Glossary

Insurance glossary

409 definitions · page 1 of 7.

ASSETS: Property owned, in this case by an insurance company, including stocks, bonds, and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets…
A-SHARE VARIABLE ANNUITY: A form of variable annuity contract where the contract holder pays sales charges up front rather than eventually having to pay a surrender charge.
ACCELERATED DEATH BENEFITS: A life insurance policy option that provides policy proceeds to insured individuals over their lifetimes, in the event of a terminal illness. This is in lieu of a traditional policy that pays beneficiaries after the insured’s death. Such benefits kick in if…
ACCIDENT AND HEALTH INSURANCE: Coverage for accidental injury, accidental death, and related health expenses. Benefits will pay for preventative services, medical expenses, and catastrophic care, with limits.
ACTUAL CASH VALUE: A form of insurance that pays damages equal to the replacement value of damaged property minus depreciation. (See Replacement cost)
ACTUARY: An insurance professional skilled in the analysis, evaluation, and management of statistical information. Evaluates insurance firms’ reserves, determines rates and rating methods, and determines other business and financial risks.
ADDITIONAL LIVING EXPENSES: Extra charges covered by homeowners policies over and above the policyholder's customary living expenses. They kick in when the insured requires temporary shelter due to damage by a covered peril that makes the home temporarily uninhabitable.
ADJUSTER: An individual employed by a property/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement…
ADMITTED ASSETS: Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included…
ADMITTED COMPANY: An insurance company licensed and authorized to do business in a particular state.
ADVERSE SELECTION: The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal…
AFFINITY SALES: Selling insurance through groups such as professional and business associations.
AGENCY COMPANIES: Companies that market and sell products via independent agents.
AGENT: Insurance is sold by two types of agents: independent agents, who are self-employed, represent several insurance companies and are paid on commission, and exclusive or captive agents, who represent only one insurance company and are either salaried or work…
ALIEN INSURANCE COMPANY: An insurance company incorporated under the laws of a foreign country, as opposed to a foreign insurance company that does business in states outside its own.
ALLIED LINES: Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage, and vandalism coverage.
ALTERNATIVE DISPUTE RESOLUTION ADR: Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
ALTERNATIVE DISPUTE RESOLUTION / ADR: Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
ALTERNATIVE MARKETS: Mechanisms used to fund self-insurance. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance…
ANNUAL ANNUITY CONTRACT FEE: Covers the cost of administering an annuity contract.
ANNUAL STATEMENT: Summary of an insurer’s or reinsurer’s financial operations for a particular year, including a balance sheet. It is filed with the state insurance department of each jurisdiction in which the company is licensed to conduct business.
ANNUITANT: The person(s) who receives the income from an annuity contract. Usually the owner of the contract or his or her spouse.
ANNUITIZATION: The conversion of the account balance of a deferred annuity contract to income payments.
ANNUITY: A life insurance product that pays periodic income benefits for a specific period of time or over the course of the annuitant’s lifetime. There are two basic types of annuities: deferred and immediate: Deferred annuities allow assets to grow tax deferred…
ANNUITY ACCUMULATION PHASE OR PERIOD: The period during which the owner of a deferred annuity makes payments to build up assets.
ANNUITY ADMINISTRATIVE CHARGES: Covers the cost of customer services for owners of variable annuities.
ANNUITY BENEFICIARY: In certain types of annuities, a person who receives annuity contract payments if the annuity owner or annuitant dies while payments are still due.
ANNUITY CONTRACT: An agreement similar to an insurance policy for other insurance products such as auto insurance.
ANNUITY CONTRACT OWNER: The person or entity that purchases an annuity and has all rights to the contract. Usually, but not always, the annuitant (the person who receives incomes from the contract).
ANNUITY DEATH BENEFITS: The guarantee that if an annuity contract owner dies before annuitization (the switchover from the savings to the payment phase) the beneficiary will receive the value of the annuity that is due.
ANNUITY INSURANCE CHARGES: Covers administrative and mortality and expense risk costs.
ANNUITY INVESTMENT MANAGEMENT FEE: The fee paid for the management of variable annuity invested assets.
ANNUITY ISSUER: The insurance company that issues the annuity.
ANNUITY PROSPECTUS: Legal document providing detailed information about variable annuity contracts. Must be offered to each prospective buyer.
ANNUITY PURCHASE RATE: The cost of an annuity based on such factors as the age and gender of the contract owner.
ANTITRUST LAWS: Laws that prohibit companies from working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption…
APPORTIONMENT: The dividing of a loss proportionately among two or more insurers that cover the same loss.
APPRAISAL: A survey to determine a property’s insurable value, or the amount of a loss.
ARBITRATION: Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.
ARSON: The deliberate setting of a fire.
ASSET-BACKED SECURITIES: Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.
ASSIGNED RISK PLANS: Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all…
AUTO INSURANCE POLICY: There are basically six different types of coverages. Some may be required by law. Others are optional. They are: 1. Bodily injury liability, for injuries the policyholder causes to someone else. 2. Medical payments or Personal Injury Protection (PIP) for…
AUTO INSURANCE PREMIUM: The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service. Premiums also vary depending on the amount and type of…
AVIATION INSURANCE: Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and…
B-SHARE VARIABLE ANNUITY: A form of variable annuity contract with no initial sales charge but if the contract is cancelled the holder pays deferred sales charges (usually from 5 to 7 percent the first year, declining to zero after from 5 to 7 years). The most common form of annuity…
BALANCE SHEET: Provides a snapshot of a company’s financial condition at one point in time. It shows assets, including investments and reinsurance, and liabilities, such as loss reserves to pay claims in the future, as of a certain date. It also states a company’s equity…
BANK HOLDING COMPANY: A company that owns or controls one or more banks. The Federal Reserve has responsibility for regulating and supervising bank holding company activities, such as approving acquisitions and mergers and inspecting the operations of such companies. This…
BASIS POINT: 0.01 percent of the yield of a mortgage, bond or note. The smallest measure used.
BEACH AND WINDSTORM PLANS: State-sponsored insurance pools that sell property coverage for the peril of windstorm to people unable to buy it in the voluntary market because of their high exposure to risk. Seven states (AL, FL, LA, MS, NC, SC, TX) offer these plans to cover residential…
BINDER: Temporary authorization of coverage issued prior to the actual insurance policy.
BLANKET INSURANCE: Coverage for more than one type of property at one location or one type of property at more than one location. Example: chain stores.
BODILY INJURY LIABILITY COVERAGE: Portion of an auto insurance policy that covers injuries the policyholder causes to someone else.
BOILER AND MACHINERY INSURANCE: Often called Equipment Breakdown, or Systems Breakdown insurance. Commercial insurance that covers damage caused by the malfunction or breakdown of boilers, and a vast array of other equipment including air conditioners, heating, electrical, telephone, and…
BOND: A security that obligates the issuer to pay interest at specified intervals and to repay the principal amount of the loan at maturity. In insurance, a form of suretyship. Bonds of various types guarantee a payment or a reimbursement for financial losses…
BOND RATING: An evaluation of a bond’s financial strength, conducted by such major ratings agencies as Standard & Poor’s and Moody’s Investors Service.
BOOK OF BUSINESS: Total amount of insurance on an insurer's books at a particular point in time.
BROKER: An intermediary between a customer and an insurance company. Brokers typically search the market for coverage appropriate to their clients. They work on commission and usually sell commercial, not personal, insurance. In life insurance, agents must be…
BURGLARY AND THEFT INSURANCE: Insurance for the loss of property due to burglary, robbery or larceny. It is provided in a standard homeowners policy and in a business multiple peril policy.
BUSINESS INCOME INSURANCE (also known as BUSINESS INTERRUPTION INSURANCE): Commercial coverage that reimburses a business owner for lost profits and continuing fixed expenses during the time that a business must stay closed while the premises are being restored because of physical damage from a covered peril, such as a fire…