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ABSTRACT:

A brief history of title to land


ACCELERATED DEATH BENEFIT:
A percentage of the policy?s face amount, discounted for interest, that can be paid
to the insured prior to death, under specified circumstances. This is in lieu of a
traditional policy that pays beneficiaries after the insured?s death. Such benefits
kick in if the insured becomes terminally ill, needs extreme medical intervention, or
must reside in a nursing home. The payments made while the insured is living are
deducted from any death benefits paid to beneficiaries.
ACCIDENT AND HEALTH INSURANCE:
Coverage for acci-dental injury, accidental death, and related health expenses.
Benefits will pay for preventative services, medical expenses, and catastrophic care,
with limits.
ACCIDENTAL DEATH BENEFIT:
An endorsement that pays the beneficiary an additional benefit if the insured dies
from an accident.
ACCOUNTS RECEIVABLE (DEBTORS) INSURANCE:
Indemnifies for losses that are due to an inability to collect from open commercial
account debtors because records have been destroyed by an insured peril.
ACTIVITIES OF DAILY LIVING:
Activities-such as eating, bathing, toileting, dressing, and continence-that trig-ger
payment in a long-term care insurance policy, if at least some of them cannot be
performed by the insured.
ACTS OF GOD:
Perils that cannot reasonably be guarded against, such as floods and earthquakes.
ACTUAL CASH VALUE:
A form of insurance that pays damages equal to the replacement value of damaged
property minus depreciation.

ACTUAL LOSS RATIO:


The ratio of losses incurred to premiums earned actually experienced in a given line
of insurance activity in a previous time period.
Actuarial COST ASSUMPTIONS:
Assumptions about rates of investment earnings, mortality, turnover, salpatterns,
probable expenses, and distribution or actual ages at which employees are likely to
retire.
ACTUARIAL COST METHODS:
Methods for computing how much money must be contributed each year to fund
pensions.
ACTUARY :
An insurance professional skilled in the analysis, evaluation, and management of
statistical information. Evaluates insurance firms? reserves, determines rates and
rating methods, and determines other business and financial risks.
ADDITIONAL INSUREDS:
Persons who have an insurable interest in the property/person covered in a policy
and who are covered against the losses outlined in the policy. They usually receive
less coverage than the pri-mary named insured.
ADDITIONAL LIVING EXPENSES:
Extra charges covered by homeowners policies over and above the policy-holder?s
customary living expenses. They kick in when the insured requires temporary
shelter due to damage by a covered peril that makes the home temporarily
uninhabitable.
ADJUSTER:
An individual employed by a property/cas-ualty insurer to evaluate losses and settle
policyholder claims. These adjusters differ from public adjusters, who negotiate with
insurers on behalf of policyhold-ers, and receive a portion of a claims settlement.
Inde-pendent adjusters are independent contractors who adjust claims for different
insurance companies.
ADMITTED COMPANY:

An insurance company licensed and authorized to do business in a particular state


or country.
ADVERSE SELECTION:
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. 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.
AFFINITY SALES:
Selling insurance through groups such as professional and business associations.
AFFIRMATIVE WARRANTY:
An agreement between an insurance company and an agent, granting the agent
authority to write insurance from that company. It specifies the duties, rights, and
obligations of both parties.
AGENT:
Insurance is sold by two types of agents: inde-pendent agents, who are selfemployed, represent several insurance companies and are paid on commission, and
exclusive or captive agents, who represent only one insurance company and are
either salaried or work on commission. Insurance companies that use exclusive or
captive agents are called direct writers.
AGGREGATE DEDUCTIBLE:
A type of deductible that applies for an entire year in which the insured absorbs all
losses until the deductible level is reached, at which point the insurer pays for all
loses over the specified amount.
AGGREGATE LIMITS:
A yearly limit, rather than a ?per occurrence? limit. Once an insurance company has
paid up to the limit, it will pay no more during that year.
ALEATORY CONTRACT:

A legal contract in which the outcome depends on an uncertain event. Insurance


contracts are aleatory in nature.
ALL-RISK AGREEMENT:
A property or liability insur-ance contract in which all risks of loss are covered
except those specifically excluded; also called ?open perils policy.?
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.
ALTERNATIVE MARKETS:
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.
ANCILLARY CHARGES:
In hospital insurance, covered charges other than room and board.
ANNUAL STATEMENT:
Summary of an insurer?s or rein-surer?s financial operations for a particular year,
including a balance sheet.
ANNUAL-PREMIUM ANNUITY:
An annuity whose purchase price is paid in annual installments.
ANNUITANT:
: An individual receiving benefits under an annuity.
ANNUITY:
A life insurance company contract that pays periodic income benefits for a specific
period of time or over the course of the annuitant?s lifetime. These payments can
be made annually, quarterly or monthly.

From a life insurer?s viewpoint, an annuity presents the opposite of mortality risk
from a life insurance policy. Life insurance pays a benefit when the policyholder
dies. An annuity pays benefits as long as the annuitant lives. With both products,
the insurer?s profit or loss depends on whether it made correct assumptions about
the policyholder?s life expectancy and the company?s future investment returns.
ANNUITY CERTAIN:
An annuity that is payable for a specified period of time, without regard to the life or
death of the annuitant.
ANNUITY UNITS:
A measure used in valuing a variable annuity during the time it is being paid to the
annui-tant. Each unit?s value fluctuates with the performance of an investment
portfolio.
APPORTIONMENT:
The dividing of a loss proportion-ately among two or more insurers that cover the
same loss.
APPRAISAL:
A survey to determine a property?s insura-ble value, or the amount of a loss.
ARBITRATION:
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.
Arson:
The deliberate setting of a fire
ASSESSABLE POLICY:
A policy subject to additional charges, or assessments, on all policyholders in the
company.
ASSET-BACKED SECURITIES:

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.
ASSETS:
Property owned, in this case by an insurance company, including stocks, bonds, and
real estate. Insurance accounting is concerned with solvency and the ability to pay
claims. Insurance laws therefore require a conservative valuation of assets.
ASSIGN:
To use life insurance policy benefits as collat-eral for a loan.
ASSIGNEE:
The party to whom the rights of the insured under a policy are transferred.
ASSIGNMENT:
A clause that allows the transfer of rights under a policy from one person to
another, usually by means of a written document.
ASSIGNOR:
The party granting the transfer of the insured?s rights to the assignee
ASYMMETRIC INFORMATION:
An insured?s knowledge of likely losses that is unavailable to insurers.
AUTO INSURANCE PREMIUM:
The price an insurance company charges for coverage, based on the frequency and
cost of potential accidents, theft and other losses.
AUTOMATIC COVERAGE:
An insurer agrees to cover accidents from all machinery of the same type as that
specifically listed in the endorsement.
AUTOMATIC TREATY:

An agreement whereby the ceding company is required to cede some certain


amounts of business and the reinsurer is required to accept them.
AVERAGE ADJUSTERS:
A name applied to claims adjusters in the field of marine insurance.
AVIATION INSURANCE:
Commercial airlines hold prop-erty insurance on aeroplanes and liability insurance
for negligent acts that result in injury or property damage to passengers or others.
Damage is covered on the ground and in the air. The policy limits the geographical
area and individual pilots covered.
B
BAILMENT:
A situation in which one has entrusted personal property to another.
BALANCE SHEET:
Provides a snapshot of a company?s financial condition at one point in time.
BASIC HEALTH INSURANCE POLICY:
Hospital insur-ance, surgical insurance, and regular medical expense insurance.
BENEFICIARY:
A person named in a life insurance policy to receive the death proceeds.
BIND:
In property and liability insurance, the agent customarily is given the authority to
accept offers from prospective insureds without consulting the insurer; in such
cases, the agent is said to bind the insurer.
BINDER:
Temporary authorization of coverage issued prior to the actual insurance policy.
BLANKET BOND:

A fidelity bond that covers all employees of a given class and may also cover perils
other than infidelity.
BLANKET COVERAGE:
Insurance coverage for more than one item of property at a single location, or two
or more items of property in different locations.
BOILER AND MACHINERY INSURANCE:
Often called Equipment Breakdown, or Systems Breakdown insurance. Commercial
insurance that covers damage caused by the malfunction or breakdown of boilers,
and a vast array of other equipment including air conditioners, heating, electrical,
telephone, and computer systems. Prevention of loss is emphasized even more than
indemnification of loss.
BOND:
A security that obligates the issuer to pay interest at specified intervals and to
repay the principal amount of the loan at maturity. In insurance, a form of
suretyship. Bonds of various types guarantee a payment or a reimbursement for
financial losses resulting from dishonesty, failure to perform and other acts.
BOOK OF BUSINESS:
Total amount of insurance on an insurer?s books at a particular point in time.
BROKER:
An intermediary between a customer and an insurance company. Brokers typically
search the market for coverage appropriate to their clients. They work on
commission and usually sell commercial, not personal, insurance. In life insurance,
agents must be licensed as securities brokers/dealers to sell variable annuities,
which are similar to stock market-based investments.
BURGLARY:
The unlawful taking of property from within premises, entry to which has been
obtained by force, leaving visible marks of entry.
BURGLARY AND THEFT INSURANCE:
Insurance for the loss of property due to burglary, robbery or larceny. It is provided
in a standard homeowners policy and in a business multiple peril policy.

BUSINESS INCOME INSURANCE:


Coverage for the reduction in revenue in the event of an insured peril.
BUSINESS INTERRUPTION INSURANCE:
Commercial coverage that reimburses a business owner for lost profits and
continuing fixed expenses during the time that a business must stay closed while
the premises are being restored because of physical damage from a covered peril,
such as a fire. Business interruption insur-ance also may cover financial losses that
may occur if civil authorities limit access to an area after a disaster and their actions
prevent customers from reaching the business premises. Depending on the policy,
civil authorities coverage may start after a waiting period and last for two or more
weeks.
BUSINESS PURSUIT:
Continued or regular activity for the purpose of earning a livelihood.
BUSINESSOWNERS POLICY:
A policy that combines property, liability and business interruption coverages for
small to medium sized businesses. Coverage is generally cheaper than if purchased
through separate insurance policies.
C
CANCELABLE:
A health policy that can be cancelled by the insurer at any time for any reason.
CAPACITY:
The supply of insurance available to meet demand. Capacity depends on the
industry?s financial ability to accept risk. For an individual insurer, the maximum
amount of risk it can underwrite based on its financial condition. The adequacy of
an insurer?s capital relative to its exposure to loss is an important measure of
solvency.
CAPTIVE AGENT:

A person who represents only one insurance company and is restricted by


agreement from submitting business to any other company, unless it is first rejected
by the agent?s captive com-pany.
CAPTIVE INSURER:
A type of insurer that is generally formed and owned by potential insureds to meet
their own distinctive needs.
CAPTIVES:
Insurers that are created and wholly-owned by one or more non-insurers, to provide
owners with coverage. A form of self-insurance.
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.
CASH VALUE:
The savings element that accumulates with some life insurance policies.
CASH VALUE OPTION:
An option in life insurance policies permitting the insured to take the cash value of
the policy on surrender.
CATASTROPHE:
Term used for statistical recording purposes to refer to a single incident or a series
of closely related incidents causing severe insured property losses totaling more
than a given amount.
CATASTROPHE BONDS :
Risk-based securities that pay high interest rates and provide insurance companies
with a form of reinsurance to pay losses from a catas-trophe such as those caused
by a major hurricane. They allow insurance risk to be sold to institutional investors
in the form of bonds, thus spreading the risk.
CATASTROPHE DEDUCTIBLE:

A percentage or fixed monetary amount that a homeowner must pay before the
insurance policy kicks in when a major natural disaster occurs. These large
deductibles limit an insurer?s potential losses in such cases, allowing it to insure
more property. A property insurer may not be able to buy reinsurance to protect its
own bottom line unless it keeps its potential maximum losses under a certain level.
CATASTROPHE FACTOR:
Probability of catastrophic loss, based on the total number of catastrophes in a state
(or region) over a 40-year period.
CATASTROPHE MODEL:
Using computers, a method to mesh long-term disaster information with current
demographic, building and other data to determine the potential cost of natural
disasters and other catastrophic losses for a given geographic area.
CATASTROPHE REINSURANCE:
Reinsurance (insurance for insurers) for catastrophic losses. The insurance industry
is able to absorb the huge losses caused by natural and man-made disasters such
as hurricanes, earthquakes and terrorist attacks because losses are spread among
thousands of companies including catastrophe reinsurers who operate on a global
basis.
CEDING COMPANY:
An insurer, also called a primary insurer, that passes on to other insurers some part
of its risk under insurance policies it has accepted.
CESSION:
A reinsurance term meaning that portion of a risk that is passed on to reinsurers by
ceding compa-nies.
CHANCE OF LOSS:
The long-term chance of occurrence or relative frequency of loss. Expressed by the
ratio of the number of losses likely to occur compared to the larger number of
possible losses in a given group.
CHIEF RISK OFFICER (CRO):

New position within some organizations, denoting the responsibility for coordinating
an enterprise risk management strategy.
CIVIL LAW:
Legal proceedings directed towards wrongs against individuals and organizations.
Breach of contract is an example of a civil wrong.
CLAIMS MANAGEMENT:
The functions performed in handling loss claims
CLAIMS-MADE POLICY:
A form of insurance that pays claims presented to the insurer during the term of the
policy or within a specific term after its expiration. It limits liability insurers?
exposure to unknown future liabilities.
COINSURANCE:
In property insurance, requires the policyholder to carry insurance equal to a
specified percentage of the value of property to receive full pay-ment on a loss. For
health insurance, it is a percentage of each claim above the deductible paid by the
policy-holder. For a 20 percent health insurance coinsurance clause, the
policyholder pays for the deductible plus 20 percent of his covered losses. After
paying 80 per-cent of losses up to a specified ceiling, the insurer starts paying 100
percent of losses.
COLLATERAL:
Property that is offered to secure a loan or other credit and that becomes subject to
seizure on default. (Also called security.)
COLLISION COVERAGE:
Portion of an auto insurance policy that covers the damage to the policyholder?s car
from a collision.
COMBINED RATIO:
Percentage of each premium rupee a property/casualty insurer spends on claims
and expenses. A decrease in the combined ratio means financial results are
improving; an increase means they are deteriorating. When the ratio is over 100,
the insurer has an underwriting loss.

COMMERCIAL GENERAL LIABILITY (CGL):


A broad commercial policy that covers all liability exposures of a business that are
not specifically excluded. Coverage includes product liability, completed operations,
premises and operations, and independent contrac-tors.
COMMERCIAL LINES:
Products designed for and bought by businesses. Among the major coverages are
boiler and machinery, business interruption, commer-cial auto, comprehensive
general liability, directors and officers liability, fire and allied lines, inland marine,
medical malpractice liability, product liability, professional liability, surety and
fidelity, and workers compensation. Most of these commercial coverages can be
purchased separately except business interrup-tion which must be added to a fire
insurance (prop-erty) policy.
COMMERCIAL PAPER:
Short-term, unsecured, and usually discounted promissory note issued by
commercial firms and financial companies often to finance current business.
Commercial paper, which is rated by debt rating agencies, is sold through dealers or
directly placed with an investor.
COMMERCIAL UMBRELLA:
A liability policy designed to cover catastrophic losses.
COMMISSION:
Fee paid to an agent or insurance sales-person as a percentage of the policy
premium. The percentage varies widely depending on coverage, the insurer, and
the marketing methods.
COMMON DISASTER CLAUSE:
A life insurance clause stating what happens to life insurance proceeds if named
beneficiaries die in a common accident.
COMMON LAW:
The unwritten law that is based on custom, usage, and court decisions; different
from statutory law, which consists of laws passed by legisla-tures.

COMPLETED OPERATIONS COVERAGE:


Pays for bodily injury or property damage caused by a completed project or job.
Protects a business that sells a service against liability claims.
COMPREHENSIVE COVERAGE:
Portion of an auto insurance policy that covers damage to the policyholder?s car not
involving a collision with another car (includ-ing damage from fire, explosions,
earthquakes, floods, and riots), and theft.
COMPULSORY AUTO INSURANCE:
The minimum amount of auto liability insurance that is statutorily required.
CONCEALMENT:
The failure of an applicant to reveal, before the insurance contract is made, a fact
that is material to the risk.
CONCURRENT CAUSATION:
A legal doctrine that says if two perils (one excluded and one not excluded) occur
and cause a loss, coverage applies.
CONCURRENT LOSS CONTROL:
Activities that take place at the same time as losses to reduce their severity.
CONDITIONAL CONTRACT:
A contract, such as an insurance contract, requiring that certain acts be performed
if recovery is to be made.
CONDITIONAL RECEIPT:
A document given to an applicant for life insurance stating that the company?s
acceptance is contingent upon determination of the applicant?s insurability.
CONDITIONALLY RENEWABLE:
A policy that can be can-celled or have the premiums raised by the insurer on a
specific anniversary date, subject to certain reasons written into the policy.

CONDITIONS:
Circumstances under which an insurance contract is in force. Breach of the
conditions is grounds for refusal to pay the loss.
CONSEQUENTIAL DAMAGE ENDORSEMENT:
Coverage for losses incurred as a result of the failure of an insured object on the
insured?s premises.
CONSEQUENTIAL LOSSES:
Losses other than property damage that occur as a result of physical loss to a
business for example, the cost of maintaining key employees to help reorganize
after a fire.
CONSIDERATION:
In an insurance contract, the specified premium and an agreement to the provisions
and stipulations that follow.
CONSTRUCTIVE TOTAL LOSS:
Loss occurring when property is not completely destroyed but when it would cost
more to restore it than it is worth
CONTINGENT BENEFICIARY:
A person named in a life insurance contract to receive the benefits of the policy if
other named beneficiaries are not living.
CONTINGENT BUSINESS INCOME INSURANCE:
Coverage for losses that result from losses to a supplier or cus-tomer on whom the
firm depends.
CONTINGENT LIABILITY:
Liability of individuals, corporations, or partnerships for accidents caused by people
other than employees for whose acts or omissions the corporations or partnerships
are responsible.
CONTRACT:

An agreement embodying a set of promises that are enforceable by law.


CONTRACT CONSTRUCTION BOND:
A surety bond guaranteeing that the principles will complete their work in
accordance with the terms of the construction contracts.
CONTRACT OF ADHESION:
A contract, such as an insurance contract, in which any ambiguities or uncertain-ties
in the wording will be construed against the drafter (the insurer).
CONTRACTORS? EQUIPMENT FLOATER:
Insures mobile equipment, such as tractors, steam shovels, drilling equipment, etc.,
whether it is owned, leased, or bor-rowed.
CONTRACTS WITHOUT TIME ELEMENT:
Insure losses resulting from fire in which the loss cannot be measured either by
direct damage by fire or in terms of elapsed time.
CONTRACTUAL LIABILITY:
Liability arising from contractual agreements in which it is stated that some losses,
if they occur, are to be borne by specific parties.
CONTRIBUTORY NEGLIGENCE:
Partial guilt or negligence in a civil lawsuit where both parties are to blame.
CONVERTIBLE:
A term policy that can be converted to permanent coverage rather than expiring on
a specific date.
COST OF RISK:
The sum of (1) outlays to reduce risks, (2) the opportunity cost of activities forgone
due to risk considerations, (3) expenses of strategies to finance potential losses,
and (4) the cost of reimbursed losses.
COST-OF-LIVING RIDER:

An endorsement that auto-matically increases the amount of coverage by the same


percentage the Consumer Price Index has risen since policy issue.
COST-TO-REPAIR BASIS:
The cost to replace property after a loss but perhaps not with like materials and
labor.
COVERAGE:
Synonym for insurance.
CREDIT:
The promise to pay in the future in order to buy or borrow in the present. The right
to defer pay-ment of debt.
CREDIT DERIVATIVES:
A contract that enables a user, such as a bank, to better manage its credit risk. A
way of transferring credit risk to another party.
CREDIT ENHANCEMENT:
A technique to lower the interest payments on a bond by raising the issue?s credit
rating, often through insurance in the form of a financial guarantee or with standby
letters of credit issued by a bank.
CREDIT INSURANCE:
Commercial coverage against losses resulting from the failure of business debtors to
pay their obligation to the insured, usually due to insolvency. The coverage is
geared to manufacturers, wholesalers, and service providers who may be
dependent on a few accounts and therefore could lose significant income in the
event of an insolvency. Sometimes called bad-debt insurance.
CREDIT LIFE INSURANCE:
Life insurance coverage on a borrower designed to repay the balance of a loan in
the event the borrower dies before the loan is repaid. It may also include
disablement and can be offered as an option in connection with credit cards and
auto loans.
CRIMINAL LAW:

Legal proceedings directed towards wrongs against society, such as rape, murder,
and rob-bery. Charges are made by a government body, and the guilty party is
subject to fine and/or imprisonment.
D
DECLARATION:
Part of a property or liability insurance policy that states the name and address of
policy-holder, property insured, its location and description, the policy period,
premiums, and supplemental information.
DECREASING TERM:
Term life insurance in which the amount of coverage declines during the period for
which it is issued.
DEDUCTIBLE:
The amount of loss borne or paid by the policyholder. Either a specified rupee
amount, a percentage of the claim amount, or a specified amount of time that must
elapse before benefits are paid. The bigger the deductible, the lower the premium
charged for the same coverage.
DEFENSIVE MEDICINE:
The practice of performing extra procedures and tests in addition to those that are
probably necessary for a given patient in an attempt to avoid malpractice litigation.
DEFERRED ANNUITY:
Benefits that begin at some specified time after the annuity is purchased.
DEGREE OF RISK:
Relative variation of actual from expected losses.
DEPENDENT LIFE:
Group term life insurance covering an employee?s dependent.
DERIVATIVES:

Contracts that derive their value from an underlying financial asset, such as
publicly-traded securities and foreign currencies. Often used as a hedge against
changes in value.
DIMINUTION OF VALUE:
The idea that a vehicle (or any other asset) loses value after it has been damaged in
an accident and repaired.
DIRECT LOSS:
A loss that stems directly from an unbroken chain of events leading from an insured
peril to the loss.
DIRECT PREMIUMS:
Property/casualty premiums col-lected by the insurer from policyholders, before
rein-surance premiums are deducted. Insurers share some direct premiums and the
risk involved with their rein-surers.
DIRECT RESPONSE:
A system to distribute insurance to customers through direct mail, telephone,
television, or other methods without the use of intermediaries.
DIRECT SALES/ DIRECT RESPONSE:
Method of selling insurance directly to the insured through an insurance company?s
own employees, through the mail, or via the Internet. This is in lieu of using captive
or exclusive agents.
DIRECT WRITERS:
Insurance companies that sell directly to the public using exclusive agents or their
own employees, through the mail, or via Internet. Large insurers, whether
predominately direct writers or agency companies, are increasingly using many
different channels to sell insurance. In reinsurance, denotes reinsurers that deal
directly with the insurance companies they reinsure without using a broker.
DIRECTORS AND OFFICERS LIABILITY INSURANCE (D&O):
Covers directors and officers of a company for negligent acts or omissions, and for
misleading statements that result in suits against the company, often by
shareholders.

DISABILITY INCOME INSURANCE:


Health insurance that provides periodic payments if the insured becomes disabled
as a result of illness or accident.
DISABILITY LOSS:
The inability of a person to work because of an illness or injury.
DISAPPEARING DEDUCTIBLE:
A deductible used in property insurance in which the size of the deductible
decreases as the size of the loss increases. At a given level of loss, the deductible
completely disappears.
DIVERSIFICATION:
Process of spreading risk through a firm?s involvement in various businesses or
through the location of its operations in different geographic areas.
DIVIDENDS:
Money returned to policyholders from an insurance company?s earnings.
Considered a partial premium refund rather than a taxable distribution, reflecting
the difference between the premium charged and actual losses. Many life insurance
policies and some property/casualty policies pay dividends to their owners. Life
insurance policies that pay divi-dends are called participating policies.
DYNAMIC RISKS:
Uncertainties, either pure or speculative, that are produced because of societal
changes.
E
EARNED PREMIUM:
The portion of premium that applies to the expired part of the policy period.
Insurance premiums are payable in advance but the insur-ance company does not
fully earn them until the policy period expires.
EARNINGS FORM:

A commercial property form without a 50 percent or more coinsurance coverage.


EARNINGS MULTIPLE APPROACH:
A group life plan in which an employee receives one or two times salary in life
insurance coverage.
EARTHQUAKE INSURANCE:
Covers a building and its contents, but includes a large percentage deductible on
each. A special policy or endorsement exists because earthquakes are not covered
by standard homeowners or most business policies.
ECONOMIC LOSS:
Total financial loss resulting from the death or disability of a wage earner, or from
the destruction of property. Includes the loss of earnings, medical expenses, funeral
expenses, the cost of restoring or replacing property, and legal expenses. It does
not include noneconomic losses, such as pain caused by an injury.
ELECTRONIC COMMERCE / E-COMMERCE:
The sale of products such as insurance over the Internet.
ELIMINATION PERIOD:
The period that must elapse before disability income is payable under a health
insurance policy covering disability income loss.
EMPLOYEE STOCK OWNERSHIP PLANS (ESOPS):
Deferred profit-sharing plans in which investment is usually in stock issued by the
employer.
EMPLOYMENT PRACTICES LIABILITY COVERAGE :
Liabil-ity insurance for employers that covers wrongful ter-mination, discrimination,
or sexual harassment toward the insured?s employees or former employees.
ENDORSEMENT:
A written form attached to an insurance policy that alters the policy?s coverage,
terms, or conditions. Sometimes called a rider.

ENDOWMENT INSURANCE:
Life insurance that pays the face amount at the end of a specified time period if the
insured is alive; the face amount is payable in the event of death before the end of
the period.
ENTERPRISE RISK MANAGEMENT:
Approach for managing both pure and speculative risks together, another name for
integrated risk management.
ENTIRE CONTRACT CLAUSE:
A life insurance contract stating that the policy and the application form constitute
the entire contract between the parties.
ENVIRONMENTAL IMPAIRMENT LIABILITY COVERAGE:
A form of insurance designed to cover losses and liabilities arising from damage to
property caused by pollution.
EQUAL SHARES:
A method of apportionment in which insurers covering the same loss share that loss
equally, up to their respective limits of liability.
EQUITY:
In investments, the ownership interest of shareholders. In a corporation, stocks as
opposed to bonds.
ERRORS AND OMISSIONS COVERAGE (E&O):
A profes-sional liability policy covering the policyholder for negligent acts and
omissions that may harm his or her clients.
ESCROW ACCOUNT:
Funds that a lender collects to pay monthly premiums in mortgage and homeowners
insurance, and sometimes to pay property taxes.
ESTOPPEL:

A legal doctrine in which a person may be required to do something or be prevented


from doing something that is inconsistent with previous behaviour; may prevent an
insurer from denying liability after a loss.
EXCESS OF LOSS REINSURANCE :
A contract between an insurer and a reinsurer, whereby the insurer agrees to pay a
specified portion of a claim and the reinsurer to pay all or a part of the claim above
that amount.
EXCLUSION:
A provision in an insurance policy that eliminates coverage for certain risks, people,
property classes, or locations.
EXCLUSIONS:
Restrictions for the coverage provided by an insurance policy
EXCLUSIVE AGENT:
A captive agent, or a person who represents only one insurance company and is
restricted by agreement from submitting business to any other company unless it is
first rejected by the agent?s company.
EXPECTED LOSS RATIO:
The ratio of losses incurred to premiums earned; anticipated when rates are first formulated.
EXPEDITING EXPENSES:
The insurer agrees to pay reasonable extra cost for expediting the repair of
machinery, including overtime and express transportation.
EXPENSE RATIO:
Percentage of each premium rupee that goes to insurers? expenses including
overhead, marketing, and commissions.
EXPERIENCE:
Record of losses.

EXPERIENCE RATING:
The system of rating or pricing insurance in which the future premium reflects past
loss experience of the insured.
EXPOSURE:
Possibility of loss.
EXPOSURE DOCTRINE:
A liability limit that provides coverage when a person is exposed to a product or
dangerous substance.
EXPRESS WARRANTY:
A warranty actually stated in a contract.
EXTENDED COVERAGE:
An endorsement added to an insurance policy, or clause within a policy, that
provides additional coverage for risks other than those in a basic policy.
EXTRA EXPENSE INSURANCE:
The consequential prop-erty insurance that covers the extra expense incurred by
the interruption of a business; the policy pays if the business does not close down
but continues in alternative facilities, with higher than normal costs.
F
FACE AMOUNT:
In a life insurance contract, the stated sum of money to be paid to the beneficiary
upon the insured?s death.
FACULTATIVE REINSURANCE:
A reinsurance policy that provides an insurer with coverage for specific individual
risks that are unusual or so large that they aren?t covered in the insurance
company?s reinsurance trea-ties. This can include policies for jumbo jets or oil rigs.
Reinsurers have no obligation to take on facultative reinsurance, but can assess
each risk individually. By contrast, under treaty reinsurance, the reinsurer agrees to

assume a certain percentage of entire classes of busi-ness, such as various kinds of


auto, up to preset limits.
FAIR RENTAL VALUE:
In a dwelling policy, the rent the building could have earned at the time of the loss
whether or not it was actually rented.
FIDELITY BOND:
A form of protection that covers policyholders for losses that they incur as a result
of fraudulent acts by specified individuals. It usually insures a business for losses
caused by the dishonest acts of its employees.
FIDUCIARY BOND:
A type of surety bond, sometimes called a probate bond, which is required of certain
fiduciaries, such as executors and trustees, that guarantees the performance of
their responsibilities.
FIDUCIARY LIABILITY :
Legal responsibility of a fiduci-ary to safeguard assets of beneficiaries. A fiduciary,
for example a pension fund manager, is required to manage investments held in
trust in the best interest of beneficiaries. Fiduciary liability insurance covers
breaches of fiduciary duty such as misstatements or misleading statements, errors
and omissions.
FINANCIAL PLANNING:
A process involving the establishment of financial goals, the development and
implementation of a plan for achieving those goals, and the periodic review and
revision of the overall plan.
FINANCIAL RISKS:
Risk involving credit, foreign exchange, commodity trading, and interest rate; may
involve chance for gain as well as loss.
FINANCIAL STATEMENT ANALYSIS:
A method of risk identification in which each item on a firm?s balance sheet and
income statement is analysed regarding potential risks.

FINANCING:
The function of planning and controlling the supply of funds.
FIRE:
Combustion in which oxidation takes place so rapidly that a flame or glow is
produced.
FIRE INSURANCE:
Coverage protecting property against losses caused by a fire or lightning that is
usually included in homeowners or commercial multiple peril policies.
FIXED ANNUITY:
An annuity that pays the annuitant a guaranteed, fixed return every month for a
fixed pre-mium. The guarantee is based on the expected return of the underlying
investments of the insurance com-pany. (See Annuity)
FIXED-AMOUNT OPTION:
A life insurance option allow-ing the beneficiary to take the proceeds in the form of
a fixed periodic payment.
FIXED-PERIOD OPTION:
Payment of a death benefit in equal instalments over a specified time period.
FLOATER:
Attached to a homeowners policy, a floater insures movable property, covering
losses wherever they may occur. Among the items often insured with a floater are
expensive jewellery, musical instruments, and expensive apparel. It provides
broader coverage than a regular homeowners policy for these items.
FLOATER POLICY:
An inland marine insurance policy that covers property subject to movement from
one location to another.
FLOOD:

(1) An overflow of inland or tidal waves, (2) unusual and rapid accumulation of
runoff of surface waters, (3) landslides or mudslides, (4) excessive erosion along the
shore of a lake or any other body of water, or (5) erosion or undermining caused by
a body of water exceeding its anticipated cyclical levels.
FLOOR-OF-PROTECTION CONCEPT:
An underlying principle of social insurance specifying that the goal of social
insurance is to provide only limited protection, not one?s entire need.
FRAUD:
Intentional lying or concealment by policy-holders to obtain payment of an
insurance claim that would otherwise not be paid, or lying or misrepresentation by
the insurance company managers, employees, agents, and brokers for financial
gain.
FREE-OF-CAPTURE-AND-SEIZURE (FC&S) CLAUSE:
A clause in ocean marine insurance that excludes war as a covered peril.
FREIGHT:
Money paid for the transportation of goods. Freight insurance is a common coverage
in marine insurance, purchased by the owners of transporting vessels.
FREQUENCY:
Number of times a loss occurs. One of the criteria used in calculating premium
rates.
FREQUENCY REDUCTION:
A method of loss control that lessens the chance that a peril will occur.
FRIENDLY FIRE:
A fire confined to the area of a boiler, stove, or other place designed to contain it.
FRONTING:
A procedure in which a primary insurer acts as the insurer of record by issuing a
policy, but then passes the entire risk to a reinsurer in exchange for a commission.
Often, the fronting insurer is licensed to do business in a country where the risk is

located, but the reinsurer is not. The reinsurer in this scenario is often a captive or
an independent insurance company that cannot sell insurance directly in a particular country.
FUTURES:
Agreement to buy a security for a set price at a certain date. Futures contracts
usually involve commodities, indexes or financial futures.
G
GENERAL AVERAGE CLAUSE:
A clause in ocean marine insurance that requires ship and freight interests other
than the insured to respond to loses suffered by the insured interest when those
losses result from voluntary, necessary, and successful sacrifice of the insured?s
freight because of shipping peril.
GENERAL INSURANCE:
Another term for property insurance.
GRACE PERIOD CLAUSE:
A clause in life insurance giv-ing the insured an extra 30 days to pay a premium due
before lapse takes place.
GROSS PREMIUM:
The premium charge for insurance that includes anticipated cost of losses,
overhead, and profit.
GROUP INSURANCE:
A single policy covering a group of individuals, usually employees of the same
company or members of the same association and their dependents. Coverage
occurs under a master policy issued to the employer or association.
GUARANTEED RENEWABLE:
A policy that cannot be cancelled by the insurer prior to a specified age. Premiums
may be increased only for an entire class of insureds.
H

HACKER INSURANCE:
A coverage that protects businesses engaged in electronic commerce from losses
caused by hackers.
HARD MARKET:
A seller?s market in which insurance is expensive and in short supply.
HAZARDS:
Conditions that introduce or increase the probability of loss stemming from the
existence of a given peril.
HEDGER:
The transferor of a speculative risk via a hedging contract
HEDGING:
A transfer of risk from one party to another; similar to speculation and may be used
to handle risks not subject to insurance, such as price fluctuations.
HOMEOWNERS INSURANCE POLICY :
The typical home-owners insurance policy covers the house, the garage and other
structures on the property, as well as personal possessions inside the house such as
furniture, appliances and clothing, against a wide variety of perils including
windstorms, fire and theft. The extent of the perils covered depends on the type of
policy. An all-risk policy offers the broadest coverage. This covers all perils except
those specifically excluded in the policy.
HOSPICE:
A health care organization that provides humane, dignified care for dying patients.
HOSPITAL INSURANCE:
An insurance contract designed to pay hospital room and board, laboratory fees,
nursing care, use of the operating room, and medicines and similar expenses.
HOSTILE FIRE:

A fire that occurs outside of its normal confines.


HULL INSURANCE:
Property insurance policy covering a sea-going vessel.
HUMAN LIFE VALUE:
The sum of money that when paid in instalments of both principal and interest over
the individual?s remaining working life, will produce the same income the person
would have earned, minus taxes and personal expenses.
I
IDENTITY THEFT INSURANCE :
Coverage for expenses incurred as the result of an identity theft. Can include costs
for notarizing fraud affidavits and certified mail, lost income from time taken off
from work to meet with law enforcement personnel or credit agencies, fees for
reapplying for loans and attorney?s fees to defend against lawsuits and remove
criminal or civil judgments.
IMMEDIATE ANNUITY:
An annuity in which benefits begin soon after the annuity is purchased.
IMPLIED WARRANTIES:
Warranties not stated in a con-tract but assumed by the parties to be true.
IMPUTED ACTS:
Acts committed by one person but for which responsibility has been transferred or ?
imputed? to another.
INBOARD WATERCRAFT:
A type of watercraft whose motor is a permanent part of it.
INCONTESTABILITY CLAUSE:
A life insurance clause that prevents the insurer, after two years, from denying
liability under the policy for misrepresentations or con-cealments by the insured.

INCREASING TERM:
Term life insurance in which the face amount of the policy increases periodically on
a predetermined basis.
INCURRED BUT NOT REPORTED LOSSES (IBNR):
Losses that are not filed with the insurer or reinsurer until years after the policy is
sold. Some liability claims may be filed long after the event that caused the injury to
occur. Asbestosrelated diseases, for example, do not show up until decades after
the exposure. IBNR also refers to estimates made about claims already reported but
where the full extent of the injury is not yet known, such as a workers compensation
claim where the degree to which workrelated injuries prevents a worker from
earning what he or she earned before the injury unfolds over time. Insurance
companies regu-larly adjust reserves for such losses as new information becomes
available.
INCURRED LOSSES:
Losses occurring within a fixed period, whether or not adjusted or paid during the
same period.
INDEMNIFY:
Provide financial compensation for losses.
INDEMNIFY:
To restore insureds to the situations that existed prior to a loss.
INDEPENDENT ADJUSTER:
An individual or firm employed by an insurer to settle loss claims.
INDEPENDENT AGENT:
Agent who is self-employed, is paid on commission, and represents several
insurance companies.
INDIRECT LOSS:
A loss that occurs indirectly as a con-sequence of a given peril.
INFLATION GUARD CLAUSE:

A provision added to a homeowners insurance policy that automatically adjusts the


coverage limit on the dwelling each time the policy is renewed to reflect current
construction costs.
INHERENT NATURE OF THE GOODS:
A cause of loss that stems from the product itself. A loss due to this cause releases
the carrier from liability.
INLAND MARINE INSURANCE:
This broad type of cover-age was developed for shipments that do not involve ocean
transport. Covers articles in transit by all forms of land and air transportation as well
as bridges, tun-nels and other means of transportation and communi-cation.
Floaters that cover expensive personal items such as fine art and jewellery are
included in this category.
INLAND TRANSIT POLICY:
A basis contract covering domestic shipments shipped primarily by land transportation systems.
INSOLVENCY:
Insurer?s inability to pay debts. Insurance insolvency standards and the regulatory
actions taken vary from country to country.
INSURABLE INTEREST:
A legal principle in which an insured must demonstrate a personal loss; prevents the
insurance from becoming a gambling contract.
INSURABLE RISK:
Risks for which it is relatively easy to get insurance and that meet certain criteria.
These include being definable, accidental in nature, and part of a group of similar
risks large enough to make losses predictable. The insurance company also must be
able to come up with a reasonable price for the insurance.
INSURABLE VALUE:

In business income coverage, the amount obtained by deducting variable costs and
expenses (those that may be discontinued in the event of a shutdown) from the
total sales.
INSURANCE:
A system to make large financial losses more affordable by pooling the risks of
many individ-uals and business entities and transferring them to an insurance
company or other large group in return for a premium.
INSURANCE RATE:
The price of insurance, expressed as a price per unit of coverage.
INSURED PENSION PLANS:
Employee benefit plans managed by an insurance company.
INSURER:
The transferee; the person or agency providing insurance.
INSURING AGREEMENT:
The part of an insurance contract that states what the insurer agrees to do and the
conditions under which it so agrees.
INTEGRATED RISK MANAGEMENT:
Approach for managing both pure and speculative risks together; another name for
enterprise risk management.
INTERNET INSURER:
An insurer that sells exclusively via the Internet.
INTERNET LIABILITY INSURANCE:
Coverage designed to protect businesses from liabilities that arise from the
conducting of business over the Internet, including copyright infringement,
defamation, and violation of privacy.
INTESTACY LAWS:

Laws governing the distribution of an estate not disposed of by a will.


INTESTATE:
Without a valid will.
INVESTMENT INCOME:
Income generated by the invest-ment of assets. Insurers have two sources of
income, underwriting (premiums less claims and expenses) and investment income.
The latter can offset underwriting operations, which are frequently unprofitable.
INVOLUNTARY COVERAGE:
Government insurance required to be purchased by certain groups and under
certain conditions.
IRREVOCABLE BENEFICIARY:
A beneficiary designation that may not be changed without the written consent of
the named beneficiary.
J
JOINT AND SEVERAL LIABILITY:
The legal doctrine that allows a plaintiff to collect in full from one negligent party in
an accident where there are two or more negligent parties.
JOINT AND SURVIVOR ANNUITY:
An annuity issued on two lives that guarantees that the annuity in whole or in part
will be paid as long as either party shall live.
JOINT AND X PERCENT SURVIVOR ANNUITY:
A joint and survivor annuity in which the payment after the first annuitant dies
equals X percent of the benefit while both were alive.
K
KEY EMPLOYEE:

An employee whose services would be difficult to replace if the employee were to


die or become disabled.
KEY PERSON INSURANCE:
Insurance on the life or health of a key individual whose services are essential to the
continuing success of a business and whose death or disability could cause the firm
a substantial financial loss.
KIDNAP/RANSOM INSURANCE:
Coverage up to specific limits for the cost of ransom or extortion payments and
related expenses. Often bought by international corporations to cover employees.
Most policies have large deductibles and may exclude certain geographic areas.
Some policies require that the policyholder not reveal the coverage?s existence.
L
LACK OF PRIVITY:
A defence in product liability cases, alleging that no liability exists because no
contractual relationship exists between the manufacturer or ven-dor and the injured
party.
LARCENY:
Wrongful or fraudulent taking and carrying away by any person of the personal
property of another.
LARGE-LOSS PRINCIPLE:
A rule for buying insurance such that serious loss exposures receive priority over
less serious loss exposures.
LAST CLEAR CHANCE RULE:
In a case of contributory negligence, the negligent plaintiff may have a cause of
action against the defendant if the defendant had a last clear chance to avoid the
accident but failed to do so.
LAW OF LARGE NUMBERS :

The theory of probability on which the business of insurance is based. Simply put,
this mathematical premise says that the larger the group of units insured, such as
sportutility vehicles, the more accurate the predictions of loss will be.
LEASEHOLD:
An interest in real property created by an agreement (a lease) that gives the lessee
(the tenant) the right of enjoyment and use of the property or a period of time.
LEGAL INJURY:
Wrongful violation of a person?s rights.
LIABILITY INSURANCE:
Insurance for what the policy-holder is legally obligated to pay because of bodily
injury or property damage caused to another person.
LIBEL:
Written, printed, or pictorial material that damages a person?s reputation by
defaming or ridiculing the person.
LIFE INSURANCE:
See Ordinary life insurance; Term insurance; Whole life insurance
LIFETIME MAXIMUM:
A limit that applies to all benefits payable under an insurance plan. The maximum
can often be restored over time, eventually allowing an insured to collect more than
the stated maximum.
LIMITS:
Maximum amount of insurance that can be paid for a covered loss.
LIQUIDITY:
The ability and speed with which a security can be converted into cash.
LLOYD?S OF LONDON:

A marketplace where underwrit-ing syndicates, or mini-insurers, gather to sell


insurance policies and reinsurance. Each syndicate is managed by an underwriter
who decides whether or not to accept the risk. The Lloyd?s market is a major player
in the international reinsurance market as well as a primary market for marine
insurance and large risks. Originally, Lloyd?s was a London coffee house in the
1600s patronized by shipowners who insured each other?s hulls and cargoes. As
Lloyd?s developed, wealthy individuals, called ?Names,? placed their personal
assets behind insurance risks as a business ven-ture. Increasingly since the 1990s,
most of the capital comes from corporations.
LOADING:
The overhead or administrative expenses of an insurer that is included in the cost of
a policy.
LONG-TERM CARE:
Care and service provided to the elderly to assist them with day-to-day living.
LONG-TERM CARE INSURANCE:
Coverage that, under specified conditions, provides skilled nursing, inter-mediate
care, or custodial care for a patient (generally over age 65) in a nursing facility or
his or her residence following an injury.
LONG-TERM CARE RIDER:
An accelerated death benefit specifically for insured?s long-term care needs.
LOSS:
A reduction in the quality or value of a property, or a legal liability.
LOSS ADJUSTMENT EXPENSES:
The sum insurers pay for investigating and settling insurance claims, including the
cost of defending a lawsuit in court.
LOSS CONTROL:
Actions taken to reduce the fre-quency and/or severity of losses.
LOSS COSTS:

The portion of an insurance rate used to cover claims and the costs of adjusting
claims. Insurance companies typically determine their rates by estimating their
future loss costs and adding a provision for expenses, profit, and contingencies.
LOSS EXPOSURE:
A potential loss that may be associ-ated with a specific type of risk.
LOSS EXPOSURE CHECKLIST:
A risk identification tool used by businesses and individuals that lists many different
potential losses. The user can determine which of the potential losses is relevant.
LOSS OF USE:
A provision in homeowners and renters insurance policies that reimburses
policyholders for any extra living expenses due to having to live else-where while
their home is being restored following a disaster.
LOSS RATIO:
Percentage of each premium rupee an insurer spends on claims.
LOSS RESERVES:
The company?s best estimate of what it will pay for claims, which is periodically
readjusted. They represent a liability on the insurer?s balance sheet
LOSS SETTLEMENT CLAUSE:
A provision that helps determine if items will be valued at actual cash value or at
replacement cost after a loss.
M
MALPRACTICE INSURANCE:
Professional liability cover-age for physicians, lawyers, and other specialists against
suits alleging negligence or errors and omissions that have harmed clients.
MANIFESTATION DOCTRINE:
A liability limit that provides coverage when a claimant?s disease or injury is
discovered.

MARINE INSURANCE:
Coverage for goods in transit, and for the commercial vehicles that transport them,
on water and over land. The term may apply to inland marine but more generally
applies to ocean marine insurance. Covers damage or destruction of a ship?s hull
and cargo and perils include collision, sinking, capsizing, being stranded, fire,
piracy, and jettisoning cargo to save other property. Wear and tear, dampness,
mould, and war are not usually included.
MATERIAL:
Describes misrepresentations that, had they been known at the time of a contract?s
issuance, would have caused it not to be issued at all or issued on different terms.
MAXIMUM POSSIBLE LOSS:
An estimate of the worst loss that might result from a given occurrence.
MAXIMUM PROBABLE LOSS:
An estimate of the likely severity of loss that might result from a given occur-rence.
MEDIATION:
Nonbinding procedure in which a third party attempts to resolve a conflict between
two other parties.
MEDICAL PAYMENTS:
Reasonable and necessary medi-cal expenses caused by an accident and sustained
by the insured. Such expenses must occur within three years of the accident.
MEDICAL PAYMENTS INSURANCE:
A coverage in which the insurer agrees to reimburse the insured and others up to a
certain limit for medical or funeral expenses as a result of bodily injury or death by
accident. Payments are without regard to fault.
MINE SUBSIDENCE COVERAGE:
An endorsement to a homeowners insurance policy, available in some states, for
losses to a home caused by the land under a house sinking into a mine shaft.

Excluded from standard homeowners policies, as are other forms of earth


movement.
MISREPRESENTATION:
A practice, usually prohibited by law, in which an insurance agent makes a
misleading statement in the sale of insurance.
MISSTATEMENT-OF-AGE CLAUSE:
A clause in life insurance requiring an adjustment of the amount of insurance
payable in the event the age of the insured has been misrepresented.
MISSTATEMENT-OF-SEX CLAUSE:
If a person?s sex has been misrepresented, the insurer adjusts the amount of
proceeds payable rather than cancelling the policy altogether.
MONEY SUPPLY:
Total supply of money in the economy, composed of currency in circulation and
deposits in savings and checking accounts.
MORAL HAZARD:
A hazard resulting from the indifferent or dishonest attitude of an individual in
relation to insured property.
MORTALITY TABLE:
A table that shows the number of deaths per thousand and the expectation of life at
var-ious ages.
MORTGAGE CLAUSE:
A clause in insurance contracts that gives first right of recovery to the mortgagor of
property that is covered.
MORTGAGE INSURANCE:
A form of decreasing term insurance that covers the life of a person taking out a
mortgage. Death benefits provide for payment of the outstanding balance of the
loan. Coverage is in decreasing term insurance, so the amount of coverage

decreases as the debt decreases. A variant, mortgage unemployment insurance


pays the mortgage of a pol-icyholder who becomes involuntarily unemployed.
MORTGAGE-BACKED SECURITIES:
Investment grade securities backed by a pool of mortgages. The issuer uses the
cash flow from mortgages to meet interest payments on the bonds.
MORTGAGEE:
A person or organization holding a mortgage.
MULTIPLE PERIL POLICY:
A package policy, such as a homeowners or business insurance policy, that provides
coverage against several different perils. It also refers to the combination of
property and liability coverage in one policy.
N
NAME:
A member of a Lloyd?s association; essentially an investor and underwriter.
NAMED INSURED:
An individual in whose name the insurance contract is issued and who is specifically
identified as the person being covered.
NAMED PERIL:
Peril specifically mentioned as covered in an insurance policy.
NAMED-PERILS AGREEMENT:
An insurance contract that lists perils to be insured; perils not listed are not
covered.
NEGATIVE ACT:
A negligent act that consists of a party?s failure to do something he or she should
have done.
NEGLIGENCE:

The failure to exercise the degree of care required by law.


NET PRESENT VALUE:
The present value of the cash inflow minus the present value of the cash outflow.
NO-FAULT:
Auto insurance coverage that pays for each driver?s own injuries, regardless of who
caused the accident. It also refers to an auto liability insurance system that restricts
lawsuits to serious cases. Such policies are designed to promote faster
reimbursement and to reduce litigation.
NON-ADMITTED INSURER:
: Insurers licensed in some states or countries, but not others. Countries where an
insurer is not licensed call that insurer non-admitted. They sell coverage that is
unavailable from licensed insurers within the country or state.
NONCANCELLABLE:
A policy that cannot be cancelled by the insurer prior to a certain age. Premiums
may be increased only by the amounts specified at the time the policy is issued.
NON-OWNED AUTO:
Any private passenger auto, pickup truck, van, or trailer nor owned by or fur-nished
for the regular use of the insured or any family member while in the custody of or
being operated by the insured or any family member.
NO-PAY, NO-PLAY:
The idea that people who don?t buy coverage should not receive benefits. Prohibits
uninsured drivers from collecting damages from insured drivers.
NOTICE OF LOSS:
A written notice required by insur-ance companies immediately after an accident or
other loss. Part of the standard provisions defining a policy-holder?s responsibilities
after a loss.
O

OBJECTIVE RISK:
The probable variation of actual from expected experience.
OBLIGEE:
In a bond, the party to be reimbursed if he or she suffers a loss because of some
failure by the obligor.
OCCUPATIONAL DISEASE:
Abnormal condition or illness caused by factors associated with the workplace. Like
occupational injuries, this is covered by workers compensation policies.
OCCURRENCE POLICY:
Insurance that pays claims arising out of incidents that occur during the policy term,
even if they are filed many years later.
OCEAN MARINE INSURANCE:
Coverage of all types of vessels and watercraft, for property damage to the ves-sel
and cargo, including such risks as piracy and the jettisoning of cargo to save the
property of others. Coverage for marinerelated liabilities. War is excluded from basic
policies, but can be bought back.
OPEN-PERILS AGREEMENT:
States that it is the insurer?s intention to cover risks of accidental loss to the
described property except due to those perils specifically excluded; also called ?all
risks.?
OPERATING EXPENSES:
The cost of maintaining a busi-ness?s property, includes insurance, property taxes,
utilities and rent, but excludes income tax, depreciation and other financing
expenses.
OPPORTUNITY COST:
The cost of keeping monies liquid in a loss reserve fund rather than using them as
working capital.
OPTIONALLY RENEWABLE:

A policy that can be cancelled by the insurer on the anniversary date. No


restrictions, other than the time, are placed on the insurer.
OPTIONS:
Contracts that allow, but do not oblige, the buying or selling of property or assets at
a certain date at a set price.
ORDINARY LIFE INSURANCE:
A life insurance policy that remains in force for the policyholder?s lifetime. It
contrasts with term insurance, which only lasts for a specified number of years but
is renewable.
OTHER INSURANCE CLAUSES:
Clauses in practically all contracts of indemnity and valued contracts that limit the
insurer?s liability in case additional insurance con-tracts also cover the loss.
P
PACKAGE POLICY:
A single insurance policy that combines several coverages previously sold
separately. Examples include homeowners insurance and commercial multiple peril
insurance.
PAIN AND SUFFERING DAMAGES:
Non-economic damages designed to compensate the injured party for the pain
endured due to the negligent behaviour of the defendant.Often greater than
economic losses, such as loss of income and medical expenses.
PAIR-AND-SET CLAUSE:
Used to determine the loss payment when part of a set or one of a pair is lost. The
insurance company will pay only the difference in the actual cash value of the item
before and after the loss.
PARTIAL DISABILITY:

An illness or injury that decreases an individual?s ability to perform some of the


major duties of his or her job, but does not cause complete cessation of
employment.
PARTICIPATING:
A type of life insurance policy in which a dividend (considered a return or a premium
overcharge) is payable to the insured.
PENSIONS:
Programs to provide employees with retirement income after they meet minimum
age and service requirements. Life insurers hold some of these funds.
PER-CAUSE DEDUCTIBLE:
A deductible that is assessed for each new sickness or accidental injury.
PERIL:
A specific risk or cause of loss covered by an insurance policy, such as a fire,
windstorm, flood, or theft. A named-peril policy covers the policyholder only for the
risks named in the policy in contrast to an all-risk policy, which covers all causes of
loss except those specifically excluded.
PERMANENT DISABILITY:
An illness or injury that prevents a person from working for the rest of his or her life.
PER-SERVICE DEDUCTIBLE:
A fee that is charged for each service or visit to the physician.
PERSONAL ARTICLES FLOATER:
A policy or an addition to a policy used to cover personal valuables, like jewellery.
PERSONAL COVERAGES:
Those lines of insurance designed to cover the risk of perils that may interrupt an
individual?s income.
PHYSICAL HAZARD:

A condition stemming from the material characteristics of an object, e.g., wet or icy
street (increasing chance of car collision) and earth faults (hazard for earthquakes)
PLANNED RETENTION:
A conscious and deliberate assumption of recognized risk.
POLICY:
A written contract for insurance between an insurance company and policyholder
stating details of coverage.
POLICY WRITING:
The function of creating a specific insurance policy for a client, usually by the agent.
POLICYHOLDER:
The insured in an insurance policy.
POLICYHOLDERS? SURPLUS:
The amount of money remaining after an insurer?s liabilities are subtracted from its
assets. It acts as a financial cushion above and beyond reserves, protecting
policyholders against an unexpected or catastrophic situation.
POLITICAL RISK INSURANCE:
Coverage for businesses operating abroad against loss due to political upheaval
such as war, revolution, or confiscation of property
POLLUTION INSURANCE:
Policies that cover property loss and liability arising from pollution-related damages,
for sites that have been inspected and found uncontaminated. It is usually written
on a claims-made basis so policies pay only claims presented dur-ing the term of
the policy or within a specified time frame after the policy expires.
POOLING:
Sharing total losses among a group
POSITIVE ACT:

Action often leading to legal injury.


POST-LOSS ACTIVITIES:
Severity-reduction measures such as salvaging damaged property rather than discarding it.
PRECERTIFICATION:
A cost-containment measurement requiring that certain non-emergency medical
services be authorized prior to delivery of treatment.
PRE-EXISTING CONDITION:
A health problem that exists prior to the time when health coverage becomes
effective.
PRE-LOSS ACTIVITIES:
Loss control methods imple-mented before any losses occur. All measures with a
frequency-reduction focus, as well as some based on severity reduction, are of this
type.
PREMATURE DEATH:
Death that occurs before the stage where it is accepted by society as part of the
natural, expected order of life.
PREMISES:
The particular location of the property or a portion of it as designated in an
insurance policy.
PREMIUM:
The price of an insurance policy.
PREMIUMS IN FORCE:
The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time.
PREMIUMS WRITTEN:

The total premiums on all policies written by an insurer during a specified period of
time, regardless of what portions have been earned. Net premiums written are
premiums written after reinsurance transactions.
PRIMARY:
Describes policies that will pay up to their limits before any other coverage
becomes payable.
PRIMARY COMPANY:
In a reinsurance transaction, the insurance company that is reinsured.
PRIME RATE:
Interest rate that banks charge to their most creditworthy customers. Banks set this
rate according to their cost of funds and market forces.
PRINCIPAL:
Another name for the obligor, the person bonded, in a fidelity or security bond.
PRINCIPLE OF INDEMNITY:
A doctrine that limits the amount that an insured may collect to the actual cash
value of the property insured.
PRIVATE INSURANCE:
Insurance coverage written by firms in the private sector of the economy (as
opposed to government insurers).
PROBATE:
A court process under which property is distributed and the terms of the will are
carried out at the owner?s death.
PRODUCT LIABILITY:
A section of tort law that determines who may sue and who may be sued for
damages when a defective product injures someone.
PRODUCT LIABILITY INSURANCE:

Protects manufacturers? and distributors? exposure to lawsuits by people who have


sustained bodily injury or property damage through the use of the product.
PRODUCTION:
The selling function in insurer opera-tions.
PROFESSIONAL LIABILITY:
Liability that arises out of the error of a professional person in performance of his or
her duties.
PROFESSIONAL LIABILITY INSURANCE:
Covers professionals for negligence and errors or omissions that injure their clients.
PROFITS INSURANCE:
Coverage for the loss of the profit element in goods already manufactured but
destroyed before they could be sold.
PROMISSORY WARRANTY:
An assurance that a certain condition, fact, or circumstance will be true for the
entire term of a contract.
PROPERTY COVERAGES:
Insurance lines designed to cover perils that may destroy property.
PROPERTY/CASUALTY INSURANCE:
Covers damage to or loss of policyholders? property and legal liability for damages
caused to other people or their property. Property/casualty insurance, which
includes auto, homeowners and commercial insurance, is one segment of the
insurance industry. The other sector is life/health. Property/casualty insurance is
referred to as non-life or general insurance.
PRO-RATA CLAUSE:
A clause that requires each insurer covering a risk to share prorata any losses, in
the proportion that its particular coverage bears to the total coverage on the risk.
PRO-RATA TREATIES:

Reinsurance agreements under which premiums and losses are shared in some
stated proportion.
PROTECTION AND INDEMNITY (P&I) CLAUSE:
Marine liability insurance covering ocean-going vessels.
PROXIMATE CAUSE:
The direct cause of loss; exists if there is no unbroken chain of events leading from
one act to a resulting injury or loss.
PUBLIC ADJUSTER:
An individual or firm hired by the insured to obtain satisfactory settlement of a loss
claim.
PUBLIC INSURANCE:
Insurance coverage written by government bodies or operated by private agencies
under government supervision and control.
PUNITIVE DAMAGES:
Assessed when it is deemed that the defendant acted in a grossly negligent manner
and deserves to have an example made of his or her behaviour so as to discourage
others from acting that way. Usually imposed in addition to other damages.
PURE PREMIUM:
The portion of an insurance premium that reflects the basic costs of loss, not
including over-head or profit.
PURE RISK:
Uncertainty as to whether a loss will occur.
Q
QUOTA SHARE TREATIES:
Reinsurance arrangements in which each insurer accepts a certain percentage of
premiums and losses in a given line of insurance.

R
RATE:
The cost of a unit of insurance. Rates are based on historical loss experience for
similar risks and may be regulated.
RATE MAKING:
The process of developing pricing structures for insurance.
RATIFICATION:
A method by which an agent gains authority to write insurance. The agent writes a
policy and, after the fact, presents it to the insurance company. If the insurance
company approves the policy, the agent?s authority is ratified.
REASONABLE AND CUSTOMARY:
A test used to judge what expenses an insurance policy will pay. The fee is
compared to prevailing fees in the area.
REASONABLE EXPECTATIONS:
An extension of the concept of adhesion, this doctrine makes the proposition that
coverage should be interpreted to be what the insured can reasonably expect.
REBATING:
A practice, usually prohibited by law or the regulator, in which a sales agent in
insurance returns part of the commission to the purchaser.
RECEIVABLES:
Amounts owed to a business for goods or services provided.
RECIPROCAL:
A form of insurer owned by policy-holders who exchange coverage with each other;
commonly found in the field of automobile insurance.
REINSTATEMENT CLAUSE:

A contract in life insurance that allows a policy that has lapsed to be reinstated.
REINSURANCE:
Insurance bought by insurers. A rein-surer assumes part of the risk and part of the
premium originally taken by the insurer, known as the primary company.
Reinsurance effectively increases an insurer?s capital and therefore its capacity to
sell more coverage. The business is global and the largest reinsurers are based
abroad. Reinsurers have their own reinsurers, called retrocessionaires.
REINSURANCE:
The shifting of risk by a primary answer (known as the ceding company) to another
insurer (known as the reinsurer).
REINSURANCE POOL:
Provides reinsurance for a specific class of business.
RENEWABLE TERM:
A life insurance policy initially written from a specified number of years and
subsequently renewable for similar periods of time.
RENTAL INCOME:
Rents collected from others who occupy property owned by the insured.
RENTAL VALUE:
Consequential coverage that insures the loss of rents in the event of the destruction
of the insured property.
RENTERS INSURANCE:
A form of insurance that covers a policyholder?s belongings against perils such as
fire, theft, windstorm, hail, explosion, vandalism, riots, and others. It also provides
personal liability coverage for damage the policyholder or dependents cause to third
parties. It also provides additional living expenses, known as loss-of-use coverage, if
a policy-holder must move while his or her dwelling is repaired.
REPLACEMENT COST:

Insurance that pays the amount needed to replace damaged personal property or
dwelling property without deducting for depreciation but limited by the maximum
amount shown on the declarations page of the policy.
REPRESENTATION:
A statement made by an applicant for insurance, before the contract is made, which
affects the willingness of the insurer to accept the risk.
REQUISITES OF INSURABLE RISKS:
From the view of the insurer, there must be a sufficient number of similar objects,
the loss must be accidental and measurable, and the objects must not be subject to
simultaneous destruction. From the view of the insured, the potential loss must be
large enough to cause financial hard-ship, and the probability of loss must not be
too high.
RES IPSA LOQUITUR:
?The thing speaks for itself? - a legal doctrine that enables a plaintiff to collect for
losses without proving negligence on the part of the defendant.
RESERVES:
A company?s best estimate of what it will pay for claims.
RESPONDEAT SUPERIOR:
A legal doctrine under which a principal is responsible for the acts of his or her
agent.
RETENTION:
The amount of risk retained by an insurance company that is not reinsured.
RETROCESSION:
The reinsurance bought by reinsurers to protect their financial stability.
RETROSPECTIVE RATING:
A method of permitting the final premium for a risk to be adjusted, subject to an
agreedupon maximum and minimum limit based on actual loss experience. It is
available to large commercial insurance buyers.

REVOCABLE BENEFICIARY:
A life insurance beneficiary designation that may be changed by the owner.
RIDER:
An attachment to an insurance policy that alters the policy?s coverage or terms.
RIGHT OF SURVIVORSHIP:
Ownership of property automatically transfers to surviving owners when one of the
owners dies.
RISK:
The chance of loss or the person or entity that is insured.
RISK:
Uncertainty as to economic loss. RISK AVOIDANCE: A conscious decision not to
expose oneself or one?s firm to a particular risk of loss.
RISK MANAGEMENT:
Management of the varied risks to which a business firm or association might be
subject. It includes analysing all exposures to gauge the likelihood of loss and
choosing options to better man-age or minimize loss. These options typically include
reducing and eliminating the risk with safety meas-ures, buying insurance, and selfinsurance.
RISK MANAGEMENT POLICY:
A plan, procedure, or rule of action followed for the purpose of securing consist-ent
action over a period of time.
RISK MANAGEMENT PROCESS:
(1) Identify risks; (2) evaluate risks as to frequency and severity; (3) select risk
management techniques; and (4) implement and review decisions.
RISK MANAGER:

An individual charged with minimizing the adverse impact of losses on the


achievement of a company?s goals.
RISK MAPPING (RISK PROFILING):
Method of risk identification and assessment by arranging all risks in a matrix
reflecting frequency, severity, and existing insurance coverage.
RISK REDUCTION:
A decrease in the total amount of uncertainty present in a particular situation.
RISK RETENTION:
Handling risk by bearing the results of risk, rather than employing other methods of
handling it, such as transfer or avoidance.
RISK TRANSFER:
A risk management technique whereby one party (transferor) pays another
(transferee) to assume a risk that the transferor desires to escape.
RISK-BASED CAPITAL:
The need for insurance compa-nies to be capitalized according to the inherent riskiness of the type of insurance they sell. Higher-risk types of insurance, liability as
opposed to property business, generally necessitate higher levels of capital.
ROBBERY:
Unlawful taking of property from another person by force, threat of force, or
violence.
S
SALVAGE:
Damaged property an insurer takes over to reduce its loss after paying a claim.
Insurers receive salvage rights over property on which they have paid claims, such
as badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have
the right to recover sunken treasures. Salvage charges are the costs associated with
recovering that property.
SCHEDULE:

A list of individual items or groups of items that are covered under one policy or a
listing of specific benefits, charges, credits, assets or other defined items.
SECOND-TO-DIE LIFE INSURANCE:
Life insurance policy covering two insureds, with proceeds payable only after both
persons are dead.
SECURITIES OUTSTANDING:
Stock held by sharehold-ers.
SECURITIZATION OF INSURANCE RISK:
Using the capital markets to expand and diversify the assumption of insurance risk.
The issuance of bonds or notes to third-party investors directly or indirectly by an
insur-ance or reinsurance company or a pooling entity as a means of raising money
to cover risks.
SELF-INSURANCE:
The concept of assuming a financial risk oneself, instead of paying an insurance
company to take it on. Every policyholder is a self-insurer in terms of paying a
deductible and co-payments. Also, a special form of risk etention in which a firm can
establish a fund to pay for losses because it has a group of exposure units large
enough to reduce risk and thereby predict losses.
SEVERITY:
Size of a loss. One of the criteria used in calculating premiums rates
SEVERITY REDUCTION:
A method of loss control that will reduce the seriousness and extent of damage
should a loss occur.
SINGLE-PREMIUM ANNUITY:
An annuity whose purchase price is paid in one lump sum.
SINGLE-PREMIUM LIFE:
A whole life policy paid for with one premium

SLANDER:
Spoken words that are defamatory and/or injurious to a person?s reputation.
SOCIAL INSURANCE:
Insurance plans operated by public agencies, usually on a compulsory basis.
SOFT MARKET:
An environment where insurance is plentiful and sold at a lower cost, also known as
a buyers? market.
SOLVENCY:
Insurance companies? ability to pay the claims of policyholders. Regulations to
promote solvency include minimum capital and surplus require-ments, statutory
accounting conventions, limits to insurance company investment and corporate
activities, financial ratio tests, and financial data disclosure.
SPECIAL AGENT:
A person who is authorized to perform only a specific act or function and who has
no general powers within the insurance company.
SPECULATIVE RISK:
The uncertainty of an event that could produce either a profit or a loss, such as a
business venture or a gambling transaction.
SPECULATOR:
A third party to which the risk of price fluctuations is transferred during hedging.
SPREAD OF RISK:
The selling of insurance in multiple areas to multiple policyholders to minimize the
danger that all policyholders will have losses at the same time. Companies are more
likely to insure perils that offer a good spread of risk. Flood insurance is an example
of a poor spread of risk because the people most likely to buy it are the people close
to rivers and other bodies of water that flood.
SPREAD-OF-LOSS TREATY:

A type of reinsurance wherein losses are spread over a five-year period with little or
no risk transfer after the five-year period ends.
STANDARD PREMIUM:
What an employer would pay at manual rates after adjustment for experience rating
but before adjustment for retrospective rating.
STATE-MANDATED BENEFITS:
Benefits that the state requires be offered to employees by employers.
STATIC RISKS:
Uncertainties, either pure or speculative, that stem from an unchanging society that
is in stable equilibrium.
STRAIGHT DEDUCTIBLE:
A deductible that applies to each loss and is subtracted before any loss payment is
made.
STRAIGHT LIFE:
A whole life policy in which premiums are payable as long as the insured lives.
STRAIGHT LIFE ANNUITY:
A life annuity in which there is no refund to any beneficiary at the death of the
annuitant.
STRAIGHT TERM:
Term insurance that covers a specific period of time and which cannot be renewed.
STRUCTURED SETTLEMENT:
Legal agreement to pay a designated person, usually someone who has been
injured, a specified sum of money in periodic payments, usually for his or her
lifetime, instead of in a single lump sum payment.
SUBJECTIVE RISK:

The risk based on the mental state of an individual who experiences uncertainty or
doubt as to the outcome of a given event.
SUBROGATION:
The legal process by which an insurance company, after paying a loss, seeks to
recover the amount of the loss from another party who is legally liable for it.
SUICIDE CLAUSE:
A clause in life insurance that requires payment by the insurer, even in the event of
suicide, if the suicide occurs after a two-year period from the date the policy was
issued.
SURETY:
In a bond, the party who agrees to reimburse the oblige.
SURETY BOND:
A contract guaranteeing the performance of a specific obligation. Simply put, it is a
three-party agreement under which one party, the surety company, answers to a
second party, the owner, creditor or ?obligee,? for a third party?s debts, default or
nonperformance. Contractors are often required to purchase surety bonds if they
are working on public projects. The surety company becomes responsible for
carrying out the work or paying for the loss up to the bond ?penalty? if the
contractor fails to perform.
SURPLUS:
The remainder after an insurer?s liabilities are subtracted from its assets. The
financial cushion that protects policyholders in case of unexpectedly high claims.
SURVIVORSHIP BENEFIT:
That amount of money that becomes available for distribution to living annuitants
as a result of the death of other annuitants.
T
TEMPORARY DISABILITIES:
Illnesses or injuries that prevent a person from working for a limited time.

TEMPORARY LIFE ANNUITY:


An annuity that pays bene-fits until the expiration of a specified period of years or
until the annuitant dies.
TERM CONTRACT:
A health policy that expires at the end of a specified time and which cannot be
renewed.v
TERM INSURANCE:
A form of life insurance that covers the insured person for a certain period of time,
the ?term? that is specified in the policy. It pays a benefit to a designated
beneficiary only when the insured dies within that specified period which can be
one, five, 10 or even 20 years. Term life policies are renewable but premiums
increase with age.
THEFT:
Any act of stealing.
THEFT INSURANCE:
Coverage against loss through stealing by individuals not in a position of trust.
THIRD-PARTY ADMINISTRATOR:
An administrator hired by an employer to handle claims and other administrative
functions associated with employee benefits. May also refer to and outside group
that performs clerical functions for an insurance company.
TITLE INSURANCE:
Insurance that indemnifies the owner of real estate in the event that his or her clear
ownership of property is challenged by the discovery of faults in the title.
TORT:
A legal term denoting a wrongful act resulting in injury or damage on which a civil
court action, or legal proceeding, may be based.
TORT LAW:

The body of law governing negligence, intentional interference, and other wrongful
acts for which civil action can be brought, except for breach of contract, which is
covered by contract law.
TORTFEASOR:
A wrongdoer; one who commits a tort.
TOTAL DISABILITY:
An illness or injury that renders a person completely incapable of gainful
employment during the period of disability.
TOTAL LOSS:
The condition of an automobile or other property when damage is so extensive that
repair costs would exceed the value of the vehicle or property.
TREATIES:
Reinsurance contracts.
TREATY REINSURANCE :
A standing agreement between insurers and reinsurers. Under a treaty each party
automatically accepts specific percentages of the insurer?s business.
TRUSTEE:
The person having legal ownership of the trust property; required by law to manage
and distribute it in accordance with the instructions specified in the trust
agreement.
TWISTING:
The acts of a life insurance agent to per-suade a client to drop one life policy and
accept another, by misrepresenting the terms of either the present policy or the
new policy, or both, to the detriment of the insured.
U
UMBRELLA POLICY:

Coverage for losses above the limit of an underlying policy or policies such as
homeowners and auto insurance. While it applies to losses over the amount stated
in the underlying policies, terms of coverage are sometimes broader than those of
under-lying policies.
UNDERINSURANCE:
The result of the policyholder?s failure to buy sufficient insurance. An underinsured
policyholder may only receive part of the cost of replacing or repairing damaged
items covered in the policy.
UNDERWRITING:
Examining, accepting, or rejecting insurance risks and classifying the ones that are
accepted, in order to charge appropriate premiums for them.
UNDERWRITING INCOME:
The insurer?s profit on the insurance sale after all expenses and losses have been
paid. When premiums aren?t sufficient to cover claims and expenses, the result is
an underwriting loss. Underwriting losses are typically offset by investment income.
UNEARNED PREMIUM:
The portion of a premium already received by the insurer under which protection
has not yet been provided. The entire premium is not earned until the policy period
expires, even though premiums are typically paid in advance.
UNFUNDED RETENTION:
Absorbing the expense of losses as they occur, rather than making any special
advance arrangements to pay for them.
UNILATERAL CONTRACT:
A contract, such as an insurance contract, in which only one of the parties makes
promises that are legally enforceable.
UNINSURABLE RISK:
Risks for which it is difficult for someone to get insurance.
UNPLANNED RETENTION:

The implicit assumption of risk by a firm or individual that does not recognize that a
risk is acknowledge to exist but the maximum possible loss associated with it is
significantly underes-timated.
UTMOST GOOD FAITH:
A legal doctrine in which a higher standard of honesty is imposed on parties to an
insurance agreement than is imposed through ordi-nary commercial contracts.
V
VALUED POLICY:
A policy under which the insurer pays a specified amount of money to or on behalf
of the insured upon the occurrence of a defined loss. The money amount is not
related to the extent of the loss. Life insurance policies are an example.
VANDALISM:
The malicious and often random destruction or spoilage of another person?s
property.
VARIABLE ANNUITY:
An annuity whose value may fluctuate according to the value of underlying
securities in which the funds are invested.
VIATICAL SETTLEMENT:
The purchase of a life insur-ance policy from a terminally ill individual by an
unrelated third party.
VICARIOUS LIABILITY:
Legal responsibility for the wrong committed by another person.
VICARIOUS LIABILITY LAWS:
Laws requiring that parents assume liability for the acts of their children and that
bar owners assume liability for the acts of their patrons. Also makes car owners
liable for acts of driv-ers of their cars.
VOID:

A policy contract that for some reason specified in the policy becomes free of all
legal effect. One example under which a policy could be voided is when information
a policyholder provided is proven untrue.
VOLUNTARY ACT:
A characteristic of a negligent act- the person committing the act chose to do so
and could have chosen not to.
VOLUNTARY COVERAGE:
Insurance coverage purchased at the discretion of the buyer.
W
WAIVER:
The surrender of a right or privilege. In life insurance, a provision that sets certain
conditions, such as disablement, which allow coverage to remain in force without
payment of premiums.
WAR HAZARD EXCLUSION:
Eliminates insurance coverage for death that is a direct result of war or other hostile
action.
WAR RISK:
Special coverage on cargo in overseas ships against the risk of being confiscated by
a government in wartime. It is excluded from standard ocean marine insurance and
can be purchased separately. It often excludes cargo awaiting shipment on a wharf
or on ships after 15 days of arrival in port.
WARRANTY:
A clause in an insurance contract that requires certain conditions, circumstances, or
facts to be true before or after the contract is in force.
WEATHER INSURANCE:
A type of business interruption insurance that compensates for financial losses
caused by adverse weather conditions, such as constant rain on the day scheduled
for a major outdoor concert.

WHOLE LIFE INSURANCE :


The oldest kind of cash value life insurance that combines protection against
premature death with a savings account. Premiums are fixed and guaranteed and
remain level throughout the policy?s lifetime.
WILL:
A way to transfer ownership of property at death.
WORKERS COMPENSATION:
Insurance that pays for medical care and physical rehabilitation of injured workers
and helps to replace lost wages while they are unable to work.