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FACE AMOUNT

The total amount or principal amount of insurance provided by an insurance policy. The term derives from the fact that the amount of insurance is usually indicated on the first page or "face" of the policy.

FACE AMOUNT [LIFE]

Since the amount of insurance protection provided under a given policy is usually stated on the face or first page of the contract, the term "face amount" is commonly used when referring to the principal sum involved in the contract. The actual amount payable by the company may be decreased by loans or increased by additional benefits payable under specified conditions, or stated in a rider.

FACE OF POLICY

The first or front page of a policy.

FACE SHEET

A form attached to the policy identifying the insured, the subject matter of the insurance, the policy limits, etc. In casualty insurance, the face sheet is very often a copy of the declarations.

FACE VALUE

The amount(s) stated in the policy as being the limit(s) of the Exchange's liability.

FACILITY OF PAYMENT

Many weekly premium policies contain a provision that the company may pay the sum due on the policy to a relative, by blood or marriage, or to any person appearing to be entitled to the payment by reason of having incurred expenses on behalf of the insured or expenses for his or her burial.

FACTOR

Various measurements of exposure, i.e., business use, weight of vehicle, etc., are converted by mathematical formula into a numerical factor. Each such factor, when multiplied by the base rate, results in a new rate incorporating the functions of the factor, i.e., the new rate will reflect the exposures of the actual risk.

FACULTATIVE REINSURANCE

Is a term used in reinsurance in its old meaning of "having the faculty or liberty." Facultative reinsurance generally means reinsurance by offer and acceptance of a single cession. This is also sometimes called "specific reinsurance."

FAIR PLAN (Fair Access to Insurance Requirements)

Federal reinsurance program whereby property insurance is made available to home and business owners who are unable to secure coverage through regular channels, because the property is located in a high risk (e.g., areas subject to riots or floods). Each participating insurer accepts a proportionate share of these risks, and is reinsured by the federal government. Only the basic coverage is provided under the plans.

FALLEN BUILDING CLAUSE

A clause in California and Iowa fire policies which provides that if any material part of the building falls, except as a result of fire, the policy immediately ceases to cover. This clause is waived by the extended coverage endorsement; and, even when we do not write extended coverage, we waive the fallen building clause by endorsement at no extra cost. Although this clause is virtually a thing of the past in fire insurance, it still appears in most sprinkler leakage policies.

FAMILY INCOME CONTRACT

A combination of Ordinary or Whole Life insurance and Decreasing Term insurance covering a period of 10, 15, or 20 years, as selected, the amount of such Term insurance in any year being sufficient to provide (often when supplemented by interest on the ordinary life insurance) an income of a stated amount, beginning at the death of the insured and continuing for the remainder of the Term insurance period. The principal or face amount of the Ordinary insurance is payable when the monthly income from the Term insurance ceases or upon subsequent death. See Monthly Income Contract.

FAMILY MAINTENANCE OR FAMILY PROTECTION CONTRACT

A contract similar to the family income contract. It combines Ordinary insurance and Term insurance, but without the decreasing insurance feature. It provides for payment beginning at the death of the insured, of an income for a fixed period of 10, 15, or 20 years, as selected, running from the date of death and not from the date of issue as in the family income contract, with payment of the principal sum of the Ordinary insurance at the end of the fixed period. See Family Income Contract.

FAMILY PLAN POLICY

An all-family plan of protection, usually with permanent insurance on the father's life, and with mother and children automatically covered for lesser amounts of protection - usually term -all included under one premium. The policy has been offered with numerous variations and features.

FAMILY PROTECTION COVERAGE

See Uninsured Motorist Coverage.

FEDERAL ESTATE TAX

An excise tax currently levied upon the transfer of property or interests in property at death. Life insurance proceeds are taxable if payable to the decedent's estate, or if payable to named beneficiaries and the insured possessed at death any incidents of ownership in the policy or policies. The value of life insurance policies owned by the decedent on the lives of others is also taxable.

FEDERAL GIFT TAX

A federal tax upon gifts of property in excess of a specified, unified credit. Under current tax laws, an annual $10,000 exclusion is allowed for each donee where the gifts are gifts of present interest. Life insurance is property for purposes of this tax.

FEE SIMPLE

An estate which belongs to a person absolutely.

FIDELITY BOND

A bond which will reimburse an employer for loss up to the amount of the bond, sustained by the employer named in the bond (the insured) by reason of any dishonest act of an employee covered by the bond.

FIDUCIARY

Holding in trust. A person upon whom a trust has been handed down. When an agent collects an insurance premium, he/she holds the money in a fiduciary capacity. The money does not belong to them, and they should turn it over to the Exchange as soon as possible.

FIDUCIARY [LIFE]

A person who occupies a position of special trust and confidence, e.g., in handling or supervising the affairs or funds of another, involving the exercise of confidence and trust.

FIELD

A term used to represent the area of contact with the public. Also an area in a punch card, intended for the recording of one type of statistical information.

FINANCIAL RESPONSIBILITY LAW

A law requiring motorists to furnish proof of their ability to pay damages up to a stipulated amount (usually 15/30/5) following a loss.

FINISHED STOCK

Merchandise which has been completely processed.

FIRE

The courts have held that actual ignition, accompanied by flame or glow, is necessary to constitute a fire under terms of the fire policy.

FIRE CLAUSE

A provision in a lease providing for cancellation in case the property is destroyed by fire or some other hazard.

FIRE COVERAGES

"Fire Coverages" include fire, theft, wind or windstorm and comprehensive coverages, as distinguished from casualty coverages such as bodily injury and property damage. Sometimes called physical damage coverages or property coverages. In a broader sense, fire coverages may include all lines written by a fire insurance company except inland marine insurance.

FIREWALL

See "Approved Firewall."

FIRST SURPLUS REINSURANCE TREATY

One of the oldest forms of treaty, and still the most common in fire reinsurance. It is based on the reinsurer sharing the gross lines of an insurance company on a pro rata basis, the proportion being varied automatically according to (a) different classes of risks, and (b) the net retentions which the insurance company keeps for its own account as large a line as it can afford or desires on each risk, while automatically reinsuring any surplus (frequently up to a large amount).

FIVE YEAR TAIL

A provision of an expiring CGL claims - made policy automatically extending the claims reporting period to five years for occurrences reported within the policy period or sixty days thereafter and occurring after the retroactive date. This provision only applies when there is no replacement coverage.

FIXED CHARGES

Expenses which a business incurs as long as it remains in existence, such as interest on debts, taxes and the requirements of sinking funds.

FIXTURES

Appurtenances, such as shelves, showcases, counters and so on, which are generally fixed in such a way that they cannot be removed without damage to the property or the fixtures.

FLAMMABLE LIQUIDS

Liquids that give off vapors capable of ignition.

FLAT CANCELLATION

A policy which is canceled upon its effective date. Usually under a flat cancellation, no premium charge is made.

FLEET

A group of five or more cars constitutes a fleet. Also used to describe a group of affiliated insurance companies.

FLEET PLAN

Any risk of five or more self-propelling commercial vehicles (not counting passenger cars) owned by one insured or under one direct operating management. Such a risk must be insured under the Fleet Plan.

FLEET POLICY

A single policy covering a number of automobiles all owned and/or operated by the same person. When five or more cars are covered, a discount is allowed.

FLOATER POLICY

One which covers movable property, such as the personal effects floater, camera floater, personal property floater, contractors equipment, etc.

FLOOD INSURANCE

Insurance coverage provided through the National Flood Insurance Program.

FLOTSAM

Wreckage of a ship or its cargo found floating on the sea.

FOLLOWING THE FORTUNES

The clause stipulating that once a risk has been ceded, whatever the ceding company may find necessary to do in good faith is binding on the reinsurers The words "in good faith" are stressed, for this is the core of the matter.

FOREIGN SOCIETY OR COMPANY

A society or company operating in a state in which it is not chartered.

FORGERY

Imitating the signature of some other person with fraudulent intent.

FORM

The insurance policy itself and any endorsements or riders which may be attached. In fire insurance, a statement attached to the policy describing the property covered and setting forth the conditions applicable to the insurance on such property.

FORMAT (ASC)

A specific arrangement of information in a record or on a display screen.

FRACTIONAL PREMIUM

A proportionate part of the regular premium payable when a change in the regular premium due date is desired.

FRANCHISE CLAUSE

A provision most commonly found in marine policies providing that the insurance company shall not be liable for any loss which is less than a certain percent of the value insured. This is not the same as a deductible, since the loss is paid in full if it exceeds the amount specified in the franchise clause.

FRANCHISE INSURANCE

A life or health insurance plan for-covering groups of persons with individual policies uniform in provisions,-although the policies may differ in benefits. Individual contracts are issued to persons in the group. Solicitation usually takes place in an employer's work force with the employer's consent. Franchise insurance generally is. written in groups too small to qualify for regular group coverage. With life insurance, it's sometimes called "wholesale insurance."

FRATERNAL INSURANCE

Insurance protection provided by fraternal benefit societies, organized without capital stock and not for profit, and maintaining a lodge system. Practically all fraternals operate on a level rate and legal reserve basis in accordance with special fraternal insurance regulations, and under supervision of the state insurance authorities. They are subject to periodic convention examinations. Rate payments are usually collected by the financial secretaries of the local lodges. The distinguished feature of fraternal insurance, in contrast to old-line insurance, is the "open contract."

FRATERNAL INSURANCE COUNSELOR (FIC)

A designation awarded to fraternal life underwriters, associated with societies that are members of the National Fraternal Congress, who complete the prescribed course of study, pass the FIC examination, and who meet the standard requirements set by the Fraternal Field Managers' Association.

FRAUD

A false representation of a matter of fact (whether by words or conduct, by false or misleading allegations, or by concealment of that which should have been disclosed) which deceives and is intended to deceive another to his/her legal injury.

FREE ON BOARD (F.O.B.)

The seller agrees to deliver the goods to the conveyance which is to transport them to the buyer. Once the goods are on board the conveyance, the seller's responsibility ends.

FRIENDLY FIRE

Friendly fires are those which stay in their proper and intended place, such as a stove, lamp or heater. For example, a fire in a stove might get too hot and scorch the adjacent wall. Unless the wall caught fire, there would be no coverage under the fire policy since the fire in the stove is a friendly fire. The courts have held that the fire policy does not cover damage caused by friendly fire.

FULL COVERAGE POLICY

One that provides for full payment of all losses, with no deductible amount.

FULL PAID ADDITIONS

See Dividend Additions.

FUNDED PENSION PLAN

A systematic prepayment method used by the employer to meet the cost of the benefits provided under the plan-. A plan may be funded by purchasing insurance or annuities under contracts with insurance companies. This is known as an insured plan. Or it may be funded by payment of adequate contributions to a trust, frequently with a bank as trustee, in which case it is known as a self-administered uninsured plan.

FUNDED TRUST

See Life Insurance Trust.

FUNERAL OR EMERGENCY EXPENSE BENEFITS

The certificates of some societies carry a blank sight draft for a stated amount, which can be filled out and cashed immediately upon the certificate's becoming a claim, for use in taking care of a sudden emergency or funeral expense. This amount is later deducted, if so used, in final settlement of the proceeds of the certificate.

GRACE PERIOD [LIFE]

Most life insurance contracts provide that premiums may be paid at any time within a period varying from 28 to 31 days following the premium due date, the policy remaining in full force in the meantime. If death occurs during the grace period, the premium is deducted from the proceeds payable. As a general rule, no interest is charged on overdue premiums if paid during the grace period.

GRILL

A demountable screen of No. 9 gauge (3/16") wire or light iron bars to protect glass door panels or show windows containing valuable displays.

GROSS COMBINATION WEIGHT (GCW)

The value specified by the manufacturer as the maximum loaded weight of a combination vehicle for which a tractor is designed. This means the total weight of the tractor, its trailer(s) and the maximum load that can be carried.

GROSS EARNINGS

Revenue from operating sources, before deducting expenses incurred in gaining such revenue.

GROSS LOSS EXPENSE, ALLOCATED

The aggregate expense of investigating and adjusting specific claims which are charged directly to the individual claim files, with no deductions for credits or reinsurance.

GROSS LOSSES PAID

The aggregate of loss payments without deductions for credits, subrogation, salvage, etc., or reinsurance during a given period of time.

GROSS NEGLIGENCE

Willful and wanton negligence or misconduct. It is typically characterized as a reckless disregard for the safety of others.

GROSS RECEIPTS

The total amount of money, including taxes, charged by the insured for operations covered by the policy and performed during the policy period.

GROSS RECEIPTS POLICY

A policy for which the premium is developed by applying a specified rate to each $100 of the insured's gross business income.

GROSS VEHICLE WEIGHT (GVW)

The value specified by the manufacturer as the maximum loaded design weight of a single vehicle. This means the weight of the vehicle and the maximum load it can carry.

GROSS WRITINGS

See Premiums, Gross.

GROUP INSURANCE

An insurance plan by which a large number of persons are protected under one master policy. Each individual insured usually receives a certificate of insurance for both life and health insurance.

GROUP I RATES

A new term for Commercial Property that replaces the expression "Fire Rates." Group I rates are for Fire, Lightning, Explosion, Sprinkler Leakage, and Vandalism. Group I rates plus Group II rates equal the Basic Form rates.

GROUP II RATES

A new term for Commercial property that replaces the expression "Extended Coverage Rates." Group II rates are for Windstorm and Hail, Smoke, Riot or Civil Commotion, Aircraft or Vehicles, Sinkhole Collapse, and Volcanic Action. Group II rates plus Group I rates equal the Basic Form rates.

GUARANTEED DIVIDEND POLICIES

Coupon policies issued by some non-participating companies. The coupons represent fixed and guaranteed "dividends" which may be applied on the payments of premiums. The so-called dividends are a series of pure endowments maturing each year.

GUARANTEED INSURABILITY (GUARANTEE ISSUE)

An arrangement, usually provided by rider under an outstanding policy, whereby additional insurance may be purchased at various times, without a new medical examination or other evidence of insurability.

GUARANTY

A security or pledge.

GUARANTY FUND

A special reserve which arises from the sale of guaranty certificates which is in the nature of the paid-in surplus commonly used in forming a mutual insurance company. Also, a surplus reserve created and required in certain states for mutual companies by action of directors.

GUARDIAN

A person appointed by a competent court to take care of the interests of some other person who is legally not capable of doing so for himself/herself. The term generally applies to a person who acts in this capacity for a minor.

GUARDIAN AD LITEM

A special guardian appointed to represent a ward in a lawsuit.

GUIDELINE MAXIMUM PREMIUM (LIFE]

The maximum amount of premium that can be paid into the policy in order for it to be considered as life insurance for favorable tax treatment.