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
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
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
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 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
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
(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
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
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.