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Insurance Definitions

Our insurance terms glossary is divided alphabetically by insurance terms in a quick reference guide to assist in understanding the language commonly used by insurance companies.

A | B | C | D | E | F | G | H | I | L | M | N | O | P | Q | R | S | T | U | V | W 

Absolute Liability - Liability for damages even though fault or negligence cannot be proven. Certain situations create absolute liability for the manufacturer a product or the provider of a service.

Accident - An event or occurrence which is unforeseen and unintended. Accidental is an important concept of risk for insurance. The more unlikely the accident or the occurrence, the less expensive it is to insure.

Accidental Death Benefit - A benefit in addition to the face amount of a life insurance policy, payable if the insured dies as the result of an accident. Sometimes referred to as double indemnity.

Act Of God - An unforeseeable, natural occurrence, such as a flood or tornado.

Actual Cash Value - The replacement cost of property damaged or destroyed at the time of loss, with deduction for depreciation. Actual Cash Value cannot exceed the applicable liability limits shown in the declarations of the policy, nor the amount it would cost to repair or replace such property with material of like kind and quality within a reasonable amount of time after a loss.

Additional Insured - An assured party specifically named under an insurance policy that is not automatically included as an insured under the policy of another, but for whom the named insured’s policy provides a certain degree of protection. An endorsement is typically required to effect additional insured status. The named insured’s impetus for providing additional insured status to others may be a desire to protect the other party because of a close relationship with that party (e.g., employees or members of an insured club) or to comply with a contractual agreement requiring the named insured to do so (e.g., customers or owners of property leased by the named insured).

Additional Named Insured - An additional person(s) specifically named on the policy, similar to Additional Insured, except that each named insured person(s) are fully covered under the terms of the policy. Parents who insure their teenage son or daughter on their existing auto insurance policy, can do so by adding them as an Additional Named Insured.

Adjustable Life Insurance - A type of insurance that allows the policyholder to change the plan of insurance, raise or lower the face amount of the policy, increase or decrease the premium and lengthen or shorten the protection period.

Adjustor - A person who investigates and settles losses for an insurance carrier.

Age Limits - Stipulated minimum and maximum ages below and above which an insurance company will not accept applications and may not renew policies.

Aggregate Deductible - Deductible in some property and health insurance contracts in which all covered losses during a year are added together and the insurer pays only when the aggregate deductible amount is exceeded.

Aggregate Limit - The maximum total dollar amount an insurance company will pay to the insured per individual policy.Example: An insured causes $100,000 in liability damage in one accident and $114,000 in liability damage in a second accident for an aggregate of $214,000 in damages. If the aggregate limit is $200,000, then the insured would be responsible for $14,000, even if the liability limits of coverage for this policy are $200,000 per incident.

Allowed Amount - Maximum amount a plan will pay for covered health care services.

Alternate Delivery Systems - Health services provided in other than an in-patient, acute-care hospital. Examples include skilled and intermediary nursing facilities, hospice programs, and home health care. Alternate delivery systems are designed to provide needed services in a more cost-effective manner.

Ambulatory Care - Medical services that are provided on an outpatient (nonhospitalized) basis. Services may include diagnosis, treatment, and rehabilitation.

Amendment - A formal document changing the provisions of an insurance policy signed jointly by the insurance company officer and the policy holder or his authorized representative.

Annual Limit - Total benefit an insurance company will pay in a year, while you are enrolled in a healthcare plan.

Arson - The willful and malicious burning of, or attempt to burn, any structure or other property, often with criminal or fraudulent intent.

Assessed Value - The dollar value of property for tax purposes.

Assets - All funds, property, goods, securities, rights of action, or resources of any kind owned by an insurance company.

Association Group - A group formed from members of a trade or a professional association for group insurance under one master health insurance contract.

Association Group Plan - Health insurance plans designed for members of a professional association or trade association. Members may be protected under a group health insurance policy or by individual franchise policies.

Attending Physician’s Statement - A statement signed by a life insurance applicant’s physician, intended to disclose any serious illnesses that might impact the insurer‘s decisions regarding acceptance and pricing of coverage. Part of the underwriting process.

Automobile Liability Insurance - Coverage designed to provide protection for the insured against financial loss because of legal liability for car-related injuries to others or damage to their property.

Automobile Physical Damage Insurance - Coverage to pay for damage to or loss of an insured automobile resulting from collision, fire, theft, or other perils.

Aviation Insurance - Aircraft insurance including coverage of aircraft or their contents, the owner’s liability, and accident insurance on the passengers.

Beneficiary - The person or entity designated or provided for by an insurance policy‘s terms to receive any benefits provided by the policy or plan upon the death of the insured.

Benefit Period - A period of time, typically one to three years, during which major medical benefits are paid after the deductible is satisfied. When the benefit period ends, the insured must then satisfy a new deductible in order to establish a new benefit period.

Benefits - The amount payable by the insurance company to a claimant, assignee or beneficiary under each coverage.

Binder - A written or oral contract issued temporarily to place insurance in force when it is not possible to issue a new policy or endorse the existing policy immediately. A binder is subject to receipt of the premium and all the terms of the policy to be issued. It is a legal agreement that serves to effect insurance coverage for a specified period of time until the actual insurance policy can be issued.

Blanket Insurance - A policy designed to provide coverage under a single limit for two or more items (e.g., building and/or contents), two or more locations, or a combination of items and/or locations

Bodily Injury Liability (BI) - When you are found legally culpable for a car accident, BI coverage pays for the costs associated with injuries to the other people involved. BI also provides coverage for a legal defense if you are sued.

Bond - A certificate or policy issued by an insurance company guaranteeing performance, fidelity or surety.

Builder’s Risk Insurance - Builders risk Insurance provides coverage to insure building contractors for damage to property under construction. The completed value form requires a 100% coinsurance because insurance value purchased must equal the completed value of the structure. The reporting form type of coverage allows coverage to be carried according to the stage of completion of the structure. Perils insured against are fire, lightning, vandalism, malicious mischief, the types of risks common to a builder’s site. Smoke, sprinkler leakage, water damage, windstorm, and hail are also usually covered.

Burglary And Theft Insurance - Coverage against property losses due to burglary, robbery, or larceny.

Business Income Insurance - A standard element of commercial property insurance providing coverage against loss of operating income due to fire, explosion, or other insured perils. Generally takes the limited form of business interruption insurance, but can be broadened through the addition of indirect loss, consequential loss, extra expense, and other coverages.

Business Insurance - A policy which primarily provides coverage of benefits to a business as contrasted to an individual.

Business Interruption Insurance - Business Interruption insurance, covers the loss of earnings as a result of damage or loss of business property. Reimbursement for salaries, taxes, rents, and other expenses, even net profits that would have been earned during the period of interruption can be included.

Business Owner’s Policy - Business insurance that combines protection from liability and property risks in one package. Typically purchased by small to medium sized businesses.

Business Personal Property - Moveable property owned by your business. Typically includes office supplies, machinery, computers, furniture and everything else excluding the building.

Cafeteria Plan - 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. Also called flexible benefit plans.

Calendar-Year Deductible - Amount payable by an insured during a calendar year before a group or individual health insurance policy begins to pay for medical expenses.

Catastrophe - Event which causes a loss of extraordinary magnitude, such as a hurricane or tornado.

Certificate Of Insurance - A statement of coverage issued to an individual insured under a group insurance contract, outlining the insurance benefits and principal provisions applicable to the member.

Claim - A request for payment of a loss which may come under the terms of an insurance contract.

COBRA - Consolidated Omnibus Budget Reconciliation Act. Contains provisions giving certain former employees, retirees, spouses and dependent children the right to temporary continuation of health coverage at group rates. This coverage, however, is only available in specific instances. Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer formerly paid a part of the premium. It is ordinarily less expensive, though, than individual health coverage.

Coinsurance - (1) A provision under which an insured who carries less than the stipulated percentage of insurance to value, will receive a loss payment that is limited to the same ratio which the amount of insurance bears to the amount required; (2) a policy provision frequently found in medical insurance, by which the insured person and the insurer share the covered losses under a policy in a specified ratio, i.e., 80 percent by the insurer and 20 percent by the insured.

Collision Insurance - Protection against loss resulting from any damage to the policyholder‘s car caused by collision with another vehicle or object, or by upset of the insured car, whether it was the insured’s fault or not.

Commercial Auto Insurance - Vehicle insurance for cars owned by your business.

Commercial Crime Insurance - Protects businesses from the loss of money, securities or inventory resulting from risks such as theft, embezzlement, forgery or alteration of checks, robbery, counterfeit currency and documents, disappearance and destruction of money, securities and documents, employee dishonesty, safe burglary, computer fraud, wire transfer, audit and investigation expense.

Commercial Multiple Peril Policy - A package of insurance that includes a wide range of essential coverages for the commercial establishment.

Commercial Package Policy - A commercial policy that can be designed to meet the specific insurance needs of business firms. Property and liability coverage forms are combined to form a single policy.

Comprehensive Automobile Insurance - Coverage designed to provide protection against loss resulting from damage to the insured auto, other than loss by collision.

Comprehensive Coverage - Comprehensive Coverage pays for the repair/replacement of your covered vehicle for those damages outside of a collision; for example, theft, vandalism or even hitting an animal.

Concealment - Deliberate failure of an applicant for insurance to reveal a material fact to the insurer.

Conditions - Provisions inserted in an insurance contract that qualify or place limitations on the insurer‘s promise to perform.

Consequential loss or damage coverage — as distinguished from direct loss or damage — is indirect loss or damage resulting from that event caused by or covered under a covered peril, such as fire or windstorm. Where windstorm is a covered peril, if a tree is blown down and cuts electricity to a home, the food in the refrigerator would have coverage for consequential loss.

Consideration Clause - The clause that stipulates the basis on which the company issues the insurance contract. In health policies, the consideration is usually the statements in the application and the payment of premium.

Contingent Beneficiary - The person or persons designated to receive the benefits of a policy or plan if the primary beneficiary dies while the insured is living.

Contract Of Indemnity - Insurance that only restores the insured back to their original financial position, after a loss occurs. The insured cannot gain from the restoration.

Contractors Liability Insurance - Contractor’s Liability Insurance provides coverage for liability exposures that result from manufacturing and/or contracting operations in process. For example, the contractor, off-premises, (away from the office), operations at a construction site. Independent contractors, damage to property by explosion, collapse, and underground property damage are excluded.

Coordination Of Benefits - The mechanism used in group health insurance to designate the order in which the multiple carriers are to pay benefits and to prevent duplicate payments.

Copayment - A fixed amount you pay, established by your insurance provider for the sharing of the cost of certain services you receive under your insurance plan.

Coverage – The scope of protection provided under a contract of insurance; any of several risks covered by a policy.

Covered Expenses - Hospital, medical, and miscellaneous health care expenses incurred by the insured that entitle him/her to a payment of benefits under a health insurance policy. Found most often in connection with major medical plans, the term defines, by either description, reasonableness, or necessity to specify the type and amount of expense that will be considered in the calculation of benefits.

Cyber Liability Insurance - Insurance coverage for your business’ liability regarding any data breaches involving sensitive customer information.

Declarations - Statements in an insurance contract that provide information about the property or life to be insured. Used for underwriting and rating purposes and identification of the property or life to be insured.

Deductible - An amount that a policyholder agrees to pay, per claim or per accident, toward the total amount of an insured loss.

Dental Insurance - Individual or group plan that helps pay costs of normal dental care as well as damage to teeth from an accident

Dependent Benefits - Insurance extended to your spouse and dependent children.

Depreciation - A decrease in the value of property over a period of time due to wear and tear or obsolescence. Depreciation is used to determine the actual cash value of property at time of loss.

Digital Assets - Digitally stored information, or online accounts owned by an individual or business.

Direct Loss - Financial loss that results directly from an insured peril.

Directors’ And Officers’ Liability Insurance - Covers the exposure of corporate managers to claims from shareholders, government agencies, and employees, and others alleging mismanagement.

Disability - A physical or a mental impairment that substantially limits one or more major life activities of an individual. It may be partial or total.

Disability Benefit – (1) Periodic payments, usually monthly, payable to participants under some retirement plans, if such participants are eligible for the benefits and become totally and permanently disabled prior to the normal retirement date. (2) A feature added to some life insurance policies providing for waiver of premium, and sometimes payment of monthly income, if the policyholder becomes totally and permanently disabled.

Disability Income Insurance - A form of health insurance that provides periodic payments to replace income when an insured person is unable to work as a result of illness, injury, or disease.

Dismemberment - Loss of body members (limbs), or use thereof, or loss of sight due to injury.

Dismemberment Insurance - A form of health insurance that provides payment in case of loss by bodily injury of one or more body members (such as hands or feet) or the sight of one or both eyes.

Duplication Of Benefits - Overlapping or identical coverage of the same insured under two or more health plans, usually the result of contracts of different insurance companies, service organizations, or pre-payment plans; also known as multiple coverage.

Durable Medical Equipment (DME) - DME includes items such as canes, crutches, walkers, kidney machines, nebulizers, ventilators and several other healthcare equipment.

Dwelling Property - Dwelling insurance is a type of insurance policy used to provide coverage to only a dwelling. It is essentially a very stripped down homeowners policy, where the land and any personal property on the land or in the home is not covered, just the dwelling.

Effective Date - The date on which the insurance under a policy begins.

Eligibility Date - The date on which an individual member of a specified group becomes eligible to apply for insurance under a group life or health insurance plan.

Eligibility Period - A specified length of time, such as one month, following the eligibility date, during which an individual member of a particular group will remain eligible to apply for insurance under a group life or health insurance policy without evidence of insurability.

Embezzlement - Fraudulent use or taking off another’s property or money which has been entrusted to one’s care.

Emergency Medical Condition - Medical Condition that involves symptoms of such severity, that if immediate medical attention isn’t provided, it could be reasonably assumed the individual will lose bodily functions or organs.

Emergency Medical Transportation - Ambulance services for an Emergency Medical Condition.

Employee Benefit Plan Insurance - Coverage designed to protect the employer against claims by employees or former employees resulting from negligent acts or omissions in the administration of the insured‘s employee benefit programs. Coverage is intended to extend to the administration of these plans, including counseling employees, interpreting employee benefit programs, handling records, enrolling, terminating or canceling employees in specified plans on a timely basis, etc.

Employee Benefit Programs - Programs designed to benefit employees, arranged by the employer, which are not paid for primarily or directly by the employee, including for instance group life insurance and group accident and/or health insurance; profit sharing plans; employee stock subscription plans; workers’ compensation; unemployment insurance; social security benefits; disability benefits, etc..

Employment Practices Liability Insurance - Coverage designed to protect the corporation, directors, officers and employees for claims resulting from wrongful termination, discrimination, sexual harassment, wrongful discipline and failure to employ or promote.

Environmental Damage - The injurious presence in or on land, the atmosphere, or any water course or body of water of solid, liquid, gaseous, or thermal contaminants, irritants, or pollutants.

Errors And Omissions Insurance - Also called Professional Liability Insurance. Coverage designed to protect an insured against loss due to a claim of some negligent act, error, or omission by the insured.

Evidence Of Insurability - Any statement of proof of a person’s physical condition and/or other factual information affecting his/her acceptance for insurance.

Exclusion - Specific condition or circumstance listed in the policy for which the policy will not provide benefit payments.

Expiration Date - Date on which your insurance contract ceases to be effective.

Explosion - A violent expansion, with force and noise, generally due to rapid chemical change; term covered under various property/casualty insurance policies.

Exposure - The risk or loss potential an insurance company assumes from its policyholder in exchange for premium.

Face Amount - The amount stated on the face of the policy that will be paid in case of death or at the maturity of the policy. It does not include additional amounts payable under accidental death or other special provisions, or acquired through the application of policy dividends.

Family And Medical Leave Act (FMLA) - Federal Law that guarantees certain employees up to 12 weeks of unpaid leave each year, without the threat of losing their jobs.

Federal Surety Bond - Type of surety bond required by federal agencies that regulates the actions of business firms. It guarantees that the bonded party will comply with federal standards, pay all taxes or duties accrued, or pay any penalty if the bondholder fails to pay.

Fidelity Bond - A Fidelity Bond is a form of insurance protection, not to be confused with a surety bond. The fidelity bond covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals.

Fiduciary - A person who holds something in trust for another.

Fiduciary Liability Insurance - Fiduciary Liability Insurance protects the fiduciaries from mistakes and wrongful acts. It covers claims arising from: (1) a breach of the responsibilities or duties imposed on a fiduciary such as a plan administrator; or (2) a negligent act, error, or omission of the administrator or fiduciary. Example: directors, and officers of employee welfare plans (group insurance, pension plans, 401k plans) are covered for actual or alleged wrongful acts.

Fire - A combustion accompanied by a flame or glow, which escapes its normal confines to cause damage.

Fire Insurance - Coverage designed to protect against losses caused by fire and lightning, plus resultant damage caused by smoke and water.

Flexible Benefits Plan - Plans that employees can use to pay for out-of-pocket health or dependent care expenses. Plans include retirement benefits, reimbursement accounts, health insurance and others.

Flexible Spending Account (FSA) - Also known as a flexible spending arrangement, is an account that you contribute tax-free dollars to, and can use to pay certain out-of-pocket healthcare costs.

Flood Insurance - Coverage against loss resulting from the flood peril, widely available at low cost under a program developed by the private industry and the federal government.

Formulary - A list of medicines.

Full Coverage -Full Coverage typically refers to an auto policy which has comprehensive, collision, and liability coverage, and every insurance company usually has its own definition for it.

General Liability Insurance - Coverage that pertains, for the most part, to claims arising out of the insured’s liability for injuries or damage caused by ownership of property, manufacturing operations, contracting operations, sale or distribution of products, and the operation of machinery, as well as professional services.

Glass Insurance - Protection for loss of or damage to glass and its appurtenances. Due to the variety of exposures that exist for plate glass windows on store fronts and elsewhere a special insurance product was created.

Good Student Discount - Reduction of automobile premium for a young driver at least sixteen who ranks in the upper 20 percent of his or her class, has a B or 3.0 average, or is on the Dean’s list or honor roll. It is based on the premise that good students are better drivers.

Grace Period - A specified period after a premium payment is due, in which the policyholder may make such payment, and during which the protection of the policy continues.

Group Insurance - Insurance written on a number of people under a single master policy, issued to their employer or to an association with which they are affiliated.

Group Life Insurance - Life insurance usually without medical examination, on a group of people under a master policy. It is typically issued to an employer for the benefit of employees, or to members of an association, for example a professional membership group. The individual members of the group hold certificates as evidence of their insurance.

Group Term Life Insurance - Most common form of group life insurance. Yearly renewable term insurance on employees during their working careers.

Guaranteed Auto Protection (GAP) Insurance - In the event of a total vehicle loss, GAP insurance covers the difference between your net auto insurance payout and your outstanding balance on the vehicle’s retail loan or lease contract.

Hazard - Condition that creates or increases the chance of loss.

Health Insurance - Coverage designed to protect against financial losses resulting from sickness or accidental bodily injury. Health insurance coverages include accident insurance, disability income insurance, medical expense insurance, and accidental death and dismemberment insurance.

Health Maintenance Organization - An organization that provides a wide range of comprehensive health care services for a specified group at a fixed periodic payment. The HMO can be contracted with and sponsored by the government, medical schools, hospitals, employers, labor unions, consumer groups, insurance companies, and hospital-medical plans.

Health Savings Account (HSA) - A tax advantaged savings account available to people enrolled in high-deductible health plans, whereby the funds in the account can be used towards approved healthcare related expenses, tax free and without penalty.

High Deductible Health Plan (HDHP) - A healthcare plan that has a lower premium but much higher deductible than the average healthcare plan and is also required to have a Health Savings Account.

Homeowner’s Policy - A package of insurance designed to provide homeowners with a broad range of property and liability coverages, pertaining to events at home as well as away from home (although not automobile-related).

Hospice - Health care facility providing medical care and support services such as counseling to terminally ill persons.

Hurricane - A tropical storm marked by extremely low barometric pressure and circular winds with a velocity of 75 miles an hour or more.

Indemnification - Compensation to the victim of a loss, in whole or in part, by payment, repair, or replacement.

Indemnity - Legal principle that specifies an insured should not collect more than the actual cash value of a loss but should be restored to approximately the same financial position that existed before the loss.

Individual Deductible - Amount that an insured and each person of his or her family covered by the policy must pay before the group or individual medical insurance policy begins to pay for medical expenses.

Individual Insurance - Policies which provide protection to the policyholder and/or his/her family. Sometimes called Personal Insurance as distinct from group and blanket insurance.

Inpatient Care - Refers to patients who require admission to a hospital for care.

Insurability - Acceptability to the company of an applicant for insurance.

Insurance - A arrangement under which individuals, businesses, and other organizations or entities, in exchange for payment of a premium, are guaranteed compensation for losses resulting from certain perils under specified conditions.

Insured - A person or organization covered by an insurance policy.

Insurer - The party to the insurance contract who promises to pay losses or benefits. Also, any corporation engaged primarily in the business of furnishing insurance to the public.

Irrevocable Beneficiary - Beneficiary designation allowing no change to be made in the beneficiary of an insurance policy without the beneficiary’s consent.

Lapse - The termination or discontinuance of an insurance policy due to non-payment of a premium.

Larceny - The unlawful taking, carrying, leading or riding away of another person’s property.

Legal Liability - Lawful obligations required due to civil actions or contract terms.

Level Premium Life Insurance - Life insurance for which the premium remains the same from year to year. The premium is more than the actual cost of protection during the earlier years of the policy and less than the actual cost in the later years. The building of a reserve is a natural result of level premiums. The overpayments in the early years, together with the interest that is earned, serve to balance out the underpayments of the later years.

Liability - Any legally enforceable obligation.

Liability Insurance - Insurance designed to protect the policyholder from financial loss due to liability resulting from injuries to other persons or damage to their property.

Liability Limits - The sum or sums stipulated in an insurance contract beyond which an insurance company is not liable to protect the insured.

License And Permit Bond - Type of surety bond guaranteeing that the person bonded will comply with all laws and regulations that govern his or her activities.

Life Insurance - Insurance providing for payment of a specified amount on the insured’s death, either to his or her estate or to a designated beneficiary; or in certain cases to the policyholder at a specified date.

Lifetime Disability Benefit - A benefit to help replace income lost by an insured person as long as he/she is totally disabled.

Lifetime Limit - A max amount an insurance company will pay for a covered benefit over the course of your enrollment in the plan.

Limited Payment Life Insurance - Whole life insurance on which premiums are payable for a specified number of years or until death (if death occurs before the end of the specified period).

Limited Policy - An insurance contract which covers only certain specified diseases or accidents.

Long-Term Care - The continuum of broad-ranged maintenance and health services to the chronically ill, disabled, or retarded. Services may be provided on an inpatient (rehabilitation facility, nursing home, mental hospital), outpatient, or at-home basis.

Long-Term Disability Income Insurance - Insurance issued to an employer (group) or individual to provide a reasonable replacement of a portion of an employee’s earned income lost through serious and prolonged illness or injury during the normal work career.

Loss Prevention - Any measure which reduces the probability or frequency of a particular loss but does not eliminate completely all possibility of that loss.

Malpractice Insurance - Coverage for a professional practitioner, such as a doctor or a lawyer, against liability claims resulting from alleged malpractice in the performance of professional services.

Market Value - fair value or the price that could be derived from current sale of an asset.

Medicaid - State programs of public assistance to persons whose income and resources are insufficient to pay for health care. Title XIX of the Federal Social Security Act provides matching federal funds for financing state Medicaid programs, effective January 1, 1966.

Medical Only - line of business that provides medical only benefits without hospital coverage. An example would be provider-sponsored organizations where there is no coverage for other than provider (non-hospital) services. Does not include self-insured business, FEHBP, Medicare and Medicaid programs, or dental only business.

Medicare - National health insurance program for people age 65 and older. A program of Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B) protection provided under the Social Security Act.

Medicare Advantage (Part C) - Health insurance that provides coverage within Part C of Medicare, and is based on a monthly fee, instead of a fee-for-service model.

Medicare Part D - Often called Medicare Prescription Drug Benefit, is an optional program intended to help Medicare recipients pay for prescription drugs through premiums.

Medicare Supplement (Medigap) - Insurance coverage sold on an individual or group basis to help fill the "gaps" in the protections granted by the federal Medicare program. This is strictly supplemental coverage and cannot duplicate any benefits provided by Medicare. It is structured to pay part or all of Medicare's deductibles and co-payments. It may also cover some services and expenses not covered by Medicare.

Morbidity - the frequency or severity of disease or illness within a subset of the population.

Morbidity Risk - the potential for a person to experience illness, injury, or other physical or psychological impairment, whether temporary or permanent. Morbidity risk excludes the potential for an individual's death, but includes the potential for an illness or injury that results in death.

Morbidity Table - a statistical record of the rate of illness among the defined age groups.

Mortality Table - chart that shows the death rates of a particular population at each age displayed as the number of deaths per thousand.

Multi-Peril Insurance - personal and business property coverage combining several types of property insurance in one policy.

Mutual Insurance Company - a privately held insurer owned by its policyholders, operated as a non-profit that may or may not be incorporated.

Named Insured - The person or entity, typically the policyholder, whose interests are protected under the insurance contract.

Named Perils - Coverage in a property policy that provides protection against loss from only the perils specifically listed in the policy (rather than protection from physical loss). Examples of named perils are fire, windstorm, theft, smoke, etc. See also Basic Form, Special Risk Insurance.

Net Present Value - The value today of an asset to be received in the future, either as a single payment or a series of payments (such as an annuity). The value is considered to be different if received at a later date because of the time value of money.

No-Fault Automobile Insurance - A form of insurance by which a person’s financial losses resulting from an automobile accident are paid by his or her own insurer regardless of who was at fault.

Noncancellable - A clause stating that the insured has the right to continue a policy in force by the timely payments of premiums set forth in the contract for some extended period of time specified, during which period the insurer has no right to make unilaterally any change in any provision of the contract while the contract is in force.

Nondisabling Injury - An injury which may require medical care, but does not result in loss of working time or income.

Occurrence - An accident, including continuous or repeated exposure to substantially the same general, harmful conditions, that results in bodily injury or property damage during the period of an insurance policy.

Open Enrollment Period - Period of time when individuals can purchase healthcare insurance in the Marketplace, and when employees can make changes to their elected healthcare options.

Affordable Care Act, ACA, or Obamacare - Law enacted on March 23, 2010, that governs healthcare coverage in the U.S.

Percentage Participation - A provision in a health insurance contract that the insurer and insured will share covered losses in agreed proportions. Also see Coinsurance.

Performance Bond - Bond issued by a surety or insurance company to guarantee performance under or in conjunction with a contract.

Peril - The cause of a possible loss, such as fire, windstorm, theft, explosion, or riot, covered in an insurance policy.

Permanent Life Insurance - A phrase used to cover any form of life insurance except term; generally accrues cash value, such as whole life or endowment.

Personal Injury Liability Insurance - Coverage designed to protect against false arrest, detention or imprisonment, or malicious prosecution; libel, slander, defamation, or violation of right of privacy; and wrongful entry, eviction, or other invasion of right of private occupancy.

Personal Injury Protection (PIP) - First-party no-fault coverage in an automobile insurance policy in which an insurer pays, within the specified limits, the wage loss, medical, hospital and funeral expenses of the insured.

Personal Lines - Those types of insurance, such as auto or home insurance, for individuals or families rather than for businesses or organizations.

Personal Representative - A person appointed through the will of a deceased or by a court to settle the estate of one who dies.

Physical Damage - Damage to or loss of the auto resulting from collision, fire, theft or other perils.

Plan Administrator - The person or persons controlling the money or property contributed to a pension, health or other plan, usually designated in the plan agreement.

Point-Of-Service Plans - Often known as open-ended HMOs or PPOs, these plans permit insureds to choose providers outside the plan yet are designed to encourage the use of network providers.

Policy - The legal document issued by an insurance company to a policyholder, which outlines the conditions and terms of the insurance; also called the policy contract or the contract.

Policyholder - A person who pays a premium to an insurance company in exchange for the insurance protection provided by a policy of insurance.
Pre-Existing Condition - A physical and/or mental condition of an insured which first manifested itself prior to the issuance of his/her policy or which existed prior to issuance and for which treatment was received.

Preferred Provider Organization (PPO) - An arrangement whereby a third-party payer contracts with a group of medical care providers who furnish services at lower than usual fees in return for prompt payment and a certain volume of patients.

Premium - The sum paid by a policyholder to keep an insurance policy in force.

Primary Insurance - Insurance that pays compensation for a loss ahead of any other insurance coverages the policyholder may have.

Primary Residence - Your primary residence, is your main residence, where you typically live. You can only have one primary residence.

Primary Use - Primary use refers to how you typically use your vehicle; for example, driving to work or school.

Primary Driver - The individual that drives your car most often.

Product Liability Insurance - Coverage designed to provide protection against financial loss arising out of the legal liability incurred by a manufacturer, merchant, or distributor because of injury or damage resulting from the use of a covered product.

Professional Liability Insurance - See Errors and Omissions Insurance.

Proof Of Loss - Documentary evidence required by an insurer to prove a valid claim exists. It usually consists of a claim form completed by the insured, and for health insurance claims by the insured’s attending physician. For medical expense insurance itemized bills must also be included.

Property - Something that has value and is owned by a person or business.

Property Damage Coverage - An agreement by an insurance carrier to protect an insured against legal liability for damage by an insured automobile to the property of another.

Property Insurance - Insurance providing financial protection against the loss of, or damage to, real and personal property caused by such perils as fire, theft, windstorm, hail, explosion, riot, aircraft, motor vehicles, vandalism, malicious mischief, riot and civil commotion, and smoke.

Proration - The adjustment of benefits paid because of a mistake in the amount of the premiums paid or the existence of other insurance covering the same accident or disability.

Provision - A clause, sentence or paragraph of an insurance contract that describes or explains a feature, benefit, condition, requirement, etc. of the insurance protection afforded by the contract.

Proximate Cause - (1) The principal cause of loss or damage; (2) An unbroken chain of events between an event and damage.

Punitive Damages - A court-awarded amount that exceeds the economic losses and general damages of a defendant and is intended solely to punish the plaintiff.

Qualified Plan - A plan which the Internal Revenue Service approves as meeting the requirements of Section 401(a) of the 1954 Internal Revenue Code. Such plans receive tax advantages.

Qualifying Event - Events that trigger changes to your insurance policy due to new life or business circumstances. Under the ACA, these events include loss of health insurance (turning 26), changes in residence, having a baby and several others.

Rate - The pricing factor upon which the insurance buyer’s premium is based.

Rehabilitation - (1) Restoration of a totally disabled person to a meaningful occupation, (2) a provision in some long- term disability policies that provides for continuation of benefits or other financial assistance while a totally disabled insured is retraining or attempting to resume productive employment.

Reimbursement - The payment of the expenses actually incurred as a result of an accident or sickness, but not to exceed any amount specified in the policy.

Reinstatement - The resumption of coverage under a policy which has lapsed.

Renewal - Continuance of coverage under a policy beyond its original term by the insurer’s acceptance of the premium for a new policy term.

Rent Insurance - A form of business interruption insurance for a landlord, designed to protect building owners against loss of income when rentals have been interrupted or rental value has been impaired by the occurrence of any of the insured perils. It assures continuous income while an insured’s building is untenantable.

Rental Reimbursement Coverage - Often referred to as ‘Rental Car Coverage,’ Rental Reimbursement Coverage is optional coverage that helps pay the cost of a rental car when you have a covered claim under your auto policy.

Renter’s Policy - A package type of insurance that includes coverage similar to a homeowners policy to cover the personal property of a renter or tenant in a building.

Replacement Cost - The cost to repair or replace property at construction costs prevailing at time of loss; the cost to repair or rebuild property without considering depreciation. Contrast Actual Cash Value.

Replacement Cost Insurance - Insurance designed to provide coverage on the basis of full replacement cost without deduction for depreciation on any loss sustained, subject to the terms of the co-insurance clause. This coverage applies to both building and contents items as specified on the face of the policy. No deduction is taken for depreciation in arriving at the proper amount of insurance needed to comply with the coinsurance clause.

Rescission - Termination of an insurance contract by the insurer on the grounds of material misstatement on the application for insurance. The action of rescission must take place within the contestable period or Time Limit on Certain Defenses clause set forth in the policy, but takes effect as of the effective date of the policy, thus voiding the contract from its inception.

Residual Disability Benefits - A provision in an insurance policy that provides benefits in proportion to a reduction of earnings as a result of disability, as opposed to the inability to work full-time.

Rider - A document that modifies an insurance policy. It may increase or decrease benefits, waive a condition or coverage, or in any other way amend the original contract. See Endorsement.

Risk - (1) The chance of loss; (2) The insured or property covered by a policy or application.

Risk Classification - The process by which a company decides how its premium rates for life insurance should differ according to the risk characteristics of individuals insured (e.g., age, occupation, sex, state of health) and then applies the resulting rules to individual applications. See also Underwriting.

Roadside Assistance Coverage - Roadside Assistance Coverage helps you when your car breaks down. Services typically include things such as towing, battery charging, flat tire service or fuel deliver.

Robbery - The taking of property from a person by force or threat of violence.

Scheduled Insurance - An insurance policy amendment or endorsement that specifies items covered, in contrast to blanket coverage, which would cover all items fitting a given description. Auto insurance is the principal scheduled insurance purchased by consumers.

Settlement - An official agreement meant to resolve a dispute between multiple parties.

Short-Term Disability Income Insurance - Coverage designed to cover a disabled person as long as he/she remains disabled up to a specified period not exceeding two years.

Step-Rate Premium - A rating structure in which the premiums increase periodically at pre-determined times such as policy years or attained ages.

Straight Life Insurance - Whole life insurance on which premiums are payable for life.

Strict Liability - Liability for damages even though fault or negligence cannot be proven.

Subrogation - Process by which one insurance company seeks reimbursement from another company or person for a claim it has already paid.

Surety Bond - An agreement providing for monetary compensation in the event of a failure to perform specified acts within a stated period. The surety company, for example, becomes responsible for fulfillment of a contract if the contractor defaults.

Survivorship Life Insurance - Policy that covers two individuals and pays out to a beneficiary, only when both covered individuals have passed.

Term Life Insurance - Life insurance payable to a beneficiary only when an insured dies within a specified period. The coverage expires without value if the insured survives the stated period.

Third Party - The claimant under a liability policy. So called because the person making the claim is not one of the two parties, insured and insurer, to the insurance contract.

Time Limit - The period of time during which a notice of claim or proof of loss must be filed.

Total Disability – An illness or injury which prevents an insured person from continuously performing every duty pertaining to his/her occupation or engaging in any other type of work.

Umbrella Liability - Insures losses in excess of amounts covered by other liability insurance policies; also protects the insured in many situations not covered by the usual liability polices.

Underwriter - 1) a company that receives the premiums and accepts responsibility for the fulfillment of the policy contract; 2) the company employee who decides whether or not the company should assume a particular risk; 3) the agent who sells the policy.

Underwriting - The process of reviewing, selecting, and approving risks for insurance and determining in what amounts and on what terms the insurance company will accept the risk.

Uninsurable Risk - One not acceptable for insurance due to excessive risk.

Uninsured/Underinsured Motorist Coverage - A form of insurance that pays the policy holder and passengers in his/her car for bodily injury caused by the owner or operator of an uninsured or inadequately insured automobile.

Universal Life Insurance - A flexible premium life insurance policy under which the policyholder may change the death benefit from time to time (with satisfactory evidence of insurability for increases) and vary the amount or timing of premium payments. Premiums (less expense charges) are credited to a policy account from which mortality charges are deducted and to which interest is credited at rate which may change from time to time.

Vehicle Identification Number (VIN) - A unique 17 letter and/or number code given to each on-road vehicle that can be used to identify the make, model and year of a vehicle.

Waiting Period - The length of time an employee must wait from his/her date of employment or application for coverage, to the date his/her insurance is effective. See Elimination Period.

Whole Life Insurance - Life insurance payable to a beneficiary at the death of the insured whenever that occurs. Premiums may be payable for a specified number of years (limited payment life) or for life (straight life).

Workers’ Compensation Insurance - Insurance against liability imposed on certain employers to pay benefits and furnish care to employees injured, and to pay benefits to dependents of employees killed in the course of or arising out of their employment.