Glossary of Insurance Terms
This glossary provides clear, plain-language definitions of commonly used insurance terms. The entries are compiled by the Research and Actuarial Department using established industry sources. Definitions reflect typical usage, but terminology can vary by company, policy, or regulatory context, and some terms may carry different meanings in other settings.
Accident: an unexpected event or circumstance without deliberate intent.
Accident Insurance: insurance for unforeseen bodily injury.
Accident Only: an insurance contract that provides coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by or necessitated as a result of accident or specified kinds of accident.
Accident Only or AD&D: policies providing coverage, singly or in combination, for death, dismemberment, disability, or hospital and medical care caused by or necessitated as a result of accident or specified kinds of accidents. Types of coverage include student accident, sports accident, travel accident, blanket accident, specific accident or accidental death and dismemberment (AD&D).
Accidental Bodily Injury: unexpected injury to a person.
Accidental Death & Dismemberment: an insurance contract that pays a stated benefit in the event of death and/or dismemberment caused by accident or specified kinds of accidents.
Accumulation Period: period of time insured must incur eligible medical expenses at least equal to the deductible amount in order to establish a benefit period under a major medical expense or comprehensive medical expense policy.
Actual Cash Value: repayment value for indemnification due to loss or damage of property; in most cases it is replacement cost minus depreciation.
Actuarial Report: (PC Insurance) a document prepared to convey an actuary’s conclusions and recommendations, methods, and analysis to regulators and boards. (In Life and Health) this document would be called an "Actuarial Memorandum."
Actuary: business professional who analyzes probabilities of risk and risk management including calculation of premiums, dividends and other applicable insurance industry standards.
Adjuster: a person who investigates claims and recommends settlement options based on estimates of damage and insurance policies held.
Admission: hospital inpatient care for any medical condition.
Admitted Assets: insurer assets which can be valued and included on the balance sheet to determine financial viability of the company.
Admitted Company: an insurance company licensed to do business in a state(s), domiciled in an alternative state or country.
Advance Premiums: occur when a policy has been processed, and the premium has been paid prior to the effective date. These are a liability to the company and not included in written premium or the unearned premium reserve.
Adverse Selection: the social phenomenon whereby persons with a higher than average probability of loss seek greater insurance coverage than those with less risk.
Advisory Organization: a group supported by member companies whose function is to gather loss statistics and publish trended loss costs.
Affiliate: a person or entity that directly, or indirectly, through one or more other persons or entities, controls, is controlled by or is under common control with the insurer.
Agent: an individual who sells, services, or negotiates insurance policies either on behalf of a company or independently.
Aggregate: the maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single project.
Aggregate Cost Payments: method of reimbursement of a health plan with a corporate entity that directly provides care where the health plan pays total operating costs of the entity, less other income, and both guarantee each other’s solvency.
Aircraft: coverage for aircraft (hull) and their contents; aircraft owners' and aircraft manufacturers' liability to passengers, airports and other third parties.
ALAE: an estimate of the claims settlement expenses associated with a particular claim or claims.
Alien Company: an insurance company formed according to the laws of a foreign country. The company must conform to state regulatory standards to legally sell insurance products in that state.
Allied Lines: coverages generally written with property insurance, e.g., glass, tornado, windstorm and hail; sprinkler and water damage; explosion, riot, and civil commotion; growing crops; flood; rain; and damage from aircraft and vehicles.
All-Risk: also known as open peril, this type of policy covers a broad range of losses unless specifically excluded in the policy contract.
Alternative Workers' Compensation: coverage other than standard workers' compensation, employer's liability and excess workers' compensation (e.g., large deductible, managed care).
Ambulatory Services: health services provided to members who are not confined to a health care institution; also called outpatient services.
Annual Statement: an annual report required to be filed with each state in which an insurer does business, providing a snapshot of financial condition and significant events.
Annuitant: the beneficiary of an annuity payment, or the person during whose life an annuity is payable.
Annuities – Immediate Non-variable: an annuity contract that provides fixed payments beginning within 13 months of purchase.
Annuity: a contract providing income for a specified period of time, or the duration of life for one or more persons.
Appraisal: an estimate of value.
Arbitration: a binding dispute resolution tactic whereby a neutral party intercedes.
Assessed Value: estimated value for real or personal property established by a taxing entity.
Asset: probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Asset Risk: in the risk-based capital formula, risk assigned to the company's assets.
Assigned Risk: a governmental pool established to write business declined by carriers in the standard insurance market.
Assisted Living Care: coverage only while a policyholder is confined to an assisted living facility and meets policy requirements.
Assumed Reinsurance: the assumption of risk from another insurance entity within a reinsurance agreement or treaty.
Authorized Company: an insurer licensed or admitted to do business in a particular state.
Authorized Control Level Risk Based Capital: theoretical amount of capital plus surplus an insurance company should maintain.
Authorized Reinsurance: reinsurance placed with a reinsurer who is licensed or otherwise allowed to conduct reinsurance within a state.
Auto Liability: coverage that protects against financial loss because of legal liability for motor vehicle–related injuries or damage to the property of others.
Auto Physical Damage: motor vehicle insurance coverage (including collision, vandalism, fire and theft) that insures against material damage to the insured's vehicle.
Automobile Liability Insurance: coverage for bodily injury and property damage incurred through ownership or operation of a vehicle.
Balance Sheet: accounting statement showing the financial condition of a company at a particular date.
BCEGS (Building Code Effectiveness Grading Schedule): classification system for assessing building codes by region with emphasis on mitigating natural disaster losses.
Beneficiary: an individual who may become eligible to receive payment due to a will, life insurance policy, retirement plan, annuity, trust, or other contract.
Benefits (Medical & Hospital Expenses): total expenditures for health care services paid to or on behalf of a member.
Blanket Coverage: coverage for property and liability that extends to more than one location, class of property, or employee.
Boatowners/Personal Watercraft: covers damage to pleasure boats, motors, trailers, equipment and personal watercraft plus liability to others.
Bodily Injury: physical injury including sickness or disease to a person.
Boiler & Machinery / Equipment Breakdown: coverage for failure of boilers, machinery and electrical equipment, including damage, temporary repairs, and related liability.
Bonds: debt securities representing a creditor stake in the issuer, with scheduled payments of principal and interest.
Book Value: original cost plus capitalized acquisition costs and minus depreciation and adjustments.
Broker: an individual who sells and services insurance policies on behalf of the customer, not tied to a single insurer.
Builders' Risk Policies: coverage for buildings under construction, including materials and equipment used in construction.
Burglary and Theft: coverage for property taken or destroyed by burglary, theft, forgery, fraud, kidnap and ransom, and off-premises exposure.
Business Auto: coverage for motor vehicles used in commerce, including liability, injury protection, and physical damage.
Business Interruption: loss of income as a result of property damage to a business facility.
Business Owners Policy: business insurance package typically covering property, liability, and business interruption.
Calendar Year Deductible: amount that must be paid by the insured during a calendar year before the insurer pays further losses.
Capital and Surplus: a company's assets minus its liabilities.
Capital and Surplus Requirement: statutory requirement ordering companies to keep capital and surplus at or above a specified amount.
Capital Gains (Loss): excess (deficiency) of the sales price of an asset over its book value.
Capitation Arrangement: managed-care compensation plan where providers are paid a flat amount per member per month.
Captive Agent: an individual who sells or services insurance contracts for a specific insurer or group of insurers.
Captive Insurer: an insurance company established by a parent firm to insure the parent’s risks.
Carrying Value (Amount): SAP book value plus accrued interest, reduced by valuation allowances and non-admitted adjustments.
Cash: a medium of exchange.
Cash Equivalent: short-term, highly liquid investments easily converted to known cash amounts.
Cash Value: amount due to the policyholder upon surrender of an insurance or annuity product.
Casualty Insurance: liability coverage for negligent acts or omissions, including workers compensation, malpractice, and crime.
Catastrophe Loss: a large, unpredictable loss resulting from a disaster or major peril.
Ceded Premium: premium paid to purchase reinsurance coverage.
Ceding Company: insurance company transferring risk through reinsurance.
Centers for Medicare & Medicaid Services (CMS): U.S. agency responsible for Medicare/Medicaid and licensing federally qualified HMOs.
Claim: a request by the insured for payment due to a covered loss.
Coinsurance: in property policies, a clause requiring the insured to carry a specified percentage of insurance; in health, the percentage of costs paid by the insured.
Commercial Auto: coverage for motor vehicles used in business, protecting against injury and property damage liability.
Commercial General Liability (CGL): broad liability coverage including premises, operations, and products/completed operations.
Commercial Property: property insurance sold to commercial ventures.
Commission: percentage of premium paid to agents by insurers for selling policies.
Comprehensive/Major Medical: broad medical coverage including hospital, surgical, and physician expenses.
Conditions: policy requirements that must be met by the insured to qualify for indemnification.
Condos: homeowners insurance for condominium owners occupying the insured property.
Contractual Liability: coverage for liability assumed by contract.
Copay: fixed dollar amount paid by the insured toward covered medical expenses.
Covered Lives: total number of insured individuals, including dependents, under all policies and certificates.
Credit: policies providing benefits to a debtor for repayment of debt upon disability, death, or unemployment.
Crop: coverage protecting crops from perils like fire, hail, windstorm, flood, and insects.
Date of Issue: date when an insurance company issues a policy.
Declarations: policy statements describing applicant and property details such as occupation and specifications.
Deductible: portion of the insured loss paid by the policyholder.
Deferred Annuity: annuity whose payments begin at a future date.
Deferred Annuities: contracts providing income at a specified point in the future for a defined period or lifetime.
Demutualization: conversion of a mutual insurance company into a stock company.
Dental Insurance: policies providing dental treatment benefits such as exams, cleanings, and procedures.
Disability Income: compensates insureds for income lost due to a disabling injury or illness.
Disability Income – Long-Term: Provides weekly/monthly income benefits for more than five years (individual) or one year (group).
Disability Income – Short-Term: Provides income benefits for up to five years (individual) or one year (group).
Dividend: Refund of part of a paid premium from insurer surplus.
Domestic Insurer: Company domiciled and licensed in the same state it sells insurance.
Dual Interest: Insurance protecting both creditor and debtor interests in collateral.
Dwelling Property/Personal Liability: Package policy combining dwelling fire, allied lines, and personal liability insurance.
Early Warning System: system used by regulators to identify practices and risk-related trends that contribute to systemic risk by measuring insurers’ financial stability.
Earned Premium: portion of prepaid premium allocated to the insurer’s loss experience, expenses and profit year-to-date.
Earthquake: property coverage for losses caused by a sudden trembling or shaking of the earth (often excluding fire, explosion, flood or tidal wave following the event).
Effective Date: date an insurance policy goes into force.
Endorsement: an amendment or rider to a policy that adjusts coverage and overrides the general contract.
Excess and Umbrella Liability: liability coverage for losses exceeding the limits of underlying policies.
Excess of Loss Reinsurance: Reinsurance method where the insurer pays all claims up to a set amount, and the reinsurer covers losses above that limit.
Excess Workers’ Compensation: Coverage above a specific attachment point or self-insured retention for workers’ compensation claims.
Expense Ratio: Percentage of premium income used for expenses to acquire and service policies.
Experience Rating: Rating method where a group’s premiums are based on its own claims experience, with adjustments over time.
Exposure: The measure of risk or possibility of loss.
Extra Expense Insurance: Property insurance for extraordinary expenses due to business interruption, such as backup power systems.
Face Amount: the value of a policy to be provided upon maturity date or death.
Facultative Reinsurance:
Reinsurance for a specific policy for which terms can be negotiated by the original insurer and reinsurer.
FAIR Plan (Fair Access to Insurance Requirements):
State pools designed to provide insurance to property owners unable to obtain property insurance through conventional means.
Fair Value:
The amount at which an asset or liability could be bought or sold in a current transaction between willing parties, excluding forced or liquidation sales. Quoted active market prices are the best evidence of fair value.
Farmowners Insurance:
Insurance similar to homeowners but designed for farms, including property and liability coverage for dwellings, barns, equipment, and livestock.
Federal Flood Insurance:
Coverage provided through the National Flood Insurance Act program for qualifying residents and businesses in flood-prone regions.
Federally Reinsured Crop:
Crop insurance reinsured by the Federal Crop Insurance Corporation under the Standard Reinsurance Agreement.
Fees Payable:
Fees incurred but not yet paid.
FEMA (Federal Emergency Management Agency):
U.S. agency responsible for responding to, planning for, and recovering from natural disasters.
Fidelity:
Bond or policy covering employer losses resulting from employee dishonesty.
Financial Guaranty:
Insurance or surety guaranteeing performance of a financial obligation in case of default.
Financial Reporting:
Regulatory requirement for insurers to keep records and file statutory financial statements governing reserves, valuation, and reinsurance credits.
Financial Responsibility Law:
Law requiring motorists to demonstrate financial ability to pay for automobile-related losses.
Financial Statement:
Balance sheet and profit/loss statement used by regulators to oversee insurer reserves, assets, and liabilities.
Fire:
Coverage protecting against loss from fire or lightning, including business interruption and rental loss.
Fire Legal Liability:
Coverage for liability when the insured’s negligence causes fire damage to another’s property (e.g., tenant damaging rented space).
Fixed Deferred Annuities:
Deferred annuities with account value growth tied to insurer general account performance, often including guaranteed minimum returns.
Flood:
Coverage protecting against property loss resulting from flooding.
Foreign Insurer:
Insurer selling policies in a state other than its domiciled state.
Foreign Investment:
Investment in property or assets located outside the United States and Canada.
Foreign Jurisdiction:
Any jurisdiction outside the U.S., Canada, or their territories.
Fraternal Insurance:
Insurance available to members of a fraternal organization.
Fronting:
Arrangement where a licensed insurer issues a policy and transfers 100% of the risk to a reinsurer.
Generally Accepted Accounting Principles (GAAP):
An aggregate of the accounting standards, principles, and best practices for the preparation of financial statements, allowing for consistency in reporting.
Gramm-Leach Bliley Act (GLBA):
Act repealing the Glass-Steagall Act of 1933, allowing consolidation of commercial banks, investment institutions, and insurance companies. It established a regulatory framework for these industries and permits financial services companies to merge and engage in insurance and other new activities.
Goodwill:
The difference between the cost of acquiring an entity and the reporting entity’s share of the book value of the acquired entity.
Gross Paid-in and Contributed Surplus:
The amount of capital received in excess of the par value of the stock issued.
Gross Premium:
The net premium for insurance plus commissions, operating, and miscellaneous expenses. For life insurance, this includes dividends.
Group Accident and Health:
Coverage written on a group basis that pays scheduled benefits or medical expenses caused by disease, accidental injury, or accidental death, excluding amounts attributable to uninsured or partially insured plans.
Group Annuities – Deferred Non-Variable and Variable:
Annuity contracts providing accumulation based on guaranteed interest rates and variable returns tied to investment performance, with payments beginning at a designated future date.
Group Annuities – Deferred Variable:
Annuity contracts providing accumulation funds that vary with the rate of return of the underlying investment portfolio selected by the policyholder, with benefits beginning at a designated future date.
Group Annuities – Immediate Non-Variable and Variable:
Annuity contracts providing accumulations based on guaranteed crediting rates and/or variable returns, with payments beginning within 13 months after purchase.
Group Annuities – Immediate Variable:
Annuity contracts where the first payment occurs within 13 months after purchase; benefit amounts vary based on the performance of separate account investments.
Group Annuities – Unallocated:
Annuity contracts or portions where the insurer purchases annuities on behalf of retirees.
Group Annuity:
A contract providing income for a specified period or lifetime of one or more persons, created to benefit members of a defined group.
Group Health:
Health insurance issued to employers, associations, trusts, or other groups covering members and dependents, with individual certificates of coverage issued to the insured.
Group Code:
A unique three- to five-digit number assigned by the NAIC to identify companies within an insurance group.
Group Credit – Life:
Coverage sold in conjunction with loans that pays a benefit upon the borrower’s death, limited by duration and amount.
Group Health Organizations – Health Maintenance Organization (HMO):
A health plan where an enrollee pays a fixed membership fee in advance for comprehensive medical services delivered through approved providers in a designated service area.
Guaranty Fund:
A state-run funding mechanism that provides money to cover policyholder obligations of insolvent insurers.
Hard Market:
A market characterized by high demand and low supply, often resulting in higher premiums and stricter underwriting standards.
Hazard:
A circumstance or condition that increases the probability or severity of a loss.
Health – Excess/Stop Loss:
Insurance for health plans or self-insured employers that protects against excessive claims, covering losses when a single claim or total claims exceed a specified threshold.
Health Insurance:
Broad term for insurance that indemnifies or reimburses losses caused by bodily injury or illness, including related medical expenses.
Health Maintenance Organization (HMO):
A medical group plan providing comprehensive physician, hospital, and clinical services to members in exchange for a fixed periodic fee.
Health Plan:
A written promise of coverage providing defined health care benefits to individuals, families, or groups in exchange for premiums or other consideration.
Hold-Harmless Agreement:
A contractual risk transfer mechanism in which one party assumes the liability of another party, protecting them from losses or claims.
Homeowners Insurance:
A package policy combining real and personal property coverage with personal liability protection, typically covering dwellings, other structures, personal property, and additional living expenses, including mobile homes at fixed locations.
Hospital Indemnity Coverage:
Coverage providing a fixed, predetermined benefit or daily indemnity during hospital or intensive care stays, regardless of actual costs.
Hull Insurance:
Coverage protecting against damage to a vessel or aircraft, including permanently affixed equipment and components.
Incontestability Provision:
A life insurance and annuity provision limiting the time within which the insurer has the legal right to void the contract on grounds of material misrepresentation in the policy application.
Incurred But Not Reported (IBNR):
Claims that have occurred but have not been reported to the insurer at the reporting date, including losses not yet entered into the claims system or deficiencies in known reserves.
Incurred Claims:
Paid claims plus amounts held in reserve for claims that have been incurred but not yet paid.
Incurred Losses:
Losses sustained, paid or unpaid, during a specified time period, calculated as paid losses plus unpaid losses sustained during the period minus prior outstanding losses.
Indemnity, Principle of:
Legal principle stating the insured should be restored to approximately the same financial position as before the loss, without profit.
Independent Adjuster:
A freelance contractor paid a fee to adjust losses on behalf of insurance companies.
Independent Agent:
A representative of multiple insurance companies who sells and services policies independently under the American Agency System.
Independent Contractor:
An individual who works for themselves, providing goods or services to clients for a fee rather than as an employee.
Index Annuity:
A fixed annuity tied to the performance of an equity index such as the S&P 500 or Dow Jones Industrial Average.
Individual Annuities – Deferred Variable:
Annuity contract where accumulation varies according to the rate of return of the underlying investment portfolio, with payments beginning at a future date.
Individual Annuities – Immediate Variable:
Annuity contract providing payments beginning within 13 months after purchase, with amounts varying according to investment performance.
Individual Annuities – Special:
Annuity contracts with unique or specialized attributes beyond standard variable or fixed structures.
Individual Annuities – Deferred Non-Variable and Variable:
An annuity with funds accumulating under both guaranteed interest rates and investment-linked returns, with payments beginning at a future date.
Individual Annuities – Deferred Non-Variable:
Annuity contract where funds accumulate based on guaranteed or additional credited interest, with future payment start.
Individual Annuities – Immediate Non-Variable:
Annuity providing fixed payments beginning within 13 months after purchase.
Individual Annuities – Immediate Non-Variable and Variable:
An annuity combining guaranteed and variable investment options, with payments starting within 13 months after purchase.
Individual Health:
Health insurance issued to an individual and/or dependents, including conversions from group coverage.
Individual Credit – Credit Disability:
Insurance that makes monthly loan or credit payments to a creditor if the insured debtor becomes disabled.
Individual Credit – Life:
Insurance sold with loans providing protection against the borrower’s death.
Industrial Life:
Small-face-amount life insurance, often called “debit insurance,” with frequent premium payments.
Inland Marine:
Coverage for movable or specialized property, property in transit, or items at multiple locations such as equipment, livestock, antiques, or communications systems.
Insurable Interest:
A right or relationship whereby the insured would suffer financial loss from damage, loss, or destruction of the insured subject matter.
Insurance:
Economic mechanism that transfers risk from individuals or businesses to insurers through pooling of similar risks.
Insurance Holding Company System:
A group of two or more affiliated entities, at least one of which is an insurer, under common control or ownership.
Insurance Regulatory Information System (IRIS):
A solvency screening system developed by the NAIC and state regulators to monitor insurer financial condition.
Insurance to Value:
Ratio of the amount of insurance purchased to the actual replacement cost of insured property.
Insured:
The party or parties covered under an insurance policy.
Insurer:
A company authorized to write insurance or reinsurance under law.
Intermediary:
Entity that contracts with physicians and providers to arrange delivery of health services for a health insurer and its enrollees.
International:
Insurance business transacted outside the U.S. and its territories where the specific line of business cannot be determined.
Internet Liability Insurance / Cyber Insurance:
Coverage for cyber-related risks including data breaches, privacy violations, intellectual property infringement, and online liability.
Investment Grade:
A debt obligation rated within the top four rating classifications or designated NAIC Class 1 or 2.
Investment Income Accrued:
Investment income earned but not yet due for payment at reporting date.
Investment Income Due:
Investment income earned and legally due to the reporting entity as of the reporting date.
Investment Income Gross:
Total investment income earned, including accrued and unearned income changes, collected income, and amortization of discounts or premiums.
Irrevocable Beneficiary:
A life insurance beneficiary whose rights cannot be changed without their consent once designated by the policy owner.
Joint and Last Survivor Annuity:
A retirement plan that continues to pay benefits as long as at least one of the two or more annuitants is alive.
Joint Underwriting Association (JUA):
A loss-sharing mechanism in which multiple insurance companies combine resources to provide additional capacity for high-risk exposures.
Joint-Life Annuity:
An annuity contract that ceases payments upon the death of the first of two or more annuitants.
Key-Persons Insurance:
A policy purchased by, for the benefit of, a business insuring the life or lives of personnel integral to the business operations.
Kidnap/Ransom Insurance:
Coverage for ransom or extortion costs and related expenses incurred in the event of a kidnapping or extortion threat.
Lapse:
Termination of a policy due to failure to pay the required renewal premium.
Level Premium Insurance:
Life insurance policy for which the cost is equally distributed over the term of the premium period, remaining constant throughout.
Liability:
A future sacrifice of economic benefits arising from present obligations of an entity to transfer assets or provide services as a result of past events. It includes: (1) a present duty requiring future settlement; (2) little or no discretion to avoid the obligation; (3) obligations created by past events.
Life – Endowment:
Insurance paying the same benefit if the insured dies during the contract term or survives to the end of the term.
Life – Flexible Premium Adjustable Life:
Group life insurance allowing adjustment of face amount and premium payments, with interest credits and charges applied to individual certificates while providing minimum guaranteed values.
Life Settlements:
A contract in which a policyholder sells or transfers ownership of a life insurance policy to a third party for compensation less than the death benefit.
Lifetime Disability Benefit:
A provision in some disability income policies that pays lost wages for the term of disability or lifetime in permanent disability cases.
Limited Benefit:
Policies providing coverage for a single service such as vision or prescription drugs, and short-term care plans providing less than one year of coverage outside acute hospital care.
Limited Payment Life Insurance:
Whole-life insurance with a predefined number of premium payments.
Limited Policies:
Health insurance coverage for a specific ailment, such as cancer.
Limits:
Maximum value payable under a policy.
Line of Business:
Classification of business written by insurers.
Liquor Liability:
Coverage for liability arising from selling or serving alcohol to persons who cause injury or property damage due to intoxication.
Living Benefits Rider:
Rider on a life policy providing long-term care benefits for the terminally ill.
Lloyd's of London:
Association offering membership in syndicates organized to write insurance for particular hazards.
Loan-Backed Securities:
Pass-through certificates, CMOs, and similar securities where payments mirror receipts from underlying loans.
Long Duration Contracts:
Contracts with terms of 13 months or more where the insurer cannot cancel or increase premium during the contract term.
Long-Term Care:
Policies covering at least one year of diagnostic, preventive, therapeutic, rehabilitative, maintenance, or personal care services outside acute hospital care.
Long-Term Disability Income Insurance:
Provides monthly income to insureds disabled for extended periods, typically two years or more.
Loss:
Physical damage to property or bodily injury, including loss of use or income.
Loss Adjustment Expense (LAE):
Expected payments for costs incurred adjusting and recording losses, including DCC, AO, ALAE, and ULAE.
Loss Frequency:
Incidence of claims on a policy during a premium period.
Loss of Use Insurance:
Coverage protecting against loss of use due to damage or destruction of property.
Loss Payable Clause:
Coverage for a third-party mortgagee when insured property subject to default is lost or damaged.
Loss Ratio:
Percentage of incurred losses to earned premiums.
Loss Reserve:
Amount set aside by insurers to cover claims incurred but not yet paid.
Loss Reserves:
Estimated liability on an insurer’s statement for reported and unreported unpaid claims.
Losses Incurred:
Claims paid plus reserves held for unpaid future payments.
Losses Incurred But Not Reported (IBNR):
Estimated reserves set aside for claims that may have occurred but have not yet been reported.
Major Medical:
A hospital/surgical/medical expense contract providing comprehensive benefits as defined by the state of delivery.
Malpractice:
Alleged misconduct or negligence in a professional act resulting in loss or injury.
Managed Care:
System of health care delivery that influences utilization, quality, and cost of services.
Mandated Benefits:
Insurance coverage required by state or federal law.
Manufacturers Output Policies:
Broad coverage for personal property of manufacturers including raw materials, goods in process, finished goods, and shipped goods.
Margin Premium:
Deposit an organization must maintain with a broker for futures contracts bought or sold.
Market Value:
Fair value or the price obtainable from the sale of an asset under current conditions.
Mechanical Breakdown Insurance:
Coverage for repair or replacement due to failure of property from defects or wear and tear, including vehicles, equipment, electronics, boats, and appliances.
Medicaid:
Insurance associated with federal/state program providing medical assistance to eligible low-income individuals and families.
Medical & Hospital Expenses:
Total health care expenditures paid to or on behalf of members.
Medical Malpractice:
Coverage protecting licensed health care providers or facilities against liability from injury or death due to negligence or misconduct.
Medical Only:
Line providing only medical benefits without hospital coverage; excludes self-insured, FEHBP, Medicare, Medicaid, or dental-only.
Medical Professional Liability:
Coverage protecting licensed health care providers/facilities against liability for injury or death due to professional negligence; also called Medical Malpractice.
Medicare:
Federal program providing hospital and medical insurance to individuals aged 65 and older.
Medicare + Choice (Medicare Part C):
Program allowing Medicare beneficiaries to select managed care or alternative plan options.
Medicare Advantage Plan:
HMO, PPO, or Private Fee-For-Service plan contracting with Medicare and often providing additional coverage such as dental, vision, and wellness services.
Medicare Cost:
Contracts reimbursed monthly by CMS allowing beneficiaries to use providers outside the network; excludes stand-alone Part D.
Medicare Part D – Stand-Alone:
Prescription drug coverage issued individually or in group contracts.
Medicare Supplement / Medigap:
Insurance filling Medicare coverage gaps, paying deductibles, co-payments, and sometimes non-Medicare expenses.
Minimum Premium Plan:
Arrangement where insurer administers claims and insures large losses while employer self-funds estimated claims.
Mobile Homes – Homeowners:
Homeowners insurance for owners occupying the described mobile home.
Mobile Homes under Transport:
Coverage for mobile homes while being transported for personal or commercial purposes.
Modified Guaranteed:
Annuity that adjusts withdrawn value based on a contractual market value formula.
Member:
Subscriber or dependent for whom a health organization accepts responsibility to provide services.
Moral Hazard:
Behavioral tendency increasing likelihood of loss due to reliance on insurance.
Morale Hazard:
Carelessness or indifference leading to increased probability of loss.
Morbidity:
Frequency or severity of illness within a population.
Morbidity Risk:
Likelihood of illness, injury, or impairment excluding death.
Morbidity Table:
Statistical record of illness rates for defined age groups.
Mortality Table:
Chart showing population death rates by age.
Mortgage:
Note securing a loan for real property.
Mortgage Guaranty:
Insurance indemnifying lenders for foreclosure losses if borrowers default.
Mortgage Insurance:
Life insurance paying lender if insured mortgagor dies and loan payments are lost.
Mortgage-Backed Securities:
Asset-backed securities secured by mortgages and paying periodic returns similar to interest coupons.
Multi-Peril Insurance:
Property coverage combining several insurance protections in one policy.
Municipal Bond Guarantee Insurance:
Coverage guaranteeing bond principal for municipalities.
Municipal Liability:
Liability coverage for acts of a municipality.
Municipal Obligation Bond:
Security issued by a governmental unit obligating repayment via tax revenue, guarantees, utility charges, or appropriations.
Mutual Insurance Company:
Privately held insurer owned by policyholders and operated as a non-profit.
Mutual Insurance Holding Company:
Mutual company owning a capital stock insurer to pool risk for many insureds.
Named Insured:
The individual defined as the insured in the policy contract.
Named Peril Coverage:
Insurance for losses explicitly defined in the policy contract.
National Association of Insurance Commissioners (NAIC):
U.S. standard-setting and regulatory support organization created by state and territorial insurance regulators. Establishes standards, coordinates oversight, and represents state regulators domestically and internationally.
Negligence:
Failure to exercise reasonable consideration resulting in loss or damage to oneself or others.
Net Admitted Assets:
Assets whose values are permitted by law to be included in an insurer’s annual statement.
Net Income:
Total revenues from insurer operations less total expenses and income taxes.
Net Premiums Earned:
Premiums on policies that will not have to be returned to policyholders if canceled.
NFIP – National Flood Insurance Program:
Federal program providing flood insurance and floodplain management for personal and business property, encouraging insurer participation through a flood insurance pool.
Nonadmitted Assets:
Assets with economic value that cannot be used to fulfill policyholder obligations or are unavailable due to encumbrances; excluded from statutory financial statements.
Nonadmitted Insurer:
Insurance company not licensed to do business within a given state.
Non-controlled Stock Insurers:
Insurers where a parent owns less than 50% voting shares and cannot exercise control.
Non-proportional Reinsurance:
Reinsurance protecting overall portfolio results rather than specific risks; includes stop-loss and catastrophe coverage.
Notional Value:
Principal value upon which derivative future payments are based at a reporting date.
Nationally Recognized Statistical Rating Organization (NRSRO):
SEC-designated and SVO-recognized rating agencies such as Moody’s, S&P, A.M. Best, Fitch, and DBRS.
Nuclear Energy Liability:
Coverage for bodily injury and property damage liability resulting from nuclear energy materials on premises or in transit.
Occurrence:
An accident, including injurious exposure to conditions, resulting during the policy period in bodily injury or property damage neither expected nor intended from the standpoint of the insured.
Ocean Marine:
Coverage for ocean and inland water transportation exposures including cargo, vessels, earnings, and related liabilities.
Officer:
A president, vice-president, treasurer, actuary, secretary, controller, or other person performing equivalent executive functions.
Option:
Agreement granting the right to buy, sell, deliver, terminate, extend, or settle based on the value or performance of one or more underlying interests.
Other Accident and Health:
Accident and health coverage not classified as Group or Credit A&H, including renewable and non-cancelable forms and all Medicare Part D prescription coverage.
Other Considerations:
Unallocated annuity considerations and deposits incorporating mortality or morbidity risk not reported as premiums or annuity considerations.
Other Liability:
Coverage protecting insureds against liability arising from negligence or failure to act causing injury or property damage.
Other Underwriting Expenses:
Allocable expenses other than loss adjustment and investment expenses.
Owner Occupied:
Homeowners insurance sold to owners occupying the described property.
Package Policy: Two or more distinct policies combined into a single contract.
Par Value: The nominal or face value of a stock or bond.
Peril: The cause of property damage or personal injury; origin of desire for insurance ("Cause of Loss").
Permanent Life Insurance: Policy that remains active for the life of the insured.
Personal Auto Policy: Coverage designed to insure private passenger automobiles and certain trucks owned by an individual or married couple.
Personal Earthquake: Earthquake property coverage for personal, family, or household purposes.
Personal Flood: Separate flood insurance policy sold for personal, family, or household purposes.
Personal GAP Insurance: Insurance covering excess loan balance over primary insurance payout after total loss of collateral.
Personal Injury Liability: Liability coverage for discrimination, false arrest, libel, slander, identity theft, privacy violation, and related offenses.
Personal Injury Protection (PIP): Auto coverage paying medical benefits for insured and passengers under no-fault systems.
Personal Property: Credit insurance covering goods used as collateral or purchased in credit transactions.
Pet Insurance Plans: Veterinary care coverage for insured pets in case of illness or accident.
Policy: Written contract establishing legal insurance agreement.
Policy Dividend: Refund of part of premium on a participating life insurance policy.
Policy Period: Timeframe during which policy coverage is effective.
Policy Reserve: Funds set aside by life insurers to ensure ability to pay future claims.
Policyholders Surplus: Assets exceeding liabilities; insurer’s financial cushion.
Pollution: Environmental contamination.
Pool: Group sharing risk to limit individual loss exposure.
Preferred Provider Organization (PPO): Health care arrangement encouraging members to use contracted providers.
Preferred Risk: Applicant presenting lower-than-average likelihood of loss.
Premises and Operations: Liability coverage for injuries or damage occurring on premises or from business operations.
Premium: Money charged for insurance coverage.
Premiums Earned: Portion of premium covering expired policy term.
Premiums Net: Premium value based on interest and mortality assumptions for reserves.
Premiums Written: Total premiums generated from all policies written during a period.
Primary Insurance: Coverage paying first when multiple policies apply.
Prior Approval Law: Law requiring regulatory approval of insurance rates and forms.
Private Passenger Auto (PPA): Auto filings covering standard personal vehicle coverages.
Producer: Individual who sells, services, or negotiates insurance policies.
Product Liability: Coverage protecting manufacturers and sellers from liability for defective products.
Professional Errors and Omissions Liability: Coverage for liability arising from professional service mistakes.
Property: Coverage for loss or damage to real or personal property from various perils.
Pro-rata Reinsurance: Reinsurance where reinsurer shares proportionally in premiums and losses.
Protected Cell: Insurance-linked security structure isolating assets from general insurer risk.
Protection and Indemnity (P&I) Insurance: Broad marine legal liability insurance.
Provider Sponsored Network (PSN): Provider organizations contracting to deliver integrated health care.
Provisions: Policy contingencies and contractual terms.
Proximate Cause: Event directly causing covered loss.
Public Adjuster: Independent adjuster representing policyholders.
Pure Premium: Portion of premium equal to expected losses only.
Pure Risk: Situation involving only possibility of loss or no loss, without gain.
Qualified Actuary:
A person who meets the education, experience, and continuing education requirements of the NAIC Specific Qualification Standard for Statements of Actuarial Opinion, is in good standing with the American Academy of Actuaries, and is approved as qualified to sign casualty loss reserve opinions by the Academy's Casualty Practice Council.
Rate: Value of insured losses expressed as a cost per unit of insurance.
Risk Based Capital (RBC) Ratio: Ratio identifying poorly capitalized insurers, calculated as company capital divided by the minimum required regulatory capital.
Rebate: Refund of part or all of a premium payment.
Reinsurance: Transaction where a reinsurer agrees to assume part or all losses and expenses of a primary insurer in exchange for premium.
Reinsurer: Company assuming reinsurance risk.
Renewable Term Insurance: Insurance renewable for successive terms without medical examination.
Renters Insurance: Coverage for contents and liability in a rented residence; excludes structure.
Replacement Cost: Cost of replacing property without depreciation.
Reported Losses: Losses from reported claims incurred but not yet paid.
Reserve: Portion of premium retained to pay future claims.
Reserve Credit: Reduction in reserve amounts for reinsurance ceded.
Residence: Domicile location of a member as designated resident.
Residual Market Plan: Coverage system for higher-risk individuals unable to obtain insurance in the standard market.
Retention: Internal funding mechanism for loss exposure instead of risk transfer.
Retention Limit: Maximum amount of claims an insurer will retain.
Retrocession: Portion of risk a reinsurer cedes to another reinsurer.
Retrospective Rating: Premium adjustment based on actual loss experience.
Rider: Amendment to a policy agreement.
Risk: Uncertainty regarding potential loss.
Risk Retention Act: 1986 Act improving organization of Risk Retention Groups and Purchasing Groups.
Risk Retention Group: Group-owned insurer created to assume and spread liability risks of its members.
Salvage: Value recoverable after a loss.
Statutory Accounting Principles (SAP): Accounting principles defined by the NAIC for statutory financial reporting by insurers.
Securitization of Insurance Risk: Method allowing insurers to access capital and hedge risk by converting policies into marketable securities.
Security: A share, participation, or interest in property, enterprise, or issuer obligation.
Self-Insurance: Retention of risk rather than transferring it to an insurer, commonly for high-frequency low-severity losses.
Separate Account: Segregated funds invested separately by an insurer, typically for group retirement funds.
Short-term Disability: Benefit period covering disability typically 2 years or less.
Short-Term Medical: Temporary major medical coverage, generally 30–180 days, sometimes renewable.
Situs of Contract: Jurisdiction in which the contract is issued or delivered.
Social Insurance: Government-administered compulsory insurance emphasizing social adequacy.
Soft Market: Insurance market with abundant supply driving premiums downward.
Special Revenue Bond: Government-issued security financing public projects, not payable from standard municipal bond sources.
Specified Disease Coverage: Coverage providing set benefits for treatment of cancer or other named diseases.
Specified/Named Disease: Policies covering diagnosis/treatment of specifically named diseases.
Standard Risk: Applicant meeting normal underwriting standards and insurable at standard rates.
State Children's Health Insurance Program: Coverage associated with the Federal/State partnership under Title XXI of the Social Security Act.
State of Domicile: State where an insurer’s home office is located.
State Page: Premium and loss exhibit for each state where an insurer operates.
Statement Type: Primary business type under which an insurer files statutory statements.
Statement Value: Statutory book value after valuation allowances and non-admitted adjustments.
Statutory Accounting: Conservative accounting standards used by regulators to assess insurer solvency.
Stock Insurance Company: Insurer owned by stockholders.
Stop Loss / Excess Loss: Coverage protecting health plans or employers against claims exceeding a set limit.
Structured Securities: Loan-backed securities divided into classes with disproportionate payment allocation.
Structured Settlements: Periodic fixed payments for settlement of a claim.
Subrogation: Insurer’s right to seek recovery from third parties responsible for insured losses.
Subrogation Clause: Policy provision granting insurer right to pursue liable third parties.
Subsequent Event: Events occurring after balance sheet date but before financial statement issuance.
Substandard Risk: Applicant requiring higher premium or special conditions due to risk factors.
Superfund: Federal law imposing retroactive liability for environmental pollution cleanup.
Surety Bond: Three-party guarantee where insurer pays obligee if obligor defaults.
Surplus: Retained earnings.
Surplus Line: Specialized coverage available from nonadmitted insurers when unavailable in admitted market.
Swap: Agreement to exchange or net payments as part of derivative contracts.
Tenants: Homeowners insurance sold to tenants occupying the described property.
Term: Period of time for which a policy is in effect.
Term Insurance: Life insurance payable only if the insured dies within a specified period.
Third Party: A person other than insured or insurer who incurs loss or is entitled to payment due to acts of the insured.
Title Insurance: Coverage guaranteeing validity of title to real or personal property and protecting against undiscovered title defects.
Total Liabilities: Total money owed or expected to be owed by the insurer.
Total Revenue: Premiums, investment income, and other revenue sources.
Travel Coverage: Coverage for losses such as trip cancellation, baggage loss, delays, missed connections, and rental vehicle damage.
Treaty: A reinsurance agreement between a ceding insurer and reinsurer.
Unallocated Loss Adjustment Expense (ULAE): Loss adjustment expenses that cannot be specifically tied to a claim.
Umbrella and Excess (Commercial): Liability coverage above primary policy limits, or for gaps in commercial coverage or self-insured retentions.
Umbrella and Excess (Personal): Non-business liability coverage for individuals above primary policy limits or for coverage gaps.
Unauthorized Reinsurance: Reinsurance placed with a company not authorized in the insurer's state of domicile.
Underinsured Motorist Coverage: Covers losses caused by a driver with insufficient liability insurance, paying the difference between losses and available coverage.
Underlying Interest: Assets, liabilities, or interests underlying a derivative instrument.
Underwriter: Person who evaluates and classifies risk to determine coverage eligibility and pricing.
Underwriting: Process of evaluating risk, deciding acceptance, classifying risk, and determining premium.
Underwriting Risk: Risk-based capital requirement related to reserves and premiums.
Unearned Premium: Premium paid for coverage not yet provided.
Unearned Premium Reserve: Premiums received for future coverage periods; reported as a liability.
Universal Life Insurance: Adjustable life insurance with flexible premiums and coverage; policyholder receives annual financial reporting.
Unpaid Losses: Claims in settlement process, including incurred but not reported claims.
Valued Policy:
Insurance contract where the value is agreed in advance and is not tied to the actual amount of loss.
Valued Policy Law:
State law requiring insurers to pay the full face amount of a policy in the event of a total loss to a dwelling.
Variable Annuity:
Annuity contract where premiums are invested in securities and value fluctuates with investment performance.
Variable Life Insurance:
Life insurance with face value and/or duration tied to investment performance.
Variable Universal Life:
Policy combining flexible premiums of universal life with variable investment features, allowing policyholder-directed investments.
Viatical Settlements:
Agreements where a buyer purchases all or part of a life insurance policy.
Vision:
Limited benefit coverage providing eye care services, exams, eyewear, and sometimes surgery related to eye injury or illness.
Warrant:
Agreement giving the holder the right to purchase an underlying financial instrument at a specified price and time.
Warranty:
Coverage protecting against manufacturer defects and breakdowns after normal warranty expiration, covering repair costs or replacement obligations.
Whole Life:
Life insurance remaining in force for an insured’s entire lifetime, paying a benefit upon death.
Whole Life Insurance:
Life insurance that remains active for a person's lifetime with premiums typically paid for the same period, and benefits payable at death.
Workers' Compensation:
Insurance covering employer liability for employee injury, disability, or death regardless of fault under statutory workers' compensation laws.
Written Premium:
Contractually determined premium charged for the policy term based on risk, benefits, and expenses.
