Terms

Insurer
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Terms in this set (44)
Insurer
insurance company
Insured
A person covered by an insurance policy
Policy
Describes the agreement contract of coverage in an insurance agreement
Loss
Reduction, decrease, or disappearance of value
Claim
Notifying the insurer for payment
Risk
Possibility that a loss may occur
Speculative risk
Risk that has the opportunity for gain as well as loss (example: gambling)
Pure risk
The possibility of loss only
Peril
The cause of the loss or potential loss
Hazard
a condition that increases the chance of loss
Physical hazardsMaterials, situations, or things (including chemicals) that can cause damage to property and immediate injury.Moral hazardsarise from people's habits and values (filing a false claim is an example of moral hazard)Morale hazardsarise out of human carelessness or irresponsibility (failing to take safety precautions is an example of morale hazard)Legal hazardsArise out of court actions that increase the likelihood/ severity of a loss due to a condition imposed by the legal process that forces an insurer to cover a risk that it would otherwise not coverRisk retentionAssuming financial responsibility for certain events. (Deductible)Law of Large NumbersA principle stating that the larger the number of similar exposure units considered, the more accurate prediction of losses in a groupRisk transferShifting responsibility for a risk to another party (insurance)Exposure unitMeasures the extent of potential loss the insurer may have to coverActuariesstatisticians who specialize in estimating the probability of mortality or morbidityInsurable Interestsomething of value that, if lost, would cause you financial harm. Affects those who purchase a policy but not beneficiariesIndemnitya payment for damage or lossFace amountthe amount of benefit stated in the life insurance policyDeductiblea specified amount of money that the insured must absorb before an insurance company will pay a claimElimination Periodtime between the disabling event and the beginning of payments in your disability coverageCoinsurancethe sharing of expenses by the policyholder and the insurance company usually expressed in percentagesCasualty Insuranceinsurance that covers for losses due to accident, chance, or negligence (legal liability). Losses: death, injury, disability, or damage to personal propertylife insuranceProvides payment to beneficiaries who were named by the insured person for death or dismemberment. Designed to protect against premature deathAnnuityGuaranteed income for the life of an annuitant. Protects against outliving financial resources and income during retirementCredit insuranceany type of insurance that ensures repayment of a loan in the event the borrower is unable to repay itCommercial Insurersare in the business of selling insurance for a profit. Commercial insurance is divided into two main groups: stock and mutual insurers.Non-commercial InsurersOperate on a nonprofit basis. Exists when profits are returned to subscribers in the form of reduced premium or expanded benefitsStock insurersAn insurance company owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium, nonparticipating policies.Mutual insurersare corporations owned by the policyowners, who elects the board of directors and shares the dividendsService insurersCompanies that offer prepayment plans for medical or hospital services, such as health maintenance organizationsReciprocal Insurersunincorporated groups of people that provide insurance for one another through individual indemnity agreementsFraternal Insurera mutual insurer that provides life and health insurance to members of a social or religious organizationLloyd's of LondonNot insurance. A marketplace where insurance buyers and sellers come together.Assessment insurersassess policyholders a premium only when losses are incurredReinsurerThe insurer that assumes some or all of the potential costs of insured loss exposures of the primary insurer in a reinsurance contractual agreementExcess and Surplus LinesInsurers that insure risks that traditional insurers will not insure due to the nature or amount of coverage of the riskSelf-insurancea special form of planned retention by which part or all of a given loss exposure is retained by the firmIndependent insurance producerSell the insurance products of several companies and work for themselves or other producers. They sell their clients the policy that fits their needs best among the many insurers they represent and are paid a commission for each sale.Exclusive or captive producerRepresent only one company, and have an agency relationship with that company. These producers are sometimes referred to as career agents working from career agencies. They are compensated by commissions.Direct Writing Companiesusually pay salaries to employees whose job function is to sell the company's insurance products. No commission. Only salaried