Glossary

Insurance glossary

409 definitions · page 4 of 7.

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES GAAP: Generally accepted accounting principles (GAAP) accounting is used in financial statements that publicly-held companies prepare for the Securities and Exchange Commission. (See Statutory accounting principles / SAP)
GENERIC AUTO PARTS: Auto crash parts produced by firms that are not associated with car manufacturers. Insurers consider these parts, when certified, at least as good as those that come from the original equipment manufacturer (OEM). They are often cheaper than the identical…
GLASS INSURANCE: Coverage for glass breakage caused by all risks; fire and war are sometimes excluded. Insurance can be bought for windows, structural glass, leaded glass, and mirrors. Available with or without a deductible.
GRADUATED DRIVER LICENSES: Licenses for younger drivers that allow them to improve their skills. Regulations vary by state, but often restrict night time driving. Young drivers receive a learner’s permit, followed by a provisional license, before they can receive a standard drivers…
GRAMM-LEACH-BLILEY ACT: Financial services legislation, passed by Congress in 1999, that removed Depression-era prohibitions against the combination of commercial banking and investment-banking activities. It allows insurance companies, banks, and securities firms to engage in each…
GROUP INSURANCE: A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents. Coverage occurs under a master policy issued to the employer or association.
GUARANTEE PERIOD: Period during which the level of interest specified under a fixed annuity is guaranteed.
GUARANTEED DEATH BENEFIT: Basic death benefits guaranteed under variable annuity contracts.
GUARANTEED INCOME CONTRACT GIC: Often an option in an employer-sponsored retirement savings plan. Contract between an insurance company and the plan that guarantees a stated rate of return on invested capital over the life of the contract.
GUARANTEED LIVING BENEFIT: A guarantee in a variable annuity that a certain level of annuity payment will be maintained. Serves as a protection against investment risks. Several types exists.
GUARANTEED REPLACEMENT COST COVERAGE: Homeowners policy that pays the full cost of replacing or repairing a damaged or destroyed home, even if it is above the policy limit. (See Extended replacement cost coverage)
GUARANTY FUND: The mechanism by which solvent insurers ensure that some of the policyholder and third party claims against insurance companies that fail are paid. Such funds are required in all 50 states, the District of Columbia and Puerto Rico, but the type and amount of…
GUN LIABILITY: A new legal concept that holds gun manufacturers liable for the cost of injuries caused by guns. Several cities have filed lawsuits based on this concept.
HACKER INSURANCE: A coverage that protects businesses engaged in electronic commerce from losses caused by hackers.
HARD MARKET: A seller’s market in which insurance is expensive and in short supply. (See Property/casualty insurance cycle)
HOMEOWNERS INSURANCE POLICY: The typical homeowners insurance policy covers the house, the garage and other structures on the property, as well as personal possessions inside the house such as furniture, appliances and clothing, against a wide variety of perils including windstorms…
HOUSE YEAR: Equal to 365 days of insured coverage for a single dwelling. It is the standard measurement for homeowners insurance.
HURRICANE DEDUCTIBLE: A percentage or dollar amount added to a homeowner’s insurance policy to limit an insurer’s exposure to loss from a hurricane. Higher deductibles are instituted in higher risk areas, such as coastal regions. Specific details, such as the intensity of the…
IDENTITY THEFT INSURANCE: Coverage for expenses incurred as the result of an identity theft. Can include costs for notarizing fraud affidavits and certified mail, lost income from time taken off from work to meet with law-enforcement personnel or credit agencies, fees for reapplying…
IMMEDIATE ANNUITY: A product purchased with a lump sum, usually at the time retirement begins or afterwards. Payments begin within about a year. Immediate annuities can be either fixed or variable.
INCURRED BUT NOT REPORTED LOSSES IBNR: Losses that are not filed with the insurer or reinsurer until years after the policy is sold. Some liability claims may be filed long after the event that caused the injury to occur. Asbestos-related diseases, for example, do not show up until decades after…
INCURRED LOSSES: Losses occurring within a fixed period, whether or not adjusted or paid during the same period.
INDEMNIFY: Provide financial compensation for losses.
INDEPENDENT AGENT: Agent who is self-employed, is paid on commission, and represents several insurance companies. (See Captive agent)
INDIVIDUAL RETIREMENT ACCOUNT IRA: A tax-deductible savings plan for those who are self-employed, or those whose earnings are below a certain level or whose employers do not offer retirement plans. Others may make limited contributions on a tax-deferred basis. The Roth IRA, a special kind of…
INDIVIDUAL RETIREMENT ACCOUNT/IRA: A tax-deductible savings plan for those who are self-employed, or those whose earnings are below a certain level or whose employers do not offer retirement plans. Others may make limited contributions on a tax-deferred basis. The Roth IRA, a special kind of…
INFLATION GUARD CLAUSE: A provision added to a homeowners insurance policy that automatically adjusts the coverage limit on the dwelling each time the policy is renewed to reflect current construction costs.
INLAND MARINE INSURANCE: This broad type of coverage was developed for shipments that do not involve ocean transport. Covers articles in transit by all forms of land and air transportation as well as bridges, tunnels and other means of transportation and communication. Floaters that…
INSOLVENCY: Insurer’s inability to pay debts. Insurance insolvency standards and the regulatory actions taken vary from state to state. When regulators deem an insurance company is in danger of becoming insolvent, they can take one of three actions: place a company in…
INSTITUTIONAL INVESTOR: An organization such as a bank or insurance company that buys and sells large quantities of securities.
INSURABLE RISK: Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable. The insurance company also must be able…
INSURANCE: A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.
INSURANCE POOL: A group of insurance companies that pool assets, enabling them to provide an amount of insurance substantially more than can be provided by individual companies to ensure large risks such as nuclear power stations. Pools may be formed voluntarily or mandated…
INSURANCE REGULATORY INFORMATION SYSTEM IRIS: Uses financial ratios to measure insurers’ financial strength. Developed by the National Association of Insurance Commissioners. Each individual state insurance department chooses how to use IRIS.
INSURANCE SCORE: Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a…
INSURANCE-TO-VALUE: Insurance written in an amount approximating the value of the insured property.
INTEGRATED BENEFITS: Coverage where the distinction between job-related and non-occupational illnesses or injuries is eliminated and workers compensation and general health coverage are combined. Legal obstacles exist, however, because the two coverages are administered…
INTERMEDIATION: The process of bringing savers, investors and borrowers together so that savers and investors can obtain a return on their money and borrowers can use the money to finance their purchases or projects through loans.
INTERNET INSURER: An insurer that sells exclusively via the Internet.
INTERNET LIABILITY INSURANCE: Coverage designed to protect businesses from liabilities that arise from the conducting of business over the Internet, including copyright infringement, defamation, and violation of privacy.
INVESTMENT INCOME: Income generated by the investment of assets. Insurers have two sources of income, underwriting (premiums less claims and expenses) and investment income. The latter can offset underwriting operations, which are frequently unprofitable.
JOINT AND SURVIVOR ANNUITY: An annuity with two annuitants, usually spouses. Payments continue until the death of the longest living of the two.
JOINT UNDERWRITING ASSOCIATION JUA: Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program. JUAs may be…
JUNK BONDS: Corporate bonds with credit ratings of BB or less. They pay a higher yield than investment grade bonds because issuers have a higher perceived risk of default. Such bonds involve market risk that could force investors, including insurers, to sell the bonds…
KEY PERSON INSURANCE: Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss.
KIDNAP RANSOM INSURANCE: Coverage up to specific limits for the cost of ransom or extortion payments and related expenses. Often bought by international corporations to cover employees. Most policies have large deductibles and may exclude certain geographic areas. Some policies…
L-SHARE VARIABLE ANNUITIES: A form of variable annuity contract usually with short surrender periods and higher mortality and expense risk charges.
LADDERING: A technique that consists of staggering the maturity dates and the mix of different types of bonds.
LAW OF LARGE NUMBERS: The theory of probability on which the business of insurance is based. Simply put, this mathematical premise says that the larger the group of units insured, such as sport-utility vehicles, the more accurate the predictions of loss will be.
LIABILITY INSURANCE: Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.
LIMITS: Maximum amount of insurance that can be paid for a covered loss.
LINE: Type or kind of insurance, such as personal lines.
LIQUIDATION: Enables the state insurance department as liquidator or its appointed deputy to wind up the insurance company’s affairs by selling its assets and settling claims upon those assets. After receiving the liquidation order, the liquidator notifies insurance…
LIQUIDITY: The ability and speed with which a security can be converted into cash.
LIQUOR LIABILITY: Coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the policyholder.
LLOYD S OF LONDON: A marketplace where underwriting syndicates, or mini-insurers, gather to sell insurance policies and reinsurance. Each syndicate is managed by an underwriter who decides whether or not to accept the risk. The Lloyd’s market is a major player in the…
LLOYDS: Corporation formed to market services of a group of underwriters. Does not issue insurance policies or provide insurance protection. Insurance is written by individual underwriters, with each assuming a part of every risk. Has no connection to Lloyd’s of…
LONG-TERM CARE INSURANCE: Long-term care (LTC) insurance pays for services to help individuals who are unable to perform certain activities of daily living without assistance, or require supervision due to a cognitive impairment such as Alzheimer’s disease. LTC is available as…
LOSS: A reduction in the quality or value of a property, or a legal liability.
LOSS ADJUSTMENT EXPENSES: The sum insurers pay for investigating and settling insurance claims, including the cost of defending a lawsuit in court.