Glossary

Insurance glossary

409 definitions · page 2 of 7.

BUSINESSOWNERS POLICY BOP: A policy that combines property, liability and business interruption coverages for small- to medium-sized businesses. Coverage is generally cheaper than if purchased through separate insurance policies.
C-SHARE VARIABLE ANNUITIES: A form of variable annuity contract where the contract holder pays no sales up front or surrender charges. Owners can claim full liquidity at any time.
CAPACITY: The supply of insurance available to meet demand. Capacity depends on the industry’s financial ability to accept risk. For an individual insurer, the maximum amount of risk it can underwrite based on its financial condition. The adequacy of an insurer’s…
CAPITAL: Shareholder’s equity (for publicly-traded insurance companies) and retained earnings (for mutual insurance companies). There is no general measure of capital adequacy for property/casualty insurers. Capital adequacy is linked to the riskiness of an insurer’s…
CAPITAL MARKETS: The markets in which equities and debt are traded. (See Securitization of insurance risk)
CAPTIVE AGENT: A person who represents only one insurance company and is restricted by agreement from submitting business to any other company, unless it is first rejected by the agent’s captive company. (See Exclusive agent)
CAPTIVES: Insurers that are created and wholly-owned by one or more non-insurers, to provide owners with coverage. A form of self-insurance.
CAR YEAR: Equal to 365 days of insured coverage for a single vehicle. It is the standard measurement for automobile insurance.
CASE MANAGEMENT: A system of coordinating medical services to treat a patient, improve care, and reduce cost. A case manager coordinates health care delivery for patients.
CATASTROPHE: Term used for statistical recording purposes to refer to a single incident or a series of closely related incidents causing severe insured property losses totaling more than a given amount, currently $25 million.
CATASTROPHE BONDS: Risk-based securities that pay high interest rates and provide insurance companies with a form of reinsurance to pay losses from a catastrophe such as those caused by a major hurricane. They allow insurance risk to be sold to institutional investors in the…
CATASTROPHE DEDUCTIBLE: A percentage or dollar amount that a homeowner must pay before the insurance policy kicks in when a major natural disaster occurs. These large deductibles limit an insurer’s potential losses in such cases, allowing it to insure more property. A property…
CATASTROPHE FACTOR: Probability of catastrophic loss, based on the total number of catastrophes in a state over a 40-year period.
CATASTROPHE MODEL: Using computers, a method to mesh long-term disaster information with current demographic, building and other data to determine the potential cost of natural disasters and other catastrophic losses for a given geographic area.
CATASTROPHE REINSURANCE: Reinsurance (insurance for insurers) for catastrophic losses. The insurance industry is able to absorb the multibillion dollar losses caused by natural and man-made disasters such as hurricanes, earthquakes and terrorist attacks because losses are spread…
CELL PHONE INSURANCE: Separate insurance provided to cover cell phones for damage or theft. Policies are often sold with the cell phones themselves.
CHARTERED FINANCIAL CONSULTANT ChFC: A professional designation given by The American College to financial services professionals who complete courses in financial planning.
CHARTERED LIFE UNDERWRITER CLU: A professional designation by The American College for those who pass business examinations on insurance, investments, and taxation, and have life insurance planning experience.
CHARTERED PROPERTY CASUALTY UNDERWRITER CPCU: A professional designation given by the American Institute for Property and Liability Underwriters. National examinations and three years of work experience are required.
CHARTERED PROPERTY/CASUALTY UNDERWRITER CPCU: A professional designation given by the American Institute for Property and Liability Underwriters. National examinations and three years of work experience are required.
CLAIMS-MADE POLICY: A form of insurance that pays claims presented to the insurer during the term of the policy or within a specific term after its expiration. It limits liability insurers’ exposure to unknown future liabilities. (See Occurrence policy)
COBRA: Short for Consolidated Omnibus Budget Reconciliation Act. A federal law under which group health plans sponsored by employers with 20 or more employees must offer continuation of coverage to employees who leave their jobs and their dependents. The employee…
COINSURANCE: In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the…
COLLATERAL: Property that is offered to secure a loan or other credit and that becomes subject to seizure on default. (Also called security.)
COLLATERAL SOURCE RULE: Bars the introduction of information that indicates a person has been compensated or reimbursed by a source other than the defendant in civil actions related to negligence or other liability.
COLLISION COVERAGE: Portion of an auto insurance policy that covers the damage to the policyholder’s car from a collision.
COMBINED RATIO: Percentage of each premium dollar a property/casualty insurer spends on claims and expenses. A decrease in the combined ratio means financial results are improving; an increase means they are deteriorating.
COMMERCIAL GENERAL LIABILITY INSURANCE CGL: A broad commercial policy that covers all liability exposures of a business that are not specifically excluded. Coverage includes product liability, completed operations, premises and operations, and independent contractors.
COMMERCIAL LINES: Products designed for and bought by businesses. Among the major coverages are boiler and machinery, business interruption, commercial auto, comprehensive general liability, directors and officers liability, fire and allied lines, inland marine, medical…
COMMERCIAL MULTIPLE PERIL POLICY: Package policy that includes property, boiler and machinery, crime, and general liability coverages.
COMMERCIAL PAPER: Short-term, unsecured, and usually discounted promissory note issued by commercial firms and financial companies often to finance current business. Commercial paper, which is rated by debt rating agencies, is sold through dealers or directly placed with an…
COMMISSION: Fee paid to an agent or insurance salesperson as a percentage of the policy premium. The percentage varies widely depending on coverage, the insurer, and the marketing methods.
COMMUNITY RATING LAWS: Enacted in several states on health insurance policies. Insurers are required to accept all applicants for coverage and charge all applicants the same premium for the same coverage regardless of age or health. Premiums are based on the rate determined by the…
COMPETITIVE STATE FUND: A facility established by a state to sell workers compensation in competition with private insurers.
COMPLAINT RATIO: A measure used by some state insurance departments to track consumer complaints against insurance companies. Generally, it is written as the number of complaints upheld against an insurance company, as a percentage of premiums written. In some states…
COMPLETED OPERATIONS COVERAGE: Pays for bodily injury or property damage caused by a completed project or job. Protects a business that sells a service against liability claims.
COMPREHENSIVE COVERAGE: Portion of an auto insurance policy that covers damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
COMPULSORY AUTO INSURANCE: The minimum amount of auto liability insurance that meets a state law. Financial responsibility laws in every state require all automobile drivers to show proof, after an accident, of their ability to pay damages up to the state minimum. In compulsory…
CONTINGENT LIABILITY: Liability of individuals, corporations, or partnerships for accidents caused by people other than employees for whose acts or omissions the corporations or partnerships are responsible.
COVERAGE: Synonym for insurance.
CRASH PARTS: Sheet metal parts that are most often damaged in a car crash. (See Generic auto parts)
CREDIT: The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.
CREDIT DERIVATIVES: A contract that enables a user, such as a bank, to better manage its credit risk. A way of transferring credit risk to another party.
CREDIT ENHANCEMENT: A technique to lower the interest payments on a bond by raising the issue’s credit rating, often through insurance in the form of a financial guarantee or with standby letters of credit issued by a bank.
CREDIT INSURANCE: Commercial coverage against losses resulting from the failure of business debtors to pay their obligation to the insured, usually due to insolvency. The coverage is geared to manufacturers, wholesalers, and service providers who may be dependent on a few…
CREDIT LIFE INSURANCE: Life insurance coverage on a borrower designed to repay the balance of a loan in the event the borrower dies before the loan is repaid. It may also include disablement and can be offered as an option in connection with credit cards and auto loans.
CREDIT SCORE: The number produced by an analysis of an individual’s credit history. The use of credit information affects all consumers in many ways, from getting a job, finding a place to live, securing a loan, getting a telephone, and buying insurance. Credit history is…
CRIME INSURANCE: Term referring to property coverages for the perils of burglary, theft and robbery.
CROP-HAIL INSURANCE: Protection against damage to growing crops from hail, fire, or lightning provided by the private market. By contrast, multiple peril crop insurance covers a wider range of yield-reducing conditions, such as drought and insect infestation, and is subsidized…
DECLARATION: Part of a property or liability insurance policy that states the name and address of policyholder, property insured, its location and description, the policy period, premiums, and supplemental information. Referred to as the “dec page.”
DEDUCTIBLE: The amount of loss paid by the policyholder. Either a specified dollar amount, a percentage of the claim amount, or a specified amount of time that must elapse before benefits are paid. The bigger the deductible, the lower the premium charged for the same…
DEFERRED ANNUITY: An annuity contract that is purchased either with a single tax-deferred premium or with periodic tax-deferred premiums over time. Payments begin at a predetermined point in time, such as retirement.
DEFINED BENEFIT PLAN: A retirement plan under which pension benefits are fixed in advance by a formula based generally on years of service to the company multiplied by a specific percentage of wages, usually average earnings over that period or highest average earnings over the…
DEFINED CONTRIBUTION PLAN: An employee benefit plan under which the employer sets up benefit accounts and contributions are made to it by the employer and by the employee. The employer usually matches the employee's contribution up to a stated limit.
DEMAND DEPOSIT: Customer assets that are held in a checking account. Funds can be readily withdrawn by check, “on demand.”
DEMUTUALIZATION: The conversion of insurance companies from mutual companies owned by their policyholders into publicly-traded stock companies.
DEPOSITORY INSTITUTION: Financial institution that obtains its funds mainly through deposits from the public. Includes commercial banks, savings and loan associations, savings banks, and credit unions.
DEREGULATION: In insurance, reducing regulatory control over insurance rates and forms. Commercial insurance for businesses of a certain size has been deregulated in many states.
DERIVATIVES: Contracts that derive their value from an underlying financial asset, such as publicly-traded securities and foreign currencies. Often used as a hedge against changes in value.
DIFFERENCE IN CONDITIONS: Policy designed to fill in gaps in a business’s commercial property insurance coverage. There is no standard policy. Policies are specifically tailored to the policyholder’s needs.