Glossary

Gap Insurance
An automobile insurance option, available in some states, that covers the difference between a car’s actual cash value when it is stolen or wrecked and the amount the consumer owes the leasing or finance company.

Garage Location
The zip code where your vehicle is parked when not in use and usually corresponds to your primary residence.

Generally Accepted Accounting Principles/GAAP
Generally accepted accounting principles (GAAP) accounting is used in financial statements that publicly-held companies prepare for the Securities and Exchange Commission.

Generic Auto Parts
Auto crash parts produced by firms that are not associated with car manufacturers. Insurers consider these parts, when certified, at least as good as those that come from the original equipment manufacturer (OEM). They are often cheaper than the identical part produced by the OEM.

Glass Insurance
Coverage for glass breakage caused by all risks; fire and war are sometimes excluded. Insurance can be bought for windows, structural glass, leaded glass, and mirrors. Available with or without a deductible.

Graduated Driver Licenses
Licenses for younger drivers that allow them to improve their skills. Regulations vary by state, but often restrict night time driving. Young drivers receive a learner’s permit, followed by a provisional license, before they can receive a standard drivers license.

Gramm-Leach-Bliley ACT
Financial services legislation, passed by Congress in 1999, that removed Depression-era prohibitions against the combination of commercial banking and investment-banking activities. It allows insurance companies, banks, and securities firms to engage in each others’ activities and own one another.

Group Insurance
A single policy covering a group of individuals, usually employees of the same company or members of the same association and their dependents. Coverage occurs under a master policy issued to the employer or association.

Good Student Discount
May be awarded to full-time students who maintain a grade average of “B” or better. Each carrier has specific rules that may apply.

Guarantee Funds
All 50 states, the District of Columbia and Puerto Rico require licensed insurers to assume some of an insolvent insurance company’s policyholder liabilities. These funds are used to bail out the policyholders of companies that fail.

Guarantee Period
Period during which the level of interest specified under a fixed annuity is guaranteed.

Guaranteed Death Period
Basic death benefits guaranteed under variable annuity contracts.

Guaranteed Income Contract/GIC
Often an option in an employer-sponsored retirement savings plan. Contract between an insurance company and the plan that guarantees a stated rate of return on invested capital over the life of the contract.

Guaranteed Living Benefit
A guarantee in a variable annuity that a certain level of annuity payment will be maintained. Serves as a protection against investment risks. Several types exists.

Guaranteed Replacement Cost of Coverage
Homeowners policy that pays the full cost of replacing or repairing a damaged or destroyed home, even if it is above the policy limit.

Gun Liability
A new legal concept that holds gun manufacturers liable for the cost of injuries caused by guns. Several cities have filed lawsuits based on this concept.

Hacker Insurance
A coverage that protects businesses engaged in electronic commerce from losses caused by hackers.

Hard Market
A seller’s market in which insurance is expensive and in short supply.

Hazard
Anything that increases the chance of an accident occurring.

Hit and Run
An accident caused by someone who does not stop to assist or provide information.

Homeowners Insurance Policy
The typical homeowners insurance policy covers the house, the garage and other structures on the property, as well as personal possessions inside the house such as furniture, appliances and clothing, against a wide variety of perils including windstorms, fire and theft. The extent of the perils covered depends on the type of policy. An all-risk policy offers the broadest coverage. This covers all perils except those specifically excluded in the policy.
Homeowners insurance also covers additional living expenses. Known as Loss of Use, this provision in the policy reimburses the policyholder for the extra cost of living elsewhere while the house is being restored after a disaster. The liability portion of the policy covers the homeowner for accidental injuries caused to third parties and/or their property, such as a guest slipping and falling down improperly maintained stairs. Coverage for flood and earthquake damage is excluded and must be purchased separately.

House Year
Equal to 365 days of insured coverage for a single dwelling. It is the standard measurement for homeowners insurance.

Hurricane Deductible
A percentage or dollar amount added to a homeowner’s insurance policy to limit an insurer’s exposure to loss from a hurricane. Higher deductibles are instituted in higher risk areas, such as coastal regions. Specific details, such as the intensity of the storm for the deductible to be triggered and the extent of the high risk area, vary from insurer to insurer and state to state.

ID Card
A card issued by your insurer containing basic information about your insurance policy. Some states require you to keep an ID card in your vehicle.

Identity Theft Insurance
Coverage for expenses incurred as the result of an identity theft. Can include costs for notarizing fraud affidavits and certified mail, lost income from time taken off from work to meet with law-enforcement personnel or credit agencies, fees for reapplying for loans and attorney’s fees to defend against lawsuits and remove criminal or civil judgments.

Immediate Annuity
A product purchased with a lump sum, usually at the time retirement begins or afterwards. Payments begin within about a year. Immediate annuities can be either fixed or variable.

Inception Date
The date that coverage begins on an insurance policy.

Incurred But Not Reported Losses/IBNR
Losses that are not filed with the insurer or reinsurer until years after the policy is sold. Some liability claims may be filed long after the event that caused the injury to occur. Asbestos-related diseases, for example, do not show up until decades after the exposure. IBNR also refers to estimates made about claims already reported but where the full extent of the injury is not yet known, such as a workers compensation claim where the degree to which work-related injuries prevents a worker from earning what he or she earned before the injury unfolds over time. Insurance companies regularly adjust reserves for such losses as new information becomes available.

Incurred Losses
Losses occurring within a fixed period, whether or not adjusted or paid during the same period.

Indemnification
The act of providing compensation for a loss with the intent to restore an individual or entity to the approximate financial position prior to the loss.

Indemnify
Provide financial compensation for losses.

Indemnity
A principle of insurance which provides that when a loss occurs, the insured should be restored to the approximate financial condition occupied before the loss occurred, no better, no worse.

Independent Adjuster
An individual who estimates losses on behalf of an insurance company, but is not an employee of that company.

Independent Agent
Agent who is self-employed, is paid on commission, and represents several insurance companies.

Individual Retirement Account
A tax-deductible savings plan for those who are self-employed, or those whose earnings are below a certain level or whose employers do not offer retirement plans. Others may make limited contributions on a tax-deferred basis. The Roth IRA, a special kind of retirement account created in 1997, may offer greater tax benefits to certain individuals.

Inflation Guard Clause
A provision added to a homeowners insurance policy that automatically adjusts the coverage limit on the dwelling each time the policy is renewed to reflect current construction costs.

Inland Marine Insurance
This broad type of coverage was developed for shipments that do not involve ocean transport. Covers articles in transit by all forms of land and air transportation as well as bridges, tunnels and other means of transportation and communication. Floaters that cover expensive personal items such as fine art and jewelry are included in this category.

Insolvency
Insurer’s inability to pay debts. Insurance insolvency standards and the regulatory actions taken vary from state to state. When regulators deem an insurance company is in danger of becoming insolvent, they can take one of three actions: place a company in conservatorship or rehabilitation if the company can be saved or liquidation if salvage is deemed impossible. The difference between the first two options is one of degree – regulators guide companies in conservatorship but direct those in rehabilitation. Typically the first sign of problems is inability to pass the financial tests regulators administer as a routine procedure.

Inspection
Verification of a vehicle’s physical condition.

Institutional Investor
An organization such as a bank or insurance company that buys and sells large quantities of securities.

Insurable Interest
Exists when an individual would suffer an economic loss as the result of damage to property or bodily injury.

Insurable Risk
Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable. The insurance company also must be able to come up with a reasonable price for the insurance.

Insurance
1.) A system in which groups of people who have similar chances of suffering a loss transfer their risk of loss to an insurer who pools the risk of many people together. In exchange for payment of premium, the insurer promises to reimburse the person for their covered losses.
2.) A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.

Insurance Fraud
The act of falsifying or exaggerating the facts of an accident to an insurance company to obtain payment that would not otherwise be made. Common types of insurance fraud are staged accidents, exaggerated injuries, and inflated medical bills.

Insurance Pool
A group of insurance companies that pool assets, enabling them to provide an amount of insurance substantially more than can be provided by individual companies to ensure large risks such as nuclear power stations. Pools may be formed voluntarily or mandated by the state to cover risks that can’t obtain coverage in the voluntary market such as coastal properties subject to hurricanes.

Insurance Regulatory Information System/IRIS
Uses financial ratios to measure insurers’ financial strength. Developed by the National Association of Insurance Commissioners. Each individual state insurance department chooses how to use IRIS.

Insurance Score
Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. It does not include information about income or race.
Studies (1) have shown that people who manage their money well tend also to manage their most important asset, their home, well. And people who manage their money responsibly also tend to handle driving a car responsibly. Some insurance companies use insurance scores as an insurance underwriting and rating tool.
Related Study – The Relationship of Credit-Based Insurance Scores to Private Passenger Automobile Insurance Loss Propensity, by EPIC Actuaries, LLC, June 2003

Insurance-To-Value
Insurance written in an amount approximating the value of the insured property.

Insured
A person or organization covered by an insurance policy.

Insurer
An organization that provides insurance.

Integrated Benefits
Coverage where the distinction between job-related and non-occupational illnesses or injuries is eliminated and workers compensation and general health coverage are combined. Legal obstacles exist, however, because the two coverages are administered separately. Previously called twenty-four hour coverage.

Intermediation
The process of bringing savers, investors and borrowers together so that savers and investors can obtain a return on their money and borrowers can use the money to finance their purchases or projects through loans.

Internet Insurer
An insurer that sells exclusively via the Internet.

Internet Liability Insurance
Coverage designed to protect businesses from liabilities that arise from the conducting of business over the Internet, including copyright infringement, defamation, and violation of privacy.

Investment Income
Income generated by the investment of assets. Insurers have two sources of income, underwriting (premiums less claims and expenses) and investment income. The latter can offset underwriting operations, which are frequently unprofitable.

Joint and Survivor Annuity
An annuity with two annuitants, usually spouses. Payments continue until the death of the longest living of the two.

Joint Underwriting Association/JUA
Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program. JUAs may be set up to provide auto and homeowners insurance and various commercial coverages, such as medical malpractice.

Junk Bonds
Corporate bonds with credit ratings of BB or less. They pay a higher yield than investment grade bonds because issuers have a higher perceived risk of default. Such bonds involve market risk that could force investors, including insurers, to sell the bonds when their value is low. Most states place limits on insurers’ investments in these bonds. In general, because property/casualty insurers can be called upon to provide huge sums of money immediately after a disaster, their investments must be liquid. Less than 2 percent are in real estate and a similarly small percentage are in junk bonds.

Key Person Insurance
Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss.

Kidnap/Ransom Insurance
Coverage up to specific limits for the cost of ransom or extortion payments and related expenses. Often bought by international corporations to cover employees. Most policies have large deductibles and may exclude certain geographic areas. Some policies require that the policyholder not reveal the coverage’s existence.

L-Share Variable Annuities
A form of variable annuity contract usually with short surrender periods and higher mortality and expense risk charges.

Laddering
A technique that consists of staggering the maturity dates and the mix of different types of bonds.

Lapse in Coverage
A point in time when a policy has been canceled or terminated for failure to pay the premium, or when the policy contract is void for other reasons.

Leased Vehicle
A vehicle rented under a long-term contract (lease). The leasing company retains ownership of the vehicle and must be shown on your insurance policy as an insured.

Legal Liability
Liability imposed by law, as opposed to liability arising from an agreement or contract.

Lender
Your lender is the institution to which you make car payments.

Lessor
Your lessor is the institution to which you make your lease payments.

Liability
Any legally enforceable obligation or responsibility for the injury or damage suffered by another person.

Liability Adjuster
The liability adjuster handles the investigation of the accident. These adjusters’ responsibilities can include collision payments, property damage payments, and bodily injury settlements. In some states, these adjusters may also handle the medical portion of your claim.

Liability Insurance
Insurance providing money on behalf of the policyholder to pay because of bodily injury or property damage caused to another person and covered in the policy.

Liability Investigation
The process of gathering information to determine the cause of an accident.

Lien
A claim, charge, or encumbrance on property as a security for the payment of a debt.

Lien holder
A person or organization with a financial interest in property up to the amount of money borrowed or still owed on the property.

Limit
The maximum amount of protection purchased by the insured for a specific coverage.

Limits of Liability
The maximum amount of insurance the insurance company will pay for a particular loss, or for a loss during a period of time.

Line of insurance/Line
The type or kind of insurance such as personal lines, life insurance or homeowners.

Liquidation
Enables the state insurance department as liquidator or its appointed deputy to conclude the insurance company’s affairs by selling its assets and settling claims upon those assets. After receiving the liquidation order, the liquidator notifies insurance departments in other states and state guaranty funds of the liquidation proceedings. Such insurance company liquidations are not subject to the Federal Bankruptcy Code but to each state’s liquidation statutes.

Liquidity
The ability and speed with which a security can be converted into cash.

Liquor Liability
Coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the policyholder.

Lloyd’s of London
A marketplace where underwriting syndicates, or mini-insurers, gather to sell insurance policies and reinsurance. Each syndicate is managed by an underwriter who decides whether or not to accept the risk. The Lloyd’s market is a major player in the international reinsurance market as well as a primary market for marine insurance and large risks. Originally, Lloyd’s was a London coffee house in the 1600s patronized by shipowners who insured each other’s hulls and cargoes. As Lloyd’s developed, wealthy individuals, called “Names,” placed their personal assets behind insurance risks as a business venture. Increasingly since the 1990s, most of the capital comes from corporations.

Lloyds
Corporation formed to market services of a group of underwriters. May issue insurance policies or provide insurance protection. Insurance is written by individual underwriters, with each assuming a part of every risk. Has no connection to Lloyd’s of London, and is found primarily in Texas.

Long-Term Care Insurance
Long-term care (LTC) insurance pays for services to help individuals who are unable to perform certain activities of daily living without assistance, or require supervision due to a cognitive impairment such as Alzheimer’s disease. LTC is available as individual insurance or through an employer-sponsored or association plan.

Loss
1.) Any measurable dollar cost of damage and/or injury suffered by a person.
2.) A reduction in the quality or value of a property, or a legal liability.
Loss Adjustment Expenses
The sum insurers pay for investigating and settling insurance claims, including the cost of defending a lawsuit in court.

Loss Costs
The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.

Loss of Use
Compensation to a third-party claimant for financial consequences resulting from the inability to use property as the result of accident-related damage.

Loss Payee
A person or entity with a legally secured insurable interest in another’s property, usually a financial institution that loaned money to buy a car. The car is the loan collateral. If the auto is damaged in an accident, loss payments will be made to you and to the loss payee on your policy.

Loss Ratio
Percentage of each premium dollar an insurer spends on claims.

Loss Reserves
The company’s best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer’s balance sheet.

Malicious Mischief
Intentional damage of personal property with malice of forethought.

Malpractice Insurance
Professional liability coverage for physicians, lawyers, and other specialists against suits alleging negligence or errors and omissions that have harmed clients.

Managed Care
Arrangement between an employer or insurer and selected providers to provide comprehensive health care at a discount to members of the insured group and coordinate the financing and delivery of health care. Managed care uses medical protocols and procedures agreed on by the medical profession to be cost effective, also known as medical practice guidelines.

Management System
A Management Systems is systematic framework designed to manage an organization’s policies, procedures and processes to ensure that the it can fulfill all tasks required to achieve its objectives. Visit Agency Matrix’s website for more information.

Manual
A book published by an insurance or bonding company or a rating association or bureau that gives rates, classifications, and underwriting rules.

Marine Insurance
Coverage for goods in transit, and for the commercial vehicles that transport them, on water and over land. The term may apply to inland marine but more generally applies to ocean marine insurance. Covers damage or destruction of a ship’s hull and cargo and perils include collision, sinking, capsizing, being stranded, fire, piracy, and jettisoning cargo to save other property. Wear and tear, dampness, mold, and war are not included. (See Inland marine and Ocean marine)

Material Damage
All property-related damage losses covered by the policy. This includes the following: Property Damage (PD), Comprehensive damage (COMP), Collision damage (COLL), Fire/Theft Combined Additional Coverage (FTCA), Rental Reimbursement (RREUN), or Uninsured Motorist Property Damage (UMPD).

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 or fails to disclose all the residents in a household.

McCarran-Ferguson Act
Federal law signed in 1945 in which Congress declared that states would continue to regulate the insurance business. Grants insurers a limited exemption from federal antitrust legislation.

Mechanical Breakdown Insurance
Covers repairs to all mechanical parts of the car.

Mediation
Nonbinding procedure in which a third party attempts to resolve a conflict between two other parties.

Medicaid
A federal/state public assistance program created in 1965 and administered by the states for people whose income and resources are insufficient to pay for health care.

Medical Adjuster
The medical adjuster is responsible for reviewing all medical bills, replacement/essential services, and lost wages submitted to the company for injuries sustained by you and/or the passengers in your vehicle (depending upon the state in which you live and the coverage on your policy).

Medical Payments Coverage
Pays medical expenses related to an automobile accident. This coverage is subject to the terms, limits and conditions of your policy contract.

Medical Payments Insurance
A coverage in which the insurer agrees to reimburse the insured and others up to a certain limit for medical or funeral expenses as a result of bodily injury or death by accident. Payments are without regard to fault.

Medical Utilization Review
The practice used by insurance companies to review claims for medical treatment.

Medicare
Federal program for people 65 or older that pays part of the costs associated with hospitalization, surgery, doctors’ bills, home health care, and skilled-nursing care.

MEDIGAP/MEDSUP
Policies that supplement federal insurance benefits particularly for those covered under Medicare.

Mine Subsidence Coverage
An endorsement to a homeowners insurance policy, available in some states, for losses to a home caused by the land under a house sinking into a mine shaft. Excluded from standard homeowners policies, as are other forms of earth movement.

Minimum Limits of Liability
The least amount of liability coverage that can be purchased, which is generally equivalent to the minimum amount required by state law. In determining rates, a carrier will use the basic limits to develop the base rates. If an insured person wants higher limits, the carrier applies an increased limits factor to the base rate in calculating the new premium for the increased coverage.

Misrepresentation
To make written or verbal statements that are untrue or misleading.

Money Supply
Total supply of money in the economy, composed of currency in circulation and deposits in savings and checking accounts. By changing the interest rates the Federal Reserve seeks to adjust the money supply to maintain a strong economy.

Mortality and Expense (M&E) Risk Charge
A fee that covers such annuity contract guarantees as death benefits.

Mortgage Guarantee Insurance
Coverage for the mortgagee (usually a financial institution) in the event that a mortgage holder defaults on a loan. Also called private mortgage insurance (PMI).

Mortgage Insurance
A form of decreasing term insurance that covers the life of a person taking out a mortgage. Death benefits provide for payment of the outstanding balance of the loan. Coverage is in decreasing term insurance, so the amount of coverage decreases as the debt decreases. A variant, mortgage unemployment insurance pays the mortgage of a policyholder who becomes involuntarily unemployed.

Mortgage-Backed Securities
Investment grade securities backed by a pool of mortgages. The issuer uses the cash flow from mortgages to meet interest payments on the bonds.

Motor Vehicle Record (MVR)
A report from the agency that issues your driver’s license, listing accidents and violations that appear on your driving record. This report is used to verify information provided by insurance applicants and policyholders.

Motorcycle Safety Foundation (MSF)
An international non-profit organization dedicated to motorcycle safety training, research and awareness.

Multi-car discount
A discount offered by some insurance companies for those with more than one vehicle insured on the same policy. In some cases, if you drive a company car insured by your company, your own insurance company may give you the multi-car discount.

Multiple Peril Policy
A package policy, such as a homeowners or business insurance policy, that provides coverage against several different perils. It also refers to the combination of property and liability coverage in one policy.

Municipal Bond Insurance
Coverage that guarantees bondholders timely payment of interest and principal even if the issuer of the bonds defaults. Offered by insurance companies with high credit ratings, the coverage raises the credit rating of a municipality offering the bond to that of the insurance company. It allows a municipality to raise money at lower interest rates. A form of financial guarantee insurance.

Municipal Liability Insurance
Liability insurance for municipalities.

Mutual Holding Company
An organizational structure that provides mutual companies with the organizational and capital raising advantages of stock insurers, while retaining the policyholder ownership of the mutual.

Mutual Insurance Company
A company owned by its policyholders that returns part of its profits to the policyholders as dividends. The insurer uses the rest as a surplus cushion in case of large and unexpected losses.

Named Insured
Any person, firm or corporation designated by name as the insured person(s) in a policy. Others may be protected by policy definition even though their names aren’t on the policy, such as other drivers operating (with consent) the named insured’s covered auto.

Named Non-Owner Policy
A policy endorsement for one who operates any non-owned automobile on a regular basis, such as driving a car provided by one’s employer.

Named peril
Peril specifically mentioned as covered in an insurance policy.

National Flood Insurance Program
Federal government-sponsored program under which flood insurance is sold to homeowners and businesses.

National Insurance Crime Bureau (NICB)
A not-for-profit organization that partners with insurers and law enforcement agencies to facilitate the identification, detection, and prosecution of insurance criminals. The NICB receives support from over 1,000 property/casualty insurance companies.

Negligence
The failure to exercise the care that is expected of a reasonable person in similar circumstances.

No-Fault Insurance
Auto insurance coverage that pays for each driver’s own injuries, regardless of who caused the accident. No-fault varies from state to state. It also refers to an auto liability insurance system that restricts lawsuits to serious cases. Such policies are designed to promote faster reimbursement and to reduce litigation. This coverage is not available in all states, check with us to find out more.

No-Fault Medical
A type of accident coverage in homeowners policies.

No-Loss Form
A statement that is a signed form telling the insurance company there have not been any losses since a certain date. The document usually includes a cancellation date, expiration date, and reinstatement date. etc.

No-Pay No-Play
The idea that people who don’t buy coverage should not receive benefits. Prohibits uninsured drivers from collecting damages from insured drivers. In most states with this law, uninsured drivers may not sue for noneconomic damages such as pain and suffering. In other states, uninsured drivers are required to pay the equivalent of a large deductible ($10,000) before they can sue for property damages and another large deductible before they can sue for bodily harm.

Non-Admitted Assets
Assets that are not included on the balance sheet of an insurance company, including furniture, fixtures, past-due accounts receivable, and agents’ debt balances.

Non-Admitted Insurer
Insurers licensed in some states, but not others. States where an insurer is not licensed call that insurer non-admitted. They sell coverage that is unavailable from licensed insurers within the state.

Non-Owned Auto
Any vehicle that is not owned, borrowed, or leased by the insured, and which is used primarily for a business purpose.

Non-Renewal
When an insurer decides not to renew a policy at the end of its policy period.

Notice of Loss
A written notice required by insurance companies immediately after an accident or other loss. Part of the standard provisions defining a policyholder’s responsibilities after a loss.

Nuclear Insurance
Covers operators of nuclear reactors and other facilities for liability and property damage in the case of a nuclear accident and involves both private insurers and the federal government.

Nursing Home Insurance
A form of long-term care policy that covers a policyholder’s stay in a nursing facility.

Occasional Driver
The person who is not the primary or principal driver of the vehicle.

Occupational Disease
Abnormal condition or illness caused by factors associated with the workplace. Like occupational injuries, this is covered by workers compensation policies.

Occurrence
An event, or repeated exposure to conditions, which unexpectedly causes injury or damage during the policy period.

Occurrence Policy
Insurance that pays claims arising out of incidents that occur during the policy term, even if they are filed many years later.

Ocean Marine Insurance
Coverage of all types of vessels and watercraft, for property damage to the vessel and cargo, including such risks as piracy and the jettisoning of cargo to save the property of others. Coverage for marine-related liabilities. War is excluded from basic policies, but can be bought back.

Open Competition States
States where insurance companies can set new rates without prior approval, although the state’s commissioner can disallow them if they are not reasonable and adequate or are discriminatory.

Operating Expenses
The cost of maintaining a business’s property, includes insurance, property taxes, utilities and rent, but excludes income tax, depreciation and other financing expenses.

Options
Contracts that allow, but do not oblige, the buying or selling of property or assets at a certain date at a set price.

Original Equipment Manufacturer Parts/OEM
Auto parts obtained from the original manufacturer of the car or the supplier of the original part.

Ordinance Law Coverage
Endorsement to a property policy, including homeowners, that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes, that did not exist when the building was originally built. For example, a building severely damaged in a hurricane may have to be elevated above the flood line when it is rebuilt. This endorsement would cover part of the additional cost.

Ordinary Life Insurance
A life insurance policy that remains in force for the policyholder’s lifetime.

Over-The-Counter (OTC)
Security that is not listed or traded on an exchange such as the New York Stock Exchange. Business in over-the-counter securities is conducted through dealers using electronic networks.

Package Policy
A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.

Passive Restraint System
A passenger safety system, such as an air-bag, that activates automatically in the event of an accident.

Pay-At-The-Pump
A system proposed in the 1990s in which auto insurance premiums would be paid to state governments through a per-gallon surcharge on gasoline

Payment Plans
Your auto insurance premium can be paid using one of our installment payment plans; you make several smaller payments but incur a service fee.

Payment Recovery
If your car is damaged because of another driver’s negligence and you ask your insurance carrier to settle the claim for damage to your vehicle, we will seek to recover your deductible and our payments from the other party. This process of payment recovery is also called subrogation.

Pension Benefit Guaranty Corporation
An independent federal government agency that administers the Pension Plan Termination Insurance program to ensure that vested benefits of employees whose pension plans are being terminated are paid when they come due. Only defined benefit plans are covered. Benefits are paid up to certain limits.

Pensions
Programs to provide employees with retirement income after they meet minimum age and service requirements. Life insurers hold some of these funds. Since the 1970s responsibility for funding retirement has increasingly shifted from employers (defined benefit plans that promise workers a specific retirement income) to employees (defined contribution plans financed by employees that may or may not be matched by employer contributions).

Per Occurrence Limit
This refers to the cap amount an insurance company will pay for all claims arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by all parties. When Bodily Injury coverage is purchased in split limits, the second limit is the “per occurrence” limit: e.g. $100,000(per person)/$300,000(per occurrence).

Per Person Limit
This refers to the cap amount an insurance company will pay for any one person’s injuries arising from a single incident. In an automobile accident, it comprises bodily injuries sustained by each person. When Bodily Injury is purchased in split limits, the first limit is the “per person” limit: e.g. $100,000(per person)/$300,000(per occurrence)

Peril
A danger or hazard that can cause a loss, for example, a car collision with an object, or a fire. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.

Personal Articles Floater
A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.

Personal Auto Policy
The most common auto insurance policy sold today. Often referred to as “PAP,” this policy is written in simple wording and provides coverage for liability, medical payments, uninsured/underinsured motorist coverage, and physical damage protection.

Personal Injury Protection
1.) May pay for your medical treatment, lost wages, or other accident-related expenses regardless of who caused the accident. This coverage is subject to the terms, limits and conditions of your policy contract.
2.) Portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder’s car.

Personal Lines
Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies.

Personal Property
Property that is not land or connected to land (real estate), such as furniture or jewelry.

Physical Damage
Damage to your covered vehicle from perils including (but not limited to) collision or upset with another vehicle object, fire, vandalism and theft. See our coverage definitions page for more information.

Physical Damage Coverage
Pays for damage to your car; this could be through Collision Coverage or Comprehensive Coverage (Also referred to as Other Than Collision).

Point-Of-Service Plan
Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed.

Policy
The written documents of a contract for insurance between the insurance company and the insured. Such documents include forms, endorsements, riders and attachments.

Policy Change
Any change made to your insurance policy during the period that the policy is in force.

Policyholder’s Surplus
The amount of money remaining after an insurer’s liabilities are subtracted from its assets. It acts as a financial cushion above and beyond reserves, protecting policyholders against an unexpected or catastrophic situation.

Policy Lapse
A point in time when a policy has been canceled or terminated for failure to pay the premium, or when the policy contract is void for other reasons.

Policy Limit
The maximum amount a policy will pay, either overall or under a particular coverage.

Policy Period
The period of time in which a policy is in effect. (For example, six months or one year).

Policy Term
The length of time that the policy is in force. Most companies offer annual and semi-annual policies.

Policyholder
One who maintains ownership in an insurance policy. This may refer to the policy owner or those covered under the policy. See also Named Insured.

Political Risk Insurance
Coverage for businesses operating abroad against loss due to political upheaval such as war, revolution, or confiscation of property.

Pollution Insurance
Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the policy or within a specified time frame after the policy expires.

Pre-accident Condition
The state of the vehicle before the accident, including damage not related to the accident, mileage, options, and other factors.

Preferred Risk
Any risk considered to be better than the standard risk on which the premium rate was calculated.

Preferred Provider Organization
Network of medical providers which charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.

Premises
The particular location of the property or a portion of it as designated in an insurance policy.

Premium
The price of insurance an insured person pays for a specified risk for a specified period of time.

Premium Financing
When 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.

Premium Tax
A state tax on premiums paid by its residents and businesses and collected by insurers.

Premiums in Force
The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time.

Premiums Written
The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Net premiums written are premiums written after reinsurance transactions.

Primary Company
In a reinsurance transaction, the insurance company that is reinsured.

Primary Insurance
Insurance that must be maintained as a condition of the most Personal Umbrella Policies. Primary insurance acts as the first layer of coverage on common types of losses. This usually includes auto, motorcycle and homeowner insurance, but may also include boat insurance, commercial liability or some other policy. Please check your insurance policy documents for more detailed information.

Primary Market
Market for new issue securities where the proceeds go directly to the issuer.

Primary Use
What your vehicle is mainly used for (pleasure, to and from work, business, commercial, or farm).

Prime Rate
Interest rate that banks charge to their most creditworthy customers. Banks set this rate according to their cost of funds and market forces.

Principal Driver
The person who drives the car most often.

Prior Approval States
States where insurance companies must file proposed rate changes with state regulators, and gain approval before they can go into effect.

Private Passenger Automobile
A four-wheeled motor vehicle that is subject to motor vehicle registration and used for private personal use.

Private Placement
Securities that are not registered with the Securities and Exchange Commission and are sold directly to investors.

Private Passenger Autos
Ordinary cars, station wagons and jeeps, utility autos (pick-ups, panel trucks and delivery vans of 1,500 lbs. or less, not used commercially) and utility trailers designed to be pulled by a private passenger auto.

Pro Rata Cancellation
Termination of an insurance contract before the policy expiration date on which the premium returned to the insured person is adjusted in proportion to the amount of time the policy was in effect.

Product Liability
A section of tort law that determines who may sue and who may be sued for damages when a defective product injures someone. No uniform federal laws guide manufacturer’s liability, but under strict liability, the injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault.

Product Liability Insurance
Protects manufacturers’ and distributors’ exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product.

Professional Liability Insurance
Covers professionals for negligence and errors or omissions that injure their clients.

Proof of Loss
A statement made regarding the extent of the claim; it may be requested in accordance with the conditions of the policy.

Property/Casualty Insurance
Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.

Property/Casualty Insurance Cycle
Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent.

Property Damage Liability Coverage
Pays for damage to someone else’s property resulting from an accident for which you are at fault and provides you with a legal defense. This coverage is subject to the terms, limits and conditions of your policy contract.

Proposition 103
A November 1988 California ballot initiative that called for a statewide auto insurance rate rollback and for rates to be based more on driving records and less on geographical location. The initiative changed many aspects of the state’s insurance system and was the subject of lawsuits for more than a decade.

Proximate Cause
An act or omission initiating an unbroken sequence of events resulting in injury to a person or damage to property.

Purchasing Group
An entity that offers insurance to groups of similar businesses with similar exposures to risk.

Pure Life Annuity
A form of annuity that ends payments when the annuitant dies. Payments may be fixed or variable.

Qualified Annuity
A form of annuity purchased with pretax dollars as part of a retirement plan that benefits from special tax treatment, such as a 401(k) plan.

Quote
A statement of the premium that will be charged for insurance coverages based on specific information provided by the person requesting the quote including drivers, vehicles, and driving record.

Rate
1.) Often used as a synonym for premium but actually refers to the base rating units that are used to determine the final premium.
2.) The cost of a unit of insurance, usually per $1,000. Rates are based on historical loss experience for similar risks and may be regulated by state insurance offices.

Rate Regulation
The process by which states monitor insurance companies’ rate changes, done either through prior approval or open competition models.

Rating Agencies
Six major credit agencies determine insurers’ financial strength and viability to meet claims obligations. They are A.M. Best Co.; Duff & Phelps Inc.; Fitch, Inc.; Moody’s Investors Services; Standard & Poor’s Corp.; and Weiss Ratings, Inc. Factors considered include company earnings, capital adequacy, operating leverage, liquidity, investment performance, reinsurance programs, and management ability, integrity and experience. A high financial rating is not the same as a high consumer satisfaction rating.

Rating Bureau
The insurance business is based on the spread of risk. The more widely risk is spread, the more accurately loss can be estimated. An insurance company can more accurately estimate the probability of loss on 100,000 homes than on ten. Years ago, insurers were required to use standardized forms and rates developed by rating agencies. Today, large insurers use their own statistical loss data to develop rates. But small insurers, or insurers focusing on special lines of business, with insufficiently broad loss data to make them actuarially reliable depend on pooled industry data collected by such organizations as the Insurance Services Office (ISO) which provides information to help develop rates such as estimates of future losses and loss adjustment expenses like legal defense costs.

Rating Plan
The rules that determine the cost of your insurance premium. These rules modify the base rates by applying discounts and surcharges based on your personal characteristics, for example, using your seat belt.

Real Estate Investments
Investments generally owned by life insurers that include commercial mortgage loans and real property.

Rebate
A reduction of a premium.

Receivables
Amounts owed to a business for goods or services provided.

Red Book
A publication used for the determination of values for used automobiles and trucks.

Redlining
Literally means to draw a red line on a map around areas to receive special treatment. Refusal to issue insurance based solely on where applicants live is illegal in all states. Denial of insurance must be risk-based.

Reinspection
A review of an estimate or appraisal done by an adjuster during or after repairs to a vehicle. This is done to guarantee the accuracy of staff or independent auto damage personnel, and to guarantee that the work required in an estimate or appraisal is being completed by the body shop.

Reinstatement
The restoring of a cancelled 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. They may also require a signed no-loss form.

Reinsurance
1.) A form of insurance that insurance companies buy for their own protection, used and required to pay for losses and claims.
2.) Insurance bought by insurers. A reinsurer assumes part of the risk and part of the premium originally taken by the insurer, known as the primary company. Reinsurance effectively increases an insurer’s capital and therefore its capacity to sell more coverage. The business is global and some of the largest reinsurers are based abroad. Reinsurers have their own reinsurers, called retrocessionaires. Reinsurers don’t pay policyholder claims. Instead, they reimburse insurers for claims paid.

Release
Legally binding contract stating that all obligations past, present or future arising from a particular accident or occurrence have been fulfilled.

Renewal
The process of keeping an active policy in force through the issuance of a renewal policy.

Renewal Date
The date that your insurance policy expires and the date that your renewed policy will begin.

Rental Reimbursement
Optional coverage that helps pay rental vehicle costs when your insured vehicle is disabled as the result of a covered accident or loss. Available to most policyholders for an additional premium.

Renter’s Insurance
A form of insurance that covers a policyholder’s belongings against perils such as fire, theft, windstorm, hail, explosion, vandalism, riots, and others. It also provides personal liability coverage for damage the policyholder or dependents cause to third parties. It also provides additional living expenses, known as loss-of-use coverage, if a policyholder must move while his or her dwelling is repaired. It also can include coverage for property improvements. Possessions can be covered for their replacement cost or the actual cash value that includes depreciation.

Replacement Cost
1.) The cost to repair or replace an insured item. Some insurance only pays the actual cash or market value of the item at the time of the loss, not what it would cost to fix or replace it. This will pay the full cost to repair an item or buy a new one to replace the damaged item.
2.) Insurance that pays the dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.

Replacement Parts
Several types of parts may be used when your vehicle is repaired: new parts, both original equipment manufacturer and after-market; and recycled parts. New or after-market parts will be used if a carrier can’t find like-kind and quality recycled parts. A 5-year-old car, for instance, would be repaired with parts at least as good as the parts that had been in the car.

Replacement Value
The full cost to repair or replace the damaged property with no deduction for depreciation, subject to policy limits and contract provisions.

Repurchase Agreement/’REPO’
Agreement between a buyer and seller where the seller agrees to repurchase the securities at an agreed upon time and price. Repurchase agreements involving U.S. government securities are utilized by the Federal Reserve to control the money supply.

Reserves
A company’s best estimate of what it will pay for claims.

Resident Adjuster
Staff adjuster who handles claims in remote areas of a region.

Residual Market
Facilities, such as assigned risk plans and FAIR Plans, that exist to provide coverage for those who cannot get it in the regular market. Insurers doing business in a given state generally must participate in these pools. For this reason the residual market is also known as the shared market.

Retention
The amount of risk retained by an insurance company that is not reinsured.

Retrocession
The reinsurance bought by reinsurers to protect their financial stability.

Retrospective Rating
A method of permitting the final premium for a risk to be adjusted, subject to an agreed-upon maximum and minimum limit based on actual loss experience. It is available to large commercial insurance buyers.

Return of Equity
Net income divided by total equity. Measures profitability by showing how efficiently invested capital is being used.

Rider
1.) In motorcycle insurance, a rider is someone who will operate the insured motorcycle.
2.) In life and health insurance, the term “rider” is often used to refer to an endorsement to an insurance policy.

Risk
The chance of suffering a loss.

Risk Management
Management of the varied risks to which a business firm or association might be subject. It includes analyzing all exposures to gauge the likelihood of loss and choosing options to better manage or minimize loss. These options typically include reducing and eliminating the risk with safety measures, buying insurance, and self-insurance.

Risk Retention Groups
Insurance companies that band together as self-insurers and form an organization that is chartered and licensed as an insurer in at least one state to handle liability insurance.

Risk-Based Capital
The need for insurance companies to be capitalized according to the inherent riskiness of the type of insurance they sell. Higher-risk types of insurance, liability as opposed to property business, generally necessitate higher levels of capital.

Safe Driver Plan
A rating system that assigns points for traffic convictions and certain accidents. Similar to a merit-rating plan, each point increases the surcharge percentage to the baseline rates.

Salvage
Damaged property an insurer takes over to reduce its loss after paying a claim. Insurers receive salvage rights over property on which they have paid claims, such as badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have the right to recover sunken goods. Salvage charges are the costs associated with recovering that property.

Schedule
A list of individual items or groups of items that are covered under one policy or a listing of specific benefits, charges, credits, assets or other defined items.

Secondary Market
Market for previously issued and outstanding securities.

Securities and Exchange Commission (SEC)
The organization that oversees publicly-held insurance companies. Those companies make periodic financial disclosures to the SEC, including an annual financial statement (or 10K), and a quarterly financial statement (or 10-Q). Companies must also disclose any material events and other information about their stock.

Securities Outstanding
Stock held by shareholders.

Securitization of Insurance Risk
Using the capital markets to expand and diversify the assumption of insurance risk. The issuance of bonds or notes to third-party investors directly or indirectly by an insurance or reinsurance company or a pooling entity as a means of raising money to cover risks.

Select Repair Shops
Body shops chosen by your insurance carrier that are authorized to handle the repair of insured vehicles without the need for an inspection by an assigned adjuster. Vehicle owners should always have the right to choose the body shop of their choice.

Self-Insurance
The concept of assuming a financial risk oneself, instead of paying an insurance company to take it on. Every policyholder is a self-insurer in terms of paying a deductible and co-payments. Large firms often self-insure frequent, small losses such as damage to their fleet of vehicles or minor workplace injuries. However, to protect injured employees state laws set out requirements for the assumption of workers compensation programs.
Self-insurance also refers to employers who assume all or part of the responsibility for paying the health insurance claims of their employees. Firms that self insure for health claims are exempt from state insurance laws mandating the illnesses that group health insurers must cover.

Self-Insured Retention
In umbrella insurance, self-insured retention is similar to a deductible in other types of insurance. The self-insured retention is the amount of damages for which the policyholder is responsible before the umbrella coverage begins to cover a loss.

Severity
Size of a loss. One of the criteria used in calculating premiums rates.

Sewer Back-Up COVERAGE
An optional part of homeowners insurance that covers sewers.

Short Rate Cancellation
A policy termination in which the refunded premium is not proportional to the amount of time remaining in the policy period due to the fixed expenses incurred by the company. The insured will generally pay more for each day of coverage than if the policy had remained in force throughout the entire policy period.

Single Premium Annuity
An annuity that is paid in full upon purchase.

Soft Market
An environment where insurance is plentiful and sold at a lower cost, also known as a buyers’ market.

Solvency
Insurance companies’ ability to pay the claims of policyholders. Regulations to promote solvency include minimum capital and surplus requirements, statutory accounting conventions, limits to insurance company investment and corporate activities, financial ratio tests, and financial data disclosure.

Special Investigation Units
Your insurance carrier helps fight fraud through its special investigation unit, staffed with experts in fraud detection and investigation.

Split Limit
Any insurance coverage with separately stated limits for different types of coverage. Example: an automobile liability policy of 100/300/50 provides a maximum of $100,000 bodily injury coverage per person, $300,000 bodily injury coverage per accident, and a property damage limit of $50,000 per accident.

Spread of Risk
The selling of insurance in multiple areas to multiple policyholders to minimize the danger that all policyholders will have losses at the same time. Companies are more likely to insure perils that offer a good spread of risk. Flood insurance is an example of a poor spread of risk because the people most likely to buy it are the people close to rivers and other bodies of water that flood.

SR-22
An SR-22 (CFR) is a certificate mandated by the state to verify that an individual is maintaining auto insurance liability coverage. If a person needs an SR-22 (CFR), they will usually be notified by their state’s Motor Vehicle Department.

Stacking
Practice that increases the money available to pay auto liability claims. In states where this practice is permitted by law, courts may allow policyholders who have several cars insured under a single policy, or multiple vehicles insured under different policies, to add up the limit of liability available for each vehicle.

Stacking of Limits
The application of more than one policy limit to the same loss or occurrence. In some jurisdictions, courts have required stacking of limits when multiple policies, or multiple policy periods, cover an occurrence. For example, Uninsured motorist bodily injury limits of $100,000/300,000 on two policies owned by the same person may be added together to pay a loss. In this event, the total amount of coverage available for an accident would be $200,000/600,000.

Statutory Accounting Principles/(SAP)
More conservative standards than under GAAP accounting rules, they are imposed by state laws that emphasize the present solvency of insurance companies. SAP helps ensure that the company will have sufficient funds readily available to meet all anticipated insurance obligations by recognizing liabilities earlier or at a higher value than GAAP and assets later or at a lower value. For example, SAP requires that selling expenses be recorded immediately rather than amortized over the life of the policy.

Stock Insurance Company
An insurance company owned by its stockholders who share in profits through earnings distributions and increases in stock value.

Structured Settlement
Legal agreement to pay a designated person, usually someone who has been injured, a specified sum of money in periodic payments, usually for his or her lifetime, instead of in a single lump sum payment.

Staff Adjuster
A non-contract or per-job adjuster that is typically employed by your insurance carrier to handle claims.

Subrogation
If your car is damaged because of another driver’s negligence and you ask your insurance carrier to settle the claim for damage to your car, we will seek payment recovery (including your deductible) from the other party.

Superfund
A federal law enacted in 1980 to initiate cleanup of the nation’s abandoned hazardous waste dump sites and to respond to accidents that release hazardous substances into the environment. The law is officially called the Comprehensive Environmental Response, Compensation, and Liability Act.

Supplement/Supplemental Estimate
Used to cover damage not included in the original estimate. Most claims settlements do their best to estimate costs, if they are wrong you are entitled to any additional money to settle your claim. This is paid with a supplement.

Surcharge
An extra charge applied by the insurer. For automobile insurance, a surcharge is usually charged for items like accidents, moving violations, or specific risks not handled by normal rating factors.

Surety Bond
A contract guaranteeing the performance of a specific obligation. Simply put, it is a three-party agreement under which one party, the surety company, answers to a second party, the owner, creditor or “obligee,” for a third party’s debts, default or nonperformance. Contractors are often required to purchase surety bonds if they are working on public projects. The surety company becomes responsible for carrying out the work or paying for the loss up to the bond “penalty” if the contractor fails to perform.

Surplus
The remainder after an insurer’s liabilities are subtracted from its assets. The financial cushion that protects policyholders in case of unexpectedly high claims.

Surplus Lines
Property/casualty insurance coverage that isn’t available from insurers licensed in the state, called admitted companies, and must be purchased from a non-admitted carrier. Examples include risks of an unusual nature that require greater flexibility in policy terms and conditions than exist in standard forms or where the highest rates allowed by state regulators are considered inadequate by admitted companies. Laws governing surplus lines vary by state.

Surrender Charge
A charge for withdrawals from an insurance-based contract before a designated surrender charge period.

Swaps
The simultaneous buying, selling or exchange of one security for another among investors to change maturities in a bond portfolio, for example, or because investment goals have changed.

Term
The length of time for which a policy or bond is in force.

Term Certain Annuity
A form of annuity that pays out over a fixed period rather than when the annuitant dies.

Term Insurance
A form of life insurance that covers the insured person for a certain period of time, the “term” that is specified in the policy. It pays a benefit to a designated beneficiary only when the insured dies within that specified period which can be one, five, 10 or even 20 years. Term life policies are renewable but premiums increase with age.

Territorial Rating
A method of classifying risks by geographic location to set a fair price for coverage. The location of the insured may have a considerable impact on the cost of losses. The chance of an accident or theft is much higher in an urban area than in a rural one, for example.

Terrorism Coverage
Included as a part of the package in standard commercial insurance policies before September 11, 2001 virtually free of charge. Since September 11, terrorism coverage prices have increased substantially to reflect the current risk.

Theft
The unlawful taking of another’s property with the intent to permanently deprive the owner of its use or possession.

Third Party
Person or entity not party to an agreement but with an interest in the agreement.

Third-Party Administrator
Outside group that performs clerical functions for an insurance company.

Third Party Claim
Claims for injury or damage to property of a third party alleged to have been caused by the insured.

Third-Party Coverage
Liability coverage purchased by the policyholder as a protection against possible lawsuits filed by a third party. The insured and the insurer are the first and second parties to the insurance contract.

Threshold Level
Under some no-fault insurance laws, the threshold level represents the degree of injury a claimant must establish before being allowed to sue the negligent party. The threshold may be verbal (regarding the severity of the injuries) or a dollar amount ($10,000), or both. For example, with a threshold of $5,000, an injured person may sue if his/her injuries and other economic damages (rehabilitation expenses, loss of income, etc.) exceed $5,000.

Time Deposit
Funds that are held in a savings account for a predetermined period of time at a set interest rate. Banks can refuse to allow withdrawals from these accounts until the period has expired or assess a penalty for early withdrawals.

Title Insurance
Insurance that indemnifies the owner of real estate in the event that his or her clear ownership of property is challenged by the discovery of faults in the title.

Tort
A private wrong or harm (other than a breach of contract) committed against another, resulting in legal liability. A tort is either intentional or accidental (negligent). Automobile liability insurance is purchased to protect one from suits arising from unintentional torts.

Tort Feasor
One who commits a tort (see the definition of tort).

Tort Law
The body of law governing negligence, intentional interference, and other wrongful acts for which civil action can be brought, except for breach of contract, which is covered by contract law.

Tort Reform
Refers to legislation designed to reduce liability costs through limits on various kinds of damages and through modification of liability rules.

Total Loss
The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.

Towing and Labor Costs
This endorsement, which is added to the physical damage coverage, provides reimbursement up to a specified limit to tow your vehicle or pay for on-site labor costs.

Transparency
A term used to explain the way information on financial matters, such as financial reports and actions of companies or markets, are communicated so that they are easily understood and frank.

Transportation Expenses
Subject to a daily and maximum dollar limit, this coverage (under the physical damage portion of an automobile policy) pays for transportation expenses incurred by the named insured only in the event of theft of an entire covered auto. Coverage generally begins after a stated minimum waiting period.

avel Insurance
Insurance to cover problems associated with traveling, generally including trip cancellation due to illness, lost luggage and other incidents.

Treasury Securities
Interest-bearing obligations of the U.S. government issued by the Treasury as a means of borrowing money to meet government expenditures not covered by tax revenues. Marketable Treasury securities fall into three categories — bills, notes and bonds. Marketable Treasury obligations are currently issued in book entry form only; that is, the purchaser receives a statement, rather than an engraved certificate.

Treaty Insurance
A standing agreement between insurers and reinsurers. Under a treaty each party automatically accepts specific percentages of the insurer’s business.

Umbrella Insurance
Provides high limits of additional liability coverage above the limits of your homeowner’s and auto policy. In addition, it provides coverage that may be excluded by other liability policies.

Umbrella Policy
Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.

Unbundled Contracts
A form of annuity contract that gives purchasers the freedom to choose among certain optional features in their contract.

Underinsurance/Underinsured
The result of the policyholder’s failure to buy sufficient insurance. An underinsured policyholder may only receive part of the cost of replacing or repairing damaged items covered in the policy.

Underwriting
The process an insurer goes through to determine whether or not it will provide coverage for an applicant.

Underwriting Income
The insurer’s profit on the insurance sale after all expenses and losses have been paid. When premiums aren’t sufficient to cover claims and expenses, the result is an underwriting loss. Underwriting losses are typically offset by investment income.

Unearned Premium
The portion of your premium remaining on your policy term. For example, with a six-month premium, at the end of the first month of the premium period, five-sixths of the premium is unearned by the insurance company. The entire premium is not earned until the policy period expires, even though premiums are typically paid in advance.

Uninsurable Risk
Risks for which it is difficult for someone to get insurance.

Uninsured Motorists Coverage
Portion of an auto insurance policy that protects a policyholder from uninsured and hit-and-run drivers.

Unsatisfied Judgment Fund
Select state’s laws that reimburse those injured in auto accidents that have been unable to collect from the responsible party.

Usage
This refers to the primary function or purpose in which you intend to operate your vehicle. For example, if you primarily drive your car to and from work, the usage is considered “commute; “if you’re self-employed and you primarily drive to see customers, the usage is considered “business;” if you’re retired, your usage is considered “pleasure.”

Valued Policy
A policy under which the insurer pays a specified amount of money to or on behalf of the insured upon the occurrence of a defined loss. The money amount is not related to the extent of the loss. Life insurance policies are an example.

Vandalism
Destruction or defacement of property.

Variable Annuity
An annuity whose contract value or income payments vary according to the performance of the stocks, bonds and other investments selected by the contract owner.

Variable Life Insurance
A policy that combines protection against premature death with a savings account that can be invested in stocks, bonds, and money market mutual funds at the policyholder’s discretion.

Vehicle Identification Number (VIN)
A 17-digit number assigned to each vehicle manufactured in the United States after 1980. This number is used for identification purposes and is visible on the dashboard when viewed from the outside of the car. It indicates many identifiers including make, model, options, and year in official records (similar to a social security number).

Viatical Settlement Companies
Insurance firms that buy life insurance policies at a steep discount from policyholders who are often terminally ill and need the payment for medications or treatments. The companies provide early payouts to the policyholder, assume the premium payments, and collect the face value of the policy upon the policyholder’s death.

Void
A policy contract that for some reason specified in the policy becomes free of all legal effect. One example under which a policy could be voided is when information a policyholder provided is proven untrue.

Volatility
A measure of the degree of fluctuation in a stock’s price. Volatility is exemplified by large, frequent price swings up and down.

Volcano Coverage
Most homeowners policies cover damage from a volcanic eruption.

Volume
Number of shares a stock trades either per day or per week.

Waiver
The surrender of a right or privilege. In life insurance, a provision that sets certain conditions, such as disablement, which allow coverage to remain in force without payment of premiums.

Waiver of Collision Deductible
This option pays your collision deductible when you carry collision coverage on a vehicle that is damaged by an uninsured or hit-and-run motorist who is at fault. Coverage applies only when there is actual physical contact and when you can identify the uninsured driver or vehicle.

War Risk
Special coverage on cargo in overseas ships against the risk of being confiscated by a government in wartime. It is excluded from standard ocean marine insurance and can be purchased separately. It often excludes cargo awaiting shipment on a wharf or on ships after 15 days of arrival in port.

Water-Damage Insurance Coverage
Protection provided in most homeowners insurance policies against sudden and accidental water damage, from burst pipes for example. Does not cover damage from problems resulting from a lack of proper maintenance such as dripping air conditioners. Water damage from floods is covered under separate flood insurance policies issued by the federal government.

Weather Derivative
An insurance or securities product used as a hedge by energy-related businesses and others whose sales tend to fluctuate depending on the weather.

Weather Insurance
A type of business interruption insurance that compensates for financial losses caused by adverse weather conditions, such as constant rain on the day scheduled for a major outdoor concert.

Whole Dollar Premium
Generally, insurance premiums are rounded to the nearest dollar; an amount of 51 cents or more being rounded up to the next dollar, and any amount less than that the cents are dropped.

Whole Life
Insurance which provides coverage for an individual’s whole life, rather than a specified term. The oldest kind of cash value life insurance that combines protection against premature death with a savings account. Premiums are fixed and guaranteed and remain level throughout the policy’s lifetime.

Worker’s Compensation
Insurance that pays for medical care and physical rehabilitation of injured workers and helps to replace lost wages while they are unable to work. State laws, which vary significantly, govern the amount of benefits paid and other compensation provisions.

Wrap-Up Insurance
Broad policy coordinated to cover liability exposures for a large group of businesses that have something in common. Might be used to insure all businesses working on a large construction project, such as an apartment complex.

Write
To insure, underwrite, or accept an application for insurance.