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ABANDONMENT

Surrender to an insurer the insured property after the event insured against has occurred. Not permitted under most property insurance contracts.

ABROGATE

To annul; repeal; or set aside.

ABSOLUTE ASSIGNMENT

A policy assignment under which the assignee (person to whom policy is assigned) receives full control over the policy and full rights to its benefits. As a general rule, when a policy is assigned to secure a debt, the owner retains all rights in the policy In excess of such debt even though the assignment is absolute in form. See Assignments.

ACCEPTANCE

An agreement, either expressly or by conduct, to the act or offer to another so that a contract is concluded and the parties become bound. See also "Offer and Acceptance."

ACCIDENT

An unforeseen and unintentional act identifiable in time and place.

ACCIDENT AND HEALTH INSURANCE

Insurance under which benefits are payable in case of disease, accidental injury, or accidental death. Also called health insurance, personal health insurance, sickness and accident insurance.

ACCIDENT FREQUENCY

The rate of occurrence of accidents often expressed in terms of the number of accidents over a period of time.

ACCIDENT SEVERITY

A measure of the severity or seriousness of losses, rather than the number of losses.

ACCIDENTAL BODILY INJURY

A bodily injury which is not intentionally self-inflicted.

ACCIDENTAL DEATH BENEFIT

Death must occur:

A. as the direct result of bodily injury caused solely by external, violent and accidental means and independent of all other causes except in the case of drowning, of internal injuries revealed by an autopsy and;

B. within XX days of such injury and;

C. before you reach insurance age XX; and

D. while this policy and its benefits are in force.

XX ‚ is defined in actual policy.

Exclusions from coverage

We will not pay this benefit if death results from:

A. suicide whether sane or insane;

B. war or any act attributable to war, declared or undeclared, whether you are in military service or not;

C. bodily or mental infirmity, illness or disease of any kind;

D. bacterial infection other than bacterial infection occurring as a consequence of accidental or external bodily injury;

E. committing or attempting to commit an assault or felony;

F. taking of any poison, drug or sedative, or asphyxiation from inhalation of gas, whether voluntary or involuntary; or

G. participation in aviation, except as a passenger.

ACCIDENTAL DIRECT PHYSICAL LOSS (ADPL)

Property insurance that covers an insured against essentially all perils except those specifically excluded.

ACCIDENTAL MEANS

A restrictive phrase found in the insuring agreement of many personal accident policies. If you attempted to lift a heavy weight and as a result injured your back, you would have no coverage under an "accidental means" policy. Although the injury was accidental (you did not expect to hurt yourself), the means which caused the injury (lifting a heavy weight) was intentional, not accidental.

ACCOMMODATION LIKE

Insurance that by itself would not be acceptable to an insurer, but written as an accommodation where the possibility of securing other desirable business seems to justify it.

ACCRUAL BASIS

Adjustment to income for uncollected items at the beginning and end of a period. Also, to adjust for unpaid items/invoices at the beginning and end of a period.

ACCUMULATION ACCOUNT LIFE (Universal Life and Uniflex)

An account to which premiums are added and from which changes are deducted. The balance earns interest.

ACQUISITION COST

The cost to a company of securing business, including commissions to agents and brokers, and in some companies, field supervision costs.

ACT OF GOD

An occurrence that results from natural causes without any human intervention and could not have been prevented by reasonable care or foresight.

ACTUAL CASH VALUE (ACV)

The amount that the property in question could have been sold for by the insured on the date of the loss. Computed on the basis of replacement value or market value less its depreciation by obsolescence or general wear. This is not the same as the retail-selling price, since the retail-selling price includes the dealer's profit.

ACV

See Actual Cash Value

ADDITIONAL INSURED OR ADDITIONAL INTEREST

Some person, other than the subject matter of the insurance, who is entitled to protection under a policy either by virtue of the wording of the basic policy or because the policy has been modified to protect such interest.

ADDITIONAL LIVING EXPENSE CLAUSE

A rider added to a fire insurance policy agreeing to pay for "the necessary additional living expense incurred by the insured, in order to continue as nearly as practicable the normal conduct of the insured's household, resulting from damage by fire of the dwelling or contents."

ADHESION

A life insurance policy is a "contract of adhesion," since buyers must "adhere" to the terms of the contract already in existence. They have no opportunity to bargain for terms, rates, values, etc.

ADJACENT PROPERTY

Property which is close to the property insured. It may increase the exposure and change a desirable risk into an undesirable one.

ADJOINING PROPERTY

Property which is in actual physical contact with the property insured.

ADJUSTABLE PREMIUM

The contractual right of a company to modify a policy owner's premium payments under certain specified conditions.

ADJUSTER

See Claims Representative

ADJUSTMENT INCOME

One of the basic uses for life insurance. Also called "Readjustment Income." An added, "step-down" income, over and above that required to cover the family's minimum needs, to help adjust to the shock of lower income following the insured's death.

ADMINISTRATOR

The person appointed by court to manage and settle the estate of a deceased person usually because the deceased person left no will. See also Executor.

ADMIRALTY COURT

A court having jurisdiction over maritime questions and offenses. In the United States, these are Federal Courts, and they have jurisdiction over rivers and lakes as well as the high seas.

ADMITTED ASSETS

Assets of an insurer permitted by a State to be taken into account in determining its financial condition. Such assets include all funds, securities, property, equipment, rights of action, or resources of any kind owned by the company or held in trust for others.

ADMITTED COMPANY

A company which has been authorized by the State Insurance Department to transact business within the limits of that State.

ADPL

See Accidental Direct Physical Loss

ADVANCE PAYMENTS

The term given to the amount of money or the number of weeks or months paid in advance of the current period on weekly premium or monthly debit policies. In Ordinary insurance, the amount of money that applicants tender with their applications for insurance. Also any premiums paid in advance of the current policy year.

ADVANCE PREMIUM, OR DEPOSIT PREMIUM

The premium for many policies depends on payroll or some other factor, which can only be determined accurately at the end of the policy period. In such cases, an estimated premium is charged in advance and an adjustment is made at the close of the policy term.

ADVERSE SELECTION

Selection "against the company." The tendency of less favorable insurance risks to seek or continue insurance to a greater extent than others. Also, the tendency of policy owners to take advantage of favorable options in insurance contracts. Adverse selection causes high loss ratios.

ADVISORY SCHEDULE (ADV. SCHED.)

A table of percentages to assist in arriving at the depreciated value of cars of a certain age. This table is usually arbitrarily produced by a company and represents its experience in appraising cars of certain ages. It is used by underwriting departments in determining the insurable value of cars insured for property coverages on a stated amount basis, and for determining age groups for collision, actual value fire, theft and tornado, and comprehensive coverages.

AGE AT ISSUE [LIFE]

The age of an insured used for insurance purposes. In some companies, the issue age is the age at last birthday. In others, it is the age at the next birthday.

AGE LIMITS

Set ages contained in a specific policy for the insuring of new applicants or for the renewal of that policy.

AGENCY

A situation wherein one party (an agent) has the power to act for another (the principal) in dealing with third parties.

AGENT

A representative of an insurer who produces business. He/she may be an independent contractor or an employee. The acts of agents are binding upon the company only to the extent specified in their contracts or otherwise authorized. They cannot bind the company by any statements contrary to the provisions of the applications or policies.

AGENT, RESIDENT

A licensed agent who is a resident of the State where he/she is licensed.

AGENT, SPECIAL (FIELD PERSON)

A salaried employee of an insurer who represents the company in dealing with agents.

AGGREGATE EXCESS OF LOSS

A stop loss agreement designed to prevent the primary company's gross loss from exceeding a specific predetermined limit. Example: A treaty which would indemnify a company's collective losses in excess of a 70% loss ratio.

AGGREGATE LIABILITY

The maximum total amount that a policy will pay during the policy period. For example, a policy might be written with Bodily Injury liability limits of 5/10/25. That means the policy would not pay more than $5,000 to any person injured in one accident, nor more than $10,000 to two or more persons injured in one accident, nor more than $25,000 total during the policy period.

AGGREGATE LIMIT

The total amount of money a company will pay under a liability policy for claims which arise. Once this limit is reached, it extinguishes the insurance company's liability, regardless of the policy period.

ALIEN COMPANY

An insurance company incorporated or organized under the laws of a foreign nation, province, or territory.

ALIENATE

To part with title to property.

ALIENATED PREMISES EXCLUSION

A provision in the CGL policy which excludes property damage coverage to premises which the insured sells, gives away or abandons. This exclusion does not apply when the premises sold are the work and property of the insured and has never been occupied, rented or held for rental.

ALL PHYSICAL LOSS

See Special Form.

ALL RISK COVERAGE

See Accidental Direct Physical Loss.

ALLIED LINES INSURANCE

Coverage for such miscellaneous perils as floods, earthquakes, and sprinkler leakage, all of which have no immediate relationship to fire insurance but are normally associated with it. Some of these perils are written by endorsement to the fire contract; others are written in separate policies.

AMERICAN AGENCY SYSTEM

The system of selling through agents compensated by commissions, the agents having the sole right to solicit insureds at expiration of their policies. (Ownership of renewals, so called.)

AMORTIZATION

The act or process of extinguishing a debt, usually by equal payments at regular intervals over a specific period of time. The liquidation of a financial obligation on an installment basis.

AMORTIZED BASIS

A method of valuing bonds where the premium or the discount involved in the purchase of a bond is extinguished by periodically charging off a portion of the premium or crediting a portion of the discount to bring the value to par at maturity. Amortized values are computed by means of a special formula devised for the purpose.

AMOUNT SUBJECT

The total value which is exposed to loss at any one location or from any one event.

ANNIVERSARY DATE

The date every year when a policy was originally written, or replaced last.

ANNIVERSARY DATE [LIFE]

The date that appears on the Policy Specification page of the Life Policy.

ANNUITANT

One to whom an annuity is payable, or a person upon the continuance of whose life further payment depends.

ANNUITY

A stipulated sum payable at certain regular intervals-during the lifetime of one or more persons, or payable for just a specified period.

ANNUITY CERTAIN

An annuity payable at equal intervals during a stipulated period and not dependent upon any person's living or dying.

APPEAL BOND

A bond given in a case at law where a judgment has been rendered, and the party against whom it has been rendered desires to take the case to another court. The bond is required of litigants who appeal judgments to higher courts. The bond guarantees payment of the judgment up to the limits of the bond, plus interest and costs, should the higher court sustain the verdict of the lower court.

APPLICATION

A general form designed to show whether or not the person seeking insurance meets the Company's underwriting requirements and to establish proper price or rating. Requested coverage may be accepted, modified, or declined.

APPLICATION [LIFE]

A form supplied by the life insurance company, usually filled in by the agent and medical examiner (if applicable) on the basis of information received from the applicant. The form is signed by the applicant and is part of the insurance contract if a policy is issued. The form gives information to the underwriting department so it may consider whether a life insurance policy will be issued and if so, in what classification and at what premium rate.

APPORTIONMENT CLAUSE

This clause provides that if there is other insurance covering the loss, the policy to which the clause is attached will not pay more than its pro rata share of the loss. If a policyholder carried $2,000 fire insurance with ABC, and $3,000 with the ZYX Insurance Company and had a loss of $1,000, ABC would pay 2/5, or $400 and the ZYX Company would pay 3/5, or $600.

APPRAISAL CLAUSE

The clause in an insurance contract providing for an appraisal in case of dispute as to the amount of loss.

APPRAISER

A person whose duty is to determine the value of property. Most policies insuring against damage to property provide that if the insured and the insurer cannot agree on the amount of a loss, each shall appoint a competent and disinterested appraiser. The appraisers choose an umpire and the decision of any two determine the amount of the loss.

APPROVED FIRE WALL

An 8-inch masonry or 6-inch reinforced concrete party wall without openings provided that if a roof is combustible or metal, the party wall would pierce the roof. In addition, if the exterior walls are not masonry, the party wall must pierce the non-masonry walls.

APPURTENANT STRUCTURES

Buildings on the same premises as the main building insured under a property policy.

ARBITRATION CLAUSE

A gentlemen's agreement designed for resolving differences between the insurer and the reinsurer without litigation. It provides for the appointment of two arbitrators, each party having the privilege of selecting one, who in turn appoint an umpire who must be agreed upon before arbitration proceedings begin. The wording of the clause may vary, but the general purpose is that difficulties shall be settled on an equitable rather than a strictly legal basis.

ARSON

This originally meant willfully and maliciously setting fire to someone else˘s dwelling. It is now generally applied to the willful, felonious and malicious burning of any property.

ASSESSMENT

Refers to the charge made by a fund.

ASSETS

All funds, property, goods, securities and resources of any kind owned by the Company. Non-admitted assets are those which the insurance commissioners will not approve, such as premiums due but not paid within ninety days. Such assets are deducted from the annual statement.

ASSIGNED RISK

A risk which is not ordinarily acceptable to insurers. Some insurers must, therefore, participate in an assigned risk pool or plan. Each participating company agrees to accept its share of these risks.

ASSIGNEE

The person (firm or corporation) to whom a right or rights under a policy are transferred by means of an assignment.

ASSIGNMENT

The transfer of a policy from one person to another. Generally speaking, a policy may not be assigned without the consent of the Company.

ASSIGNMENTS (COMMERCIAL)

A commercial life insurance Policy (and sometimes group insurance) is assignable to others. If the company is given due notice of the assignment, the policy benefits will accrue to the person named as assignee. The company does not guarantee the validity of an assignment.

ASSIGNOR

The person (firm or corporation) who assigns his/her policy to someone else.

ASSIGNOR [LIFE]

A person (including corporation, partnership, or other organization) who transfers a right or rights under an insurance policy to another by means of an assignment.

ASSOCIATION GROUP

Group insurance provided to a trade, business or professional association by which all members are protected under one master health contract.

ASSUMED LIABILITY

See Contractual Liability.

ASSURANCE

Same as Insurance. The term "assurance" is used more commonly in England than in the United States.

ASSURED

Same as Insured. British companies generally use the word "assured," while American usage favors "insured."

ATTAINED AGE

With reference to an insured, it's the current insurance age.

ATTORNEY IN FACT

A person who is given the power of performing stated acts for another person. This is done by a written contract, called a power of attorney.

ATTORNEY, POWER OF

A legal document authorizing one person to act for another.

ATTRACTIVE NUISANCE

Any object, place or condition t hat is attractive to children and may prove harmful to them. People may be held liable for injuries to children caused by an attractive nuisance, even if the children were trespassing when they got hurt.

AUDIT

A survey or examination of the insured's books or other records to determine the premium due the carrier for coverage provided.

AUDIT, INTERIM (INT. AUD.)

An audit of a short term period of less than a full year, usually a month, quarter, or half year.

AUTHORIZATION

The amount of insurance which an insurer will accept from a broker; also the limit of authority for a claims adjuster in settling losses on his/her own initiative.

AUTOMATIC COVERAGE

Subject to contract terms, coverage of additional property or other risk by an existing contract without specific request by the insured.

AUTOMATIC PREMIUM LOAN OPTION

An option which will automatically pay any premium which is in default at the end of the grace period and charge the amount so paid against the policy as a policy loan, provided such premium. is not in excess of the policy's cash surrender value on the due date of the premium (computed on the assumption that such premium had been paid).

AUTOMATIC REINSTATEMENT CLAUSE

A clause providing for the automatic restoration of the full face value of the policy after the payment of a loss. If a person with a $5,000 fire policy suffers a $1,000 loss, there is $4,000 of insurance left. But our policy provides for automatic reinstatement to the full face value if the loss does not exceed $250.

AUTOMATIC TREATY

Usually a pro rata treaty whereby the reinsurer is automatically liable simultaneously with the ceding company, to accept a fixed share of each risk. Each party has a fixed obligation. The direct company is obligated to cede, and the reinsurer is obligated to accept.

AUTOMOBILE

See Private Passenger Vehicle

AUTOMOBILE INSURANCE

A type of insurance which protects the insured against losses involving automobiles. Different coverages, e.g., the liability coverages of Bodily Injury, Property Damage, Medical Payments, Personal Injury Protection and Uninsured Motorist, and the Physical Damage coverages of Collision and Comprehensive may be included.

AVERAGE CLAUSE

See Coinsurance Clause

AVERAGE RATE

A rate used in fire insurance to determine the premium for a policy or policies covering more than one location or more than one type of property. It is obtained by multiplying the rate for each location by the value at that location, totaling the premium for all locations, and dividing the sum of the results by the total value.

AVIATION EXCLUSION

A Provision in the policy either attached by rider or included in standard policy language which excepts from coverage certain deaths due to aviation, such as "other than a fare-paying passenger."