Insurance Terms Glossary – ABC

Accident: An unexpected event, unforeseen and unintended.

Accidental Death and Dismemberment insurance (AD&D): A form of life insurance that provides payment if death or dismemberment of the insured results from accident.

Administrator (executor): The person appointed by a court to settle an estate, sometimes called an executor.

Alien Company: An insurer organized and domiciled in a country other than the United States.

Annuitant: The person receiving the annuity.

Annuity: 1) An amount of money payable yearly or, at other regular intervals. 2) An agreement by an insurer to make periodic payments that continue for a specified period.

Applicant: The person making application to the insurance company for a policy.

Application: A form on which the prospective insured states facts requested by the insurer and on the basis of which the insurer decides whether or not to accept the risk

Assignee: The person to whom policy rights are assigned by the policy owner.

Assignment: Transfer of rights in a policy to other than the policy owner.

Attained Age: The current age of the insured

Authorized Company: An insurer permitted to sell insurance within a state.

Business Insurance: Life or Health or Disability insurance written to cover business situations such as key person, sole proprietor, partnership, corporations, etc.

Cancelable: An insurance contract that may be terminated by the insurance company or insured at any time. Virtually every form of insurance is Cancelable except Life insurance and those Health policies designated as Guaranteed Renewable or Non-cancelable and Guaranteed Renewable.

Cancellation (termination): Termination of contract of insurance in force by voluntary act of the insurance company or insured.

Cash Surrender Value (cash value): The value in a policy that is the legal property of the policy owner, and that may be expected by him should he surrender it for cash.

Certificate: A statement or evidence that a policy has been written and stating the coverages in general.

Claim: A demand for payment under the insurance policy.

Classification: The grouping of persons for the purpose of determining an underwriting or rating group into which a particular risk must be placed

Coinsurance (participation): I) In Property insurance, a clause under which the insured shares in losses to the extent that he is under insured at the time of the loss. 2) In Health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion.

Collateral Assignment: Assignment of part of the proceeds of an insurance policy to a bank as collateral to settle the loan balance that may exist at the insured’s death.

Major Medical (health insurance): A form of Health insurance that combines the coverage of Major Medical and Basic Medical Expense contracts into one broad contract that provides coverage for almost all types of medical expense usually subject to a Deductible

Concealment: The withholding of facts by an applicant for insurance that materially affects an insurance risk or loss.

Conditional Receipt: Provides that if premium accompanies an application, coverage shall be in force from the date of application (whether the policy has yet been issued or not) provided the insurance company would have issued the coverage on the basis of facts as revealed by the application and other usual sources of underwriting information.

Conditionally Renewable: A contract of Health insurance that provides that the insured may renew the contract to a stated date or an advanced age, subject to the right of the insurer to decline renewal only under conditions defined in the contract.

Conditions: The part of an insurance contract setting out the responsibilities of both the Insured and the Insurer.

Consideration: The exchange of value on which a contract is based. In Life and Health insurance, the Consideration is the premium and the statements in the application.

Contingent Beneficiary (Secondary Beneficiary): Person or persons named to receive benefits if the Primary Beneficiary is not alive.

Contract: A legal agreement between two parties for consideration, such as an insurance policy.

Convertible Term Insurance: A Term policy that can be converted to a permanent type of coverage without proof of insurability.

Corridor Deductible: A Major Medical deductible that applies between benefits paid by the Basic plan and the start of the Major Medical benefits.

Accident: A sudden and unexpected event, occurring at a specific time and place.

Actual Cash Value (ACV): The cost to replace an item of property at the time of loss, less an allowance for depreciation. Often used to determine amount of reimbursement for a loss (Replacement Cost minus Depreciation).

Additional Insured: A person, firm, or corporation other than the Named Insured on a policy, or a lender named in a mortgage clause, who is protected against loss by the terms of the policy.

Additional Living Expenses: A coverage designed to reimburse the insured for an increase in living expenses necessitated by loss to the dwelling. This Indirect Loss must be the result of Direct Loss by a covered Peril.

Adjuster: Represents the insurance company and acts for the company in working on agreements as to the amount of a loss and the liability of the company.

Admitted Company: A company that meets the state insurance department’s standards and is authorized by the Director to do business in the state.

Agent: An individual appointed by an insurance company to solicit, negotiate, effect, or countersign insurance contracts on its behalf

Aggregate Limit (Combined Limit): A type of policy limit found in Liability policies that limits coverage to a specified total amount for all losses occurring within the policy period.

Alien Company: An insurance company incorporated in a country other than the ‘United States.

All Risk Insurance (All Peril): Insurance protecting the insured from loss arising from any Peril other than those specifically excluded by name. This contrasts with Named Peril Insurance, which names the Peril or Perils insured against.

Application: A questionnaire that is filled out by an agent and the prospect seeking insurance. The form contains rating and underwriting information. The applicant is expected to make representations by answering questions to the best of his knowledge (truthfully).

Appraisal: If the insured and insurer cannot agree on the amount of loss, either may demand an appraisal.

Assigned Risk (The auto insurance “plan”): There are some applicants that underwriters do not care to insure, but because of state law or otherwise, must be provided protection. To become authorized, a Casualty company must agree to participate in the Assigned Risk Pool and take its turn providing Auto insurance to high-risk drivers.

Audit: A survey of the financial records of the insured conducted to determine exposures, limits, etc., which are needed to calculate the premium.

Binders (conditional receipts): Binders are given in writing and are deemed to include all usual terms of the policy for which it was given plus endorsements. Life or Disability insurance utilizes conditional receipts instead of binders.

Bodily Injury (BI): Usually defined to include bodily harm, sickness, disease, including required care, loss of services and resulting death.

Bond: An obligation of the insurance company to protect one against financial loss caused by the acts of others.

Broker: One who represents an insured in the solicitation, negotiation, or procurement of contracts of insurance, and who may render services incidental to, those functions. Brokers may also be licensed as agents.

Burglary: As it is defined in Crime insurance policies, the unlawful taking of property by forced entry into the premises, or exit from the premises, while the premises are closed for business.

Business Owners Policy (BOP): A commercial package policy designed for certain types of small businesses, combining Property and Liability coverages. Very similar to a Commercial Package Policy (CPP).

Cancellation: Termination of contract of insurance in force by voluntary act of the insurance company or insured, effected in accordance with provisions in the contract or by mutual agreement.

Casualty Insurance: A type of insurance that is primarily concerned with losses caused by injury to persons and legal liability imposed upon the insured for such injury or damage to property of others.

Coinsurance: 1) In Property insurance, a clause under which the insured shares in losses to the extent that she is underinsured at the time of the loss. 2) In Health insurance, a provision that the insured and insurance company will share covered losses in agreed proportion. In Health insurance, the preferred term is “Percentage Participation.”

Commercial Package Policy (CPP): A multi peril, multiline policy that provides a broad spectrum of Property and Casualty coverages for businesses. (Can Include: Marine, Boiler and Machinery, Glass, Crime, Business Auto or Farm coverages)

Comparative Negligence: Doctrine that a defendant is liable only for the amount of damages allocated to that defendant in direct proportion to the defendant’s percentage of fault (if not 51% or more at fault, defendant is not held liable).

Comprehensive Personal Liability: Nonbusiness Liability exposure of individuals who are insured under this policy. The most common Personal Liability exposures arise out of the residence premises and activities of individuals and family members. Comprehensive Personal Liability coverage first became available as a separate policy. Eventually it was incorporated into Homeowners policies.

Compulsory Insurance: Any form of insurance which is required by law. In many states, for example, automobile bodily injury liability insurance is compulsory for all owners of automobiles.

Concealment: The withholding of a material fact from the insurance company. May void the insurance policy.

Conditions: The portion of an insurance contract that sets forth the rights and duties of the insured and the insurance company.

Consequential Loss: Indirect losses that occur as a “consequence” of a direct loss. (Includes time-element coverages)

Consideration: A characteristic of a legal contract: the thing of value exchanged for the performance promised in the contract. In insurance, the applicant’s answers and the policy premium paid constitute the consideration.

Contingent Business Income: A Time-Element coverage that protects the insured against Indirect Loss that results because of a Direct Loss to a supplier, buyer or leader location.

Contingent Liability (Vicarious Liability): Liability that an insured person or business incurs because of the actions of others (family or emploees).

Contract: A legal agreement between two parties promising a certain performance in exchange for a certain consideration.

Contractual Liability: Provides coverage against liability arising out of an insured’s contractual obligations.

Countersignature: The signature of a licensed agent, which must appear on the policy to validate the contract.

Custodian: In Crime insurance, a custodian is the insured or a regular employee or partner of the insured who has care or control of property within the premises. (Not including watchmen, porters or janitors)