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.
Liability for damages even though fault or negligence cannot be proven. Certain situations create absolute liability for the manufacturer a product or the provider of a service.
An event or occurrence which is unforeseen and unintended. Accidental is an important concept of risk for insurance. The more unlikely the accident or the occurrence, the less expensive it is to insure.
Accident And Health Insurance
A type of coverage that pays benefits, when an accident occurs or a medical problem arises, sometimes including reimbursement for loss of income, in case of sickness, accidental injury, or accidental death.
A form of health insurance against loss by accidental bodily injury.
Accidental Bodily Injury
Injury to the body as the result of an accident.
Accidental Death Benefit
A benefit in addition to the face amount of a life insurance policy, payable if the insured dies as the result of an accident. Sometimes referred to as double indemnity.
Accountable Care Organization (ACO)
ACOs are groups of hospitals, doctors and other healthcare providers that organize to provide quality care to their collective Medicare patients.
The process of recording, summarizing, and allocating all items of income and expense of the company and analyzing, verifying, and reporting the results.
Process by which regulatory organizations determine whether an entity (i.e. healthcare providers) meet the acceptable standards for the services the entity wishes to provide.
(1) The time between the first premium payment and the first benefit payout under a deferred annuity;
(2) A specified period of time, such as 90 days, during which the insured person must incur eligible medical expenses at least equal to the deductible amount in order to establish a benefit period under a major medical expense or comprehensive medical expense policy.
The mechanism used to account for the insured‘s deposits in a variable annuity contract during the premium paying period. The number of units purchased depends upon the current valuation of a unit in dollars.
The insurer‘s cost of putting new business in force, including the agent’s commission, the cost of clerical work, fees for medical examinations and inspection reports, sales promotion expense, etc.
Activities Of Daily Living
A list of activities, normally including mobility, dressing, bathing, toileting, transferring, and eating which are used to assess degree of impairment and determine eligibility for some types of insurance benefits.
Act Of God
An unforeseeable, natural occurrence, such as a flood or tornado.
The percentage of total costs for coverage benefits that a health plan will cover.
Acts Of War, Confiscation, Detainment, Revolution Free Of Capture
Exclusion in most marine cargo policies, which states that coverage is not provided when due to capture, seizure, arrest, detainment, confiscation, preemption, requisition, or nationalization, whether in time of peace or war. This clause also excludes from coverage loss due to hostilities or warlike operations (including atom bombs), embargoes or other interference with the free flow of trade. Coverage for these hazards can be obtained through the Cargo War Risk policy. See also Cargo Insurance.
Actual Cash Value
The replacement cost of property damaged or destroyed at the time of loss, with deduction for depreciation. Actual Cash Value cannot exceed the applicable liability limits shown in the declarations of the policy, nor the amount it would cost to repair or replace such property with material of like kind and quality within a reasonable amount of time after a loss.
Actuarial Cost Method
One of several systems for determining either the contributions to be made under a retirement plan, or the level of benefits when the contributions are fixed. In addition to forecasts of mortality, interest and expenses, some of the methods involve estimates of future labor turnover, salary scales and retirement rates.
If the present values of two series of payments are equal, taking into account a given interest rate and mortality according to a given table, the two series are said to be actuarial equivalent on this basis. For example, a lifetime monthly benefit of $67.60 beginning at age 60 (on a given set of actuarial assumptions) can be said to be the actuarial equivalent of $100 a month beginning at age 65. The actual benefit amounts are different but the present value of the two benefits, considering mortality and interest, is the same.
Describes insurance whose cost exactly equals the expected losses.
A person professionally trained in the technical aspects of pensions, insurance, and related fields. The actuary estimates how much money must be contributed to an insurance or pension fund in order to provide future benefits.
See Actual Cash Value.
An assured party specifically named under an insurance policy that is not automatically included as an insured under the policy of another, but for whom the named insured’s policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named insured’s impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (e.g., customers or owners of property leased by the named insured).
Additional Named Insured
An additional person(s) specifically named on the policy, similar to Additional Insured, except that each named insured person(s) are fully covered under the terms of the policy. Parents who insure their teenage son or daughter on their existing auto insurance policy, can do so by adding them as an Additional Named Insured.
Adhesion, Contract Of
A contract that is drafted by one party and accepted or rejected by the other, with no opportunity to bargain with respect to its terms.
Adjustable Life Insurance
A type of insurance that allows the policyholder to change the plan of insurance, raise or lower the face amount of the policy, increase or decrease the premium and lengthen or shorten the protection period.
Adjusted Gross Estate
Approximately the net worth of a deceased’s estate—the beginning point for the computation of estate taxes. In addition to the deceased’s assets while alive, the value will also generally include the proceeds of life insurance.
Adjusted Gross Income (AGI)
AGI is your total income less any deductions.
The process of investigating and settling losses with or by an insurance carrier. This service is usually conducted by a claims adjustor. Sometimes they are employees of the insurance company and sometimes they are independent.
Organization for adjusting insurance claims that is supported by insurers using the bureau’s services. Sometimes for specialized adjusting or for smaller insurance companies this bureau provides better service.
A person who investigates and settles losses for an insurance carrier.
Administrative Services Only Plan
An arrangement under which an insurance carrier or an independent organization will, for a fee, handle the administration of claims, benefits and other administrative functions for a self-insured group.
Admitted/Non-Admitted Insurance Company
Admitted insurance companies have been formally licensed to operate by the various state insurance agencies where the company operates. Conversely, non-admitted insurance companies (often called excess or surplus insurers) are not state regulated, and as a result, are not backed financially by the state.
Pension-funding method in which the employer systematically and periodically sets aside funds prior to the employee’s retirement.
Advance Premium Mutual
Mutual insurance company owned by the policyholders that does not issue assessable policies but charges premiums expected to be sufficient to pay all claims and expenses.
Advance Premium Tax Credit (APTC)
A federal tax credit that reduces the amount you pay for monthly health insurance when such insurance is purchased on the Marketplace.
The tendency of persons who present a poorer-than-average risk, to apply for, or continue, insurance to a greater extent than do persons with average or better-than-average expectations of loss. An insurance company that experiences adverse selection will also experience poor financial results.
Injury rising out of an offense committed in the course of your advertising activities, if such injury rises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition, or infringement of copyright, title or slogan.
Stipulated minimum and maximum ages below and above which an insurance company will not accept applications and may not renew policies.
An insurance company representative licensed by the state who solicits, negotiates or effects contracts of insurance and provides service to the policyholder on behalf of the insurer.
Deductible in some property and health insurance contracts in which all covered losses during a year are added together and the insurer pays only when the aggregate deductible amount is exceeded.
The maximum dollar amount that may be collected for any disability or period of disability under the policy.
The maximum total dollar amount an insurance company will pay to the insured per individual policy.Example: An insured causes $100,000 in liability damage in one accident and $114,000 in liability damage in a second accident for an aggregate of $214,000 in damages. If the aggregate limit is $200,000, then the insured would be responsible for $14,000, even if the liability limits of coverage for this policy are $200,000 per incident.
Agreed Amount Endorsement
An endorsement to a policy made by the insurance company wherein it waives the coinsurance clause on the specified property. As long as this endorsement is in effect, there would be no coinsurance penalty at the time of a claim. By combining an Agreed Amount Endorsement with a Replacement Cost Endorsement you can obtain an unusually high quality of insurance coverage.
See Association of Health Insurance Advisors.
Acquired immune deficiency syndrome. A fatal, incurable disease caused by a virus that can damage the brain and destroy the body’s ability to fight off illness.
An insurance company domiciled in another country. Contrast Foreign Insurer.
Alienated Premises Exclusion
An exclusion that eliminates coverage for property damage liability to premises sold by an entity. For example, a person owns a lot and builds a house on it. After the house is completed and sold, a subcontractor’s faulty wiring causes the house to burn. The buyer, or his/her insurance company, sues for the cost of repairing or rebuilding the house. There is no coverage for this exposure under standard liability policies.
All-Risks Policies provide cover where all losses are insured, unless they are specifically excluded from the policy. These policies are not so common today as insurers and legal counsel have advised against their use, because one might know what they cover today, but they could provide unintended coverage in the future, given today’s legal climate.
A term for forms of property insurance allied with fire insurance, covering such perils as windstorm, hail, explosion, and riot.
Benefits for which the maximum amount payable for specific services is itemized in the contract.
Maximum amount a plan will pay for covered health care services.
Alteration Coverage Form
See Forgery Coverage Form.
See Forgery Insurance.
Alternate Delivery Systems
Health services provided in other than an in-patient, acute-care hospital. Examples include skilled and intermediary nursing facilities, hospice programs, and home health care. Alternate delivery systems are designed to provide needed services in a more cost-effective manner.
Rating agency that provides news, credit ratings and financial performance data for companies operating in the insurance industry.
Medical services that are provided on an outpatient (non-hospitalized) basis. Services may include diagnosis, treatment, and rehabilitation.
A formal document changing the provisions of an insurance policy signed jointly by the insurance company officer and the policy holder or his authorized representative.
Paying an interest-bearing liability by gradual reduction through a series of installments, as opposed to one lump-sum payment.
Total benefit an insurance company will pay in a year, while you are enrolled in a healthcare plan.
The annual report, as of December 31, of an insurer to a state insurance department, showing assets and liabilities, receipts and disbursements, and other financial data, presented according to Statutory Accounting Principles.
The person during whose life an annuity is payable, usually the person to receive the annuity.
A contract that provides an income for a specified period of time, such as a number of years or for life.
A contract that provides an income for a specified number of years, regardless of life or death.
The payment, or one of the regular periodic payments, an annuitant makes for an annuity.
See Adverse Selection.
A signed statement of facts made by a person applying for insurance and then used by the insurance company to decide whether or not to issue a policy. The application becomes part of the insurance contract when the policy is issued.
Unique series of numbers/letters that is provided to you after applying for healthcare coverage in the Marketplace.
An expert assessment of the value of something.
A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to responsibility for or extent of a loss.
The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent.
See Administrative Services Only Plan.
Hazard generally covered under a marine cargo policy, which includes loss due to thievery when accompanied by violence, but does not include petty thievery. See also Cargo Insurance.
A policy that comes with an assessment provision. Mutual insurance companies used to offer these policies as a way of collecting more premium in the future if the coverages that they offered turned out to be more costly than originally contemplated. This type of coverage is not offered much today. Some older policies might have such a provision.
The dollar value of property for tax purposes.
An insurer that does not charge a fixed premium for insurance, but rather assesses its members periodically to pay its losses. Assessment insurers usually collect an advance premium which is estimated to cover losses and expenses, but reserve the right to make additional assessments whenever the premium collected is insufficient.
Mutual insurance company that has the right to assess policy-owners for losses and expenses.
All funds, property, goods, securities, rights of action, or resources of any kind owned by an insurance company. Statutory accounting, however, excludes non-admitted assets, such as deferred or overdue premiums, that would be considered assets under Generally Accepted Accounting Principles.
See Automobile Insurance Plan.
The legal transfer of one person’s interest in an insurance policy to another person.
Type of captive insurer owned by members of a sponsoring organization or group, such as a trade association.
A group formed from members of a trade or a professional association for group insurance under one master health insurance contract.
Association Group Plan
Health insurance plans designed for members of a professional association or trade association. Members may be protected under a group health insurance policy or by individual franchise policies.
Association Of Health Insurance Advisors
The mission of the Association of Health Insurance Advisors is to provide leadership in sustaining and improving the business environment for the marketing of a broad range of health related products and services. AHIA takes a lead advocacy role on issues that impact members involved in the sale of group and individual health related products including major medical, disability, long-term care, critical illness, and Medicare Supplement Insurance.
Assumption Of Risk Doctrine
Defense against a negligence claim that bars recovery for damages if a person understands and recognizes the danger inherent in a particular activity or occupation.
Conditions and rules underlying the calculation of a pension benefit, including expected interest, mortality and turnover.
Attending Physician’s Statement
A statement signed by a life insurance applicant’s physician, intended to disclose any serious illnesses that might impact the insurer‘s decisions regarding acceptance and pricing of coverage. Part of the underwriting process.
Condition that can attract and injure children. Owners or occupants of land on which such a condition exists are liable for injuries to children.
Sometimes factors that enter into determining appropriate premiums for insurance coverage can’t be known in advance; therefore, accurate premiums for the coverage provided can’t be billed by the insurance carrier. This often is true in the case of Worker’s Compensation and Product Liability Insurance, where such things as payroll and sales can’t be determined ahead of time. An audit serves as an examination of the insured‘s records after the fact to adjust the initial premium billed to reflect the actual coverage.
The person you designate to handle your healthcare service affairs with the Marketplace.
Automatic Premium Loan
Cash borrowed from a life insurance policy‘s cash value to pay an overdue premium after the grace period for paying the premium has expired.
An agreement that the insurer must cede and the re-insurer must accept all risks within certain explicitly defined limits. The re-insurer undertakes in advance to grant reinsurance to the extent specified in the agreement in every case where the ceding company accepts the application and retains its own limit. See also Treaty.
Automobile Insurance Plan
One of several types of shared market mechanisms where persons who are unable to obtain such insurance in the voluntary market are assigned to a particular company, usually at a higher rate than the voluntary market. Formerly called Assigned Risk. Compare Automobile Reinsurance Facility, Residual Market.
Automobile Liability Insurance
Coverage designed to provide protection for the insured against financial loss because of legal liability for car-related injuries to others or damage to their property.
Automobile Physical Damage Insurance
Coverage to pay for damage to or loss of an insured automobile resulting from collision, fire, theft, or other perils.
Automobile Reinsurance Facility
One of several types of shared market mechanisms used to make automobile insurance available to persons who are unable to obtain such insurance in the regular market.
Automobile Shared Market
Automobile Shared Market Insurance is a program in which all automobile insurers in each state make coverage available to car owners who are unable to obtain auto insurance in the voluntary market. This is called uninsured motorist coverage in most states.
Average Indexed Monthly Earnings
Under the OASDI program, a person’s actual earnings are indexed to determine his or her primary insurance amount.
Aircraft insurance including coverage of aircraft or their contents, the owner’s liability, and accident insurance on the passengers.
See Loss Avoidance.
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