Acceleration Clause
The part of a contract that says when a loan may be declared due and payable.
Accidental Death Benefit
In a life insurance policy, benefit in addition to the death benefit paid to the beneficiary, should death occur due to an accident. There can be certain exclusions as well as time and age limits.
Active Participant
Person whose absence from a planned event would trigger a benefit if the event needs to be cancelled or postponed.
Activities of Daily Living
Bathing, preparing and eating meals, moving from room to room, getting into and out of beds or chairs. dressing, using a toilet.
Actual Cash Value
Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year old sofa will not be replaced at a current full value because of a decade of depreciation.
Actuary
A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics. In most countries, this person is known as a mathematician.
Adjustable Rate
An interest rate that changes based on changes in a published market-rate index.
Adjuster
A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted.
Admitted Assets
Assets permitted by state law to be included in an insurance company's annual statement. These assets are and important factor when regulators measure insurance company solvency. They include mortgages, stocks, bonds and real estate.
Agent
An individual who sells and services insurance policies in either of the two classifications"
1. Independent agent represents at least two insurance companies and services clients by searching the market for the most advantageous price for the most covera
Aggregate Limit
Usually refers to liability insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents may occur.
Annual Administrative Fee
Charge for expenses associated with administering a group employee benefit plan.
Annual Crediting Cap
The maximum rate that the equity-indexed annuity can be credited in a year. If a contract has an upper limit or cap of 7 percent and the index linked to the annuity gained 7.2 percent, only 7 percent would be credited to the annuity.
Annuitization
Process by which you convert part or all of the money in a qualified retirement plan or nonqualified annuity contract into a stream of regular income payments, either for your lifetime or the lifetimes of you and your joint annuitant. Once you choose to a
Annuitization Options
Choices in the way to annuitize. For example, life with a 10 year period certain means payouts will last a lifetime, but should the annuitant die during the first 10 years, the payments will continue to beneficiaries through the 10th year. Selection of su
Annuity
An agreement by an insurer to make periodic payments that continue during the survival of the annuitant or for a specified period.
Approved for Reinsurance
Indicates the company is approved or authorized to write the reinsurance on risks in this state. A license to write reinsurance might not be required in this state.
Approved or Not Disapproved for Surplus Lines
Indicates the company is approved or not disapproved to write excess or surplus lines in this state.
Assets
All the available properties of every kind or possession of an insurance company that might be used to pay its debts. There are three classifications of assets: invested assets, all other assets, and total admitted assets. Invested assets refer to things
Attained Age
Insured's age at a particular time. For example, many term life insurance policies allow an insured to convert to permanent insurance without a physical examination at the insured's then attained age. Upon conversion, the premium usually rises substantial
Authorized Under Federal Products Liability Risk Retention Act
(Risk Retention Groups) Indicates companies operating under the Federal Products Liability Retention Act of 1981 and the Liability Risk Retention Act of 1986
Automobile Liability Insurance
Coverage if an insured is legally liable for bodily injury or property damage caused by an automobile.
Balance Sheet
An accounting term referring to a listing of a company's assets, liabilities and surplus as of a specific date.
Benefit Period
In health insurance, the number of days for which benefits are paid to the named insured and his or her dependents. For example, the number of days that benefits are calculated for a calendar year consists of the days beginning on Jan 1 and ending on Dec
Best's Capital Adequacy Relativity (BCAR)
This percentage measures a company's relative capital strength compared to its industry peer composite. A company's BCAR, which is an important component in determining the appropriateness of its rating, is calculated by dividing a company's capital adequ
Broker
Insurance salesperson that searches the markeplace in the interest of clients, not insurance companies.
Broker-Agent
Independent insurance salesperson who represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant's coverage to maximize coverage and minimize cost. This person is licensed as an agent
Business Net Retention
This item represents the percentage of a company's gross writings that are retained for its own account. Gross writings are the sum of direct writings and assumed writings. This measure excludes affiliated writings.
Capital
Equity of shareholders of a stock insurance company. The company's capital and surplus are measured by the difference between its assets minus its liabilities. This value protects the interests of the company's policyowners in the event it develops financ
Capitalization or Leverage
Measures the exposure of a company's surplus to various operating and financial practices. A highly leveraged, or poorly capitalized company can show a high return on surplus, but might be exposed to a high risk of instability.
Captive Agent
Representative of a single insurer or fleet of insurers who is obliged to submit business only to that one company, or at the very minimum, give that company first refusal rights on sale. In exchange, that insurer usually provides its captive agents with
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.
Casualty
Liability or loss resulting from an accident.
Casualty Insurance
That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance ag
Ceded Reinsurance Leverage
The ratio of the reinsurance premiums ceded, plus net ceded reinsurance balances from non-US affiliates for paid losses, unpaid losses, incurred but not reported (IBNR), unearned premiums and commissions, less funds held from reinsurers, plus ceded reinsu
Change in Net Premiums
The annual percentage change in Net Premiums Written. A company should demonstrate its ability to support controlled business growth with quality surplus growth from strong internal capital generation.
Change in Policyholder Surplus
The percentage change in policyholder surplus from the prior year-end derived from operating earnings, investment gains, net contributed capital and other miscellaneous sources. This ratio measures a company's ability to increase policyholders' security.
Chartered Property and Casualty Underwriter (CPCU)
Professional designation earned after the successful completion of 10 national examinations given by the American Institute for Property and Liability Underwriters. Covers such areas of expertise as insurance, risk management, economics, finance, manageme
Claim
A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.
Class 3-6 Bonds (% of PHS)
This test measures exposure to noninvestment grade bonds as a percentage of surplus. Generally, noninvestment grade bonds carry higher default and illiquidity risks. The designation of quality classifications that coincide with different bond ratings assi
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 policyh
Collision Insurance
Covers physical damage to the insured's automobile (other than that covered under comprehensive insurance) resulting from contact with another inanimate object.
Combined Ratio After Policyholder Dividends
The sum of the loss, expense and policyholder dividend ratios not reflecting investment income or income taxes. This ratio measures the company's overall underwriting profitability, and a combined ratio of less than 100 indicates an underwriting profit.
Commercial Lines
Refers to insurance for businesses, professionals and commercial establishment.
Commission
Fee paid to an agent or insurance salesperson as a percentage of the policy premium. The percentage varies widely on coverage, the insurer, and marketing methods.
Common Carrier
A business or agency that is available to the public for transportation of persons, goods or messages. Common carriers include trucking companies, bus lines and airlines.
Comprehensive Insurance
Auto insurance coverage providing protection in the event of physical damage (other than collision) or theft of the insured car. For example, fire damage or a cracked windshield would be covered under the comprehensive section.
Concurrent Periods
In hospital income protection, when a patient is confined to a hospital due to more than one injury/and or illness at the same time, benefits are paid as if the total disability resulted from only one cause.
Conditional Reserves
This item represents the aggregate of various reserves which are similar to free resources or surplus, include unauthorized reinsurance, excess of statutory loss reserves over statement reserves, dividends to policyholders undeclared and other similar res
Coverage
The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death be
Convertible
Term life insurance coverage that can be converted into permanent insurance regardless of an insured's physical condition and without a medical examination. The individual cannot be denied coverage or charged an additional premium for any health problems.
Copayment
A predetermined, flat fee an individual pays for health-care services, in addition to what insurance covers. For example, some HMOs require a $10 copayment for each office visit, regardless of the type or level of services provided during the visit. Copay
Cost-of-Living Adjustment (COLA)
Automatic adjustment applied to Social Security retirement payments when the consumer price index increases at a rate of at least 3% the first quarter of one year to the first quarter of the next year.
Coverage Area
The geographic region covered by travel insurance.
Creditable Coverage
Term means that benefits provided by other drug plans are at least as good as those provided by the new Medicare Part D program. This may be important for people eligible for Medicare Part D but do not sign up at their first opportunity because if the oth
Current Liquidity
The sum of cash, unaffiliated invested assets and encumbrances on other properties to net liabilities plus ceded reinsurance balances payable, expressed as a percent. This ratio measures that proportion of liabilities covered by unencumbered cash and unaf
Death Benefit
The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.
Deductible
Amount of loss the insured pays before the insurance kicks in.
Developed to Net Premiums Earned
The ratio of developed premiums through the year to net premiums earned. If premium growth was relatively steady, and the mix of business by line didn't materially change, this ratio measures whether or not a company's loss reserves are keeping pace with
Development to Policyholder Surplus
The ratio measures reserve deficiency or redundancy in relation to policyholder surplus. This ratio reflects the degree to which year-end surplus was either overstated or understated in each of the past several years, if original reserves had been restate
Direct Premiums Written
The aggregate amount of recorded originated premiums, other than reinsurance, written during the year, whether collected or not, at the close of the year, plus retrospective audit premium collections, after deducting all return premiums.
Direct Writer
An insurer whose distribution mechanism is either the direct selling system or the exclusive agency system.
Disease Management
A system of coordinated health-care interventions and communications for patients with certain illnesses.
Dividend
The return part of the policy's premium for a policy issued on a participating basis by either a mutual or stock insurer. A portion of the surplus paid to the stockholders of a corporation.
Earned Premium
The amount of the premium that has been paid for in advance that has been "earned" by virtue of the fact that time has passed without a claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.
Elimination Period
The time which must pass after filing a claim before a policyholder can collect insurance benefits. Also known as "waiting period.
Employers Liability Insurance
Coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by workers' compensation law.
Encumbrance
A claim on property, such as a mortgage, a lien for work and materials, or a right of dower. The interest of the property owner is reduced by the amount of encumbrance.
Exclusions
Items or conditions that are not covered by the general insurance contract.
Expense Ratio
The ratio of underwriting expenses (including commissions) to net premiums written. This ratio measures the company's operational efficiency in underwriting its book of business.
Exposure
Measure of vulnerability to loss, usually expressed in dollars or units.
Extended Replacement Cost
This option extends replacement cost loss settlement to personal property and to outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment. Subject to limitations on certain kinds of personal property; includes inflation prote
File-and-Use Rating Laws
State-based laws which permit insurers to adopt new rates without the prior approval of the insurance department. Usually insurers submit their new rates with supporting statistical data.
Financing Entity
Provides money for purchases.
Floater
A separate policy available to cover the value of goods beyond the coverage of a standard renters insurance policy including movable property such as jewelry or sports equipment.
Future Purchasing Option
Life and health insurance provisions that guarantee the insured the right to buy additional coverage without proving insurability. Also known as "guaranteed insurability option.
General Account
All premiums are paid into an insurer's general account. Thus, buyers are subject to credit-risk exposure to the insurance, which is low but not zero.
General Liability Insurance
Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured's premises or operations, products sold by the insured, operations
Grace Period
The length of time (usually 31 days) after a premium is due and unpaid, during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time. In Universal Life p
Gross Leverage
The sum of net leverage and ceded reinsurance leverage. This ratio measures a company's gross exposure to pricing errors in its current book of business, to errors of estimating its liabilities and exposure to its reinsurers.
Guaranteed Insurability Option
Life and health insurance provisions that guarantee the insured the right to buy additional coverage without proving insurability. Also known as "future purchase option.
Guaranteed Issue Right
The right to purchase insurance without physical examination; the present and past physical condition of the applicant are not considered.
Guaranteed Renewable
A policy provision in many products which guarantees the policyowner the right to renew coverage at every policy anniversary date. The company does not have the right to cancel coverage except for nonpayment of premiums by the policyowner; however, the co
Guaranty Association
An organization of life insurance companies within a state responsible for covering the financial obligations of a member company that becomes insolvent.
Hazard
A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explopsion.
Hazardous Activity
Bungee jumping, scuba diving, horse riding and other activities not generally covered by standard insurance policies. For insurers that do provide coverage for such activities, it is unlikely that they will cover liability and personal accident, which sho
Health Maintenance Organization (HMO)
Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals, and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.
Health Reimbursement Arrangement (HRA)
Owners of high-deductible health plans who are not qualified for a health savings account can use an HRA.
Health Savings Account (HSA)
Plan that allows you to contribute pre-tax money to be used for qualified medical expenses. HSAs, which are portable, must be linked to a high-deductible health insurance policy.
Hurricane Deductible
Amount you must pay out-of-pocket before hurricane insurance will kick in. Many insurers in hurricane-prone states are selling homeowners insurance policies with percentage deductibles for storm damage, instead of the traditional dollar deductibles used f
Impaired Insurer
An insurer which is in financial difficulty to the point where its ability to meet financial obligations or regulatory requirements is in question.
Indemnity
Restoration to the victim of a loss by payment, repair or replacement.
Independent Insurance Agents & Brokers of America
Formerly the Independent Insurance Agents of America, this is a member organization of independent agents and brokers monitoring an and affecting industry issues. Numerous state associations are affiliated with the IIABA.
Income Taxes
Incurred income taxes (including income taxes on capital gains) reported in each annual statement for the year.
Inflation Protection
An optional property coverage endorsement offered by some insurers that increases the policy's limits of insurance during the policy term to keep pace with inflation.
Insurability Interest
Interest in property such that loss or destruction of the property could cause a financial loss.
Insurance Adjuster
A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an "as needed" basis and might work for several insurance
Insurance Attorneys
An attorney who practices the law as it relates to insurance matters. Attorneys might be solo practitioners or work as part of a law firm. Insurance companies who retain attorneys to defend them against lawsuits might hire staff attorneys to work with the
The Institutes
An organization which develops programs and conducts national examinations in general insurance, risk management, management, adjusting, underwriting, auditing and loss control management.
Interest-Crediting Methods
There are at least 35 interest-crediting methods that insurers use. They usually involve some combination of point-to-point, annual reset, yield spread, averaging, or high water mark.
Investment Income
The return received by insurers from their investment portfolios including interest, dividends and realized capital gains on stocks. It doesn't include the value of any stocks or bonds the company currently owns.
Investments in Affiliates
Bonds, stocks, collateral loans, short-term investments in affiliated and real estate properties occupied by the company.
Insurance Regulatory Information System
Introduced by the National Association of Insurance Commissioners in 1974 to identify insurance companies that might require further regulatory review.
Laddering
Purchasing bond investments that mature at different time intervals.
Lapse Ratio
The ratio of the number of life insurance policies that lapsed within a given period fo the number in force at the beginning of that period.
Least Expensive Alternative Treatment
The amount an insurance company will pay based on its determination of cost for a particular procedure.
Leverage or Capitalism
Measures the exposure of a company's surplus to various operating and financial practices. A highly leveraged, or poorly capitalized company can show a high return on surplus, but might be exposed to a high risk of instability.
Liability
Broadly, and legally enforceable obligation. The term is most commonly used in a pecuniary sense.
Liability Insurance
Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence to others imposed by law or assumed by contract.
Licensed
Indicates the company is incorporated or chartered in another state but is a licensed admitted insurer for this state to write specific lines because of business for which it qualifies.
Licensed for Reinsurance Only
Indicates the company is a licensed admitted insurer to write reinsurance on risks in this state.
Lifetime Reserve Days
Sixty additional days Medicare pays for when you are hospitalized for more than 90 days in a benefit period. These days can only be used once during your lifetime. For each lifetime reserve day, Medicare pays all covered costs except for the daily coinsur
Liquidity
The ability of an individual or business to quickly convert assets into cash without incurring a considerable loss. There are two kinds of liquidity: quick and current. Quick refers to funds; cash, short-term investments, government bonds, and possessions
Living Benefits
This feature allows you, under certain circumstances, to receive the proceeds of your life insurance policy before you die. Such circumstances include a terminal or catastrophic illness, the need for long-term care, or confinement to a nursing home. Also
Lloyd's
Generally refers to Lloyd's of London, England, an institution within which individual underwriters accept or reject the risks offered to them. The Lloyd's Corp. provides the support facility for their activities.
Lloyd's Organizations
These organizations are voluntary, unincorporated associations of individuals. Each individual assumes a specified portion of the liability under each policy issued. The underwriters operate through a common attorney-in-fact appointed for this purpose by
Loss Adjustment Expenses
Expenses incurred to investigate and settle losses.
Loss and Loss-Adjustment Reserves to Policyholder Surplus Ratio
The higher the multiple of loss reserves to surplus, the more a company's solvency is dependent upon having and maintaining reserve adequacy.
Losses and Loss-Adjustment Expenses
This represents the total reserves for unpaid losses and loss-adjustment expenses, including reserves for any incurred but not reported losses, and supplemental reserves established by the company. It is the total for all lines of business and all acciden
Loss Control
All methods taken to reduce the frequency and/or severity of losses including exposure avoidance, loss prevention, loss reduction, segregation of exposure units and noninsurance transfer of risk. A combination of risk control techniques with risk financin
Loss Ratio
The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio measures the company's underlying profitability, or loss experience on its total book of business.
Loss Reserve
The estimated liability, as it would appear on an insurer's financial statement, for unpaid insurance claims or losses that have occurred as of a given evaluation date. Usually includes losses incurred but not reported, losses due but not yet paid, and am
Losses Incurred (Pure Losses)
Net paid losses during the current year plus the change in loss reserves since the prior year end.
Medical Loss Ratio
Total health benefits divided by total premium
Member Month
Total number of health plan participants who are members for each month.
Mortality and Expense Risk Fees
A charge that covers such annuity contract guarantees as death benefits.
Mortgage Insurance Policy
In life and health insurance, a policy covering a mortgagor with benefits intended to pay off the balance due on a mortgage upon the insured's death, or to meet the payments due on a mortgage in case of the insured's death or disability.
Mutual Insurance Companies
Companies with no capital stock, and owned by policyholders. The earnings of the company, over and above the payments of the losses, operating expenses, and reserves are the property of the policyholders. There are two types of mutual insurance companies.
Named Perils
Perils specifically covered on an insured property.