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ACCIDENT:
An event or occurrence which is unforeseen and
unintended,
and occurs suddenly and at a definite place.
ACCIDENTAL DEATH
BENEFIT: Provides for additional benefit in case of
death by accidental means.
ACQUISITION COST: The
immediate cost of issuing a new policy, including
cost of clerical work, agent's commission, and
medical inspection fees.
ACTUAL CASH VALUE:
The cost of repairing or replacing damaged property
with other of like kind and quality in the same
physical condition; commonly defined as replacement
cost less depreciation.
ACTUARY: A person
trained in mathematics, statistics, and accounting
who is responsible for determining premium rates,
reserves, and dividends as well as conducting
various other statistical studies.
ADJUSTABLE LIFE
POLICY: A participating life insurance contract that
offers the insured flexibility to change: (1)
premium payments, (2) the face amount, and (3) the
mix of whole life and term insurance.
ADJUSTABLE PREMIUM: A
premium which an insurance company may modify under
certain special conditions in accordance with a
policy provision. Also may refer to an option by the
owner to elect a change in premium amount.
ADJUSTER: A person
who represents an insurance company who seeks to
determine the extent of the firm's liability for a
loss when a claim is submitted.
ADMITTED COMPANY: An
insurance company licensed and authorized to do
business in a particular state.
ADVANCED FUNDED PLAN:
A retirement plan that accumulates funds during the
time employees are actively working.
AGENT: One who
solicits, negotiates or effects contracts of
insurance on behalf of an insurer.
AGGREGATE: The
maximum dollar amount which may be collected for a
single occurrence, during the policy period or
during the insured's lifetime.
ALLIED LINES: A term
for forms of insurance allied with property
insurance, covering such perils as sprinkler
leakage, water damage, and earthquake.
ALLOCATED BENEFITS:
Benefits for which the maximum amount payable for
specific services is itemized in the contract.
ANNUITY: A contract
that provides an income for a specific period of
time, such as a number of years or for life. The
person receiving the payment is called an annuitant.
Annuity payments are usually made monthly but can be
quarterly, semi-annually, or annually.
APPLICATION: A signed
statement of facts requested by the company on the
basis of which the company decides whether or not to
issue a policy. This becomes a part of the contract;
places reliance on statements by the applicant.
ARSON: The willful
and malicious burning of, or attempt to burn, any
structure or other property, often with criminal or
fraudulent intent.
ASSESSABLE: A policy
which gives the insurer the right to require
policyholders to pay additional premium.
ASSIGNMENT: Transfer
of the ownership or benefits of a policy.
AUTOMATIC PREMIUM
LOAN PROVISION : Provides that if a life insurance
premium is not paid, a policy loan in the amount of
the premium due will automatically be made at the
end of the grace period, provided there is enough
available cash value to cover the loan and its
interest for one year.
BASIC HEALTH CARE
POLICIES: Provide first-dollar
coverage for hospital, surgical, and non surgical
doctor's care, usually subject to relatively low
maximum dollar amounts or days of service.
BENEFICIARY: A person
designated by the policyholder to receive a
specified payment upon the insured's death.
BENEFIT DURATION: The
maximum period during which the disability income
benefits are to be payable.
BINDER :A temporary
insurance contract made by an agent of an insurance
company.
BOND: A three-party
contract in which one party (the surety) guarantees
the specific performance of a contract or an
agreement between a second party (the principal) and
a third party (the obligee). The surety makes the
guarantee to the obligee on behalf of the principal.
BROKER: One who
represents an insured in the solicitation,
negotiation or procurement of contracts of
insurance.
BUSINESS
INTERRUPTION: Provides coverage for a loss of
INSURANCE earnings in the event that the
policyholder's business is shut down by fire,
windstorm, explosion, or other insured peril.
CAPACITY:
The financial ability of an insurer to under-write
new insurance. It is generally measured by the
relation-ship of premiums written to surplus (net
worth) and is modified by access to reliable
reinsurance.
CATASTROPHIC LOSS: A
loss (or related losses) that is unbearable in that
it causes severe consequences such as bankruptcy to
a family, organization, or insurer.
CEDING COMPANY: An
insurance company that shifts part or all of a risk
it has assumed to another insurance company. The
latter is the insurer.
CHARTERED LIFE
UNDERWRITER: A professional designation offered by
the American College to persons who:
(1) pass a series of
ten professional examinations on subjects related to
life-health insurance,…ĐjˆGET http://66.221.">(2) have at least
three years of life-health insurance experience, and
(3) subscribe to a
code of ethics.
CLAIM: A demand to
the insurer by the insured person for the payment of
benefits under a policy.
CLASS RATING: A
premium rate determination in which all risks with
similar characteristics are charged the same rate.
COINSURANCE CLAUSE: A
clause under which the insured shares in losses to
the extent that he is underinsured at the time of
loss or in a proportion agreed to in advance.
COMPREHENSIVE
MEDICAL: Provides benefits of both a basic and a
major medical health insurance policy. It is
characterized by a low deductible amount, a
coinsurance (participation) clause, and high maximum
benefits.
CONDITIONAL BINDING
RECEIPT: A receipt given for a premium payment
accompanying the application for life insurance.
This binds the company if the applicant is insurable
to make the policy effective from the date of
receipt. If you die while your application is being
processed, a claim for the death benefit will be
paid only if you are insurable.
CONFINING SICKNESS:
An illness which confines an insured person to their
home or a hospital.
CONSEQUENTIAL LOSS:
An indirect loss arising from the policyholder's
inability to use the property over a period of time.
CONVERSION PRIVILEGE:
Right to change from term to permanent insurance
without insurability.
COORDINATION OF
BENEFITS: A method of integrating benefits payable
under more than one health insurance plan so that
the insured's benefits from all sources do not
exceed 100 percent of allowable medical expenses.
COST OF LIVING
ADJUSTMENT: A retirement plan provision that
increases benefits during retirement years in
accordance with a cost-of-living or wage index.
Usually subject to a maximum increase of 4 or 5
percent per year.
DEDUCTIBLE
:A provision that requires the policyholder to
contribute up to a specified sum per claim or
accident toward the amount of insured loss.
DEFERRED ANNUITY: An
annuity under which payments will begin at some
definite future date, such as in a specified number
of years or at a specified age.
DEFINED BENEFIT PLAN:
Clearly defines, by its benefit formula, the amount
of retirement income available at retirement.
DEFINED CONTRIBUTION
PLAN: A plan which provides for an individual
account for each participant based solely on the
amount contributed to the account- plus earnings and
forfeitures.
DIRECT LOSS: A loss
that results directly from a peril such as fire.
DISMEMBERMENT: Loss
of, or loss of use of, specific members of the body
resulting from accidental bodily injury.
DIVIDEND:
Policyholder's share in the insurer's divisible
surplus funds apportioned for distribution. May take
the form of a refund of part of the premium of a
participating policy.
DIVIDEND ADDITION:
Paid-up life insurance purchased with policy
dividend and added to the face amount of the policy.
DOUBLE INDEMNITY:
Life insurance policy provision which doubles the
death benefit when death is caused by accident.
EMPLOYEE BENEFITS:
Employer-sponsored programs to increase the economic
security of employees. Both insurance and
non-insurance benefits are included.
EMPLOYEE STOCK
OWNERSHIP PLAN (ESOP): A profit-sharing plan where
employer contributions are not a function of
profits. Contributions are in the form of the
employer's common stock.
ENDORSEMENT: A
document which modifies the protection of a policy,
either expanding or decreasing its benefits, or
adding/excluding certain conditions from the policy.
ENDOWMENT: Life
insurance contract that pays the face amount if the
insured dies during the premium paying period or at
the end of this period.
EVIDENCE OF
INSURABILITY: Any statement or proof of a person's
physical condition and/or other factual information
affecting his/her acceptance for insurance. May also
include medical exam or records.
EXCLUSIONS: Specific
perils or losses listed in the policy which will not
provide benefit payments.
EXPOSURE: The state
of being subject to the possibility of loss.
FACE AMOUNT:
The amount stated in a life insurance policy to be
paid upon death of the insured or the maturity date
of an endowment policy.
FAMILY INCOME POLICY:
A combination of decreasing term and ordinary life
insurance that, in the event of the insured's death
within a specified period such as twenty years, pays
a monthly income of $10 per $1000 of ordinary life
face amount for the remainder of the specified
period, and the face amount of ordinary life at the
end of this period.
FAMILY MAINTENANCE
POLICY: A combination of level term and ordinary
life insurance that, in the event of the insured's
death within a specified period such as twenty
years, pays a monthly income of $10 per $1000 of
ordinary life face amount for a specified number of
years from the date of your death and the face
amount of ordinary life at the end of the monthly
payments.
FIDELITY BOND: A
contract which indemnifies an employer for losses
caused by dishonest or fraudulent acts of employees.
FIDUCIARY: One who
exercises discretionary authority or control over a
retirement plan or disposition of its assets;
renders investments advice for a fee with respect to
moneys or property of a plan or has authority or
responsibility to do so; or has discretionary
authority or responsibility in the administration of
a plan.
FIRST-DOLLAR
INSURANCE: Contracts that start paying losses
without any retention, perhaps in the form of a
deductible by the insured.
FLOATER POLICY: A
property insurance policy in which the protection
follows the property wherever it may be located.
FORTUITOUS LOSSES:
Losses that occur as a matter of chance. Losses are
not controlled or influenced by the insured.
GRACE PERIOD:
A period after a premium payment is due, in which
the policyholder may make payments and during which
the policy remains in force.
GROUP INSURANCE:
Insurance plan under which a number of persons and
their dependents are insured by a single policy,
issued to their employer or an association with
which they are affiliated. Individual certificates
are given to each insured person.
GUARANTEED COST
POLICY: Life insurance policy which does not pay
dividends. Also called non-participating.
GUARANTEED
INSURABILITY: Allows the periodic purchase of
additional amounts of life insurance without proof
of insurability.
GUARANTEED RENEWABLE:
A policy the insured has the right to continue in
force by the timely payment of premiums to a
specified age. During this period the insurer has no
right to make changes in any provision of the
contract while it is in force, other than a change
in the premium rate for classes of insureds.
HAZARD:
A condition that increases the probability or
severity of loss.
HEALTH MAINTENANCE
ORGANIZATION: An organization that provides for wide
comprehensive health care services for a specified
group at a fixed periodic payment.
HOLD-HARMLESS CLAUSE:
A contractual provision which transfers risk from
one party such as a property owner to another party
such as a tenant.
INCONTESTABLE CLAUSE:
A clause which provides that the insurer may not
contact the validity of the contract after it has
been in force for a specified period, such as two
years.
INDEMNITY: A
principle that says an insured should not collect
more from insurance than the amount of loss.
INDEPENDENT ADJUSTER:
A person who represents an insurer in settling loss
claims but is not an employee of the insurer or of
the insured.
INDEPENDENT AGENT: An
agent who represents several companies as an
independent contractor rather than an employee.
INDIRECT LOSS: A loss
that arises out of a direct loss but not caused
directly and immediately by that peril.
INSURABLE INTEREST:
If the occurrence of a loss, such as destruction of
a house by fire, will affect you adversely, you have
an insurable interest.
INSURED: In life
insurance, the person on whose life a policy is
issued; the subject of insurance. In property and
liability insurance, the person to whom, or on whose
behalf, benefits are payable.
INSURING CLAUSE: The
clause which sets forth the type of loss being
covered by the policy and the parties to the
insurance contract.
JOINT LIFE POLICY:
A special contract that insures two lives (such as
husband and wife) and pays upon the first or last
death.
KEY-PERSON INSURANCE:
Life or health insurance to protect the firm from
the loss caused by the death or disability of an
employee who makes significant contributions.
LAPSE:
Termination of a policy caused by the policyholder's
failure to pay the premium within the time required.
LEVEL PREMIUM: A
premium which remains unchanged throughout the life
of a policy.
LIFE EXPECTANCY: The
average number of years of life remaining for a
group of persons of a given age according to a
particular mortality table.
LIVERY: In automobile
insurance, the carrying of passengers for hire.
LOSS CONTROL:
Activities that reduce the severity of a loss that
has occurred.
MALPRACTICE
INSURANCE: Liability insurance
policy for professionals, such as physicians and
surgeons, to protect them against the risk of claims
for damages in connection with professional
services.
MEDICAID: State
programs of public assistance to persons regardless
of age whose income and resources are insufficient
to pay for health care.
MEDICARE: Hospital
and medical insurance provided by Social Security.
MORTALITY TABLE:
Shows the number of persons living, dying and the
death rate starting at a certain age by year. It is
used to calculate the probability of dying in, or
surviving through any period.
MORTGAGE PROTECTION:
A term life insurance contract in which the amount
of insurance decreases at the same pace as the
principal on a mortgage loan.
NON CONFINING
SICKNESS: An illness which prevents
the insured person from working but which does not
confine him or her to a hospital or home.
OPTIONALLY RENEWABLE:
A contract of health insurance in
which the insurer reserves the right to terminate
the coverage at any anniversary or, in some cases,
at any premium-due date, but does not have the right
to terminate coverage of the insured between such
policy dates.
ORDINARY LIFE POLICY:
Whole life insurance on which premiums are paid for
life. Also called straight life.
PAID-UP POLICY:
A policy that will remain in force with further
premium payments.
PARTICIPATING
INSURANCE: Insurance that allows the insured to
share in the profits of the insurance operation.
Profits are shared in the form of dividends which
may also include the refund of part or all of an
initial increase or overcharge in premium.
PARTICIPATION CLAUSE:
Requires the insured to pay for a specified
percentage of the cost or health care services
covered by a health insurance policy.
PERIL: The cause of a
possible loss.
POLICY LOAN: A loan
made by the insurer to the owner of a life insurance
policy, using its surrender value as collateral.
POLICY TERM: The
period for which an insurance policy provides
coverage.
PORTABILITY: The
transfer of pension rights and credits when a worker
changes jobs.
PRE-EXISTING
CONDITION: A physical and/or mental condition of an
insured which existed prior to the issuance of his
or her policy.
PREMIUM: The payment
made of insurance policy.
PROBATIONARY PERIOD:
A specified number of days after the date of the
issuance of the policy during which there is no
coverage for sickness. The purpose of this type of
provision is to eliminate or to reduce adverse
selection.
PRO RATA LIABILITY
CLAUSE: If a loss covered by this policy is also
covered by other insurance, the insurer will pay
only the proportion of the loss that the limit of
liability that applies under this policy bears to
the total amount of insurance covering the loss.
PROXIMATE CAUSE: The
cause actually responsible for the loss; the one
that set in motion the events that led to a loss.
PUNITIVE DAMAGES:
Damages awarded separately and in addition to
compensatory damages as punishment for the
wrongdoer.
QUALIFIED PLAN:
An employee benefit plan which the Internal Revenue
Service approves as meeting the requirements of
ERISA and is entitled to certain tax advantages.
RECIPROCAL:
An insurance organization in which
each insured assumes a share of the risk brought to
the organization by other insureds.
RECURRING CLAUSE: A
provision in some health insurance policies which
specifies a period of time during which the
recurrence of a condition is considered continuation
of a prior period of disability or hospital
confinement.
REINSTATEMENT: The
resumption of coverage under a policy which has been
lapsed.
REINSURANCE:
Assumption by one insurance company of all or part
of a risk undertaken by another insurance company.
RENEWAL: The
continuation of coverage under a policy beyond its
original term by the acceptance of a premium for a
new policy.
RIDER: A document
which modifies the protection of policy, either
expanding or decreasing its benefits or
adding/excluding certain conditions from the policy.
RISK MANAGEMENT: An
organized, formal approach to dealing with pure
risks.
SERVICE BENEFIT:
An insurance benefit in the form of hospital or
medical care services rather than money.
SPLIT FUNDING: An
arrangement whereby a portion of the contributions
to a retirement plan are paid to a life insurance
company and the remainder invested through a
corporate trustee, mostly in equities. An insurer
created to make a profit for stockholders.
SUBROGATION: Gives
the insurer whatever right against third parties you
may have as a result of the loss for which the
insurer paid you.
SUICIDE CLAUSE: A
provision that precludes the payment of life
insurance death benefits for a specified period of
one or two years after which suicide is paid the
same as death from natural causes.
SURETY BOND: An
agreement providing for monetary compensation should
there be a failure to perform specified acts within
a stated period.
SURRENDER COST INDEX:
A measure of the cost, including interest foregone,
of a life insurance policy if you keep it in force
for a specified period and then surrender it for the
cash surrender value.
TERM LIFE INSURANCE:
A type of life insurance that pays if you die during
a specified time such as a year. Term insurance
usually has an increased pattern of premiums over
time and is pure protection (no savings).
TRADITIONAL NET COST:
A measure of the surrender cost of a life insurance
policy which ignores the cost of interest foregone.
UMBRELLA LIABILITY
POLICY: A form of insurance
protection against losses in excess of amounts
covered by other liability insurance policies; also
protects the insured in many situations not covered
by the usual liability policies, subject to a
deductible.
UNDERWRITING: The
process by which the insurer decides whether or not
and on what basis it will issue a policy.
UNISEX MORTALITY
FACTORS: A weighed average of male and female
mortality rates. Required for employer-sponsored
employee benefit plans, after August 1, 1983.
UNIVERSAL LIFE
INSURANCE: A flexible life insurance contract that
clearly separates its insurance, investment, and
expense elements.
VARIABLE LIFE
INSURANCE: An ordinary life policy
in which the face amount of insurance changes in
relation to the performance of its investment
elements subject to a guaranteed minimum face
amount.
VESTING: A provision
concerning the right of pension and profit-sharing
plan participants to contributions made by the
employer.
WAITING PERIOD:
Time between the beginning of an insured's
disability and the beginning of benefit payments.
WAIVER: An agreement
attached to a policy which excludes from coverage
certain disabilities or injuries which are normally
covered by the policy.
WARRANTY: A statement
made by the applicant for insurance which, if false,
provides the basis for voiding of the policy.
WHOLE LIFE POLICY: A
life insurance policy which remains in force
throughout the life of the insured.
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