For informational purposes only. Refer to your policy or ask your agent
for the exact definition of any term defined in your policy.
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David G. Sayles Insurance Services Insurance Terms--A |
 | Absolute Liability: Liability for damages even though fault or negligence cannot be proven. |
| Accident: An event or occurrence which is unforeseen and unintended. |
| Accident and Health Insurance: A type of coverage that pays benefits, sometimes including reimbursement for loss of income, in case of sickness, accidental injury, or accidental death. [MORE ON HEALTH ISSUES] |
| Accident Insurance: A form of health insurance against loss by accidental bodily injury. |
| Accidental Bodily Injury: Injury to the body as the result of an accident. |
| Accidental Death Benefit: A benefit in addition to the face amount of a life insurance policy, payable if the insured dies as the result of an accident. Sometimes referred to as double indemnity. |
| Accounting: The process of recording, summarizing, and allocating all items of income and expense of the company and analyzing, verifying, and reporting the results. |
| Accumulation period: (1) The time between the first premium payment and the first benefit payout under a deferred annuity; (2) A specified period of time, such as 90 days, during which the insured person must incur eligible medical expenses at least equal to the deductible amount in order to establish a benefit period under a major medical expense or comprehensive medical expense policy. |
| Accumulation units: The mechanism used to account for the insured's deposits in a variable annuity contract during the premium paying period. The number of units purchased depends upon the current valuation of a unit in dollars. |
| Acquisition Costs: The insurer's cost of putting new business in force, including the agent's commission, the cost of clerical work, fees for medical examinations and inspection reports, sales promotion expense, etc. |
| Activities of Daily Living: A list of activities, normally including mobility, dressing, bathing, toileting, transferring, and eating which are used to assess degree of impairment and determine eligibility for some types of insurance benefits. |
| Acts of War, Confiscation, Detainment, Revolution (Free of Capture, Seizure Clause): Exclusion in most marine cargo policies, which states that coverage is not provided when due to capture, seizure, arrest, detainment, confiscation, preemption, requisition or nationalization, whether in time of peace or war. This clause also excludes from coverage loss due to hostilities or warlike operations (including atom bombs), embargoes or other interferences with the free flow of trade. Coverage for these hazards can be obtained through the Cargo War Risk Policy. See also, [MARINE CARGO INSURANCE] |
| Actual Cash Value (ACV): The replacement cost of property damaged or destroyed at the time of loss, with deduction for depreciation. Actual cash value cannot exceed the applicable limit of liability shown in the declarations of the policy, nor the amount it would cost to repair or replace such property with material of like kind and quality within a reasonable amount of time after a loss. |
| Actuarial Cost Method: One of several systems for determining either the contributions to be made under a retirement plan, or level of benefits when the contributions are fixed. In addition to forecasts of mortality, interest and expenses, some of the methods involve estimates of future labor turnover, salary scales and retirement rates. |
| Actuarial Equivalent: If the present values of two series of payments are equal, taking into account a given interest rate and mortality according to a given table, the two series are said to be actuarially equivalent on this basis. For example, a lifetime monthly benefit of $67.60 beginning at age 60 (on a given set of actuarial assumptions) can be said to be the actuarial equivalent of $100 a month beginning at age 65. The actual benefit amounts are different but the present value of the two benefits, considering mortality and interest, is the same. |
| Actuarially Fair: The price for insurance which exactly represents the expected losses |
| Actuary: A person professionally trained in the technical aspects of pensions, insurance and related fields. The actuary estimates how much money must be contributed to an insurance or pension fund in order to provide future benefits. |
| Additional insured: An assured party specifically named under an insurance policy that is not automatically included as an insured under the policy of another, but for whom the named insured's policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named insured's impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (e.g., customers or owners of property leased by the named insured). |
| Additional named insured: (1) An individual or entity, other than the first named insured, identified as an insured in the policy declarations or an addendum to the policy declarations. (2) An individual or entity who is added to a policy with the status of named insured after the policy is written. Such an individual or entity would have the same rights and responsibilities as an individual or entity named as an insured in the policy declarations (other than those rights and responsibilities reserved to the first named insured). In this sense the term can be contrasted with additional insured, an individual or entity added to a policy as an insured but not as a named insured. The term additional named insured has not acquired a uniformly agreed-upon meaning within the insurance industry, and use of the term in the two different senses defined above often produces confusion in requests for additional insured status between contracting parties. |
| Adhesion, Contract of: A contract that is drafted by one party and accepted or rejected by the other, with no opportunity to bargain with respect to its terms. |
| Adjustable Life Insurance: A type of insurance that allows the policyholder to change the plan of insurance, raise or lower the face amount of the policy, increase or decrease the premium and lengthen or shorten the protection period. |
| Adjusted gross estate: Approximately the net worth of a deceased's estate--the beginning point for the computation of estate taxes. In addition to the deceased's assets while alive, the value will also generally include the proceeds of life insurance. |
| Adjuster: A person who investigates and settles losses for an insurance carrier. |
| Adjusting: The process of investigating and settling losses with or by an insurance carrier. |
| Adjustment Bureau: Organization for adjusting insurance claims that is supported by insurers using the bureau's services. |
| Administrative Services Only (AS0) Plan: An arrangement under which an insurance carrier or an independent organization will, for a fee, handle the administration of claims, benefits and other administrative functions for a self-insured group. |
| Advance Funding: Pension-funding method in which the employer systematically and periodically sets aside funds prior to the employee's retirement. |
| Advance Premium Mutual: Mutual insurance company owned by the policyowners that does not issue assessable policies but charges premiums expected to be sufficient to pay all claims and expenses. |
| Adverse Selection: The tendency of persons who present a poorer-than-average risk to apply for, or continue, insurance to a greater extent than do persons with average or better-than-average expectations of loss. |
| Advertising Injury: Injury rising out of an offense committed in the course of your advertising activities, if such injury rises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition or infringement of copyright, title or slogan. [MORE] |
| Age Limits: Stipulated minimum and maximum ages below and above which the company will not accept applications or may not renew policies. |
| Agent: An insurance company representative licensed by the state who solicits, negotiates or effects contracts of insurance, and provides service to the policyholder for the insurer. |
| Aggregate Deductible: Deductible in some property and health insurance contracts in which all covered losses during a year are added together and the insurer pays only when the aggregate deductible amount is exceeded. |
| Aggregate Indemnity: The maximum dollar amount that may be collected for any disability or period of disability under the policy. |
| Aggregate Limit: (1) A limit in an insurance policy stipulating the most it will pay for all covered losses sustained during a specified period of time, usually one year. Aggregate limits are commonly included in liability policies. While not often used in property insurance, aggregates are sometimes included with respect to certain catastrophic exposures, e.g., earthquake and flood. (2) The dollar amount of reinsurance coverage during one specified period, usually 12 months, for all reinsurance losses sustained under a treaty during such period. |
| Agreed Amount Endorsement: An endorsement to a policy made by the insurance company wherein it waives the coinsurance clause on the specified property. As long as this endorsement is in effect, there would be no coinsurance penalty at the time of a claim. By combining an Agreed Amount Endorsement with a Replacement Cost Endorsement you can obtain an unusually high quality of insurance coverage. |
| AIDS: Acquired immune deficiency syndrome. A fatal, incurable disease caused by a virus that can damage the brain and destroy the body's ability to fight off illness. |
| Alien Insurer: An insurance company domiciled in another country. Contrast Foreign Insurer. |
| Alienated Premises Exclusion: An exclusion that eliminates coverage for property damage liability to premises sold by an entity. For example, a person owns a lot and builds a house on it. After the house is completed and sold, a subcontractor's faulty wiring causes the house to burn. The buyer, or his/her insurance company, sues for the cost of repairing or rebuilding the house. There is no coverage for this exposure under standard liability policies. |
| Allied Lines: A term for forms of property insurance allied with fire insurance, covering such perils as windstorm, hail, explosion, and riot. |
| Allocated Benefits: Benefits for which the maximum amount payable for specific services is itemized in the contract. |
| All-risks Policy: Coverage by an insurance contract that promises to cover all losses except those losses specifically excluded in the policy. To be covered for damage or loss under a "basic " contract, the damage or loss must be caused by a peril that is "named" or listed in the contract. Consequently, if damage or loss is caused by a peril that is not named, there is no coverage. In an all-risk policy, coverage is provided unless specifically excluded. The contract's exclusions must be considered in determining coverage. See also Named Perils and Special Risk Insurance. |
| Alternate Delivery Systems: Health services provided in other than an in-patient, acute-care hospital. Examples include skilled and intermediary nursing facilities, hospice programs, and home health care. Alternate delivery systems are designed to provide needed services in a more cost-effective manner. |
| Ambulatory Care: Medical services that are provided on an outpatient (nonhospitalized) basis. Services may include diagnosis, treatment, and rehabilitation. |
| Amendment: A formal document changing the provisions of an insurance policy signed jointly by the insurance company officer and the policy holder or his authorized representative. |
| Amortization: Paying an interest-bearing liability by gradual reduction through a series of installments, as opposed to one lump-sum payment. |
| Annual Statement: The annual report, as of December 31, of an insurer to a state insurance department, showing assets and liabilities, receipts and disbursements, and other financial data, presented according to Statutory Accounting Principles. |
| Annuitant: The person during whose life an annuity is payable, usually the person to receive the annuity. |
| Annuity: A contract that provides an income for a specified period of time, such as a number of years or for life. |
| Annuity Certain: A contract that provides an income for a specified number of years, regardless of life or death. |
| Annuity Consideration: The payment, or one of the regular periodic payments, an annuitant makes for an annuity. |
| Antiselection: The tendency of persons who present a poorer-than-average risk to apply for, or continue, insurance to a greater extent than do persons with average or better-than-average expectations of loss. |
| Application: A signed statement of facts made by a person applying for life insurance and then used by the insurance company to decide whether or not to issue a policy. The application becomes part of the insurance contract when the policy is issued. |
| Arbitration: A form of alternative dispute resolution where an unbiased person or panel renders an opinion as to reponsibility for or extent of a loss. |
| Arson: The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent. |
| Assailing Thieves: Hazard generally covered under a marine cargo policy, which includes loss due to thievery when accompanied by violence, but does not include petty thievery. See also [MARINE CARGO INSURANCE]. |
| Assessment Association: An insurer that does not charge a fixed premium for insurance, but rather assesses its members periodically to pay its losses. Assessment insurers usually collect an advance premium which is estimated to cover losses and expenses, but reserve the right to make additional assessments whenever the premium collected is insufficient. |
| Assessment Mutual: Mutual insurance company that has the right to assess policyowners for losses and expenses. |
| Assets: All funds, property, goods, securities, rights of action, or resources of any kind owned by an insurance company. Statutory accounting, however, excludes non-admitted assets, such as deferred or overdue premiums, that would be considered assets under generally accepted accounting principles (GAAP). |
| Assigned Risk: See Automobile Insurance Plan. |
| Assignment: The legal transfer of one person's interest in an insurance policy to another person. |
| Association Captive: Type of captive insurer owned by members of a sponsoring organization or group, such as a trade association. |
| Association Group: A group formed from members of a trade or a professional association for group insurance under one master health insurance contract. |
| Association Group Plan: Health insurance plans designed for members of a professional association or trade association. Members may be protected under a group health insurance policy or by individual franchise policies. |
| Assumption of Risk Doctrine: Defense against a negligence claim that bars recovery for damages if a person understands and recognizes the danger inherent in a particular activity or occupation. |
| Assumptions: Conditions and rules underlying the calculation of a pension benefit, including expected interest, mortality and turnover. |
| Assurance: See Insurance. |
| Attractive Nuisance: Condition that can attract and injure children. Owners or occupants of land on which such a condition exists are liable for injuries to children. |
| Audit, Insurance: Sometimes factors that enter into determining appropriate premiums for insurance coverage can't be known in advance; therefore, accurate premiums for the coverage provided can't be billed by the insurance carrier. This often is true in the case of Worker's Compensation and Product Liability insurance, where such things as payroll and sales can't be determined ahead of time. An audit serves as an examination of the insured's records after the fact to adjust the initial premium billed to reflect the actual coverage. |
| Automatic Premium Loan: Cash borrowed from a life insurance policy's cash value to pay an overdue premium after the grace period for paying the premium has expired. |
| Automatic Reinsurance: An agreement that the insurer must cede and the reinsurer must accept all risks within certain explicitly defined limits. The reinsurer undertakes in advance to grant reinsurance to the extent specified in the agreement in every case where the ceding company accepts the application and retains its own limit. See also, Treaty Reinsurance. |
| Automobile Insurance Plan: One of several types of shared market mechanisms where persons who are unable to obtain such insurance in the voluntary market are assigned to a particular company, usually at a higher rate than the voluntary market. Formerly called Assigned Risk. Compare Automobile Reinsurance Facility, Residual Market. |
| Automobile Liability Insurance: Coverage designed to provide protection for the insured against financial loss because of legal liability for car-related injuries to others or damage to their property. [MORE ON AUTO INSURANCE] |
| Automobile Physical Damage Insurance: Coverage to pay for damage to or loss of an insured automobile resulting from collision, fire, theft, or other perils. |
| Automobile Reinsurance Facility: One of several types of shared market mechanisms used to make automobile insurance available to persons who are unable to obtain such insurance in the regular market. |
| Automobile Shared Market: A program in which all automobile insurers in each state and the District of Columbia participate to make coverage available to car owners who are unable to obtain auto insurance in the voluntary market. Except in Maryland, which operates a state-funded mechanism whose losses are subsidized by private insurers, each state uses one of three systems (an automobile insurance plan, a joint underwriting association, or a reinsurance facility) to guarantee the availability of automobile insurance. |
| Aviation Insurance: Aircraft insurance including coverage of aircraft or their contents, the owner's liability, and accident insurance on the passengers. |
| Average Indexed Monthly Earnings (AIME): Under the OASDI program, the person's actual earnings are indexed to determine his or her primary insurance amount (PIA). |
| Avoidance: see Loss Avoidance. |
Copyright 1998 David G. Sayles Insurance Services
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