Insurance Tips

A - Z

  • Actuary - A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics.
  • Adjuster - A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted.
  • Agent - individual who sells and services insurance policies in either of two classifications:
  • 1. Independent agent represents at least two insurance companies and (at least in theory) services clients by searching the market for the most advantageous price for the most coverage. The agent's commission is a percentage of each premium paid and includes a fee for servicing the insured's policy.
  • 2. Direct or career agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent.
  • Aggregate Limit - Usually refers to liability insurance and indicates the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents might occur.
  • Annuity - An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.
  • Broker - Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.
  • Broker-Agent - Independent insurance salesperson who represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant's coverage to maximize protection and minimize cost. This person is licensed as an agent and a broker.
  • Casualty - Liability or loss resulting from an accident.
  • Casualty Insurance - That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance.
  • Claim - A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.
  • Commercial Lines - Refers to insurance for businesses, professionals and commercial establishments.
  • Coverage - The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.
  • Earned Premium - The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.
  • 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 - A claim on property, such as a mortgage, a lien for work and materials, or a right of dower. The interest of the property owner is reduced by the amount of the encumbrance.
  • General Liability Insurance - Insurance designed to protect business owners and operators from a wide variety of liability exposures. Exposures could include liability arising from accidents resulting from the insured's premises or operations, products sold by the insured, operations completed by the insured, and contractual liability.
  • Hazard - A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.
  • Health Maintenance Organization (HMO) - Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.
  • Impaired Insurer - An insurer which is in financial difficulty to the point where its ability to meet financial obligations or regulatory requirements is in question.
  • Insurance Adjuster - A representative of the insurer who seeks to determine the extent of the insurer's liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an "as needed" basis and might work for several insurance companies at the same time. Independent adjusters charge insurance companies both by the hour and by miles traveled.
  • Investment Income - The return received by insurers from their investment portfolios including interest, dividends and realized capital gains on stocks. It doesn't include the value of any stocks or bonds that the company currently owns.
  • 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.
  • Lloyd's - Generally refers to Lloyd's of London, England, an institution within which individual underwriters accept or reject the risks offered to them. The Lloyd's Corp. provides the support facility for their activities.
  • Lloyds Organizations - These organizations are voluntary unincorporated associations of individuals. Each individual assumes a specified portion of the liability under each policy issued.
  • Loss Adjustment Expenses - Expenses incurred to investigate and settle losses.
  • Loss Control - All methods taken to reduce the frequency and/or severity of losses including exposure avoidance, loss prevention, loss reduction, segregation of exposure units and noninsurance transfer of risk. The use of appropriate insurance, avoidance of risk, loss control, risk retention, self insuring, and other techniques that minimize the risks of a business, individual, or organization.
  • Loss Ratio - The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio measures the company's underlying profitability, or loss experience, on its total book of business.
  • Loss Reserve - The estimated liability, as it would appear in an insurer's financial statement, for unpaid insurance claims or losses that have occurred as of a given evaluation date. Usually includes losses incurred but not reported (IBNR), losses due but not yet paid, and amounts not yet due. For individual claims, the loss reserve is the estimate of what will ultimately be paid out on that claim.
  • Mortgage Insurance Policy - In life and health insurance, a policy covering a mortgagor with benefits intended to pay off the balance due on a mortgage upon the insured's death, or to meet the payments due on a mortgage in case of the insured's death or disability.
  • Named Perils - Perils specifically covered on insured property.
  • Net Premium - The amount of premium minus the agent's commission. Also, the premium necessary to cover only anticipated losses, before loading to cover other expenses.
  • Net Premiums Written - Represents gross premium written, direct and reinsurance assumed, less reinsurance ceded.
  • Net Underwriting Income - Net premiums earned less incurred losses, loss-adjustment expenses, underwriting expenses incurred, and dividends to policyholders.
  • Occurrence - An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn't have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.
  • Peril - The cause of a possible loss.
  • Personal Lines - Insurance for individuals and families, such as private-passenger auto and homeowners insurance.
  • Policy - The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
  • Preferred Auto - Auto coverage for drivers who have never had an accident and operates vehicles according to law. Drivers are not a risk for any insurance company that writes auto insurance, and no insurance company would be afraid to take them on as risk.
  • Premium - The price of insurance protection for a specified risk for a specified period of time.
  • Reinsurance - In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn't fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period.
  • Renewal - The automatic re-establishment of in-force status effected by the payment of another premium.
  • Reserve - An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability.
  • Risk Management - Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.
  • Solvency - Having sufficient assets--capital, surplus, reserves--and being able to satisfy financial requirements--investments, annual reports, examinations--to be eligible to transact insurance business and meet liabilities.
  • Statutory Reserve - A reserve, either specific or general, required by law.
  • Stop Loss - Any provision in a policy designed to cut off an insurer's losses at a given point.
  • Subrogation - The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.
  • Term Life Insurance - Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn't build up any of the nonforfeiture values associated with whole life policies.
  • Total Loss - A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.
  • Underwriter - The individual trained in evaluating risks and determining rates and coverages for them. Also, an insurer.
  • Underwriting - The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not quality.
  • Unearned Premiums - That part of the premium applicable to the unexpired part of the policy period.
  • Universal Life Insurance - A combination flexible premium, adjustable life insurance policy.
  • Whole Life Insurance - Life insurance which might be kept in force for a person's whole life and which pays a benefit upon the person's death, whenever that might be.

Insurance Resources


Insurance Tips - Useful information that you need to know when seeking insurance coverage. As always, we will be happy to provide you with any other information that you desire.

Glossary of Insurance Terms - Here are definitions which are provided solely for general informational purposes. They are not intended to be complete descriptions of all terms.