Accidental Death Benefit (Auto or Health Insurance):
Provision for payment of a dollar amount—usually equal to the face amount of insurance—if the insured is killed in an accident. This coverage is available either as a health insurance policy, or as an auto insurance option with some companies. (Also see Accidental Death Benefit [Life Insurance].)
Accidental Death Benefit (Life Insurance):
Provision under a life insurance policy for payment of an additional amount—usually equal to the face amount of insurance—if the insured is killed in an accident. Popularly known as “double indemnity.” (Also see Accidental Death Benefit [Auto or Health Insurance].)
Accident and Health Insurance:
See Health Insurance.
Act of God (Act of Nature):
Perils that occur naturally such as tornadoes, earthquakes and hurricanes.
Actual Cash Value:
Insurance under which the amount payable is the current replacement cost of the property new; reduced by an allowance for depreciation, wear and obsolescence.
A highly specialized mathematician professionally trained in the risk aspects of insurance, whose functions include the calculations involved in determining proper insurance rates, evaluating reserves, and in various aspects of insurance research.
Additional Living Expense:
A property coverage which pays for the increased expense of living while the insured’s residence is being rebuilt or repaired after damage from an insured peril. Examples are the extra cost of housing the insured’s family in a hotel, dining in restaurants, etc.
A person who investigates and settles losses for an insurance carrier.
Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See Assets.)
Admitted Company (Carrier):
An insurance company licensed and authorized to do business in a particular state.
The tendency of those exposed to a higher risk to seek more insurance coverage than those at a lower risk. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.
Selling insurance through groups such as professional and business associations.
See Crash Parts; Generic Auto Parts.
Companies that market and sell products via independent agents.
Laws of all states require all insurance agents to be licensed by the state to sell insurance. Agents may be categorized as: (1) An Exclusive Agent, who is a sales employee or sales representative of one and only one insurance company or its affiliated group of insurance companies, and seeks and services business exclusively for that company or group. (See Direct Writer.) (2) An Independent Agent, who usually represents two or more insurance companies or groups in a sales and service capacity as an independent business person.
Alien Insurance Company:
An insurance company incorporated under the laws of a foreign country.
Types of insurance associated with property insurance, which may include earthquake, sprinkler leakage, and income and extra expense coverages.
Alternative Dispute Resolution (ADR):
Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
Mechanisms used to fund self-insurance. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance, are also a form of self-insurance.
Insurance policy written for a term of one year or renewed one year at a time.
A report made by a company at the close of its fiscal year. It is the primary financial report required by state insurance departments to be submitted by insurers annually.
The person during whose life an annuity is payable, usually the person to receive the annuity.
A contract that provides an income for life, a specified number of years, or a combination of the two.
Laws that prohibit companies from working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran-Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.
The statement of information that a prospective insured gives when applying for an insurance policy and that an insurance company uses to help decide if it will issue the policy and what premium rate will be charged.
The dividing of a loss proportionately among two or more insurers that cover the same loss.
A survey to determine a property’s insurable value, or the amount of a loss.
In insurance, a specialist that evaluates the size and cost of an object, such as jewelry or art; or the extent of damage based on a claim. Often works with a claims adjuster.
Buildings on the same premises as the main building insured under a property insurance policy.
Procedure in which an insurance company and the insured or a vendor agree to settle a claim dispute by accepting a decision made by a third party.
The deliberate setting of a fire.
Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.
The extra premium a mutual or reciprocal insurer’s policyholder may be required to pay in the event the insurer’s losses are greater than anticipated.
(1) All of the property owned by a carrier. (2) The items on the balance sheet of the insurer that show the book value of property owned. Under state regulations, not all property or other resources can be admitted on the statement of the insurer. This gives rise to the term “non-admitted assets.” (Examples would be furniture, fixtures, agents’ debt balances and accounts receivable that are over 90 days old.)
Assigned Risk Plan (Automobile Insurance Plans):
A mechanism used in some states to insure people who cannot obtain insurance in the voluntary market. There is one rate level and the individual policies are assigned to specific companies according to the percentage of the market they insure.
These terms are today generally accepted as synonymous, although not originally so. The term “assurance” is used more commonly in Canada and Great Britain than in the United States.
Synonymous with “insured.” One who has an insurance policy with an insurance carrier. “Insured” is preferred.
An examination of the books of accounts, vouchers or other records of a person, corporation, firm or other organization for the purpose of ascertaining the accuracy or inaccuracy of the record.
Automobile Death Indemnity Coverage:
Provides limited life insurance protection to insured persons specifically named in the policy in the event of a death that is a direct result of a vehicle accident. Payment is not contingent upon the establishment of negligence, but death by an intentional act of the insured is not covered.
Automobile Disability Income Coverage:
Provides persons specifically named in the policy with the weekly benefit shown in the policy in the event of continuous total disability as a direct result of bodily injury, sickness, or infection caused by an auto accident.
Automobile Insurance (Coverages):
For definitions of specific types available, see following auto insurance coverages listed alphabetically throughout the Glossary—Automobile Death Indemnity Coverage, Automobile Disability Income Coverage, Automobile Liability Insurance, Automobile Physical Damage Insurance, Bodily Injury Liability Insurance, Collision Insurance, Comprehensive Automobile Insurance, Deductible Collision and Deductible Comprehensive Coverages, Medical Payments Automobile Insurance, Personal Injury Protection Automobile Insurance (PIP), Property Damage Liability Insurance, Towing Coverage, Underinsured Motorists Coverage, Uninsured Motorists Coverage and Uninsured Motorists Property Damage Coverage.
Auto Insurance Premium:
The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service. Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day–rush hour in an urban neighborhood or leisure-time driving in rural areas, for example. Some insurance companies may also use credit history-related information. (See Insurance Score.)
Automobile Liability Insurance:
Protection for the insured against loss arising out of legal liability when his or her car injures others or damages their property. (Includes Bodily Injury Liability and Property Damage Liability Coverages.)
Automobile Physical Damage Insurance:
The Collision and Comprehensive coverages in the automobile insurance policy.
Coverage against aviation perils, primarily involving operation of aircraft and characterized by a constant exposure to potential catastrophe loss. Types of coverages include insurance for damage to the aircraft or contents, aircraft owner’s liability insurance on passenger bodily injury or death, Airport Liability, Hangarkeeper’s Liability, and Aviation Products Liability insurance.