Glossary

Insurance glossary

409 definitions · page 5 of 7.

LOSS COSTS: The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.
LOSS OF USE: A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.
LOSS RATIO: Percentage of each premium dollar an insurer spends on claims.
LOSS RESERVES: The company’s best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer’s balance sheet.
MALPRACTICE INSURANCE: Professional liability coverage for physicians, lawyers, and other specialists against suits alleging negligence or errors and omissions that have harmed clients.
MANAGED CARE: Arrangement between an employer or insurer and selected providers to provide comprehensive health care at a discount to members of the insured group and coordinate the financing and delivery of health care. Managed care uses medical protocols and procedures…
MANUAL: A book published by an insurance or bonding company or a rating association or bureau that gives rates, classifications, and underwriting rules.
MARINE INSURANCE: Coverage for goods in transit, and for the commercial vehicles that transport them, on water and over land. The term may apply to inland marine but more generally applies to ocean marine insurance. Covers damage or destruction of a ship’s hull and cargo and…
MCCARRAN-FERGUSON ACT: Federal law signed in 1945 in which Congress declared that states would continue to regulate the insurance business. Grants insurers a limited exemption from federal antitrust legislation.
MEDIATION: Nonbinding procedure in which a third party attempts to resolve a conflict between two other parties.
MEDICAID: A federal/state public assistance program created in 1965 and administered by the states for people whose income and resources are insufficient to pay for health care.
MEDICAL PAYMENTS INSURANCE: A coverage in which the insurer agrees to reimburse the insured and others up to a certain limit for medical or funeral expenses as a result of bodily injury or death by accident. Payments are without regard to fault.
MEDICAL UTILIZATION REVIEW: The practice used by insurance companies to review claims for medical treatment.
MEDICARE: Federal program for people 65 or older that pays part of the costs associated with hospitalization, surgery, doctors’ bills, home health care, and skilled-nursing care.
MEDIGAP MEDSUP: Policies that supplement federal insurance benefits particularly for those covered under Medicare.
MINE SUBSIDENCE COVERAGE: An endorsement to a homeowners insurance policy, available in some states, for losses to a home caused by the land under a house sinking into a mine shaft. Excluded from standard homeowners policies, as are other forms of earth movement.
MONEY SUPPLY: Total supply of money in the economy, composed of currency in circulation and deposits in savings and checking accounts. By changing the interest rates the Federal Reserve seeks to adjust the money supply to maintain a strong economy.
MORTALITY AND EXPENSE (M&E) RISK CHARGE: A fee that covers such annuity contract guarantees as death benefits.
MORTGAGE GUARANTEE INSURANCE: Coverage for the mortgagee (usually a financial institution) in the event that a mortgage holder defaults on a loan. Also called private mortgage insurance (PMI).
MORTGAGE INSURANCE: A form of decreasing term insurance that covers the life of a person taking out a mortgage. Death benefits provide for payment of the outstanding balance of the loan. Coverage is in decreasing term insurance, so the amount of coverage decreases as the debt…
MORTGAGE-BACKED SECURITIES: Investment grade securities backed by a pool of mortgages. The issuer uses the cash flow from mortgages to meet interest payments on the bonds.
MULTIPLE PERIL POLICY: A package policy, such as a homeowners or business insurance policy, that provides coverage against several different perils. It also refers to the combination of property and liability coverage in one policy. In the early days of insurance, coverages for…
MUNICIPAL BOND INSURANCE: Coverage that guarantees bondholders timely payment of interest and principal even if the issuer of the bonds defaults. Offered by insurance companies with high credit ratings, the coverage raises the credit rating of a municipality offering the bond to that…
MUNICIPAL LIABILITY INSURANCE: Liability insurance for municipalities.
MUTUAL HOLDING COMPANY: An organizational structure that provides mutual companies with the organizational and capital raising advantages of stock insurers, while retaining the policyholder ownership of the mutual.
MUTUAL INSURANCE COMPANY: A company owned by its policyholders that returns part of its profits to the policyholders as dividends. The insurer uses the rest as a surplus cushion in case of large and unexpected losses.
NAMED PERIL: Peril specifically mentioned as covered in an insurance policy.
NATIONAL FLOOD INSURANCE PROGRAM: Federal government-sponsored program under which flood insurance is sold to homeowners and businesses. (See Adverse selection; Flood insurance)
NO-FAULT: Auto insurance coverage that pays for each driver’s own injuries, regardless of who caused the accident. No-fault varies from state to state. It also refers to an auto liability insurance system that restricts lawsuits to serious cases. Such policies are…
NO-FAULT MEDICAL: A type of accident coverage in homeowners policies.
NO-PAY NO-PLAY: The idea that people who don’t buy coverage should not receive benefits. Prohibits uninsured drivers from collecting damages from insured drivers. In most states with this law, uninsured drivers may not sue for noneconomic damages such as pain and suffering…
NON-ADMITTED ASSETS: Assets that are not included on the balance sheet of an insurance company, including furniture, fixtures, past-due accounts receivable, and agents’ debt balances. (See Assets)
NON-ADMITTED INSURER: Insurers licensed in some states, but not others. States where an insurer is not licensed call that insurer non-admitted. They sell coverage that is unavailable from licensed insurers within the state.
NOTICE OF LOSS: A written notice required by insurance companies immediately after an accident or other loss. Part of the standard provisions defining a policyholder's responsibilities after a loss.
NUCLEAR INSURANCE: Covers operators of nuclear reactors and other facilities for liability and property damage in the case of a nuclear accident and involves both private insurers and the federal government.
NURSING HOME INSURANCE: A form of long-term care policy that covers a policyholder’s stay in a nursing facility.
OCCUPATIONAL DISEASE: Abnormal condition or illness caused by factors associated with the workplace. Like occupational injuries, this is covered by workers compensation policies. (See Workers compensation)
OCCURRENCE POLICY: Insurance that pays claims arising out of incidents that occur during the policy term, even if they are filed many years later. (See Claims-made policy)
OCEAN MARINE INSURANCE: Coverage of all types of vessels and watercraft, for property damage to the vessel and cargo, including such risks as piracy and the jettisoning of cargo to save the property of others. Coverage for marine-related liabilities. War is excluded from basic…
OPEN COMPETITION STATES: States where insurance companies can set new rates without prior approval, although the state’s commissioner can disallow them if they are not reasonable and adequate or are discriminatory.
OPERATING EXPENSES: The cost of maintaining a business’s property, includes insurance, property taxes, utilities and rent, but excludes income tax, depreciation and other financing expenses.
OPTIONS: Contracts that allow, but do not oblige, the buying or selling of property or assets at a certain date at a set price.
ORDINANCE OR LAW COVERAGE: Endorsement to a property policy, including homeowners, that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built. For example, a building severely damaged…
ORDINARY LIFE INSURANCE: A life insurance policy that remains in force for the policyholder’s lifetime.
ORIGINAL EQUIPMENT MANUFACTURER PARTS OEM: Sheet metal auto parts made by the manufacturer of the vehicle. (See Generic auto parts)
OVER-THE-COUNTER (OTC): Security that is not listed or traded on an exchange such as the New York Stock Exchange. Business in over-the-counter securities is conducted through dealers using electronic networks.
PACKAGE POLICY: A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.
PAY-AT-THE-PUMP: A system proposed in the 1990s in which auto insurance premiums would be paid to state governments through a per-gallon surcharge on gasoline.
PENSION BENEFIT GUARANTY CORPORATION: An independent federal government agency that administers the Pension Plan Termination Insurance program to ensure that vested benefits of employees whose pension plans are being terminated are paid when they come due. Only defined benefit plans are covered…
PENSIONS: Programs to provide employees with retirement income after they meet minimum age and service requirements. Life insurers hold some of these funds. Since the 1970s responsibility for funding retirement has increasingly shifted from employers (defined benefit…
PERIL: A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of…
PERSONAL ARTICLES FLOATER: A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.
PERSONAL INJURY PROTECTION COVERAGE PIP: Portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder’s car.
PERSONAL LINES: Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies. (See Commercial lines)
POINT-OF-SERVICE PLAN: Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed.
POLICY: A written contract for insurance between an insurance company and policyholder stating details of coverage.
POLICYHOLDERS SURPLUS: The amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation.
POLITICAL RISK INSURANCE: Coverage for businesses operating abroad against loss due to political upheaval such as war, revolution, or confiscation of property.
POLLUTION INSURANCE: Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the…
PREFERRED PROVIDER ORGANIZATION: Network of medical providers which charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.