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.
The pricing factor upon which the insurance buyer’s premium is based.
In efforts to hold insurers accountable and further transparency, ACA requires that insurance companies that are looking to raise rates substantially, submit their proposed increases to the state or federal government for review, first.
An insurance policy issued at a higher-than-standard premium rate to cover a higher-than-standard risk; for example, an insured who has impaired health or a hazardous occupation.
The statistical process by which insurers determine probability of loss and pricing for the basic classes of insurance.
A geographical grouping in which like hazards tend to equalize and permit the establishment of an equitable rate for the territory.
Reasonable And Customary Charge
A charge for health care which is consistent with the going rate or charge in a certain geographical area for identical or similar services.
Giving any valuable consideration, usually all or part of the commission, to the prospect or insured as an inducement to buy or renew. Rebating is illegal.
Recurring Claim Provision
A provision in some health insurance policies which specifies a length of time during which the recurrence of a condition is considered to be a continuation of a previous period of disability or hospital confinement.
A provision in some health insurance policies, which specifies a period of time during which the recurrence of a condition is considered a continuation of a prior period of disability or hospital confinement.
Reduced Paid-Up Insurance
A form of insurance available as a non-forfeiture option. It provides for continuation of the original insurance plan, but for a reduced amount. The policy cash surrender value is used to purchase whole life insurance. No additional premiums are required to maintain the reduced death benefit amount under this reduced paid up whole life policy.
Supervision of business practices by a governmental entity. Regulation of insurance companies is through respective state insurance commissioners.
(1) Restoration of a totally disabled person to a meaningful occupation,
(2) a provision in some long- term disability policies that provides for continuation of benefits or other financial assistance while a totally disabled insured is retraining or attempting to resume productive employment.
The payment of the expenses actually incurred as a result of an accident or sickness, but not to exceed any amount specified in the policy.
The resumption of coverage under a policy which has lapsed.
The acceptance by one or more insurers, called re-insurers, of a portion of the risk accepted by another insurer who has contracted for the entire coverage. Reinsurance can be treaty or facultative.
An alternative mechanism to service those insureds that cannot obtain insurance in the voluntary market. Premiums and losses for the business that is ceded to the facility are pooled and all insurers share according to their proportion of the voluntary market. See also Residual Market.
Renewable Term Insurance
Term insurance which can be renewed at the end of the term, at the option of the policyholder and without evidence of insurability, for a limited number of successive terms. The rates increase at each renewal as the age of the insured increases.
Continuance of coverage under a policy beyond its original term by the insurer’s acceptance of the premium for a new policy term.
A form of business interruption insurance for a landlord, designed to protect building owners against loss of income when rentals have been interrupted or rental value has been impaired by the occurrence of any of the insured perils. It assures continuous income while an insured’s building is un-tenantable.
Rental Reimbursement Coverage
Often referred to as ‘Rental Car Coverage,’ Rental Reimbursement Coverage is optional coverage that helps pay the cost of a rental car when you have a covered claim under your auto policy.
A package type of insurance that includes coverage similar to a homeowners policy to cover the personal property of a renter or tenant in a building.
The substitution of health insurance coverage from one policy contract to another.
The cost to repair or replace property at construction costs prevailing at time of loss; the cost to repair or rebuild property without considering depreciation. Contrast Actual Cash Value.
Replacement Cost Insurance
Insurance designed to provide coverage on the basis of full replacement cost without deduction for depreciation on any loss sustained, subject to the terms of the co-insurance clause. This coverage applies to both building and contents items as specified on the face of the policy. No deduction is taken for depreciation in arriving at the proper amount of insurance needed to comply with the coinsurance clause.
The percentage of income before retirement that is required to be replaced to maintain the same standard of living after retirement.
Statements made by an applicant in an insurance application, which he represents as being substantially true to the best of his knowledge and belief, but which are not warranted as exact in every detail.
Termination of an insurance contract by the insurer on the grounds of material misstatement on the application for insurance. The action of rescission must take place within the contestable period or Time Limit on Certain Defenses clause set forth in the policy, but takes effect as of the effective date of the policy, thus voiding the contract from its inception.
Reservation Of Rights
An arrangement whereby an insurer defends a case without commitment to provide coverage in the event that the facts disclosed during the trial reveal that the occurrence is not covered.
(1) An amount representing an insurer’s estimate of its liabilities on future commitments under policies outstanding.
(2) An amount allocated for a special purpose.
A period of partial disability that immediately follows a period of total disability. Benefits for residual disability are paid on a pro-rata basis, depending on the percentage of earnings loss.
Residual Disability Benefits
A provision in an insurance policy that provides benefits in proportion to a reduction of earnings as a result of disability, as opposed to the inability to work full-time.
A source of insurance available to applicants who are unable to obtain insurance through ordinary methods in the voluntary market. See Automobile Insurance Plan, Joint Underwriting Association.
The net amount of risk retained by an insurance company for its own account or that of specified others, and not re-insured.
See Earnings Test.
The process by which a re-insurer obtains reinsurance from another company.
The first date for which claims will be paid under a claims-made policy of liability insurance.
Rating procedure which allows adjustment of an insured’s final rate on the basis of the insured’s own loss experience.
A trust that can be terminated or revoked by its creator.
A document that modifies an insurance policy. It may increase or decrease benefits, waive a condition or coverage, or in any other way amend the original contract. See Endorsement.
Right Of Survivor-ship
Legal rule which states that at the death of one co-owner of property, that person’s interest in the property automatically passes to the surviving joint tenant or tenants.
(1) The chance of loss;
(2) The insured or property covered by a policy or application.
The process by which a company decides how its premium rates for life insurance should differ according to the risk characteristics of individuals insured (e.g., age, occupation, sex, state of health) and then applies the resulting rules to individual applications. See also Underwriting.
Any conscious action (or decision not to act) intended to reduce the frequency, severity, or unpredictability of accidental losses.
Risk Retention Group
An alternative form of insurance in which members of a similar profession or business band together to self insure their risks.
Roadside Assistance Coverage
Roadside Assistance Coverage helps you when your car breaks down. Services typically include things such as towing, battery charging, flat tire service or fuel deliver.
The taking of property from a person by force or threat of violence.
Transfer of IRA or other qualified pension funds from one financial institution to another.
Rollover Individual Retirement Account (IRA)
A retirement investment vehicle that allows you to consolidate your retirement savings from other sources, such as a 401k or 403b into one account.
A retirement vehicle where contributions are not taxed, given certain commitments are met.
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