-P-

PACKAGE POLICIES

A combination of coverages marketed as a single policy. Homeowners Multi-Peril and Business Owners Policies are examples of package policies.

PAID-UP ADDITIONS

Additional insurance purchased by policy dividends on a net single premium basis. The premium is determined by the insured's attained insurance age at time additions are purchased.

PAID-UP POLICY

A policy on which no future payments for the current term are to be made, and under which the company is held liable for the benefits provided under the terms of the contract.

PARTIAL DISABILITY

Defined in many accident policies as: "Inability to perform one or more important duties of one's occupation".

PARTIAL LOSS

In property insurance, a loss which does not either (1) completely destroy the property, or (2) exhaust the applicable insurance.

PARTIAL SURRENDER [LIFE] (Uniflex)

Withdrawal by the policyholder of part of the cash value without surrendering the policy or taking a loan. The total death benefit would be reduced by the amount of the withdrawal.

PARTICIPATING OR PRO RATA REINSURANCE

Includes quota share treaties, first surplus, second surplus, and all other sharing forms of reinsurance which participate pro rata in all losses from the first dollar up.

PARTICIPATING POLICY

One under which the insured shares in the saving resulting from good underwriting and favorable loss experience. Such policies are usually written by mutuals, sometimes by reciprocals, and occasionally by stock companies.

PARTICULAR AVERAGE

In marine insurance, an accidental, partial loss to some specific property, not resulting from a sacrifice to avert a common peril.

PARTNERSHIP

An association of two or more persons to carry on as co-owners a business for profit. Under many circumstances, each partner may be held personally liable for the debts of the firm.

PARTNERSHIP INSURANCE

See Business Insurance.

PARTY

A person taking part in a contract or a legal action.

PAYOR BENEFIT

A benefit available under certain Juvenile policies, upon payment of an extra premium. It provides for the waiver of future premiums in the event the person responsible for the payments dies or is disabled before the policy on the child becomes, 1) fully paid, 2) matures as a death claim, 3) matures as an endowment or 4) when the child reaches a specified age.

PAYROLL AUDIT

An examination of the insured's accounts by the insurer to determine exactly the amount of premium due when the policy has been written on a payroll basis and the advance premium has been merely estimated.

PAYROLL DEDUCTION INSURANCE

See Salary Savings Insurance.

PAYROLL PREMIUM

A premium which is computed by applying a certain rate to each one hundred dollars paid as wages and salaries by the insured during the policy period.

PENALTY

The limit of coverage or amount of insurance under a fidelity or surety bond. It corresponds with the limit of liability in an insurance policy.

PENSION ANNUITY

See Retirement Annuity.

PER CAPITA RULE

Under this rule, the death proceeds of a life insurance policy are divided equally among the living primary beneficiaries.

PERIL

Cause of loss. Sometimes incorrectly used interchangeably with "hazard". The technical meaning is reserved to denote the particular forms of misfortunes which can strike, such as fire, explosion, wind, hail, lightning, collision, flood, bodily injury, loss of profits etc.

PERJURY

Any false statement made under oath with knowledge of its falsity.

PERSISTENCY

The "staying" quality of life insurance policies. High persistency means that a low percentage of policies lapse for non-payment of premiums,

PERSISTENCY RATIO

In life insurance the persistency ratio is the ratio of life insurance still in force on a block of policies issued within a given period and measured at a later date for the ratio still in force. A good persistency ratio is important because no one (agent, policyholder, or the company) makes money on lapsed policies,

PERSON

Under California Insurance Law this means any person (i.e. human being), association, organization, partnership, business trust, or corporation. The term "natural person" is often used to distinguish an individual person from a type of organization or group.

PERSONAL EFFECTS FLOATER

A policy providing broad coverage against loss of or damage to the personal effects of the insured. It covers against almost all risks anywhere in the world, except in the permanent residence of the insured.

PERSONAL LIABILITY

Damages and/or Medical expenses from an accident which a person is legally obligated to pay because of bodily injury or property damage.

PERSONAL PROPERTY

Speaking generally, any moveable property.

PERSONAL PROPERTY FLOATER

This is similar to the personal effects floater, but it may be written on any kind of personal property, and it covers property in the principal residence of the insured as well as elsewhere.

PER STIRPES RULE

Under this rule, the death proceeds of a life insurance policy are divided equally among the named beneficiaries. If a named beneficiary is deceased, their share then goes to the living descendants of that individual.

PHYSICAL HAZARD

That part of any insurance risk which is contributed by the nature or location of the insured property or the bodily or mental condition of the insured.

PILFERAGE

Petty theft, especially theft of articles in less than package lots. In auto insurance this would include the theft of such things as hubcaps, spotlights, spare wheels, and so on.

PLAINTIFF

The person who institutes a law suit against another. In some types of cases the word "complainant" is used in the same sense.

PLEADINGS

The written documents filed in court by the parties of a lawsuit.

POLICE POWER

The right of a nation, state, county or city to make regulations for the protection of public health, safety, comfort, well-being or morals.

POLICY

(1) A written contract of insurance; a contract between two parties the policyholder and the insurance company under which the company, for a consideration called the premium, agrees to insure the policyholder in accordance with the provisions and conditions stated in the contract. (2) A settled course or method followed by Management.

POLICY FEE

Some States allow a flat sum charged in addition to the premium when a small policy is written.

POLICY FEE [LIFE]

In some companies, the base premium rate per $1,000 is multiplied by the amount of insurance (in thousands). Then a policy fee which is independent of the amount of insurance is added. Use of this method results in a final premium rate per $1,000 of insurance which is graded by size of policy. As the size of policy increases, the final premium per $1,000 decreases.

POLICY LIMIT(S)

The maximum amounts which the insurance company contracts to pay under terms of an insurance policy.

POLICY PERIOD OR POLICY TERM

The length of time an insurance policy agrees to afford protection. Or the period of time between the effective and expiration date of a policy.

POLICY RESERVES

See Reserves.

POLICY-WRITING AGENT

An agent who is authorized to fill out and sign insurance policies on behalf of the companies he/she represents.

POLICY YEAR

(1) The year in which the policy is written. (2) The 12 month period following issue or renewal date of a policy of insurance.

POLICY YEAR BASIS

A method of compiling experience on policies issued during a given calendar year. The experience of a given policy year -1983, for example - is a complete record of all transactions on policies issued effective during the twelve months comprising the calendar year 1983. Because annual policies are issued between January I and December 31 of the following year, an annual policy issued in any given policy year will extend over a portion of two calendar years.

POLICYHOLDER

The person in whose favor the policy is issued. May be a person other than the named insured.

PORTFOLIO

A list of securities owned by an insurance company (or any other financial organization.)

PORTFOLIO REINSURANCE

A type which, in the U.S., does not belong within the normal field of reinsurance, but is an arrangement whereby one insurance company takes over from another. It frequently takes place at inception or terminations of a treaty, or a company may retire from a territory or from the insurance business altogether.

POSSESSION

The right of usage and control over property in question. It does not necessarily involve ownership.

POSTMORTEM DIVIDEND

A dividend allotted after the death of the insured and constituting a pro rata portion of the dividend that would-have been payable at a later date if the policy owner had lived.

POWER OF ATTORNEY

Authority given to one person to act for and obligate another, but only to the extent specified in the instrument granting the power.

PRECEDENT

In law, this term refers to a previous decision involving similar facts and made by a court of competent jurisdiction. Such decisions are used by the courts as standards for deciding future cases. Legal precedents are frequently very important in the interpretation of insurance policies.

PRE-EXISTING CONDITION

A condition of health in existence before the issue date of a policy. Generally, when an employee or covered dependent received treatment within a specified period of time prior to the issue date of a health policy, a pre-existing condition is said to exist.

PREFERRED RISK

A risk whose physical condition, occupation, mode of living, and other characteristics indicate a prospect for longevity which is superior to that of the average longevity of unimpaired-lives of the same age. See Standard Risk.

PREMISES

(1) The extent of real property owned or occupied by a person. (2) In many insurance policies, that part of the insured's property to which the protection extends, as defined in the policy. (3) Matters previously stated or set forth; provisions in a legal document, especially a deed.

PREMISES/OPERATIONS

That liability coverage attaching from ownership, use or maintenance of premises or actions of the insured, employees, servants or other kinds of agents.

PREMIUM

The monetary consideration which the policyholder pays to the insurance company for a policy of insurance, and for which the company assumes the risk.

PREMIUM, ADDITIONAL (ADD. PREM.)

The amount due the insurer by the insured by reason of (1) a change endorsement resulting in an increase in the original premium, or (2) an audit disclosing the actual earned premium as being greater than the estimated premiums. In the case of change endorsements, the additional premium represents the excess of the new premium over the estimated premium.

PREMIUM, DEPOSIT (DEP. PREM.)

The amount paid to the carrier by the insured at the inception of the policy. On policies issued on an annual audit basis the deposit premium equals the estimated premium; on policies issued on an interim-audit basis, the deposit premium is a fixed percentage of the estimated annual premium depending on whether the policy is to be audited monthly, quarterly, or semiannually.

PREMIUM, EARNED (E.P.)

The amount charged the insured by the insurer for the insurance provided during the time policies are in force. A premium is not fully earned until after termination of the policy period, or any designated portion thereof.

PREMIUM NOTICE

Notice of premium due, sent out by the company or one of its agencies, to an insured.

PREMIUM, ORIGINAL

The original premium recorded or the latest premium in case of a subsequent endorsement controlled statistically for the purpose of keeping accurate "premiums in force" records.

PREMIUM, PRESENT (PRES. PREM.)

The premium stated in the policy as of any particular date. This expression is used particularly in connection with endorsements.

PREMIUM, RETURN (R.P.)

The amount due the insured by the carrier by reason (1) cancellation of the policy, (2) a change endorsement resulting in a reduction in the original premium, or (3) an audit disclosing the actual earned premium as being less than the estimated premium. On change endorsements the return premium represents the excess of the premium stated in the policy over the new premium. In the case of cancellations the return premium represents the excess of the premium-stated in the policy over the earned premium. On audits the return premium represents the excess of the estimated premium over the earned premium.

PREMIUM WRITTEN

Gross premium written minus premiums on policies canceled and all returned premiums during a given period.

PREMIUM, YEARLY (YR. PREM.)

The premium for a full year's protection. This expression is used particularly in connection with change endorsements.

PREMIUMS EARNED

The aggregate of the earned premiums on all policies during a given period. The figure is arrived at by adding the premiums written to the unearned premiums as of the beginning of the period and subtracting the unearned premiums as of the end of the period.

PREMIUMS, GROSS

The aggregate of all the premiums, including additional premiums, written in the policies or renewals issued during a given period without any deductions whatever.

PREMIUMS IN COURSE OF COLLECTION

Premiums due.

PREMIUMS IN FORCE

The aggregate of premiums on all policies in effect on a given date. This term is used especially in connection with statements and reports prepared by a home office.

PREMIUMS, NET

Gross premiums minus premiums on policies canceled flat, all return premiums and premiums on reinsurance ceded and assumed during any given period.

PREMIUMS, OUTSTANDING

The total amount of all unpaid premiums due the carrier from the policyholder.

PREMIUMS, UNEARNED

Insurance premiums are payable in advance, and since the obligation of the carrier with respect to claims occurring during the term of the policy does not cease until the policy expires, the premium is not fully earned until the policy has expired. Unearned premiums represent premium money received by carriers which actually has not been earned. The earned portion of a policy premium as of any particular date represents the amount required to compensate the carrier on a pro rata basis for the insurance already provided during the elapsed portion of the policy period. The unearned portion represents the amount required to compensate the carrier on a pro rata basis for the insurance yet to be provided during the remaining portion of the policy period.

PRESUMPTION

An inference as to the existence of one fact not certainly known, from the known existence of another fact, founded on a previous experience or general knowledge of their connection.

PRIMARY RATING FACTOR

A function in the rating of commercial autos, determined by GVW, (Gross Vehicle Weight) business use and -radius of operation.

PRINCIPAL

The person, firm or corporation whose performance of certain obligations is covered or guaranteed by a bond.

PRINCIPAL SUM

The amount specified in a health and accident policy to be paid in the event of certain losses.

PRINCIPAL SUM [LIFE] (Uniflex)

The amount of initial death benefit (pure insurance) shown on the policy specifications page. The actual death benefit paid may be more or less than the Principal Sum.

PRIOR INSURANCE

Insurance in force at the time a particular policy is written.

PRIVATE CARRIER

An individual or corporation not primarily engaged in the transportation business that hauls its own property in its own vehicles. One who does not haul for hire.

PRIVATE PASSENGER CAR

Four wheel land motor vehicle of the private passenger or station wagon type licensed for use upon public highways.

PRO RATA CANCELLATION

A cancellation on which the premium charge is adjusted in proportion to the time the coverage has been in effect.

PRO RATA DISTRIBUTION CLAUSE

A form usually attached to a fire policy covering several buildings. It provides that the insurance shall apply to each building only in the proportion that the value of such building bears to the total value of all buildings covered under the policy.

PRO RATA PREMIUM

See Fractional Premium.

PRO RATE

The actual percentage for the time insurance is in force, as distinguished from short rate.

PROCEEDS

The net amount of money payable by the company at the death of an insured or at the maturity of a policy.

PRODUCER

In Insurance, this refers to any person engaged in the production of business, i.e. sales. In most other forms of business, the producer is the manufacturer who turns out the product to be sold.

PRODUCTS/COMPLETED OPERATIONS

That liability coverage attaching from product failure or defects in workmanship which cause bodily injury or property damage after the product has been removed from the insured premises or the insured, employees servants or agents have completed their-. operations and departed the premises.

PRODUCT LIABILITY INSURANCE

Protection against liability arising out of the handling or use of the existence of any condition in-goods or products manufactured, sold, handled or distributed by the insured if the accident occurs after the insured has relinquished possession to others and away from the insured's premises. Coverage also applies to accidents caused by faulty workmanship if the accident occurs away from the insured's premises and after the work has been allegedly completed.

PROHIBITIVE RISK

An applicant or policyholder whose characteristic credit or claim experience prohibit against insuring that person.

PROMISSORY NOTE

A written promise to pay on demand or at some fixed future time a certain sum of money to a specified person or bearer.

PROOF OF LOSS

A sworn statement which usually must be furnished by the insured before any property insurance loss will be paid.

PROPERTY DAMAGE INSURANCE

Coverage for liability due to losses inflicted on the property of others.

PROPERTY DAMAGE LIABILITY

The liability imposed by law on one person for negligently damaging or destroying the property of another.

PROPERTY INSURANCE

Insurance written to cover the loss, by damage or theft, to specified objects of value owned, possessed, or held by the insured. Sometimes called physical damage in case of automobile insurance.

PROPOSAL

A term used by Lloyds of London and some other marine insurers instead of "application."

PROTECTION

Same as Coverage.

PROTECTIVE LIABILITY INSURANCE

A term sometimes used instead of "contingent liability". It is most commonly used in the case of Owners' or Contractors" Protective Liability.

PROVISIONAL RATE

Estimated temporary rate. Always subject to adjustment.

PROXIMATE CAUSE

That which in an ordinary natural sequence produces a specific result. To be proximate, a cause doesn't need to be direct, but it must be that upon which the responsibility can be placed.

PUBLIC CARRIER

A person who undertakes to transport people or goods for a consideration. In the strict sense of the term, a public carrier must accept all persons for whom it has the necessary facilities and who are willing to pay for the service, at the same rates for each class.

PUBLIC POLICY

The legal doctrine that the government, particularly the courts will administer the law and interpret statutes and contracts in the manner best calculated to protect the interests of the majority of the people. Many rulings pertaining to insurance are based upon this doctrine.

PUBLIC UTILITY

A business which the legislature or the courts have declared essential to the well-being of the public, and which they have assumed the right to regulate in the interest of the public. Insurance is not, strictly speaking, a public utility, but it is of such vital importance to the public that it is subject to state regulation.

PUBLISHED RATES

Rates established by the State Board of Insurance for particular risks. They are based on a physical survey and on the application of rating schedules.

PURE ASSESSMENT MUTUAL

One in which no advance premium is charged. As each loss occurs every policyholder is assessed his/her pro rata share. This is not a bona fide plan of insurance, since no one knows how much or how often he/she is going to be called upon to pay.

PURE ENDOWMENT

A contract which provides for payment only upon survival of a certain person to a certain date and not in event of that person's prior death. This type of contract is just the opposite of a Term contract which provides for payment only in event the insured person dies within the term period specified.

PURE PREMIUM

The amount of premium required to pay losses alone. An amount, usually a percentage, must be added to pay the cost of acquiring and managing the business, etc. in order to determine the manual rate.