Terms in this set (100)
A loss-causing event that is sudden, unforeseen, and unintentional
Actual Cash Value
Value of property at the time of its damage or loss, determined by subtracting depreciation of the item from its replacement cost.
Someone who legally represents the insurer, has the authority to act on the insurer's behalf, and can bind the principal by expressed authority, by implied authority, and by apparent authority
Periodic payment to an individual that continues for a fixed period or for the duration of a designated life or lives.
Authorization of coverage by an agent given before the company has formally approved a policy. Provides evidence that the insurance is in force.
Someone who legally represents the insured, soliciting or accepting applications for insurance that are not in force until the company accepts the business
Generic term for an employee benefit plan that allows employees to select among the various group life, medical expense, disability, dental and other plans that best meet their specific needs.
Amount payable by an insured during a calendar year before a group or individual health insurance policy begins to pay for medical expenses.
Cash surrender value
Amount payable to the owner of a cash-value life insurance policy if he or she decides the insurance is no longer wanted. Calculated separately from the legal reserve.
Field of insurance that covers whatever is not covered by fire, marine, and life insurance.
Corporate bonds that permit the issuer of the bond to skip or defer scheduled payments of principal or interest if a catastrophic loss occurs.
Certified Financial Planner
Professional who has attained a high degree of technical competency in financial planning and has passed a series of professional examinations.
Change of loss
The probability that an event will occur.
Chief risk officer
Person responsible for the treatment of pure and speculative risks faced by an organization.
Person who settles claims; an agent, company adjustor, independent adjustor, or public adjustor.
Damages to an automobile caused by the upset of the automobile or its impact with another vehicle or object. Collision losses are paid by the insurer regardless of fault.
Risks faced by business firms, including property risks, liability risks, loss of business income, and other risks.
Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.
Flat amount that the insured must pay for certain benefits, such as an office visit or prescription drug. Not to be confused with coinsurance.
Benefit that can be added to a life insurance policy under which the policyowner can purchase one-year term insurance equal to the cumulative percentage change in the consumer price index with no evidence of insurability.
Statements in an insurance contract that provide information about the property to be insured and used for underwriting and rating purposes and identification of the property to be insured.
A provision by which a specified amount is subtracted from the total loss payment that would otherwise be paid.
A term to describe the conversion of a mutual insurer into a stock insurer.
Financial loss that results directly from an insured peril.
A risk that affects only individuals or small groups and not the entire economy, which can be reduced or eliminated by diversification.
Brief period of time during which an employee can sign up for group insurance without furnishing evidence of insurability.
Enterprise risk management
Comprehensive risk management program that considers an organization's pure risks, speculative risks, strategic risks, and operational risks.
Equity indexed annuity
A fixed, deferred annuity that allows limited participation i nthe stock market but guarantees the principal against loss if the contract is held to term.
Provisions in an insurance contract that list the perils, losses, and property excluded from coverage.
Unit of measurement used in insurance pricing.
A risk that business firms face because of adverse changes in commodity prices, interest rates, foreign exchange rates ,and the value of money.
Annuity whose periodic payment is a guaranteed fixed amount.
Unforeseen and unexpected loss that occurs as a result of chance.
Period of time during which a policyowner may pay an overdue life insurance premium without causing the policy to lapse.
Group life insurance
Life insurance provided on a number of persons a in a single master contract. Physical examinations are not required, and certificates of insurance are issued to members of the group as evidence of insurance.
Continuance provision of a health insurance policy under which the company guarantees to renew the policy to a stated age, and whose renewal is at the insured's option. Premiums can be increased for broad classes of insureds.
Condition that creates or increases the chance of loss.
Health Maintenance Organization -- organized system of health care that provides comprehensive health services to its members for a fixed prepaid fee. HMOs may also have cost-sharing provisions.
Technique for transferring the risk of unfavorable price fluctuations to a speculator by purchasing and selling options and future contracts on an organized exchange.
Clause written into a contract by which one party agrees to release another party from all legal liability, such as a retailer who agrees to release the manufacturer from legal liability if the product injures someone.
Human life value
For purposes of life insurance, the present value of the family's share of the deceased breadwinner's future earnings.
Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.
In life insurance, the reserve at the beginning of any policy year.
Pooling of fortuitous losses by transfer of risks to insurers who agree to indemnify insureds for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with the risk.
A credit-based score based on an individual's credit record and other factors that is highly predictive of future claim costs; insureds with low insurance scores generally file more homeowners and auto insurance claims than insureds with good credit and higher insurance scores.
Interest rate risk
Risk of loss caused by adverse interest rate movements.
Type of surety bond used for court proceedings nand guaranteeing that the party bonded will fulfill certain obligations specified by law, for example, fiduciary responsibilities.
Law of large numbers
Concept that the greater the number of exposures, the more closely will actual results approach the probable results expected from an infinite number of exposures.
Liability item on a life insurer's balance sheet representing the redundant or excessive premiums paid under the level-premium method during the early years. Assets must be accumulated to offset the legal reserve liability. Purpose of the legal reserve is to provide lifetime protection.
Someone who enters or remains on the premises with the occupant's expressed or implied permission.
The amount that must be added to the pure premium for expenses, profit, and a margin for contingencies.
A form of health insurance that pays a daily benefit for medical or custodial care received in a nursing facility or hospital. Home health benefits may also be provided.
The probable size of the losses that may occur.
Major medical insurance
Health insurance designed to pay a large proportion of the covered expenses of a catastrophic illness or injury.
Policy designed for a firm's specific needs and requirements.
Part of the total Social Security program that covers the medical expenses of most people age 65 and older and certain disable people under age 65.
Money purchase plan
A defined-contribution plan in which each participant has an individual account, and the employer's contribution is a fixed percentage of the participant's compensation.
Dishonesty or character defects in a n individual that increase the change of loss.
Insurance corporation owned by the policyowners, who elect the board of directors. The board appoints managing executives, and the company may pay a dividend or give a rate reduction in advance to insured.
Method for estimating amount of life insurance appropriate for a family by analyzing various family needs that must be met if the family head should die and converting them into specific amounts of life insurance. Financial assets are considered in determining the amount of life insurance needed.
Failure to exercise the standard of care required by law to protect others from harm.
Net present value
Used in capital budgeting and is the sum of the present values of the future cash flows minus the cost of the project. A positive net present value represents an increase in value for the firm.
A tort reform proposal in which the injured person would collect benefits from his or her insurer and would not have to sue a negligent third party who caused the accident and prove legal liability.
Relative variation of actual loss from expected loss, which varies inversely with the square root of the number of cases under observation.
Optionally renewable policy
The insurer has the right to terminate a policy on any anniversary date, or in some cases, on a premium date.
Ordinary life insurance
Type of whole life insurance providing protection throughout the insured's lifetime and for which premiums are paid throughout the insured's lifetime.
Inability of the insured to perform one or more important duties of his or her occupation.
Cause or source of loss.
Personal liability insurance
Liability insurance that protects the insured for an amount up to policy limits against a claim or suit for damages because of bodily injury or property damage caused by the insured's negligence. This coverage is provided by Section II of the homeowners policy.
Personal umbrella policy liability
Policy designed to provide protection against a catastrophic lawsuit or judgement, whose coverage ranges generally from $1 million to $10 million and extends to the entire family. Insurance is excess over underlying coverages.
Spreading of losses incurred by the few over the entire group, so that in the process, average loss is substituted for actual loss.
Beneficiary of a life insurance policy who is first entitled to receive the policy proceeds on the insured's death.
The bonded party in the purchase of a surety bond who agrees to perform certain acts or fulfill certain obligations.
Pro rata liability
A generic term for a provision that applies when two or more policies of the same type cover the same insurable interest in the property. Each insurer pays based on the proportion that its insurance bear to the total amount of insurance on the property.
That portion of the insurance rate needed to pay losses and loss-adjustment expenses.
Situation in which there are only the possibilities of loss or no loss.
Price per unit of insurance
A practice--illegal in virtually all states-of giving premium reduction or some other financial advantage to an individual as an inducement to purchase the policy.
An arrangement by which the primary insurer that initially writes the insurance transfers to another insurer (called the reinsurer) part of all of the potential losses associated with such insurance.
Risk management technique in which the firm retains part of all of the losses resulting from a given loss exposure. Used when no other method is available, the worst possible loss is not serious, and losses are highly predictable.
Term used in insurance contracts to describe a document that amends or changes the original policy.
Uncertainty concerning the occurrence of a loss.
An IRA in which the contributions are not income-tax deductible but distributions are received income-tax free if certain conditions are met.
Section 401(k) plan
A qualified profit-sharing or thrift plan that allows participants the option of putting money into the plan or receiving the funds as cash. The employee can voluntarily elect to have his or her salary reduced up to some maximum annual limit, which is then invested in the employer's Section 401(k) plan.
Section 403(b) plan
A qualified retirement plan designed for employees of public educational systems and tax-exempt organization, such as hospitals, nonprofit groups, and churches.
An award for damages that can be determined and documented, such as medical expenses, lost earnings, or property damage.
Situation in which either profit or loss are clear possibilities.
The amounts of insurance for bodily injury liability and property damage liability are stated separately.
Substitution of the insurer in place of the insured for the purpose of claiming indemnity from a negligent third party for a loss covered by insurance.
Party who agrees to answer for the debt, default, or obligation of another in the purchase of a bond.
Type of life insurance that provides temporary protection for a specified number of years. It is usually renewable and convertible.
In many life insurance waiver-of-premium provisions, total disability means that because of disease or bodily injury, the insured cannot do any of the essential duties of his or her job, or any job for which he or she is suited based on schooling, training, or experience.
Arrangement in which property is legally transferred to a trustee who manages it for the benefit of named beneficiaries for their security and to insure competent management of estate property.
Illegal practice of inducing a policyowner to drop an existing policy in one company and take out a new policy in another through misrepresentation or incomplete information.
The selection and classification of applicants for insurance through ha clearly stated company policy consistent with company objectives.
Only one party makes a legally enforceable promise.
Variable life insurance
Life insurance policy in which the death benefit and cash surrender values vary according to the investment experience of a separate account maintain by the insurer.
Characteristic of pension plans guaranteeing the employee's right to part of all of the employer's contributions if employment terminates prior to retirement.
Responsibility for damage done by the driver of an automobile that is imputed to the vehicle's owner.
Voluntary relinquishment of a known legal right.
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THIS SET IS OFTEN IN FOLDERS WITH...
Property and Casualty Insurance Basics
Section 2 - General Insurance Concepts
Section 3 - Life Insurance Basics
Section 4 - Life Insurance Policies