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Accelerated Death Benefits: A benefit that can be attached to a life insurance policy that enables the policy holder to receive cash advances against the death benefit in the case of being diagnosed with a terminal illness. Many individuals who choose the accelerated death benefit have less than one year to live and use the money for treatments and other costs needed to stay alive.
Actual Cash Value: The current market value of lost or damaged property at the time of a covered loss. For example, a three-year-old car's value is based on similar three-year-old cars selling on a used car lot. In a home insurance policy, actual cash value is the replacement cost of the property, less depreciation; the balance is reimbursed upon replacement of the property.
Additional Insured: An individual or organization covered by an insurance policy other than the named policyholder. In a car insurance policy, anyone who drives your car with your consent is an additional insured. In a home insurance policy, a mortgage company may be listed as an additional insured.

Additional Living Expenses
Extra charges covered by homeowners policies over and above the policyholder'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/casualty insurer to evaluate losses and settle policyholder claims. These adjusters differ from public adjusters, who negotiate with insurers on behalf of policyholders, and receive a portion of a claims settlement. Independent adjusters are independent contractors who adjust claims for different insurance companies.

Admitted Assets
Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets.

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

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, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.

Agency Companies
Companies that market and sell products via independent agents.

Agent
Insurance is sold by two types of agents: independent agents, who are self-employed, 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.

Alien Insurance Company
An insurance company incorporated under the laws of a foreign country, as opposed to a foreign insurance company that does business in states outside its own.

Allied Lines
Property insurance that is usually bought in conjunction with fire insurance; it includes wind, water damage, and vandalism coverage

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.

Annual Annuity Contract Fee
Covers the cost of administering an annuity contract.

Annual Statement
Summary of an insurer’s or reinsurer’s financial operations for a particular year, including a balance sheet. It is filed with the state insurance department of each jurisdiction in which the company is licensed to conduct business.

Annuitant
The person(s) who receives the income from an annuity contract. Usually the owner of the contract or his or her spouse.

Annuitization
The conversion of the account balance of a deferred annuity contract to income payments.

Annuity
A life insurance product that pays periodic income benefits for a specific period of time or over the course of the annuitant’s lifetime. There are two basic types of annuities: deferred and immediate: Deferred annuities allow assets to grow tax deferred over time before being converted to payments to the annuitant. Immediate annuities allow payments to begin within about a year of purchase.

Annuity Accumulation Phase or Period
The period during which the owner of a deferred annuity makes payments to build up assets.

Annuity Administrative Charges
Covers the cost of customer services for owners of variable annuities.

Annuity Beneficiary
In certain types of annuities, a person who receives annuity contract payments if the annuity owner or annuitant dies while payments are still due.

Annuity Contract
A written agreement between an insurance company and a customer outlining each party's obligations in an annuity coverage agreement. This document will include the specific details of the contract, such as the structure of the annuity (variable or fixed), any penalties for early withdrawal, spousal provisions such as a survivor clause and rate of spousal coverage, and more.

Annuity Contract Owner
The person or entity that purchases an annuity and has all rights to the contract. Usually, but not always, the annuitant (the person who receives incomes from the contract).

Annuity Death Benefits
The guarantee that if an annuity contract owner dies before annuitization (the switchover from the savings to the payment phase) the beneficiary will receive the value of the annuity that is due.

Annuity Insurance Charges
Covers administrative and mortality and expense risk costs.

Annuity Investment Management Fee
The fee paid for the management of variable annuity invested assets.

Annuity Issuer
The insurance company that issues the annuity.

Annuity Prospectus
Legal document providing detailed information about variable annuity contracts. Must be offered to each prospective buyer.

Annuity Purchase Rate
The cost of an annuity based on such factors as the age and gender of the contract owner

Antitrust Laws
Laws that prohibit companies from working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran-Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.

Apportionment
The dividing of a loss proportionately among two or more insurers that cover the same loss.
Appraisal: An evaluation by a claims representative or appraiser estimating the amount of damage to your property or vehicle, and the cost to repair the property or vehicle, or, in the worst-case scenario, the determination of a complete loss.

Arbritation
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.

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. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances, and accounts receivable that are more than 90 days past due.

Assigned Risk Plans
Facilities through which drivers can obtain auto insurance if they are unable to buy it in the regular or voluntary market. These are the most well-known type of residual auto insurance market, which exist in every state. In an assigned risk plan, all insurers selling auto insurance in the state are assigned these drivers to insure, based on the amount of insurance they sell in the regular market.

Auto Insurance Policy
There are basically six different types of coverages. Some may be required by law. Others are optional. They are:

1. Bodily injury liability, for injuries the policyholder causes to someone else.
2. Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car.
3. Property damage liability, for damage the policyholder causes to someone else’s property.
4. Collision, for damage to the policyholder’s car from a collision.
5. Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft.
6. Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.

Coverages and benefits listed above may be available at an additional charge, talk to us today to find out more.

Auto Insurance Premium
The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service.

Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day – rush hour in an urban neighborhood or leisure-time driving in rural areas, for example. Some insurance companies may also use credit history-related information

Aviation Insurance
Commercial airlines hold property insurance on airplanes 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.

Basic/State Minimum Financial Responsibility Limit
The lowest coverage amount, as prescribed by law or the insurance company, for which an insurance policy can be written.
Bodily Injury: Injury to the body of a person. In insurance, people often refer to Bodily Injury as the liability coverage afforded for financial protection against injury to a person resulting from an accident for which the insured is alleged to be legally responsible.

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.

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 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 (also known as 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 insurance 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.

Businessowners Policy / BOP
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.

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.

A property/casualty insurer must maintain a certain level of capital and policyholder surplus to underwrite risks. This capital is known as capacity. When the industry is hit by high losses, such as after the World Trade Center terrorist attack, capacity is diminished. It can be restored by increases in net income, favorable investment returns, reinsuring more risk and or raising additional capital. When there is excess capacity, usually because of a high return on investments, premiums tend to decline as insurers compete for market share. As premiums decline, underwriting losses are likely to grow, reducing capacity and causing insurers to raise rates and tighten conditions and limits in an effort to increase profitability. Policyholder surplus is sometimes used as a measure of capacity.

Capital
Shareholder’s equity (for publicly-traded insurance companies) and retained earnings (for mutual insurance companies). There is no general measure of capital adequacy for property/casualty insurers. Capital adequacy is linked to the riskiness of an insurer’s business. A company underwriting medical device manufacturers needs a larger cushion of capital than a company writing Main Street business, for example.

CAPITAL MARKETS
The markets in which equities and debt are traded.

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 company

CAPTIVES
Insurers that are created and wholly-owned by one or more non-insurers, to provide owners with coverage. A form of self-insurance.

CAR YEAR
Equal to 365 days of insured coverage for a single vehicle. It is the standard measurement for automobile 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.

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, currently $25 million (per the Insurance Information Institute, iii.org).

CATASTROPHE BONDS
Risk-based securities that pay high interest rates and provide insurance companies with a form of reinsurance to pay losses from a catastrophe 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 dollar 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 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 multibillion dollar 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. Insurers’ ability and willingness to sell insurance fluctuates with the availability and cost of catastrophe reinsurance.

After major disasters, such as Hurricane Andrew and the World Trade Center terrorist attack, the availability of catastrophe reinsurance becomes extremely limited. Claims deplete reinsurers’ capital and, as a result, companies are more selective in the type and amount of risks they assume. In addition, with available supply limited, prices for reinsurance rise. This contributes to an overall increase in prices for property insurance.

CHARTERED FINANCIAL CONSULTANT / ChFC
A professional designation given by The American College to financial services professionals who complete courses in financial planning.

CHARTERED LIFE UNDERWRITER / CLU
A professional designation by The American College for those who pass business examinations on insurance, investments, and taxation, and have life insurance planning experience.

CHARTERED PROPERTY/CASUALTY UNDERWRITER / CPCU
A professional designation given by the American Institute for Property and Liability Underwriters. National examinations and three years of work experience are required.
Claim
A request for payment under an insurance contract due to a covered loss or accident.
Conditions: Provisions that set forth the rights, duties, and responsibilities of the parties to an insurance contract.
Collision Insurance: This insurance covers a loss to your vehicle caused by its impact with another vehicle or object, or damage caused by a covered weather event.
Comprehensive Coverage: This insurance protects against any loss or damage to your vehicle except those caused by collision or by upset (i.e., glass repair/replacement or coverage against fire or theft).
Compulsory Auto Financial Responsibility Laws: Laws which make it illegal to operate a vehicle without first establishing the ability to pay for a judgment that may result from an accident (i.e., proof of insurance).
Covered Auto(s): Any vehicle shown in the policy declarations or, in some cases, a substitute vehicle used temporarily because of breakdown or repair of your own covered vehicle.

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Damages: A sum of money that a party is legally obligated to pay to another as compensation for property damage or injury.
Declarations: The part of the policy that provides detailed information about the policyholder, the insurer, and the various coverages provided by the policy.
Deductible: The amount of a claim that you agreed to pay at the time you purchased insurance. This amount is deducted from a claims payment.
Effective Date: The date coverage begins under an insurance contract (policy). An endorsement, which modifies coverage, may also have an effective date.
Endorsement: An endorsement is attached to your policy to modify the terms of the insurance contract. It can amend your policy to cover unique items or circumstances. An endorsement can also represent a change to a policy that is made during the policy's term.
Exclusion: Part of an insurance contract that excludes coverage of certain risks, persons, property, or locations.
Expiration Date: The ending date of an insurance contract (policy).
Fire Insurance: Part of your homeowner's policy, insuring against direct loss by fire, lightning, and other defined causes.
Glass Insurance: Coverage for accidental breakage to glass or vandalism. This coverage is not available in all states. Where it is not offered, damage to glass is covered under Comprehensive coverage, and subject to the applicable deductible.

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Insuring Agreements: Part or parts of an insurance policy that state the various coverages provided by the policy.
Hazard: Situation or condition that increases the possibility or extent of a loss, such as flammable liquid kept on your property or downspouts pouring onto a driveway or walkway.
Insurance to Value: The amount of coverage provided by your policy compared with the replacement value of the property.

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Liability Insurance: If you injure someone, or damage someone's property, in a car or other accident, liability insurance protects you for covered losses up to your liability limit.
Limit of Liability: The maximum amount available under your policy for covered losses.
Loss: A car accident or damage to your home covered by your insurance policy, the amount sought in a claim, or the amount paid on your behalf under an insurance contract. A partial loss is a loss that does not completely destroy your property.
Loss of Use Insurance: Compensation for loss you incur due to the inability to use your property or vehicle.
Mortgage or Loss Payee Clause: A clause in your insurance policy that makes a claim jointly payable to you and your lender.
Named Insured: The person or persons named as insureds in the policy declarations. Additional persons or entities may also be added as additional named insureds under certain circumstances.
Medical Payments Insurance: In certain states, Medical Payments insurance is a coverage under which an insurer agrees to pay, up to a specified limit, for medical, surgical, hospital, and funeral expenses, regardless of liability.
No-Fault Insurance/Personal Injury Protection(PIP): In certain states, No-Fault insurance permits car accident victims to be directly reimbursed for medical and hospital expenses and potential loss of income from their own insurance companies regardless of who is at fault. In certain states, PIP provides insurance that covers medical costs, loss of earnings, and funeral costs for occupants of your automobile. Some states require a basic amount of PIP; optional or extra coverage can be purchased.

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Policy: A formal written contract of insurance. The policy includes your declarations and all endorsements.
Policyholder: The person or persons to whom a policy is issued who agrees to pay a premium to an insurer in return for the insurer's promise to provide specified insurance protection.
Premium: The amount that you agree to pay to the insurance company for an insurance policy.
Property Damage: Damage to a car or someone else's personal property resulting from an accident that may be covered by an insurance policy.
Renewal: A policy issued to replace one that has expired.
Replacement Cost: Coverage for the cost of replacing your car or property with new materials in the event of a covered loss.
Peril: The cause of a possible accident, loss, or claim (such as fire or wind).
Rental Reimbursement: Rental reimbursement coverage is optional. If you must rent a car because your own car is out of service due to a covered loss, rental coverage pays you back for money you spent on the rental car (up to the specific limit you selected at the time you purchased your car insurance). Some restrictions may apply, such as a maximum dollar amount or specific time limitations.
Property Insurance: Part of home, condominium or renters insurance, this is first party personal property insurance against physical loss or damage.

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Subrogation: When an insurance company pays money to you, for a loss caused by another person, the insurance company has the right to recover that money from the party that was legally at fault for the loss. This typically includes money paid for property damage, medical expenses and rental expenses. As part of this process, your insurer will reimburse the appropriate percentage of your deductible to you based on the amount recovered.
Total Loss: An accident or event that leaves your car or home irreparable by insurance company standards.
Scheduled Property: Listing specific personal property for a stated policyholder value. This is usually considered for valuable items that are subject to limited coverage.
Towing / Labor: Towing / Labor is an optional coverage. It pays the cost of having your car towed or repaired on site (up to a specific limit) when your car breaks down. You are covered for the on-site labor costs at the breakdown site (not any parts) needed to get the car running again. Some restrictions may apply, such as maximum dollar amount allowed per claim or specific time limitations, among other items.
Uninsured or Underinsured Motorists Coverage: Uninsured or Underinsured Motorists coverage provides protection in the event damage is caused by a motorist who has no insurance or not enough insurance to cover the loss.

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