A
Actual Cash Value
An amount equivalent to the fair market value of the stolen or damaged property immediately preceding the loss. For real property, this amount can be based on a determination of the fair market value of the property before and after the loss. For vehicles, this amount can be determined by local area private party sales and dealer quotations for comparable vehicles.
Admitted Company
An insurance company authorized to do business in the state that they are licensed in.
Agent
A licensed person or organization authorized to sell insurance by or on behalf of an insurance company.
B
Binder
A temporary or preliminary agreement which provides coverage until a policy can be written or delivered.
Broker
A licensed person or organization paid by you to look for insurance on your behalf.
C
Cancellation
The termination of insurance coverage during the policy period. Flat cancellation is the cancellation of a policy as of its effective date, without any premium charge.
Claim
Notice to an insurer that under the terms of a policy, a loss maybe covered.
Claimant
The first or third party. That is any person who asserts right of recovery.
Common Carrier Liability
Coverage for transportation firms that must carry any customer’s goods so long as the customer is willing to pay. Examples include trucking companies, bus lines, and airlines.
Credit Life Insurance
Insurance issued to a creditor (lender) to cover the life of a debtor (borrower) for an outstanding loan.
D
Decline
The company refuses to accept the request for insurance coverage.
Deductible
The amount of the loss which the insured is responsible to pay before benefits from the insurance company are payable. You may choose a higher deductible to lower your premium.
Disability Insurance
Health insurance that provides income payments to the insured wage earner when income is interrupted or terminated because of illness, sickness, or accident.
E
Endorsement
Amendment to the policy used to add or delete coverage. Also referred to as a “rider.”
Exclusion
Certain causes and conditions, listed in the policy, which are not covered.
Exclusive Provider Organization (EPO)
A managed care health plan where services are covered only if you use doctors, specialists, or hospitals in the plan’s network (except in an emergency).
Expiration Date
The date on which the policy ends.
F
Face Amount
The dollar amount to be paid to the beneficiary when the insured dies. It does not include other amounts that may be paid from insurance purchased with dividends or any policy riders.
Financial Guarantee Insurance
A surety bond, insurance policy or, when issued by an insurer, an indemnity contract and any guaranty similar to the foregoing types, under which loss is payable upon proof of occurrence of financial loss to an insured claimant, obligee, or indemnitee.
G
Grace Period
A period (usually 31 days) after the premium due date, during which an overdue premium may be paid without penalty. The policy remains in force throughout this period.
Guaranteed Insurability
An option that permits the policy holder to buy additional stated amounts of life insurance at stated times in the future without evidence of insurability.
H
Health Insurance
A policy that will pay specifies sums for medical expenses or treatments. Health policies can offer many options and vary in their approaches to coverage.
Health Maintenance Organization (HMO)
A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally won’t cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage. HMOs often provide integrated care and focus on prevention and wellness.
I-J-K
Incontestable Clause
A policy provision in which the company agrees not to contest the validity of the contract after it has been in force for a certain period of time, usually two years.
Insured
The policyholder – the person(s) protected in case of a loss or claim.
Insurer
The insurance company.
L
Legal Insurance
Prepaid legal insurance coverage plan sold on a group basis.
Liability Insurance
Coverage for all sums that the insured becomes legally obligated to pay because of bodily injury or property damage, and sometimes other wrongs, to which an insurance policy applies.
Life Insurance
A policy that will pay a specified sum to beneficiaries upon the death of the insured.
Limit
Maximum amount a policy will pay either overall or under a particular coverage.
Loan Value
The amount which can be borrowed at a specified rate of interest from the issuing company by the policyholder, using the value of the policy as collateral. In the event the policyholder dies with the debt partially or fully unpaid, then the amount borrowed plus any interest is deducted from the amount payable.
M-N-O
Material Misrepresentation
The policyholder / applicant makes a false statement of any material (important) fact on his/her application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged.
Medical Payments
Will pay reasonable expenses incurred for necessary medical and /or funeral services because of bodily injury caused by accident and sustained by you or any other person while occupying a covered automobile.
Misquote
An incorrect estimate of the insurance premium.
Mortgage Insurance
Life insurance that pays the balance of a mortgage if the mortgagor (insured) dies.
P
Peril
The cause of a possible loss. For example, fire, theft, or hail.
Policy
The written contract of insurance.
Point of Service (POS)
A type of health plan where you pay less if you use doctors, hospitals, and other health care providers that belong to the plan’s network. POS plans require you to get a referral from your primary care doctor in order to see a specialist.
Policy Limit
The maximum amount a policy will pay, either overall or under a particular coverage.
Preferred Provider Organization (PPO)
A type of health plan where you pay less if you use providers in the plan’s network. You can use doctors, hospitals, and providers outside of the network without a referral for an additional cost.
Premium
The amount of money an insurance company charges for insurance coverage.
Premium Financing
A a policyholder contracts with a lender to pay the insurance premium on his/her behalf. The policyholder agrees to repay the lender for the cost of the premium, plus interest and fees.
Pro-Rata Cancellation
When the policy is terminated midterm by the insurance company, the earned premium is calculated only for the period coverage was provided. For example: an annual policy with premium of $1,000 is canceled after 40 days of coverage at the company’s election. The earned premium would be calculated as follows: 40/365 days X $1,000=.110 X $1,000=$110.
Q
Quote
An estimate of the cost of insurance, based on information supplied to the insurance company by the applicant.
R
Reinstatement
The restoring of a lapsed policy to full force and effect. The reinstatement may be effective after the cancellation date, creating a lapse of coverage. Some companies require evidence of insurability and payment of past due premiums plus interest.
Rider
Usually known as an endorsement, a rider is an amendment to the policy used to add or delete coverage.
S
Short-Rate Cancellation
When the policy is terminated prior to the expiration date at the policyholder’s request. Earned premium charged would be more than the pro-rata earned premium. Generally, the return premium would be approximately 90 percent of the pro-rata return premium. However, the company may also establish its own short-rate schedule.
Surrender
To terminate or cancel a life insurance policy before the maturity date. In the case of a cash value policy, the policyholder may exercise one of the non-forfeiture options at the time of surrender.
T-U-V
Underwriting
The process of selecting applicants for insurance and classifying them according to their degrees of insurability so that the appropriate premium rates may be charged. The process includes rejection of unacceptable risks.
W-X-Y-Z
Waiting Period
A period of time set forth in a policy which must pass before some or all coverages begin.
Workers Compensation Insurance
Coverage providing four types of benefits (medical care, death, disability, and rehabilitation) for employee job-related injuries or diseases as a matter of right (without regard to fault).
Security and Bonds Terminology
Effective Date
The date on which an insurance policy or bond goes into effect, and from which protection is furnished.
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.
Principal
A person or organization whose obligation are guaranteed by a bond.
Surety
An arrangement whereby one party becomes answerable to a third party for the acts of a second party. Customarily an insurance company, the party in a suretyship arrangement who holds himself responsible to one person for the acts of another.