Our insurance terms glossary is divided alphabetically by insurance terms in a quick reference guide to assist understanding the language commonly used by insurance companies. Policy documents contain a number of insurance terms because they typically define the limitations of risk and liability on the insured and any exclusions of coverage.
If you plan to start a new policy or renew your current policy with a carrier or agency, it is important to review and understand the policy differences behind individual quotes from multiple carriers. Lower policy premiums may be the result of decreased payout benefits, higher deductibles, or maximum damages allowed. It is important to identify these unique features in any policy comparison, otherwise a lower price may come at a much higher cost when you have to file a claim for loss or damages in the future.
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 called flexible benefit plans.
Amount payable by an insured during a calendar year before a group or individual health insurance policy begins to pay for medical expenses.
A contract of health insurance that may be canceled during the policy term by the insurer or insured.
The discontinuance of an insurance policy before its normal expiration date, either by the insured or the company.
(1) 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.
(2) The amount of insurance a company or the industry are able to write, due to limitations on or availability of capital.
Profit realized on the sale of securities. An unrealized capital gain is an increase in the value of securities that have not been sold.
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.
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 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. The company’s stock is controlled by one interest or a group of related interests so as to provide coverage for their business operations. A Captive Insurance Company may be a non-admitted, nonresident, or foreign insurer. Sometimes it may provide reinsurance to a self-insured or a domestic company. See also Association Captive.
Career Average Formula
A pension plan formula that bases retirement benefits on earnings during all years of service to the employer.
Type of ocean marine insurance designed to protect the shipper of the goods against financial loss if the goods are damaged or lost.
Cash Surrender Value
The amount available in cash upon voluntary termination of a policy by its owner before it becomes payable by death or maturity.
Insurance concerned with the insured‘s legal liability for injuries to others or damage to other persons’ property; also encompasses such forms of insurance as plate glass, burglary, robbery and workers’ compensation.
Event which causes a loss of extraordinary magnitude, such as a hurricane or tornado.
Catastrophic Health Plan
A high-end deductible health plan sod in the Marketplace. To qualify you must be under 30 years of age, or receive a ‘hardship exemption;’ essentially, recognition that you cannot afford health care coverage.
Form added to commercial property insurance policy that indicates the causes of loss that are covered. There are four causes-of-loss forms: basic, broad, special, and earthquake.
To transfer all or part of a risk written by an insurer (the ceding, or primary company) to a re-insurer.
Centers For Medicare And Medicaid Services
A federal agency within the Department of Health and Human Services (HHS) that governs Medicare, Medicaid and the Children’s Health Insurance Program (CHIP).
Certificate Of Insurance
A statement of coverage issued to an individual insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.
Certified Financial Planner
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
Professional in property and liability insurance who has passed a series of examinations by the Society of Certified Insurance Counselors.
Amount of the insurance ceded to a re-insurer by the original insuring company in a reinsurance operation.
See Certified Financial Planner.
See Commercial General Liability Policy.
Change Of Occupation Clause
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.
Chartered Financial Consultant
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 administered by The American College.
Chartered Life Underwriter
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. Must have minimum of three years of experience in life or health insurance sales and have passed ten professional examinations administered by The American College.
Chartered Property And Casualty Underwriter
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.
See Chartered Financial Consultant.
Children’s Health Insurance Program (CHIP)
CHIP provides low or no-cost coverage to eligible children.
Allows auto insureds the choice of remaining under the tort system or choosing no-fault at a reduced premium.
Chronic Disease Management (CDM)
CDM programs are proactive, integrated approaches focused on managing the needs and illnesses of a defined population of patients.
See Certified Insurance Counselor.
A request for payment of a loss which may come under the terms of an insurance contract.
Person who settles claims: an agent, company adjustor, independent adjustor, adjustment bureau, or public adjustor.
Claims-Made liability insurance, is different that Occurrence Form coverage. In a claims made policy, only those claims brought against the insured during the policy period and are reported during the policy period are covered. In an Occurrence form policy, the claims brought against the insured or insurance company are based on the insurance that was in-force at the time of the accident or event. A claims made policy can begin to look more like an occurrence form policy if the insured has been with the same insurance carrier for many years and has purchased “prior acts coverage”, similarly that same insured should purchase an “extended reporting or tail cover” to cover exposures known as incidents when the policy is in-force but do not develop into claims until after the policy is expired.
A liability insurance policy under which coverage applies to claims filed during the policy period.
Rate-making method in which similar insureds are placed in the same underwriting class and each is charged the same rate. Also called manual rating.
See Chartered Life Underwriter.
See Coordination of Benefits.
Consolidated Omnibus Budget Reconciliation Act. Contains provisions giving certain former employees, retirees, spouses and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available in specific instances. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer formerly paid a part of the premium. It is ordinarily less expensive, though, than individual health coverage.
(1) 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;
(2) 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, i.e., 80 percent by the insurer and 20 percent by the insured.
Collateral Source Rule
A legal rule, which states that the defendant cannot introduce any evidence that shows the injured party has received compensation from other collateral sources.
Protection against loss resulting from any damage to the policyholder‘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.
Basically, 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.
Commercial Auto Insurance
Vehicle insurance for cars owned by your business.
Commercial Crime Insurance
Protects businesses from the loss of money, securities or inventory resulting from risks such as theft, embezzlement, forgery or alteration of checks, robbery, counterfeit currency and documents, disappearance and destruction of money, securities and documents, employee dishonesty, safe burglary, computer fraud, wire transfer, audit and investigation expense.
Commercial General Liability Policy
Commercial liability policy drafted by the Insurance Services Office containing two coverage forms: an occurrence form and a claims-made form.
Insurance for businesses, organizations, institutions, governmental agencies, and other commercial establishments.
Commercial Multiple Peril Policy
A package of insurance that includes a wide range of essential coverages for the commercial establishment.
Commercial Package Policy
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.
The part of an insurance premium paid by the insurer to an agent or broker for his services in procuring and servicing the 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.
Securities that represent an ownership interest in a corporation.
A special ownership form 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.
A concept which requires health insurance providers to provide healthcare policies within a given territory at the same price regardless of medical underwriting and health status.
Claims adjustor who is a salaried employee representing only one company.
Under this concept a plaintiff (the person bringing suit) may recover damages even though guilty of some negligence. His or her recovery, however, is reduced by the amount or percent of that negligence.
Completed Operations is insurance that cover’s a contractor’s liability for accidents arising out of jobs, projects or operations that were completed by the contractor.
Comprehensive Automobile Insurance
Coverage designed to provide protection against loss resulting from damage to the insured auto, other than loss by collision or upset.
Comprehensive Coverage pays for the repair/replacement of your covered vehicle for those damages outside of a collision; for example, theft, vandalism or even hitting an animal.
Comprehensive General Liability Insurance
Under this form of insurance and regarding a covered occurrence, the company will pay all sums the insured becomes legally obligated to pay as damages due to bodily injury (Coverage A) or property damage (Coverage B).
Comprehensive Major Medical Insurance
A policy designed to give the protection offered by both a basic and a major medical health insurance policy. It is characterized by a low deductible amount, a coinsurance feature, and high maximum benefits.
Comprehensive Medical Expense Insurance
A form of health insurance that provides, in one policy, protection for both basic hospital expense and major medical expense coverages. The major medical part of a comprehensive policy is characterized by a deductible amount, coinsurance, 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 or business operation liabilities.
Compulsory Auto Liability Insurance
Insurance laws in some states require motorists to carry at least certain minimum auto coverages. This is called compulsory insurance.
Any form of insurance which is required by law.
Compulsory Insurance Law
Law 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 drive legally within the state.
Computer Extra Expense Insurance
Coverage designed to provide protection if computer or EDP equipment is damaged or destroyed by fire or any other insured peril. In such an event it would probably be necessary to incur certain extra expenses to continue business operations.
Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.
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.
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.
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.
Provisions inserted in an insurance contract that qualify or place limitations on the insurer‘s promise to perform.
An illness that confines an insured person to his home or to a hospital.
Consequential loss or damage coverage — as distinguished from direct loss or damage — is indirect loss or damage resulting from that event caused by or covered under a covered peril, such as fire or windstorm. Where windstorm is a covered peril, if a tree is blown down and cuts electricity to a home, the food in the refrigerator would have coverage for consequential loss.
The attempt by the insurer to prevent the lapse of a policy.
One of the elements for a binding contract. Consideration for an insurance policy is acceptance by the insurance company of the payment of the premium and the statement made by the prospective policyholder in the application, balanced by the insurance company’s promise to provide benefits in the case of loss.
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.
Contents Broad Form
See Homeowners Policy.
An initial period—generally the first two years that the policy is in force—during which the insurance company has the right to cancel a policy based on any false statements made by the insured.
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. See Joint-and-Survivor Annuity.
The person or persons designated to receive the benefits of a policy or plan if the primary beneficiary dies while the insured is living.
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.
The person to succeed as owner of a life insurance policy if the original owner dies.
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.
The group, entity or person to whom a group annuity contract is issued.
Contract Of Indemnity
Insurance that only restores the insured back to their original financial position, after a loss occurs. The insured cannot gain from the restoration.
Contractors Liability Insurance
Contractor’s Liability Insurance provides coverage for liability exposures that result from manufacturing and/or contracting operations in process. For example, the contractor, off-premises, (away from the office), operations at a construction site. Independent contractors, damage to property by explosion, collapse, and underground property damage are excluded.
Legal liability of another party that the business firm agrees to assume by a written or oral contract. It is common in construction and other agreements (written or oral) for one party to assume the liability of another. This is sometimes referred to as a hold harmless agreement. The extent to which one holds another harmless varies from contract to contract, job-to-job, etc.
Contribution By Equal Shares
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.
A group insurance plan issued to an employer under which both the employer and employee contribute to the cost of the plan. Seventy-five percent of the eligible employees must be insured. Compare Noncontributory.
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.
The right given to an insured person to change insurance without evidence of medical insurability, usually to an individual policy upon termination of coverage under a group contract.
A bond that offers the holder the privilege of converting the bond into a specified number of shares of stock.
Convertible Term Insurance
Term insurance that can be exchanged, at the option of the policyholder and without evidence of insurability, for another plan of insurance.
Coordination Of Benefits
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.
A fixed amount you pay, established by your insurance provider for the sharing of the cost of certain services you receive under your insurance plan.
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.
An amount attributed to an asset for income tax purposes; used to determine gain or loss on sale or transfer; used to determine the value of a gift.
The controller reduction of inefficiencies in the consumption, allocation, or production of health care services that contribute to higher than necessary costs.
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.
Often considered ‘out-of-pocket costs,’ cost sharing is the portion of healthcare costs you pay that are not covered by your insurance.
Cost Sharing Reduction (CSR)
Subsidies paid under the Patient Protection and Affordable Care Act that help lower your out-of-pocket costs and deductibles.
The scope of protection provided under a contract of insurance; any of several risks covered by a policy.
Coverage For Damage To Your Auto
That part of the personal auto policy insuring payment for damage or theft of the insured automobile. This optional coverage can be used to insure both collision and other-than-collision losses.
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.
Hospital, medical, and miscellaneous health care expenses incurred by the insured that entitle him/her to a payment of benefits under a health insurance policy. Found most often in connection with major medical plans, the term defines, by either description, reasonableness, or necessity to specify the type and amount of expense that will be considered in the calculation of benefits.
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.
See Chartered Property and Casualty Underwriter.
See Commercial Package Policy.
A statistical measure of the degree to which past results make good forecasts of future results.
The weight given to an individual insured‘s past experience in computing premiums for future coverage.
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.
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
Term life insurance issued through a lender or lending agency to cover payment of a loan, installment purchase, or other obligation, in case of death.
Health benefit plans that meet a minimum set of qualifications; includes group, student and individual health plans, as well as government-backed plans.
Crop Hail Insurance
Coverage designed to provide financial protection against damage to growing crops as a result of hail or certain other named perils.
Cross Liability Endorsement
In the event of claim by one insured for which another insured covered by the same policy may be held liable, this endorsement covers the insured against whom the claim is made in the same manner as if separate policies had been issued. However, it does not operate to increase the insurance company‘s overall limit of liability.
Cross Purchase Agreement
Specifies the terms for the surviving partners or shareholders to buy a deceased’s share of the business’s ownership.
See Customer Service Representative.
Current Assumption Whole Life Insurance
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 called interest-sensitive whole life insurance.
Status of a covered person under the Old-age, Survivors, and Insurance (OASDI) program who has at least six quarters of coverage out of the last thirteen quarters, ending with the quarter of death, disability, or entitlement to retirement benefits.
Customer Service Representative
Customer Service Representatives support 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.
Cyber Liability Insurance
Insurance coverage for your business’ liability regarding any data breaches involving sensitive customer information.
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