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Abandonment Clause - A clause in fire insurance policies and other property forms that prohibit the insured from abandoning partially damaged property to the insurer in order to claim a total loss.

Absolute Assignment - Assignment by the policy owner of all control and rights to a third party (such as a trust fund). 

Accelerated Endowment - An option to use policy dividends to mature an endowment at an earlier date.

Accident - A fortuitous event, unforeseen and unintended. 

Accumulation Period - The period of time, prior to retirement, during which an annuitant is making payments or investments in an annuity. Such payments will accumulate on a tax-deferred basis.

Act of God - A flood, an earthquake or other accident or event that is without any human intervention and that could not have been prevented by reasonable care or foresight but is the result of natural causes.

Actual Cash Value - The sum of money required to pay for damages or lost property, computed on the basis of replacement value less its depreciation by obsolescence or general wear. 

Advertising Injury - Injury arising out of libel or slander, violation of the right to privacy, misappropriation of advertising ideas, or infringement of copyright, title or slogan committed in the course of advertising goods, products, or services. Contrast with Personal Injury.

Additional Living Expense - A form of coverage, which may be included in a policy, providing funds to pay for increased living costs (such as rent for alternative housing after a fire or other covered loss), which result from damage covered by the policy.

All Risk - Insurance against loss or damage to property arising from any fortuitous cause, except such as may be specifically excluded. The name implies everything (all) is covered, but merely means there are more things covered than not. Its use is a bit of a misnomer.

Ancillary Benefits - Benefits for miscellaneous hospital charges.

Annuity - (1) An amount of money payable yearly, or by extension, at other regular intervals; (2) An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.

Annuity Certain - An annuity that pays for a fixed number of years. If it pays for life after the certain period, it is called an "annuity certain and for life thereafter.

Annuity Due - An annuity under which the benefits are paid at the beginning of the benefit period rather than at the end.

Apportionment - The division of loss among insurance companies when two or more cover the same loss. 

Appurtenant Structures - A structure pertaining or belonging to the insured structure, such as a tool shed. Appurtenant structures are provided for in the Homeowners policy and other dwelling forms.

Assumed Liability - Liability which would not rest upon a person except that he or she has accepted responsibility by contract expressed or implied. This is also known as contractual liability. 

Audit - A survey of the insured's books, made to determine the premiums which should be paid the insurance company for protection furnished where the premium is based on the insured's payroll, gross receipts, values on hand or units handled or sold. 

Automatic Premium Loan - A provision in a life insurance policy authorizing the insurance company to use the loan value to pay any premium not paid by the end of the grace period.

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Bailee - A person or concern having possession of property committed in trust from the owner. An automobile repair shop is an example. 

Binder - An acknowledgement (usually from the agent) that insurance applied for is in force whether or not premium settlement has yet been made or the policy issued. 

Blanket Insurance - Property-liability insurance that covers more than one type of property in one location in one policy or form instead of under separate items, or one or more types of property at more than one location.

Bodily Injury Liability (sometimes denoted by the initials: BI) - The liability that may arise from injury or death of another person. On a standard automobile policy it is usually written with two amounts (shown on the dec page as 100 / 300 and referred to as "split limits"). The per person aggregate limit - means the most the company will pay for injury or death of one person ($100,000), and the per accident aggregate limit means the most the company will pay per accident of all those injured or killed ($300,000). Less frequently the Bodily Injury can be written as a Combined Single Limit (CSL) - meaning one limit is set regardless of the number of persons injured (ex: $300,000 CSL - means that one person could receive up to $300,000 in bodily injury damage or death benefit where in the previous example, that same person would be limited to $100,000). Most insurers have discontinued this type of BI limit for the obvious reason that if there were four persons injured or killed, the company would have to pay out $12,000 (4 x 3[000]) instead of only $300,000 in the "split limits" example. CSL is generally found only on commercial automobile policies. 

Bond - An obligation of the insurance company to protect one against financial loss caused by the acts of another. 

Builder's Risk Coverage Form - A commercial property coverage form specifically designed for buildings in the course of construction. (usually purchased by contractors or owners of rental property). 

Builder's Risk Insurance - Insurance against loss to buildings or structures in the course of construction. (used by private homeowners constructing their own home - this coverage can normally be added for an additional premium to an existing homeowners policy while the new house is being built). 

Burglary - Breaking and entering into premises of another, with felonious intent and with visible signs of the forced entry.

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Cancelable - A contract of insurance that may be terminated by the insurance company or insured at any time. Virtually every from of insurance is cancelable except life insurance and those health insurance policies designated as "guaranteed renewable" or "noncancellable and guaranteed renewable." 

Capital Sum - The maximum amount payable in one sum in event of accidental dismemberment. 

Catastrophe Hazard (or catastrophic loss) - The risk of loss by reason of simultaneous occurrence of a peril to which all insured in a group (or very large number of insured) are subject. A flood or tornado is examples of catastrophic loss.

Causes of Loss - Under the latest commercial policy forms, this term replaces the earlier term "perils insured against." 

Certificate - A statement evidencing that a policy has been written and stating the coverage in general. Also referred to as Evidence of Insurance. 

Cestui Que Vie - The person whose life measures the duration of a trust, gift, estate or insurance contract. Thus, in life and health insurance, this refers to the person on whose life or health the policy is written. Such a person is commonly called the insured, policyholder or policy owner. 

Chartered Property and Casualty Underwriter (CPCU) - A designation granted by the American Institute for Property and Liability Underwriters upon successful completion of a series of examinations and experience requirements in the fields of insurance, plus accounting, financing, economics, management and law. 

Claims-Made Coverage - A policy providing liability coverage only if a written claim is made during the policy period or any applicable extended reporting period. For example, a claim made in the current year could be charged against the current policy even if the injury or loss occurred many years in the past. If the policy has a retroactive date, an occurrence prior to that date is not covered. Contrast with Occurrence Coverage. 

Class Rate - A rate for risks of similar hazard. Class rates, for example, apply to dwellings. 

Clause - A term used to identify a particular part of a policy or endorsement.

CLU - Chartered Life Underwriter, a designation granted after examination and experience requirements by the American College of Life Underwriters. 

Coinsurance - In property insurance, a clause under which the insured shares in losses to the extent that she is underinsured at the time of loss. For example, if an insured building has a $100,000 Actual Cash Value and the policy has an 80% coinsurance clause, the insured would be expected to carry at least $80,000 of coverage. As long as the amount of insurance is $80,000 or more, all losses up to the policy limit would be paid on an ACV basis. If coverage is only $60,000 and a $20,000 loss occurs, the policy will only pay three-quarters* of the loss ($15,000). If coverage is $60,000 and a total loss occurs, the policy limit will be paid. *3/4 is the ratio of what the insured should have carried over the amount he actually carried in this particular case. 

Collateral Assignment - Assignment of a life insurance policy as security for a loan, the creditor to receive the proceeds or values to the extent of his or her interest. 

Collision Coverage - Physical damage protection for the insured's own automobile(s) for damage resulting from collision with another object or upset. 

Commercial General Liability (CGL) Coverage Part - General liability coverage that may be written as a monoline policy or part of a commercial package. "CGL" now means "commercial" general liability forms that have replaced the earlier "comprehensive" general liability forms. The latest forms include all sublines, provide very broad coverage, and two variations are available - "Occurrence" or "Claims-Made" coverage. 

Commercial Lines - This term is used to refer to insurance for businesses, professionals, and commercial establishments. 

Commercial Package Policy (CPP) - A commercial lines policy that contains more than one of the following coverage parts: Commercial Property, Commercial General Liability, Commercial Inland Marine, Commercial Crime, Boiler and Machinery Insurance, Commercial Automobile Insurance and Farm Coverage. 

Commissioner - The title of the head of the department of insurance in most states. The Insurance Commissioner is appointed by the current governor of the state. (See www.ohioinsurance.gov) 

Common Law Liability - The responsibility for injuries or damage imposed upon a party because of his actions, by that part of the law based upon custom and usage as established by the courts, as distinguished from liability under statutes passed by a legislative body. 

Completed Operations Liability Insurance - Liability insurance coverage for bodily injury and property damage arising out of the completed operations of a business, as opposed to the product of a business. (See also Product Liability). For example, repair work on an automobile. This coverage only applies once the completed operation (work) leaves the premises of the insured. 

Comprehensive Coverage - Traditional name for physical damage coverage for losses by fire, theft, vandalism, falling objects and various other perils. On Personal Auto Policies, this is now called "other than collision" coverage. On commercial forms, it continues to be called "comprehensive" coverage. 

Comprehensive Major Medical - A plan of health insurance that has a low deductible, high maximum benefits and a coinsurance feature. It is a combination of basic coverage and major medical coverage that has virtually replaced separate hospital, surgical and medical policies with each having its own deductible requirements. It is sometimes called an 80/20 or 50/50 plan referring to the special deductible features of the plan. 

Concealment - The withholding of facts by an applicant for insurance that affects an insurance risk or loss. 

Conditional Receipt - The more exact term for what is often called a "binding receipt" in life and health insurance. It provides that if premium settlement accompanies the application (usually the first month's or quarter's premium), the coverage shall be in force from the date of application (whether the policy has been issued or not) on the "condition that" the insurance company would have issued the coverage on the basis of facts as revealed by the application and other usual sources of underwriting information. 

Consequential Loss - A loss arising indirectly from an insured peril. For example, the damage done by water coming in through the widow broken by a storm tossed branch is covered under the "falling objects" part of the policy. Ordinarily, the water damage would not be covered had the window simply been left open on a basic form policy. 

Consideration - The exchange of value on which a contract is based - usually, in insurance, the premium. In life and health insurance, the Consideration is usually the premium and the statements in the application. 

Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 -Legislation providing for a continuation of group health care benefits under the group plan for a period of time when benefits would otherwise terminate. Continuation rights apply to enrolled persons and their dependents. Coverage may be continued for up to 36 months in nearly all other cases, such as loss of dependent eligibility because of death of the enrolled person, divorce or attainment of the limiting age. 

Constructive Total Loss - A partial loss of sufficient degree to make the cost of repairing more than the property is worth. 

Contingent Beneficiary - Person or persons named to receive benefits if the primary beneficiary is not alive. 

Contingent Business Interruption Insurance - Protects the insurable interest of a businessman in the continued operation of another business: (1) from which he obtains necessary supplies, (2) to which she sells a large part of her product. 

Contract of Insurance - A contract whereby an insurance company agrees to indemnify an insured for losses, provide other benefits, or render services to, or on behalf of, an insured. (The contract of insurance is often called an "insurance policy", but "policy" is merely the evidence of the agreement.) 

Contractual Liability - Liability assumed under any contract or agreement. Coverage is generally limited in liability policies, but in most cases may be provided for an additional premium. 

Contribution - (1) The share of a loss payable by an insurer when contracts with two or more insurers cover the same loss (apportionment). (2) The insurer's share of a loss under a coinsurance or similar provision. (3) The amount of the premium for group insurance or a pension plan paid by the employee.

Contributory - A general term used to designate any plan of insurance (usually group or franchise) in which the insured pays at least part of the premium. 

Convertible - A policy that may be changed to another form by contractual provision and without evidence of insurability. Usually a Term Life Insurance policy that may be changed to a permanent (whole life) form. 

Cost Base - Money that has already been taxed; used in reference to taxation of investment dollars. 

Coverage Trigger - A mechanism that determines whether a policy covers a particular claim for loss. For example, the difference between the coverage triggers of liability "occurrence" forms and "claims made" forms is that loss must occur during the policy period in the first case and the claim must be made during the policy period in the second case. 

Credit Insurance - Insurance on a debtor in favor of a lender intended to pay off a loan or the balance due thereon if the insured dies or is disabled (also called Credit Life insurance).

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Debris Removal Clause - A clause often added to a Fire Insurance Policy under which the company assumes liability for the removal of debris resulting from damage to the property covered by the peril insured against (for example: tree limbs from storm damage). 

Declarations (Dec Sheet) - A term used in insurance for the portion of the contract which contains information such as the name and address of the insured, the property insured, its location and description, the policy period, the amount of insurance coverage, applicable premiums and supplemental representations by the insured. 

Decreasing Term - A form of Life Insurance that provides a death benefit that declines throughout the term of the contract, reaching zero at the end of the period. Sometimes called "Mortgage Life", these policies are rarely issued with the lower rates offered for Level Term. 

Deductible - A provision or clause in an insurance policy that the first given number of dollars or percentage of expense will not be reimbursed. Sometimes referred to as "self insured retention", a deductible is used to lower the premiums for the insured and reduce the risk assumed by the company. 

Deferred Annuity - An annuity contract that provides for the initiation of payments at some designated future date in contrast to one in which payment begins immediately on purchase. 

Demolition Clause - A provision that excludes liability for costs incurred in demolishing undamaged property, often necessitated by building ordinances requiring that structures must be demolished after a certain degree of damage has been sustained. 

Dependent Properties - Properties that an insured business does not own, operate or control, but upon which the insured's income depends. Examples include major suppliers or customers. Previously known as "contingent" properties. 

Depreciation - Decrease in the value of property over a period of time due to use, wear, tear and obsolescence. 

Direct Writer - An insurance company that sells its policies through salaried employees (licensed agents) who represent it exclusively, rather than through independent local agents, who represent several insurance companies. Allstate and State Farm are examples of Direct Writers. Their agents are sometimes referred to as "captive agents". 

Disability Income Insurance - A form of health insurance that provides periodic payments to replace income, actually or presumptively lost, when the insured is unable to work as a result of sickness or injury. 

Discovery Period – The time allowed the insured after termination of certain bond and policy provisions to discover that he has sustained a loss which occurred during the period covered by the contract. 

Dividend – The return of part of the premium paid for a participating policy. 

Double Indemnity (DI) – Payment of twice the basic benefit in event of loss resulting from specified causes or under specified circumstances. Accidental Death and Dismemberment policies are generally written as a double indemnity.

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Earned Premium – That portion of a premium for which the policy protection has already been given during the now-expired portion of the policy term. 

Effective Date – The date on which an insurance policy or bond goes into effect, and from which protection is furnished. 

Electronic Data Processing (EDP) Coverage – Specialized type of insurance designed to cover computer equipment, data systems, information storage media and expenses or income loss related to EDP losses. 

Elimination Period – A loosely used term sometimes designating the waiting period and sometimes the probationary period. 

Employers Liability Insurance – Coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by a workers’ compensation law. 

Encumbrance – Any outside interest in or right to property founded on legal grounds, such as a mortgage, lien for work and materials, or a right of dower. It diminishes the interest of the person owning the property. 

Endorsement – A form attached to the policy bearing the language necessary to change the terms of the policy to fit special circumstances. 

Endowment Insurance – A form of Life Insurance where the face amount is payable to the insured at the end of the contract period or to a beneficiary if the insured dies before that. An example would be an insured purchasing an endowment payable at age 65: If he reaches that age, the proceeds would be payable to him. If he dies prior to that age, the proceeds would be payable to the designated beneficiary as a Life Insurance benefit. 

Exclusion Ratio – The relationship or ratio of cost base to total expected return from an annuity; used to calculate the percentage of each annuity payment which is considered to be a return of cost base. 

Exclusions – Causes, conditions or property listed in the policy which are not covered and for which no benefits are payable. 

Experience – The loss record of an insured, a class of coverage or of an insurance company. 

Experience Modification – A percentage increase or reduction in rates produced by application of the experience rating plan, based on the loss history of the insured. 

Expiration – The date upon which a policy will cease to cover, unless previously cancelled. 

Expiry – Termination of a Term policy at the end of the term period. 

Exposure – (1) State of being subject to the possibility of loss; (2) Extent of risk as measured by payroll, gate receipts, area or otherwise; (3) Possibility of loss due to a risk being caused by its surroundings (ex: house built in flood zone). 

Extended Coverage Endorsement (EC) – A specific endorsement attached to a Standard Fire Policy, usually providing coverage of windstorm, hail, explosion, riot, riot attending a strike, aircraft, vehicular damage, smoke and civil commotion. 

Extra Expense Coverage Form – A commercial property form designed to cover extra expenses incurred by a business that remains in operation following a covered property loss. 

Extra Expense Insurance – Insurance providing extra funds needed to continue a business uninterruptedly, after damage. It assumes no loss of income. 

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Face Amount – In a Life Insurance policy, the death benefit stated on the first page of the policy.

Fair Credit Reporting Act – Public Law 91-508 requires that an applicant be advised that a consumer report may be requested, if such be the case, and the scope of the investigation which may be requested and the name and address of the reporting agency, should the request for insurance be declined, because of information contained in that report. 

Family Expense Policy – A health insurance policy that insures the medical expense of all members of a family. 

Family Income Policy – A life insurance policy that pays an income after the death of the insured for a stated number of years from date of issue of the policy, and then pays the face amount. 

Family Maintenance Policy – A policy that pays a stated income for a stated number of years from the date of death of the insured and then pays the face amount. 

Federal Estate Tax - Also known as the Death Tax, the federal tax that is imposed on the deceased’s estate which includes the total assets comprising a person’s estate at death. 

Fidelity Bond – A bond that will reimburse an employer for loss up to the amount of the bond, sustained by an employer (the insured) by reason of any dishonest act of an employee (or employees) covered by the bond. 

Fiduciary – A person who occupies a position of special trust and confidence (for example, in handling or supervising the affairs or funds of another). 

Fiduciary Bonds – Bonds issued for persons appointed by order or decree of the court to take into custody, care for, manage and settle the estate of a decedent or of a person under legal age, or of a person who is otherwise – by reason of incompetence or insolvency – legally presumed to be incapable of managing his or her own business affairs; or to divide by sale, or in kind, real estate or personal property belonging to another. 

Financial Responsibility Law – A statute requiring motorists to furnish evidence of ability to pay damages, either before of after an accident. 

Fire – Combustion sufficient to produce a spark, flame or glow and which is hostile (as opposed to friendly – i.e., not in the place where it is intended to be, as in a furnace). 

“First” Named Insured – The first named insured appearing on a commercial policy. The latest forms permit the insurer to satisfy contractual duties by giving notice to the “first” named insured rather than require notice to all named insureds. 

Fixed Dollar Annuity – Guarantees a fixed, minimum dollar payout, during each payout period. 

Fixed-Period Installments – A settlement option under which the proceeds are guaranteed to be paid in equal installments for a specified period of time. 

Flat Cancellation – Cancellation of a policy free of any charge or penalty to the insured, as contrasted to short rate or pro-rata cancellation. 

Flexible Premium Annuity – An annuity that allows the contract holder to vary the amount of the premium payment, or stop payments and resume payments at will. A flexible premium annuity is used to fund IRA and Keogh retirement plans because it allows the amount of premium to change as wages change. 

Flexible Premium Policy – A life insurance policy under which the policy holder may vary the amount or timing of premium payments. 

Floater Policy – A policy under the terms of which protection follows moveable property, covering it wherever it may be. 

Fortuitous Event – An unforeseen accident. 

Franchise – In life and health insurance, a plan for covering groups of persons with individual policies uniform in provisions (although they may differ in benefits). Usually used for groups too small to qualify for true group or in association-group cases. In life insurance, the term wholesale is sometimes used instead of franchise. 

Fraternal – An insurance company organized under a special section of the state insurance code, characterized by a lodge or social system, and issuing insurance only to members. Also, the insurance issued by such an insurance company. 

Free Look – A period of time (usually 10, 20 or 30 days) during which a policyholder may examine a newly issued individual policy of life or health insurance, and surrender it in exchange for a full refund of premium if not satisfied for any reason.

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General Account – An investment portfolio used by the insurer for investment of premium income. This portfolio generally consists of safe, conservative, guaranteed investments, such as real estate and mortgages. 

General Aggregate Limit – A Commercial General Liability limit that applies to all damages paid for bodily injury, property damage, personal injury, advertising injury, and medical expenses, except damages included in the products-completed operations hazard. 

Grace Period – A period of time (commonly 30 – 31 days) after premium-due date during which a policy remains in force without penalty even though the premium due has not been paid. 

Guaranteed Insurability – An option in Life or Health Insurance contracts that permits the insured to buy additional prescribed amounts of insurance at prescribed future time intervals without evidence of insurability. 

Guaranteed Renewable – A contract that the insured has the right to continue in force by the timely payment of premiums for a substantial period of time as set forth in the contract. During that period of time, the insurer has no right to make any change in any provision of the contract other than a change in the premium rate for all insured in the same class.

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Hazard – A specific situation that increases the probability of the occurrence of loss arising from a peril, or that may influence the extent of the loss. For example, accident, sickness, fire, flood, liability, burglary, and explosion are perils. Slippery floors, unsanitary conditions, shingled roofs, congested traffic, unguarded premises, and uninspected boilers are also hazards. 

Health Maintenance Organization (HMO) – An organization of health providers. Each member pays a premium for which he receives medical care when desired. The emphasis is on preventative medicine, and it is an alternative to employee benefit plans. Employers of more than 25 persons are required to offer the alternative of HMO to employees, but not if the cost exceeds that of present employee benefit plans. 

Hired Car – An automobile that, for a consideration, is given to others for temporary use (ex: rental car). 

Hold Harmless Agreement – A contractual arrangement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of responsibility. Such agreements are typically found in contracts like leases, sidetrack agreements, and easements. For example, a typical lease may provide that the lessee must “hold harmless” the lessorfor any liability from accidents arising out of the premises. 

HR-10 – A qualified retirement plan for the self employed. Also known as a Keogh plan.

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Improvements and Betterments – Additions or changes made by a lessee at his own cost to a building which he is occupying which enhance its value. These become part of the realty and require special insurance consideration. 

Incontestability Clause – A clause in a health insurance policy providing that after the policy has been in force for a given length of time (two or three years) the insurance company shall not be able to contest it as to statements contained in the application and that, after that time, no claim shall be denied or reduced on the grounds that a condition, not excluded by name at the time of issue, existed prior to the effective date. A clause usually found in policies guaranteeing renew ability. Other policies usually use a variation of the clause entitled “Time Limit on Certain Defenses”. Both are contained in the mandatory Uniform Provisions. 

Indemnify – To restore the victim of a loss, in whole or in part, by payment, repair or replacement. 

Indirect Damage – Loss resulting from a peril, but not caused directly and immediately thereby. Indirect damage may be covered by insurance, as for example, Business Interruption, Leasehold Interest, Profits and Commissions, Rent or Rental Value and Consequential coverage.

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Level Premium Insurance – In Life Insurance, the premium for which remains at the same level (amount) throughout the life of the policy (except as reduced by any policy dividends). 

Level Term Policy or Rider – Provides a level or constant amount of insurance throughout its term. For example, a 20 year level term with a face value of $100,000 for a premium of (x) will remain at that level for the entire 20 years. Neither the face amount, nor the premium will increase or decrease during that term. Recently, however, laws have been enacted prohibiting insurance companies from projecting premiums beyond ten years. Policy illustrations now have what is called a “Numeric Summary” page showing possible projected “worst case scenarios” should the economy collapse or the insurance company fail. The insured’s premium, in that case, could be greatly increased. The insured is required by law to be made aware of this and must sign the page indicating he or she understands this possibility. There are now available, for an added premium, “guaranteed” Level Term products that the insurance company covenants with the insured to maintain the level face value and premium no matter what happens. 

Liability – Broadly, any legally enforceable obligation. The term is most commonly used in a pecuniary sense. 

Liability Insurance – Insurance that pays and renders service on behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract. 

License and Permit Bonds – Bonds required by various municipalities or public authorities to indemnify them against loss in the event of violation of regulations or ordinances under which the permit is required. 

Life Annuity – A contract that provides a stated income for life, payable annually or more frequently. 

Life With Period Certain – An annuity option that provides a lifetime income to the annuitant plus an extra guarantee of income for a specified period of time such as 5 or 10 years. The period certain provides income to the annuitant or the annuitant’s survivor. 

Limited Pay Life Policy – A whole life contract with premium limited until the expiration of a stated (limited) period. 

Loading – The amount added to the pure insurance cost to cover the cost of the operations of an insurer, the possibility that losses will be greater than statistically expected, and fluctuating interest rates on the insurer’s investments. The “pure” insurance cost is that portion of the premium estimated to be necessary for losses. 

Long-Term Disability – (1) A disability having a duration longer than a short-term disability, the exact duration being variable and a matter of reference; more commonly, anything longer than 90 days. (2) A form of group disability insurance paying benefits for more than the customary 13 to 26 weeks; more commonly, benefits of five years duration or more but again depending on terms of reference. 

Loss Ratio – The percentage of losses to premiums – usually losses incurred to premiums earned. 

Lost Policy Release – A statement signed by the insured releasing the insurance company from all liability under a lost or mislaid contract of insurance, so that a replacement policy may be issued.

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Maloney Act – A 1938 amendment to the Securities Exchange Act of 1934. The Maloney Act established the National Association of Security Dealers (NASD) as a self regulatory organization (SRO) for those involved in the sale of securities. 

Market Risk – A risk experienced by those who invest in securities, which is the risk of possible loss of investment since there are no guarantees associated with such investments. 

Market Value Clause – A provision that may be used in a property damage insurance form covering some risks which obligates the insurance company, in the event of loss, to pay the established cash selling price of the destroyed or damaged stock, rather than the actual cash value as provided in the Standard Fire Policy. 

Master Policy – The policy contract issued to the employer (or other entity) under a group insurance plan. 

Maturity – The date at which the face amount of a life insurance policy comes due either by reason of death or endowment. See also Endowment Insurance. 

Maxi Tail, or Full Tail – Unlimited extended reporting period allowing for making claims after expiration of a “claims-made” liability policy. See also Supplemental Extended Reporting Period. 

Medicaid – A medical benefits program administered by states and subsidized by the federal government. Under this plan, various medical expenses will be paid to those who qualify. It is technically referred to as Title XIX Benefits. 

Medicare Benefits – Benefits provided by a Federal program as part of the Social Security program. It applies to persons over 65 years of age and certain disabled beneficiaries under the Social Security program. Benefits provide hospital insurance and supplementary medical insurance. 

Medicare Supplement Insurance – Insurance coverage sold on an individual or group basis that helps to fill the gaps in the protection provided by the Medicare program. Medicare supplements cannot duplicate any benefits provided by Medicare, but may pay part or all of Medicare’s deductibles and co-payments, and may cover some services and expenses not covered by Medicare. 

MIB – Medical Information Bureau. An organization serving as a clearing house of medical information on impaired risks reported to it by insurance companies which are members of the service and reported to them as a source of underwriting information on applicants. 

Midi Tail – Automatic five-year extended reporting period allowing for the making of claims after expiration of a “claims-made” liability policy, but only applies to claims arising from occurrences which were reported no later than 60 days after the end of the policy. See also Extended Reporting Period. 

Mini Tail – Automatic 60-day extended reporting period allowing for the making of claims after expiration of a “claims-made” liability policy. See also Extended Reporting Period. 

Minimum Premium – The smallest premium that an insurance company will accept for writing a particular policy or bond for a designated period. 

Misrepresentations – The use of written or oral statements of the insured or insurance company misrepresenting the risk, terms, coverages, benefits, privileges or estimated future dividends of any policy. 

Mode Premium  – The premium paid according to the mode of payment selected by the policy owner; that is, monthly, quarterly, semi-annually or annually (or any other mode acceptable to the insurance company). 

Monoline Policy – Any insurance coverage written as a single line policy: an automobile insurance policy, for example. 

Moral Hazard – A condition of morals or habits that increases the probability of a loss from a peril. Smoking in bed would be an example, or hanging towels to dry on a space heater. 

Morale Hazard  – An attitude that increases the probability of loss from a peril. The attitude of, “It’s insured; so why worry?” is an example of a morale hazard. 

Mortgage (or Mortgagee) Clause – A provision attached to a Fire or other direct damage insurance policy covering mortgaged property, reciting that the loss shall be payable to the mortgagee as his interest may appear and that the mortgagee’s right of recovery shall not be defeated by any act or neglect of the insured and giving the mortgagee other rights and privileges. 

Mortgage Insurance Policy – In life and health insurance, a policy the benefits from which are intended to pay off the balance due on a mortgage or meet the payments on a mortgage as they fall due upon or after the death or disability of the insured. In some policies, the benefits are limited to payment of the remaining mortgage. A term life policy – matching the term of the mortgage - may be a better way to cover this exposure. 

Motor Truck Cargo Policy – Owner’s Form – This form insures the owner of a truck against loss to his own property while being transported. It pays for the loss or damage of cargo for the perils insured against, regardless of the legal liability. 

Motor Truck Cargo Policy – Trucker’s Form – This form indemnifies the policyholder, a trucker, for loss or damage resulting from his legal liability as a carrier while transporting the property of others. It does not insure against any loss for which he is not legally liable. Statutory law requires a trucker to carry a minimum amount of this coverage. 

Multiple Indemnity – A provision in a policy that allows the benefit to be increased by a stated multiple (double or triple, for example) if the peril occurs in a specified way or ways (such as double indemnity in a life insurance policy for accidental death or triple indemnity in a health policy for common carrier accident). 

Mutual Insurance Company (Insurer) – An incorporated insurance company without incorporated capital whose governing body is elected by the policyholders. The policyholders are the shareholders and they share in the success and sometimes the failure of the company.

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NAIC – National Association of Insurance Commissioners. An association of state insurance commissioners, active in discussions of regulatory problems and in the formation and recommendation of uniform practices and legislation.

Named Insured – Any person, firm or corporation, or any member thereof, specifically designated by name as insured(s) in a policy as distinguished from the others who, though unnamed, are protected under some circumstances. A common application of this latter principle is in liability policies wherein by a definition of “insured” protection is extended to interests (not designated by name) according to their status or in particular situations or circumstances. 

Named Non-Owner Policy – An Automobile Insurance policy issued to someone who does not own an automobile, but who drives borrowed or rented autos. 

Named Peril Policies – Named peril policies specify what perils are insured against, contrary to so-called all risk policies. Most standard home and auto policies are of this type. 

National Flood Insurance Program (NFIP) – The federal government’s program to provide flood insurance at subsidized rates. 

Natural Death – Death by means other than accident. 

Negligence – Failure to use that degree of care that an ordinary person of reasonable prudence would use under the given circumstances. Negligence may be constituted by acts of either omission or commission or both.  

Net Cost – Premiums paid minus cash value and any policy dividends paid as of the date the calculation is being made. In the life business, it is common to draw up net cost comparisons at the end of ten and twenty years. 

Net Line – The amount of liability the insurance company is prepared to expose to loss for its own account. 

Net Premium or Rate – (1) The pure insurance premium. (2) In life insurance, a participating premium after subtracting dividends paid or anticipated. (3) In property / liability insurance, the gross premium less the commission. 

Nonrenewal – Termination of insurance coverage at an expiration date or anniversary date. This action may be taken by an insurer who refuses to renew, or by an insured who rejects a renewal offer. 

Non-Admitted Insurance Company (Insurer) – An insurance company not licensed (admitted) to do business in a given state. These companies are sometimes called “Surplus Lines Carriers”. 

Non-Assignable – A policy that the owner cannot assign to a third party. 

Non-Cancelable (Non-Can) - A contract of Health Insurance that the insured has a right to continue in force by payment of premiums, as set forth in the contract. During that period of time, the insurer has no right to make any change in any provision of the contract. The NAIC recommends that the term “non-cancelable” not be permitted to be used to designate any form that is not renewable to at least age 50 or for at least 5 years if issued after age 44. Note that this is in contrast to Guaranteed Renewable, on which the premium may be increased by classes. The premium for non-cancelable policies must remain as stated in the policy at the time of issue.

Non-Contributory – Any plan or program of insurance (usually group) for which the employer pays the entire premium and the employee contributes no part of the premium. 

Non-Forfeiture Values – Those values in a life (and, rarely, health) insurance policy that the policyowner does not forfeit even if he ceases to pay premiums: cash value, loan value, paid-up value, extended term value. 

Non-Ownership Automobile Liability Insurance (usually; “Hired & Non-owned”) – Protection of the policyholder against claims for bodily injury and property damage liability caused by his employees or others using autos not owned or hired by the insured in conducting his or her business. 

Non-Participating – Insurance that does not pay policy dividends. 

Non-Qualified Plan – A retirement plan that is not qualified for special tax considerations by the IRS. The plan may discriminate as to participation and is not filed with the IRS.

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Obligee – Basically, anyone in whose favor an obligation runs. This term is used most frequently in surety bonds, where it refers to the person, firm or corporation protected by the bond. 

Occupancy – In insurance, this term refers to the types and character of the use of property in question. 

Occupational Hazard – A condition in an occupation that increases the peril of accident, sickness, or death. 

Occurrence Coverage – A policy providing liability coverage only for injury or loss that occurs during the policy period, regardless of when the claim is actually made. For example, a claim made in the current policy year could be charged against a prior policy period, or may not be covered, if it arises from an occurrence prior to the effective date. Contrast with Claims-Made Coverage. 

Optionally Renewable – A contract of health insurance in which the insurer reserves the unrestricted right to terminate the coverage at any anniversary or, in some cases, at any premium due date, but does not have the right to terminate coverage between such dates. 

Other Insurance Clause – A provision found in practically every insurance policy except life and sometimes health, stating what is to be done in case any other contract of protection embraces the same property and/or hazard. 

Over-Age Insurance – Health insurance issued at ages above those of which such insurance is normally issued, mainly above age 65. 

Over-Insurance – A condition in which (1) more insurance is in force on the insured or the risk than the potential loss or (2) so much is in force as to constitute a moral or morale hazard - such as so much disability insurance being in force that it becomes profitable to become disabled.

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Package Policy – Any insurance policy including two or more lines or types of coverage in the same contract. 

Paid-Up – Life insurance on which all premiums have been paid but that has not yet matured by death or endowment, such as a Limited Payment policy on which the premium-paying period has been completed or the insurance paid for by using the cash value under the paid-up Non-forfeiture option. 

Paid-Up Adds – Abbreviation for Paid-Up Additions. Additional single premium life insurance paid for by policy dividends and added to the face amount. 

Partial Disability – A condition in which, as a result of injury or sickness, the insured cannot perform all of the duties of his occupation but can perform some. Exact definitions vary from policy to policy. 

Partial Loss – A loss under an insurance policy which does not either (1) completely destroy or render worthless the insured property, or (2) exhaust the insurance policy limit. 

Participating – (1) Insurance that pays policy dividends. (2) Insurance or reinsurance which contributes proportionately with other insurance on the same risk. 

Payor Benefit / Clause – A rider or provision, usually in Juvenile policies, under which premiums are waived if the payor (usually the parent) of the premium becomes disabled or dies while the child is still a minor. 

Payroll Audit – An examination of the insured’s payroll records by a representative of the insurance company to determine the premium (or refund) due on a policy. 

Percentage Participation – A provision in health insurance contracts that the insurance company will share covered losses in agreed proportions. (often erroneously called “Co-Insurance”) 

Peril – Cause of a possible loss. 

Permanent & Total Disability – A total disability from which the insured does not recover. When used as a definition in a policy (usually a life insurance policy rider), “permanent” is presumed after a stated period of time commonly six months. 

Permanent Life Insurance – A term loosely applied to life insurance policy forms other than Group and Term, usually cash value life insurance including Endowment as well as Whole Life. 

Personal Articles Floater – Provides all risk coverage for valuable items such as furs, jewelry, cameras, silverware, etc. formerly insured under separate contracts. The items are generally listed by description and value. This can be contrasted to the personal effects floater. 

Personal Injury – Injury other than bodily injury arising out of false arrest or detention, malicious prosecution, wrongful entry or eviction, libel or slander, or violation of a person’s right to privacy committed other than in the course of advertising, publishing, broadcasting or telecasting. Contrast with Advertising Injury. 

Personal Injury Protection (PIP) – The formal name usually given to no-fault benefits in states that have enacted mandatory or optional no-fault Automobile Insurance coverages. PIP usually includes benefits for medical expenses, loss of work income, essential services, accidental death and funeral expenses. 

Personal Lines – This term is used to refer to insurance for individuals and families, such as private passenger automobile insurance and homeowner policies. 

Personal Property – Any property of an insured other than real property (real estate). Homeowner policies protect the personal property of family members, and commercial forms are used to protect many types of business personal property of an insured. 

Personal Property of Others – Property, other than real property (real estate), which is not owned by an insured. Liability forms have traditionally excluded coverage for property of others in an insured’s care, custody or control. Modern homeowner forms and commercial property forms provide some coverage for property of others. 

Policy Dividend – The return of the overcharge in a participating premium. It represents the difference between the premium charged and actual experience. 

Policy Fee – A special, one-time, first premium charge to offset in whole or part the first-year acquisition cost rather than amortize it over several years. Also sometimes used as a “quantity-discount” device. The policy fee, being the same amount whether the insurance policies for $1,000 or $1,000,000, means that the insured pays proportionately less as policy size increases – which is equitable in view of the fact that certain costs of acquisition (such as clerical costs) do not vary with policy size. 

Policyholder – Literally, the person who has possession of the policy. Thus the term is non-functional as commonly used. See comment under Insured. 

Policy Loan – A loan made by the insurance company to the policyowner with the cash value of the policy as security or collateral. One of the usual Nonforfeiture options. 

Policyowner – The person who has the right to exercise the rights and privileges in the policy contract. Such person may or may not be the insured, depending on policy ownership and assignment, if any. 

Policy Reserve – In health insurance, same as unearned premium reserve. In life insurance, the erroneous concept that an individual policy has a pro rata share of the total reserve for all policies. 

Power of Attorney – Authority given one person or corporation to act for and obligate another, to the extent laid down in the instrument creating the power. In reciprocal insurance each subscriber gives the individual or incorporated manager (attorney-in-fact) authority to exchange insurance for him with other subscribers. A reciprocal contract of insurance cannot be completed without this power of attorney. 

Pre-existing Condition – A condition of health or physical condition (and sometimes moral condition) that existed before the policy was issued. 

Preferred Provider Organization (PPO) – An organization of hospitals and physicians who provide, for a set fee, services to insurance company clients. These providers are listed as preferred and the insured may select from any number hospitals and physicians without being limited as with an HMO. Coverage is 100%, with a minimal copayment for each office visit or hospital stay. Contrast with Health Maintenance Organization. 

Presumption of Agency – A legally binding agency relationship when, in fact, no formal agency agreement is in effect. If an insurer acts to give the appearance of agency, perhaps by furnishing letterhead and applications before a person has been licensed and appointed, an agency relationship exists under the law and the insurer may be legally bound by acts of person acting as agent. 

Primary Beneficiary – The beneficiary named first to receive proceeds or benefits, if living when proceeds of benefits are due.  

Principal – A person or organization whose obligations are guaranteed by a bond. 

Principal Sum – The amount payable in one sum in the event of accidental death or certain accidental dismemberments. When a contract provides benefits for both accidental death and accidental dismemberment, each dismemberment benefit is an amount equal to the principal sum or some fraction therof. Examples would be half the principal sum for loss of one arm, half the principal sum for the loss of one leg, etc. 

Probationary Period  – A period of time between the effective date of a health insurance policy and the date coverage begins for certain conditions. See Elimination Period and Waiting Period for distinctions.  

Producer – Term commonly applied to an agent, solicitor, or other person who sells insurance, producing business for the company and for a commission (if so paid) for himself or herself. 

Products Liability Insurance – Provides protection against claims arising out of the use, handling or consumption of a product. (See also Completed Operations insurance.) 

Professional Liability Insurance – Liability insurance to indemnify professionals, doctors, lawyers, architects, etc. for loss or expense resulting from claim on account of bodily injuries because of any malpractice, error, or mistake committed or alleged to have been committed by the insured in his profession. 

Property Damage (Liability) Insurance – Protection against liability for damage to the property of another not in the care, custody and control of the insured, as distinguished from liability for bodily injury. In the majority of cases, property damage insurance is written in connection with the bodily injury protection, the premiums and limits of insurance being distinct. 

Pro Rata – (1) Distribution of the amount of insurance in one policy, among the several objects or places covered, in proportion to their value or to the amounts shown. (2) The distribution of liability among the several insurance companies having policies on the risk. 

Pro Rata Cancellation – The termination of an insurance contract or bond, premium charge being adjusted in proportion to the exact time the protection has been in force. (See Short Rate.) 

Pro Rata Distribution – A provision, also known as the Pro Rata Distribution Clause, used in the writing of certain blanket policies. Its purpose is to divide the amount of insurance carried under a single item in the policy form among the several subjects of insurance, in that proportion which the value of each subject of insurance bears to the total value of all property covered under that single item in the policy form. 

Pro Rata Liability Clause – Provides that losses will be paid in the proportion that the amount of the policy bears to the entire amount of insurance on all policies covering the loss. This provides for insurance companies to appropriately share in the loss when more than one policy exists yet prevents the insured from collecting in total from several insurance companies and making a profit. 

Proration – The adjustment of Health Insurance policy benefits by reason of a change of occupation or the existence of the other insurance covering the same contingency. 

Protection – (1) Term used interchangeably with the word “coverage” to denote the insurance provided under the terms of a policy. (2) Term used to indicate the existence of fire-fighting facilities in an area known as a “protected” area. These areas are rated into classes, the lower the number being the better suited to fight fires in that particular area. Usually they number 1 – 9. Hudson has a Protection Class 4, for example where more urban areas, such as the city of Cleveland will have a 3 or lower rating and a more rural area like Rootstown will be Protection Class 9. 

Proximate Cause -The effective cause of loss or damage; an unbroken chain of cause and effect between the occurrence of an insured peril or a negligent act and resulting in injury or damage to property. 

Public Liability Insurance – A general term applied to forms of “Third Party Liability Insurance,” both as respects bodily injury and property damage. The term is still sometimes used to indicate forms of “Bodily Injury” Liabilty insurance as distinguished from “Property Damage” Insurance, but the better practice is to designate by their respective titles these different forms in the interest of clarity. 

Public Official Bond – A Surety bond under which the company (surety) guarantees that the principal (the public official) will faithfully perform his official duties and will account for all funds entrusted to his care.

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Qualified Plan – A retirement plan which does qualify for special tax advantages due to filing with and approved by the IRS. Qualified plans must meet certain IRS requirements to be classified as qualified.

Quarantine Indemnity – A benefit paid for loss-of-time resulting from quarantine of the insured by health authorities. 

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Railroad Sidetrack Agreement – A contract entered into between a railroad and an entity under the terms of which the railroad agrees to build and maintain a switch track on the entity’s premises to facilitate shipments, and the entity agrees to release the carrier from liability to a certain extent. 

Rated – Usually used in combination, rated-up or rated policy. A policy issued with an extra premium charge because of physical or moral impairment. A form of substandard insurance. 

Rating Bureau – An organization that classifies and promulgates and in some cases compiles data and measures hazards of individual risks in terms of rates in a given territory. 

Rebate – Giving to the policyowner some part of the agent’s commission (or something of value) as an inducement to buy, which is an illegal action. 

Recurring Clause – A Health Insurance policy provision defining the duration of a period of time during which the recurrence of a condition will be considered a continuation of a prior period of disability or confinement. 

Reduced Paid-Up Insurance – A form of insurance available as a non-forfeiture option that provides that the cash value of the policy may be used as the single premium for paid-up insurance in whatever amount it will provide (which will be a lesser or reduced amount than the policy face amount in most cases). 

Refund Life Annuity – An annuity paying installments as long as the insured lives and installments after death to the beneficiary until the amount paid equals the principle sum of insurance. 

Reinstatement – (1) Putting a lapsed policy back in force. (2) The payment of a claim under some forms of insurance reduces the principal amount of the policy by the amount of the claim. Provision is usually made for a method of reinstating the policy to its original amount. This may be done automatically either with or without premium consideration or at the request of the insured. 

Reinsurance – (1) A contract of indemnity against liability by which the insurance company procures another insurance to insure it against loss or liability by reason of the original insurance. (2) Insurance by one insurance company of all or part of a risk accepted by it with another insurance company which agrees to reimburse the insurance company for the portion of the claim reinsured. The insurance company obtaining the reinsurance is called the “ceding insurance company;” the insurance company issuing the reinsurance is called the “reinsurer.” A reinsurer may, in turn, seek reinsurance on some portion of the risk it has reinsured, a process known as “retrocession.” 

Relative Value Schedule (RVS) – Shows the value of one medical procedure in relation to another. 

Release – (1) To give up, abandon, and discharge a claim or an enforceable right to one as against another. (2) Name of the instrument or form evidencing such an act. 

Renewable Term – Term Life Insurance that may, upon expiry of the term for which issued, be renewed for another term without evidence of insurability. 

Rent Insurance (Rental Income) – For loss by the owner-landlord of the rent that would have been payable by the tenant of the property where the tenant, by the terms of the lease or by statute, is relieved of liability for the payment of rent during a period of disuse if the property is damaged by a peril covered by the contract.  

Rental Value Insurance – Insurance that provides indemnity for loss of the rental value of property when the owner or the tenant (if he or she remains liable for the payment of rent) is deprived of the use of the property because of its damage by a peril insured against. 

Replacement Cost – The cost of replacing property without deduction for depreciation. 

Reporting Form – Fire or other direct damage insurance written under a form of policy that covers fluctuating values of stocks of merchandise, furniture and fixtures and improvements and betterments by means of periodical reports submitted to the insurance company by the insured, with an annual adjustment of premium on the average value. Builders Risk is sometimes written on a Reporting Form. 

Representations – On an application: facts that the applicant represents as true and accurate to the best of his or her knowledge and belief. In contrast to warranty (see Warranty). 

Rescission – Repudiation of a contract for cause. 

Reserve – (1) An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. (2) An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion a reserve may be an asset, such as a reserve for taxes not yet due. 

Residual Markets – Various insurance markets outside of the normal agency-company marketing system. Residual markets include government insurance programs, specialty pools (aviation risks and nuclear risks), and shared market mechanisms (assigned risk plans). 

Retention – (1) The amount of liability assumed but not reinsured by an insurance company. (See Net Line and Reinsurance). (2) A risk management form that means to retain a risk. One of the four major risk management techniques. 

Retroactive Date – Date on a “claims-made” liability policy that triggers the beginning period of insurance coverage. A retroactive date is not required. If one is shown on the policy, any claim made during the policy period will not be covered if the loss occurred before the retroactive date. 

Return of Premium – A rider or provision (a) in a Life Insurance policy that agrees to pay in addition to the face amount, a supplemental amount equal to the total of premiums paid to date of death; or (b) in a Health Insurance policy agreeing that if claims over a stated period of time (usually ten years) are less than a certain percentage of total premiums paid, the policyowner will be paid an amount equal to a percentage of premiums paid to date. 

Return Premium – The amount due the insured if a policy is cancelled, reduced in amount or reduced in rate. (See Pro Rata and Short Rate.) 

Rider – An amendment attached to a policy that modifies the conditions of the policy by expanding or decreasing its benefits or excluding certain conditions from coverage. 

Risk – (1) A chance of loss. (2) A person or thing insured. (Impaired or substandard risk: An applicant whose physical condition or moral habits do not meet the standard on which the rate is based.) 

Robbery – The felonious taking, either by force or by fear of force, of the personal property of another, commonly known as “hold-up.”

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Salvage – (1) Property taken over by an insurance company to reduce its loss. (2) Award recoverable by salvors under maritime law. 

Schedule – (1) A list of specified amounts payable for, usually, surgical procedures, dismemberments, ancillary expenses or the like in Health Insurance policies. (2) The list of individual items covered under one policy as the various buildings, animals and other property in property insurance or the list of the rings, bracelets, etc., insured under a jewelry floater. 

Second Injury Fund – Special funds set up by each state to pay all or part of the compensation required when a partially disabled employee suffers a subsequent injury. Because the compound effect of two injuries can be greater than the effect of the same two injuries in isolation, employers might be reluctant to hire the handicapped if they had to bear the full burden for a second injury. Second injury funds relieve employers of some of this burden. 

Securities Act of 1933 – A federal law that requires full and fair disclosure and the use of a prospectus in the sale of securities.

Securities Exchange Act of 1934 – A federal law that requires the registration of companies and agents with the federal government if they are selling securities. 

Self-Insurance – Making financial preparations to meet pure risks by appropriating sufficient funds in advance to meet estimated losses, including enough to cover possible losses in excess of those estimated. Few organizations are large or dispersed enough to make this a sound alternative to insurance. Many large corporations self-insure against losses.

Service Plans - Plans of insurance where benefits are the actual services rendered rather than a monetary benefit, such as the benefits provided by Blue Cross and Blue Shield. 

SGLI (Servicemens Group Life Insurance) - Group Life insurance issued to members of the armed forces while in the service. Convertible after separation to individual coverage in participating or eligible private insurance companies.

Short Rate - The term "short rate" in insurance and bonding is used to describe the charge required for insurance or bonds taken for less than one year, and in some cases, the earned premium, including a penalty, for insurance or bonds cancelled by the insured before the end of the policy period or term of bond.

Short-Term Disability Income Policy - A disability income policy with benefits payable for "Short Term," usually less than two years, as opposed to a Long Term Disability Income policy.

Sickness Insurance - A form of health insurance against loss by illness or disease. To this definition, the Commission on Terminology (I am not making this up) adds the following comment: "This form of health insurance provides benefits in event of loss occasioned by sickness (either illness or disease). Illness or disease does not include accidental bodily injury. Sickness insurance may provide benefits for loss of time or expense incurred by pregnancy."

Single Interest Policy - Insurance protecting the interest of only one of the parties having an insurable interest in certain property, as that protecting a mortgagee but not the mortgagor, or protecting the seller but not the buyer of merchandise.

Sinkhole Collapse - The peril of a sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or similar rock formations. This peril is now covered by the latest commercial property forms. Other forms of earth movement continue to be excluded in most cases.

Special Coverage Form - Any of the commercial or personal lines property forms which provide coverage on an "all-risk" type basis. These forms provide the broadest coverage and do not list covered perils, but do include a lengthy list of exclusions.

Speculative Risk - A risk that has the possibility of either gain or loss, such as a business venture.

Standard - A risk that meets the same conditions of health, physical condition, and morals as the tabular risks on which the rate is based. For example, a standard risk automobile policy would include a driver of a typical automobile (four wheel, licensed vehicle under 10,000 lbs) with no more than two traffic violations or accidents.

Standard Fire Policy - Generally, the 1943 New York 165-line fire insurance policy. Many states utilize that policy and others modify it slightly.

Standard Provisions - (1) Provisions prescribed by state law that must appear in all policies issued in that jurisdiction. (2) Provisions adopted by the NAIC to apply to group Life Insurance as minimum protection. They are required by law in most states. (3) Formerly, a set of prescribed provisions regulating the operating conditions of a Health Insurance policy by law in most jurisdictions between about 1912 and 1950. They are now superseded by uniform provisions for Individual Accident and Health Insurance policies which contain an NAIC model bill. These have been enacted in virtually all jurisdictions.

Stated Amount - Relating to an agreement by the insurance company to pay a specified amount of money to or on behalf of the insured upon the occurrence of a defined loss. In contrast to a Reimbursement benefit.

 
Stock Insurance Company (Insurer) - An incorporated insurance company with capital divided into shares and owned by the shareholders. Companies such as Allstate and State Farm are examples of Stock Insurance Companies.

Stop Loss - (1) Any provision in a policy designed to cut off the insurance company's loss at a given point. Aggregate benefits and maximum benefits are examples. (2) A type of reinsurance designed to transfer the loss from the ceding company to the reinsurer at a given point.

Sublimit - Any limit of insurance that exists within another limit. For example, special classes of property may be subject to a specified dollar limit per occurrence, even though the policy has a higher overall limit; a health insurance policy may limit certain benefits to fixed dollar amounts or maximum amounts per day, even though the overall coverage limit is higher.

Subrogation - The legal process by which an insurance company seeks from a third party who may have caused the loss, recovery of the amount paid to the insured.

Subrogation Waiver - A waiver by the named insured giving up any right of recovery against another party. Normally an insurance policy requires that subrogation (recovery) rights be preserved. In commercial property insurance, a written waiver of subrogation rights is permitted if it is executed before the loss occurs.

 
Sub-Standard (also, Non-Standard) - Less than standard. For example, a non-standard automobile policy would be on a driver with a DUI (Driving Under the Influence of drugs or alcohol) violation. (See also Standard).

Supplementary Payments - A provision in most liability policies under which the insurer agrees to pay defense costs, premiums on various bonds, interest accruing after a judgment, and other reasonable expenses in addition to the limit of liability.

Surety - (1) A term loosely used to describe the business of suretyship or bonds. Suretyship is an arrangement whereby one party becomes answerable to a third party for the acts or neglect of a second party. There are typically three parts to a surety agreement: (a) A principal, the party who has agreed to fulfill the obligation, which is the subject of the bond - for example, a carpentry contractor. (b) An obligee, the party for whose benefit the bond is written. If the principal defaults on the obligation, damages are payable to the obligee - usually, the city or municipality where the contractor will be performing his services (for the benefit of a citizen of that city or municipality); (c) A guarantor or surety, the surety providing the bond for a fee. The surety joins with the principal in guaranteeing fulfillment of the obligation, and agrees to pay damages if the principal defaults. (2) The party in a suretyship arrangement who holds himself responsible to one person for the acts of another (customarily an insurance company).

Surety Bond - A bond in which the surety agrees to answer to the obligee for the non-performance of the principal (also know as the obligor).

Surplus Line - Coverage procured in an unlicensed insurance company because of its unavailability in the licensed market.

Surrender - Withdrawing the cash value of a policy and surrendering the policy form to the insurer, usually a requirement when the cash value is withdrawn.  

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Tabular - Of or relating to a table. Tabular mortality: mortality as shown on a mortality table. Tabular morbidity: rate of morbidity as shown on a morbidity table.

Tail - This term has been used to describe both the exposure that exists after expiration of a policy and the coverage that may be purchased to cover that exposure. On "occurrence" forms a claims tail may extend for years after policy expiration, and the losses may be covered. On "claims made" forms tail coverage may be purchased to extend the period for reporting covered claims beyond the policy period. See Mini, Midi, and Maxi Tail.

Tax Base - For tax purposes, this is money that has yet to be taxed.

Tax Sheltered Annuity (TSA) - A qualified annuity for employees of certain non-profit organizations as described in the Internal Revenue Code, such as school system employees, church employees, etc.

Temporary Agent - A person who is licensed to act as an agent for a brief period of time (usually 90 days) without taking a written examination. Temporary licenses are commonly granted to allow someone to continue the business of an agent who has died, become disable, or entered active military service. 

Term - (1) Relating to a contract of health insurance that makes no provision for renewal or termination other than by expiration of the policy term. (2) Life insurance issued for a term of years, after which it expires without value. (3) The period for which the coverage runs which is usually the period for which the premium is paid in a Health Insurance policy. Usually used as policy term. (4) A period of time for which a policy or a bond is issued.

Tertiary Beneficiary - A beneficiary designated as third in line to receive proceeds or benefits, if the primary and secondary beneficiaries do not survive to draw them. 

Theft - An act of stealing. Theft includes larceny, burglary and robbery.  

Time Element Insurance - A general term referring to coverage that protects against indirect losses resulting from damage to described property, where the amount of such losses depends on the length of time over which such losses accumulate. Examples include Rent insurance, Leasehold insurance, Business Interruption insurance, and Extra Expense insurance. 

Time Limit on Certain Defenses - A Uniform Provision specifying that after a given number of years (usually two or three) no statements (except fraudulent misstatements) made in the application shall be used to deny a claim or void the policy and that no claim shall be denied or reduced on the ground that a disease or physical condition not excluded at time of issue existed prior to effective date.

Total Disability - A degree of disability from injury or sickness that prevents the insured from performing the duties of any occupation for remuneration or profit. The definition in any given case depend on the wording in a covering policy.

Transfer of Risk - Shifting all or part of a risk to another party. Insurance is the most common method of risk transfer, but other devices, such as hold harmless, also transfer risk. One of the four major risk management techniques.

Travel Ticket Insurance - Accident insurance issued for the duration of a specified trip by common carrier. Name is derived from the fact that it was originally issued in the form of an extra stub on a travel ticket.

Trip Transit Policy - An insurance policy for loss to personal property on a single trip between two specified locations.

Trust Agreement - (1) In connection with a Life Insurance policy, a supplemental agreement to pay the proceeds in a manner specified in the agreement. (2) In the field of Trusts, an agreement under which a trustee manages and distributes property for the beneficiaries of the Trust. 

Twisting - Inducing or seeking to induce a policyowner by misrepresentation to terminate an existing policy to take a new policy.

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Umbrella Liability Policy - A liability policy designed to provide liability protection above and beyond that provided by standard liability contracts. Most umbrella forms these days should be called Excess Liability policies because they usually only extend coverage beyond the underlying coverage - exceeding the policy limits - but do not cover "gaps" in the true sense of the word.

Under-Insurance - A condition in which not enough insurance is carried to cover the insurable value and, especially, to satisfy a coinsurance clause in property insurance.

Underwriter - (1) A person trained in evaluating risks and determining the rates and coverages that will be used for them. (2) An agent, especially a life insurance agent, who might qualify as a "field underwriter." In theory, the agent is supposed to do some underwriting before submitting the case to the home office underwriter; i.e., to make a decision on the basis of facts known to him on whether or not the risk is sound and to report all facts known to him that might affect the risk.

Unearned Premium - That portion of an advance premium that has not yet been used for coverage written. Thus in the case of an annual premium, at the end of the first month of the premium period, 11 months of the premium would still be "unearned", etc.

Uniform Provisions - A set of provisions relating to the "operating conditions" of a Health Insurance policy that are specified by state law. Uniform Provisions Law is the National Association of Insurance Commissioners model law entitled, "Uniform Individual Accident and Sickness Policy Provisions Law."

Unit Investment Trust (UIT) - An investment company which invests on behalf of investors in a portfolio of securities such as stocks and bonds. The trust does not have a management function. It merely holds the assets.

Universal Life - A combination flexible premium, adjustable life insurance policy. The premium payer may select the amount of premium he or she can pay and the policy benefits are those that the premium will purchase. Or, the premium payer may change the amount of insurance and pay premium accordingly. Many believe this is the only true solution to the "buy term and invest the difference" problem. 

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Variable Annuity - An annuity contract in which the amount of the periodic benefit varies, usually in relation to security market values, a cost-of-living index, or some other variable factor in contrast to a fixed or guaranteed return annuity.

Variable Life Insurance - A form whose face value varies depending upon the value of the dollar or securities or other equity products at the time payment is due.

Variable Universal Life - A combination of the features of Variable life Insurance and Universal Life Insurance under the same contract. Benefits are variable based on the value of equity investments, and premiums and benefits are adjustable at the option of the policyholder.

VGLI - Veteran's Group Life Insurance. Group insurance available to veterans who were covered under SGLI (Servicemen's Group Life Insurance) if converted within 120 days of separation from the service. 

Vis Major - An accident for which no one is responsible, similar to an "act of God" occurrence.

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Waiting Period - A period of time between the beginning of a disability and the date benefits begin. (See Elimination Period and Probationary Period).

Waiver - (1) A rider waiving (excluding) liability for a stated cause of accident or (especially) sickness. (2) A provision or rider agreeing to waive (forego) premium payment during a period of disability. (3) The giving up or surrender of a right or privilege that is known to exist. It may be effected by the agent, adjuster, or insurance company employee or official orally or in writing.

Warranty - A statement made on an application for insurance that is warranted to be true in all respects. If untrue in any respect, even though the untruth may not have been known to the person giving the warranty, the contract may be voided whether or not the untruth or inexactness is material to the risk. Statement on life and health insurance applications are, in the absence of fraud, not warranties, but representations. (See also Representations).

Whole Life - A life insurance policy that runs for the whole life - that is, until death (except that it will pay the face amount at the ultimate age on the mortality table being used because, as far as the table goes, that age is death for all surviving insureds). Premiums for a Whole Life policy may be paid for the whole life or for a limited period during which the higher premium charged pays up the policy. 

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