISABILITY, PERMANENT PARTIAL 
Under workers’ compensation insurance, this is a condition which results in partial loss of earning power.

DISABILITY, PERMANENT TOTAL 
Under workers’ compensation insurance, this is a condition which is considered the equivalent of a complete and permanent loss of earning power.  Many compensation laws specify that certain injuries, such as total loss of sight, loss of both hands or both legs shall constitute permanent disability, regardless of the injured's ability to do some work.

DISABILITY, TEMPORARY PARTIAL Under workers’ compensation insurance, this is a condition which results in a partial loss of earning power but from which recovery can be expected.  Worker's compensation laws generally provide for compensation for temporary partial disability on the basis of a percentage of the difference between the employee's wages before the injury and what he can earn in his disabled condition.

DISABILITY, TEMPORARY TOTAL
Under workers’ compensation insurance, this is a condition which disables the employee from working, but from which complete or partial recovery can be expected, enabling him to return to employment.

DISABILITY THRESHOLD 
Provides that a victim may not sue in tort unless he has been disabled from an accident for a specific period of time.

DISABILITY, TOTAL
Under accident and health insurance, this is a condition, caused by either injury or sickness which wholly, necessarily, and continuously prevents an insured from performing any and every duty pertaining to his occupation.

Disappearing Deductible
Deductible in an insurance contract that provides for a decreasing deductible amount as the size of the loss increases, so that small claims are not paid but large losses are paid in full. 

DISCLAIMER 
A denial of liability for cause, for example, to deny coverage on grounds that a statutory condition had been breached.

disintermediation
The movement of money, especially as it applied to life insurance policy holders who took loans on low paying policies and invested these funds in higher paying investments.
Dismemberment
Loss of limbs, or use thereof, or loss of sight due to injury. 

Dismemberment Insurance
A form of health insurance that provides payment in case of loss by bodily injury of one or more body members, such as hands or feet or the sight of one or both eyes. 

Disposable Personal Income
The personal income less personal tax and nontax payments. It is the income available to people for spending and saving. 

distribution of risk
The principle of the sharing of economic risk.

DIVERSIFICATION 
Spreading of risk accomplished by different techniques such as geographically, type of risk, type of coverage, or by insuring more risks that are separate exposures.

DIVIDED COVERAGE 
A division of insurance between two or more companies that would normally be covered by one insurance policy. 

DIVIDED COVERAGE, BURGLARY
Grouping of property by classes in an insurance policy with a separate maximum amount of payment stipulated for each class, in order to cover the loss or damage sustained with that class.  For example, a burglary policy, written under divided coverage would specify that the company would pay up to a certain sum for the theft of jewelry and up to another amount for household furnishings.

Dividend
A return of part of the premium on participating insurance to reflect the difference between the premium charged and the combination of actual mortality, expense, and investment experience. Such premiums are calculated to provide some margin over the anticipated cost of the insurance protection.  An amount returned to a policy holder by an insurance company out of its earnings. In capital stock companies, a share of the profits distributed to stock holders.
Dividend Addition
An amount of paid up insurance purchased with a policy dividend and added to the face amount of the policy. 

DIVIDEND OPTIONS 
Clauses in a policy that give the insured alternatives in his use of his dividends, such as to receive them by check, have them accumulate and draw interest, or use them to purchase additional insurance.

DIVIDEND REINVESTMENT
A technique whereby a policy holder's dividend is used to purchase additional coverage. An option available to share holders whereby dividends on stocks are used to purchase additional stock of the company.  Often this involves no brokerage fee and may even be at a modest discount from the current market price.

DIVISIBILITY 
The privilege, under an insurance contract covering two or more items, of treating the insurance as though a contract had been written separately on one or more of the items.

DIVISIBLE CONTRACT CLAUSE 
A clause which provides that a violation of the conditions of the policy at one insured location will not void the policy at all locations.

double indemnity clause
A clause in an insurance contract which states that the amount of the proceeds will be doubled if the insured’s death is caused by an accident. 

doctrine of insurable interest
This doctrine requires that there must be some significant relationship between the insured and the person, object, or activity which is the subject of the insurance transaction.  The justification for the doctrine of insurable interest is to avoid potential corruption which might result from allowing insurance contracts to afford opportunities for net gain as a result of a loss.

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.

Domestic Insurer
An insurance company is a domestic company in the state in which it is incorporated. 

DOMICILED COMPANY 
A company whose head office is in the same state as the person referring to it.
DOMINO THEORY OF ACCIDENT CAUSATION 
A theory to explain the causation and prevention of accidents in terms of an unbroken chain of conditions or events.  This chain consists of: 1) the accident victim's ancestry and social environment, 2) personal fault or shortcoming, 3) an unsafe act or physical condition, 4) a sudden event or accident, and 5) a resulting injury.

Donor
The person making a gift. 

Double Indemnity
A policy provision usually associated with death, which doubles payment of a designated benefit when certain kinds of accidents occur.
 
DRAFT 
A negotiable instrument frequently used by insurance companies to pay claims.  Instead of ordering a bank to pay, the insurance orders itself to pay.

DRAFT AUTHORITY 
A producer with draft authority is permitted to handle small claims and issue drafts to pay certain types of covered claims that are within the dollar limit of the draft authority.

Dramshop Law
Law that imputes negligence to the owner of a business that sells liquor in the case that an intoxicated customer causes injury or property damage to another person. Usually excluded from general liability policies. 

Dread Disease Insurance
Insurance providing an unallocated benefit, subject to a maximum amount, for expenses incurred in connection with the treatment of specified diseases such as cancer, poliomyelitis, encephalitis and spinal meningitis. 

Driver Education Credit
Student discount or reduction in premium amount for which young drivers become eligible on completion of a driver education course.

DUAL CAPACITY DOCTRINE 
Rule of civil procedure which permits an employee entitled to workers' compensation benefits to also sue the employer on the basis that the employer acted wrongfully in some other capacity, such as an occupancy of premises, causing harm to the injured employee. 

DUAL INTEREST POLICY 
A policy providing protection to two or more individuals or companies, such as a finance company and the purchaser of the property being financed by the finance company.

DUAL LIFE STOCK COMPANY 
A stock company issuing both    nonparticipating and participating life insurance contracts.

DUFF FIRE 
An underground fire, usually the result of a surface fire which burns deep into the accumulated leaf litter or peat, called "duff”.  This fire can smolder and burn slowly to several feet.  The confined heat is intense, and a duff fire can burn into areas thought too damp to support combustion.

DUN & BRADSTREET (D & B) 
The world’s largest credit reporting organization, gathering and maintaining information on businesses and supplying this information to interested parties, including underwriters.  Reports on the history of the company and the background of its owners and manager, describes its operations, outlines its paying record, analyzes its financial condition, and assigns a credit rating.

Duplication of Benefits
Overlapping or identical coverage of the same insured under two or more health plans, usually the result of contracts of different insurance companies, service organizations, or pre-payment plans.  Also referred to as multiple coverage. 

DURATION OF RISK 
The period of time for which the risk is to run and distinctly stated in the policy.

duty of care 
Involves an insurer performing its obligations with care, skill, reasonable expedience, and faithfulness. 

duty of good faith and fair dealing 
States that a “special relationship” is created by the insurer’s disproportionately strong bargaining position in the claims handing process.

duty to defend
Arises from the liability insurance contract.  An insurer has the duty to defend any suit against an insured which seeks damages resulting from bodily injury or property damage.

duty to indemnify
The duty to make compensation or remuneration for the incurred harm, injury, loss, or damage which was insured against. 

Duty to settle
The duty of an insurance company to settle valid claims within a reasonable period of time.

Dwelling Property 1
Property insurance policy that insures the dwelling at actual cash value, other structures, personal property, fair rental value, and certain other coverages. Covers a limited number of perils. 

Dwelling Property 2
Property insurance policy that insures the dwelling and other structures at replacement cost. It adds additional coverages and has a greater list of covered perils than the Dwelling Property 1 policy.

Dwelling Property 3
Property insurance policy that covers the dwelling and other structures against direct physical loss from any peril except for those perils otherwise excluded. However, personal property is covered on a named perils basis. 

DYNAMO CLAUSE (OR ELECTRICAL EXEMPTION) 
Property insurance clause providing that damage to electrical appliances caused by artificially generated electrical currents is insured only if fire ensues, and then only for the damage caused by the fire. 
E

Early Retirement
Retirement of a participant prior to the normal retirement date, usually with a reduced amount of annuity. Early retirement is generally allowed at any time during a period of 5 to 10 years preceding the normal retirement date. 
Earned Income
Employment income derived from salary, wages, commissions, or fees. 

Earned Premium
The part of the total property/casualty policy premium which applies to the portion of the policy period which has already expired.

EARNINGS AND PROFITS 
When  a person has an insurable interest in productive property, he may insure the prospective earnings and profits which arise from this.  These interests must be specifically covered.

Earnings Test 
Determination of the amount of Social Security benefits payable to a beneficiary after adjusting for earnings. The amount of earnings allowed before his benefits is indexed annually.

ECONOMIC LIFE 
The period through which a building may be profitably utilized.  Period during which a building is more valuable in use than for salvage.

Economic LosS
The estimated total cost, both insured and uninsured, of mishaps such as motor vehicle accidents, work accidents, and fires.  Includes factors such as property damage; funeral expenses; wage loss; insurance administration costs; and medical, hospital and legal costs. 

ECONOMIC OBSOLESCENCE 
Impairment of desirability or of the useful life arising from economic forces such as changes in optimum land use, legislative enactments which restrict or impair property rights, or changes in supply and demand relationships.  To be distinguished from loss in value from physical deterioration and functional obsolescence.

Economic Policy
Special type of participating whole life insurance in which the dividends are used to buy term insurance or paid up additions equal to the difference between the face amount of the policy and some guaranteed amount. 

Effective Date
The date on which the insurance under a policy begins. 

EFFECTIVE GROSS INCOME 
Normal annual income, including overtime, that is regular or guaranteed and may come from more than one source.

EFFECTIVE GROSS INCOME (PROPERTY)
Stabilized income that a property is expected to generate after a vacancy allowance.

EFFECTIVE GROSS REVENUE 
Total income less allowances for vacancies, contingencies, and sometimes collection losses, but before deductions for operating expenses.

EFFECTIVE RATE 
The actual rate of return to the investor.

ELECTIVE BENEFITS 
Conditions which may be selected by the insured in the settlement of his claim as an alternative to another form of compensation.

ELECTRICAL EXEMPTION CLAUSES 
Paragraphs in fire insurance policies limiting coverage to electrical machinery damage by electric current.  A clause attached to a fire insurance contract stating that, in the event of electrical injury or disturbance to electrical
appliances, including wiring, caused by artificially generated electric currents, the insurer shall be liable only if fire ensues and then for the damage by fire only.	

ELECTRONIC DATA PROCESSING (EDP) COVERAGE
Covering direct and indirect losses resulting from damage to computer hardware, software, or data.

element of risk
In an insurance transaction, element of risk refers to the speculation of potential loss.
ELEVATOR COLLISION COVERAGE
Coverage for damage to an elevator and any
property thereon.

ELEVATOR LIABILITY INSURANCE POLICY
Type of business insurance against loss due to claims for damages arising out of the ownership, maintenance, or use of elevators or other hoisting devices.

Eligibility Date
The date on which an individual member of a specified group becomes eligible to apply for insurance under the insurance plan. 

Eligibility Period
A specified length of time, frequently 31 days, following the eligibility date during which an individual member of a particular group will remain eligible to apply for insurance under a group life or health insurance policy without evidence of insurability. 

Eligibility Requirements
Refers to the conditions which an employee must satisfy to participate in a retirement plan or conditions which an employee must satisfy to obtain a retirement benefit.

ELIGIBLE EMPLOYEES
Those members of a group who have met the eligibility requirements under a group life or health insurance plan.

Elimination Period
A period of time between the period of disability and the start of disability income insurance benefits, during which no benefits are payable.

Embezzlement
Fraudulent use or taking of another's property or money which has been entrusted to one's care. 

EMERGENCY FUND 
A reserve death benefit fund provided by the insured to protect his family against sudden large, unbudgetable expenses such as accidents, operations, etc.  

EMINENT DOMAIN 
The power of a sovereign body to appropriate for public use certain private property.  The most common forms of the exercising of this power are in the condemnation of private property for streets, roads, railroads, public utilities.

EMPLOYEE 
One who performs services for another under a contract of hire, acting under the direction and control of the person by whom he is hired.

EMPLOYEE BENEFITS 
Advantages, besides salary or wages, that an employee may have through his employment.  Sometimes referred to as fringe benefits, these may include pension plans, group life insurance, group health, medical care, accident, and sickness coverage.

Employee Dishonesty Coverage Form
Commercial crime insurance form drafted by the Insurance Services Office that covers the loss of money, securities, and other covered property because of any dishonest act of  covered employees. 

Employee Retirement Income Security Act (ERISA)
Legislation passed in 1974 applying to most private pension and welfare plans that requires certain minimum standards to protect participating employees. 

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) 
A defined contribution pension plan which is designed to invest primarily in employer securities.

EMPLOYER’S LIABILITY INSURANCE
Protects an employer against claims for damages which arise out of the injuries to employees in the course of their work. Employer’s liability insurance provides protection in cases not covered by workers’ compensation laws.

EMPLOYER’S NON-OWNERSHIP LIABILITY COVERAGE 
Liability coverage with respect to non-owned automobiles.

Endorsement
An amendment of the policy usually by means of a rubber stamp or rider.

Endowment
Life insurance payable to the policy holder if living, on the maturity date stated in the policy, or to a beneficiary if the insured dies prior to that date. 

ENDOWMENT ANNUITY INSURANCE
A contract of insurance combining features of a deferred annuity of the retirement type plus decreasing term insurance of the excess of the face amount over the cash value.  Developed as retirement contracts in employee pension plans under the pension trust system.

ENDOWMENT INSURANCE 
A type of life insurance that pays upon the death of the insured within covered period or at the end of the covered period if the individual is still alive.  If the policy holder dies during the endowment period, payment is made to a beneficiary.

Enrolled Actuary
A person who performs actuarial service for a plan and who is enrolled with the Federal Joint Board for the Enrollment of Actuaries. 

Enrollment Card
A document signed by an employee as notice of his desire to participate in the benefits of a group insurance plan.

Entire Contract Clause
Provision in life insurance policies stating that the life insurance policy and attached application constitute the entire contract between the parties. 

ENTIRETY OF THE POLICY 
Where the policy is issued for a single premium, such as a blanket or floater policy, but covers a number of separate items or subjects,  a breach of condition in any part of the property covered will void the insurance on the whole of the property.  It is customary in such cases, to insert a condition in the policy offsetting this principle, the condition reading to the effect that "breach of contract in one part of the premises will be held to attach to that part only, and will not prejudice other parts in which no breach had occurred.”

Entity Purchase Agreement
Specifies the terms for the business to buy back a deceased's share of the business's ownership.  This type of agreement binds both the stock holders and a corporation.  Upon the death of a stock holder, the corporation is bound to purchase the stock to the extent of its available surplus. Also referred to as a redemption agreement.

ENURE (OR INURE)
Refers to serving the benefit of a person.  For example, if this clause in an insurance policy provides that if household goods insured under a residence and outside theft policy should be stolen while in transit, the insurance shall not enure to the benefit of the trucking or moving company transporting the property, although the insurance company will pay for the loss sustained.

Environmental Impairment Liability Insurance
A form of insurance designed to cover losses and liabilities arising from damage to property by pollution.

EQUIPMENT 
The portion of fixed assets, other than real   estate,  usually qualified as office equipment, automotive equipment, etc.  To be distinguished from assets that are included under the category of fixtures by virtue of their attachment to realty, either in a physical sense or by legal interpretation.

EQUIPMENT FLOATER INSURANCE Type of inland marine broad protection.

EQUITABLE SUBROGATION 
The right of a third party, such as an insurer, who has met an obligation for which another is primarily responsible, such as a tortfeasor, to seek repayment from the party primarily responsible.

Equities
Investments in the form of ownership of property, usually common stocks, as distinguished from fixed income bearing securities, such as bonds or mortgages. 

EQUITY ANNUITIES 
The term formerly used for variable annuities.

Equity in the Unearned Premium Reserve
Amount by which an unearned premium reserve is overstated because it is established on the basis of gross premium, rather than net premium.

EQUITY RATE 
The rate applied to very large risks that have had outstandingly good or bad records of claims so that the ordinary rates would not truly represent the risk.

EQUIVALENT LEVEL ANNUAL DIVIDEND 
The average of an annual policy dividend which may be projected during a stated time frame.  The critical factor is the assumption of a specific rate of interest.

ERROR IN NAME 
An error in name, or in designation of place, occurring in an insurance policy. 

Errors and Omissions Insurance
Liability insurance policy that provides protection against loss incurred by a client because of some negligent act, error, or omission by the insured. Errors and omissions insurance provides for indemnity to the mortgagee if, by reason of error or omission in the operation of its customary procedure in procuring insurance, it happens that a damaged or destroyed building is found to be without insurance.

ERTA (ECONOMIC RECOVERY TAX ACT OF 1981) 
A federal law that liberalized tax treatment of employee benefit plans.

Estate
The assets and liabilities of a person left at death. 
Estate Planning
Developing a plan to transfer property from one generation to the next or within a generation.

estate taxes
Federal taxes due on an estate at the time of death. In addition, many states impose state death taxes.  Also referred to as death taxes.
ESTIMATED PREMIUM 
A provisional premium subject to final adjustment on ascertainment of the necessary facts.

Estoppel
Legal doctrine that prevents a person from denying the truth of a previous representation of fact, especially when such representation has been relied on by the one to whom the statement was made.

event
The consequence of causing a loss. 

EVIDENCE OF INSURABILITY
Evidence such as medical examination records, considered necessary by the insurer which establishes a potential insured’s qualification or nonqualification for the insurance in question.

EXAMINATION UNDER OATH 
Clause in some policies that permits the insurance company to obtain under oath statements on claims and related facts from the insured.

excess escape clause
The provision in an insurance contract which provides that the insurance applies “only in the amount by which the limit of liability for this coverage exceeds the applicable limit of liability of such other insurance.”  This provision is an escape clause because it entitles the insurer to escape liability, unless the maximum coverage limit exceeds the other insurance and because it limits liability to situations when its coverage exceeds the primary coverage.  

EXCESS FLOATER INSURANCE 
Insurance against losses that may exceed specified insurance.

EXCESS INSURANCE 
A policy or bond covering the insured against certain hazards, which applies only to loss or damage in excess of a stated amount.

EXCESS INTEREST 
The difference between the minimum rate of interest contractually guaranteed on dividends or proceeds left with the company and the interest actually credited.

EXCESS LINES BROKER
An agent who places a surplus line.

EXCESS OF LOSS REINSURANCE Reinsurance that indemnifies the ceding company for the excess of a stipulated sum or primary retention in event of loss.

excess over gross loss rule
Under the excess over gross loss rule, the insurer pays to another person or entity the excess above the gross loss.  The designee’s other rights of indemnification are subject to either a subrogation rule or to the other rights as excess coverage rule, but only to the extent necessary to prevent net gain.  

Exclusion ratio
The portion of an annuity payment considered by the tax law to be a return of initial investment, that is not subject to income tax when received.

Exclusions
Specific conditions or circumstances listed in the policy for which the policy will not provide benefit payments. 

Exclusive Agent
An agent who is employed by only one insurance company and who solicits business exclusively for that company. 

exculpatory clauses
Exculpatory means "excusing”.  Exculpatory clauses are intended to excuse the insurer from liability by declaring  that either another insurer provides primary coverage or that the insurance contract containing the clause provides no coverage when another insurance coverage applies to the loss.  Also referred to as other insurance clauses.  

EXECUTOR 
The  (male) person or institution, specifically named in a valid will, to carry into effect, or execute, the provisions of a will.

executrix
The  (female) person specifically named in a valid will, to carry into effect, or execute, the provisions of a will.

EXPECTED MORTALITY 
The mortality, or deaths, anticipated on the basis of the figures in the mortality table used.

EXPENSE ALLOWANCE 
Compensation paid to insurance   agents    in    excess of  prescribed commissions.

EXPENSE CONSTANT 
A flat amount added to the premium of a risk below the experience rating size.  Designed to offset the fact that the expense loading on the smaller risk does not yield enough money to cover the minimum cost of issuing and servicing a policy.

EXPENSE LOADING 
A practice in rate making denoting the amount which is added to the pure premium to provide for the expense of the insurance company.

EXPENSE RATIO 
The percentage of premiums obtained by dividing the premiums into the expenses.  The percentage of the premium used to pay all the costs of acquiring, writing, and servicing business.

EXPERIENCE 
The loss record of an insured or of a class of coverage.

Experience Modification Factor
Used in workers’ compensation, a rating to reflect the degree to which a particular employer has experience that is better or worse that expected for that industry. 

Experience Rating
The process of determining the premium rate for a group risk, wholly or partially on the basis of that group's experience. 

Experience Refund
A provision in most group policies for the return of premium to the policy holder because of lower than anticipated claims.

EXPERIENCED MORTALITY 
The actual mortality experienced by a company over any given period.  The number of death claims for a stated interval of time.

EXPIRATION DATE 
The date on which the insurance policy ceases to protect the policy holder.

EXPIRATION NOTICE 
A notice sent by an insurer to an agent or broker, by an agent to a client, or by an insurer to a policy holder to the effect that a policy is about to expire on a given date.

EXPIRY 
Termination of a term policy at the end of the term period.

EXPOSURE
State of being subject to the possibility of loss.  The extent of risk as measured by payroll, gate receipts, area, or other standard.  The possibility of loss to a risk being caused by its surroundings. 

Exposure Loss 
Where the damage to the insured’s premises results from a fire or other insured peril which originates elsewhere and has spread to the insured premises.

Exposure Unit
Unit of measurement used in insurance pricing. 

EXTENDED COVERAGE
A clause in an insurance policy or an endorsement which provides extra or additional coverage for other hazards or risks than those provided for under the basic provisions of the policy.

EXTENDED COVERAGE ENDORSEMENT 
An endorsement extending the fire policy, usually to cover loss, with certain exceptions, caused by windstorm, hail, explosion (except by steam boilers), riot, civil commotion, aircraft, vehicles, and smoke.

EXTENDED TERM INSURANCE 
A form of insurance available as a nonforfeiture option providing the original amount of insurance for a limited period of time.  On failure to pay premiums, it is represented by insurance for the face value of the policy, plus dividend additions or accumulations, and usually less the amount of indebtedness for the term for which the cash value used as a single premium will pay.

EXTRA PREMIUM 
An additional amount added to the basic premium which may be required because the risk covered is unusually hazardous.

EXTRA PREMIUM REMOVAL 
Seeking a reduction in the amount of the premium that is attributable to a reduced risk or a risk which no longer exists.

F

FACE AMOUNT
The amount stated on the face of the policy that will be paid in case of death or at maturity.  Does not include any amounts added through dividend additions, double indemnity or other special provisions.  Also referred to as face value.

FACE OF POLICY 
The front or first page of the insurance policy which generally includes the name of the insurance company, as well as certain insuring clauses.  Commonly used to mean the amount in dollars of insurance provided.

Facility
A pooling mechanism for insureds not able to obtain automobile 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. 

Facility of Payment CLAUSE
Generally in reference to industrial life insurance, the facility of payment clause is a contractual provision which authorizes payment to anyone who is fairly entitled to the insurance proceeds by reason of having incurred expenses on behalf of the insured for such things as medical treatment, burial, and other purposes.

Factory Mutual
Mutual insurance company insuring only properties that meet high underwriting standards.  Emphasizes loss prevention. 

FACULTATIVE OBLIGATORY TREATY 
A reinsurance contract under which the ceding company may cede exposures or risks of a defined class that the reinsurer must accept.

FACULTATIVE REINSURANCE
A reinsurance contract in which a reinsurer retains the right of rejecting any business ceded to it.

FAILURE TO DISCLOSE
An allegation of failure to disclose requires the plaintiff to prove that the defendant intended to induce him into a transaction into which he would not have otherwise entered.  Knowledge and intent are the essential elements under failure to disclose.
fair market value
Fair market value is the price which goods or property would bring in a market of willing buyers and willing sellers in the ordinary course of trade.  It is a method used to calculate the value of a business.

FAIR PLAN Fair Access to Insurance Requirements Plan
A state requirement in a number of states to ensure that property in such areas as slums will be insured.  A type of assigned risk pool to cover property that normally would be unattractive to insurance companies.

Fair Rental Value
Amount payable to an insured home owner for loss of rental income due to damage that makes the premises uninhabitable.

FAMILY AUTOMOBILE POLICY
Contract of insurance providing larger coverage than the combination automobile policy, providing liability coverage, physical damage, and medical expense coverage.

FAMILY EXPENSE POLICY 
A policy which insures both the policy holder and his immediate dependents, typically spouse and children.   An accident and sickness policy, or an accident only policy covering all the members of one family.

FAMILY INCOME INSURANCE 
Insurance that provides an income insurance to the beneficiary, typically $10 monthly per $1000 of insurance, from the inception to the end of a specified period if the insured dies within that period.  The face amount of the insurance is paid at the end of the income period or when the insured dies after the end of the period.

FAMILY INCOME RIDER
A rider of decreasing term insurance written in combination with Term of Age 70 or higher premium plans.  Provides a higher face value of protection at a level premium during a policy holder's younger years when he may not have the higher premiums required for a permanent form of insurance.

Family Policy
A life insurance policy providing insurance on all or several family members in one contract, generally whole life insurance on the principal breadwinner and small amounts of term insurance on the other spouse and children, including those born after the policy is issued. 

Family Purpose Doctrine
Concept that imputes negligence committed by immediate family members while operating a family car to the owner of the car. 

Farm owners-Ranch owners Policy
A package policy for a farm or a ranch, providing property and liability coverages against personal and business losses. 

FARMER’S COMPREHENSIVE PERSONAL LIABILITY INSURANCE 
A modified comprehensive personal liability policy covering risks associated with farming.

FEDERAL CRIME INSURANCE 
Insurance offered by the Federal Insurance Administration which covers burglary, larceny, and robbery losses.

FEDERAL DEPOSIT INSURANCE CORPORATION 
An mechanism of the U.S. government that insures deposits in insured banks under certain restrictions as to maximum amounts per account.  The premium is paid by the bank as a small percentage of all deposits, although insurance is only on that portion of the deposits less than $100,000 per account.

FEDERAL ESTATE TAX 
The Internal Revenue Code’s specified conditions for including life insurance proceeds in the gross estate of the deceased for purposes of estate tax.

FEDERAL FLOOD INSURANCE
Insurance offered by the federal government in those localities meeting specific requirements which protects against flood and mud slides.

FEDERAL GIFT TAX 
The requirement by the Internal Revenue Service that a tax payer must obtain a statement of the value of life insurance gifts from his insurance companies.

FEDERAL INSURANCE CONTRIBUTIONS  ACT 
Tax on employees and employers based on wages which are used to meet Social Security payments.

Federal Servant Doctrine
A common law defense blocking an injured employee from collecting workers’ compensation benefits if he or she sustained an injury caused in any way by the negligence of a fellow worker.

Federal Surety Bond
A type of surety bond required by federal agencies that regulates the actions of business firms. It guarantees that the bonded party will comply with federal standards, pay all taxes or duties accrued, or pay any penalty if the bond holder fails to pay.
 
FEDERAL UNEMPLOYMENT INSURANCE TAX 
Dual state and federal tax based on merit rating to provide insurance benefits for unemployment of covered individuals.

FEE SIMPLE
Without restrictions of ownership.

FIDELITY BOND
A form of insurance which protects the covered employer against loss due to dishonesty of employees.  A bond which will reimburse an employer for loss up to the amount of the bond sustained by the employer by reason of any dishonest act of an employee covered by the bond.  Blanket fidelity bonds embrace groups of employees.

FIDUCIARY 
A person who occupies a position of special trust and confidence, for example, in handling or supervising the affairs or funds of another involving the exercise of confidence and trust. The fiduciary relationship means that the fiduciary owes complete loyalty and cannot engage in any activity which conflicts with the relationship to which he owes this fiduciary responsibility.  The fiduciary’s responsibility is one of a duty of good faith and utmost loyalty.

FILING COMPANY
An insurance company which files risk information with an insurance bureau.

Final average formula
A pension plan formula that bases retirement benefits on earnings during recent years of employment. 
FINANCED INSURANCE 
The use of borrowed funds to pay life insurance premiums.  The funds are generally provided from the cash value of the policy.

FINANCIAL GUARANTY 
A type of bond in which the insurer guarantees that it will pay a fixed or determinable sum of money.

FINANCIAL RESPONSIBILITY CLAUSE 
A clause which states that the policy holder is protected under the terms of any state.  This is exemplified in those states which have a financial responsibility law.  In case of an automobile accident, the driver may be required to post a bond or to make a deposit to cover any personal injuries or property damage which might result.  The financial responsibility clause in a policy assures the holder that he complies with the state legal requirements.

FINANCIAL RESPONSIBILITY LAW
A statute requiring motorists to furnish evidence of the ability to pay damages, either before or after an accident.  The law requires an operator or owner of a motor vehicle to give evidence of financial ability to meet claims for damages in order to be licensed to drive a vehicle or to have his vehicle registered.  Financial responsibility laws may be compulsory on all registrants in certain states.

FINE ARTS INSURANCE (FLOATER POLICY) 
Coverage on works of arts, usually written by inland marine underwriters on an all risk and valued basis. 

Fire
A combustion accompanied by a flame or glow, which escapes its normal confines to cause damage.

FIRE INSURANCE
A contract prescribed by each state subject to modification by endorsements which insures against direct loss by fire, lightning, and other defined causes.
Fire Legal Liability
Liability of a firm or person for fire damage caused by negligence of and damage to property of others. 

FIRE MAP
A map showing the location and distribution of a particular insurer’s fire insurance contracts in a given area.  By avoiding heavy concentration in a given area, the risk of catastrophic loss is greatly reduced.

FIRE, WIND, AND THEFT 
A form of automobile coverage for these specified perils.  May be provided singly or in combinations.

First party claim
A demand made by a policy holder reporting an insured event directly to his company. 

First Party Coverage
An insurance coverage under which the policy holder collects compensation for losses from the insured's own insurer, rather than from the insurer of the person who caused the accident. 

FIVE-POINT POLICY 
A term which signifies an automobile policy, under which only one company provides insurance for both the casualty coverages of bodily injury liability, property damage liability, and medical payments, and the physical damage coverages of comprehensive (fire, theft, and collision).
Fixed Amount Option
Life insurance settlement option in which the policy proceeds are paid out in fixed amounts.

FIXED ANNUITY
Fixed payments provided throughout the period of the annuity.

FIXED DOLLAR ANNUITIES
An annuity under which the amount of each payment is stated in a fixed amount, such as $100 per month.

FLAT CANCELLATION 
Policy terminations which may be canceled free of any charge to the insured

FLAT COMMISSION  
Remuneration paid  to an agent on the basis of a straight percentage of premium for all types of risks and policies, as compared to a graded scale of separate percentages for different types of policies.

FLAT MATERNITY BENEFIT 
A hospital reimbursement stipulated benefit.  Payment for the maternity confinement is not the actual cost of the confinement, but the amount or formula in the policy.

FLAT RATE
A rate used when no coinsurance clause is attached to the policy. The rate from which the credits for coinsurance are deducted which, in some states is referred to as the gross rate.

FLEET POLICY
An arrangement by which a single motor vehicle insurance policy used to cover a large number of vehicles.

Flex rating Law
Type of rating law in which prior approval of the rates is required only if the rates exceed a certain percentage above and below the rates previously filed. 

Flexible Premium Policy or Annuity
A life accident policy or annuity under which the policy holder or contract holder may vary the amounts or timing of premium payments. 

Flexible Premium Variable Life Insurance
A life insurance policy that combines the premium flexibility feature of universal life insurance with the equity-based benefit feature of variable life insurance.

FLOATER POLICY 
A policy whose protection follows moveable property within the territory specified in the policy. 

FLOOR PLAN INSURANCE 
Protection taken out by finance companies on equipment such as automobiles or electrical appliances which they have financed for retail dealers.  The articles are in the possession of the dealer; however, they are collateral for the loan by the finance company.

FLYWHEEL INSURANCE 
Insurance covering direct loss or damage to property, as well as loss of life or bodily injuries to individuals due to the breaking, bursting, or explosion of a flywheel.  Additional coverage may be written covering loss to the insured of profits or income.

FOREIGN COMPANY 
Incorporated or organized under the laws of some other state or territory of the United States, for example, a company organized under the laws of Oklahoma and doing business in Texas.  Such a corporation is a foreign company in Texas.  This term may also be applied to a company writing or soliciting business in the jurisdiction in which it is not admitted to transact business, also referred to as a nonadmitted company.

FOREIGN INSURER 
An insurer incorporated in a different state from which it is authorized to do business.

Forfeitures
Amounts contributed on behalf of terminated, non-vested participants. In a pension plan, such amounts must be applied to reducing future employer contributions. In a profit sharing plan, such amounts may be allocated to the accounts of remaining participants. 

Forgery or Alteration Coverage Form
Commercial crime insurance form by the Insurance Services Office that covers loss resulting from the forgery or alteration of checks, drafts, bills of exchange, promissory notes, and similar instruments.

Fortuitous Loss
Unforeseen and unexpected loss that occurs as a result of chance.

fortuity
In insurance terms, fortuity refers to “brought about by chance or accident”.  Insurance contracts generally do not provide coverage when a loss is not fortuitous.  Fortuity is generally considered from the perspective of the person who is to receive the benefits.  For example, a loss is not accidental if it is intentionally caused.  
401(k) Plan
A salary reduction plan that allows employees to contribute a portion of their salaries on a tax-deferred basis. 

FRANCHISE DEDUCTIBLE 
Often found in automobile policies and home owners’ policies, this is a formula whereby the deductible applies in small losses and is gradually reduced as the size of the loss increases so that in the larger losses, the insurance company pays the loss in full.

Franchise Insurance
Insurance under individual contracts issued to the employees of a common employer or the members of an association under an arrangement by which the employer or association agrees to collect the premiums and remit them to the insurer. The insurer usually agrees to waive its right to discontinue or modify any individual policy, unless its simultaneously discontinues or modifies all other policies in the same group. 

FRATERNAL INSURANCE 
A system of cooperative protection furnished by a fraternal order to its members and on a nonprofit basis.

Fraternal Society
A social organization that provides insurance for its members.

FRAUD
The elements of fraud are simple.  There must be a material representation that is false, and the maker must know it to be false,  or he must make the representation recklessly without any knowledge of the truth.  The maker must make the representation with the intent that it be acted upon by the other party.  The other party must rely on it, and the party must suffer resulting injury.  Examples of fraud would be representing that a policy has benefits that it does not actually have and misrepresenting the terms, benefits, advantages, dividends, etc. of a policy.

FREIGHT INSURANCE
With respect to marine insurance, this is insurance purchased by the owners of the transporting vehicles or vessels or the owner of the product.

friendly fire
Generally, a friendly fire is one that occurs in an ordinary place for a fire such as a stove, a furnace, a fireplace, etc.

front sales load
The front sales load is an expense charged against money being deposited into the policy.

FULL COVERAGE
Any form of insurance which provides for payment, without deduction, of all losses occasioned by the hazards covered.  Insurance against the full amount of any loss up to the amount of the insurance, without deductions.

FULLY INSURED STATUS
A term referring to Old Age Survivors and Disability Insurance.  Whether a person is currently or fully insured depends upon the number of quarters of coverage he has.  With some exceptions, those with forty quarters of coverage are fully insured.

FUNDED PENSION PLAN 
A system used by the insurer to accumulate the amount which will be needed to meet the claims of the plan.  A plan may be funded by purchasing insurance annuity contracts from insurance companies, and this  is an insured plan.  Or, the plan may be funded by depositing funds with a trustee, frequently a bank, and this is a self-administered or uninsured plan.

Funding Agency
A financial institution or individual that provides for the accumulation or administration of the pension contributions that will be used to pay pension benefits. 

Funding Instrument
An insurance contract or trust agreement that states the terms under which the funding agency will accumulate, administer, and disburse the pension funds.

FUNERAL DIRECTORS MALPRACTICE COVERAGE 
Liability coverage with respect to claims arising from malpractice or error in the insured's practice as a funeral director.

FUR FLOATER INSURANCE POLICY
A type of insurance coverage on fur, an all risk marine coverage.

FURNITURE AND FIXTURES 
Usually the contents of a building, excepting merchandise for sale or in the course of manufacture (stock) and excepting machinery. Fixtures are the pieces "fixed," that is, attached to the building. 

FURRIERS' CUSTOMERS INSURANCE 
Coverage under an inland marine policy for a furrier storing garments for customers.

Future Increase Option
A provision found in some policies that allows the insured to purchase additional disability income insurance at specified future dates, regardless of the insured's physical condition. 

Future Service Benefits
Benefits accruing for service after the effective date of coverage under the plan.  That portion of a participant's retirement benefit that relates to his period of credited service after the effective date of the plan.

G

Garage Liability Insurance
Insurance protecting against legal liability from the operation of a  garage. 

GARMENT CONTRACTORS' FLOATER
Coverage under an inland marine policy for makers of garments while the garments are in the possession of a subcontractor.

GENERAL AGENCY SYSTEM 
Type of life insurance marketing system in which the general agent is an independent business person who represents only one insurer, is in charge of a territory, and is responsible for hiring, training, and motivating new agents.  A method of handling insurance through general agents, as opposed to the branch office system.

GENERAL AGENT, 
The company representative in a given territory who is entrusted with supervising the company's business within that territory.  The general agent may appoint local agents whom he services.  The general agent is an independent contractor who is compensated on a commission basis.
GENERAL AGENT, CASUALTY
An individual who may solicit business from the public and has a commission contract with an insurance company stating whether he has an exclusive territory or not.

GENERAL AGENT, FIRE 
Individual having an exclusive territory and in charge of the supervision of agents in that territory.  The general agent does not sell insurance to the general public directly.

GENERAL AVERAGE 
In maritime law and marine insurance, this term meant "a sacrifice to avert a common peril".  This refers to losses suffered through expenses voluntarily incurred and sacrifices intentionally made by a master of a ship of a part of a ship's cargo in order to preserve the rest from destruction.  Since they were for the benefit of all, these losses and expenses are shared proportionately by each of the interests involved.  Therefore, a policy of insurance may be undertaken to provide coverage for such a risk.

GENERAL COVER CONTRACT
A form of insurance designed to assure adequate protection on stocks of goods which fluctuate in volume and price.  It is frequently associated with companies that have several establishments.

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.

General disability BENEFITS
General disability benefits are paid when the insured is unable to perform the duties of his occupation.  He may also be unable to engage in any work or occupation for which he is reasonably suited.

General Liability Insurance
Coverage that pertains to claims arising out of the insured's liability for injuries or damage caused by ownership of property, manufacturing operations, contracting operations, sale or distribution of products, and the operation of machinery, as well as professional services. 

GENERAL MORTGAGE BOND 
A written instrument representing an obligation secured by a mortgage but preceded by senior issues.

general partnership
A general partnership is one in which the partners are actively involved in the conduct of the business.  A general partnership is an association of two or more persons to carry on as co-owners of a business, including every trade, occupation, or profession for profit, whether or not this association is called a "partnership".

GENERAL PROVISIONS 
Provisions in addition to the regular insuring and benefit provisions and to the standard or uniform provisions, which define and limit the coverage.  Also referred to as additional provisions.

Generally Accepted Accounting Principles (GAAP)
Principles of accounting and reporting business results developed by the American Institute of Public Accountants. 

Generation skipping tax
A transfer tax imposed on gift or inheritance to those at least two generations younger than the person making the transfer.

GEOGRAPHICAL LIMITATION
A specification in a policy that coverage is limited to those risks occurring or acquired within certain geographical limits.

GIFT TAX 
An excise tax levied by the federal government and many states on the gift or transfer of property.  Most taxes on gifts are progressive and have minimum exemptions.

GLASS INSURANCE 
Provides insurance for broken glass.  In many cases the company replaces the actual glass rather than making a cash settlement of the claim. Sometimes referred to as plate glass insurance.

GOLF LIABILITY INSURANCE 
Protection against any accidents a golfer  causes to the public while playing golf.
Good Student Discount
A reduction of automobile premium for a young driver at least 16 who ranks in the upper 20 percent of his class, has a B or 3.0 average, or is on the Dean's list or honor roll. It is based on the premise that good students are better drivers.

GOVERNING CLASSIFICATION
Pertains to the main operation of an employer where several different functions are performed.  The main operation of an employer is the one which carries the largest payroll and is used as a basis for determining workmen’s compensation insurance rates.

GRACE PERIOD 
A period of time, usually 31 days following the premium due date, during which a premium may be paid.  The policy remains in force throughout this period.

GRADED COMMISSION 
Remuneration paid to an agent that varies with the type and volume of risks written.

GRADED DEATH BENEFITS 
Generally found in juvenile life insurance policies.  Death benefits in the early years of the contract are less than the face amount of the policy.  These benefits increase with the age of the policy.
GRADED PREMIUM LIFE INSURANCE
A type of modified life insurance in which the premiums increase each year for the first several years and then level off.  Frequently sold to young adults whose earnings will increase.

GRADED VESTING
A form of immediate or deferred vesting under which an increasing proportion of the accrued benefits of a participant becomes a vested benefit in accordance with a specific formula and requirements, usually in terms of attained age, years of service, or plan membership.

GRADING SCHEDULE OF CITIES AND TOWNS 
A schedule used to find the complete range of exposures within a particular community.  Prepared by the National Board of Fire Underwriters.

GRADUATED LIFE TABLE 
An actuarial table derived from a mortality experience curve.

Gross estate
All of the assets and liabilities owned at death. 

Gross Negligence
The intentional failure to perform a manifest duty in reckless disregard of the consequences as affecting the life or property of another.

GROSS NET PREMIUM 
Computed by deducting return premiums from gross premiums, but not less reinsurance premiums.

Gross Premium
The raw premium before subtracting costs for reinsurance or sometimes before any return premium.  The total premium charged for the insurance coverage, which includes anticipated expenses such as losses and overhead.  Also, the premium paid by the policy holder. 

Gross Rate
The sum of the pure premium and a loading element.
GROUND COVERAGE 
Coverage applicable to an airplane when it is not flying.

GROUP ANNUITY
A pension plan providing annuities at retirement to a group of persons under a master contract.  It is usually issued to an employer for the benefit of employees with the individual members of the group holding certificates as evidence of their coverage.  The most common type of group annuity provides for the purchase each year of a paid up deferred annuity for each member, the total amount received by the member at retirement being the sum of these deferred annuities.

Group Annuity Contract
A contract issued by a life insurance company that may be used as the funding instrument for benefits to be made in accordance with a pension plan. A single master contract provides that the group of persons participating in the plan will receive annuities during retirement. Individual certificates stating coverage may be issued to members of the group.

GROUP CERTIFICATE 
The policy issued to each party to a group plan stating the term of the contract.

Group Contract
A contract of insurance made with an employer or other entity that covers a group of persons identified as individuals by reference to their relationship to the entity.

GROUP CREDITOR INSURANCE 
Contract issued to the creditor on the lives of his debtors to pay the amount of the indebtedness in the event of death.  Often used by banks to reduce the problem of collection from a deceased estate.

GROUP DISABILITY INSURANCE Provides benefits for a group of individuals, usually employees of the covered company, in order to compensate for losses such as time lost because of accident, sickness, hospitalization cost, and medical or surgical expense.

GROUP INSURANCE 
Any insurance plan by which a number of employees and their dependents, or other homogeneous group, are insured under a single policy issued to their employer or leader with individual certificates given to each insured individual or family unit.  The most commonly written lines are life, accidental death and dismemberment, weekly benefits, hospital, and surgical and medical expense. 

GROUP LIFE INSURANCE 
A type of life insurance provided to members of a group such as employees of one or more employers, members of associations or labor unions, or individuals to whom credit has been extended.  The term is generally used to distinguish this type of life insurance from individual life insurance.

Group Ordinary Life Insurance
A group insurance plan providing life insurance for employees. Traditional whole life policy is split into decreasing insurance protection and increasing cash values. 

Group Paid Up Life Insurance
Accumulating units of single premium whole life insurance and decreasing term insurance, which together equal the face amount of the policy. Provided through a group life insurance plan. 

GROUP PERMANENT INSURANCE 
A contract providing permanent life insurance on a basis of level premiums.

Group Permanent Plan
A type of pension plan in which cash value life insurance is issued on a group basis and cash values in each policy are used to pay retirement benefits when a worker retires. 

Group Term Life Insurance
Most common form of group life insurance. Yearly renewable term insurance on employees during their working careers. 

Group Universal Life Products (GULP)
Universal life insurance plans sold to members of a group, such as individual employees of an employer. There are some differences between GULP plans and individual universal life plans.  For example, GULP expense charges generally are lower than those assessed against individual policies. 

GUARANTEED DIVIDEND POLICIES
Coupon policies issued by some nonparticipating companies.  The coupons represent fixed and guaranteed dividends which may be applied on the payment of premiums.  These “dividends” are a series of pure endowments maturing each year.

GUARANTEED INSURABILITY 
An option which permits the holder of a standard policy, at stated intervals, to purchase specified amounts of additional insurance without evidence of insurability.

GUARANTEED INTEREST RATE 
The minimum rate of interest by which the insureds’ values in the policy are increased each year.

Guaranteed Investment Contract
An investment contract with an insurer in which the insurer guarantees both principal and interest on a pension contribution. 

Guaranteed Purchase Option
A benefit that can be added to a life insurance policy permitting the insured to purchase additional amounts of life insurance at specified times in the future without requiring evidence of insurability. 

GUARANTEED RENEWABLE 
A policy which is renewable at the option of the insured for a specified period of years, or more commonly to a stated age such as 60 or 65.  A guaranteed renewable policy which is also noncancellable.

Guaranteed Issue Life Insurance 
A form of life insurance which the insurance company  sells, regardless of health status.  The company requires no medical examination or tests. The premiums are high, and the death benefits are usually small and only paid out if death occurs more than two or three years after purchase.

Guaranty Fund
A fund derived from assessments against solvent insurance companies to absorb losses of claimants against insolvent insurance companies.

guide line level premium
The guide line level premium means the level annual amount that will fund the future benefits (face amount at age 95) payable to age 95, assuming the contract's stated mortality and expense charges and given interest rate. 
 
Guide line premium requirements  
Guide line premium requirements are based upon the guide line single premium or the sum of the guide line level premiums to date.

GUIDING PRINCIPLES
Recommended principles covering unclear situations in order to minimize disputes.

H

HAIL INSURANCE
A contract of insurance covering property against damage caused by hail and hailstorms.

HANGAR KEEPERS’ LIABILITY INSURANCE POLICY 
Type of business insurance coverage specially designed to protect hangar keepers from the liabilities peculiar to that activity.

HAZARD 
Condition that creates or increases the chance of loss.  A specific situation that introduces, or increases, the probability of occurrence of a loss arising from a peril, or that may influence the extent of a loss.

HAZARD, PERIL, OR RISK
Generally synonyms used to describe the damage against which the policy indemnifies the insured.  However, see individual definitions in this manual.  

HEAD OFFICE 
The principal office of an insurer where its chief executives and supervisory departments are located and from which its operations are directed.

HEALTH CERTIFICATE
A statement filed with a request for reinstatement of a lapsed policy.  It declares that the health of the insured is not impaired as of the date of the statement.

HEALTH INSURANCE 
Insurance against loss by sickness or accidental bodily injury.

HEALTH INSURANCE BENEFITS
Those benefits in a policy which are payable as a result of disability from covered sicknesses.  Health coverage is rarely written separately unless the insured also carries an equal amount of accident insurance with the same company.

HEALTH MAINTENANCE ORGANIZATION (HMO) 
A facility that offers group health care to individuals on a prearranged basis for services.  An HMO has four essential characteristics:  It is an organized system for providing health care in a geographic area.  There is an agreed upon set of basic and supplemental health maintenance and treatment services.  The group enrolls voluntarily.  Finally, the services are reimbursed by the HMO through predetermined and periodic prepayments made by or on behalf of each person or family unit enrolled.  This is without regard to the amounts of actual services provided. 

HELD IN TRUST 
Property held by a bailee for another, for example, a car held in a garage, with the words "for which he is legally responsible”  clearly evident.

HERD INSURANCE 
A  special type of insurance on animals.

HIGHLY PROTECTED RISK (HPR) 
A risk so protected with fire extinguishers, sprinkler systems, fences, etc., that the insurer may write a lower cost policy.

HIRED CAR 
An automobile whose exclusive use and control has been temporarily given to another for a consideration.  This is distinguished from contract hauling, since contract hauling involves the owner retaining control of the movements of the vehicle and simply agrees to furnish the transportation.

HOLD HARMLESS AGREEMENT
When the liability of one party is assumed by a second party, which frequently is an insurance company.

HOME OFFICE 
The place where an insurance company maintains its chief executive and general supervisory departments.  The legal headquarters of an insurer in the jurisdiction in which it is domiciled, usually also its head office.

HOME OWNERS ASSOCIATION 
An organization of home owners residing within a particular development who have banded together to maintain and provide community facilities and services for the common enjoyment of the residents.

HOME OWNERS’ POLICY 
A package policy for dwelling and contents risks combining fire and allied line coverage with comprehensive personal liability and theft insurance for home owners and tenants. This policy carries an indivisible premium in that the premium is not separately stated or broken down for the various hazards insured against. There are different home owners’ forms, and they vary in extent of coverage and cost from the basic policy to the comprehensive coverage. 

HOSPITAL LIABILITY INSURANCE
Indemnification against claims for damages that may have resulted from bodily injury, shock, mental anguish, or death of a patient resulting from malpractice, mistakes, or errors on the part of the hospital staff.

HOSPITALIZATION INSURANCE
Various plans of coverage providing indemnity for hospital, nurse, surgical and miscellaneous medical expenses due to bodily injuries or illness.

hostile fire
Hostile fires include those which occur in a place where fire is ordinarily not maintained.  Fires which originate as friendly fires but escape their usual confines.

HOUSE CONFINEMENT
An accident and sickness insurance clause requiring house confinement in order to be eligible for benefits. The term “house” is expanded to include a hospital sanitarium, visit to a hospital or office of a physician, or certain activities made at the direction of a doctor for therapeutic purposes.

HULL COVERAGE-AIRCRAFT INSURANCE POLICY 
A type of business insurance coverage against loss to an aircraft or its machinery or equipment.

HULL COVERAGE- MARINE INSURANCE POLICY 
A type of business insurance coverage against loss to a vessel or its machinery or equipment.

HULL POLICY
Ocean, river, marine, or aviation insurance contract covering a ship or plane itself.

HULL SYNDICATES 
A combination of ocean marine insurance underwriters who share expenses and insurance on vessels.

Human Life Value
For purposes of life insurance, the present value of the family's share of the deceased bread winner's future earnings. 

HUNTER DISABILITY TABLES
Tables that give the rate of disability or the probability of total and permanent disability, the rate of mortality among disabled lives.  This table is based upon the experience of several fraternal orders.

Hurricane
A tropical storm marked by extremely low barometric pressure and circular winds with a velocity of 75 miles an hour or more.

I

ILLEGAL OCCUPATIONS OR TRADES 
All insurances are issued subject to the provision that the property covered shall be used for legal purposes trades or occupations of a legal character.  A policy issued on a subject which is illegal is void and cannot be enforced.

IMMEDIATE ANNUITY 
An annuity contract which provides for the first payment of the annuity at the end of the first interval of payment after purchase.  The interval may be monthly, quarterly, semi-annual or annual.

IMMEDIATE PARTICIPATION GUARANTEE PLAN 
A pension plan written on large groups with the employer's contribution establishing a fund which is credited with interest earned by the insurance company and charged with interest with expense of operation.  There is no contingency fund or guarantee, and the fund must be adjusted annually to keep it in balance. Also referred to as a pension administration plan or direct rated deposit administration plan.

IMMEDIATE VESTING
A form of vesting under which rights to vested benefits are acquired by a participant commencing immediately upon his entry into the plan.
IMPAIRED CAPITAL 
Capital is impaired when liabilities and claims consume an insurance company's surplus.  Suspension of the right to do business normally follows.

IMPAIRED RISK
A risk that is substandard or under average.

implied exception 
A term which is used to describe a situation where an insurer’s denial of coverage is not based on any specific language in the contract terms.  Even though the policy terms do not state that a particular act or event will preclude recovery, this is implied.

implied exception by inherent vice
With respect to marine insurance, the inherent vice exception means that deterioration, either of goods or of a vessel which is due to ordinary wear and tear, does not come within the coverage provided by a policy covering loss from “perils of the sea”.

implied in fact agreement
An implied agreement that the insurer must act promptly in determining coverage.

Imputed Negligence
A case in which responsibility for damage can be transferred from the negligent party to another person, such as an employer.

IMPROVEMENTS AND BETTERMENTS INSURANCE 
Protects a renter against suffering loss on the improvements and betterments he has made on his leased property.  For example, if one rents a building and makes improvements to the property, it is desirable to take out a fire insurance policy that protects the interest in those improvements in case a fire should destroy the building.

IN FORCE 
A term referring to insurance written but not expired or to original premiums paid on policies that have not expired.

IN FORCE POLICY 
A policy which would provide a death benefit if an individual died today; if all due premiums have been paid.  The full face value would be payable upon death and the policy is said to be in full force.

in trust clause
When personal property is entrusted to a warehouse, either for storage on consignment for sale, insurance policies for warehouse businesses typically include a provision referred to as an in trust clause. This clause extends coverage for damage to property held, but not owned, by an insured.  Also referred to as an on commission clause or an on consignment clause.

INADMITTED ASSET 
Any asset prohibited form being included in regulated assets as reported by the insurance company to the state insurance examiners.  These inadmitted assets are presumed to have little value to meet claims in case of liquidation of the insurance company.
IN-AND-OUT RATES 
Rates for use in fire insurance on property that is sometimes in and sometimes out of a building.  This property is subject to the hazards of a given building only part of the time, so that the rate for the contents of that building would not accurately measure the hazard involved.

INCENDIARISM 
The willful and malicious burning of property sometimes with the intent of defrauding the insurance companies.

INCENDIARY
The malicious burning of property or the individual who starts such a fire.

INCHMAREE 
A clause in ocean marine insurance policies covering perils other than the perils of the sea.

INCIDENTS OF OWNERSHIP
The rights to exercise any of the privileges in the policy, that is, to change beneficiaries, withdraw cash values, make loans on the policy, assign it, etc.  These may belong to the original owner or, by assignment, to the beneficiary or an assignee who is not the beneficiary.

INCOME POLICY 
A life or endowment policy which provides for specified monthly amounts in the payment of proceeds in place of the lump sum.

Incontestability
Life policies provide that, except for non-payment of premiums and certain other circumstances, the policy shall be incontestable after the policy has been in force for two years during the lifetime of the insured.

INCONTESTABLE CLAUSE 
A clause in some accident and sickness and life insurance policies making the contract incontestable as to any statement made in the application after a period of time, such as two years.  The application may require a statement of illnesses requiring hospitalization.  If this information is not given, the policy may be voided by the company during the contestable period.  After that period, the insurance company cannot cancel on that ground.

Incontestable Period 
A period of time during which the insurance company agrees to refrain from challenging claims for benefits because of alleged application misstatements by the insured after a stipulated period has passed, usually one or two years. 

INCREASE IN HAZARD 
Enlargement of a risk by the insured beyond the intent of the insurance company when the original policy was issued.  Suspension of liability of the company will result from such material increase in hazard.  For example, a manufacturer producing a low risk non-inflammable product would increase the hazard if he converted to making paint or explosives.

INCREASED COST OF CONSTRUCTION INSURANCE 
This is property insurance which is used to cover additional costs resulting from compliance with city ordinances.  It covers the cost of more expensive materials and other items required by these ordinances.

INCUR
To become liable for a loss or expense.

Incurred but not reported (IBNR) reserves
The liability account on an insurer's balance sheet reflecting claims that are expected based upon statistical projections, but which have not yet been reported to the insurer.

Incurred Claims
Incurred claims equal the claims paid during the policy year plus the claim reserves as of the end of the policy year, minus the corresponding reserves as of the beginning of the policy year. The difference between the year end and beginning of the year claim reserves is called the increase in reserves and may be added directly to the paid claims in order to produce the incurred claims.

INCURRED LOSS RATIO 
The ratio of losses incurred to earned premiums and expressed as a percentage.

INCURRED  LOSSES 
Losses which occur within a fixed period, whether they are adjusted and paid or not.

Indemnification
Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement. 

INDEMNIFY
To restore the victim of a loss, in whole or in part, by payment, repair, or replacement.

Indemnity
A collateral contract or assurance by which one person secures another against an anticipated loss.  Indemnity signifies compensation has been given to an insured in order to make him whole again and to relieve him from his loss.  A legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position as existed before the loss.  An  insurance policy must be a contract of indemnity, that is, it must indemnify the insured for the loss, and no more than the loss.

INDEMNITY COMPANY 
A casualty insurance company.

INDENTURE 
A deed to which two or more persons are parties and under which they enter into obligations toward each other.

Independent ADJUSTER
A claims adjuster who offers his services to insurance companies and is compensated by a fee.

Independent Agency System
A type of property and liability insurance marketing system, sometimes called the American agency system, in which the agent is an independent business person representing several companies. The agency owns the expirations or renewal rights to the business, and the agent is compensated by commissions that vary by line of insurance. 

Independent Agent
An independent business person who usually represents two or more insurance companies in a sales and service capacity and who is paid on a commission basis.  He decides which of several insurance companies to recommend for any particular client.

INDEPENDENT PLANS
Independent plans exist when an organized group acts as a self-insurer.  The members of the group make their premium payments, and they receive services from the providers who have contracted with the plan.  Also referred to as self-insured plans.

Indeterminate Premium Whole Life Insurance
A nonparticipating whole life policy that permits the insurer to adjust premiums based on anticipated future experience. Initial premiums are guaranteed for a certain period. After the initial guaranteed period expires, the insurer can increase premiums up to some maximum limit. 

indirect loss
Indirect losses are a consequential result of an insured peril.

Individual Contract
A contract of health insurance made with an individual called the policy holder or the insured, which normally covers such individual and, in most instances, members of his family.

Individual Deductible
The amount that an insured and each person of his family covered by the policy must pay before the group or individual medical insurance policy begins to pay for medical expenses. 

Individual Insurance
Policies which provide protection to the policy holder and his family. Sometimes referred to as personal insurance, as distinguished from group and blanket insurance. 

Individual Policy Pension Trust
A type of pension plan, frequently used for small groups, administered by trustees who are authorized to purchase individual level premium policies or annuity contracts for each member of the plan. These polices usually provide both life insurance and retirement benefits.

Individual Retirement Account (IRA)
An account to which an individual can make annual contributions of 100% of earnings up to $2,000.  These contributions are tax deductible for most workers.

INDUSTRIAL GROUP 
A group formed for group insurance among the employees of one employer, as contrasted to an association group.

Industrial Life Insurance
Life insurance issued in small amounts, usually less than $1,000, with premiums payable on a weekly or monthly basis. These policies are basically whole life, term, or endowment policies.  The premiums are generally collected at the home by an agent of the company. An industrial life insurance policy usually prohibits the assignment of the policy or the assignment of its benefits.  Sometimes referred to as debit insurance.

INDUSTRIAL PROPERTY FORM
A package policy insuring manufacturers against various losses to personal property and buildings at more than one location.

Inflation Guard Endorsement
An endorsement which is added at the insured's request to a home owners’ policy in order to increase periodically the face amount of insurance of the dwelling and other policy coverages by a specified percentage. 

INHERENT 
The result of a hazard which commonly arises from the occupancy of a structure such as the water heater exploding.

INHERENT EXPLOSION
A violent and noisy bursting caused by the normal processing, such as found in the operation of certain type of pressing operations.  For example, the explosion of a hot water heater would be an inherent explosion and would be covered by the terms of a fire insurance policy.

INHERENT HAZARD INSURANCE POLICY
A type of business insurance coverage which protects against inherent hazards.

INHERENT HAZARDS 
Hazards which are beyond the common hazards of light, heat, and power, found in a given occupation.

INHERENT VICE
A condition in property which causes deterioration or damage, for example, the painting of damp wood.  This clause may be found in such policies as property floater policies.  For example, an article of clothing might have some defects because of inferior material or workmanship which might cause it to go to pieces before it is worn out.  Such a condition is caused by inherent vice and would not be covered under the terms of a personal property floater policy.

Inheritance tax
A tax on the right of an heir to receive property upon at the death of another.

Initial Past Service Liability
The actuarial value (single sum) of the past service benefits as of the effective date of the establishment of the plan, or at the date of the latest liberalization. The maximum annual past service contribution allowable for tax deduction is the amount necessary to amortize past service liabilities and other supplementary pension or annuity credits over ten years. Funding of the past service liability over a period of 30 years (40 in some cases) is required by the Internal Revenue Service under ERISA.

INITIAL PREMIUM 
Amount charged at the beginning of coverage but subject to change after additional experience or other information has been obtained.
Initial Reserve
In life insurance, the reserve at the beginning of any policy year.

Injunction
A procedure used when the state requests the state attorney general to bring an action in the name of the state against an insurer in order to restrain the use of unfair practices.

Injury Independent of All Other Means
An injury resulting from an accident, provided that the accident was not caused by an illness. 

INLAND MARINE EXPOSURE 
The exposure to loss of property capable of being transported from place to place either in transit or wherever the property may be located, except on a body of water, as contrasted  with ocean marine exposure.

Inland Marine Insurance
A broad form of insurance, generally covering articles in transit as well as bridges, tunnels, and other means of transportation and communication. Besides goods in transit, generally excepting transocean, it includes numerous floater policies, such as those covering personal effects, personal property, jewelry, furs, fine arts, and other items.

INNKEEPERS' LEGAL LIABILITY POLICY 
Insurance contract protecting innkeepers against liability for property of guests.

IN-PATIENT 
A patient admitted to a hospital as a resident case.
INSIDE ADJUSTER
An inside claims adjuster who works entirely inside the office, using only a telephone and the mail.

INSOLVENCY 
The lack of means to pay one's debts.

INSOLVENCY CLAUSE 
A clause referring to reinsurer liability for its share of the loss, even though the ceding company, or primary insurer, becomes insolvent. 

Insolvent
Having insufficient financial resources or assets to meet financial obligations or liabilities.

INSPECTION
An examination of a risk to be insured in order to decide on acceptance, rejection, or rate.

INSPECTION BUREAU                  
An organization which investigates risks or establishes rates of risks.

Inspection Report 
A report, usually written, of an investigation of an applicant, conducted by an independent agency who specializes in insurance investigations. The report covers such matters as occupation, financial status, health history, and moral problems.   It is filed by an investigator employed by the insurance company or credit agency. 

INSTALLATION RISK
A policy which protects a machinery owner during the process of installing his equipment on other's property.

INSTALLMENT PREMIUM 
A premium that is paid in several installments, as distinguished from a single payment.

Insurability
The acceptability to the company of an applicant for insurance. 

INSURABLE INTEREST
The relationship such that loss or destruction of life or property would cause a pecuniary loss.  An interest in the life of an individual or in property by which there will be a financial loss if the insured dies or in the case of property, if it is lost, damaged, or destroyed.

Insurable Risk
The conditions that make a risk insurable.  These conditions are: 1) The peril insured against must produce a definite loss not under the control of the insured, 2) There must be a large number of homogeneous exposures subject to the same perils, 3) The loss must be calculable, and the cost of insuring it must be economically feasible, 4)  The peril must be unlikely to affect all insureds simultaneously, and 5) The loss produced by a risk must be definite and have a potential to be financially serious.

Insurance
A system under which individuals, businesses, and other organizations or entities, in exchange for payment of a sum of money, that is, a premium, are guaranteed compensation for losses resulting from certain perils under specified conditions.  This is a term for a contractual device designed to reduce the risk of individuals or companies, the  insured, by transferring the risk to an insurance company, the insurer.  This relationship exists when one party, for a consideration, agrees to reimburse another for loss caused by designated contingencies.  The first party is known as the insurer; the second party is the insured; the contract is the insurance policy; the consideration is the premium; the property in question is the risk; the contingency in question is the hazard or peril.

INSURANCE AS EXCESS COVERAGE RULE
The insurance as excess coverage rule considers one source of indemnification as the primary source and other sources as secondary, such as insurance.  A secondary source is available when the sources other than insurance are available to provide indemnification, such as the party who is responsible for the loss.

INSURANCE CARRIER 
The insurance company which provides the protection for a particular risk.  A transporter of goods, a form of bailee for which insurance is provided.

INSURANCE CHARGE
The amount related to retrospective rated risks which reflects the possibility that losses will exceed the amount estimated by a rating bureau or underwriter, but which is now the loss below the limits of the policy.

INSURANCE CLAUSE 
A provision of an insurance contract or an endorsement to the contract.  Clauses may be divided into the following classifications based upon their function:  permits, warranties, waivers, fixing the method of payment, and broadening of the contract.  The printed forms usually include clauses applying to the property and the call of risk covered.  

INSURANCE COMMISSIONER OR INSURANCE COMMISSIONERS 
The top insurance regulatory official in a state.  The individual or, in some states, the group of individuals who enforce their states' insurance codes.  Also, some states refer to this  individual as the Superintendent of Insurance.

INSURANCE COMPANY 
Any corporation primarily engaged in the business of furnishing insurance protection to the public. An organization which is chartered under state or provincial laws to act as an insurer.  In the United States, insurance companies are usually classified as fire and marine, life, casualty, and surety companies and may write only those kinds of insurance policies which are specifically authorized in their charters.  However, many company charters have now been broadened to include several of these types.

INSURANCE CONTRACT 
The agreement by an insurer to provide benefits or reimburse losses in return for a premium, and the policy is the written statement of the insurance contract terms.

INSURANCE COVERAGE
The total amount of insurance which is carried.

INSURANCE DEPARTMENT
The state department which has the responsibility for the enforcement of the state’s insurance code.  This department is charged with the supervision and licensing of insurance companies and agents as well as the general administration of insurance laws of the state.

INSURANCE EXAMINER
A public employee in several of the states whose duty it is to make periodic examinations into the conditions of foreign and domestic companies which operate within the state. 

INSURANCE EXCHANGE
A term used to describe a facility that exists in a few states to provide a market for reinsurance and for the insurance of large and unusual domestic and foreign risks that are difficult to insure in the normal markets. Examples are the New York Insurance Exchange, the Insurance Exchange of the Americas, and the Illinois Insurance Exchange.  Operating through an attorney-in-fact, the members of an insurance exchange share the exchange's profits and losses in proportion to the amount of insurance each member purchases from the exchange. Also referred to as a reciprocal exchange.  A marketplace, such as Lloyd's of London or other insurance exchanges, which operate in several U.S. states, where underwriters, agents, and brokers gather to negotiate insurance and reinsurance.

Insurance Guaranty Funds
State Funds that provide for the payment of unpaid claims of insolvent insurers.

INSURANCE IN FORCE
The total face amount of the insurance under contracts in force.

insurance of title
An insurance of title warrants the validity of the title in any and all events.

INSURANCE POLICY
The entire written contract of insurance.  Or, the basic written or printed document as, distinguished from the form and endorsements added thereto.

INSURANCE PREMIUM
The charge by the insurance company to an individual or company for the insurance contract.  The premium reimburses the insurance company for the risk it has assumed.

INSURANCE PRODUCTION SYSTEM
A means by which an insurance company produces sales.  An insurance production  system may use independent agents, exclusive agents, direct writers, a direct mail marketing system, brokers, or some combination of theses.

INSURANCE RATE 
The ratio of the insurance premium to the total amount of insurance carried.  Usually expressed in dollars per $100 or per $1,000 or sometimes in a percentage.

INSURANCE RATE REGULATION
The control by state insurance regulators over the rates, classification, and rating systems used by insurers.

INSURANCE RATING SYSTEMS
Methods for arriving at an appropriate premium.

INSURANCE REGISTER 
Record of important data about insurance carried such as dates of purchase, amounts of premiums, expiration, companies, and other information.

INSURANCE RISK 
A general or relative term expressing the hazard involved in the insuring of property.  The premium or cost of insurance is predicated upon the relative risk or hazard considered to be involved.

INSURANCE SERVICES OFFICE (ISO), NEW YORK, NEW YORK 
Major rating organization in property and liability insurance that drafts policy forms for personal and commercial lines of insurance and provides rate data on loss costs for property and liability insurance lines. 

INSURANCE TO VALUE
Insurance written in an amount approximating the value of the insured property.

INSURED 
A person or organization covered by an insurance policy, including the named insured and any other parties for whom protection is provided under the policy terms. The person(s) or party(ies) protected by an insurance policy or contract. Some property liability policies distinguish between the named insured and other insureds.

INSURED, ADDITIONAL
A person other than the original named insured who is protected under an insurance contract.

INSURED, NAMED
The insured with whom the insurance contract is made and who is specifically named as such.

INSURER 
The party to the insurance contract, such as a syndicate, pool or association, who promises to pay losses or render service.

INSURING AGREEMENT 
That part of an insurance policy or bond which recites the agreement of the insurance company to protect the insured against loss or damage.  This agreement is the basis of the insurance contract.

INSURING CLAUSE 
That part of an insurance policy or bond which sets forth the type of loss being covered by the policy and the parties to the insurance contract. This is the heart of the contract of insurance.

INSURRECTION INSURANCE POLICY 
A specialized type of insurance protection against loss caused by insurrection or revolution.

INTANGIBLE PROPERTY
The elements of property in an enterprise which are represented in the establishment doing business such as good will and other rights incident to the enterprise.  This is distinguished from the physical items such as the plant facilities and working capital.

INTEGRATION
The coordination of pension, disability or other benefit with the other sources of income, such as Social Security benefit, through a specific formula designed to ensure reasonable income replacement. Qualified plans must integrate so that total benefits are non-discriminatory between rank and file employees and owners, officers or highly compensated employees.

INTEGRATION OF PENSION PLANS WITH SOCIAL SECURITY 
The process of combining a private pension plan with Social Security in an overall scheme of retirement benefits for employees.  Through integration, a company can cut pension plan costs by approximately the amount it pays in Social Security taxes.

INTENTIONAL INJURY
An injury which results from an act, the doer of which intended to inflict injury.  Self-inflicted injuries are not covered by an accident policy because they are not an accident.  Generally, intentional injuries inflicted upon the insured by someone else are covered unless expressly excluded.

Inter vivos Trust 
A trust created while the creator of the trust is living. Also referred to as a living trust. 

INTEREST
Money paid for the use of money.  A participation.  Also, a property in land or chattels used in conjunction with the terms and title.

INTEREST ACCRUED
Interest on bonds, debentures, mortgages, etc., which is earned but is not yet payable.

INTEREST ADJUSTED COST
A particular means of determining the cost of life insurance.  This method takes into account the interest that might have been earned on premium payments if these funds had been invested, rather than put into premiums.

Interest Adjusted Method
A method of determining cost to an insured of a life insurance policy that considers the time cost of money by applying an interest factor to each element of cost.

INTEREST FACTOR
The decimal equivalent for an interest rate on a unit amount for a period of time.  Computed by interest rate divided by basic year and multiplied by days accrued.

Interest Option
A life insurance settlement option in which the principal is retained by the insurer and interest is paid periodically.

INTEREST RATE
The percentage of the principal sum charged for its use.

INTEREST RATE RISK 
The unpredictability of future interest rates.  Whether a rise or fall of interest rates has favorable or unfavorable effects on an organization depends upon whether it is a debtor or creditor and the extent to which its resources are committed to borrowing or lending.
	
INTERIM COVERAGE
Coverage which is provided when an individual submits an application for life insurance together with the payment of the first premium.  In many jurisdictions, interim coverage commences as a matter of law when an application for life insurance is accompanied by the payment of the first premium. Also referred to as temporary coverage

INTERIM RECEIPT
A preliminary contract of insurance which is furnished to a proposer or applicant pending the approval and issue of the contract.  It is generally good for thirty days and cannot be renewed.  If the preliminary period is to be extended, a new interim receipt should be prepared.  An interim receipt extended over the period for which it was issued is demonstrative of the company's acceptance to the risk  and remains in force for the full term of the insurance applied for. Also referred to as a cover note. 

INTERINSURANCE EXCHANGE
A voluntary unincorporated association which is organized to write insurance for its members. All policy holders are both insurers and policy holders and may be assessed for additional sums if needed to pay losses.

INTERMEDIATE
A reference to a policy or line of policies which designates combining some features of ordinary policies and some of industrial policies, usually policies written for amounts from $500 to $1,000 and collected monthly by the agent.  However, this definition varies from company to company.

Intestate
Having died without a will.

Investment Income
The portion of a company's income which is derived from its investments, including interest and dividends on stocks and bonds and other financial ventures.

Investment Only Contract
A type of funding instrument that uses only the investment services of an insurer.

INVESTMENT RESERVE
A special sector of capital funds set aside to act as a buffer account and respects the fluctuations in the market value of securities in company's portfolio.

INVITEE 
A person who is expressly or impliedly invited onto the premises for some purpose involving economic or potential economic benefit to the occupier of the premises, for example, a customer entering a store for the purpose of making a purchase.  An invitee, using reasonable care on his own part for his own safety, is entitled to expect that the occupier shall, on his part, use reasonable care to prevent damage from any unusual danger which he knows or ought to know exists.  It is the duty of an occupier to see the premises are reasonably safe for an invitee.

IRA (INDIVIDUAL RETIREMENT ACCOUNT) 
An account to which an individual can make annual contributions of 100% of earnings up to $2,000.  These contributions are tax deductible for most workers.

IRON SAFE CLAUSE
Part of some fire insurance policies which require the policy holder to keep his major records and books in an iron safe when not in business use.

IRREGULAR PREMIUM
The fractional or proportionate premium paid to change the regular premium due date form one month or season of the year to another.

IRREVOCABLE BENEFICIARY
The stated beneficiary of a policy that cannot be changed without the permission of the beneficiary or by his death.

IRREVOCABLE TRUST
A trust in which the creator does not reserve the right to reacquire the trust property.

ISSUE DEPARTMENT
The department of the secretary, registrar, or the manager of selection or other title.  This department prepares policies and keeps records of them.

ISSUED BUSINESS
Those applications that have as a result of being signed by the applicant, the applicant having been medically examined, and the premium having been paid, have had policies made out by the insurance company, but the policies have not yet been delivered to the applicant. Issued business is distinguished from delivered business, examined business, paid business, placed business, issued business, and written business.

J

JEOPARDY ASSESSMENT BOND
A bond used to stay jeopardy assessments pending appeal.  A bond required to guarantee payment of federal income taxes which are due or are claimed to be due. A jeopardy assessment bond is Treasury Department Form 1129.

JEWELER'S BLOCK INSURANCE 
A type of inland marine insurance coverage on most losses to jewelers’ merchandise and subject to certain exceptions.  Insurance of a jeweler's stock against all risks of loss.  Jeweler’s block insurance also covers, to some extent, property of others entrusted to the insured.

JEWELRY FLOATER
Most home owners’ policies have dollar limitations for jewelry. A jewelry floater is an inland marine insurance contract which allows for full coverage of the appraised value of the items listed but within the territorial limitations of the policy.  It is insurance on specific listed jewelry wherever it is.

JOHN DOE
A fictitious name often used when the true name of a defendant is unknown.  This term is also used to indicate a person for the purpose of argument.

Joint and Several Liability
A legal principle that permits the injured party in a tort action to recover the entire amount of compensation due for injuries from any tort feasor who is able to pay, regardless of the degree of that party's negligence. Joint and several liability represents liability under which each of several joint wrong doers are responsible either on a combined, undivided basis, or on an individual basis for the full amount of damages for which the several wrong doers are collectively responsible, regardless of the degree of any party’s negligence.

JOINT AND SEVERAL NOTE 
A note signed by two or more persons, each of whom is liable for the full amount of the debt.

Joint and Survivor Annuity
A contract that provides income periodically, payable during the longer life time of two persons. The amount payable may decrease at the death of one or the other.  Also referred to as a joint life and survivorship annuity or a joint life annuity. 

JOINT AND SURVIVORSHIP OPTION A policy option that permits having the cash proceeds of an insurance contract to be distributed only after the death of the final survivor of those listed in the policy.  A joint and survivorship option is frequently used as retirement income in cases of man and wife. 

JOINT ANNUITY 
This is an incorrect designation for the joint and survivor annuity.

JOINT CONTROL BOND 
A bond which is required before the assets of an estate can be transferred to the custody of the principal.
JOINT LIABILITY
Liability for which more than one person or company share the responsibility.

JOINT LIFE INSURANCE 
Insurance on two or more persons, the benefits of which are payable upon the death of the first.

JOINT OWNERSHIP 
Ownership in which two or more individuals are co-owners.  The property passes to the survivor if one of them dies.  The property in this form of ownership does not enter into a decedent's estate for probate purposes.

JOINT PROBABILITY 
The probability that two or more events will occur.  For example, if A and B are two events, the joint probability of both is expressed as “A and B”.

JOINT SCHEDULE POLICIES 
A type of automobile liability insurance used by insureds with many employees.  Joint schedule policies insure the employee and the employer.  The schedule refers to a list of names of those insured.

Joint Tenants
A form of joint property ownership with right of survivorship, that is, in which the survivors automatically own the share of a deceased co-owner. 

Joint Underwriting Association
One of several types of shared market mechanisms used to make automobile insurance available to persons who are unable to obtain such insurance in the regular market. Certain companies, called carriers, issue policies at one rate level and handle claims, but the ultimate costs are borne by all companies writing insurance in that state.  Joint underwriting associations also have been created in some states in order to help alleviate availability problems in the fields of medical malpractice and commercial insurance.

Judgment Rating
A rate making method for which each exposure is individually evaluated and the rate is determined largely by the underwriter's judgment.

Judicial Bond
A type of surety bond used for court proceedings and guaranteeing that the party bonded will fulfill certain obligations specified by law, for example, fiduciary responsibilities. 

JUMBO LINE 
A much larger risk than normally accepted by the underwriter.  A jumbo line may be reinsured.

JUMBO RISK 
An exceptionally large policy or risk.

JUMPING JUVENILE 
A popular trade designation for a junior estate builder or other similar type of policy.

JUNIOR ACCUMULATOR 
One of several trade designations for jumping juvenile, junior estate builder, and other similar types of policies.

JUNIOR ESTATE BUILDER 
One of several trade designations for a juvenile policy that is sold in units of $1,000 and used for the protection to juveniles.  When the child reaches a mature age, typically 21, the insurance automatically is increased and does not require either an additional premium or a new medical examination.

JUSTICE OF THE PEACE BOND
A bond issued to judicial officers of inferior rank who hold courts not of record and are limited in civil and criminal jurisdiction. These bonds covers their faithful performance of the ministerial functions and not their judicial functions.

JUVENILE INSURANCE
Policies on lives of children below the regular adult minimum, as indicated by each state's insurance code.  It is insurance on the life of a child, applied for by and issued to a person liable for the child's support.  Juvenile insurance provides permanent life insurance that increases in face value five times at age 21 with no increase in premium.

K

KENNY RATIO 
Proposed by Roger Kenny, the theory that property and liability insurers should not write premiums more than twice the capital and surplus of the firm.

KEOGH ACCOUNT 
An account to which a self-employed person can make annual tax-deductible contributions as determined by current regulations.

KEY MAN INSURANCE
Protection of a business firm against the financial loss caused by the death of, or disability of, a vital member of firm.  A means of protecting a business from the adverse results of the loss of individuals possessing special managerial skill or experience.  Also referred to as key employee insurance and key person insurance.

KICKER 
A term describing any benefit to a lender above ordinary interest payments such as equity in a property or a participation in the income stream.

KIDNAP/RANSOM/EXTORTION INSURANCE
Insurance, which indemnifies the named insured for money, surrendered as ransom for specified individuals or classes of persons or to prevent threatened physical damage to property of the insured.

KIDNAPPING COVERAGE
Insurance against the hazard of a person being seized outside the insured premises and forced to return and open the premises or a safe inside or to give information which will enable the criminals to do so.

KITE
To raise the amount of a check or to issue valueless checks to cover other checks.  This term is loosely used to cover all forms of forgery involving checks or financial instruments.

L

LANDLORD’S LIABILITY INSURANCE POLICY
A type of business insurance coverage. 

LANDLORD'S PROTECTIVE LIABILITY
A contract of insurance covering liability for accidents on owned property leased to others.

LAPPING 
Theft from one customer being covered by theft from another, generally by means of false entries in books of accounts.

LAPSE 
The expiration or forfeiture of an insurance policy by nonpayment of the due premium.  Loosely used to indicate any termination because of premium default.

LAPSE RATIO
The ratio of the number of insurance policies lapsed without value or surrendered for cash during a year to those in force at the beginning of the year.

LARCENY 
The unlawful taking of personal property of another without his consent or against his will and with intent to deprive him of ownership or use. 

LAST CLEAR CHANCE 
In the law of negligence, an accident is often the result of negligence of someone who has started a chain of events resulting ultimately in the injury or damage.  If the chain of events were unbroken, the person who started the events would probably be responsible for the ultimate result.  When there is a clear break, usually in a matter of time an opportunity, by the use of reasonable care to have avoided the loss, that person may be held liable by the "last clear chance" rule, that is, he did not use that last clear chance to avoid the result.

LAST SURVIVOR 
An annuity payable as long as any one of the two or more individuals remain alive.

LAST SURVIVOR INSURANCE 
Life insurance on two or more persons, the benefits of which are payable on the death of the last survivor.

LAW OF LARGE NUMBERS 
The theory of probability that is the basis of insurance.  The larger the number of risks or exposure, the more closely will the actual results obtained approach the probable results expected from an infinite number of exposures.

LAY UNDERWRITER 
Home office representative who evaluates risk based upon known probability and statistics as well as evaluation of the human element. 

LAY UP REFUND 
Return of part of premium because a ship is laid up and, therefore, is not subject to ocean perils.

LAY UP WARRANTY 
Guarantee by policyholder that the insured ship will be laid up and not used for certain periods.

LEAD INSURER (OR UNDERWRITER) 
Insurer that provides the first layer of coverage under a property or liability insurance policy jointly underwritten by several insurers.

LEADER PROPERTY 
Merchant or other organization in a shopping mail or district which attracts customers into that district and, therefore, adds to the business volume of other stores or organizations in that area.  When a particular district has a leader" property, every organization in that district may have a contingent business interruption loss exposure if that leader property should shut down temporarily.

LEASEHOLD 
A property held under tenure of lease.

LEASEHOLD INSURANCE 
Protects against the loss sustained through the termination of a lease by hazards specifically insured against such as, for example, fire.

LEGAL DESCRIPTION 
A statement containing a designation by which land is identified according to a system set up by law or approved by law.

LEGAL LIABILITY 
An obligation enforceable by law most often considered in a monetary sense.  Any legally enforceable obligation.  The term is most commonly used in a pecuniary sense.  For example, if you own an automobile you may have a legal liability, or liability under the law, to reimburse anyone who may be injured through your negligence in the operation of that automobile.

LEGAL LIABILITY INSURANCE POLICY
A type of business insurance coverage, which protects the insured against injury or damage, claims from other parties.

LEGAL LISTS 
A term describing investments that life insurance companies, mutual savings banks, or other regulated investors may make under a state charter or court order.

LEGAL RESERVE 
The minimum reserve which a company must keep to meet future claims and obligations as they are calculated under the state insurance code.  A legal reserve company denotes a company whose reserves are calculated on this basis, in contrast to an assessment company or one writing a policy contract permitting the assessment of an additional amount of premiums.  The legal reserves are a bookkeeping liability calculated by actuaries, but are offset by admitted assets.

LESSEE 
One who possesses the right to use to occupy a property under a lease; the tenant.

LETTER OF CREDIT 
A letter authorizing a person or company to draw on a bank or stating that the bank will honor their credit up to a stated amount.
LEVEL PREMIUM INSURANCE 
Insurance for which the cost is distributed evenly over the period during which premiums are paid.  The premium remains the same from year to year and is more than the actual cost of protection in the earlier years of the policy and less than the actual cost in the later years.

LEVEL TERM INSURANCE 
Term insurance on which the face value remains the same from the date the policy comes into force until the date the policy expires.

LEVERAGE
The use of borrowed money to increase one's return on cash investment.  For leverage to be profitable, the rate of return on the investment must be higher than the cost of the money borrowed. 

LIABILITY 
This is a term for a legal responsibility, which can arise from negligence, assumption of a liability in a contract, or strict/absolute liability. 

LIABILITY, CONTINGENT 
Liability for damages arising out of the acts or omissions of others. 

LIABILITY, CONTRACTUAL 
An obligation assumed by contract to pay damages for which another is legally liable.

LIABILITY INSURANCE
This is insurance that pays on behalf of or defends the insured for legal responsibility arising from negligence or assumption of liability. 

LIABILITY INSURANCE, BODILY INJURY 
Insurance against loss due to claims for damages because of bodily injury, including death, to persons, not employees.

LIABILITY INSURANCE, COMPREHENSIVE GENERAL 
Insurance against loss due to all claims against the insured for damages arising from his business premises or operations, except those arising from motor vehicles away from the premises and other stated exclusions.

LIABILITY INSURANCE, COMPREHENSIVE PERSONAL 
Insurance against loss due to all claims for damages arising from personal, non-business premises or conduct, except those arising from motor vehicles away from the premises and other stated exclusions.

LIABILITY INSURANCE, CONTRACTUAL
Insurance against loss under a contractual liability agreement.

LIABILITY INSURANCE, ELEVATOR
Insurance against loss due to claims for damages arising out of the ownership, maintenance, or use of elevators or other hoisting devices.

LIABILITY INSURANCE, EMPLOYERS'
Insurance against loss to claims for damages by employees for bodily injuries, including death, excluding liability under workmen's compensation laws.

LIABILITY INSURANCE, OWNERS', LANDLORDS’, and TENANTS'
Insurance against loss due to claims for damages against owners, landlords, or tenants arising out of ownership, maintenance, or use of specified premises.

LIABILITY INSURANCE, PROPERTY DAMAGE 
Insurance against loss due to claims for damages because of injury to others' property.

LIABILITY LIMITS 
The sum beyond which a liability insurance company does not protect the insured on a particular policy. 

LIBEL 
A legal action directed against a vessel as well as publication of defamatory information.

LIBEL INSURANCE 
Insurance coverage for publishers and other disseminators of information against claims of alleged defamation, slander, and libel.

LICENSE 
Permission to do something that would otherwise be improper or wrongful, for example, a license may be granted to an insurance agent to conduct the business of insurance.

LICENSE, AGENT’S 
Certification issued by a state department of insurance authorizing a qualified individual to solicit insurance applications for the period covered and subject to that state’s statutory regulations.

LICENSE AND PERMIT BONDS 
Bonds required by municipalities or public authorities to indemnify them against loss in the event of violation of regulations or ordinance under which the permit is required.

LIEN 
A hold or claim which one person has upon the property of another as a security for some debt or charge.

LIEN PLAN 
A plan rarely used for substandard risk life insurance policies as a marketing aid.

LIFE ANNUITY 
A contract that provides an income for life, payable annually or more frequently.

LIFE EXPECTANCY 
The average number of years of life remaining for persons at any given age, according to the particular mortality table in use.

LIFE EXPECTANCY TERM INSURANCE 
A type of policy issued at an individual’s age, with the premium being represented by that age’s "expectation of life".

LIFE INSURANCE 
Insurance providing for payment of a specified amount on the insured's death either to his estate or to a designated beneficiary.

LIFE INSURANCE COST INDEXES 
The measurements used to determine the cost of life insurance protection.

LIFE INSURANCE, LEGAL RESERVE 
Life insurance for which the law requires certain minimum reserves.

LIFE INSURANCE, LIMITED PAYMENT 
Whole life insurance for which premiums are payable for a stated number of years or until the prior death of the insured.

LIFE INSURANCE, ORDINARY 
Whole life insurance written under a contract providing for periodic payment of premiums as long as the insured lives.

LIFE INSURANCE POLICY RESERVE 
The financial liability for future benefits payable under the policy that approximates the cash value of the policy.

LIFE INSURANCE PROGRAMMING 
The integration of the proceeds of a life insurance program with other assets of an estate so that certain financial objectives are achieved.

LIFE INSURANCE, TERM 
Life insurance providing for payment of benefits if the insured dies within a specified period. 

LIFE INSURANCE TRUST 
An arrangement whereby life insurance policy proceeds are paid to a trust company and distributed under the terms of a trust agreement, permitting greater flexibility in the distribution of the proceeds.

LIFE INSURANCE, WHOLE LIFE 
Life insurance providing for payments of benefits whenever the insured dies.

LIFE INSURED 
The person on whose death or disability the insurance proceeds will become payable.

LIFE ONLY ANNUITY 
An annuity payable as long as the annuitant lives with all payments ceasing at death.

LIFE PAID UP AT AGE 
A form of limited payment whole life insurance that requires that all the premiums for the policy be paid by the time the insured reaches a certain age.
LIFE SAFETY CODE 
The National Fire Protection Association National Fire Code Number 101, which covers the construction, protection, and occupancy features of buildings and structures that are concerned with the dangers to life associated with fire, smoke, fumes, and panic before the building or structure is evacuated.

LIFE TABLE
A tabulated statement presenting mortality and survivor characteristics of a given population.

LIFE UNDERWRITER 
One who acts on behalf of a life insurance company and to the broker who is appointed by a life insurance company to represent it on behalf of the insured.

LIFETIME DISABILITY BENEFIT 
A benefit to help replace income lost by an insured person as long as he is totally disabled.

LIFETIME POLICY 
A policy which pays disability benefits for life or, a policy which is guaranteed to be renewable or non-cancellable to age 65 or above.

LIMIT, AGGREGATE 
The maximum amount of damages that the insurer will pay under a contract or section of insurance policy during the contract period.

LIMIT, BASIC 
The limit of liability for which the basic rates on a liability insurance contract is quoted.

LIMIT, EXCESS 
A limit higher than the basic limit.
Limitation Period 
The time during which an insurance policy provision is not applicable. 

LIMITS OF LIABILITY
The maximum amount the insurer or company will pay in the event of a loss that is covered by the policy. The limits of liability of the policy are shown on the declarations page. 

LIMITATIONS 
Exceptions or reductions to the general coverage.

LIMITED COMMON AREA
Common area assigned to a specific owner for personal private use.

LIMITED LIABILITY 
A risk of loss measured by the amount of investment in corporations and limited partnerships.

LIMITED PARTNERSHIP 
A partnership that consists of one or more general partners who are fully liable and one or more limited partners who are liable only for the amount of their investment.

LIMITED PAYMENT LIFE INSURANCE 
A plan of insurance for the whole of life on which the premiums are payable for a specified number of years or until death, if death occurs before the end of the specified period.

LIMITED POLICY 
A policy providing insurance against specified types of accidents or which is restricted in indemnity payments, as contrasted with full coverage policies.

LIMITS 
The sum beyond which a liability insurance company does not protect the insured on a particular policy.

LINE
Generally, a particular type of insurance.

LINE LIMIT 
Underwriting guidelines specifying the maximum amount of a particular type of insurance that an insurer judges it can safely write on a particular exposure without purchasing reinsurance.

LINE OF BUSINESS 
The general classification of business use in the insurance industry, for example, fire, allied lines, homeowners’, etc.

LINE OF CREDIT 
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time to a specific borrower.

LIQUIDITY 
The ability of an individual or business to quickly convert assets into cash without incurring a considerable loss.

LIQUOR LICENSE BOND 
Insurance required by a regulatory body for those having liquor licenses.

LITIGATION 
The act of carrying on a lawsuit.

LIVERY INSURANCE 
An automobile insurance that covers drivers and owners who carry hired passengers.

LIVESTOCK INSURANCE POLICY 
Type of insurance coverage protecting against loss due to death of livestock.
LIVESTOCK TRANSIT INSURANCE 
Coverage on accidents from movement by rail or truck for livestock.

Living Benefits 
Accelerated benefits and viatical settlements combined; the proceeds of a life insurance policy received by the policyholder prior to death. 

LLOYD’S ASSOCIATION 
An insurance association where insurers are individuals, as opposed to being an insurance company or a corporation.  The liability for loss is several liability, that is, separate and distinct, and there is no joint liability.  Our legislature typically does not favor this type of organization.  Among those states that do authorize Lloyd’s associations, there are severe restrictions and regulations for conducting the business of insurance as a Lloyd’s association.

LLOYD’S BROKER 
A broker that can deal with Lloyd's of London underwriters.

LLOYD'S OF LONDON 
A Corporation that maintains facilities for the insurance business of underwriting and broker members, regulates membership and collects and disseminates information.

LLOYD’S SYNDICATE 
Combination of underwriters at Lloyd's of London that operates as a unit.

LLOYD’S UNDERWRITER 
A member of Lloyd's of London who underwrites insurance at Lloyd's.

LOADING 
An amount added to the basic rate or premium to cover the expense to the insurance company in securing and maintaining the business.  This term is also used in connection with inland marine insurance, as the amount added to the fire rate to cover additional perils. 

LOAN GUARANTY CERTIFICATE 
A certificate issued to a lending institution by the Veterans’ Administration indicating the percentage of the loan that is guaranteed.

LOAN RECEIPT 
With respect to property insurance, an instrument which an insurer issues to its insured when paying a loss for which a third party may be legally liable.  Using this instrument, the insurer lends to the insured, rather than paying the insured outright, the money needed to restore the damaged property.  The insurer agrees to cancel the loan to the extent that the amount of the loss cannot be recovered from the third party. 

LOAN TO VALUE RATIO 
The relationship between the amount of the mortgage loan and the appraised value of the security, expressed as a percentage of the appraised value.
LOAN VALUE 
The largest amount that can be borrowed by the insured on the security of the cash value of his life insurance.

LOCKED IN VESTING 
A form of vesting in a contributory plan, under which the participant generally has no right to withdraw his contribution after benefits attributable to employer contributions have vested.

LONG TERM DISABILITY 
A disability which generally lasts longer than 90 days, but which is defined by policy terms.

LONG TERM INSURANCE 
A term used to describe insurance, which is written for a longer term than one year, typically three years.

LOSS 
The basis for a claim for indemnity or damages under the terms of an insurance policy.  Any reduction of quantity, quality, or value of property.

LOSS ADJUSTMENT EXPENSES 
Expenses involved in the adjusting of losses such as adjuster's fees, court costs, attorneys’ fees, etc.  For government purposes, adjustment expenses incurred under a condition of third party liability must be included with losses.

LOSS AND LOSS EXPENSE RATIO 
The percentage, for a given period, of an insurance company's net premiums earned that have been or are expected to be paid out in claims and expenses that have been incurred in the claim settlement process.  This ratio takes into account claims paid, claims which have been reported, but not yet paid, claims incurred but not reported, and the cost of settling claims.

LOSS CONSTANT 
A flat sum or amount included in the premium of a risk too small for experienced ratings to be applied.  It is generally associated with workers’ compensation insurance.

LOSS CONTROL REPORT 
Prepared by a loss control representative, a loss control report is a written document that provides a first hand picture of the applicant for the underwriter, especially with respect to the operations and hazards of his business.

LOSS CONTROL REPRESENTATIVE 
Those who perform loss control surveys or inspections and prepare written loss control reports to describe their findings.  Also known as safety engineers.

LOSS CONVERSION FACTOR 
An amount added to the actual losses to provide for the expenses incurred in the insurance handling of the claims.  It is normally associated with a retrospective-rating plan of workers’ compensation insurance.

LOSS DEPARTMENT 
The part of an insurance company that pays and handles claims or losses.  Also known as the Claim Department.

LOSS DEVELOPMENT 
The difference between the estimated amount of losses as initially reported to the reinsurer and the amount of the final settlement.

LOSS DEVELOPMENT FACTOR 
A mathematical factor used to estimate the future value of current known unpaid and incurred but not reported losses.

LOSS DRAFT 
Insurance payments in settlement of a claim for damage to mortgaged property.

LOSS EXPECTANCY 
The underwriter's estimate of damage that would result from the peril insured against, taking into consideration the probable maximum loss expectancy, which is an estimate of damage if there had been the normally expected control and protecting against the peril and the above normal loss expectancy, the estimate of damage occurring if the peril were not controlled by the protection to be reasonably expected.
LOSS EXPENSE, ALLOCATED 
Handling expenses, such as legal fees, paid by a property and liability insurance company in settling a claim, which can be charged to that particular claim and excluding payments to the claimant.

LOSS EXPENSE, UNALLOCATED 
Salaries and other expenses incurred in connection with the operation of a claim department of a property and liability insurance carrier, which can not be charged to individual claims.

LOSS EXPOSURES
Situations that could lead to accidental loss.

LOSS INFORMATION SERVICE 
A service provided to an insurance company by the National Board of Fire underwriters, which gives the names of individuals involved in arson or fires of suspicious nature.

LOSS LOADING OR MULTIPLIER
A factor applied to pure loss cost or losses to produce a reinsurance rate or premium.

LOSS OF INCOME BENEFITS 
Benefits paid because the insured is disabled and unable to work.

LOSS OF TIME BENEFITS 
Benefits paid because the insured is disabled and unable to work.

LOSS OF USE INSURANCE 
Compensation caused because the policyholder does not have the use of his property.  An automobile hired to replace one stolen would be an example of the need and use of such coverage.

LOSS OUTSTANDING 
Tabulation of losses that an insurance company has in the form of claims, but which it has not settled.

LOSS PAYABLE CLAUSE 
A clause in an insurance contract providing for payment of a loss, for which the insurer is liable.

LOSS PAYABLE TO 
The phrase in insurance policies designating to whom the loss is payable.

LOSS PREVENTION 
All measures to reduce the frequency of losses. 

LOSS PREVENTION SERVICE 
Engineering and inspection work done by insurance companies or independent organizations for the purpose of changing or removing conditions which would be likely to cause loss.

LOSS RATIO 
The percentage of losses to premiums.  The proportion which losses incurred bear to the earned premiums.

LOSS RATIO METHOD 
The procedure for changing the premium rates for several classes of closely related property or liability insurance contracts in order to bring the combined actual loss ratio of these classes to the expected or permissible loss ratio for these classes.

LOSS REDUCTION 
A risk management technique, measure, or method designed to reduce the severity of accidental losses.

LOSS REPORT 
An agent's written account of a claim or loss suffered by his client.

LOSS RESERVE 
That portion of the assets of an insurance company kept in a readily available form to meet probable claims.  A fund provided for the payment of losses, which have been incurred but not yet due.

LOSS RUN 
A report that lists the accidental losses or claims incurred by an organization showing each claim or loss number, date of loss, open or closed status, claimant, description of loss, value of incurred loss, loss reserve, and other information.

LOSS TRENDING 
Use of past loss frequency and loss severity data to project future expected losses.

LOSS YEAR STATISTICS 
A method of gathering data on losses, especially liability insurance claims, which charges the total costs of the accidents to a given calendar, regardless of when the costs are incurred.  Also referred to as calendar accident year statistics and accident year statistics.

LOSSES INCURRED 
The total losses sustained by a company under a policy or policies whether paid or unpaid.

LOSSES OUTSTANDING 
The amount of loss for which the insurer is liable and which it expects to pay in the future.

LOSSES PAID 
Tabulation of claims that have been paid.  The amount of loss for which money has been disbursed by the insurer.

LOST INSTRUMENT BOND 
A bond available to owners of securities that have been lost, stolen, destroyed, or have mysteriously disappeared, which covers not only the reissuance of a duplicate instrument, but the risk that the original missing security may be negotiated.

LOST OR NOT LOST CLAUSE 
Portion of ocean marine insurance policy providing for coverage even if loss had occurred before the insurance was placed, for example, before the owners were unaware of the loss. 

LOST POLICY RELEASE 
A statement signed by the insured releasing the insurance company from all liability under a lost or mislaid contract of insurance.

LOW BURNING THEORY 
The theory that fire tends to sweep upward until it meets an obstacle to its progress.

LUMP SUM 
A method of settlement provided by most policies representing the entire amount due or still owing under the policy contract unless an alternate settlement is elected by the policyholder before death or the beneficiary before receiving the payment.

LUMP SUM DISTRIBUTION 
Payment within one taxable year of the entire balance of a fund payable from a trust which forms part of a qualified pension or employee annuity plan.

M

MACHINE ISSUANCE 
Policies prepared and issued by electronic equipment.

MACHINERY BREAKDOWN INSURANCE
A contract of indemnification against loss due to breakdown or failure of machinery.

MACHINERY CLAUSE 
A clause in an insurance contract providing that, in case of loss to a machine consisting of several parts, the insurer will not be liable for more than the insured value of the part to which loss occurs.

MAJOR MEDICAL INSURANCE 
A type of health insurance that provides benefits for most types of medical expenses incurred up to a high limit, subject to a large deductible.  Such contracts may contain internal limits and a percentage participation clause or coinsurance clause.

MAKER 
The promisor to pay a note.  Also used to refer to an arsonist or the maker of a fire.

MALICIOUS ACT 
A wrongful act intentionally done without legal justification or excuse.  An unlawful act done willfully or purposely to injure another.

MALICIOUS MISCHIEF 
Injury to the rights or property of another with a wicked or perverse intent.

MALPRACTICE 
Alleged professional misconduct or lack of ordinary skill in the performance of a professional act.  A practitioner is liable for damage or injuries caused by malpractice.  Can usually be covered by insurance.

MALPRACTICE LIABILITY INSURANCE 
Insures against loss for damages because of injury or death resulting from malpractice or error by the insured.

MANDATORY VALUATION RESERVE 
A reserve designed to protect against adverse fluctuations in the values of bonds and stocks held by insurance companies as admitted assets.

MANIFESTATION / INJURY THEORIES 
Under this theory, a person suffers harm when the first symptoms of harm become outwardly apparent.  Under the injury theory, a person suffers harm when he or she first comes into contact with the physical agent which ultimately results in injury or disability, frequently after a significant period of dormancy.

MANUAL PREMIUM 
The manual premium for a policy is the premium determined from the rating manual, but does not include discounts or surcharges.

MANUAL RATES 
Refers to the cost of a unit of insurance protection as quoted in the rating manual.  It may also refer to those rates developed by the application of a recognized rating plan.

MANUFACTURER'S AND CONTRACTOR'S LIABILITY INSURANCE 
Contractual coverage of liability as a result of the ownership or operation of a business such as installation, construction, or manufacturing.
MANUFACTURERS' OUTPUT POLICY 
A broad form of all risks coverage of personal property of insured manufacturer covering the property of the manufacturer, except on the premises of the manufacturer.

MANUSCRIPT POLICY 
An insurance policy to include specific coverages or conditions not provided in a standard policy.  In any dispute over policy language, the adhesion doctrine is modified for such a policy.

MAP CLERK 
A junior underwriter who enters essential data such as policy number, amount, property covered, and expiration date regarding certain types of policies.

Marine Franchise Clause
A Marine Franchise Clause is a type of deductible clause that says that if a loss exceeds a stated amount, the loss is paid in full.  Below that amount the entire loss is assumed by the Insured. 

MARINE INSURANCE 
The form of coverage which is primarily concerned with the protection of goods in transit and the means of transportation.  This term is applied in common usage to risks involving ocean transit.

MARINE PERILS 
Risks covered by marine insurance policy.  Each word that is used in the marine policy has been defined by admiralty decisions.

MATERIAL BOND 
Insurance to the beneficiary, the contractor, that the person posting the bond, the supplier, will provide the materials necessary for the completion of contracted work.

MATERIAL DAMAGE 
Insurance against damage to a vehicle or boat itself.  It includes automobile comprehensive, collision, fire and theft.  Sometimes referred to as physical damage. 

MATERIALITY 
The disclosure of all material facts known must be communicated.  The test of materiality is when the nature of the true facts, if they had been known, would have influenced the insurer to decline the risk or to write it.

MATURED VALUE 
The proceeds payable on an endowment contract at the end of the specified endowment period or payable on an ordinary life contract at the last age of the mortality table if the insured is still living at that age.

MATURITY DATE 
The date upon which an endowment policy becomes payable if the insured is still living.

MAXIMUM DISABILITY POLICY
Noncancellable disability income insurance with a limit on the insurer’s liability for each claim but containing no limit on the aggregate amount of all claims.

MAXIMUM POSSIBLE LOSS 
The largest loss possible for a given risk.

MAXIMUM PROBABLE LOSS 
The largest loss expected for a given risk assuming normal circumstances.

MAXIMUM RETROSPECTIVE PREMIUM 
The highest premium which would be required for workers’ compensation insurance under a retrospective rating plan.

measure of the duty of care 
That degree of care and diligence which a man of ordinary care and prudence would exercise in the management of his own business.

MEDICAID 
State programs of public assistance to persons, regardless of age, whose income and resources are insufficient to pay for health care.

MEDICAL EXAMINATION 
An examination by a physician required as a part of the policy application. Medical examinations are usually required with non-cancellable applications and may not be required with other kinds of applications.

MEDICAL IMPAIRMENT BUREAU 
A clearinghouse of information on people who have applied for life insurance in the past reflecting any adverse findings on previous examinations and other information.

MEDICAL PAYMENTS COVERAGE 
The medical payments coverage of a general liability or home owners’ policy which pays for injuries to guests, customers, or other members of the public who are injured on the premises, regardless of whether the home owner is legally responsible for the injury.

MEDICAL PAYMENTS COVERAGE OF AN AUTO INSURANCE POLICY 
Covers the medical expenses of a covered person who is injured in an auto accident regardless of who was at fault.

MEDICAL PAYMENTS INSURANCE 
An agreement by an insurer to pay, subject to a limit, medical, surgical, hospital, and funeral expenses, regardless of the liability of the insured.  Medical payments insurance is typically included in automobile and other public liability policies.

MEDICARE 
A federal government insurance plan attached to the Social Security Act in 1965, which provides a health insurance program for the aged.

MEDIGAP INSURANCE 
Policies, which are designed to pay all or part of the expenses for health care not, covered by Medicare.

MERCANTILE OPEN STOCK BURGLARY INSURANCE 
Indemnification against loss of merchandise due to burglary caused by felonious entry using force or violence when the premises are closed for business.

MERCANTILE SAFE BURGLARY INSURANCE 
Indemnification against loss caused by burglary in which the opening of a safe with force and violence through the use of tools, explosives, chemicals, or electricity leaves marks on the safe.  The coverage covers damage to the safe, property in the safe, furniture, fixtures, and the premises.

MERCHANDISE INSTALLMENT FLOATER 
A contract insuring a vendor and/or a vendee against loss to merchandise sold on the installment plan, as long as the vendor has an interest in the merchandise.

MERCHANTS' PROTECTIVE BOND 
Insurance for a limited amount for loss or damage due to embezzlement, robbery of messengers, interior robbery, safe burglary, forgery, counterfeit money, plate door damage, stock and fixture damage, and other specified coverage.

MERIT RATING 
A system used in measuring the differences of a specific risk from some moral, or other standard, in order to correct the manual rate for that risk.

MILL CONSTRUCTION 
A building with thick brick walls, floors of three- or four-inch planks, an eight- or twelve-inch wood posts and girders, and no concealed spaces behind interior finish.

MINIMUM AMOUNT POLICY 
A life insurance contract which is sold only with a minimum face amount.

MINIMUM BENEFITS 
A provision that a minimum amount of annuity will be paid if the regular benefit formula produces less.  This minimum is usually payable only if certain service requirements are met at retirement.

MINIMUM DEPOSIT POLICY 
A life insurance contract whose cash value provides a first year loan value, which is made available immediately for borrowing upon payment of the first year's premium.

MINIMUM GROUP 
The least number of employees permitted under a state law to comprise a group for insurance purposes.

MINIMUM PREMIUM PLAN 
A group insurance financing arrangement in which the employer is responsible for paying all claims up to an agreed upon aggregate level and the carrier is responsible for the excess.

MINIMUM PROPERTY STANDARDS 
Federal Housing Authority regulations that set forth minimum acceptable technical standards for insurable loans.

MINIMUM RATE 
A general class for risks of low hazard with many units in the class.

MINIMUM RETROSPECTIVE PREMIUM 
Refers to the lowest premium, which would be charged in any event under a retrospective rating plan for worker's compensation insurance.

MISREPRESENTATION 
Written or verbal misstatement of a material fact concerning an insurance application or loss claim.

misrepresentation and false advertising of policy contracts
Consumers are protected against misstatements and misrepresentations concerning policy contracts.  Making an estimate or illustration, which portrays the terms of any insurance policy in a false or misleading way, is misrepresentation and false advertising of policy contracts.

MIXED PERILS 
Two or more perils which simultaneously cause loss, such as when during a storm, both wind and water damage property. 

MOBILE EQUIPMENT 
A term defined in general liability policies as land vehicles which includes machinery and apparatus attached thereto, whether or not self-propelled, and not subject to motor vehicle registration; used exclusively on the insured's premises; designed principally for use off public roads; or designed or maintained for the sole purpose of providing mobility for permanently attached equipment such as cranes, loaders, pumps, generators or welding equipment.

MODIFIED LIFE
Ordinary insurance with a premium payable during the first few years slightly larger than the rate for term insurance.

MONEY AND SECURITIES BROAD FORM POLICY 
An insurance contract for protection of a business against most losses of securities and money, except from forgery and dishonesty of employees.

MONEY PURCHASE PLAN 
An arrangement for periodically applying an amount of money, usually a percentage of wages), to the purchase of an annuity as part of a pension.

MONOPOLISTIC STATE FUND 
A state workers’ compensation insurance plan which prohibits the writing of this coverage by private carriers.

MORAL HAZARD 
Refers to the risk resulting from the personal habits of the insured, which may increase the possibility of loss due to carelessness or dishonesty frequently associated with individuals who have had a series of losses such as fires.

MORTALITY RATE 
The proportion of persons of a given age who die during a period of one year.

MORTALITY SAVINGS 
The difference between the actual mortality losses and the amount expected according to the mortality table in use.

MORTALITY TABLE 
A statistical table showing the death rate at each age, usually expressed in deaths per thousand.
MORTGAGE BACKED SECURITIES
Bond type investment securities representing an undivided interest in a pool of mortgages or trust deeds.

MORTGAGE CLAUSE 
A clause in an insurance policy which makes the proceeds payable to the holder of a mortgage on the insured property to the extent of his interest in that property.

MORTGAGE INSURANCE 
A type of term life insurance available to mortgagors.  The amount of coverage decreases as the mortgage balance declines.  In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.

MORTGAGE INSURANCE PREMIUM 
The consideration paid by a mortgagor for mortgage insurance either to the Federal Housing Authority or to a private mortgage insurance company. 

MOTION PICTURE NEGATIVE FLOATER INSURANCE 
An all risk indemnification against damage or loss to negative motion picture films caused by physical risks.

MOTOR TRUCK CARGO INSURANCE
Insures the owner of the truck and cargo against loss to his property while it is being transported.

MOTOR TRUCK CARRIER'S INSURANCE FORM 
Type of business insurance coverage especially designed to protect operators of motor trucks.

MOTOR TRUCK CONTENTS FLOATER INSURANCE 
Indemnification against loss or damaged goods carried by motor trucks due to specific perils.

MOTOR VEHICLE 
Any mechanically or electrically powered device, except one moved by human power and not operating on rails, upon which or by which any person or property may be transported on land.  In addition, the load on a motor vehicle or trailer attached to it is considered part of the vehicle.

MOTOR VEHICLE REPORT 
A report, which lists the moving violations, such as speeding tickets, and serious accidents that, a driver has had in the past several years.

MUSICAL INSTRUMENTS FLOATER
A form of inland marine coverage designed to insure musical instruments against many kinds of loss or damage. A value is determined for each item described; coverage applies within the territorial limits of the policy.

MUTUAL ATOMIC ENERGY REINSURANCE POOL 
A reinsurance pool of mutual insurance companies for policies written on private nuclear energy reactor installations.

MUTUAL BENEFIT ASSOCIATIONS 
Fraternal or social organizations or corporations for the relief of members of the group operating on a corporate or assessment plan.  Its features provide that the payment of losses is not met by fixed premiums payable in advance, but by assessment intended to liquidate specific losses.

MUTUAL INSURANCE COMPANIES 
Companies with no capital stock and owned by policyholders.  Trustees of the company are chosen by the policyholders and the earnings of the company exceeding the payments of the losses and operating expenses and reserves are the property of the policyholders.

Mutual life insurance
Mutual life insurance is written by mutual life insurers.  The insured pays a fixed premium slightly more than the estimated cost of his coverage.  Then, a dividend is paid each year based on losses, expenses, interest rates, and other factors.

MUTUAL MORTGAGE INSURANCE FUND 
One of four Federal Housing Authority insurance funds into which all mortgage insurance premiums and other specified revenue are paid and from which losses are met.

MYSTERIOUS DISAPPEARANCE
The loss of insured property in an unexplainable manner or from an unidentified cause. This type of loss is normally excluded from personal property coverage and is stated so on the policy. 

N

Named Insured
A person named in an insurance policy and for whom the policy is primarily written. It is distinguishable from the simple word "insured" in that an insured includes both named and unnamed insureds. It is distinguishable from unnamed insured in that it identifies the specific party in the policy. 

Named Perils Policies
Policies which specifically state the perils against which protection is given, and no others. This is distinct from the All Risk Policy, which covers all risks of direct physical loss or damage except those specifically excluded in the policy. 

NARRATIVE 
A form of written statement which differs from the question and answer form in that it is an informal and chronological story or account of events in paragraph form.

National Fire Protection Association, THE 
An independent, voluntary membership, nonprofit organization which safeguards man and his environment from destructive fire.  The NFPA uses scientific and engineering techniques and education.

NATIONAL SERVICE LIFE INSURANCE 
Insurance created by Act of Congress in 1940 relating to provisions of policies for individuals on active service with naval and military forces.

NATIONWIDE INTERCOMPANY ARBITRATION AGREEMENT 
A general agreement among many insurers specifying the procedures for resolving disputes among themselves with respect to the way subrogation claims and recoveries will be handled without resorting to litigation.

NATIONWIDE MARINE DEFINITION 
A statement of the types of insurance that may properly be written under marine or inland marine policies by recommendation of the National Association of Insurance Commissioners.

NATURAL CAUSE 
A fire caused by natural causes without human aid such as lightning, spontaneous ignition, malfunction of equipment, etc.

NATURAL PREMIUM 
The cost of life insurance based upon pure mortality for one year at any specific age.

NEGLIGENCE CONCURRENT 
A situation where two or more persons acting independently cause injury to a third party in the same accident.

NEGLIGENCE, CONTRIBUTORY 
A situation where the person complaining that he was injured or damaged by another person's negligence may actually been guilty of want of due care for his own safety. 

NEGLIGENCE, GROSS 
The reckless, wanton, and willful misconduct where the standard of due care of a reasonable prudent person has been ignored by a wide margin.

NET COST 
The total premiums paid on a policy, minus any dividends and the surrender value, as of the date of the determination of the cost. 

NET INCOME 
The amount achieved after deducting from the gross income all operating expense, maintenance, taxes, and losses pertaining to operating properties, excepting interest or other financial charges on borrowed or other capital.

NET LEVEL PREMIUM 
The cost of life insurance based upon pure mortality from the inception of the contract until its maturity date.

NET LINE 
The amount of liability the company is prepared to expose to loss for its own account.

NET LOSS 
The amount of loss sustained by an insurer after giving effect to all applicable reinsurance, salvage, and subrogation recoveries.

NET PAYMENTS COST INDEX 
One of the measures of the cost of a life insurance policy that includes interest foregone if a policy is kept in force until the insured dies.

NET PREMIUM 
Generally, the billed premium, less the agent's commission.  Or, the original premium, less return premiums and premiums for reinsurance.

NET PREMIUMS EARNED 
Net premiums earned are amortized or spread over the life of the policy.  The income statement for a given accounting period includes only net premiums earned during that period, regardless of the amount of premiums written.

NET PREMIUMS WRITTEN 
The premium dollars retained by a company consisting of direct premiums written plus reinsurance premiums accepted and less premiums ceded.

NET PROFITS 
Used without qualifying expression, to describe only the profits remaining after including all earnings, and other income or profit, and after deducting all expenses and charges of every character, including interest, depreciation, and taxes.

NET RATE 
The amount of the premiums before loading for expense.  The actual amount paid after subtracting any dividends.  In the case of a nonpar policy, this is identical with the rate book figure.

NET RETENTION
The amount of insurance, which a ceding company keeps for its own account and does not reinsure in any way.  Also referred to as net retained liability.

NET UNDERWRITING PROFIT OR LOSS 
Statutory underwriting profit or loss plus dividends to policyholders.

NET WORTH 
The value of all assets, including cash, less total liabilities.  Net worth is frequently used as an underwriting guideline to indicate credit worthiness and financial strength.

NFC MORTALITY TABLE
National Fraternal Congress Table of Mortality prepared in 1898 to permit fraternal insurance to establish better mortality and lapse experience.

NO AMOUNT POLICY 
This policy shows no fixed amount of insurance on the face of contract but pays the actual cash value of the claim or loss on the property.  Physical damage automobile policies are examples of this type of coverage and insurance.  Also referred to as an actual cash value policy.

NO FAULT AUTOMOBILE INSURANCE 
A form of insurance by which a person's financial losses resulting from an automobile accident, such as medical and hospital expenses and loss of income, are paid by his own insurance company, regardless of who was at fault.  

NO FAULT THRESHOLD 
The financial amount below which one may not bring tort liability actions against those responsible for the accident.

NO FILING LAW 
Under a no rate filing law, no rate filing is required because insurance regulators do not approve or disapprove insurance rates.  Also referred to as open competition.

NOMINAL DAMAGES 
Damages awarded to plaintiff as a token of the court's finding in his favor, when wrong has been committed against him by which he has suffered no real damage.

NONADMITTED ASSETS
Assets which include the excess of ledger values over market values of investments and other items which are not permitted by the state insurance departments to be listed for the purpose of a balance sheet.

NONADMITTED CARRIER or company 
An insurer that has not been licensed to write insurance in a given jurisdiction.

NON ADMITTED REINSURANCE 
A situation where no credit is given in a ceding company's annual report for this reinsurance because the reinsurer is not licensed to do business in the ceding company's jurisdiction.

NONASSESSABLE INSURANCE 
Insurance under which the insured may not be called upon to pay an assessment in addition to his premium.

NONASSESSABLE POLICIES 
Nonassessable policies limit the liability of the policyholder to the amount of premium which is paid, and no additional levy can be made against the policyholder.

NONBOARD COMPANY
An insurance company that does not subscribe to the rates and rules of the respective rating bureaus.

nonCANCELLABLE DISABILITY INSURANCE 
Disability insurance which may be continued at the option of the insured to a specified age, such as 60 years. 

NONCANCELLABLE GUARANTEED RENEWABLE POLICY 
An individual policy which the insured person has the right to continue in force until a specified age, such as to age 65, by the timely payment of premiums.  During this period, the insurer has no right to arbitrarily make any changes in any provision of the policy while it is in force.

NONCANCELLABLE POLICY 
An insurance contract that may not be terminated.  Most insurance policies permit cancellation by either the insured or the insurance company.  However, a noncancellable policy may limit one or both parties to the contract.

NONCONCURRENCY 
A situation where a number of the same interests and against the same perils or hazards are not identical pertaining to the extent of coverage.  Typically involves policies insuring partly the same and partly different subjects or using different coinsurance percentages.

NON-CURRENT 
The term is applied to policies, which are not in agreement with respect to range, condition, or wording with other policies on the same owner. 

NONCONCURRENT INSURANCE
Insurance under two or more contracts, on all or part of the same risk, varying in their description of the risk or in particulars other than amounts of insurance or policy dates.

NONCONFining sICKNESS 
Sickness which prevents the insured from working but does not confine him to his home.

NONCONTRIBUTORY plan	
A group or pension plan in which the employer pays all the premiums.
	
NONDISTURBANCE AGREEMENT 
An agreement that permits a tenant under a lease to remain in possession of a property, despite any action of foreclosure.

NONDUPLICATION OF PAYMENTS
A provision found in some health insurance contracts whereby the insurer is not liable for benefits provided by other insurers.

NONFORFEITURE OPTION 
The value, either in cash or in another form of insurance available, upon failure to continue the required premium payments.  The other forms of insurance available are extended term insurance, which provides the original amount for a limited period of time and reduced paid up insurance, which continues the original insurance plan, but for a reduced amount.

NONFORFEITURE VALUES 
Values such as loans, cash, paid up insurance, and extended term, which are not lost by nonpayment of premiums.

NONHAZARDOUS 
A risk not involving the ordinary or average hazard of its class of property. 

NONINSURABLE RISK 
A risk for which no insurance can be written because the chance of loss is very high or cannot be accurately measured.

NONINSURANCE TRANSFER 
The transfer of a loss exposure to an entity which is not an insurer.  Examples of noninsurance transfers are indemnity agreements, hold harmless agreements, and being a named insured under another party's insurance coverage. 

NONLEDGER ASSETS 
Assets due and payable in the current year but not received by the company.

NONMEDICAL 
Life insurance issued without the requirement of an examination by a physician.  However, a statement of health and physical condition is taken from the applicant and becomes a part of the policy.

NONOCCUPATIONAL POLICY 
A policy which does not cover disability resulting from injury or sickness covered by workers’ compensation, for example, group accident and sickness policies.

NONOWNERSHIP AUTOMOBILE LIABILITY
Coverage against liability for damage or loss caused while driving an automobile not owned or leased to the insured.

NONOWNERSHIP AUTOMOBILE LIABILITY INSURANCE 
Protects the policy holder against the claims for property damage or public liability which may be caused by automobiles not owned or hired by him but which may be used by his employees or agents in the conduct of his business activity.
NONPARTICIPATING 
A policy without dividends that guarantees the final cost in advance and written by stock insurance companies.

NONPARTICIPATING INSURANCE 
Insurance on which no dividends are payable.  Insurance written for a fixed premium, without provision for dividends to, or assessment of, insureds.

NONPROFIT INSURERS 
Insurance associations organized under nonprofit laws and exempt from certain types of taxation, such as Blue Cross and Blue Shield. 

NONPROPORTIONAL INSURANCE 
Life reinsurance whereby the reinsurer makes payments to the ceding company only after the ceding company 's claims exceed a preset aggregate loss limit.

NONRENEWAL 
The situation created when an insurer decides not to renew a policy at the end of a policy period. 

NONRESIDENT 
Persons who do not reside within the state or other designated area.

NONVALUED POLICY 
A contract of insurance in terms of which the insurance company agrees to pay the actual cash value of property destroyed within the limits of the policy.

NONWAIVER AGREEMENT 
Agreement by the insured that an investigation and determination of the value of the claim by the insurance company does not constitute an admission that the insurance company has assumed liability.

NORMAL RETIREMENT AGE
With respect to pension plans, the earliest age at which eligible participants are permitted to retire with full pension benefits.  Since unreduced Social Security retirement benefits are available at 65, that is the most common normal retirement age.

NOTICE OF LOSS 
The conditions of an insurance policy which require that any person sustaining a loss against the property insured by the policy shall immediately give notice to the company of such loss.  This notice is a condition precedent to recovery, unless waived by the insurer.  Failure to give notice of loss as required has been held to be a bar against recovery.  A notice of loss must be in writing, and verbal notice to the agent is not sufficient to comply with the condition.

NUISANCE 
A class of wrong that arises out of unreasonable, unwarranted, or unlawful use by a person of his own property whether that property.  In insurance claims, nuisance is most frequently met as a cause of action arising from the escape of a substance such as waters, smoke, gas, noise, etc.  It may also apply to the wrongful disturbance of an easement.

NUMERICAL RATING SYSTEM 
The numerical system is based upon the principle that a large number of factors are involved in determining the composition of a risk.  Statistical studies of each factor are used to determine the degree of risk involved.

O

Objective risk
Refers to a state of nature, and it is measured by the actual chance of loss.

Obligee
A person or corporation under a fidelity or surety bond who is protected from loss. 

OBLIGOR 
Commonly called the principal, the one bound by an obligation. 

OBSOLESCENCE 
The impairment of desirability and usefulness brought about by changes in public preference or by forces in addition to those which cause deterioration.  Functional obsolescence refers to impairment of functional capacity or efficiency.  Economic obsolescence refers to impairment of desirability or use arising from forces such as legislative enactments which restrict or impair property rights or and changes in supply demand relationships.

OCCUPANCY 
Refers to the type and character of the use of property and plays an important part in computing rates and in determining the acceptance or rejection of risks.

OCCUPATIONAL ACCIDENT 
An accident occurring in the course of one's employment and caused by inherent or related hazards.

OCCUPATIONAL CLASSIFICATION
Classification of occupations according to the degree of risk inherently involved in the practice of that occupation.

Occupational disability
Occupational disability benefits are paid when the insured is unable to perform the “usual and customary” duties of his occupation.

OCCUPATIONAL DISEASE 
Impairment of health caused by continued exposure to conditions inherent in a person's occupation.

OCCUPATIONAL HAZARD 
A danger inherent in the insured's line of work.

OCCURRENCE 
A continuance or repeated exposure to conditions which results in injury.  An occurrence clause is frequently found under a personal liability policy, for example, all damages which arise out of the same general conditions are considered as arising from one occurrence.

OCCURRENCE BASIS 
The liability insurance clause under which covered acts must satisfy stated conditions.  For example, the results must be accidental and unintended, although the occurrence may be a deliberate act of an insured.

OCEAN MARINE EXPOSURE
Exposure to loss while in transit on water, not necessarily an ocean, of property being transported or of the transport vessel.

OCEAN MARINE INSURANCE 
Insurance associated with insurance of vessels and their cargoes as well as the related areas.
OFF PREMISES CLAUSE
Additional language in a policy indicating that personal property is covered in instances other than the premises described in the policy. 

OFFER AND ACCEPTANCE 
As it relates to life insurance, the offer may be made by the applicant through signing an application, submitting to physical examination, and prepayment of the first premium.  The issuance of the policy constitutes acceptance by the company.  Or, the offer may be made by the company where no premium payment has been submitted with application and medical.  The premium payment on the offered policy then constitutes acceptance by the applicant.

OFFICE BURGLARY AND ROBBERY POLICY 
An insurance contract of broad coverage covering loss of insured either inside or outside his office.  Areas covered include money, securities, office fixtures, and equipment, as well as burglary.

OFFICE CONTENTS SPECIAL FORM 
All risk coverage of furniture, fixtures, office supplies, and equipment of an office. 

OFFICER’S AND DIRECTOR’S LIABILITY INSURANCE POLICY 
Type of business insurance coverage.

OFFSET PENSION FORMULA 
A formula by which some part, typically a maximum of 50 percent, of an employee's Social Security benefit is subtracted from a defined amount in order to determine the benefit from the pension plan.

OFF SITE IMPROVEMENTS 
Improvements such as sidewalks, streets, curbs, gutters, etc. outside the boundaries of a property that enhances its value.

OLD LINE 
A phrase used by reserve system companies to differentiate their type of operation from the fraternal insurance system.

OLD LINE LEGAL RESERVE 
Legal reserve companies not engaged in fraternal insurance sales.

omnibus clause
An omnibus clause provides coverage for some persons in addition to those who are identified as the named insureds.  The term “omnibus clause” is often used in liability insurance policies.  For example, this type of insurance clause usually states that any person driving an insured vehicle with the permission of the named insured is an additional insured.

OPEN COVER 
A facility commonly used in reinsurance whereby risks in a particular category became known and are insured.

OPEN POLICY 
An insurance contract covering all described types of cargo shipped by or to the insured within a specified geographical area, the amounts being reported as shipments are made by or notified to the insured.  An insurance contract on a specified risk or group of risks in which the amount and terms are not specified and under which reports of individual amounts insured and periods of coverage are made to the insurer by the insured.  Also referred to as open certificate.

OPEN STOCK 
Goods in show windows, on display, or on shelves.

OPEN STOCK BURGLARY POLICY 
Contractual insurance coverage against loss caused by burglary of merchandise on shelves, on display, or in show windows.

OPERATING EXPENSES 
All expenses of a property with the exception of real estate taxes, depreciation, interest, and amortization.

OPERATING RATIO 
The percentage relationship between budgeted or actual operating expenses, plus taxes, and effective gross income.

OPERATIONS 
The activities of the insured and his employees in the conduct of a business.

OPTION 
An agreement granting the exclusive rights during a stated period of time, without creating any obligation, to purchase, sell, or otherwise direct or contract the use of a property.  The privilege for a consideration of buying or leasing property for a specified price within a specified time.  Also, choice of one of several alternatives as payment options of a policy.

OPTIONAL BENEFITS 
Lump sum indemnities for specified injuries, usually dislocations, sprains, and fractures.  In some policies, the insured may elect to receive these benefits in lieu of loss of time benefits.

OPTIONAL MODES OF SETTLEMENT 
Many life insurance policies permit the insured or his beneficiary or beneficiaries to choose one of several options or methods of being paid.  The typical options permit a single lump sum payment, payment of interest on the principal, or some installment or annuity payments.

OPTIONAL SETtleMENT CLAUSE 
A clause in an insurance policy permitting the insured under certain circumstances to have a choice of benefits.  In accident and health policies, the insured may have a choice of payment of various bills for the provided amount of time or a lump sum settlement of a predetermined amount set out in the policy.  In a fire policy, a dwelling owner who carries insurance to 80 percent of the value may have repairs made to damage resulting from a peril insured without charge for depreciation and providing the repairs do not exceed the actual value of the property.

OPTIONALLY RENEWABLE
A contract of health insurance in which the insurer reserves the unrestricted 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 between these dates.

ORAL EVIDENCE 
Statements from people, often who were at the scene of an accident.  Oral evidence helps to clarify the events surrounding an accident.  Also referred to as verbal evidence.

ORDINARY CONSTRUCTION 
A building in which the supporting walls are brick and the floors are wood joists.  The interior finish usually conceals space in which fire can spread and with little protection of stair shifts.

ORDINARY INSURANCE 
All individual life insurance not defined by state law as industrial insurance.

ORDINARY LIFE INSURANCE 
Life insurance usually issued in amounts of $1,000 or more with the premiums payable on an annual, semi-annual, quarterly, or monthly basis.  The term is also used to mean straight life insurance, a plan of insurance for the	whole of life with premiums payable until death.

ORDINARY PAYROLL (EXCLUSION ENDORSEMENT) 
An endorsement to business interruption coverage eliminating insurance for the entire, or some portion of, payroll expense for all the employees of an insured except officers, executives, department managers, employees under contract, and other important employees.  Coverage for any continuing ordinary payroll expense usually can be purchased for an additional premium.

ORIGIN 
With respect to fire and explosion investigation, this term refers to where the fire or explosion originated.  Point of origin refers to the exact place where the fire originated.  Origin is defined as the process of coming into being from a source of derivation.

OTHER INSURANCE CLAUSE 
A clause in an insurance policy which states the matter of apportioning the insurance where two or more policies cover the same clause.  For example, if there are two $10,000 fire insurance policies on a building and the insured suffers a $4,000 loss, the other insurance clause in the policies provides that the loss would be divided between the two policies on a pro rata basis.

OTHER STATES COVERAGE 
Other states coverage improves workers' compensation coverage for situations where an employee could be injured while out of state for some business reason.

OUTAGE INSURANCE 
Insurance against loss due to failure of machinery to operate.

OUTBOARD MOTOR BOAT AND OUTDOOR MOTOR POLICY
A policy covering boats, motors, and equipment for named perils such as fire, collision, and theft or, at a higher premium, for all risks.

OUTSIDE HOLDUP INSURANCE 
Insures the owner of property, securities, or money against loss caused by robbery away from the insured's place of business.

OVER AGE INSURANCE 
Accident and sickness insurance written at ages beyond which ordinary policies do not go.  Usually the benefits are hospitalization and medical care.

OVERHEAD INSURANCE 
A type of short-term disability income contract that reimburses the insured person for specified, fixed, monthly expenses, normal and customary in the operation and conduct of his business or office.

OVERHEAD WRITING
An insurance company’s acceptance of business from a broker or agent, other than an agent that has an exclusive territorial agreement.

OVERIMPROVEMENT 
An addition or alteration which is not in the highest and best use for the site on which it is placed, resulting in a very expensive building on a very poor site.

OVERINSURANCE 
The situation which exists where a risk is insured for more than its fair or reasonable value.

OVERLAPPING INSURANCE 
Insurance coverage from two or more policies or companies which in part duplicate the insurance of certain risks.  Since the insured's premium includes the duplicated coverage he is paying an unnecessary amount of premium.

OVER LINE 
The amount of insurance or reinsurance which exceeds the insurers or reinsurers normal capacity.  Also applies to a commitment to write insurance exceeding this capacity.

OVERRIDING COMMISSION 
The fee paid to an agent or special agent who by contract is entitled to a fee on business written in his territory.  Sometimes referred to as an overwriting commission.

OVER THE COUNTER SELLING 
A nonagency system of selling insurance in which the insured obtains his insurance by going to the insurance company and purchasing it. 

OWNERS, LANDLORDS AND TENANTS LIABILITY COVERAGE
Legal liability coverage with respect to the ownership, maintenance, and use of the premises and all operations necessary or incidental to this.  

P

PACKAGE INSURANCE
A combination of coverage in a single policy.

PACKAGE POLICIES 
Combination policies where several coverages are included in one contract, for example, a store keepers' burglary and robbery policy, a residence all in one policy, home owners’ policy, and a comprehensive dwelling policy.

PAID BUSINESS 
The situation created when the application has been signed by the applicant, and the applicant has received a medical examination and has paid the first premium.

PAID FOR LIFE INSURANCE 
Insurance on which there has been settlement for the first premium, regardless of whether the application has been accepted by the company or the policy yet issued.

PAID LOSS RETRO PLAN 
A retrospective rating plan, typically used for workers' compensation or other liability insurance, under which the deposit premium the insured pays at the beginning of a policy period is adjusted at the end of that period to reflect insured losses paid during that period. 
PAID LOSSES 
Total payments made to discharge obligations under policies issued.

PAID ADDITIONS 
Units of single premium insurance purchased with participating policy dividends under one of the customary dividend options.

PAID UP INSURANCE 
Insurance, on which all required premiums have been paid, frequently used to mean the nonforfeiture option, reduced paid up insurance.

PARCEL POST INSURANCE 
Indemnity for damage or loss to package while being processed by the United States Post Office Department.

PARTIAL DISABILITY 
An insured’s reduction in ability to do things and work that one could when in full health.

PARTIAL LIMITATION CLAUSE 
Provides in an insurance policy for the payment of the total loss when a loss is more than the specified amount.

Partial Loss
A partial loss is one, which neither totally destroys and renders worthless the insured property, nor exhausts the amount of insurance, as opposed to total loss. 

PARTIAL VESTING
The form of immediate or deferred vesting under which a specified portion of the accrued benefits of a participant becomes a vested benefit.

PARTICIPANT 
One who may become eligible to receive, or is receiving, benefits under a plan as a result of his credit service.

PARTICIPATING INSURANCE 
Insurance on which the policyholder is entitled to share in the surplus earnings of the company through dividends, which reflect the difference between the premium charged and actual experience.  Also insurance or reinsurance which contributes proportionately with other insurance on the same risk.

PARTICIPATING CLAUSE 
A provision in an insurance policy that calls for the insured to pay a specified percentage of the cost of health care covered by the policy.

PARTICULAR AVERAGE 
Loss borne by one of a number of carriers in marine insurance, such as partial loss of cargo, hull, or freight, failing entirely on the interest concerned.  Primarily, a loss suffered by the insured without benefit to or right of remuneration from others.  This term is also used synonymously with partial loss in marine insurance.

PARTNERSHIP ENTITY PLAN 
Provides a buy and sell agreement.  Upon the death of a partner, the partnership will purchase the share of the deceased partner for the account of the surviving partners.  The premiums are payable by the partnership out of income, and the cash value of the insurance is an asset of the firm.

PAST SERVICE BENEFIT 
The portion of a participant's retirement benefit that relates to his period of credited service before the effective date of the plan.  

PATENT INSURANCE 
Insurance against loss due to infringement of the insured's patent, or due to claim of infringement of the other's patent by the insured.

PAYMASTER ROBBERY INSURANCE 
Indemnification for loss or damage of property due to robbery of the. insured's payroll.  Also covered is loss or damage of property other than the payroll.

PAYEE 
The person to whom money is paid.

PAYEE CLAUSE 
A clause in an insurance contract providing for payment of loss to a person or class of persons.

PAYER 
The party who pays the bill.

PAYER CLAUSE 
A clause in a policy issued on a juvenile's life under which all future premiums are waived if the parent dies before the child reaches a stated age or maturity.

PAYER INSURANCE 
The benefit available under certain juvenile policies, upon payment of an extra premium, which provides for the waiver of future premiums in event the person responsible for the payment of the premiums dies or is disabled before the child reaches a specified age.

PAYROLL AUDIT 
An examination of the insured's payroll records by a representative of the insurer to determine the premium due on a policy written on a payroll basis.

PAYROLL DEDUCTION INSURANCE
The situation created when an employer is authorized to deduct from the earnings of employee amounts to cover the premium of individual life insurance policies.

PEAK SEASON INSURANCE
Property insurance that provides different limits during different months of the year in order to accommodate the insured's seasonal business.

PENALTY 
The limit of an insurance company's liability on a bond.

PENSION 
The amount of money paid at regular intervals to an employee who has retired from a company and is eligible under a retirement income plan to receive such payments.

PENSION BENEFITS 
A series of payments to be provided in accordance with the plan of benefits.

PENSION PLAN
A system for the payment of annuities or pensions to qualified individuals.  Sections 165 and 23 of the Internal Revenue Code establish requirements for taxes based upon pension plans.

PENSION TRUST FUND
A fund consisting of money contributed by the employer and in some cases the employee, to provide pension benefits.  Contributions are paid to a trustee, who invests the money, collects the interest and earnings, and disburses the benefits under the terms of the plan and trust agreement.

PER ACCIDENT LIMIT 
With respect to liability insurance, the maximum amount the insurer will pay for claims growing out of a particular accident, regardless of the number of persons injured or property interests damaged.

PERCENTAGE OF LOSS DEDUCTIBLE
The deductible applied to each loss, which is expressed as a specified percentage of each loss and, therefore, increases as the loss increases.

PERCENTAGE OF VALUE DEDUCTIBLE
The deductible applied to each loss, which is expressed as a specified percentage of the total value of the insured property, and not just the amount of insurance, at the time of the loss.

PERCENTAGE PARTICIPATION 
A provision in a health insurance contract that the insurer and the insured will share covered losses in agreed proportions.

PER DIEM BUSINESS INTERRUPTION 
Coverage that provides a stated and fixed amount that will be paid for each day the business is not in operation due to insured peril.

Peril
A peril insured against is a specific event causing loss or damage - such as the damage to building caused by fire or windstorm, or damage in a collision between two autos.  Other examples of perils are fire, hurricanes, flood, and heart attacks.

PERMANENT LIFE INSURANCE POLICY
Ordinary life and whole life are considered to be permanent life insurance policies and will stay in that status as long as premiums are paid.

PERMANENT PARTIAL DISABILITY BENEFITS 
Periodic indemnities for a disability which impairs earning capacity but which does not involve the total inability to work.

PERMANENT TOTAL DISABILITY BENEFITS 
Periodic indemnities, generally weekly, for a disability of a kind that renders any employment impossible.  This compensation may be limited by maximum time or maximum amount, but if unlimited may run for life.

PERMISSIBLE EXPOSURE LIMIT 
Maximum concentration of a harmful airborne substance that is permissible in a work place according to the Occupational Safety and Health Act.

PERMISSIBLE LOSS RATIO 
The highest loss ratio, which permits an insurer to earn its anticipated underwriting, profit.

PERMISSIVE USER 
A person not otherwise an insured under a policy who has an insured's explicit or implied permission to use an insured automobile, item of mobile equipment, or other insured property.  Permissive user status makes the permittee an insured for most purposes under the permitor's policy.

PER PERSON LIMIT 
In liability insurance, the maximum amount the insurer will pay for bodily injury to any one person in any one accident.
PERSISTENCY 
The maintenance of policies in full force until completion of the term for which the policy was written.  May also refer to continuance and renewal of insurance contracts upon their expiration.

PERSONAL ACCIDENT INSURANCE
Contractual protection of an individual against damage caused by an accident.

PERSONAL ARTICLES FLOATER 
Sold as a separate policy or attached to an existing property policy for the protection of either specified items, such as furs or jewelry, or to cover all personal property owned by the insured, regardless of where loss or damage occurs.

PERSONAL AUTO POLICY 
A policy for personal automobile insurance now replaced the family auto policy.

PERSONAL BOND
A guaranty executed by an individual as additional security for specific performance of an obligation.

PERSONAL EFFECTS FLOATER
A contract of insurance against loss to personal effects usually carried by travelers and located away from the home of the insured.

PERSONAL INJURY
Bodily harm to a humans.

PERSONAL INJURY COVERAGE 
An extension of liability coverage to provide for libel, slander, false arrest, invasion of privacy, etc. 

PERSONAL INJURY PROTECTION 
Insurance under a state automobile no fault plan covering an insured's own losses from automobile injuries.  Personal injury protection generally covers medical expenses and loss of income to the insured and the insured's dependents arising from an accident to which the no fault law applies.

PERSONAL INSURANCE 
Personal insurance refers to insurance coverages that are purchased by individuals and families to cover nonbusiness exposures.

PERSONAL LINES
Insurance with specified coverage for individuals, rather than businesses.  

PERSONAL PROPERTY 
The right or interest which a person may have in things personal, movable, or separable from the realty. 

PERSONAL PROPERTY FLOATER 
An insurance policy with broad coverage for personal property either at home or away.

PERSONAL SURETY 
Surety provided by an individual, as compared to surety provided by an insurance company.

PERSONAL THEFT INSURANCE 
Contractual protection against loss caused by theft of household goods or other personal property, either in or outside of a residence.

PERSONAL UMBRELLA POLICY
In the event of a catastrophic lawsuit or judgment, this policy provides liability limits over all other personal and primary insurance (auto, homeowners, boat, RV), general liability and workers compensation policies.  Offered in increments of one million dollars, it provides primary liability coverage for certain types of liability claims excluded in an auto or homeowner's policy or subject to deductible. 

PERSONAL UNDERWRITER 
One who analyzes insurance requests from individuals and families.

PERSONNEL LOSS 
Loss of the services of a key person, perhaps an important executive or a particularly skilled employee whose talents are difficult to replace.  Personnel losses are caused by death, disability, retirement, or resignation.

PHYSICAL APPROACH TO VALUE 
An appraisal method where property value is derived by estimating the replacement cost of improvements, less estimated depreciation, plus estimated land value by use of market data.

PHYSICAL DAMAGE 
A term indicating actual damage to property.

PHYSICAL DAMAGE APPRAISER 
A claims adjuster who specializes in auto physical damage claims and is able to estimate repair costs based on auto parts prices and labor costs.  Also referred to as a material damage appraiser.

PHYSICAL DEPRECIATION 
Relating to those elements that are inherent in the physical property itself, as distinguished from other and external circumstances that may influence its utilization.  Deterioration due to the adverse changes in the physical condition of property such as the loss of top soils or the rotting or wearing away of buildings.

PHYSICAL HAZARD 
The material, structural, or operational features of the risk itself. 

PHYSICALLY IMPAIRED RISK 
A person having a physical disability or disease which may affect his acceptability as a risk.

PHYSICIANS' AND SURGEONS' PROFESSIONAL LIABILITY INSURANCE 
Insurance against loss due to claims for damages alleging malpractice by physicians or surgeons in the exercise of their professions.

PHYSICIAN'S EXPENSE COVERAGE 
Coverage, which provides benefits toward the cost of such services as doctor's fees for nonsurgical care in the hospital, at home, or in a physician's office, and x-rays or laboratory tests performed outside the hospital.  Also referred to as regular medical expense insurance.

PILFERAGE 
Any petty thievery or the theft of a portion of property such as theft of a tire from an automobile.

PLAINTIFF 
Individual who brings a lawsuit against a defendant.

PLAN ADMINISTRATOR 
The person controlling the money or property contributed to the plan, usually designated in the plan agreement.

PLATE GLASS INSURANCE POLICY 
Type of business insurance coverage that indemnities the insured against loss caused by breakage of glass.

PLEDGE 
The transference of property such as the cash value of a life insurance policy to a creditor as security for a debt.

POINT OF ORIGIN 
The exact location in the area of origin where the very first ignition occurred.

POLICY 
The printed document issued to the insured by the company stating the terms of the insurance contract.  A written contract of insurance between an insurance company and the policyholder.

POLICY CHANGE 
A revision made during the policy period to a policy that is in force. A policy change may or may not require a change to premiums.

POLICY DIVIDEND 
The annual dividend represents the policyholder's share of the company's divisible surplus earnings.

POLICY FEE 
A charge made by an agent in addition to the premium, illegal in most states.

POLICY HOLDER 
Person or other entity that has ownership rights under an insurance policy and who may or may not be the insured.

POLICY HOLDER DIVIDEND RATIO 
The percentage of a company's net premiums earned that is returned to policyholders in the form of dividends. This ratio is computed by dividing policyholder dividends by net premiums earned. 

POLICY HOLDERS' SURPLUS 
Amount over and above liabilities available for an insurer to meet future obligations to its policyholders.

POLICY LOAN 
A loan made by an insurance company to a policyholder on the security of the cash value of his policy.

POLICY LOAN PROVISION 
A provision found in most permanent life policies allowing the policy holder to borrow money from the insurance company at a stated rate of interest, using the cash surrender value of his policy as security for the loan.

POLICY PERIOD 
The period during which a policy contract affords insurance.

POLICY RESERVES 
The funds that an insurance company holds specifically for the fulfillment of its policy obligations.

POLICY TERM 
The term of policy, usually the period for which the premium is paid.

POLICY WRITING AGENT 
An agent who has the right to make out his own policy.

POLICY YEAR 
The number of days between annual premium dates.  The year commencing with the effective date of the policy or with an anniversary of that date.

POLICY YEAR EXPERIENCE 
Experience on a business during the twelve-month period from the effective date of the policy, which became effective during a given year and regardless of when the transactions, payment of premium or loss payment, may actually have taken place.

POOL 
A group of insurance companies that have joined together for the purpose of sharing certain risks on an agreed upon basis.

PORTFOLIO 
The securities in which the assets of the company are invested.

PORTFOLIO REINSURANCE 
A type of reinsurance where the reinsurer assumes all obligations of the ceding company in a particular class.

PORTFOLIO RUN OFF 
Continuing the reinsurance of a portfolio until all ceded premiums are earned or all losses are settled or both.

POST MORTEM DIVIDEND 
A dividend allotted after the death of the insured and constituting a pro rata portion of the dividend that would have been payable at a later date if the policy holder had lived.

POWER INTERRUPTION INSURANCE POLICY 
A type of insurance coverage against loss due to interruption of power supply from a public utility caused by accidental breakdown of the utility's machinery.

POWER OF ATTORNEY 
A written instrument by which the authority of one person to act in the place of another as his attorney in fact is bestowed

Pre-existing Condition Exclusion 
Period of time after issuance of an insurance policy during which benefits will not be paid in connection with a pre-existing condition, usually three to twelve months. 

PREFERRED PROVIDER ORGANIZATION
A group of health care providers, each of whom agrees to provide services to any given insurer or employer at a lower cost in return for a steady volume of patients or other incentives.  Commonly known as a PPO. 

PREFERRED RISK 
One or something that is considered to be less of a mortality risk than the standard risk.

PRELIMINARY PROOFS OF LOSS 
The requirement that a policyholder to make a statement of the particulars of the loss, as indicated in the statutory conditions of the policy.  This statement is termed a preliminary proof of loss, and it must be followed by supplementary details prepared under oath.  Such proofs must be delivered in accordance with the law as set forth in the statutory conditions, and they must be as explicit as possible to the particulars of the loss. 

PRELIMINARY TERM 
Insurance protection for a temporary period that precedes the effective date of a permanent policy form.

PREMISES 
A particular location or portion there a particular location, as stated by the policy contract.

PREMISES AND OPERATIONS LIABILITY 
A business's responsibility for bodily injury or property damage caused by conditions on its premises or activities in its business operations.

PREMIUM
The price an insurance company charges to provide specified coverage.  The payment or one of regular periodical payments a policyholder is required to make for an insurance policy.  The amount of money that the policyholder agrees to pay to the insurance company for the policy of insurance.

PREMIUM ADJUSTMENT ENDORSEMENT
With respect to property or liability insurance policy endorsements, a deposit premium is charged at the beginning of the policy period, periodic reports of exposures are made during the policy period or at the end of it, and premiums are adjusted as reports are received or at the end of the policy period.

PREMIUM AUDITOR 
A person who examines the policyholder's records at the end of the policy term in order to determine the audited premium.  If the audited premium is less than originally estimated and paid, the policyholder will receive a refund.  Of the audited premium is greater that originally estimated, the policyholder will be billed.

PREMIUM DISCOUNT 
A premium discount is a credit applied to workers' compensation policies on larger businesses to reflect the fact that some of the expenses of selling and servicing workers' compensation insurance do not vary in proportion to the premium.
PREMIUM EARNED 
The amount of the premium which has been paid for in advance that has been earned by virtue of the fact that time has passed without claim. For example, a three-year policy that has been paid in advance and is one year old would have only partly earned the premium.

PREMIUM FINANCING 
A mechanism which allows the insured to pay part of the premium when coverage takes effect and spread the remainder of the premium payments throughout the period of the policy.

PREMIUM TO SURPLUS RATIO
The premium to surplus ratio measures the capital and retained earnings, or net worth, of a company relative to its liabilities. 

PREMIUM LOAN 
A policy expressly made for the purpose of paying premiums.

PREMIUM, NET 
The portion of the premium calculated on the basis of a particular mortality table and interest rate to enable the insurer to pay benefits as provided by the insurance contract, regardless of expenses, contingencies, or profit.  Except with respect to life insurance, these are premiums earned or written by an insurer after deducting premiums returned to policyholders and premiums paid for reinsurance.

PREMIUM, PURE 
The portion of the premium rate calculated to enable the insurer to pay losses and, in some cases, allocated claim expenses,

PREMIUM REFUND 
A special policy provision, effective for a specified period in event of death of the insured, calling for payment to the beneficiary of principal sum plus all premiums paid to date of death.  This amount reverts to principal sum only if insured lives beyond specified period.  Sometimes written as a special policy form and sometimes added by rider to standard policy.

PREMIUM, RESTORATION 
The premium charged to restore an insurance or surety contract to its original amount after payment of a loss.

PREMIUM, RETURN 
A premium returned to policyholders principally on cancellation or partial cancellation of contracts, on rate adjustments, or on determination that an advance premium is in excess of the actual premium.

PREMIUM, SINGLE 
The amount that constitutes payment in full for a contract at its inception.

PREMIUM / SURPLUS RATIO 
The ratio of premiums written to policyholder's surplus.

PREMIUM, UNEARNED 
That part of the premium, which is applicable to the unexpired part of the policy period.

PREMIUMS WRITTEN 
The entire amount of premium on policy contracts written by an insurer.

PREMIUMS WRITTEN, GROSS 
Total premiums received from all sources including reinsurance assumed from other companies.

PREMIUMS WRITTEN, NET 
Gross premiums written less reinsurance ceded to other companies.
PREPAID EXPENSE 
An expenditure, often recurrent, for benefits not yet received.  For example, unexpired insurance is a prepaid expense from the policyholder's point of view.

PREPAID GROUP PRACTICE PLAN 
A system under which participating doctors, dentists, and other medical professionals provide services to groups of individuals.  The patients pay computed amounts in advance of the service being rendered.

PRESENT VALUE or PRESENT WORTH 
The value or discounted worth, at the time of appraisal, of an amount or amounts receivable in the future.

PRIMACY 
The state of being primary, or first in order.  For example, when two or more insurance policies each cover the same loss, one policy may provide that it is excess over the other policy.  The policy not containing such a provision has primacy.  In some cases, a policy will state that it provides primary coverage, and this gives the policy primacy.

PRIMARY INSURANCE 
Provides coverage up to a specified amount or against specific perils.

PRIMARY LOSS 
The stated amount of deductible in a credit insurance policy that is intended to reflect the normal credit losses of the insured company.

PRIMARY RATING FACTOR 
The index number showing the added risks of various insured classes and used in rate making plans.

PRINCIPAL 
A party to a transaction, as distinguished from an agent. Or, an individual or company whose performance of certain obligations is covered by a bond.  Or, the money due under the policy.  A sum loaned or employed as a fund or investment, as distinguished from its income or profits.  The original amount of the total due and payable at a certain date.

PRINCIPAL BALANCE 
The outstanding balance of a mortgage, exclusive of interest and any other charges.

PRINCIPAL SUM 
The amount specified in a policy to be paid in the event of certain losses, such as a designated amount of money to be paid in case of loss of limb.

PRINCIPLE OF INDEMNITY
This concept that insurance contracts should confer no benefit greater in value than the loss suffered is known as the principle of indemnity.  Using the principle of indemnity, one person secures an anticipated loss against another.  Indemnity indicates that compensation has been given to an insured in order to relieve him from his loss.

PRINCIPLE OF INSURABLE INTEREST 
The concept that the insured must have a demonstrated financial interest in the subject of the insurance before being paid by the insuring company in the event of a loss.  This Doctrine of Insurable Interest requires that there must be some significant relationship between the insured and the person, object, or activity which is the subject of the insurance transaction.  The justification for the doctrine of insurable interest is to avoid potential corruption that might result from allowing insurance contracts to afford opportunities for net gain as a result of a loss.

PRIOR APPROVAL LAW 
A prior approval law requires that the state insurance department approve rate changes before they can be put into effect.

PRIOR APPROVAL RATING 
Rate regulatory system under which an insurer must have rate changes formally approved by the state insurance department before using them.

PRIOR SERVICE BENEFIT 
The portion of a participant's retirement benefit that relates to his period of credited service before a specified date.

PRIVATE FIRE PROTECTION 
Fire protection provided by the owner or occupant of a property or by a nonpublic entity hired to provide such protection.  Most private fire protection is achieved through fire extinguishers and sprinkler systems.
PRIVATE MORTGAGE INSURANCE (PMI) 
Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.

PRIVATE PASSENGER CAR 
An automobile operated for personal use by its owner.

PRIVITY 
Exists where heirs, executors, and certain others succeed to the rights of a contract.  This permits them to have the same rights as the original party.  Privity may be a factor in action of negligence.
PRO FORMA STATEMENT 
A financial or accounting statement projecting income and performance of real estate within a period of time, usually one year, based upon estimates and assumptions.

PRO RATA CANCELLATION 
Termination of an insurance contract or bond, the premium charge being adjusted in proportion to the time the protection has been in force.

PRO RATA CLAUSE 
A clause in an insurance contract providing that losses will be paid in the proportion that the amount of the contract bears to the entire amount of insurance covering the loss.

PRO RATA LIABILITY CLAUSE 
Provides that the insurance company is liable for not more than the proportion of loss, which the amount insured under the policy bears to all insurance policies covering the loss.

PRO RATA REINSURANCE
A general term describing all forms of reinsurance in which the reinsurer shares a pro rata portion of the losses and premiums of the ceding insurer.  Pro rata reinsurance includes quote share reinsurance and surplus reinsurance, among other arrangements. Also referred to as share reinsurance and participating reinsurance.

PRO RATA RATE 
A premium rate charged for a short term at the same proportion of the rate for a longer term as the short term bears to the longer term.

PRO RATA TREATY 
A reinsurance agreement under which the insurance companies share in an agreed upon manner in both the premiums and the losses.

PRO RATE 
To allocate proportionate shares of income, such as rents, or of an obligation, such as taxes and insurance premiums, paid or due, between seller and buyer at closing.

PROBABILITY DISTRIBUTION 
A set of probabilities, often presented in a table or graph, of all the possible outcomes of a particular event and of the probability associated with each possible outcome.  Because a probability distribution encompasses all possible outcomes, the sum of the probabilities in such a distribution always equals one.

PROBABLE MAXIMUM LOSS (PML) 
The maximum amount of loss that can be expected under normal circumstances.  Extraordinary circumstances, such as delayed alarm, insufficient water supply; etc. can result in a loss exceeding the probable maximum loss. 

PROBATE 
The proof of a valid will before the proper court.  The official copy of the will with a certificate of it having been proved, that is, probated.

PROBATE COURT 
A court having jurisdiction of the proof of wills, the settlement of estates, and guardianships.  In some states, probate court is the district court.

PROBATION PERIOD 
The time after the beginning date of a policy during which sickness benefits will not be payable.  The purpose of the period is to eliminate sickness actually contracted before the policy went into effect.  

PROCEEDS 
The face value of the policy plus any additions payable at maturity or death.

PROCESSOR’S POLICY 
A contract of insurance that protects the policyholder when the insured property is in another's possession for processing, such as dyeing or pressing.  Also, goods in the state of being delivered to or from the processor also are covered.

PRODUCER 
A term commonly applied to an agent, solicitor, broker, or any other person who sells insurance; producing business for the company and for a commission. A producer also creates the insurance product, namely, security and relief from risk for the insured.

PRODUCER ASSOCIATIONS 
Associations made up of producers, described above, who provide educational services, legislative and lobbying support, office procedures, assistance, and many other services to the producers who are their members.

PRODUCT LIABILITY 
The basis of product liability is the responsibility put upon one who sends goods out into the channels of trade for use by others.  Product liability refers to the liability, which results after the completion of a manufacturing or selling process by reason of a defect in merchandise, or in improper workmanship.  The courts have stated that the product liability of a manufacturer, as well as the corresponding right of the consumer, is simply the liability which the law imposes on a manufacturer in favor of a consumer for loss suffered by reason of a defective product that attributable to that manufacturer.

PRODUCT 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.

PRODUCT SAFETY COMMISSION 
The Consumer Product Safety Commission administers the provisions of the Consumer Product Safety Act.  The Commission combines into a single agency the authority of the Food and Drug Administration, the Center for Disease Control, the Department of Commerce, and the Federal Trade Commission.

PRODUCTS COMPLETED OPERATIONS LIABILITY COVERAGE 
Liability protection against claims arising from products manufactured, sold, handled, or distributed; liability protection against claims arising out or operations that have been completed or abandoned.

PRODUCTS LIABILITY COVERAGE 
Products liability coverage pays for bodily injury or property damage that takes place away from the insured's premises and is caused by a product sold by the insured.

PRODUCTS LIABILITY INSURANCE
Protection provided against claims arising from the utilization of the covered product manufactured, sold, handled, or distributed by the insured or others trading under his name if the accident occurs after possession has been relinquished to others and away from premises owned, rented, or controlled by the insured.

PROFIT SHARING PLAN 
A plan established and maintained by the employer to provide for participation in its profits by the employees or their beneficiaries. Using a profit sharing plan, no company contributions are made for covered employees, unless there are profits.  A profit sharing plan may be a retirement plan, but it is not required to be so.  Company contributions for the employee's benefit can be distributed before retirement, death, disability, termination of employment, or termination of the plan.  The only requirement is that at least two years must elapse between the time the company makes the employee's contribution and the time the employee withdraws it.  Profit sharing benefits usually vest and are distributed more rapidly than pension benefits. 

PROGRESSIVE IMPAIRMENT 
A physical condition in which the body deteriorates, for example, diabetes and cancer are two examples of progressive impairment.

PROHIBITED ARTICLES 
All fire policies now contain a clause against the keeping of certain classes of extra hazardous property, or prohibited articles, upon the insured premises, unless special permission to do so is endorsed on the policy.  Violation of the terms of these policies in the event of loss may void the policy.

PROJECTED DIVIDEND 
An estimate of future policy dividends based upon certain assumptions.  These dividends are not guaranteed but are believed to be reasonable as of the time the projection is made.

PROMISSORY NOTE 
An unconditional promise in writing to pay money to another person either on demand or at a set date in the future.

PROMISSORY WARRANTY
A warranty that something is, and will remain, true.  For example, an insured may warrant that his property is and will remain protected by an adequate fire fighting sprinkler system.
PROOF 
Any evidence and testimony that will prove the existence or nonexistence of facts.  Sufficient evidence to establish a thing as true.

PROOF OF LOSS 
A written statement complying with certain conditions made by the insured and given to the insurance company, its purpose to place before the company sufficient information concerning the loss to enable it to determine its liability under the policy or bond.

PROPERTY AND CASUALTY INSURANCE
Insurance which covers the property of a business.  Also non life insurance lines of fire, marine, casualty and surety. 

PROPERTY 
The exclusive right to control an economic good.  A property refers to units capable of being used independently in single ownership.  A property may consist of the rights to a single parcel of land, a house and lot, a complete manufacturing plant, or any one of the items assembled together to constitute such a plant.  It may also consist of the rights developed and inherent in the attached business of an enterprise or any one of the elements reflected therein, such as the rights to patent, a trademark, a contract, or the proved good will of the public.  The exclusive right to possess, enjoy, and dispose of a thing; ownership in a broad sense; any valuable right or interest considered primarily as a source of wealth; that to which a person has a legal title; a thing owned, an estate.  It is incorrectly used as a synonym for the term real estate.

PROPERTY DAMAGE 
Generally refers to damage to physical property of others as distinct from personal injuries to others.  It is commonly written in conjunction with such public liability or personal injury insurance.

PROPERTY DAMAGE INSURANCE 
Covers the insured against claims, which arise out of destruction or damages of other's property.

PROPERTY DAMAGE LIABILITY 
The responsibility that may arise from damage to the property of others.

PROPERTY INSURANCE 
Insurance providing financial protection against the loss of, or damage to, real personal property caused by specified perils.

PROPERTY, PRESERVATION OF 
Insurance policies require that it shall be the duty of the insured to do whatever he reasonably can to save and protect the property insured at, during, and after a fire.  In case he does not comply, the company will not be liable for loss arising out of this failure.  Therefore, the insured is bound to do whatever he can to minimize the loss of the company.

Property rights
Property rights are characterized as ownership interests.  They are uniformly recognized as sufficient to satisfy the insurable interest requirement.  

PRORATION 
The adjustment of the benefits paid by reason of change of occupation or the existence of other insurance covering the same accident or disability.

PROSPECTIVE FUTURE SERVICE BENEFIT 
The portion of a participant's retirement benefit that relates to his period of credited service to be rendered after a specified current date.

PROSPECTIVE RATING 
A method used in arriving at the reinsurance rate and premium for a specified period, based in whole or in part, on the loss experience of a prior period.

PROSPECTIVE RATING PLAN 
The formula in a reinsurance contract for determining reinsurance premium for a specified period on the basis, in whole or in part, of the loss experience of a prior period.

PROSPECTIVE RESERVE 
A reserve based upon the present value of assumed future claims minus the present value of net premiums assuming a given rate of interest for both sums.

PROTECTION AND INDEMNITY CLAUSE 
A clause in a marine insurance contract affording protection and indemnity insurance.

PROTECTION AND INDEMNITY INSURANCE 
Insurance against loss due to claims for damages against vessel owners or operators not covered by the basic marine insurance contract, often written by mutual associations called clubs.

PROTECTIVE LIABILITY INSURANCE
Provides insurance against claims which may arise out of secondary or indirect responsibilities, such as association with independent contractors.

PROTOTYPE PLAN 
A standardized plan, approved and qualified as to its concept by the Internal Revenue Service, which is made available by life insurance companies, banks and mutual funds for employers' use.

Proximate cause 
A legal term often used in insurance terminology.   The term “proximate cause” is derived from the law of negligence.  Under that law, the proximate (or nearest) cause of a loss is the first cause in a chain of several events resulting in a loss.  It is an event or thing, without which the loss would not have occurred.  

PUBLIC ADJUSTER 
An individual who, for a fee, will adjust or represent policyholders in presenting their claims to insurance companies.

PUBLIC CARRIER 
An individual or company offering to transport people or merchandise for a fee.  Such public or common carriers are required by law to accept shipments from all that request and pay for their services.

PUBLIC FIRE PROTECTION 
Fire protection provided by a municipal or other governmental authority to all properties over which that authority has jurisdiction.  Most public fire protection is achieved through fire or police department personnel and equipment.

PUBLIC INSURANCE 
Insurance written by governmental agencies or by private companies but supervised and controlled by the government.

PUBLIC LIABILITY INSURANCE 
Provides protection against claims arising out of bodily injury or damaged property of the public.

PUBLIC POLICY 
The principle under which freedom of contract or private dealings are restricted by law for the good of the community.

PUBLIC PROPERTY 
That property which is owned by other than the individual or individuals or private corporations; that is, property whose ownership is vested in the community.  Include such things as public buildings, such as post offices, town halls, county courthouses, etc.

PUBLIC TRUSTEE 
A person appointed or required by law to execute and administer a trust.

PUNITIVE DAMAGES 
Damages awarded separately and in addition to compensatory damages and which are intended to serve as a punishment for the wrong doer.

PURCHASING GROUP 
Two or more individuals or organizations acting together as a cooperative in bargaining for substantially identical coverage from one or more insurers.  Each member of the group has an individual policy, which is not group coverage.

PURE LOSS COST 
The ratio of reinsurance losses incurred in the ceding company's subject premium.

PURE ENDOWMENT 
A contract which provides for payment only upon survival of a certain person to a certain date and not in event of that person's prior death, the opposite of a term contract which provides for payment only in event the insured person dies within the term period specified.

PURE PREMIUM 
The amount of money required to pay losses covered by insurance without consideration to the cost and expense of operation of the insurance company.

Pure risk
Pure risk refers to situations, which can result only in a loss or in no change.  The exposure to loss of a home by fire is an example of an exposure to pure risk.

PYRAMID
An abusive practice where the insured has been issued and charged for policies of consumer credit insurance without the canceling of current policies.

Q

Q SCHEDULE
From the New York Code, a limitation on the expenses that may be charged to new business.  The schedule presents in detail the new business expenses of the insurance company filing that return.

QUADRUPLE INDEMNITY 
A policy provision under which the principal sums, and sometimes-other indemnities, are be multiplied by 400 percent in case of death from certain types of accidents.

QUALIFICATION 
A portion of a report by an auditor, underwriter, claims investigator, accountant, or actuary that calls attention to the limitations of his report.

Qualification Period 
The length of time required before the insured becomes eligible for a specific benefit. 

Qualified Benefit / Retirement Plan 
A retirement plan that meets certain federal tax requirements and is initiated by a business organization.

QUALIFIED IMPAIRMENT INSURANCE 
A form of substandard or special class insurance which restricts benefits for the insured person's particular condition.

QUALIFIED PRIVILEGE 
A publication or communication made in good faith on any subject matter in which the person making the publication or communication has an interest or a duty is privileged, even though it contains matter, which would be actionable without the privilege.  To be within the privilege, the statements must be made in good faith, have a public or common interest, be limited in scope to the purpose, be made on proper occasion, and be published in a proper manner to the proper parties.

QUALIFIED REPORT 
A report with exceptions or inadequate facts so that full credence should not be given to the finding.

QUALIFIED TRUST 
A pension or bonus plan that meets the standards of the Internal Revenue Code.  Meeting the requirements permits minimizing taxes for both the employer and employee.

QUARANTINE INDEMNITY
A benefit sometimes included in policies making the loss of time indemnities apply in case of quarantine of the insured by reason of a contagious disease in his house.

QUARRY
A missing subject or witness.  A person or object being sought.

QUARTERMASTERS' BONDS 
Disbursing officers of the military services are required by law to give bond with surety for the faithful performance of their official duties, and these bonds or sureties protect the public interest as the office of quartermaster is concerned.

QUASI CONTRACT
A situation imposed by law to prevent unjust enrichment or injustice and not dependent on agreement of the parties to the contract.

QUASI-INSURANCE INSTITUTIONS 
Those compulsory social insurance activities carried out by various branches of government, for example, old age and survivors insurance; unemployment insurance; and certain phases of workers’ compensation and industrial accident insurance are examples of these institutions.

QUASI-JUDICIAL BODIES 
Some federal agencies that are concerned with insurance, such as the Federal Trade Commission, have powers similar to a judicial body.  This permits them to enforce their regulations and rules, and they are considered quasi-judicial bodies.

QUASI-PUBLIC CORPORATION 
An incorporated organization that is privately operated but in which some general interest of the public is evident, for example charitable and religious corporations.

QUICK ASSETS 
Those assets of an insurance company that are rapidly convertible into cash.  Items such as till cash, checks deposited and in process of collection, short-term securities, and notes are examples of quick assets.

Quick Liquidity 
A liquidity test measures the proportion of net liabilities covered by cash and quickly convertible investments. It indicates a company's ability to reduce its premium volume or to reinsure a portion of its outstanding liabilities without needing to sell long-term investments or to borrow money.

QUID PRO QUO 
Something given in exchange for another thing of like value.

QUOTA SHARE REINSURANCE 
A type of reinsurance contract in which a quota, which is a percentage of every risk falling under terms of this agreement, is ceded.

QUOTA SHARE TREATY 
A reinsurance arrangement under which each insuring company accepts a stated proportion of premiums and losses on the insurance written.

R

RADIOACTIVE CONTAMINATION INSURANCE POLICY 
Special coverage for loss due to radioactive material or nuclear reaction.

RADIUM INSURANCE 
Coverage against loss of and damage to radium elements, generally used by medical institutions.

RAILROAD INSURANCE RATING BUREAU 
An organization that makes studies of railroad property claims and prepares rates, which are filed by members with the insurance departments of the various states.

RAILROAD POLICY 
An accident policy sold in railroad stations by ticket agents or automatic machines.

RAILROAD SUBROGATION WAIVER CLAUSE 
The portion of an insurance contract providing that a release by the insured of a railroad from liability as a condition of obtaining accommodations from the railroad shall not affect the insurance contract or the insured's rights under it.

RAILWAY SIDETRACK AGREEMENT 
An agreement between a railroad and a company in which the railroad builds and maintains a switch track on the premises of the company to facilitate shipments, and in which the company often agrees to release the railroad from liability. 

RAILWAY UNDERWRITER 
The individual whose duty it is to determine the acceptability of insurance risks involving railroads and their use.

RAIN INSURANCE
Insures against loss caused by a measured amount of rainfall within a stated period of time.  Protects against loss or expense incurred or loss of income expected caused by the reduction of patronage of sales or other events by rain, hail, snow, or sleet.

RANDOM SAMPLE 
A sample selected or assigned in such a way that all members of the population from which the sample is drawn are equally likely to have been selected.

RATE 
The cost of insurance per unit used as a means or base for the determination of premiums.

RATE BLANKET AVERAGE 
A rate that applies when a building and its contents or when two or more separate buildings and/or contents are insured under one coverage item of the policy.

RATE CREDIT or rate DEFICIENCY
A reduction or increase in the premium rate charged an insured under a schedule-rating plan.

RATE FILINGS
Rate filings are documents submitted to a state insurance department which contain the proposed rates and the statistics on which the rates are based.

RATE MANUAL
A manual containing the rates for various coverages offered by a particular insurer.

RATED POLICY
A rated policy is an insurance policy issued at a higher rate than standard premium rate.  Also referred to as an extra risk policy.

RATED UP
Frequently, a person who is considered substandard as an insurance risk is able to secure protection from some company by paying premiums based on a higher mortality table or based on a higher age, and  he is said to have rated up his policy.

RATER 
A rating clerk or rater handles the duty of calculating insurance premiums with the aid of a rating manual.

RATIFICATION 
An act or an agreement by which something previously done is confirmed or adopted, as when a principal ratifies the act of his agent. 
RATING 
The evaluation of the moral or other risk of an individual or organization.  The making of insurance rates.

RATING BUREAU
An organization that classifies and promulgates rates and, in some cases, compiles data and measures hazards of individual risks in terms of rates in a given territory.  An organization which prepares insurance studies and whose rates are used by its members.  A rating bureau classifies risk and promulgates rates, usually on the basis of statistical data compiled by the bureau or upon  inspection of the risks made by the bureau.  

RATING, EXPERIENCE 
The determination of the premium rate for an individual risk partially or wholly on the basis of that risk's own experience.

RATING, RETROSPECTIVE 
A method of rating that adjusts the final premium of a risk in accordance with the experience of that risk during the term of the policy for which the premium is paid.

RATING, SCHEDULE
Making or modifying the premium rate for an individual risk on the basis of the physical conditions which affect the probability of loss.

RATING TERRITORY
In various property and casualty lines, a rating territory is a geographical grouping within which insureds are likely to share an exposure to similar risks.  Grouping of insureds within a territory helps to establish equitable rates for the territory.

READJUSTMENT INCOME 
The income needed to allow a family time to adjust to a new and usually lower standard of living after the death or disability of the primary wage earner.

real estate investment trust (REIT) 
An investment vehicle established for the benefit of a group of real estate investors and managed by one or more trustees who hold title to the assets for the trust and control of its acquisitions and investments.  A major advantage to a real estate investment trust is that no federal income tax is paid if certain qualifications are met.  The real estate investment trust is designed to provide an opportunity for large-scale public participation in real estate investment.

REAL ESTATE SYNDICATE 
A group of investors who pool funds for investment in real property.

REAL ESTATE TAX 
The tax or amount of money levied by taking authority against the ownership of real estate for purposes of financing the functioning of the government.

REAL PROPERTY 
Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and the inherent rights associated with these. 

REASONABLE AND CUSTOMARY CHARGE 
A charge for health care, which is consistent with the going rate or charge in a certain geographical area for identical or similar services.

REASONABLE MAN TEST 
Under common law, or as defined by statutes applicable to particular situations, a standard of conduct that is sufficient to preclude liability.  The reasonable man test is most frequently applied in situations involving alleged negligence and draws relevance to the way a reasonable man would have acted under similar circumstances.

REBATE
A rebate is considered a giving, either directly or indirectly, as an inducement for an advantage for special favors, other than what is specified in the policy contract.  Rebates also refer to any giving, selling, or purchasing as an inducement to the insurance.  This may include such things as stocks, bonds, securities, or other dividends not specified in the contract.  

REBATING 
The illegal practice of allowing an insured a remission or reduction of the premium, or anything of value, whereby the payment of full legal premium is defeated.

REBUILDING OR REPAIRING
If, under an insurance policy, an insurance company elects to rebuild or repair the premises damaged or destroyed,  it must give notice of the intention proceed within fifteen days after receipt of the proofs of loss.

RECIPROCAL EXCHANGE
Reciprocal exchanges were originally designed to make bringing any legal action against them difficult.  For example, an exchange could resist a claim thought to be fraudulent, despite the inability to prove suspected fraud.  States now have stringent regulation of reciprocal exchanges, which has reduced their risk of potential financial failure.  Also referred to as reciprocal associations and inter-insurance exchanges.

RECIPROCAL INSURANCE 
Insurance provided by subscribers at a reciprocal exchange.  Each subscriber agrees to become liable for his share of the losses and expenses of all subscribers and authorizes the attorney in fact to effect his exchange of insurance with the other subscribers.  A separate account is often maintained with each subscriber, to which are credited his premiums and his share of other income, and to which his share of losses and other disbursements are debited.

RECIPROCAL LAW 
A law by which one state provides for granting to insurers or producers of another state doing business in the first state privileges equal to those granted to insurers or producers in its own state.

RECIPROCITY 
The system of placing reinsurance on a reciprocal basis, so that a ceding company will only give a share of its reinsurance to a reinsurer who is able to offer reinsurance in return.  Or, the reciprocity described above.

RECESSION 
The cancellation or annulment of a transaction or contract by the operation of law or by mutual consent.

RECITAL 
An introductory statement made in a document leading up to and explaining the nature of the document. 

RECORDS DESTRUCTION INSURANCE POLICY 
A type of business insurance coverage.

RECOURSE NOTE 
A debt instrument under which the lender can take action against the borrower or endorser personally, in addition to foreclosure.

RECOVERY 
Money or other valuables that the insurance company obtains from subrogation, salvage, or reinsurance.

RECURRING CLAUSE 
A provision sometimes found in health insurance policies, which states the amount of time during which the recurrence of a condition is considered a continuation of a prior period of disability or hospital confinement.  A health insurance clause which specifies the period of time that must elapse between disability or claim for the recurrence of that disability or claim to be considered a new benefit period.

RECURRING DISEASE 
A disease characterized by recurrence.

Reduced Paid Up insurance
A nonforfeiture option. The cash surrender value is applied to purchase paid up insurance with no future premiums payable. The coverage remains in force until the policy is surrendered. The death benefit is lower than that provided if premiums had been continued.

REFERRAL RISKS 
Risks beyond the underwriting authority of an office and which must be referred to a supervisory office for decision.

REFORM OF THE POLICY 
To correct an error in a policy, for example, if the terms of the policy contract are opposed in any part, the courts can compel a performance of the original contract as evidenced by the terms of the agreement and correct the mistake.

REFORMATION OF CONTRACT 
Proof in a court of equity that the contract does not state the true intentions of both parties, and this permits a reformation of contract to correct the contract.

REGISTERED MAIL INSURANCE
The U. S. Office Department insures up to a maximum of $1,000 for mail that is sent registered.  However, if the value is higher than $1,000, it may be insured with insurance companies that provide this service.  It provides protection against loss of money and securities while in transit via registered mail. 

Registered Representative 
A person who has passed the NASD examination. Any agent selling variable products must also be a registered representative of the NASD.

rEGULAR MEDICAL EXPENSE INSURANCE 
A type of insurance coverage for payments, other than for surgical procedures, covering doctor's visits, laboratory tests, x-rays, etc.

Regular Purchase Date 
Dates, nearest specified birthdays of the insured, that gives the insured the right to purchase additional permanent policies without providing evidence of insurability.

REHABILITATION CLAUSE 
A health insurance clause which is designed to aid a disabled policyholder in vocational rehabilitation.

REHABILITATION PROGRAMS 
Programs designed to retrain disabled accident victims so that they may become gainfully employed.

REIMBURSEMENT BENEFITS 
The actual expense incurred by the insured such as medical, nursing, and hospital treatment.  Reimbursement benefits are in contrast to indemnity benefits, which pay a stated amount without regard to the cost to the insured.

Reinstatement
The period after the grace period, usually five years, during which the policy can be restored from a lapsed status through submission of acceptable evidence of insurability and unpaid premiums plus interest. The policy must not have been surrendered for its cash value.

REINSTATEMENT PREMIUM 
A premium charged to restore an insurance policy or bond to its original value after the payment of a loss.

REINSURANCE 
An agreement between two or more insurance companies by which the risk of loss is proportioned.  The risk of loss is spread and, therefore,  a disproportionately large loss under a single policy does not fall on one company.  Acceptance by an insurer, called a reinsurer, of all or part of the risk of loss of another insurer. Reinsurance takes place when an insurer cannot sell enough ventures in a risk pool so that the theory of risk distribution operates satisfactorily.  In this case, the first insurer may arrange with another insurer to reinsure part or all of the risk undertaken.

REINSURANCE ASSOCIATION 
A group of reinsurers acting as a cooperative in offering reinsurance and sharing among themselves, on specified terms, certain reinsured business.

REINSURANCE BROKER
An organization that places broker reinsurance through a reinsurance underwriter.

REINSURANCE, EXCESS
Reinsurance against loss in an amount in excess of a stipulated primary amount.

REINSURANCE FACILITY
An organization established by insurers and reinsurers, under whom insurers can obtain reinsurance for exposures that individual reinsurers would not readily accept.  Reinsurers participating in the reinsurance association generally take pro rated shares of all reinsurance placed in the facility.  Also, an organization such as Lloyd's of London or a stock exchange, for the voluntary offering and buying of reinsurance.

REINSURANCE PREMIUM 
The consideration paid by the ceding company to the reinsurer.

REINSURANCE, share
Acceptance by the reinsurer of a share of the risk or risks of the reinsured, the two sharing all losses and expenses as agreed.

REINSURANCE, STOP LOSS 
Excess reinsurance against all loss incurred after the reinsured's aggregate loss on a line reaches a specified amount, or after the loss ratio reaches a specified figure.

REINSURANCE, SURPLUS 
Reinsurance of amounts over a specified amount of insurance retained by the reinsured carried, the reinsurer contributing to the payment of losses in proportion to its share of the total amount of the insurance; a form of share reinsurance.

REINSURANCE TICKET 
A form attached to a daily report showing facts on reinsurance that has been made.

REINSURER 
An insurer reinsuring risks of another insurer under a contract of reinsurance.

RELEASE 
To give up, abandon, and discharge a claim of an enforceable right to one as against another.  Also, the name of the instrument evidencing such an act.

REMAINDER or remainder estate
The estate in property created simultaneously with other estates such as a life estate, by a single grant and consisting of the rights and interests contingent upon and remaining after the termination of the first estate.

REMOTE STATION ALARM 
An alarm which is directly wired to an off premises office of a fire or police department or owner of the protected property.

REMOTENESS OF DAMAGE 
Unless an act is the immediate or direct cause of the damage, the damage is generally too remote to support a right of recovery.  Remoteness of damage refers particularly to cases where there has been either some intervening cause or circumstances or the ultimate result could not have been foreseen as a result of the act.

RENDERING 
An interpretation.

Renew
To continue the policy for another period of time. Permanent coverage is generally renewable annually for life. Term insurance coverage may or may not be renewable; if renewable, the renewal period may be much shorter than life.

Renewal
An extension of a policy for an additional policy period as the current policy is about to expire, is known as a renewal. 

RENEWAL AGREEMENT 
A provision of some policies in which the insurance company agrees to renew the policy for a stated period.

RENEWAL CERTIFICATE
Written proof from the insurance company to its policyholder indicating that the specified insurance policy is being renewed for another term. 

RENEWABLE TERM INSURANCE 
Term insurance providing the right to renew at the end of the term for another term or terms, without evidence of insurability.  The rates increase at each renewal as the age of the insured increases.

RENT or LEASE POLICIES 
Rent policies are issued to the owners of property occupied by tenants to indemnify the owner against the loss of rentals caused by fire making the property untenable. Lease policies are issued in order to secure to the lessees of certain specified property any difference in value between the sum paid under the lease and the sum received from the tenants of the leased property. 

RENT INSURANCE 
A contract of insurance for the protection of a building owner's receipts.  In the event that a tenant does not pay rent because of such perils as a fire, the insurance company will pay these losses.

RENTER’S POLICY 
A homeowner's policy adapted for those who rent.  Also referred to as a tenant’s policy.

RENT / RENTAL VALUE INSURANCE 
Insurance that provides indemnity for the loss of the rental value of property when the owner or the tenant is deprived of the use of the property because of its damage by a peril insured against.  Or, insurance that provides for indemnity for the loss by the owner of the rent that would have been payable by the tenant of the property where the tenant, by the terms of the lease or by statute, is relieved of liability for the payment of rent during the period of untenantability if the property is damaged by a peril covered by the contract.

RENTS OR RENTAL VALUE COVERAGES 
Insurance against loss of the rental value of a property.  Protects against loss of rents resulting from an insured peril.

REPAIRS 
Ordinary repairs, which are permitted to a property without, notice to the company.  Generally,  the policy sets a limit of time in which such repairs can be affected.  For anything, which requires a longer limit, the company's consent in writing must be obtained.

Replacement
The act of terminating coverage with one insurer for coverage with another.

Replacement insurance
Insurance policies, which state that in the case of a partial loss, the full repair cost will be paid without any reduction in the measure of recovery by reason of depreciation. 

REPLACEMENT RESERVE 
A cash reserve for the future replacement of fixed assets.

REPORTING CONTRACT 
An insurance contract covering stocks of goods and often types of property in their actual amounts, these amounts being reported periodically by the insured, and the premium being based on these reports.

REPORTING FORM 
A policy designed for use when values of the insured property fluctuate during the policy term.  Usually an adequate limit of liability is set, and then the insured reports the values actually on hand on a given day of each month.  At the end of the year or policy term, these reported values are averaged, and the premium is adjusted accordingly.

REPRESENTATION
Statements made by an applicant on the application that he represents as being substantially true to the best of his knowledge and belief, but which are not warranted as exact in every detail.

REPRESENTATIVE SAMPLE 
A sample that corresponds to or matches the population from which it was drawn, with respect to the percentage of cases having characteristics likely to be important for the purpose under study.

REPUGNANCY
A term used to signify that there is a disagreement or inconsistency between two or more clauses of a written instrument.  A repugnancy is always interpreted against the insurer.

Required Minimum Distribution
Contract owners of qualified plans are required by the Internal Revenue Service to take a minimum payout from their contracts according to a calculation involving the account balance and life expectancy. The first required minimum distribution must be taken on or before April 1st following the year the owner attains age 70 ½.

RESERVE	
Funds that are set aside by an insurance company for the purpose of meeting obligations as they fall due.

RESERVE, UNEARNED PREMIUM 
Reserves equal or approximately equal to the total of the unearned premiums on insurance in force with an insurer.

RESERVES Incurred but not reported (IBNR)
The liability account on an insurer's balance sheet reflecting claims that are expected based upon statistical projections, but which have not yet been reported to the insurer.

RES GESTAE 
The doctrine of res gestae is an exception to the hearsay rule.   It is applied when it is impossible to produce the actual person who made the declarations or statements.  An example of a hearsay exception is a driver stating immediately after an accident, "God!  My brakes didn’t hold!".

Recision
The legal act of canceling (rescinding) the policy and refunding all premiums paid from the policy's issue.

RESIDENCE AND OUTSIDE THEFT INSURANCE 
Protection of the insured's personal property from loss by theft and damage caused by theft or malicious mischief.  Insurance against loss by actual or attempted theft, larceny, burglary, or robbery of property on the residence premises of the insured or elsewhere.

RESIDENCE EMPLOYEE 
An employee whose duties are incidental to the ownership, maintenance, or use of personal residential premises and to the personal, rather than business activities of the insured.

RESIDENCE INSURANCE
Insurance pertaining to a personal residence, as distinguished from business premises.

RESIDUAL DISABILITY BENEFITS 
A provision in an insurance policy that provides benefits in proportion to a reduction of earnings as a result of disability, as opposed to the inability to work full time.

RESIDUAL MARKET 
A collective term for any of several channels through which an applicant can purchase at least minimum amounts of property, liability, and other types of insurance which insurers are not willing to provide in the voluntary market.

RES IPSA LOQUITUR 
From the Latin, the phrase literally means, "The thing speaks for itself." The res ipsa loquitur doctrine is used when an injury occurs to a plaintiff, with the inference that the defendant was negligent because the instrumentality causing the injury was in the defendant’s exclusive control.

RESPONDENT 
The one required to answer.  The defendant in certain proceedings.

RESTORATION PREMIUM 
The premium charged to restore a policy or bond to its original value after payment of a loss.

RESTRICTIONS 
A limitation by private agreement or by public legislative action conditioning the use or occupancy of real estate through such means as covenants and deeds or conditions and leases.

RESTRICTIVE COVENANT 
A clause in a deed limiting use of the property conveyed for a certain period of time.

RETENTION
The amount withheld out of payment to contractors or subcontractors, as per contractual agreement, to insure a final and satisfactory completion of the job.

Retention Limit
The maximum amount of insurance the company can retain before ceding business to a reinsurer. The maximum amount may depend on the insured's age, health, coverage in force as well as the company's financial condition.

RETALIATORY LAWS 
Laws by which one state imposes requirements on insurers or producers of another state doing business in that state to the same extent as the requirements of its own insurers or producers.

RETENTION
The amount of liability retained on a given risk.  The part of the insurance on a risk retained by a reinsured for its own account, the excess or surplus of which, if any, is reinsured.

RETENTION POLICY 
A contract which the insured agrees to pay all losses up to a specified amount in consideration of a lower premium, only legal in certain states.

RETIREMENT INCOME 
A stipulated amount of income starting at a selected retirement age, generally derived by exercising one of the settlement options available against the policy cash value.

Retirement Income Contract 
An annuity that includes a term life insurance policy.

RETIREMENT INCOME INSURANCE
Insurance payable on death before a specified age, with provision of a life annuity certain if the insured attains that age.
RETROACTIVE EXTENSION 
Extending retroactively the terms, except the amount, of present coverage into the period of prior insurance.

RETROACTIVE LIABILITY INsurance
Insurance written after the insured peril has occurred.  In some cases, insurance has been acquired after the occurrence of an event with a full disclosure to the insurer.  For example, the owners of a large hotel in Las Vegas sought retroactively to increase the amount of their liability insurance following a fire in which there were many deaths and injuries.  Naturally, the insurer knew of the fire.  The justification for permitting the increase in coverage was the theory that the required uncertainty, which underlies all insurance transactions, was still present at the time of the contract.  The final costs of the liability claims were unknown, and the transaction involved a premium payment of several million dollars.

RETROACTIVE PERIOD 
A period of time at the onset of an injury or disease during which no benefits are payable unless the injury or disease causes disability which extends beyond the retroactive period.  If disability lasts longer than the retroactive period, the benefits are payable retroactively from the first day of disability.

RETROACTIVE RESTORATION 
Reinstatement of a bond or policy to its original face value after a loss has been paid for the purposes of providing payment, if prior losses were discovered at a future date.

RETROCESSION 
The act of a reinsuring company that has accepted a risk in again reinsuring the risk with still another company.  A cession of reinsurance by a reinsurer to another reinsurers

RETROSPECTIVE RATING 
Adjusting the final premium for a risk based on the loss experience of the insured during the period of protection between maximum and minimum limits.

RETROSPECTIVE RATING PLAN 
The formula in a reinsurance contract for determining the reinsurance premium.

RETROSPECTIVE RESERVE
A reserve which is viewed as the difference between the accumulation at interest and survivorship of the net premiums received in the past and the accumulation at interest and survivorship of the claims paid.

Return on Equity 
Net operating gain as a percentage of prior year capital and surplus. This profitability test reflects the return on capital and surplus from insurance operations and investments and has been traditionally used with stock companies to indicate the return on stockholder's investment.

RETURN PREMIUM 
The amount due the insured if a policy is canceled, reduced in amount, or reduced in rate.

Reverse Split Dollar
A split dollar arrangement in which the employer receives the majority of the death benefit and the employee owns the cash value. Premium payments are shared by the employer and the employee.

REVOCABLE BENEFICIARY 
A beneficiary whose rights in a policy are subject to the insured's reserved right to revoke or change the beneficiary designation and the right to surrender or to make a loan on the policy without the consent of the beneficiary.

revocable living trust 
A revocable living trust agreement allows the business owner, during his lifetime, to familiarize the trustee with the operation of the business.  It has the added advantage of relieving the proprietor of some of the burdens of sole management.

REVOCATION 
The act of recalling a power or authority conferred.

RIDER 
A document or forms containing special provisions that are not contained in the policy contract and which are added or attached to the policy.

RIGHT OF OCCUPANCY 
A privilege to use and occupy a property for a certain period under some contractual guarantee, such as a lease. 

RIGHT OF SURVIVORSHIP 
The right of survivors to acquire the interest of a decreased joint tenant.

RIGHT OF WAY 
A single right or easement for several independent or combined uses.  Or, two or more rights or easements for different parties and over different parcels for several independent or combined uses.

RIOT AND CIVIL COMMOTION INSURANCE 
Protection from loss caused by riot, strikes, insurrection, and civil commotions or insurance against loss due to the violent action of two or more persons.

RISK 
A person or thing insured. Uncertainty as to the outcome of an event when two or more possibilities exist.  The theory of risk is prevalent in all insurance transactions.  The burden of risk is transferred from the individual to whom it attaches to a carrier who is willing to assume that risk.

Risk Amount
The difference between the death benefit and cash value. This is the amount on which mortality charges are assessed annually.

RISK AND INSURANCE MANAGEMENT SOCIETY
An organization for risk and insurance managers of commercial and industrial enterprises, public entities, and service organizations.

Risk Classification 
An underwriting process used to determine the appropriate price category of the proposed insured, according to risk factors associated with that person's health condition, lifestyle, etc.

RISK CONTROL 
An arrangement whereby the risk is minimized.  Some examples of risk control are fire escapes, inflatable automobile air bags, brakes, smoke detectors, and caution signs.  

risk, degree of
The degree of risk is a measure of the accuracy with which the outcome of an event can be predicted.  The more accurate the prediction, the lower the degree of risk.  Conversely, the less accurate the prediction, the higher the degree of risk.  

risk distribution
Risk distribution is the principle of the sharing of economic risk.  Insurers deal with the uncertainty of risk by combining the risks of loss for many ventures into a pool as a means of risk distribution.

RISK EXPERIENCE PROGRAM 
A procedure by which, on large risks, a listing of premiums and losses is referred periodically to the underwriter for review.

RISK FINANCING 
The use of one or more of several techniques or sources of funds to pay for losses.  Risk financing is generally divided into two classes:  retention, that is, the use of funds originating within the organization, and transfer, that is, the use of funds originating outside of the organization, most typically, insurance.

RISK MANAGEMENT 
The use of appropriate insurance, avoidance of risk, loss control, risk retention, self-insuring, and other techniques to minimize the risks of a business, individual, or organization.

RISK MANAGEMENT CONSULTANT 
One who provides expert advice to corporations regarding how their risks should be treated.

RISK MANAGER 
One who is responsible for preserving a firm's assets against accidental losses of various kinds by buying insurance protection and other methods.

risk, objective
Objective risk refers to a state of nature, and it is measured by the actual chance of loss.
 
risk, pure
Pure risk refers to situations, which can result only in a loss or in no change.  The exposure to loss of a home by fire is an example of an exposure to pure risk.  Either the house either burns, or the house does not burn.  

Risk reduction  
A method of risk control. An example of risk reduction would be the required removal of asbestos in older buildings.

Risk retention  
A process whereby risk transference or risk distribution is accomplished without actually using insurance.  If an entity engages in sufficient volume, it can act on its own to spread the risk. Essentially, the company insures itself.  Also referred to as self-insuring.

RISK RETENTION GROUP 
A group of two or more organizations authorized by the Federal Risk Retention Act of 1981 to pool and retain some or all of their products liability exposures, thereby gaining favorable income tax treatment of their contributions to related loss reserves.

risk, speculative
Uncertainty of the probability of an occurrence of an event that could produce either a gain or loss or no change.  Most speculative risks are uninsurable.

risk, subjective
Subjective risk refers to the perception of risk by the individual.  For example, two people might have the same exposure to a loss, but one person might feel much more uncertainty about this possible event than the other person might.  This person possesses a greater subjective risk than the other does. 

Risk transference  
The process whereby an insured transfers his risk of loss to an insurer.  All insurance contracts contain the element of risk transference.

ROBBERY 
The unlawful taking of property by violence, force, or intimidation.

ROBBERY INSURANCE POLICY 
A type of insurance coverage protecting against loss from the unlawful taking of property by violence, force, or intimidation.

Rollover
The tax-free transfer of accumulated assets from a qualified retirement plan to an IRA, which must be completed within 60 days of the termination of the original plan.

Rule of nonliability
The rule of nonliability provides for a complete or full defense to an insured's claim.  The insurer has no liability for any part of the stated benefits when the insurance payments would produce a net gain for the person designated to receive the proceeds.

RUNNING DOWN CLAUSE 
The portion of the marine policy that protects against damage by collision with another ships.

RUN OFF 
A termination provision in a reinsurance policy whereby the insurer remains liable for losses occurring after the date of termination on those policies in force on that date.
S

SAFE BURGLARY INSURANCE POLICY 
A type of insurance coverage against loss of or liability for loss of the contents of a safe.

SAFE DEPOSIT BOX INSURANCE POLICY 
A type of insurance coverage against loss of or liability for loss of the contents of a safe deposit box.  Also referred to as safe depository insurance.

SAFE DRIVER PLAN 
A system for adjusting standard rates up or down, according to good or bad driving records of insured persons.

SAFETY AUDIT
Periodic examination of an organization to provide the basis for management decisions affecting the organization's safety program.

SAFETY FUND LAW 
Legislation permitting insurance companies to accumulate from profits a fund, which is placed in a designated depository in order to meet emergency claims.

SALARY DEDUCTION INSURANCE 
Life insurance in individual policies issued to employees whose employer automatically deducts the premium from salary or wages before payment.

Salary Savings Insurance
Regular forms of life insurance sold to groups of employees with premiums collected on a monthly basis by the employer from employee wages.

SALESMEN'S SAMPLE FLOATER 
Insurance coverage on samples carried by salesmen.

SALVAGE 
The recovery reducing the amount of loss.  To save endangered property and to enhance the value of damaged property.  With respect to marine insurance, the cost of saving property exposed to a peril.

Sanctions
Steps taken to order an insurer to cease and desist a specified activity or to suspend or revoke the authority of an insurer to do business in the state.

SAVINGS BANK LIFE INSURANCE 
Insurance written in several states through mutual savings banks.  Characterized by having no agents to sell the insurance.  Savings bank life insurance is purchased over the counter and is available in statutory limited amounts in the form of whole life, limited payment life, endowment, term, and annuities on a participating basis.
Savings Element
Refers to the cash value component of a life insurance policy. It accumulates with interest on a tax-deferred basis and is available to the owner through policy loans. It can also be used to keep the policy in force if premium payments are stopped, and the entire savings element can be withdrawn upon surrender of the policy.

SCHEDULE 
The listing of various properties covered by a policy.

SCHEDULE BOND 
A bond listing individuals by name, rather than by their position.

SCHEDULE OF PROPERTY 
A term applied to a statement, which is attached to a policy, sets forth the various items to be insured, and the amounts applying to each one of the items in the schedule.

SCHEDULE POLICy
A covering under separate insuring agreements for several hazards which are frequently covered under individual policies.

SCHEDULE	RATING 
An analysis of the various physical elements of a risk which attempts to provide an equitable rate for insurance.

SCHEDULED INJURY 
An injury listed in the workers’ compensation law for which specified compensation is payable, regardless of whether or not the employee suffers a loss of earning power.

SCHEDULE OF INSURANCE 
The list of individual items covered under one policy.

SCHEDULED PROPERTY 
The listing of a specific dollar amount against each item covered by one policy.

SCHEDULE PROPERTY FLOATER 
Insurance on specific articles under one policy form.

Scheduled Premiums
Refers to planned premiums that are scheduled at the time of issue.

SCRATCH ENDORSEMENT 
A copy of the endorsement completed by the underwriter or rater to be used by the policy writer in preparing the endorsement.

SEASONAL RISK 
An insured property that is only used for part of the year.
Second To Die 
A type of life insurance policy that insures two lives. The death benefit is payable at the second death. Generally, this is a funding vehicle for estate taxes payable at the second death when the unlimited marital deduction is utilized. Also referred to as survivorship policies.

SECONDARY BENEFICIARY 
The beneficiary next in line to collect insurance proceeds, should the primary beneficiary be unable to do so.

Section 401(k) Plan 
Internal Revenue Code 401(k) is an employer sponsored, salary reduction retirement savings program. The employee defers a percentage of current salary on a pretax basis and the employer often matches some portion of that amount. There is a cap on the annual contribution, and a ten- percent penalty is levied on monies withdrawn before age 59 1/2. The accumulating funds can be borrowed by the employee and repaid with interest.

Section 403(b) Plan
Internal Revenue Code 403(b) is a retirement program offered to employees of tax exempt organizations, such as public schools. Subject to certain limitations, the organization pays annuity premiums on behalf of their employees and provides employees with a tax advantage by excluding the amount of the payments from their gross incomes.

Section 408(k) Plan
Internal Revenue Code 408(k) is an individual employee retirement account, funded by either an employer or a self-employed person. The maximum contribution is the lesser of 15 percent of compensation or $30,000. Employees have the option of taking the employer contribution in cash, but must then pay current income taxes on it. Also referred to as a Simplified Employee Pension (SEP).

Securities and Exchange Commission (SEC)
A federal agency created by the Securities Exchange Act of 1934 to administer the act and to help protect the interests of investors.

Security
An investment contract containing the following elements: a transaction in which money is invested, the investment is in a common enterprise, and an expectation of profit resulting from the efforts of others. Examples of securities include stocks, bonds, and mutual funds.

SECURITY AGREEMENT 
An agreement between a secured party and a debtor that creates a security interest.

SEGREGATION OF EXPOSURE UNITS 
A risk management technique that disperses an existing single loss exposure to reduce the severity and/or increase the predictability of losses.

Select Mortality Table
The mortality charges associated with newly underwritten insureds, which reflect very favorable experience.

SELECTION 
The choice of risks in order to prevent adverse selection.

SELF-ADMINISTERED PLAN 
A profit sharing or pension plan that is funded through a bank or fiduciary or investment company, other than an insurance company.

SELF-ADMINISTRATION 
The procedure where an employer maintains all records regarding the employees covered under a group insurance plan.

Self-Employed Individual's Retirement Act
An act of the U.S. Congress, approved in 1962, permitting self-employed people and their employees to take advantage of tax benefits similar to those offered under tax sheltered annuities and the qualified retirement plans of large organizations. Also referred to as HR 10 and the KEOGH Act.

SELF-INSURANCE 
The technique of one whom is subject to a risk to periodically set aside sums in order to provide a fund to cover any loss that occurs.

SELF-INSURED RETENTION
A deductible in an umbrella policy.  When a liability claim is covered by an umbrella, but not by another policy that covers liability, the insurer with the umbrella subtracts the self-insured retention before paying the claim.

SELF-INSURER 
An individual, partnership, or corporation who retains all or part of its risk.  Generally, this entity retains a level of risk it feels it can absorb financially and purchases insurance in excess of the retained level to protect itself against greater losses.

SELF-REINSURANCE 
The creation of a fund by an insurer to absorb losses beyond the insurer's normal retention.

SEMI-COMMERCIAL 
A classification of accident and sickness policies created to cover forms which are the same as commercial forms, but are issued for slightly lower limits and with quarterly or monthly premiums.

SENIOR CITIZEN POLICES 
Contracts insuring people’ 65 years of age or over and supplementing the coverage afforded under Medicare.
Separate Account
By law, insurers are required to hold the assets on all variable plans apart from the general assets of other plans. A separate account is not subject to the claims of creditors during regulatory proceedings and is perceived by some as an enhancement to the security of variable plans.

SEPARATE PROPERTY 
Property owed by a husband or wife and independent of the other.  Not community property.

SEPARATION RULE 
The  rule that an agent may represent only insurers of a specified class if he is to represent any one insurer of that class.

SERIOUS INJURY FREQUENCY RATE 
The number of serious injuries per 1,000,000 employee hours worked.  Serious injuries include all disabling injuries plus other categories of nondisabling injuries.

SERVICE
Associated with agreements by insurers to pay certain providers of health care services for rendering services to covered persons.

SERVICE BENEFIT
Insurance in the form of hospital or medical care, as distinguished from monetary payment for such benefits.

SERVICE STATION LIABILITY INSURANCE 
A type of business insurance coverage for the specific needs of service stations. 

SETTLEMENT OPTION 
An option for settling a claim in more than one way, such as with money or the same type of property.  Also, the option the insured or beneficiary may have in choosing how the money from a policy will be paid.

7-Pay Test
The maximum annual premium allowed during the first seven years in order to avoid classification as a modified endowment contract.  The premium will vary by company and the insured's issue age, sex and underwriting class. A new 7-pay test is required after each material change of the contract.

SEVERANCE PAY 
A lump sum payable on termination of employment in accordance with an ordered formula.

SEVERITY RATE 
With respect to workers' compensation, the total days charged for work injuries per 1,000,000 employee hours of exposure.

SHOCK LOSS 
A claim or loss that is so large that it affects underwriting averages.

SHORT DATE RATES 
Rates which follow the percentages set for in the short date tables and which are in excess of a pro rata proportion of the yearly premium.

SHORT-PERIOD INSURANCE 
This is insurance for periods of less than one year.

SHORT RATE 
The charge required for insurance or bonds taken for less than one year.

SHORT TERM 
An insurance contract for less than a year.

SHORT-TERM DISABILITY INCOME INSURANCE 
A type of coverage that pays benefits to a disabled individual for a stated period of time not exceeding two years.

SHORT-TERM TRUST 
A reversionary trust under which the income or principal of the trust reverts to the grantor after a specific event or period.

SICKNESS INSURANCE 
Provides for payment of a substantial part of earned income lost through disability caused by illness and for payment of medical expenses incurred as a result of the illness.

SILVERWARE FLOATERS
All risk inland marine policy covering silverware.

SIMPLE INTEREST 
The interest arising from the principal sum only.

Simplified Employee Pension Plan (SEP/SEPP)
An employer sponsored plan than can be used by sole proprietors, partners, and corporations. Deductible contributions up to the lesser of 15 percent of salary, not to exceed $30,000, can be made by eligible employees. No Internal Revenue Service filings are required.

Simplified Underwriting
An underwriting process that applies a less strict analysis of risk factors. Participants in group plans or charitable giving plans may qualify for this abbreviated form of underwriting.

SINGLE INTEREST POLICY 
Insurance protecting the interest of only one of the parties having an insurable interest in certain property, for example, protecting the seller but not the buyer of merchandise.
Single Life Status Survivorship
A second to die life contract that changes after the first death to reflect that only one life is insured. Generally, the premium does not change, but the illustrated dividends, mortality assessments and the cash values may increase. 

SINGLE LIMIT 
With respect to liability insurance, the overall maximum on the insurer's liability for all types of bodily injury, property damage, or personal injury claims growing out of one accident, regardless of the number of persons suffering injury.

Single Premium
Refers to the one-time payment required to cover the entire cost of a life insurance or annuity contract.

Single Premium Immediate Annuity
A fixed immediate annuity that is purchased with a single lump sum payment, providing income for life or for a specified period of time.

Single Premium Life Insurance
An insurance plan that requires only one premium and is guaranteed to remain paid up throughout the insured's lifetime. These contracts are generally used as cash accumulators. Under current tax law, new single premium contracts are classified as modified endowment contracts.

Single Premium Limit
The maximum payment that can be made to a universal policy at one time without causing the contract to become a modified endowment contract.

Single Premium Retirement Annuity
A fixed deferred annuity that is purchased with a single lump sum payment.

SISTERSHIP CLAUSE 
A liability insurance exclusion which denies coverage for the withdrawal or recall of potentially defective products from the market.

SISTERSHIP LIABILITY
The loss of property or income which occurs when an owner or user of a product decides not to use the product or is legally forbidden from using the product.

SLANDER	
Maliciously speaking false and defamatory words about another, whereby that person is injured.

SLIDING SCALE COMMISSION 
A system whereby actual commissions paid by a reinsurer to the ceding company varies inversely with the loss ratio within certain set limits.

SMOKE DAMAGE INSURANCE 
Insurance against damage done by smoke from the sudden, unusual, and faulty operation of a heating or cooking unit but only when such unit is connected to a chimney by a smoke pipe and while on the premises Smoke damage from fireplaces and industrial apparatus is excluded.  Damage covered by smoke from a hostile fire is covered by a fire insurance policy, rather than the smoke damage insurance policy.

SOCIAL INSURANCE 
A device for the pooling of risks by their transfer to an organization, usually governmental, that is required by law to provide pecuniary or service benefits to or on behalf of covered persons upon the occurrence of certain predesignated losses.

SOCIAL SECURITY 
A federal government insurance program established in 1935 that provides certain benefits such as old age and survivors insurance, contributions to state unemployment insurance programs, and old age assistance.  

SOCIAL SECURITY OPTION 
An option whereby an employee may elect to receive higher annuity payments before a certain age, usually the age of retirement, and a lower payment after that age, at which time he will be receiving social security payments from the government.

Social Security Substitute Benefit (SSSB)
An optional disability insurance policy benefit that provides benefits when the insured is totally or partially disabled, except that benefits may be reduced or may not be payable when the insured or a member of the insured's family is entitled to Social Security benefits.

Society of Actuaries
An organization whose members are trained in the application of actuarial mathematics, that is, statisticians who compute insurance risks and premiums.

SOLD BUT NOT DELIVERED 
This clause in an insurance policy refers to the merchant or manufacturer's liability for goods that have not been legally delivered to the client.

SOLE AND UNCONDITIONAL OWNERSHIP CLAUSE 
With respect to fire or property insurance, this clause states that the policy becomes void if the interest of the policyholder is other than sole and unconditional.

SOLE PROPRIETORSHIP 
A business operated by an individual who is the sole owner.

SOLICITOR 
A person authorized by an agent to be his representative and who may solicit and receive applications for insurance.

SOUND VALUE 
A term used to indicate the value of the insured property immediately before the damage.

SPECIAL ACCEPTANCE 
An agreement by a reinsurer that includes a risk in a reinsurance contract that would not normally be covered by that contract.

SPECIAL AGENT 
An individual who represents an insurance company in an exclusive territory and who supervises agents and the operations of the company.

SPECIAL DAMAGES 
Damages, which are actual, but not the necessary result of the injury complained of.

SPECIAL MULTI-PERIL (SMP) 
A policy for certain nonpersonal line risks.

SPECIAL RISK or SPECIALTY RISK 
A transfer of risk from one individual to another not based on true insurance principals of reducing the individual risk to the risk of the statistical universe, for example, the legs of a famous model.

SPECIAL RISK INSURANCE 
Coverage for risks or hazards of a special or unusual nature.

SPECIFIC FORM or specific POLICY 
A policy, which provides for a definite amount of protection on each of one or more items specifically named. 

SPECIFIC INSURANCE 
A policy coverage that goes into detail with respect to the description of the property covered.

SPECIFIC LIMIT 
An insurer's maximum liability for a specified type of loss or claim, usually smaller than the policy limit, applicable to losses or claims generally.
SPECIFIC RATE 
A rate applying to an individual property determined by a schedule.

SPECIFIED PERILS 
Specified perils property policies cover any loss that is caused by one of the covered perils that is named, or specified, in the policy.

SPECIMEN 
A sample, such as physical evidence sent to the crime laboratory for analysis.  Also, samples of debris taken from the fire scene for laboratory analysis.

SPENDTHRIFT  TRUST or SPENDTHRIFT CLAUSE 
A provision to protect the beneficiary of an insurance settlement from his own imprudence.

SPLIT DEDUCTIBLE 
A per loss deductible under which the amount of each loss the insured retains differs, depending upon the peril causing the loss.  For example, a split deductible may call upon the insured to pay the first $1000 of any fire loss, but only the first $500 of any windstorm loss.

Split Dividend Option
Using one portion of the dividend to reduce premiums while the other portion is used to purchase additions.

SPLIT DOLLAR
The split dollar concept refers to the division of insurance proceeds between the company and the executive's beneficiaries.  Split dollar is a type of insurance used for tax deferred compensation for senior executives.  It is not term insurance, rather it is permanent.

SPLIT FUNDING 
A technique under which portions of the contributions to a pension plan is paid to an insurance company, with the remainder being invested through a corporate trustee.

SPLIT LIFE INSURANCE 
A form of insurance where term insurance and an installment annuity are combined. 

SPLIT LIMIT 
With respect to liability insurance, separate limits of liability for bodily injury and property damage claims, as contrasted with single limit.

SPORTS LIABILITY INSURANCE 
Insurance protection against liability for damages resulting in bodily injuries or death occurring as a result of an accident to individuals caused by the insured while engaged in sports.

SPREAD LOSS 
A type of reinsurance agreement.

SPRINKLER LEAKAGE INSURANCE
Insurance against damage caused by accidental flow of water from a sprinkler.  In some contracts, fire protection equipment also is included.  This protection limits claims to causes other than a hostile fire or certain other specified causes.

SPRINKLER LEAKAGE LEGAL LIABILITY INSURANCE 
Insurance covering the legal liability of an insured whom has a sprinkler leakage loss that damages the property of others.

SPOUSE'S BENEFIT 
Payments to the surviving spouse of a deceased employee, usually in the form of a series of payments upon meeting certain requirements and usually terminating with the survivor's remarriage or death.

STAFF ADJUSTERS 
Full time employees of the insurance company, that is, these adjusters are on the insurance company's staff.

STAFF UNDERWRITERS 
Those who help to determine an insurer's goals and set up guidelines so that line underwriters can make decisions which contribute to the insurance company's attempt to achieve satisfactory results.

STAMPING OFFICE 
A central office or bureau to which agents and companies send certain daily reports, endorsements, and other documents for auditing before their transmittal to the insurance company.

STANDARD 
Insurance written on a basis of the regular mortality and underwriting assumption used by the company.

STANDARD EXCEPTIONS C
Commonly found in workers' compensation insurance, certain classes or groups of employees are separately classified when rates are established.

STANDARD FORM 
An insurance policy which has been adopted by many insurance companies and approved by state insurance departments.

STANDARD INSURANCE 
Insurance that is written on the basis of regular morbidity underwriting assumption used by an insurance company and issued at normal rates.

STANDARD POLICY 
An insurance contract in common use and in many cases complying with state laws with respect to form and content.

STANDARD PREMIUM 
With respect to workers’ compensation insurance, the standard premium is computed on the basis of rates used before the premium is adjusted under a premium discount or retrospective rating.

STANDARD PROVISIONS 
Clauses that certain state codes prescribe as being inserted in contracts of insurance.  Contract provisions that are in general use by insurers, adopted by a group of insurers, approved by a state insurance department, or required by statute.

STANDARD RISK
A person who, according to a life insurance company's underwriting standards, is entitled to insurance protection without extra rating or special restrictions.

STATE DISABILITY PLAN 
A state plan for accident and sickness or disability insurance required by state statute.

STATE FUND 
A fund set up by a state government to provide insurance.  Some statutes permit and others exclude competition by private insurers.

STATE FUND, COMPETITIVE 
A state fund which writes insurance in competition with private insurers.

STATE FUND, MONOPOLISTIC 
A state insurance fund where competition is excluded by statute.

STATE INSURANCE DEPARTMENT 
A department of a state government whose duty it is to regulate the business of insurance and the circulation of insurance information.

STATE INSURANCE REGULATORS 
State insurance regulators who approve insurance rates, classifications, and rating systems.

STATE UNEMPLOYMENT INSURANCE 
A form of social insurance that operates by means of a payroll tax and which is used to pay calculated benefits to people who are unemployed. 

STATED AMOUNT
Coverage for a car which, for reasons of uniqueness, does not decrease in value with age, for example antique or specialty cars. 

STATEMENT OF CLAIM 
A written or printed statement by the plaintiff in an action showing the facts relied upon to support his claim against the defendant. 

STATEMENT OF VALUES 
Information required by a rating bureau or underwriter to value risks separately.

STATIC IMPAIRMENT
A physical condition in which the body has suffered some loss or injury, for example, the permanent loss of sight or the amputation of a limb.

STATUTE OF LIMITATIONS 
A statute placing a time limit on the bringing of actions.
STATUTORY ACCOUNTING PRINCIPLES (SAP) 
Statutory requirements which must be met by an insurance company when submitting its financial statement to the state insurance department.

STATUTORY PROFIT 
Premiums earned, less losses and expenses.

STATUTORY UNDERWRITING PROFIT OR LOSS 
Premiums earned, minus losses and expenses incurred.

STATUTORY WARRANTY DEED
A warranty deed form prescribed by state statutes.

STEP RATE PENSION FORMULA 
A method of integrating private pension plan benefits with Social Security retirement benefits.  A higher benefit multiplier is applied to earnings above a specified earnings level.

STEP RATE PLAN 
A premium plan that charges a higher rate for older policyholders.

STIPULATED PREMIUM INSURANCE 
A form of assessment insurance.  A regular rate is normally charged the policyholder; however, the company may require additional payment.

STOCK 
An insurance company that issues stock, as compared to a mutual insurance company.  Also merchandise as compared to fixtures, machinery, or furniture.

STOCK AND INVENTORY 
Stock and inventory are terms used for the merchandise that a store intends to sell.  Businesses also use these terms to refer to their materials or products on hand.

STOCK COMPANY 
A company owned by a number of investors or stockholders.

STOCK IN TRADE 
This term is limited to personal property.  When this phrase is used in connection with a specified trade or business, it should include the materials essential to the carrying on of that trade or business.

STOCK INSURANCE COMPANY 
A company owned and controlled by stockholders and conducted for profit.  A stock insurance company sets a premium charge for insurance, assuming all liabilities on a corporate basis, and the owners of the business are paid the profits.

STOCK INSURER 
An insurance firm organized in corporate form that issues stock and is designed to make a profit.

STOCK LIFE INSURANCE COMPANY 
A life insurance company owned and controlled by stockholders who share in the surplus earnings and which may issue either nonparticipating or participating life insurance.

STOCK PURCHASE PLAN 
A program under which employees buy shares in the company's stock, with the company contributing a specific amount for each unit of employee contribution.

STOCKS AND SHARES 
Stocks and shares are issued to the owners of a company who then become the shareholders.  That is, they own shares of stock in that company.

STOP LOSS 
A provision in a policy designed to cut off the company's loss at a given point.  A stop loss may be an aggregate payable under the policy, a maximum payable for any one disability, or other similar situation. 

STOPPAGE IN TRANSITu
The act by which the unpaid vendor of goods stops their progress and resumes possession of them, while they are in course of transit from him to the purchaser and not yet actually delivered to the latter.

STOREKEEPER’s BURGLARY AND ROBBERY POLICY
This type of package policy insures against losses from robbery or burglary. 

STOREKEEPER’S LIABILITY POLICY
This type of package policy insures against bodily injury claims and damage to property due to operation of the business.

STRAIGHT LIFE ANNUITY
A life annuity policy which does not provide any refund to any beneficiary at the death of the annuitant.

STRAIGHT LIFE INSURANCE 
A plan of insurance for the whole of life with premiums payable until death.

STRATIFICATION OF LOSSES 
Refers to the classification of losses, either individual losses or annual totals of loss, into categories of dollar size in order to analyze the likelihood of various levels of loss severity and to make appropriate decisions for financing or controlling these losses.

STRICT LIABILITY 
The legal concept covering the degree of care used by manufacturers.  Under the law of strict liability, the claimant only needs to show that there was a defect in the product and that loss or injury occurred as a result of the defect.  It is not necessary to prove negligence on the part of the manufacturer in order to apply strict liability.

STRIKE INSURANCE 
Indemnification designed to protect employers against monetary loss due to strikes.

STRIKE THROUGH CLAUSE 
A reinsurer is liable for his share of a loss, even when a ceding company is insolvent.  Using a strike throughout clause, the reinsurer's payment goes directly to the insured.

STRUCTURED SETTLEMENT 
Alternatives to lump sum settlements of bodily injury liability claims or court verdicts.  Under a structured settlement, the claimant is paid specified sums at specified intervals as compensation for loss of income, medical and rehabilitation expenses, and pain and suffering until a specified future date, possibly the claimant's death.  Many structured settlements are financed through insured annuities, and payments can be adjusted for changes in price levels or in the claimant's situation.

SUBAGENT 
An individual who reports to an insurance company through another agent.

SUBJECT PREMIUM 
When the reinsurance rate is added to a ceding company's premium, that is, the subject premium, the reinsurance premium results.

SUBMISSION 
The entire package of materials that go to the underwriter.

SUBORDINATION 
The act or process by which a person’s rights are ranked below the rights of others. For example, a second mortgagee’s rights are subordinate to those of the first mortgagee.  This process may also apply to other types of debt instruments.

SUBPOENA 
A command to appear at a certain time and place to give testimony upon a certain matter.

SUBPOENA DUCES TECUM
A subpoena as described above, but which commands the person to attend and produce some book, paper, document or physical object.

Subrogation 
Developed as an equitable doctrine, subrogation facilitates an adjustment of rights in order to avoid unjust enrichment.  To subrogate means “to substitute”.  So, subrogation substitutes one person for another, with respect to a claim or right that the second person has against a third party. 

SUBROGEE 
An entity, such as an insurer, which may become subrogated to another's rights.

SUBROGOR 
An entity, such as an insured, whose rights against a third party are transferred to a subrogee, such as an insurer through either equitable or contractual subrogation.

SUBSCRIMON POLICY 
A policy which has been subscribed to by two or more insurers.  The amount of risk assigned to each subscriber is stated in the policy.

SUBSTANDARD 
Conditions which make a risk less desirable than normal for its class.

SUBSTANDARD INSURANCE 
Insurance of persons who do not meet the standards set for insurance at regular rates.  Such a policy usually calls for an additional amount of premium.

SUBSTANDARD RISK 
A risk that is under average or impaired.

SUBSTITUTED SERVICE 
The service of process on a person other than the one named in the paper.  Under certain circumstance, when the party cannot be found, the court will order service upon someone else.

SUBTROPICAL RISKS 
An extra premium on life insurance policies issued to individuals in subtropical countries because of the higher mortality rates in those areas.

SUE AND LABOR CLAUSE 
A provision of marine policy that requires the insured to attempt salvage.  The insurance company pays not only the claim but also the salvage expenses.

SUICIDE CLAUSE 
A clause in an insurance policy that calls for payment in the event of a suicide, if that suicide occurs after a two-year period from the time the policy was written.

SUPERINTENDENT 
In some states, the official designation of the commissioner of insurance.

SUPERINTENDENT OF INSURANCE
A title used in some states for the commissioner of insurance.

SUPERSEDED SURETYSHIP 
When a company writes a bond to take the place of another which has been canceled, a rider should be attached (unless the bond itself contains a superseded suretyship provision) agreeing to pay losses that would have been recoverable under the first bond except that the discovery period has expired, and this rider is said to supersede the suretyship.

SUPERSEDED SURETYSHIP RIDER
A continuity of coverage clause in the form of a rider attached to a new fidelity bond, taking the place of another bond and agreeing to pay losses that would be recoverable under the first bond except that the discovery period has expired.

SUPPLEMENTAL AGREEMENT 
An agreement that is not a usual part of the policy contract as printed by the company but which is signed and attached to the contract by the company. It usually concerns a special method of settling the proceeds.

SUPPLEMENTAL SECURITY INCOME (SSI) 
The social insurance program of the Social Security Administration.  Under supplemental security income, cash benefits are paid to those covered individuals who are able to demonstrate a need and who qualify.

SUPPLEMENTAL TERM INSURANCE
A supplemental agreement available in some life insurance policies which provides for the payment of an additional specified sum in the event the insured dies during the given term period.
SUPPLEMENTAL UNEMPLOYMENT BENEFITS (SUB) PLAN 
An employer funded plan that supplements state unemployment insurance payments to workers during temporary periods of layoff.  Supplemental unemployment benefit plans are typically used in the automobile, steel, and related industries.

SUPPLEMENTARY CONTRACT 
An agreement by the company to retain the lump sum payable under an insurance policy and to make payments in accordance with the settlement option chosen.

SUPPLEMENTARY PAYMENTS 
The clause in a liability policy, which calls for the insurer to pay for defense costs, cost of court bonds, and interest on judgment, as well as judgments handed down by the court of law.

SURETY 
The corporation or individual guaranteeing performance or faithfulness under a bond.

SURETY BOND 
An instrument providing for monetary compensation should there be a failure to perform any specific acts within a stated period.
SURETYSHIP 
All forms of obligations to pay the debt or default of another.  Also, the function of being a surety.

SURFACE FIRE 
The most common forest fire that generally runs through the flash fuels that litters the forest floor.  A surface fire is generally fast burning and very hot, and it is easily influenced by wind. 

SURGEON'S LIABILITY INSURANCE POLICY 
A type of business insurance coverage.  

SURGICAL EXPENSE INSURANCE 
Health insurance policies, which provide benefits towards the physician's or surgeon's operating fees.  Benefits may consist of scheduled amounts for each surgical procedure.

SURGICAL INSURANCE 
Coverage for surgeons’ fees up to the amounts specified for various types of operations listed in the policy.  This coverage is often combined with a hospitalization policy.

SURGICAL SCHEDULE 
A list of cash allowances attached to the policy, which are payable for various types of surgery, with a maximum amount based upon the severity of the operation.

SURPLUS 
A company's surplus is the difference between its assets and liabilities.

SURPLUS SHARE REINSURANCE 
A pro rata insurance under which the reinsurer accepts that part of each insured exposure written in excess of a specified retention. Or, reinsurance for the amount of any insured exposure that exceeds the net limit retained by the ceding insurer, for which the reinsurer receives premiums and contributes to the payment of losses in proportion to its share of the exposure.

SURPLUS TO POLICY HOLDERS 
The total capital plus the unassigned (surplus) funds including voluntary and general reserve funds and special reserve funds not in the nature of liabilities.  Or, the amount beyond liabilities available to met obligations to policyholders.

SURRENDER 
To voluntarily give up possession.  With respect to insurance policies, the cancellation of the policy is often referred to as surrendering a policy.  Usually, there is some allowance for interest on the equity that has accumulated when the life policy includes some type of investment feature.

SURRENDER CHARGE 
The difference between the reserve on a policy and the amount of the cash surrender value. Under the standard nonforfeiture valuation laws, there is no direct surrender charge, the cash values being disassociated from the reserves and calculated directly.

SURRENDER COST INDEX 
The measure of the cost, including interest foregone, of an insurance policy if it is kept in force for a stated period and then later surrendered for its cash surrender value.

SURRENDERED POLICY 
A policy terminated because of nonpayment of premiums, for which there is a cash value or other nonforfeiture value available.

SURVEY 
An examination of the insurance requirement of a buyer and the report of such examination.  A study of a risk for underwriting or accident and occupational disease prevention purposes.

SURVEY AGENT 
An individual who is not permitted to write a policy but instead submits an application to his company.  The company then prepares the policy from the application.

SURVIVAL STATUTE 
Statutes in virtually all state and federal jurisdictions which provide that most rights and duties of a deceased person can be exercised by that person's estate or heirs.  Survival statutes allow the  deceased person’s rights and duties to “survive”, even though the person dies.

SURVIVORSHIP WHOLE LIFE 
Traditional whole life insurance with the death benefit payable at a second or subsequent death.

SUSPENSION PROVISION 
A clause in an insurance policy which temporarily suspends coverage if some specified condition occurs.  Coverage is restored if the condition is corrected.  For example, many commercial fire policies contain a provision that coverage is suspended during any substantial increase in hazard which is within the knowledge and control of an insured.

SWAP MATERNITY 
A type of group health insurance plan where immediate maternity coverage is granted.

SWEAT EQUITY 
Equity created in a property by the performance of work or labor by the purchaser or borrower.

SWITCH MATERNITY 
The situation which occurs when husbands of female employees are included in a health insurance as dependents in order for group health maternity coverage to apply.

SWORN STATEMENT 
A statement made under oath which may or may not be in writing.

SYNDICATE POLICY 
A contract of insurance carrying the name and risk of each participating syndicate member company.
SYSTEMATIC RISK 
A chance of loss that is predictable under relatively stable circumstances.  For example, fire and perils of nature, such as wind or flood, produce losses which, in the aggregate over time, can be accurately predicted despite short-term fluctuations in losses.

T

TABULAR MORTALITY
Mortality as shown on the mortality table in use, that is, expected mortality.

TACIT 
Silent and implied, arising without express contract or agreement.  For example, when a suspect is accused of setting the fire and he remains silent, this is sometimes referred to as a tacit confession.

TANGIBLE PROPERTY 
Property that, by its nature, may be felt or touched.  Generally land, fixed improvements, furnishings, merchandise, cash, and other items of capital used in carrying on an enterprise are considered tangible property.

Target Premium
The annual payment on a universal life contract based on non-guaranteed elements and which endows the contract at its maturity date (usually age 95). The premium is calculated by the insurer and may be more conservative than the minimum premium that could be illustrated under the product's current assumptions. The target premium may change from year to year as the insurance company's actual experience fluctuates.

TARGET RISKS 
Policyholders or prospects for insurance and whose business develops large premiums are considered targets for competing insurance agents and brokers.  This term is also used to describe risks of large value or limits and severe hazards that are difficult to insure or to reinsure.

TARIFF RATE 
The insurance rate established by the rating organization having jurisdiction over the class and territory.

TAX AND BOARD 
Percentages of the paid premium for state and local taxes and for the support of the various rating offices, bureaus, and rating boards.

Tax Basis
On a life insurance policy, the total premiums paid, less costs for additional benefits. The total premiums less dividends and cash surrenders received determine the policy's gain. On a non-modified endowment contract, the tax basis is recovered before the policy's gain is taxed as income.

Tax Deferral
Postponing the payment of income taxes until some point in the future, often at retirement.

TAX MULTIPLIER
A factor applied in retrospective rating to a basic premium to increase it to cover state premium taxes.

Tax Payer Identification Number (TIN)
The policy owner's Social Security number. The insurer must have a certified TIN to avoid backup withholding when there is taxable gain.
TAX PENALTY 
The extra charge or forfeiture of an amount because of delinquent payment of taxes.

Tax Qualified Plan
A retirement plan arrangement that allows an employee and/or employer to make contributions, often on a pretax basis, to an annuity.

Tax Reform Act of 1984 (TRA 84)
Legislation that refined the definition of a what qualifies as a life insurance company, raised taxes on life insurance companies beyond TEFRA, and defined requirements which a life insurance product must meet in order to receive favorable tax treatment.

Tax Reform Act of 1986 (TRA 86)
Legislation that eliminated nearly all tax shelters and many income tax deductions in exchange for lower tax rates for both individuals and corporations.

TAXABLE VALUE
The value set upon the property by which the tax levy is computed.  In some cases, the tax value may have only a small relationship to the market value, since the market value fluctuates and is not set in an arbitrary manner.

TAXING AUTHORITY 
A statutory authority invested in a governmental body to levy and collect taxes for public purposes.

TECHNIQUE FOR HUMAN ERROR PREDICTION 
A quantitative evaluation of the contribution of human error to product defects or to a product's failure to perform its intended function. 

TAX EQUITY AND FISCAL RESPONSIBILITY ACT OF 1982 (TEFRA) 
A federal revenue generating measure with far reaching implications for qualified pension plans, profit sharing plans, and group health care benefits.

TEMPORARY DISABILITY BENEFITS 
Weekly benefits payable to employees for non-occupational accidents and sickness.

TEMPORARY DISABILITY LAWS 
State laws that provide disability income for individuals who are disabled either on or off the job for a stated period of time.

TEMPORARY LIFE ANNUITY 
An annuity payable while the annuitant lives, but not beyond a specified period, such as five years.  No payments are to be made after the end of the stipulated temporary period or the death of the annuitant.

TEMPORARY PARTIAL DISABILITY
Under workers’ compensation insurance, this is a condition, which results in a partial loss of earning power but from which recovery can be expected.  Worker's compensation laws generally provide for compensation for temporary partial disability on the basis of a percentage of the difference between the employee's wages before the injury and what he can earn in his disabled condition.

temporary total disability 
Under workers’ compensation insurance, this is a condition which disables the employee from working, but from which complete or partial recovery can be expected, enabling him to return to employment.

Ten Day Free Look
The time period after the policy's delivery during which the insured can return the contract and receive a full refund of premiums paid. The policy is then void from the beginning. This provision is mandated by many states and in some cases is longer than ten days. Also referred to as the right to return provision.

1035 Exchange
An Internal Revenue Code provision that allows the tax free exchange of one insurance contract for another. The exchange is not taxable, and the tax cost basis of the old contract is carried over to the new one. However, the exchanged contracts must be similar products, and the insured and owner may not change.

TENANCY 
A holding in a state of tenure, or temporary possession of that which belongs to another.

TENANCY AT WILL
An estate which may be terminated by either the lessor or the lessee at any time.

TENANCY IN COMMON 
A form of estate held by two or more persons, each of whom is considered as being possessed of the whole of an undivided part.

TENANT 
One who holds property, houses, or land, owned by another, by payment of rent.  In more popular sense, a tenant is one who has the temporary use of real estate that belongs to another.  
TENANT’S POLICY 
A form of homeowners’ policy sold to people who rent, rather than own their own homes.

TENDER OF UNEARNED PREMIUM 
To tender means to offer to a person holding a claim or demand against him the amount of money that is due.  The portion of an unearned premium must be tendered in case of the termination of a contract before its full term has expired.  Therefore, the tender of this unearned premium should be made at the time of cancellation.  If the tender is refused, the exact amount should be offered and counted in the presence of the policyholder.  If the tender is still refused, such tender will be sufficient to maintain the cancellation.

TERM 
The period of time for which a lease or an insurance policy is issued.

Term Conversion
Many term policies come with conversion rights guaranteeing that, for a specified period of time, the policy can be converted to a permanent plan for the equivalent amount of coverage, without having to provide additional evidence of insurability. In some cases, the premium on the new policy will be based on the insured's age at the time of the original purchase.

Term life insurance
Life insurance that provides for payment of the face value only if an individual dies within a specified time and if the policy is in full force.  Term life policies offer protection during a certain number of years, but they expire without policy cash value if the insured survives the stated period.  These policies typically do not provide a cash surrender value.

TERM LOAN 
A loan by insurance companies or banks for a period generally in excess of five years.  The loan is made to business firms and typically has an agreement on the part of the debtor to restrict his performance to an area circumscribed by various ratios.

TERM NONCANCELLABLE 
A term sometimes applied to policies, which omit the cancellation provision but are not guaranteed renewable.  These policies are noncancellable for the term of the policy.

TERM OF POLICY 
The period for which the policy runs.  This usually refers to the period for which a premium has been paid in advance.  In some instances, it may be for a year or longer even though the premium is paid on a semi-annual or other basis.

TERM POLICY 
Usually, a fire or casualty policy written for more than one year.  However, see the definition above with respect to life insurance.

TERM RATE 
The price per $100 of insurance for insurance lasting a year or longer.  Short-term rates refer to the price per $100 of insurance for periods lasting less than a year.

Term Rider
A rider attached to a basic policy to provide additional coverage in the form of term insurance. Dividends earned on the basic plan may be designated to replace the term insurance with permanent paid up additions.
TERM RULES 
The various formulas for computing the application of a rate where the period of the policy is for over one year.  For example, a three-year rate would not be three times the yearly rate because of reduced overhead costs.

TERMINATION 
Default in premium payment rendering the death or endowment benefits of the policy void and resulting in the application of one of the nonforfeiture values.

Termination Dividend
A dividend paid at the death of the insured or the maturity or surrender of the policy. It does not enhance the policy's loan value, nor can it be placed under the dividend options. Also referred to as a maturity dividend or settlement dividend.

THEATER PUBLIC LIABILITY INSURANCE
A form of public liability insurance for theaters.

THEATRICAL FLOATER 
Inland marine coverage for theatrical properties, costumes, and scenery against loss or damage that results from other than wear and tear.

THEFT 
The taking or removing of property with the intent to deprive the rightful owner.  Theft includes such crimes as robbery, burglary, and larceny.

THIRD DEGREE Burns
Considered as full thickness burns, third degree burns are those where the burn agent has affected all layers of the skin.

THIRD PARTY 
One who is not a party to an agreement or to a transaction but who may have rights therein.

THIRD-PARTY ACTION 
An action brought by a defendant against another party when he, the defendant, is not a party to an insurance arrangement.  For example, an injured workman may bring a third-party claim against a principal contractor if he feels the principal contractor is liable for his loss, even though the insurance arrangement is between the principal contractor and a subcontractor.

THIRD-PARTY ADMINISTRATION
The administration of a group insurance plan by some person or firm other than the insurer or the policyholder.

THIRD-PARTY INSURANCE 
Protection for the insured against liability arising out of bodily injury to others or damage to their property.  Insurance other than life against loss due to liability to third parties, or for the benefit of third parties.

third pARTY OVER ACTION 
A law suit brought by a third party against the employer of an injured employee after that third party has been held legally responsible for the employee's work related injury or disease.  A third party over action takes place when an employee sues and recovers from a third party, and the third party then sues the employer for at least partial repayment based on the employer's alleged contributory negligence or other wrong doings.

THREE D POLICY (DDD)
A fidelity policy against dishonesty, destruction, and disappearance and covering losses of such things as money and security, depositors' forgery and/or counterfeiting.

THREE-FOURTHS VALUE CLAUSE 
A clause in a policy contract providing that the insurer will not pay on any loss more than three-fourths of the actual cash value of the property covered by the contract at the time of loss.

THRESHOLD
In no fault insurance, this term refers to the minimum extent of injury, which a claimant must suffer before being entitled to bring a tort suit against a wrong doer causing the injury.  If the injury does not exceed the threshold, the injured claimant can receive only no fault (the other first-party insurance) benefits.  The various state automobile no fault statutes establish different thresholds, and some require medical expenses of a given dollar amount or physical injuries of a given severity. 

TIME ELEMENT INSURANCE 
A type of insurance contract that pays when the policyholder has lost the use of the insured property for a period of time.  The claim payment is based on the period of time necessary to correct the situation.

TIME IS OF THE ESSENCE 
When included in an insurance policy contract, this phrase means that performance within a specified time is a material element of the transaction.

TIME LIMITS 
The period of time within which notice of claim or proof of loss must be filed.

TIME POLICY 
An ocean marine policy covering the insured's interests in voyages which begin during the policy period.   A time policy is appropriate for a shipper of many cargoes or the owner of several vessels.  It does not cover losses to voyages which were underway when the policy period began but, as long as the voyage began during the policy period, it covers losses to voyages which conclude after the policy period ends.

TIME WEIGHTED AVERAGE 
A measure of the concentration of a potentially harmful airborne chemical or of physical agents during a specified internal, such as an eight hour workday.

TITLE DEFECT 
Any legal right held by others to claim property or to make demands upon an owner.

TITLE EXCEPTION 
An exception appearing in a title policy against which the company does not insure.

TITLE GUARANTEE POLICY 
Title insurance provided as an alternative to an abstract of title.  The insurance is written by a title insurance company.  Under a title guarantee policy, an agreement binds the insurer to indemnify the insured for such losses as specifically described by reason of defects in the title of the real estate, providing there are no exceptions listed in the title insurance policy.  Since the title insurance company investigates the property prior to issuing a policy, it serves as an indication of their mature evaluation of the risk involved.

Title insurance
Title insurance is insurance against loss or damage resulting from failure of title to a particular parcel of realty.  Title insurance also refers to such a loss from the enforcement of liens existing against it at the time of the insurance.  It is taken out by the purchaser of the property or by the one loaning the money on the mortgage.  It is furnished by title companies who are specially organized for this purpose.

TITLE INSURANCE POLICY 
A contract by which the insurer, usually a title insurance company, agrees to pay the insured a specific amount for any loss caused by defects of title to real estate, wherein the insured has an interest as the purchaser, mortgagee, etc..

TITLE I 
The section of the Federal Housing Authority insurance program for home improvements and mobile homes.

TORNADO
A violent wind associated with a funnel shaped cloud that moves along a fairly narrow path.

TORNADO INSURANCE 
Contractual coverage against loss caused to property by unusually high winds.
TORT 
A wrongful act, injury, or damage committed on a person, but one that does not involve a breach of contract for which a civil action may be brought.

Total Cash Value
On life insurance sales illustrations, the combinations of the guaranteed and nonguaranteed portion of the cash value. The term refers to the cash value after the deduction of any surrender charges.

TOTAL COMPENSATION 
The complete pay package for employees including all forms of money, benefits, services, etc. 

TOTAL DISABILITY 
Under accident and health insurance, this is a condition, caused by either injury or sickness which wholly, necessarily, and continuously prevents an insured from performing any and every duty pertaining to his occupation.

TOTAL LOSS 
The complete destruction of the property insured.  Or, a claim of sufficient size to require settlement of the maximum amount of insurance on the covered property.

TOTAL LOSS ONLY INSURANCE (TLO)
Property insurance, most often used for ocean marine exposures, under which the insurer pays only if a total loss occurs, and then for the full amount of the applicable insurance.  Therefore, under a total loss only policy, the insured retains, or otherwise finances, all partial losses.

TOURISTS' BAGGAGE FLOATER 
A type of all risk personal insurance on personal effects.  Also referred to as a tourist's floater.

TOWING CHARGES 
The expense of towing a disabled or damaged automobile from the place of accident to a garage.

TOWING COVERAGE 
Insures against charges for towing and road service at the place of disablement, with a maximum amount stipulated for each occurrence.

TOWNHOUSE 
A residential unit on a small lot which has coincidental exterior limits with other similar units.  Title to the unit and its lot is vested in the individual buyer along with a fractional interest in common areas, if any.

TOXIC 
Any substance, other than a radioactive substance, which has the capacity to produce personal injury or illness through ingestion, inhalation, or absorption through any body surface.

TRACTOR TRAILER 
A  motor truck which is used to tow or pull a trailer.
TRADE LOSS 
For commodities that are shipped in bulk, the loss of that percentage of a shipment which is considered normal and, therefore, excluded from insurance.

TRADITIONAL NET COST 
A measure of the surrender cost of a life insurance policy that does not consider the cost of the interest that has been foregone.

Transfer for Value
Transfer of the ownership of a life insurance contract for valuable consideration. At the death of the insured, this results in reportable ordinary income to the extent that the death benefit exceeds the new owner's tax basis. There are certain exceptions to this rule: transfers to the insured, a corporation to which the insured is an officer or share holder, to the insured's partner or partnership, a transfer by gift, and a transfer where the transferee's basis is determined in whole or in part by reference to the transferor's basis.

TRANSFER OF RISK 
Shifting of the legal responsibility for loss or the financial burden of loss, either through insurance or noninsurance transfer.

TRANSFERABILITY 
Any arrangement under which the accumulated benefit credits of a terminating participant, or their actuarial value, are transmitted from one plan to another or to a central agency.

TRANSFEREE 
An organization, person, or other entity that receives a transferred exposure.

TRANSFEROR 
An organization, person, or other entity that transfers an exposure to another.

TRANSIT POLICY 
Contractual coverage for loss or damage to merchandise while it is being moved.

Transition Benefit
In disability insurance, a benefit which, under specified conditions, provides a proportionate benefit for up to 12 months following the insured's recovery from a total or partial disability.

TRANSPORTATION INSURANCE 
Insurance against loss to personal property while in the course of transportation.  Also referred to as transportation floater insurance.

TRAUMA 
A body injury produced by violence of any thermal, chemical, or other extrinsic agent.  Or, the condition resulting from the injury. A startling experience that has a lasting effect on mental life; shock.

TRAUMATIC INJURY 
Damage of a physical nature caused by accidents while traveling, usually by common carrier.

TRAVEL ACCIDENT POLICY 
A policy limited to indemnities for accidents while traveling, usually by common carrier.

TRAVEL TICKET POLICIES 
Accident insurance issued for the duration of a specified trip by a common carrier.  Travel ticket policies are usually separate policies and generally issued at a ticket window or station, often through automatic vending machines.

TREATY 
A contract of reinsurance between various insurance companies.

TREATY REINSURANCE 
Reinsurance of specified types or classes of insured exposures, which are automatically ceded and accepted within the terms of the reinsurance contract, called a treaty, without evaluation of each exposure.  The reinsurance takes effect as soon as the primary insurance is in force.

TRIP TRANSIT INSURANCE 
Transportation insurance against loss to personal property on a single trip between two specified points.

TRIPLE PROTECTION 
A type of protection which is created when whole life and term life insurance are combined.  The term portion of the insurance, which terminates at a certain age, is generally twice as large in dollar amount as the whole life.

TRUCKMAN’S LIABILITY INSURANCE 
Contractual coverage which indemnities the operator or owner of a truck or trucks when used to carry goods of others for hire.  Truckman’s liability insurance protects against liability, which the truckman may have resulting from damage or loss that has occurred to the transported property.  This type of liability insurance is required by the Interstate Commerce Commission for common carriers under their supervision.

TRUE GROUP 
A form of group insurance whereby individuals are covered by one master policy and separate individual contracts are not issued.

TRUST 
An equitable right or interest in property distinct from the legal ownership thereof.  A property interest held by one person for the benefit of another, usually under temporary or conditional terms such as when ownership is transferred to a trustee until an heir becomes of legal age.

TRUST AGREEMENT 
A supplemental settlement agreement, which distributes the proceeds in a special way, similar to the way a fiduciary trust does.

TRUST DEED 
A deed which establishes a trust, conveying legal title of property to a trustee and states his authority and the conditions which bind him in dealing with the property held in the fiduciary capacity as a means to secure the lenders against loss.  A trust deed may serve a similar function to a mortgage.

TRUST INDENTURE 
The buy sell agreement should contain a provision for naming the beneficiary of the insurance policy.  If there is a third-party trustee to the agreement, the trustee is named as the beneficiary.  This agreement is drawn as a trust indenture, and the provisions follow the general buy sell agreement, modified by the trust provisions.  These provisions specify that the trustee is made beneficiary custodian of the policy.

TRUST clause or COMMISSION CLAUSE 
A clause extending the coverage of the insurance contract to the insured's interest in a legal liability for property belonging to others and held by the insured interest, on commission, on storage, for repairs, or otherwise held.

TRUSTEE 
One who holds the title to the property for the benefit of another.  This may be either an individual or a company such as a bank and trust company.  Since the trust company has a more permanent existence than the life of an individual, it will frequently be combined with an individual trustee in a trust procedure.

TURNOVER RATE 
The rate at which employees terminate covered service, other than by death or retirement.  Expected future turnover can be taken into account in translating contributions into benefits.

TWISTING 
By twisting, an agent might attempt to convince a policyholder to cancel one policy and purchase the policy he is selling.  Twisting usually causes considerable losses, especially if the policy canceled is a whole life policy.  The practice of inducing any policy holder to lapse or cancel a policy for the purpose of replacing such policy with another to the detriment of the policy holder.

U

Ultimate Mortality Table
The mortality charges employed when the insured reaches the end of the select period after original underwriting.

UNALLOCATED BENEFIT 
A reimbursement provision, usually for miscellaneous hospital and medical expenses, which does not specify how much will be paid for each type of treatment, examination, dressing, etc., but which sets a maximum which will be paid for all such treatments.

UNAUTHORIZED COMPANY 
An unlicensed insurer not licensed in a state.  

UNAUTHORIZED INSURANCE
A policy of insurance written by a company not licensed by the state or country in which the policy has been sold, that is, insurance with a nonadmitted insurance carrier.

UNBALANCED IMPROVEMENT 
An improvement which is not the highest or best use for the site on which it is placed.  The moral hazard and adverse selection may result from insurance of unbalanced risks.

UNBUNDLING 
Offering various insurance related services separately or in any combination desired by the buyer.  Insurance related services include payment for losses, claims adjusting service, loss control advice and service, and risk management advice and services.

UNCONDITIONAL VESTING 
A form of vesting in a contributory plan under which entitlement to a vested benefit is not conditional upon the non-withdrawal of the participant's contributions.

Unconscionable conduct 
Unconscionability on the part of an agent takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a grossly unfair degree or results in a gross disparity between the value received and the consideration paid.

UNDERINSURANCE 
Insurance which is not sufficient to cover a loss.  A condition in which not enough insurance is carried to cover the insurable value, and especially to satisfy a coinsurance clause.  Or, insurance less in amount than the possible loss to which it applies.

UNDERINSURED MOTORIST PROVISION 
A type of coverage for a situation in which the motorist does meet the state law requirements for liability insurance but a judgment is rendered in excess of these limits.

UNDERLYING
The amount of insurance or reinsurance on a risk, which attaches before the next higher excess layer of insurance or reinsurance attaches.

UNDERWRITE 
To determine whether an individual is insurable under the policy for which he has applied and at what premium rate.
underWRITER 
The insurance company or group that underwrites or insures a particular risk.  The individual whose duty it is to determine the acceptability of insurance risks.

UNDERWRITERS LABORATORIES, INC.  
A not for profit corporation having as its sole objective the promotion of the public safety through conduct of “scientific investigation, study, experiments, and tests, to determine the relation of various materials, devices, products, equipment, constructions, methods, and systems to hazards appurtenant thereto or to the use thereof affecting life and property and to ascertain, define, and publish standards, classifications, and specifications for materials, devices, products, equipment, constructions, methods, and systems affecting such hazards, and other information tending to reduce or prevent bodily injury, loss of life, and property damage from such hazards".  It has no capital stock, nor shareholders, and exists solely for the service it renders in the fields of fire, crime, and casualty prevention.

UNDERWRITING 
The process of selecting risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk.

UNDERWRITING AUTHORITY 
The limit on decisions an underwriter can make without receiving approval from someone at a higher level.

UNDERWRITING EXPENSE RATIO 
An underwriting expense ratio represents the percentage of a company's net premiums written which go toward underwriting expenses, such as commissions to agents and brokers, state and municipal taxes, salaries, employee benefits and other operating costs.  The underwriting expense ratio is computed by dividing underwriting expenses by net premiums written.  For example, a company with an underwriting expense ratio of 29.3 percent is spending more than 29 cents of every dollar of net premiums written to pay underwriting costs.

UNDERWRITING GAIN 
An amount equal to 100, less the total of the loss and expense ratios.

UNDERWRITING GUIDE 
An underwriting guide details the underwriting practices of the insurance company and provides specific guidance relating to the way underwriters should analyze all of the various types of applicants they might encounter.

UNDERWRITING LOSS 
An underwriting loss occurs when the combined loss and expense ratio is greater than 100 percent.

UNDERWRITING PROFIT 
That portion of the earnings of an insurance company that comes from the function of underwriting.  Underwriting excludes the earnings from investments either in the form of income from securities or sale of securities at a profit.  The remainder is found by deducting incurred losses and expenses from earned premiums.

UNEARNED INCREMENT 
An increase in the value of property caused by such things as population increase, community expansion, increased desirability of the sites, the chance location of some large project nearby.

UNEARNED PREMIUM 
That part of the original premium not yet earned by the insurance company and which is, therefore, due to the policyholder if the policy should be canceled.

UNEARNED PREMIUM INSURANCE 
Insurance against loss by the insured of unearned premium due to payment of a claim made prior to the end of the term for which the premium was paid.

UNEARNED PREMIUM RESERVE 
The fund set aside by an insurance company to provide for the payment of unearned premiums on canceled policies.

UNEARNED REINSURANCE PREMIUM 
That part of the reinsurance premium applicable to the unexpired portion of the policies reinsured.

UNEMPLOYMENT INSURANCE 
A type of social insurance for unemployed covered individuals that are paid through state organizations after a waiting or qualifying period.

UNIFORM COMMERCIAL CODE (UCC) 
A commercial and comprehensive law which regulates commercial transactions.

UNIFORM PROVISION 
A set of provisions, the wording of which is specified by law, which must be included in certain policies issued in a jurisdiction.  Uniform provisions generally set the operating conditions of the policy.  'They have been adopted and recommended for passage in all states by the National Association of Insurance Commissioners to replace the older standard provisions.

UNILATERAL 
A term associated with or considering only one side of a matter or question.  Pertaining to, occurring on, or affecting one side only.

UNILATERAL CONTRACT 
A contract in which one party makes an express engagement or undertakes a performance, without receiving in return any express engagement or promise of performance from the other.
UNINSURABLE RISK 
A risk which is not acceptable for insurance due to excessive risk.

UNINSURED PLAN 
An arrangement whereby an employer undertakes to provide health benefits to employees outside of an insurance contract.  The plan may be administered by the employer or by an insurance company or other organization.

UNISEX RATING
Using the same insurance rate for males and females.

UNIT BENEFIT PLAN 
An arrangement for purchasing periodically an amount of annuity such as a percentage of wages as part of a retirement pension.

universal life insurance
Universal life insurance is a type of insurance that combines term insurance with an investment program.  It is a life insurance policy in which premiums, less expense charges, are credited to a policy account from which periodic charges for life insurance coverage are deducted and to which interest is credited.  Usually, the policyholder can vary the amount and timing of premium payments and change the amount of his insurance.

UNIVERSAL MERCANTILE SCHEDULE 
A technique for computing fire insurance rates, which has been, adopted by other types of insurance rate makers.

Universal Variable Life
A universal life policy that offers the policy owner a choice of variable, separate, investment accounts in which to deposit premiums. The variable account performance is not guaranteed and policy values will increase or decrease accordingly. Administrative procedures must comply with Securities and Exchange Commission requirements.

UNOCCUPIED 
This term means furnished but not lived in.  The standard fire insurance policy prohibits vacancy and unoccupancy beyond a specified period. 

UNSAFE	
This is a term used in schedule rating to describe a condition for which a penalty is applied and which can usually be corrected.  With the removal of the charge and condition, there is a reduction of the insurance rate.

UNSATISFIED JUDGMENT FUNDS 
A fund created by state law in several states.  Reimbursement is made to those persons having claims arising out of automobile accidents and who have been unable to collect from the party responsible for the accident because that party was not insured or is financially not in a position to pay.
UNSYSTEMATIC RISK 
A chance of loss that is highly unpredictable in the aggregate because it results from forces difficult to predict.  For example, recession, unemployment, epidemics and war related perils are unsystematic.

Update Offer
An offer from the company to its existing policy owners to amend their policies by adding new provisions or other features available on newer contracts.

USE 
The purpose for which a property or an automobile will be used.

UTMOST GOOD FAITH 
A phrase in a legal document which calls for the highest standards of integrity on the part of the insured and the insurer.

V

VACANCY AND RENT LOSS 
Vacancy and rent loss refers to any type of rental property or unit that is unrented.  In the estimate of gross income of a property, an allowance or discount is typically made for vacancy.  Rent loss can result from several factors such as a loss in income during periods of remodeling or rehabilitation, low occupancy rates, a tenant's inability to pay, etc.

VALUATION 
An estimate or act of processing of value.  Valuation is often accomplished through the process of an appraisal.

VALUATION CLAUSE 
A clause in a marine policy in which the insured and insurer agree on the value of the covered property.

VALUED POLICY 
A policy which provides that a special amount shall be paid in event of a total loss of the property.  Most fine arts and some other inland marine policies have this provision.  In most states, it is illegal to have valued policy provisions associated with fire insurance.  However, in other states, valued policy laws require that fire insurance on buildings be treated as valued policies.

VALUED POLICY LAW 
State law requiring an insurance company to pay the total face amount of a policy in the event that the insured has a total loss.

VANDALISM AND MALICIOUS MISCHIEF
The willful injury or destruction of property, for example, throwing stones rocks through the window of a home and damaging the home’s furnishings.  Vandalism and malicious mischief can be insured against by extending coverage of a fire insurance policy.
VANDALISM INSURANCE POLICY 
A type of insurance coverage protecting against loss caused by the willful injury or destruction of property.

VARIABLE ANNUITY 
A variable annuity is an annuity contract set up to provide a variable monthly income after retirement.  The payments are predicated on the performance of the investment.  The amount of the initial monthly income payable at retirement is determined by the guarantee in the contract, the total value of the fund at retirement, and actuarial factors.  The subsequent payments may fluctuate based on investment performance.

VARIABLE CONTRACT 
A life insurance or annuity contract under which benefits are not fixed but vary with the market value of a specified group of assets in which the premiums have been invested.

VARIABLE LIFE insurance
A type of life insurance where the premiums remain level, and the face amount, subject to a minimum, and cash value may fluctuate based on investment performance, policy owner decisions, and investment vehicles.

VARIABLE LIMIT 
With respect to property insurance, the limit that automatically increases at each policy anniversary, unless the insured specifically rejects the increase, in order to increase the amount of coverage in keeping with the average annual inflation rate.

VARIABLE RATE MORTGAGE 
A mortgage agreement that allows for adjustment of the interest rate in keeping with a fluctuating market and the terms agreed upon in the note.

VEHICLE IDENTIFICATION NUMBER (VIN) 
The vehicle identification number is the serial number of a car, usually found on the doorframe or dashboard of a car on the driver's side.

VENDEE 
One who purchases any kind of property, especially real estate.

VENDOR 
One who sells any kind of property, especially real estate.

Vendor’s LIEN 
An equitable lien on which the vendor of land has for the unpaid purchase money.

VERBAL THRESHOLD 
With respect to no fault auto insurance, in states which apply the verbal threshold, victims are allowed to sue in tort only if their injuries meet certain verbal descriptions of the types of injuries that should, as a matter of policy, render one eligible to seek to recover for pain and suffering in a cause of action in tort.

VERIFIED INFORMATION 
Information that tells the Who, What, When, Why, How and Where of the matter under investigation.  The truth is established by a statement made by a reliable individual having direct personal knowledge of the facts, authenticated documents, physical evidence, etc.

VESTED BENEFIT 
The payment of a benefit which is not contingent upon a participant's continuation in specified employment.

VESTING
The attainment by a participant of a benefit right, attributable to employer contributions.  Vesting is not contingent upon a participant's continuation in that employment.

VEXATIOUS DELAY PENALTY 
A statute which assesses a fixed percentage penalty for the frivolous or vexatious delay by an insurance company beyond a stated time, usually 30 to 60 days, for the payment of a claim of loss.  
In some states which have a vexatious delay penalty statute, an insurance company which denies liability for a fire loss and loses the case in court may be penalized by having to pay as much as 25 percent, in addition to the original claim, plus interest.

Viatical Settlement 
The proceeds from the sale of a life insurance policy to a third party by a terminally ill individual.

VICARIOUS LIABILITY
Liability imposed upon a person even though he is not a party to the particular occurrence, for example, the owner of a motor vehicle is vicariously responsible for injuries even though he is not driving the car at the time of the occurrence.  Because of the injury causing potential of certain products, the courts have often been called upon to deal with the negligence of manufacturers in connection with the acts of their employees.  For example, if a druggist’s employee negligently offers an injurious drug instead of the one asked for or where he fills a prescription negligently, the druggist or employer is responsible the injured person.  This holds true even if the employee was competent and experienced.  This is termed vicarious liability.  

VITAL STATISTICS 
Public records kept by a state, city, or other governmental subdivision under a statutory provision of births, marriages, diseases, deaths, etc.

VOIDABLE CONTRACT 
A valid contract which can be rescinded by one of the parties due to such grounds as fraud, duress, insanity, incompetence, or minority.
VOLATILITY 
Volatility is governed primarily by boiling, although nearly all-combustible liquids produce flammable vapors at temperatures below the boiling point.  The volatility of liquids is important because all flaming fires are reactions between the oxygen in the atmosphere and gaseous products.

VOLUNTARY COMPENSATION INSURANCE
A type of insurance that is found in some states by which the insurance pays insured employees who are not subject to compensation law benefits.  In some states, the compensation law applies only to employees engaged in certain hazardous occupations.  Under a voluntary compensation policy, an employee engaged in a nonhazardous occupation could receive the same benefits as are provided by the compensation law.

VOLUNTARY CONVEYANCE 
A mortgagor's act of conveying title on a mortgaged property to the holder of the mortgage in order to avoid foreclosure.

VOLUNTARY MARKET 
The market where a person seeking insurance obtains the insurance with no help from the state and through an insurer of his own selection.

VOLUNTARY RESERVE 
This term refers to the designation of surplus for particular purposes.

W

WAITING PERIOD
Usually found in health insurance, the waiting period is the time between the start of a disability or illness and the start of benefits, as provided in the policy.

WAIVER 
The surrender of a right or privilege which is known to exist.  An excuse from future premiums usually during the total and permanent disability of the payor.

WAIVER OF COINSURANCE 
A common fire contract clause that states that coinsurance does not apply unless the amount of the loss exceeds a certain amount.

WAIVER OF LIEN 
The written evidence from the contractor, or any supplier of material, surrendering the right of lien in order to enforce collection of debt against property.

WAIVER OF PREMIUM 
A provision that under certain conditions, an insurance policy will be kept in full force by the insurance company without the payment of premiums.  It is used most often as a total and permanent disability benefit, but it may be available in certain other cases.
WAIVER OF RESTORATION PREMIUM 
A provision in certain contracts, especially in bonds, wherein the company agrees not to charge any additional premium for reinstating the contract after loss has occurred.

WAIVER OF SUBROGATION 
A voluntary relinquishing, before a loss occurs and by an insurer, of rights which, after a loss, the insurer may become subrogated.  For example, under an insurance policy covering the interests of two or more parties who may later become involved in a legal dispute, the insurer will often waive the rights to which it may become subrogated because of the wrong doing of another insured.

WAR CLAUSE 
A clause in an insurance contract relieving the insurer of liability, or reducing its liability, for loss caused by war.

WAR RISK CLAUSE
Part of an insurance contract that limits coverage.  In the event of loss due to war, the insurance company does not accept liability for loss claims.

WAR RISK INSURANCE
Coverage against damage or loss caused by enemies while at war.  Commercially, war risk insurance is written by marine companies on vessels.

WAREHOUSE TO WAREHOUSE CLAUSE 
A marine cargo clause which provides coverage from the originating warehouse to the terminating warehouse.

WAREHOUSEMAN’S LIABILITY INSURANCE POLICY 
A type of business insurance protecting warehousemen from liability.

WAREHOUSING 
This term refers to the borrowing of funds by a mortgage banker on a short-term basis at a commercial bank using permanent mortgage loans as collateral.  This is essentially a form of interim financing which is used until the mortgages are sold to the permanent investor.

WARRANT 
To engage or promise that a certain fact or state of facts, in relation to the subject matter, is and shall be as it is represented.  

WARRANTED VALUE
Value can be warranted only to the extent that it is dependent on services or benefits that will or could actually be received by the owner.

WARRANTIES AND REPRESENTATIONS
A promise that a proposition of fact is true.  For example, all statements made by the applicant in connection with application for insurance are considered, in the absence of fraud, to be warranties or representations.
WARRANTY 
The statement by an insured, and this truth becomes a condition of the validity of the policy.  Also, a statement or stipulation in a policy representing the existence of a fact or a condition of the subject of the insurance which, if untrue, will void the policy.

WARRANTY DEED 
A deed by which a freehold is guaranteed in writing by the grantor and his successors.  Also, a written instrument by which a real estate is created or alienated and whereby the grantor, his heirs, or his successors guarantee the freehold.

WARRANTY, IMPLIED 
Implied warranties are generally classified as either warranties of merchantability or warranties of fitness for the particular purpose.  An implied warranty rests on the foundation of business ethics.  For example, the manufacturer of an article that, under certain conditions, may be dangerous, must give adequate warning.  When a product is sold without this adequate warning, there is the breach of warranty of merchantability.  Contrary to this concept of duty to warn, when a product is fit for its intended use, it is considered merchantable.  It does not cease being merchantable because it does not carry a warning.  The implied warranty of merchantability does not require the manufacturer to warn of dangers that are unknown and not discoverable.  Therefore, the warranty is implied.

WARSAW CONVENTION AGREEMENT
An international agreement that established limits of liability of air lines operating international flights for baggage loss or damage or for bodily injury or death of passengers.

WATCHMAN CLAUSE 
A phrase used in insurance contracts which provides for lower insurance rates and premiums on properties that are protected by a watchman than those which are not protected.

WATER DAMAGE INSURANCE POLICY 
A type of business insurance coverage protecting against loss due to specified damage caused by water.  A water damage insurance policy is contractual protection against damage or loss that results from accidental presence of water where water is not supposed to be.

WATER FLOW ALARM 
An alarm which sounds when a fire suppression sprinkler system begins to discharge in order to serve as a fire alarm.  If there is no fire, the alarm signals the inappropriate discharge of the sprinkler system.

WEDDING PRESENT FLOATER 
Contractual insurance protection of almost all risks for wedding presents for a stated period of time before and after the wedding.

WEIGHT AND HEIGHT TABLE 
A table of statistics giving such information as average weight and height for men and women by age.  Weight and height tables may be prepared by the Actuarial Society of America and the Association of Life Insurance Medical.

WELFARE PLAN 
A plan that provides medical, surgical,, or hospital care of benefits in the case of sickness, accident, disability, death, or unemployment.  Under ERISA, a welfare plan may also include other benefits such as funded vacation, scholarship plans, etc.

WHOLE COVERAGE 
Whole coverage is any form of insurance that provides for payment of all losses without any deduction, as contrasted with a deductible policy.

WHOLE DOLLAR PREMIUM 
A method by which the premium for each exposure is rounded to the nearest dollar for each coverage or each endorsement.  For example, for purposes of this rule, an amount of $.51 is considered $1.00. 

WHOLE LIFE INSURANCE
Whole life coverage is intended to run for the entire life of the insured, and the proceeds are paid upon the death of the insured.  The payment of the proceeds is certain.

WHOLESALE INSURANCE 
A modification of a group policy to a number of employees as defined in state statutes, typically between 25 and 50 employees.  So, instead of a master policy, individual policies are issued.

WILL 
An instrument, almost always in writing, which has been prepared by an individual in contemplation of his death and in which instructions for the disposition of his estate are contained.

WILLFULNESS 
Generally, willfulness indicates a bad or a corrupt purpose, an evil intent without reasonable grounds to believe that the action is lawful.  Therefore, willfulness usually conveys the idea of legal malice in a greater or lesser degree. For example, a requirement of arson is “willful malicious burning”.

WINDSTORM INSURANCE POLICY 
A type of business insurance coverage against loss due to windstorm.  A windstorm insurance policy is contractual protection against loss or damage caused by cyclones, hurricanes, and high winds.

WITHOUT PREJUDICE 
When employed as part of a nonwaiver agreement, this phrase holds that the insured who signs the agreement cannot legally construe certain actions, such as the determination of the value of a claim by the insurance company, to be an admission of liability on their part.

WITHOUT RECOURSE 
This term is used in endorsing a note or a bill to denote that the future holder is not to look to the endorser in case of nonpayment.

WORDS, ACTIONABLE PER SE 
With respect to the law of libel and slander, actionable words per se imply damage.  Examples of actionable words per se are words, which import a charge of some punishable crime or some offensive disease, impute moral turpitude, or tend to injure a party in his trade or business.

WORK AND MATERIALS CLAUSE 
A common provision of fire insurance policies which permits the insured to store, process, and use material and handle these in the manner customary for his line of business.

WORKERS' COMPENSATION 
Each state has its own workers' compensation statutes.  Workers’ compensation laws have the objective of providing cash payment or medical care to cover health services for workers injured in the course of their employment.  They also provide rehabilitation services to restore workers to their fullest economic capacity.  Most laws provide for compulsory insurance.  The awards are usually fixed according to the nature of the disability and in terms of days' or weeks' earnings.  Under workers’ compensation statutes, no lawsuit is necessary, nor is it necessary that the negligence of the employer be proved.  All workers’ compensation benefits are financed by employers.

WORKERS’ COMPENSATION CATASTROPHE COVERAGE 
A primary insurer's purchase excess of loss reinsurance to cover their unlimited compensation and medical liability as a result of the workers’ compensation laws in many states.

WORKERS’ COMPENSATION INSURANCE POLICY 
A type of business insurance coverage protecting an employer against liability imposed by a workers’ compensation law.

WORKMEN'S COMPENSATION LAW 
A statute imposing liability on employers to pay benefits and furnish care to employees injured and to pay benefits to dependents of employees injured or killed in the course of and because of their employment.  Under these laws, the employer is generally relieved of liability for common law damages.

WORKING CAPITAL
Liquid assets available for the conduct of daily business.

WORKING CAPITAL RATIO
The ratio of current assets to current liabilities.  Working capital ratio is one of the most commonly used ratios to indicate a company's financial position or strength.

WORKING COVER
An excess reinsurance contract which provides coverage in certain areas in which the number of losses has been anticipated.

WORLD WIDE COVERAGE
A clause found in some policies that provides coverage in any place in the world.  Jewelry, fur, personal effects, and personal property floaters may contain this clause.

WRAP AROUND 
A mortgage term used to describe the securing of a debt which includes the balance due on an existing senior mortgage and an additional amount advanced by the wrap around mortgagee.  The wrap around mortgagee makes the amortizing payments on the senior mortgage.

WRIT OF CERTIORARI 
An order which is used when the court has discretion on whether or not to hear an appeal.  If the writ is denied, the court refused to hear the appeal, and the judgment stands unchanged.  

WRIT OF ERROR 
A writ directed to the judges of a court of record commanding them to examine the record or to send it to another court of appellate jurisdiction.

WRIT OF HABEAS CORPUS 
A name given to a variety of writs having their objective to bring a party before a court or a judge.  Literally, from the Latin, the term means “You have the body”.

WRIT OF MANDAMUS 
A writ issued by any court that orders the performance of a duty.  For example, an individual requesting a hearing before a zoning board may go to a court for help if the board has evaded his request by postponing hearings.

WRITTEN BUSINESS 
Those applications that have been signed by the applicant, but on which no premiums have yet been paid.

WRONGFUL ABSTRACTION 
This term refers to all forms of stealing and is generally used synonymously with theft. It is by means of theft and wrongful abstraction that the insured is protected from the wrong doer who gains admission to the locked premises by use of a key or who opens the safe by discovering the combination.

WRONGFUL DEATH ACTION 
Civil suit brought by survivors against a party believed to be responsible, by negligence or by intention, for another's death.  In a few states, amounts recoverable for wrongful death are subject to statutory minimums or maximums.

Y

YACHTS FIRE COVERAGE 
A fire coverage, rather than a marine risk, that is written on a standard fire insurance policy but issued through the marine department of the insurer, which has an endorsement covering a ship ashore or afloat.

YACHTS, PROTECTION AND INDEMNITY 
Protection of the yacht owner from liability for loss of life and personal injury and property damage.  This protection excludes workers’ compensation claims, which may be covered by obtaining a special endorsement.

YEARLY RENEWABLE TERM INSURANCE 
Term policies for one-year periods.  Group insurance and reinsurance are frequently written on a yearly renewable term basis.

YIELD 
The annual percentage of return on an investment.  The yield on an insurance company’s investments must be adequate when combined with capital gains or losses and underwriting gains or losses to meet their charges.

YIELD, CURRENT 
The rate of return expressed in percentage that is calculated by dividing the annual dividend, coupon, or payment, such as rent, by the price paid for the investment.

YIELD TEST 
A measurement applied to bond investments in the portfolios of insurance companies. The yield test is the relationship of the yield of bonds the insurance company has in its portfolio individually to the yield of fully taxable United States Government bonds of the same maturity.

YIELD TO MATURITY 
The rate of return expressed in a percentage that will be obtained on an investment if the investment is held to maturity.  The yield to maturity takes into account that few investments are bought exactly at par and, therefore, they have a capital gain or loss in addition to the rate of return stated on the face of the instrument.

YORK ANTWERP RULES 
A body of regulations used by major maritime countries which provides a procedure for settling a loss when that loss involves many different interests, for example, owners of a ship, the owners of a cargo, the owners of related freight interests.  Also, a set of rules for the adjustment of general average loss.

YOUTHFUL INSURED 
An insured that is under age 25 years of age.

Z

Z TABLE 
A mortality table giving recent ultimate experience on insured lives, computed from experience on contracts of insurance issued during 1925 through 1934 by major companies.  This table was important in the processing of the Commissioners Standard Ordinary Table (CSO).

ZEBRA 
Zero Balance Reimbursement Accounts.

ZONE SYSTEM 
A technique developed by the National Association of Insurance Commissioners for the triennial examination of insurance companies.  Terms of examiners are formed from the staff of various states and have major direction from the insurance department of the insurance companies' home state insurance departments.

ZONING 
The employment of the police power by a public body regulating the character and the intensity of the use of property in the public interest.  The effectiveness of zoning is important in the establishment of rates and maps.

ZONING ORDINANCE 
The exercise of police power of a municipality in regulating and controlling the character and use of property.