46856913 Insurance Terms

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Dictionary of Insurance TermsFirst Edition

Copyright 2009 by AskForInsurance.com

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ABANDONMENT AND SALVAGE - INSURANCE POLICY - A legal position allowing aninsurance company complete control and ownership of the insured's property. The ABANDONMENTCLAUSE most often pertains to MARINE INSURANCE, very rarely involving property insurance like

HOMEOWNERS INSURANCE (SMP) policies. As a figurative example, an insured person/personsmay choose to abandon a marine vessel if the cost of repairing it exceeds it's overall value. Insured person/persons must inform the insurance company of their intention to abandon a detrimental property. The insurance company then makes an informed decision on whether or not to acquire thesequestionable assets without being legally bound to accept them.

MARINE ABANDONMENT - INSURANCE CLAUSE - A clause within marine insurance policiesallowing an insured person/persons the legal right to forego lost or damaged property while stillclaiming a full settlement amount from the insurance company. This full settlement amount is subjectto restrictions set within the original policy. Two different types of property losses are covered under this particular abandonment clause.

1.. Complete and Total Loss Property - Property damaged beyond all hope of repair. Damage incurredfrom fires, sinking, hail, wind and unaccountable disappearance are all included and insurable causes of complete and total loss property. Many ships have sunk to the bottom of the sea, classified asunrecoverable total losses because the retrieval costs exceed the value of the property. Losses anddisappearance involving various factions of circumstance including Bermuda Triangle and luxuryvessel hijackings by drug cartels are listed as insurable losses within the confines of complete and totalloss property insurance.

2. Rehabilitative Total Loss Property - A property damaged to a degree that the cost of rebuilding or renewing it to original condition costs more than the properties restored value. Any marine vesseldamaged to this degree can be abandoned by insured person(s) if repair costs total more than 50% of the properties total value, or the insurance company concurs with the decision to abandon the propertyin regard to circumstantial variables.

ABSOLUTE LIABILITY - INSURANCE POLICY - A form of liability insurance not dependent onfault. Absolute liability is used most frequently regarding actions of an individual or businessdisregarding public policy. Actions insured do not have to be intentional or negligent. For example, a

product that causes an injury due to defective mechanics will hold the retailer liable for any damagesincurred to the product owner. Although the manufacturer or retailer is not directly related to thedefectiveness of the product, they can still be held strictly liable. Animal attacks, specifically regardinganimals without a prior history of violence, is another example of an insurable event withinABSOLUTE LIABILITY INSURANCE.

ACCELERATED OPTION - POLICY PROVISION - Allows the POLICYHOLDER to use theaccrued cash value, by means of a single premium payment, to pay the cost of or mature the policy asan asset.

ACCELERATION LIFE INSURANCE - INSURANCE POLICY - A portion of the guaranteedDEATH BENEFIT (usually 25%) is awarded to the insured to pay for medical conditions present prior to death. Specifically, the accelerated death benefit will provide funds to pay for life extension effortsof the insured. Proof of alleged medical conditions are required, and upon presentation this proof willenable the insurance company to pay 25% of the death benefit. If a portion of the death benefitsremain, this remainder sum is to be paid to a named BENEFICIARY, in the same structure as atraditional life insurance policy.

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to ACCIDENT identification methods. As an example, a car accident that occurs while insured under aPERSONAL AUTOMOBILE INSURANCE POLICY (PAP) will provide payments for lossesregardless of acts of negligence or omissions by the insured. Bodily injury, property damage, anddamage to outside parties may be covered as well.

ACCIDENTAL DEATH AND DISMEMBERMENT - INSURANCE POLICY - Insurance policy that

pays according to the insurance contract in the event of bodily harm or death due to accidentalcircumstance (barring natural causes). For instance, an insured victim is decapitated in an accident. Alump sum payment or predefined schedule of payments are used to compensate the insured'sBENEFICIARY.

Payment schedules vary in regards to amounts payable based on the part of body lost, as well asfatalities caused by an accident.

ACCIDENTAL DEATH BENEFIT - INSURANCE CLAUSE - In addition to benefits paid in theevent of the insured's death, this clause pays an additional sum if the death occurs from directinvolvement in an accident. Double indemnity inclusions pay twice the original value of the policy,

payable to the beneficiary. Triple indemnity awards three times the original value of the policy, and soon. Accidental death as a result of war, flight (except as a passenger on a commercial flight), andillegal actions are most often exempt from inclusion. Age and time limits apply. In order for anaccidental death to be eligible for certain benefits,, the insured must die within a specific time frameafter the accident and as a direct result of the accident. An age group requirement is often enabledwithin the policy, calling upon probability to ensure death is a direct result of the catastrophic event andnot old age.

ACCIDENTAL DEATH - INSURANCE POLICY - This policy provides payments to the insured if he/she dies by means of an accident. Frequently, this policy is included as a multiple policy packagealong with dismemberment insurance. The insured's beneficiary receives the accidental death paymentaccording to the terms outlined in the policy. If coupled with dismemberment insurance, and loss of limb is sustained, payment amounts are awarded according to the policy terms.

ACCIDENTAL MEANS - An unexpected event, not under the direct control of the insured, causingsubstantial bodily injury.

ACCIDENT AND HEALTH - INSURANCE POLICY - Policy coverage for accidental injury,accidental death, and sickness. This policy is also known as Accident and Sickness Insurance. Whenhospital stays, surgical expenses, and loss of income occurs due to accident or sickness, award

payments are made according to the terms outlined in the policy.

ACCIDENT AND SICKNESS - INSURANCE POLICY - Label previously used for a type of insurance policy that covers accident and sickness.

ACCIDENT FREQUENCY - The total number of times an accident has occurred. Premiums are basedon mathematical equations that factor in the number of times an accident has happened.

ACCIDENT INSURANCE - INSURANCE POLICY- Policy coverage including injury and or death asa result of accidental circumstance. Critical injuries resulting in death trigger this type of insurance toaward benefits and/or income according to the policy terms.

ACCIDENT SEVERITY - The extent of loss as a direct result of accidents. Accident severity is alsoused to give insurance companies data to define their premium costs. ACCIDENT- YEAR STATISTICS RECORD - Premiums and losses received for accident coverage

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accountants liability within the confines of their professional tasks. Any mistakes made within work orders and tasks directly related to accounting are covered. However, if the insured accountant was toget into an accident outside the realm of the working environment, completely unrelated to the job, thisand similar events would not be covered by this form of insurance.

ACCOUNTS RECEIVABLE INSURANCE POLICY - This form of insurance covers the expense

incurred when records are destroyed. Records directly related to the business, damaged by an insured business risk, are covered by the policy to ensure proper record reconstruction and collection of associated fees. The raw materials upon which the records are stored, however, are not insured bythis insurance policy.

ACCREDITED ADVISOR IN INSURANCE (AAI) - This is a professional certification awarded after the completion of three national exams given by the Insurance Institute of America (IIA). The examscover multiple insurance and insurance related subjects requiring expert knowledge of each.

ACCRUE to gain or amass more, to increase or grow. For instance, the cash value of a life insurance policy will ACCRUE at a certain rate, growing more valuable as the years progress.

ACCRUED BENEFIT COST METHOD (ACTUARIAL) - This is the calculation method used todetermine proper crediting of earned retirement benefits. For each year of work, the insured beneficiaryis awarded one unit of benefit. The current value of the unit of benefit is is calculated using variablesthat change over time, such as life expectancy of the insured. The resulting amount of benefit, after calculation, is assigned to the employees account. The assigned amount can take the form of a

percentage or flat dollar sum depending on the circumstances of the agreement. Amounts of 1.5%compensation accreditation per year are commonly used in retirement benefit agreements.

ACCRUED BENEFIT COST METHOD actuarial method of crediting retirement benefits earned andthe costs associated with these earned retirement benefits. An increment (unit) of benefit is credited for each year of recognized service that an employee has earned. Then the present value of these benefits(including the employee's life expectancy) is calculated and assigned to the year earned. The benefitearned by the employee can take the form of a flat dollar amount or a percentage of compensation. For example, this may work out to 1 1/2% of an employee's compensation being credited to the employee'saccount for each year of recognized service.

ACCRUED INTEREST AMOUNT - This interest amount has accrued, but has not yet been awarded.This amount is to be paid upon the maturity of the next interest payment.

ACCUMULATED VALUE (MULTIPLIER) - In order for insurance companies to gain this figure, thefollowing calculation must be performed. The total number of ACCUMULATION UNITS ismultiplied by the ACCUMULATION UNIT VALUE for a VARIABLE ANNUITY. Current marketvalues are derived from a similar calculation method.

ACCUMULATION PERIOD TIME FRAME - This is the period of time when an ANNUITANT is providing his or her premium payments to an insurance company. The insurance company is liable touphold certain obligations, depending on the terms of the PURE ANNUITY or REFUND ANNUITYfor which the premiums are being paid. Different factors must be considered for an annuity purchase.Depending on the circumstances surrounding the purchase, either option can yield a more

advantageous position.

ACCUMULATION UNIT - Comparable in similarity to a mutual fund unit, an ACCUMULATIONUNIT is used to measure the policyholder's interest in a VARIABLE ANNUITY prior to theANNUITY DATE.

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1. HOMEOWNERS INSURANCE POLICY (COMMUNICABLE DISEASE) - THE INSURANCE

SERVICES OFFICE (ISO) policy form contains a communicable disease endorsement EXCLUSION.Most property and casualty insurance companies utilize this form in it's entirety or through the use of

minor modifications. This exclusion has yet to be defeated in a court of law.

2. AUTOMOBILE INSURANCE - AIDS exposure can result from negligence and/or accidentsinvolving insured persons suffering from the AIDS virus. Personal and business automobile insurance policies hold equal relevance.

(a) An injury victim who is unknowingly infected with the AIDS virus by means of a necessitated blood transfusion may file a suit against the driver who caused the accident. This negligent driver isnegligent according to the TORT LIABILITY system. A similar example depicts a diseaseexposure circumstance using a different situational variable.

During a car accident caused by a negligent driver, two passengers open wounds come in contact witheach other. One of the passengers has AIDS and subsequently infects the clean passenger with thevirus. A suit is now filed against the driver using simple logic as the aggressor. Common sense woulddictate that bodily fluid transmission would not have occurred had there been no accident.

(b) activation of a previously dormant AIDS virus (one capable of staying inactive within the hostwhilst retaining the ability to reproduce at a later date) becomes active. The injured party may file suitagainst the driver for stress related induction of AIDS progression. Justification of legal proceedingsare based upon the assumption that the accident acted as a catalyst to change the way the virussurvives. Had this not occurred, the progression of the virus into an active state may have not haveoccurred for many years.

3. COMMERCIAL GENERAL LIABILITY FORM (CGL) - This form is used to safeguard employersand/or employees against negligent acts or circumstances that occur within the confines of a businesssite. Negligence may be related to the employees as well as the work environment itself.

(a) An AIDS exposure resulting from employee negligence or accidental circumstance, such as product or service infection that is in direct contact with uninfected customers or fellow employees.

Using a figurative example, an AIDS-infected employee may cough upon a customer while sufferingfrom a bloody nose. Acts of vengeance, specifically intentional and malicious acts upon customers or employees also pose a risk.

(b) AIDS exposure as a result of sexual assault by an AIDS-infected offender can be incurred by acustomer while he or she is within the confines of a business location. This customer may bring suitagainst the business. It is the sole responsibility of the business to keep and provide a safe environmentfor customer visitation. Cases of assault involving AIDS exposure pose a situational risk regardless of an employees criminal record or past history of violent behavior.

(c) AIDS exposure as a result of negligent employer policies can provide the employee means to filesuit against an employer. Using the premise of libel, slander, and invasion of privacy, an employer who discloses to their staff the status of an AIDS-infected employee is in violation of the employeesrights. This incorrect business practice also violates the confidentiality agreement with the employer.

4. WORKERS COMPENSATION POLICY - AIDS exposure may result from an injury at work involving infected and non-infected parties, as well as necessitive on-site blood transfusion betweeninfected and uninfected employees. The resulting exposure is relevant to the worker compensation

policy.

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coverage.

DEATH BENEFIT limitations are also relevant to group policies. An AIDS-infected employee isrestricted in how high of a coverage amount he or she can hold. Usually, the generally accepted policyrate holds twice the employee's annual salary as a coverage limit. The subsequent reduction of ADVERSE SELECTION by AIDS-infected employees is crucial to the employers financial well being.

2. Individual Life, Disability, and Medical Insurance - In individual coverages, unlike groupinsurance, a multitude of variables are used to determine coverage eligibility. Age, gender, healthhistory, family health issues, vocation, interests, hobbies, lifestyle habits, and more are carefullyconsidered to create a fair statistical construction of the individual applying for benefits. All of theabove factors play a part in the actualization of whether or not high levels of benefit coverage areavailable to the individual. Once INSURED, a insurance company is at the mercy of any future AIDSinfection that may occur with a currently and completely uninfected customer. The inclusion of POLICY PURCHASE OPTION (PPO) allows the insured to automatically increase

coverage limits whenever certain events transpire. For example, a certain calendar date can be set totrigger an increase in the coverage limit. An AIDS patient can set his or her policy to increase thecoverage amount according to a preset date schedule. AIDS patients who hold dividend paying

policies can use the dividends to pay up the policy without a physical examination or medical review.This is known as a form of GUARANTEED INSURABILITY, whereas the insurer is not in control of

coverage distribution.

Many life insurance policies do not include AIDS related questions. This leaves a chronic insurancesusceptibility regarding overall benefit amounts paid to the increasing AIDS epidemic.

ACTS - The accomplishment of a task or ongoing function. Certain ACTS are excluded frominsurance coverage. This term usually involves criminal behaviors such as intentional destruction of

property. Any illegal ACTS committed release the insurance company from any responsibilityassociated with the behavior. ACTUAL/ EXPRESS AUTHORITY - Power the insurance company bestows upon an AGENT withina written contract.

ACTUAL CASH VALUE - The cost to replace damaged or destroyed property with a new propertyhaving a nearly identical value. Depreciation and obsolescence are used to determine an adequatereplacement. Items holding an appreciation value, one that grows over time, require separatescheduling within the policy.

ACTUARIAL ADJUSTMENT MODIFICATION - Changes in value that reflect the true lossexperience, expenses, and upcoming benefits yet to be paid.ACTUARIAL CONSULTANT (INDEPENDENT ADVISOR) - Insurance companies, federal, state,and local governments, as well as labor unions and corporations are assisted with knowledge andexpertise provided by this type of advisor. Analysis of small insurance company liability, estimatingthe structural integrity of a policy, as well as the design of information systems are all the responsibilityof the ACTUARIAL CONSULTANT .

ACTUARIAL COST METHOD SYSTEM - Used for figuring the financial benefit between a pension plan's present cost and future benefits. This relationship outlines the degree to which a pension plan isfunded. The primary objective is to contrast the average cost of benefits accrued against the specificyear in question. ACTUARIAL EQUIVALENT DETERMINATION - Mathematical calculation based on the likelihoodf f d h b f d h l f h h f


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Product development, construction of annual reports, as well as overseeing overall financial functionare key job characteristics of an ACTUARY MATHEMATICIAN. Actuaries are most often requiredto possess a strong business background and exceptional mathematical talent. Actuarial associations

provide certification by means of a qualification test.

ADDITIONAL CAR/CARS - A vehicle leased or purchased by an insured or his/her marital partner in

addition to the presently insured motor vehicle. In order for this vehicle to be covered under theinsureds current insurance policy, it must meet specific requirements. Vehicle must be a private passenger car and must fit into a family of vehicles insured by the same insurance company. Alladditional pickups and vans must also be insured under this same company in order to be eligible for additional car/cars coverage.

ADDITIONAL DEATH BENEFITS - An added layer in addition to traditional life insurance coverage.Double indemnity is most frequently associated with this term. Benefits in amounts of multiplied face

values are based upon certain variables. For example, if an insured dies within a certain ageclassification while dependent family members are still living at home, a multiple benefit higher thanthe original death benefit is awarded.

ADDITIONAL DEPOSIT PRIVILEGE CLAUSE - CURRENT ASSUMPTION WHOLE LIFEINSURANCE policies allow unscheduled premiums to be paid at any point in time before the maturityof policy. An outstanding loan forces the additional deposits to be applied to the loan first. Aminimum deposit amount is sometimes required for an additional deposit.

ADDITIONALLY INSURED INDIVIDUAL - Person(s) added to the insurance policy other than theoriginal and primarily insured individual. Logical financial reasoning is the prominent factor behindthe utilization of additional insureds. Adding to the current policy is usually much less expensive thana completely separate policy purchase. Property and liability insurance are two forms of insuranceallowing for an additional policy member to enjoy the same benefits as the original insured.

ADDITIONAL LIVING EXPENSE INSURANCE COVERAGE - Homeowners, Condominium, andRenter policy that will reimburse the costs associated with temporary living arrangements until theoriginally insured home can be made livable again. Generally, 10-20% of the homes structuralcoverage is provided as living expenses.

ADD TO CASH VALUE DIVIDEND OPTION - This option allows the policy owner to collectdividends from a participating policy in order to apply them to the accumulation of CASH VALUES.

ADHESION INSURANCE CONTRACT AGREEMENT - An acceptance agreement created by aninsurance company to offer possible insureds using take-it-or-leave-it terms. Upon an insuredsmisinterpretation of this contractual agreement, courts generally side with the insureds as they can notalter the terms of this contract. All insurance contracts are classified within the court system to becontracts of adhesion.

ADJACENT - Adjoining. The majority of insurance policies, such as a HOMEOWNERSINSURANCE POLICY, offer structural coverage for an adjacent structure according to the samecontractual basis as the primary structure. .

ADJUSTABLE LIFE INSURANCE (INSURANCE POLICY) - Face value, premiums, and the plan of insurance are variable and able to be modified according to a policy owners decision in the followingways, without issuance of additional policies.

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higher premium payment and subsequently pay the policy off in a shorter period of time.ADJUSTABLE LIFE INSURANCE allows John the ability to alternate between a paid-up-at-65

policy and term life policy depending on the present status of his financial situation. It is at John's solediscretion whether the policy remains a term or paid-up policy.

ADJUSTABLE PREMIUMS - Variable premiums that can increase or decrease. Specific insurance

policies allow the premium payment to change according to expenses incurred by the company.Factors like experience, investment returns, and success of the insurance company determine whether the premium costs reduce or inflate.

ADJUSTED LIABILITIES - These are calculated using: Legal liabilities minus INTERESTMAINTENANCE RESERVE minus ASSET VALUATION RESERVE.

ADJUSTED PREMIUM (INSURANCE PREMIUM) - A premium reflecting the NET LEVELPREMIUM and it's modifications to include the cost involved with acquiring the first year of coverage.This modification consists of a calculation involving the division of the acquisition expense by the

present day value of a LIFE ANNUITY DUE (spreading the payments due across a given premium pay period). This newly calculated premium is used to produce the minimum CASH SURRENDER VALUE included in the NON FORFEITURE PROVISION.

ADJUSTED PREMIUM CALCULATION METHOD - The method used to produce a life insurance policy's cash surrender value (CSV) independent of the policy's RESERVE calculation. The CSV willestimate the ASSET SHARE VALUE of the insurance policy according to requirements of theSTANDARD NON-FORFEITURE LAW. To determine the CSV, the following steps are followed insequence:(1) Calculating the initial year expense allowance(2) Calculating the ADJUSTED PREMIUM(3) Replacing the adjusted premium with the NET LEVEL PREMIUM used in the calculation of thePROSPECTIVE RESERVE. ADJUSTED SURPLUS AMOUNT - This figure is derived from the following calculation method:Statutory surplus plus INTEREST MAINTENANCE RESERVE plus ASSET VALUATION

RESERVE.

ADJUSTER EMPLOYEE - Individual hired by a property and casualty insurance company to settle theclaims filed by insureds. The adjuster employee assesses each claim in order to make informedrecommendation to the insurance company.

ADJUSTMENT INCOME FUNDING - Income awardable to a surviving spouse or beneficiary upondeath of the primary income earner. ADJUSTMENT INCOME provides a source of funding until a

beneficiary can render themselves self-reliant. Using a figurative example, ADJUSTED INCOMEFUNDING can be supplied to a beneficiary until such time as he or she is financially self reliant.Adjustment income is directly dependent on the amount of life insurance purchased.

ADJUSTMENT PROVISION PERMISSION - This allows an Adjustable Life Insurance policy to

change in structure through the following means of modification:(1) Increase or decrease of the premium(2) Increase or decrease the FACE AMOUNT(3) Lengthen or shorten protection periods(4) Lengthen or shorten the premium payments allowable time frame period. ADMINISTERING AGENCY EMPLOYER - An employer utilizing a self-administered insurance

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ADMINISTRATIVE SERVICES ONLY (ASO) ASSISTANCE - Aid provided in accordance with anemployee benefit plan. A clerical staff is supplied by the employer in order to effectively operate the

plan, comparable in relativity to a custodian. This board of trustees provide directional influence over the plan's funds, most often pertaining to self-directed investment accounts. Trustee plans areachieving increased prevalence through employer and employee demand for stronger control over

pension funds. A self-insured or liability plan's group may hold an ASO contract with an insurance

company or third-party administration in order to handle their claims and processing efforts moreefficiently.

ADMINISTRATOR (APPOINTED) - Individual appointed by the court system to control the estate of a deceased having declared no EXECUTOR or EXECUTRIX. An ADMINISTRATOR acts withFIDUCIARY ability in relation to the estate

ADMIRALTY PROCEEDING CONDUCTION - Administration of maritime suits pertaining toOCEAN MARINE INSURANCE claims presented before an admiralty court.

ADMITTED ASSETS (STATE ALLOWED) - These assets are permitted, in accordance with statelaw, to be included in the ANNUAL STATEMENT of the insurance company. ADMITTED ASSETSare crucial elements in the determination of an insurance companies financial competence. Stocks,

bonds, mortgages, and real estate are some of these key components. Long term mortgages made up alarge portion of admittable assets, historically speaking. The inception of current assumption wholelife insurance policies can make short term financial instruments the great majority of admittableassets.

ADMITTED INSURANCE POLICY(S) - Insurance purchased from a licensed insurance company inthe state where the policy was originally secured. These state specific insurance policies are purchasedthrough a broker or agent licensed by the power of that particular state. The state determines themarketing of the insurance policys and the forms used to procure the the business.

ADVANCED PENSION PLAN (FUNDED) - A retirement plan comprised of money allocated to fundan employees' pension.

ADVANCED LIFE UNDERWRITING PROCESS - The analysis of intricate personal and businesscases in accordance with tax and estate planning to establish life insurance necessity. The advancedlife underwriter's expertise is utilized in elaborate business and personal cases focusing on areas of understanding unknown to the family life agent or underwriter .

ADVANCE FUNDING PAYMENT(S) Premiums awarded before their established due date. Within pension plans, premiums are assigned to cover the payment of future award benefits prior to their availability. ADVANCE PAYMENT(S) Payment or payments awarded to the insured by the insurance company

prior to the predefined settlement date. An insurance company may opt to pay a claim prior to thescheduled payment date in light of variable circumstances. ADVANCE PREMIUM PAYMENT - A premium paid before the originally specified due date. Aninsured may complete the premium payment before it is actually due, resulting in a discount on the

premium.

ADVERSE FINANCIAL SELECTION PROCESS - This process is established as active when thePOLICY-HOLDER ends his or her policy due to the occurrence of the following circumstances:(1) There are higher rates of return offered by a competing establishment(2)An economic depression forces the insured to use his or her policy proceeds to combat financiald ff l h ld h h l h ld h h h


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character, and copyright infringement are covered.

ADVERTISING BY AN INSURANCE COMPANY - Prominent and attention getting marketingefforts targeted to the public audience with the purpose of:(1) Motivating agents and brokers to increase their selling efforts regarding insurance company

products

(2) Familiarize potential customers with the insurance companies existence, thereby making sales callsless invasive.(3) Promote a positive public opinion of how an insurance company is viewed by the mainstreammajority. .(4) Allow for the debut of new product offerings.(5) Sway judicial and public opinion regarding issues pertinent to insurance industries.

Real life examples of such advertising are defined as:Product advertising portraying the benefits of particular products and the reason for their inception.Institutional advertising used to promote the financial prowess and solidity of a company within certainmarkets.Depending on the area of focus, company advertising may be distributed nationally, locally, or cooperatively.Joint advertising campaigns launched using a combination of company and corporate resources.

ADVISORY COMMITTEE GROUP - A group dedicated to providing advice regarding employee benefit plans and their relative processes. Benefit amounts, financing methods, and qualificationrequirements determining eligibility (VESTING requirements) are all handled by this advisorycommittee group. Their advice is only used as a means of influence. Never as a direct, authoritarianline of command. AFFILIATED COMPANIES - Insurers classified in a group under the same common stock ownershipor group of interlocking directorates. This structuring of insurer classification makes the exchange of insurance products simpler and more efficient. There is also a notable reduction in the repetition of duplicate efforts and lower costs in regards to research and development costs. AGE CHANGE DATE - The date according to calendar year when a person turns one year older.Varying across the choices in insurance companies, the premiums for life and health insurance

manuals are calculated using the nearest age according to calendar month approximation, or the ageaccording to the insureds last birthday.

AGE DISCRIMINATION IN EMPLOYMENT ACT(ADEA) - This act put into law a prohibitionstating employers may not force a mandatory retirement at the age of 70.

AGENT (INDIVIDUAL) - An individual involved in the sales and service of insurance policesrepresenting either of two categories:

1. Independent agent - This type of agent represents at least two different insurance companies(according to accepted definition) and serves the customer as a market researcher to discover the most

beneficial coverage for the best price. The agent's salary is a commission derived from a percentage of every premium from which a payment is received. Fees are included to cover the cost of maintainingthe insureds policy.

2. Direct writer - This type of agent is sanctioned by and sells policies from a specific insurancecompany. He or she is paid using a continuous commission rate in the same mannerism as anindependent agent.

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agent as payment for his or her services. The total amount is calculated and dictated according to theagent's contract with an insurance company.

AGENT'S QUALIFICATION LAWS (MINIMUMS) - This legislation establishes the bare minimumeducation and experience required by state law for a person to be considered for a licensed AGENT

position. This minimum requirement is only a prerequisite in the determination of employment

consideration by the company.AGE SETBACK ASSUMPTION - This is figured by subtracting a certain number of years from theaccepted table of life insurance rates using a probable assumption. A particular group of women willoutlive men and subsequently pay their premiums for a longer duration of time. Using a figurativeexample, the same premium cost can hold true for a 33 year old man the same as a 36 year old woman

because of the assumption of female longevity. However, one state has already passed legislationrequiring men and women of the same age to be charged an identical rate for the insurance they

purchase.

AGE-WEIGHTED PROFIT-SHARING COMBINATION PLAN - This plan introduces the flexibilityof the traditional PROFIT-SHARING PLAN to the most valued features of the DEFINED BENEFITPLAN and TARGET BENEFIT PLAN. This combinations inclusion of age-weighing allows for higher contributions for plan participants within older age group classifications. Best of all, these newcontributions are fully accepted by the IRS. Traditional profit-sharing plans are structured to provideyounger employees with larger employer contributions. These younger employees are demographicallyless likely to consider using these funds for retirement. So, as a courtesy measure, cash is traditionallyoffered as an immediate profit-sharing benefit. These Age-Weighted Plans offer more options in regards to their contribution structure. Under the

terms of defined benefits plans and target benefit plans, a minimum contribution must be made eachyear in comparison to profit-sharing plans. Age-Weighted Plans are similar to a traditional profit-sharing system in terms of their restrictive maximum deductible contribution of 15% of the employee'stotal compensation. The maximum allowable contribution of any employee participating in the planmust be lesser or equal to 25% of the total compensation, or $30,000. This plan has no minimumrequirement for annual contributions or service charges to reflect fees paid on the PENSION BENEFITGUARANTY CORPORATION (PBGC) premiums, federal, or actuarial valuations. For instance, asubstantially smaller contribution amount a younger employee makes equals a substantially larger contribution that an older employee makes. Logical mathematical reasoning defines this equation. Therapidly increasing nature of COMPOUND INTEREST dictates that the contribution made by theyounger employee will purchase the same retirement benefit amount as the older employee.

AGGREGATE ANNUAL DEDUCTIBLE (YEARLY) - This deductible is applicable for the presentyear. Using a figurative example, an organization pays the first $50,000 in losses payment to cover their losses accrued over their year of business. After this amount is paid, the insurance company paysfor the rest of the losses (up to the LIMIT OF RECOVERY) as accepted upon in the insurance

policy's terms of service.

AGGREGATE EXCESS CONTRACT POLICY - If the total losses on a property or liability exceedthe preset limit during a POLICY year, the insurer agrees to pay this excess amount. Generally, theinsurer is responsible for the entire amount exceeding the insurance company's responsibility for loss(80-100% in most cases)..

AGGREGATE INDEMNITY LIMIT - The coverage limit total, spanning all policies relevant to theinsured loss for which the policy holder can be reimbursed. Using a figurative example, if twoinsurance policies are active for one individual, the AGGREGATE INDEMNITY LIMIT is thecombined amount of coverage provided by the primary policy along with the secondary policy.


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dollars and medical costs pertaining to a serious medical implication reach $203,000, the remaining$3,00 must be paid in full by the insured. Once hospital or medical expenses have reached theAGGREGATE COVERAGE LIMIT, any future health expenses incurred are paid entirely out of

pocket by the insured.

2., Liability insurance policy. The AGGREGATE COVERAGE LIMIT in this policy example is

$150,000 An automobile accident revealing the insured at fault (single, isolated occurrence), causinginjury to a group of individuals whose combined medical bills total $200,000, leaves the insured to paythe remaining $50,000 dollars that has exceeded the preset AGGREGATE COVERAGE LIMIT.

AGGREGATE PRODUCTS LIABILITY LIMITATION This is the largest sum of money that aninsurance company is willing to pay, in accordance with the PRODUCT LIABILITYINSURANCE coverage period, for all product liability and related claims falling under insurable policycoverage.

AGGREGATE STOP LOSS INSURANCE COVERAGE - This type of coverage is enabled when theself insured employer's total group health insurance claims reach a certain mark, generally 125% of theannual cost for predicted health claims.

AGREED AMOUNT CLAUSE (AS IT PERTAINS TO) PROPERTY INSURANCE - a contractualagreement made with the insured and insurance company requiring the insurance coverage amount bein legal abidance with the COINSURANCE requirement.

AGRICULTURAL EQUIPMENT INSURANCE COVERAGE - This insurance coverage handles property damage sustained to agricultural equipment and their related machinery. Harnesses, saddles, blankets, and liveries are all covered under this policy. Catalysts for damage covered include fire,lightning, vandalism, malicious mischief, and removal. If there are perils that fall out of the scope of general coverage, these may be added to the policy for an additional fee. Certain coverage exclusionsapply, such as crops, feed, hay, aircraft, watercraft, and grass. These are covered under separateinsurance policies to handle damage claims more efficiently.

AIR CARGO INSURANCE COVERAGE - This insurance type is used to cover the costs incurred byan air carrier in relation to customer property and their legal liability for the responsibility of that

property. This coverage is designed on an ALL RISKS format with certain peril exclusions notallowed in the policy. Air cargo insurance is a form of MARINE INSURANCE, insuring only propertytraveling above bodies of water. As of the present day, this property may be insured regardless of themethod used for delivery.

AIRCRAFT HULL INSURANCE COVERAGE - This type of insurance coverage provides protectionfor all risks regardless of whether or not the airplane is grounded or in flight. This insurance coveragealso goes by the name of hull aircraft insurance. Exclusions include illegal use of the aircraft, when theaircraft is being used for activities against the terms set forth in the policy, normal wear and tear,unauthorized piloting of the aircraft by an uninsured person(s), piloting or usage of the aircraft outside

preset geographical boundaries, damage or total destruction of the aircraft resulting from any one of thefollowing events: War, rioting, civil disruptions, workers on strike, mechanical failure loss, structuralintegrity failure, and conversion. The overall value of the hull is comprised of the various instruments,radio equipment, wings, aircraft engines, and qualifying equipment directly related to the plane. Thesehull components are determined by the terms of the policy.

AIRCRAFT LIABILITY INSURANCE COVERAGE - Coverage provided for negligentacts/omissions committed by an insured that results in damages directly connected with the ownership,

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PERSONAL INJURY COVERAGE (3) PREMISES MEDICAL PAYMENTS INSURANCECOVERAGE (4) Contractual. This policy can be customized to meet the specific needs of theINSURED.

ALEATORY CONTRACT TYPE - Usage of this type of contract can give more benefits than the premiums paid and vice versa. The great majority of insurance contracts are aleatory in nature because

of the business blueprint insurance companies are formed upon. Insurance companies thrive dependingon the give/take relationship of premiums paid and benefits awarded.

ALIEN INSURER COMPANY - These insurance companies function based upon legal demands of aforeign country. Although alien insurer companies are legally allowed to sell their products andconduct business within the United States, they must also abide by state laws governing all insurancecompanies within the particular state.

ALIMONY SUBSTITUTION TRUST AGREEMENT - Spouse A (required by a court of law to provide alimony and/or child support provisions to spouse B) is forced to allocate assets into a TRUST.

From this TRUST, payments are awarded to spouse B. Under the terms of this trust agreement, payments created from the income provided by the principal is considered taxable income in possessionof spouse B. Any sums paid from the corpus of this principal amount is not considered to be taxableincome as it pertains to spouse B. Spouse A is not eligible for a tax deduction on the payments made tothe trust's corpus principal, and is therefore not required to pay income taxes on any amount produced

by the principal of the trust.

ALLIANCE OF AMERICAN INSURERS (AAI) ORGANIZATION - Stationed in Chicago, Illinois,this alliance is comprised mainly of property and casualty insurance companies. Primarily focused onthe persuasion of the general public and their political legislators on subject matter directly related to

property/casualty insurance industries, publish various documents, conduct investigational research,and present a wide array of educational programs for member companies.

ALL LINES COMBINATION INSURANCE - Unified insurance coverage spanning property,liability, health, and life policies stemming from a single insurance company.

ALLOCATED BENEFIT PAYMENTS - Awarded payments within a DEFINED BENEFIT PLAN.Benefits are distributed to individuals assigned to a pension plan as the premiums are collected by theinsurance company. Because the pension plan benefits are paid for in full, the employee has nowlocked in a guaranteed pension when he or she retires, regardless of whether or not the firm becomesclosed for business.

ALLOCATED FUNDING INSTRUMENT CONTRACT - A contract pertaining to insurance or annuity terms within a pension plan used to purchase units of retirement benefits by paying acontribution amount for each employee into a group fund. The benefits are guaranteed to be awardedto employees upon retirement with the insurance company being bound by a legal contract requiringthem to award all benefits for which they have received premium payments. Pension plans that don'thave any funds available in which to purchase benefits before the retirement date involveUNALLOCATED FUNDING INSTRUMENT CONTRACTS (benefits not purchased when premium

payments were applied) ALLOCATION OF PLAN ASSETS UPON TERMINATION - Scheduled allocation of assets

upon cancellation of a pension plan. Asset distribution is performed in one of two ways:1. The refund of the total contribution amount of an employee plus interest2. Formation of employee classes and their associated beneficiaries in relation to entitlement of

benefits.

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classification of dispute resolution is to avoid the considerable expenses of extended court hearings.

ALTERNATIVE MINIMUM COST PROCEDURE - Method of funding allowed under theEMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974 (ERISA) An individual in controlof a pension plan can abide by the terms of the mandatory minimum funding requirement by delegatinga secondary cost method whereby the standard cost is the lesser of the standard cost. (1) In accordance

with the actuarial cost method of the pension plan (2) In accordance with the accrued benefit costmethod of the plan, minus benefit calculations.

ALTERNATIVE RISK FINANCING - These facilities offer mainstream coverage to their participantswhich include corporations, public entities, and professionals. These facilities were orignally used andcreated by organizations and people with mutual insurance coverage requirements not able to acquirethe coverage in commercial markets, could not acquire coverage at an acceptable rate, could notefficiently perform the duty of CAPTIVE INSURANCE COMPANY, or not able to act as SELF-INSURER. Policies include property, workers compensation, directors and officers liability, medicalmalpractice liability, and primary and excess liability. Among the qualified and already insured are awide range of companies and singular people, medical employees, banks, manufacturers, public andnonprofit entities, business contractors, transportation services and systems. The great majority of thefacilities reside in Bermuda.

AMBIGUITY LANGUAGE - System of words for communication within the insurance policy deemedto be unclear or open to questionable interpretations. If the insurance policy can be interpreted in morethan one way, feasibly able to be misunderstood, a situational event of ambiguity exists. When cases of ambiguity arise, the court system overwhelmingly takes the side of insured individuals rather than theinsurance companies because policies are primarily contracts of adhesion. Insurance companies have amultitude of resources at their disposal to make the terms of a policy agreement perfectly understood.Therefore, an obviously correctable misunderstand arising in a loss will generally side in favor of theinsured.

AMENDMENT (PROVISION) - These changes are added to the original terms of an insuranceagreement to effectively change the benefits and coverage conditions of the contract. Using afigurative example, homeowners insurance can be changed to include an additional living area with therisks associated with this living area covered under the policy.

AMERICAN INDEPENDENT AGENCY SYSTEM - This is a term used to describe the marketing of insurance performed by independent agents. Independent agents most often offer insurance policiesfrom more than one company and are paid to provide their best coverage at the most affordable rate.Independent agents are compensated using a commission based percentage system that comes from the

premiums paid on the policies they sell. The documented records of any policies sold becomethe property of these independent agents, allowed by law to solicit policy renewals on the policies sold.At the independent agent's discretion, policies may be transfered to new companies and renewed

according to the customer's request.

AMERICAN ANNUITY TABLE (1955) - This mortality table was originally introduced in 1955, usedto compute premium rates within deferred annuities as well as optional modes of settlement within lifeinsurance policies. The 1983 Table-a (mortality table representing annuity rates for male customers)replaced this table to accurately represent the change in mortality statistics.

AMERICAN COLLEGE SCHOOL - This college was formerly known as the American College of Life Underwriters for the CLU (Chartered Life Underwriter) and the ChFC (Chartered FinancialConsultant). Offering undergraduate, graduate, and the continuing education for students in the areasof life insurance and financial service. Campus, as well as long distance learning are both available.The subjects of: life insurance, pensions, insurance economics, finance, investing, business evaluating,

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AMERICAN EXPERIENCE TABLE (CHART) - Originally published by Sheppard Homans (anactuary that represented the Mutual Life Insurance Company of New York) in the year 1868, this table

provided data based on the lives of insured people(s) within the time period of 1843 to 1858. Duringthis time period, it was utilized in the calculation of life insurance premiums and figuring reservecalculations. This chart has been subsequently replaced by the C.S.O. Table.

AMERICAN INSTITUTE FOR PROPERTY AND LIABILITY UNDERWRITERS - Officiallyrecognized body for the CPCU (Chartered Property and Casualty Underwriter) designation. Thisinstitute supplies undergraduate and continuing education for property and casualty insurance usingcorrespondence courses. Course itinerary is comprised of insurance risk management, commercial

property insurance risk management, commercial insurance liability risk management, personalinsurance risk management, insurance company operations, insurance environment (from a legalstandpoint), management, accounting, finances, and economics. This highly respected institute isstationed in Malvern, Pennsylvania.

AMERICAN INSURANCE ASSOCIATION (Also known as AIA) - Membership only organizationcomprised of liability and property insurance companies. Promotes the financial, legislative, and

public standpoints of its members through their focus on accounting procedures, disaster and pollutioncomplications, auto insurance renovations, as well as a variety of other activities. The AIA is stationedin New York City, New York. AMERICAN RISK AND INSURANCE ASSOCIATION (ORGANIZATION) - Exclusivemembership comprised of companies, academic groups, and individuals within the insurance businesswhose primary focus is to advance education and research efforts for insurance and risk management.This association is the publisher of The Journal of Risk and Insurance, committed to academic writings

on insurance, risk management issues, and related areas of learning. AMORTIZATION (PAYMENTS) - Sequential repayment of a debt owed. Amortization payments arerequired to be paid on specific dates, thereby lessening the debt amount to zero upon completion of thegiven time frame. AMORTIZATION SCHEDULE (PAYMENT METHOD) - This term defines the payback of aspecified sum whose value has been discounted in some way, in accordance with a prearrangedschedule. Each of these fixed interval payments include a portion of the owed principal and interest. AMOUNT RISKED

1. The differing financial worth in regards to the face value of a permanent life insurance policy andthe total cash value it has accrued thus far. Pure costs of protection are calculated according to theamount of this difference. Using a figurative example, a given value of a life insurance policy is set at$100,000, the cash value $80,000, creating a remaining risk total of $20,000. The Internal RevenueService states that the corridor of protection, or total risk amount, must be perfectly obvious in order for the policy to reserve its tax privileged status.

2. As it pertains to property and liability insurance policies, the amount risked is the lesser of the policy limit or the largest possible loss incurred by the insured. AMOUNT OF INSURANCE COMPARED TO THE VALUE - The comparative balance between thetotal insured and the properties total value.

ANALYSIS OF PROPERTY AND CASUALTY INSURANCE POLICIES - Evaluation of (1) The property covered/excluded under the terms of the policy agreement, (2) risks included/excluded (3)

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AUTOMATIC PROPORTIONAL REINSURANCE COVERAGE - This type of coverage allows theinsurer the automatic benefit of reinsuring specific risks with it's reinsurer. An insurer is required totransfer the specific risks to its reinsurer. The reinsurer must, in turn, accept this transfer. Both thelosses and the premiums are shared in the same manner as the total policy limits of the risks.. Thereinsurer awards the insurer a transfer commission based on the supposed equity value of the insurersunearned premium reserve. This is designed to cover the acquisition expenses, premium taxes due, and

the cost of the insurer's management of the business. Automatic proportional reinsurance coverage isable to be partitioned into two types: quota share and surplus. AUTOMATIC REINSTATEMENT PROVISION CLAUSE - This provision is found in property or liability policies, declaring that upon payment of a loss, the original limits of the policy are put back into effect. Using a figurative example, an insurer incurs a loss of $40,000 under a homeownersinsurance policy with $100,000 worth of property damage coverage. As soon as the $40,000 loss is

paid, the original coverage amount of $100,000 is reinstated fully. AUTOMATIC REINSURANCE (EVENT) - An automatic reinsuring process of an insurer's individualrisks through a reinsurer. In order for an automatic reinsurance event to take place, an insurer musttransfer his/her risks to the reinsurer. The reinsurer must subsequently accept this transfer for thereinsurance to take effect. As soon as the risks are accepted, reinsurance occurs automatically.

AUTOMOBILE ASSIGNED RISK INSURANCE COVERAGE - This plan covers people without theability to acquire standard automobile liability insurance policies. Generally, the reason is most often aflawed driving record These people are singled out and placed in a surplus insurance market.Insurance companies are directed to create specialized polices for them, using higher premium rates toreflect the risk factor. These higher premiums are directly proportionate to the cost of the premiumswithin the specific state. While these plans cost more than standard insurance policies, they allow baddrivers to protect fellow motorists from property damage or injury they may sustain because of their negligent driving tendencies. Using standard rules, these negligent drivers would not be able to obtaininsurance.

AUTOMOBILE, BOAT, AND AIRCRAFT INSURANCE COVERAGE - These policies are made for varying types of motor vehicles, with each type requiring different policies for their property damageand liability coverage. Because motor vehicles are not allowed to be covered under a homeownersinsurance policy when operated away from the insured perimeter, these coverage policies are necessaryfor operation outside the homeowners coverage area.

AUTOMOBILE LIABILITY INSURANCE COVERAGE - This coverage is used to cover aninsured's legally liability for physical injury or property damage that results from the use of anautomobile. The personal automobile policy (PAP) and business automobile policy (BAP) will cover liability damages according to the terms of the policy (up to the maximum coverage limit of the

policy), court costs, and legal representation fees. Insurance companies recommend against operating amotor vehicle without being covered under automobile liability insurance. State laws demand thatdrivers carry automobile liability insurance coverage as their minimum requirement.

AUTOMOBILE PHYSICAL DAMAGE INSURANCE COVERAGE - These policies are used tocover losses incurred from the damage of an insured's vehicle. Coverage includes automobilesdamaged, destroyed, or otherwise defective by means of fire, theft, vandalism, devious acts, collision,or weather. Two forms of property damage coverage exist: Collision insurance and comprehensiveinsurance.

AVERAGE ADJUSTER EMPLOYEE - This term defines an individual working for an ocean marineinsurance company to settle claims filed by insureds that directly relate to ocean marine insuranceevents. This adjuster analyzes the validity of each claim and provides professional advice to the


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workers 62nd birthday. (Within a maximum time period of 40 years)

2. Omit the five years having the smallest level of total earnings, in turn choosing the 35 highestearning years automatically (a total of 420 months)

3. The total earnings of the 35 most financially productive years is then divided by 420 months to

determine the Average Monthly Wage.A Social Security Administration table portrays the PIA for the Average Monthly Wage computed inStep 3, above. The PIA is then raised to express the cost-of-living-adjustment (COLA) to decide thecorrect benefit amount.

AVERAGE RATE - rate of each property, within a property insurance policy, of all locationsmultiplied by the financial value of the real/personal properties at that place of activity, all combined,and divided by the entire financial value of all real and/or personal property throughout all locations,multiplied by their specific rates.

AVERAGE SEMIPRIVATE ROOM RATE in health insurance, this is the average rate charged for asemiprivate room within the local area (geographically speaking).

AVERAGE WEEKLY WAGE RATE - This rate is used as a foundation for computing benefitamounts in workers compensation insurance.

AVIATION ACCIDENT INSURANCE POLICY - This is life insurance policy coverage for individuals or employee groups that provides protection for a passenger on a flight using a continuallyscheduled airline. AVIATION EXCLUSION (LIFE AND ACCIDENTAL DEATH INSURANCE) - This frequentomission is found in life and accidental death insurance (double indemnity) policies, stating that unlessan insured is a passenger on an officially recognized or regular scheduled airline, policy coverage willnot apply to incurred losses. Using a figurative example, an insured is killed during a private planeflight that is deemed to be different than a regularly scheduled and insured airline flight. The insurancecompany is not liable to pay the insured's beneficiary the death benefit by means of the aviationexclusion omission.

AVIATION HAZARD - This hazard is affiliated with aeronautics in a different genre than that of a passenger flying a regularly scheduled, officially recognized airline. Thusly, an additional premium ischarged, and/or exclusions subjected to specific benefits affiliated with this risk. Using a figurativeexample, a pilot flying small planes and not a regularly scheduled airline would be liable for thishazard.

AVIATION INSURANCE (COMBINATION) - Coupling of a property insurance policy for anairplane's hull and liability insurance through the use of the following formula:

1.Property coverage supplied using an all risks basis or specified perils basis relating to the hull,autopilots, radios, instruments, as well as any and all equipment in the airplane that has been listed to

be included in the insurance policy.

2. Liability insurance coverage supplied to cover an insured's acts of negligence and/or absence thatresults in bodily harm and/or property damage to the passengers as well as individuals deemed to not

be passengers.

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the insured's present age.

BAILEE'S CUSTOMERS INSURANCE POLICY - This insurance policy covers any legal liability asa result of damage or destruction of the bailor's property while it is under the temporary possession of the bailee. This includes any property being transferred to and from the bailee's premises. Peril riskscovered are comprised of fire, theft, lightning, burglary, windstorm, robbery, flood, collision,

explosion, sprinkler leakage, strike, earthquake, and property damage incurred as a result of transportation by a common carrier. This insurance is in active status as soon as a bailee provides areceipt to the bailor for the item. Coverage omissions include the insured bailee's property and anylosses incurred from vermin and insect damage. Using a figurative example, a lawsuit scheduled to becleaned is considered to be under the temporary responsibility of the bailee (in this case, the cleaner).The bailor is under the presumption that the suit will be returned to his possession in an acceptable

condition. If this suit is destroyed as a result of fire damage, this insurance policy is scheduled to cover this loss.

BALANCE SHEET RESERVE AMOUNT - This sum is shown as a liability on the insurancecompany's balance sheet to show benefits owed to insured people(s). These reserve amounts must bemanaged using precise mathematical equations in order to guarantee all benefit award payments can bemade to cover policy claims for which premiums have been paid. BAND CLASSIFICATION SYSTEM - This method of classifying the face amount of policies uses the

policies size (within a predetermined range) as it's determining classification factor. The premium ratefor a $1,000 face amount changes in a declining fashion. As the face amount adjusts to a higher dollar value, the premium rate for $1,000 of face amount is reduced accordingly. BANK BURGLARY AND ROBBERY INSURANCE COVERAGE - This policy coverage is used toinsure a bank's premises in the event of burglary/robbery in the following methods: Securities,Monies, and other such valuables inside the banks vault(s), theft of monies and securities within bank

premises, vandalism and other forms of mischief that results in damage during a robbery or attemptedrobbery. BANKERS BLANKET BOND COVERAGE - This policy coverage applies to and covers a bank should a loss occur because of treacherous acts of employees or individuals of no association to the

bank. Using a figurative example, a bank teller boards a flight with stolen bank monies. The bank isthen reimbursed for the loss under the terms of the bankers blanket bond coverage.

BARRATRY (VIOLATION OF DUTY) - Within marine insurance, the acts of the captain and crewthat cause substantial damage to the vessel. Covered damages include: deliberately running the vesselaground, deviating the ship from it's scheduled course of direction, cargo theft, and completelyabandoning ship. BASE PREMIUM - This is the ceding company's premium, pertinent to the reinsurance premiumfactor used to determine the reinsurance premium amount.

BASIC BENEFITS or BASIC HOSPITAL PLAN - This term refers to the minimum payments givenwithin a given health insurance policy coverage.

BASIC LIMITS OF LIABILITY (REQUIRED COVERAGE AMOUNT) - This term defines themandatory minimum coverage amount an insurance company is willing to provide. Using a figurativeexample, $25,000 dollars in auto liability insurance coverage is the bare minimum most insurancecompanies are willing to provide. The great majority of liability coverages do not fall below this dollar amount.

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a product, that causes the product to be inherently defective. These errors are insured within productsand completed operations insurance policies.

BENCHMARKING MANAGEMENT TOOL - This tool is utilized for evaluating, measuring, andimproving various aspects of the insurance establishments business. Insurance establishments can usethis tool to more effectively examine and determine market trends, gage the efficiency of their sales

efforts, gage market growth and expansion, and measure individual product effectiveness.BENEFICIARY - Assigned by the life insurance policyholder, the beneficiary receives the

designated proceeds upon the death of the insured or maturity of the endowment. A beneficiary can beanybody the policyholder designates (family member, complete stranger, an animal (pet), charity groupor organization, corporation, business partner/trustee, alliance, or anybody else). The primary

beneficiary is the first beneficiary named; he/she must still be living at the time of insured's death inorder to be awarded the proceeds. A contingent or secondary beneficiary, designated in the event of the primary beneficiary's death prior to the insureds. A revocable beneficiary (either primary or secondary) can be interchanged (replaced) by the beneficiary at his/her discretion at any time.Anirrevocable beneficiary (primary or secondary) can be interchanged by the policy owner through thewritten authorization of the originally named beneficiary only. Upon naming an irrevocable

beneficiary, the policy is eliminated from the estate of the insured, thereby giving up any incidences of ownership for purposes of estate taxes. If a beneficiary is found guilty of the crime of the murder, and subsequently the insured is found dead,the beneficiary is no longer privilege to the death benefit. The death benefit would be entitled to theinsured's estate.

BENEFICIARY CLAUSE PROVISION - This condition of agreement is found within life insurance policies, allowing a policy owner to designate anybody to become the primary and secondary beneficiaries. The policy owner is allowed to interchange the beneficiaries at their discretion, at anytime, by addressing the insurance company through a written document as well as sending the policyfor a written authorization upon request.

BENEFIT SUM - This financial amount is awarded or made payable to an awardee who has paid premiums to the insurance company.

BENEFIT ALLOCATION METHOD - Process of providing money for a pension plan that requires asolitary premium payment in order to fund an individual benefit unit for a single year of acknowledgedemployment with the employer. Using a figurative example, an employee earning an $85 unit of

benefit for a year of acknowledged employment to start at age 60, a single premium deferred annuitywould be bought for that employee's account. After this initial year, for every year that passes an extrasingle premium differed annuity would be acquired for each additional year of acknowledgedemployment. Upon reaching the retirement threshold, these acquired annuities would be compoundedto supply a monthly income benefit amount to the employee.

BENEFIT FORMULA - This calculation method is found within employee benefit plans to computelife insurance and retirement benefit award amounts for an employee. The employee is contractuallyentitled to these benefits. BENEFIT PERIOD (HEALTH INSURANCE) - This period is found within a health insurance policy,and defines the total number of days that benefits are to be awarded to the named insured, as well as hisor her dependents. Using a figurative example, the total number of calendar days that benefits arecalculated during a calendar year are comprised of a specific period of time, January 1st throughDecember 31st of each year.

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company at the time of death. The policy also requires the business continue to pay the premiumamount even after the key employee's departure from the work force. 8. a life insurance coverage

policy may be cancelled in order to obtain it's cash value, or sold to the key insured person. Almostalways, barring any unforeseen circumstances, the business is ensured a recompensation for the total of the premiums paid. 9. Long-term disability income insurance policies on a key person supply financialsupport for salary continuance to the handicapped key person. (When dealing with temporary

disabilities, a business may decide on self insurance. The premium cost for disability income insuranceis quite high in comparison to the possible income benefits) BILATERAL CONTRACT - Legal agreement comprised of an exchange. In a bilateral contract the

exchange is a promise for a promise. Insurance policies are not bilateral contracts, they are legallycertified to be unilateral contracts.

BILL OF LADING - When a loss is incurred during the transportation of goods, this writtendeclaration form must be produced when the claim for the loss is made. This form affirms factual

proof of the shippers care, custody, or control exercised over the goods at the time the loss happened.

BINDER (TEMPORARY CONTRACT) - This is a temporary insurance contract that suppliescoverage until such time as a permanent policy can be brought into effect. Within casualty and

property insurance, certain agents hold the power to legally bind an insurance company to temporarilycover until a new policy can be purchased or issued. Using a figurative example, the buyer of a vehiclecan summon the agent, who can then fulfill the request of binding the insurance company to providetemporary contractual coverage. BINDING RECEIPT - This receipt is used as evidence of the temporary contractual agreement thatlegally requires an insurance company to supply coverage for as long as the application is accompanied

by the premium. An agent within the property insurance field can legally bind an insurance companyto provide coverage for a particular risk. Certain agents have the legal power to serve an insurancecompany an oral binder, which is ordinarily followed by a written binder

BLACK LIST STATES - These states within the USA inhibit the induction of surplus lines withinspecific insurance companies. BLACKOUT PERIOD (TIME INTERVAL) - This time period is defined by the date Social Security

benefits stop and the date they are re-enabled. Using a figurative example, survivor benefits areawarded to a parent (who is less than 60 years old) caring for a child under the age of 16. Upon thechild's 16th birthday, the surviving parent will not receive Social Security benefits again until age 60.The time period in between, where no benefit payments are awarded, is called the blackout period.

BLANKET CONTRACT POLICY - This insurance coverage is used to insure a policyholder's property at numerous separate locations. This policy is used by business operating on a co-location basis, subsequently more inclined to move their property to and from their separate business locations.

BLANKET CRIME INSURANCE POLICY - This type of insurance policy is used most often as aninclusion in special multi-peril insurance (SMP), usually replaced by the commercial packageinsurance policy, through the coupling of the Blanket Crime Endorsement. Perils and risks coveredinvolve dishonesty of a companies work force, loss of capital while inside as well as outside acompanies place of business, misplaced money orders, fraudulent crimes because of the actions of adepositor, and the counterfeit production or use of paper currency. Because of the extensiveness of thecrime policy, it is described as providing a "blanket" of coverage for policyholders. This commercialcrime coverage form has taken the place of this insurance coverage to a large extent.

BLANKET INSURANCE POLICY (SINGLE) - This is an individual policy active for an insured'sh f ll f l d h


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BLANKET MEDICAL EXPENSE INSURANCE POLICY - This health insurance policy suppliescoverage for a policyholder's medical expenses with the exception of specific exclusions. This policyis highly beneficial, possibly the most so of all medical policies, due to the fact that unless a particular medical cost is excluded it is covered as an automatically insured expense.

BLANKET POSITION BOND - Covering all of a companies work force on a blanket basis, with the

highest applicable limit of coverage used for each separate work employee found guilty of committinga crime.

BLANKET RATE PREMIUM - This is a premium required (and used on a constant basis) for property insurance to cover numerous properties at numerous places of location. This rate is usedwithin a blanket insurance policy as a replacement for a particular rate assigned to each location or specific type of property. BLENDED OR INTEGRATED INSURANCE PROGRAM - These programs integrate finite risk insurance, reinsurance, and standard insurance policies as an alternative option to self insurance. Theseinsurance programs are generally of a lengthy duration period (long term). The primary goal of thisinsurance program is to combine the qualities of a finite risk program (regulation of cash flow and theimprovement of income and profit sharing efforts) with the qualities of risk transfer through standardinsurance.

BLOCK LIMITS INSURANCE TOTAL - This is the complete and total amount of insurance coveragean insurer is willing to provide on any particular city block. Having these limits in place consequentlyreduces the insurance companies risk of exposure to a possibly tragic occurrence. Hurricanes, floods,fires, and tornadoes that could consume the entire block in multiple damages or complete destructionare prime examples.

BLOCK OF POLICIES - This term defines the total number of insurance policies insured andauthorized by the insurance company that utilizes identical policy rates and forms.

BLOCK POLICY INSURANCE COVERAGE - This form of insurance coverage uses an all risks basisto cover valuable goods while being transported, in bailment, and while they are in the possession andon the grounds of another individual or group.

BLUE CROSS INSURANCE COVERAGE PLAN - This is an self sufficient, not for profit,membership only hospital insurance plan. Offering a variety of risk benefits including: hospitalizationcoverage for expenses incurred minus specific excluded costs (semiprivate room only, certainsurgeries, etc.) A participating hospital concurs on a preset schedule for named medical services andinclusions. Participating hospitals are required to transfer any bills amassed to their Blue Crosscoverage plan location for indemnification. Other services covered include outpatient stays, extendedand private care services such as a nursing home or assisted living, as outlined in the terms of thecontract.

BLUE SHIELD INSURANCE COVERAGE PLAN - This is a self sufficient, not for profit,membership only plan that covers primarily medical and surgical services. The acting physician andsurgeon are both required to bill the insured's Blue Shield insurance coverage plan in accordance withthe law, and not allowed to directly bill the patients. However, any deviation from the scheduled ratesand doctor expenses are the responsibility of the insured.

BOBTAIL LIABILITY INSURANCE COVERAGE - This is a specific insurance coverage insuring acommon transportation carrier for their liability while returning to their terminal after successfullyunloading their cargo. The insurance policy was created to insure drivers on their homecoming trip. A

business that hires the truck is liable for any damages incurred while the truck is full of cargo, but after d l d h k d b d h h b b l l b l


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separate property having direct involvement, and any legal costs incurred.

BOND DEDICATION - This term defines the layering of a bond portfolio in which bonds that possessa yield to maturity that is lower are sold, and bonds that possess a yield to maturity that is higher are

purchased in order to ensure that reserve funds are available to provide future benefit award payments by the insurance establishment. .

BOOK OF BUSINESS - This term defines the complete amount of insurance within an insurer's log books at any given time.

BORDEREAU - This term defines the specific form of reinsurance that depicts the losshistory/premium history in accordance with specific risk factors. A ceding company is required to

present the reinsurer with this particular information. Then, this information is utilized by thereinsurance company to determine the cost of reinsurance premiums.

BORDERLINE RISK - A possible insurance applicant who is considered to have a less than perfectunderwriting description. BOSTON PLAN - This term defines the agreement named and derived from the city of Boston. In this

plan, an insurance company must insure real properties within the lower socioeconomic areas,regardless of their location, as long as all hazards and risk found upon inspection are brought up tocode.

BOTH-TO-BLAME CLAUSE (OCEAN MARINE INSURANCE) This insurance provision declaresthat a wreck involving two or more ships in a collision, all sharing the same degree of fault, requires allinvolved owners and shippers with a financial interest in the specific ship transport share in theresponsibility of losses as they coincide with the financial investments they had in the ships prior totheir colliding. This provisional clause overrides any other provision pertaining to the delegation of losses amongst shippers and owners in ocean marine insurance policies.

BOTTOMRY - This term defines the means of delegating risks, widely known as the starting elementof the present day insurance policy agreement. Ancient Greece promoted and followed the idea of asea faring vessels loan being removed if the vessel did not return to it's assigned port. The concept wascontinued and embraced by Lloyd's of London during the 1600s for the insurance of England'smerchant fleets while transporting goods to various colonies. The inception of casualty and propertyinsurance establishments across the globe began through the original insurance of merchandise beingtransported across large bodies of water.

BREACH OF CONTRACT - This term defines a party's failure of compliance (without legal recourse)with a promise they previously made. The modern day insurance policy operates on the basis of upholding legally manageable promises created only by the insurance company. The insured are notapplicable to make promises. This is the basis for declaring all insurance policies to be a unilateralcontract, due to the exclusion of an insured from the promise making allowance.

BREAK IN SERVICE (PENSION PLAN FEATURE) - This term defines the specific element of a pension plan that allows an employee incurring an interruption in service to have the period added totheir retirement.

BRIDGE INSURANCE COVERAGE - This term defines the insurance coverage applicable to thedamage or destruction of an insured bridge. Operating on an all risks basis with certain exclusionsinherent to the coverage. War, general wear and tear, standard defective mechanics, and nuclear incurred destruction. Coverage is available to state and local governing bodies to restrict exposures tothe costs of an instantaneous tax hike to repair, rebuild, or reconstruct a damaged or devastated bridge.


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value of the property is allowable; the true insurable value of the property can be determined by allmeans necessary that present an accurate depiction of the property's actual financial value. This is ameans of ascertaining the actual insurable worth of a structure consistent with any method available to

produce the most precise determination of that property's total value. This method of actual cash valuedetermination is becoming thoroughly accepted as an approved method of determining the actual cashvalue.

BROAD FORM INSURANCE COVERAGE POLICY - This term defines the coverage of many risk factors similar to what is found in broad form personal theft insurance.

BROAD FORM PERSONAL THEFT INSURANCE COVERAGE POLICY - This coverage providesan all risks basis insurance coverage for any losses incurred as a result of theft or unaccountabledisappearances of personal property, property and premises damage incurred as a result of theft,vandalism, and other malicious trouble making to the inside of a property or other property belongingto the insured located away from than the insured grounds. Sublimits are active on specialty propertiesthat are especially vulnerable to theft. Examples include: monies, securities, works of art, coincurrencies, and precious jewelry. This insurance coverage is generally found in Part I Coverage C of the homeowners insurance policy, shown as a percentage figure of the home's structural makeup.

BROAD FORM PROPERTY DAMAGE ENDORSEMENT ATTACHMENT - This addition to ageneral liability insurance policy forces the elimination of property exclusion, subsequently including itin the policy, of any property under the management, control, or custody of the insured. Foregoing thisendorsement as an optional coverage addition would result in the inability of general liability insurance

policy to cover damages incurred on property under the management, control, or custody of theinsured.

BROAD FORM STOREKEEPERS INSURANCE COVERAGE POLICY - This coverage is generallysupplied as an inclusion to storekeepers burglary and robbery insurance to cover any damages incurredas a result of the theft and/or burglary of merchandise, fixtures, equipment, and furniture.

BROKERAGE GENERAL AGENT (INDEPENDENT CONTRACTOR) - This individual employeeof the insurance company has the power to assign brokers on the insurance companies behalf. Thissupervisor like power figure has the goal and focus of selling an insurance establishment's products tothe delegated brokers who sell them at retail to the mainstream public.

BROKER-AGENT (INDEPENDENT INSURANCE) - This salesperson represents and sellsindependent insurance from specific insurers, always reserving the right to serve as a broker

performing research in the complete insurance market to discover coverage providing maximumefficiency. Legally licensed as an agent an broker, this individual is officially recognized.


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CLAIMS OCCURENCE BASIS LIABILITY COVERAGE - A technique used to determine theavailability of coverage for specific claims. If an event transpires causing a claim to occur during thetime period in which the policy is active, then the insurance company is to be held responsible for thedebt, provided the debt is within the limits of insurance policy. The date of claims submission by the

business is irrelevant as long as these terms are met. Experts say it should be noted, when acquiring a property or a new insurance policy, it is imperative to find out whether the claims are paid on a claims

made basis or claims occurrence basis.CLAIMS RESERVE capital pool founded to pay for claims that the insurance company knows about(claims incurred or future claims) but has not yet settled. The claims reserve is crucial since it is anaccurate measure of a company's liabilities. This reserve does not cover INCURRED BUT NOTREPORTED LOSSES (IBNR).

CLASH REINSURANCE - a kind of EXCESS OF LOSS REINSURANCE in which the insurancecompany (CEDENT) is reimbursed in the event there is a casualty loss causing at least two INSUREDS

producing losses from the occurrence of a single casualty.

CLASS- a group of insureds with identical characteristics, created for the purposes of rate-making. I.E.,all wood-frame houses within 300 feet of a fire-plug in the same geographical area would have similar likeliness of incurring a total loss. See also RATE MAKING.

CLAUSE - in an insurance policy, paragraphs and sentences detailing different types of coverages,duties of the insured ,exclusions, locations covered, and conditions that terminate or suspend coverage.

CLAUSES ADDED TO A LIFE INSURANCE POLICY - provisions, usually needing an extra premium, that are added to an insurance contract. These include WAIVER OF PREMIUM (WP),DISABILITY INCOME (DI), ACCIDENTAL DEATH CLAUSE, policy purchase option (PPO). Ayouthful family with children may wish to consider these clauses since the leading income generator is7-9 times more likely to become disabled than to die at a young age

CLEANUP FUND a part of necessary coverage determined by the "needs approach" to life insurancefor a family. It is meant to cover last minute costs as well as those that arise after the death of aninsured, such as funeral costs, probate charges, and medical bills.

CLEAR-SPACE CLAUSE in PROPERTY INSURANCE - policies, a clause that demands that aspecific insured property be a stated distance from similar insured or noninsured property. I.E, storedflammable devices should be at least 500 yards from an insured building.

COINSURANCE LIMIT - in a MERCANTILE OPEN-STOCK BURGLARY INSURANCE policy,the $ amount of coverage as demanded by the COINSURANCE clause. This $ amount is theMAXIMUM PROBABLE LOSS (MPL) of merchandise that the insurer estimates may result from asingle burglary. The indemnification of the insured merchant may not be more than the lesser of thiscoinsurance limit or the COINSURANCE PERCENTAGE of the total monetary value of the productthat has been insured.

COINSURANCE PENALTY - A subtraction in the total that the insured is paid from the insurer, after having incurred a property loss, because the insurer did not carry the amount of coverage demanded bythe COINSURANCE clause. See also COINSURANCE REQUIREMENT.COINSURANCE PERCENTAGE - in many PROPERTY INSURANCE policies, it is required thatthe insured carry insurance as a percentage of the total cash value of the insured property. If thisrequirement is not met, then the insured is subject to the COINSURANCE PENALTY. See alsoCOINSURANCE; COINSURANCE REQUIREMENT


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COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs) - bonds that are protected by mortgagesecurities categorized as either interest only or principal only strips (separate trading of registeredinterest and principal of securities). Insurance companies find CMOs advantageous because of their foreseeable cash flow patterns.

COLLATERAL SOURCE RULE - legal rule of evidence under which no subtraction in damagesgiven by a court is allowed for accident, bodily injury, sickness, or illness merely because the plaintiff has other income paying revenue such as HEALTH INSURANCE and DISABILITY INCOMEINSURANCE.

COLLEGE RETIREMENT EQUITIES FUND (CREF) - system preserved by the Teachers InsuranceAnnuity Association. This capital pool is primarily for college faculties and staff, who pay premiumsthrough salary deductions toward a tax-sheltered retirement variable annuity.

COLLISION - physical contact of a vehicle with another inanimate object causing damage to theinsured automobile. Insurance coverage is accessible to provide security against this occurrence. Seealso PERSONAL AUTOMOBILE POLICY (PAP).

COLLISION DAMAGE WAIVER - special property damage coverage bought by an individual rentinga vehicle under which the rental company cancels any right to regain property damage to the vehiclefrom that individual, regardless of who is at fault. A substantial fee is paid by the insured to thecompany providing the rental for this waiver for coverage that may already be given by a PERSONALAUTOMOBILE POLICY (PAP).

COLLISION INSURANCE - in automobile insurance, coverage offering security in the event of physical damage to the insured's own vehicle (other than that protected under COMPREHENSIVEINSURANCE) caused by COLLISION with another inanimate object. See also PERSONALAUTOMOBILE POLICY (PAP).

COMBINATION AGENT an employee of an insurance company who sells industrial and ordinarylife insurance policies. In an attempt to move their field forces into the ordinary life business, manyindustrial companies have systematically trained their agents to sell ordinary life policies.

COMMERCIAL CREDIT INSURANCE - coverage for an insured firm if its business debtors fail to pay what they owe. The insured firm can be a service organization or a manufacturer but it cannotoffer its products or service on a retail level to be protected under commercial credit insurance. Under this type of insurance, the insured firm takes the expected loss up to the retention amount and theinsurance company is responsible for anything above that amount, that is within the limits of the creditinsurance policy.

COMMERCIAL FORGERY POLICY - protection for an insured who accepts forged checksunknowingly. Coverage can be found under the SPECIAL MULTIPERIL INSURANCE (SMP) policy(SECTION III CRIME COVERAGE INSURING AGREEMENT 5DEPOSITORS FORGERY).

COMMERCIAL PACKAGE POLICY (CPP) an insurance policy that is of COMMERCIAL LINESin orientation and is made up of 2 or more of the following coverages: COMMERCIAL PROPERTY,BUSINESS CRIME, BUSINESS AUTOMOBILE, BOILER AND MACHINERY, COMMERCIALGENERAL LIABILITY (CGL), INLAND MARINE INSURANCE, and FARMOWNERS and


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premiums. Expenses and policy lapses are not included in th

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46856913 Insurance Terms

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