Indigo Insurance & Financial Services

A Share Variable Annuity: A form of variable annuity contract where the contract holder pays sales charges up front rather than eventually having to pay a surrender charge.
AAI: Accredited Advisor in Insurance.
Abandonment: The relinquishment or surrender to the insurer all interest in the thing insured; it is generally accepted that damaged property cannot be abandoned to the insurer. One notable exception to this general rule occurs in ocean marine, where abandonment is merely one step in proving a loss.
Absolute Assignment: A policy assignment under which the assignee (person to whom the policy is assigned) receives full control over the policy and also full rights to its benefits. Generally, when a policy is assigned to secure a debt, the owner retains all rights in the policy in excess of the debt, even though the assignment is absolute in form. See also assignee; assignment; assignor.
Absolute Liability: Liability for injury to others imposed, in the absence of negligence or intent, on those best able to control the occurrence.
Accelerated Benefits: An optional benefit under life insurance policies under which the insurer agrees to prepay a part of the death benefit if the insured is stricken by a catastrophic illness or is confined to a nursing home.
Accelerated Benefits Rider: A life insurance rider that allows for the early payment of some portion of the policy’s face amount should the insured suffer from a terminal illness or injury.
Accelerated Death Benefits: A life insurance policy option that provides policy proceeds to insured individuals over their lifetimes, in the event of a terminal illness. This is in lieu of a traditional policy that pays beneficiaries after the insured’s death. Such benefits kick in if the insured becomes terminally ill, needs extreme medical intervention, or must reside in a nursing home. The payments made while the insured is living are deducted from any death benefits paid to beneficiaries.
Acceptance: One party’s agreement to the purchase offer of another party, such that a legal contract is formed and both parties are contractually bound. With an insurance contract, acceptance generally takes place when the agent binds coverage or the policy is issued. See also offer and acceptance.
Accident: An unexpected and unintended event, occurring suddenly and causing measurable loss. See occurrence
Accident and Health Insurance: Coverage for accidental injury, accidental death, disease, and related health expenses. Benefits will pay for preventative services, medical expenses, and catastrophic care, with limits. See health insurance, personal health insurance, sickness and accident insurance.
Accidental Bodily Injury: A broad definition of disability where a person is injured, by any means other than intentionally self-inflicted.
Accidental Bodily Injury Provision: Disability income or accident policy provision that requires that the injury be accidental in order for benefits to be payable.
Accidental Death and Dismemberment – AD&D: Insurance providing payment if the insured’s death results from an accident or if the insured accidentally severs a limb above the wrist or ankle joints or totally and irreversibly loses his or her eyesight.
Accidental Death Benefit: A form of insurance that provides payment if death of the insured results from an accident, subject to the conditions of the specific policy. AD is often added to a life policy at an amount that would double or triple the benefits if death resulted from a accident. Also, AD is often combined with dismemberment insurance in a form called Accidental Death & Dismemberment (Ad&D). See double (triple) indemnity
Accidental Direct Physical Loss – ADPL: Property insurance that covers an insured against essentially all perils except those specifically excluded.
Accidental Dismemberment: The severance of limbs at or above the wrists or ankle joints, or the entire irrevocable loss of sight. Loss of use in itself may or may not be considered dismemberment.
Accidental Means Provision: Unforeseen, unexpected, unintended cause of an accident. Requirement of an accident-based policy that the cause of the mishap must be accidental for any claim to be payable.
Accommodation Line: Insurance that by itself would not be acceptable to an insurer, but written as an accommodation where the possibility of securing other desirable business seems to justify it. AKA Accommodation Risk
Account Receivables: See Receivables
Account Value: The account value is the total of (1) any amounts in any variable investment option, (2) any amounts in the guaranteed interest option, and (3) any amounts that are being held to secure policy loans (including any interest on those amounts that has not yet been allocated to the variable investment options).
Accumulation Account: An account to which funds are added and from which risk charges are deducted. The balance earns interest.
Accumulation Period: A specified period of time, such as 90 days, during which the insured person must incur eligible medical expenses at least equal to the deductible amount in order to establish a benefit period under a major medical expense or comprehensive medical expense policy.
Accumulation Type Policy: In this type of policy specific expense charges are taken out of the gross premium paid, resulting in the net premium. The accumulation of these net premiums with interest is referred to as the accumulation value. At the end of each specified period, cost of insurance charges are removed from the accumulation value just prior to adding the interest credits.
Accumulation Unit: The premiums an annuitant pays into a variable annuity are credited as accumulation units. At the end of the accumulation period, accumulation units are converted to annuity units.
Accumulation Value: The value of the policy prior to deduction of any surren der charges. The accumulation value less surrender charge is often called the cash value or cash surrender value. The net cash value is the cash value less any policy loans.
ACLI: American Council of Life Insurance.
Acquired Immune Deficiency Syndrome – AIDS: A life threatening condition brought on by the human immunodeficiency virus; insurers must adhere to strict underwriting and claims guidelines in regard to AIDS risks and AIDS-related conditions.
Acquisition Cost: The portion of an insurance premium that represents the cost of producing the insurance business; it includes the agent’s commission, the company field expense, and other related expenses.
Act of God: Accident or event resulting from natural causes, without any human intervention, that reasonable foresight or care could not have prevented, such as flood, lightning, earthquake, or storms.
Act of God Bond: See Catastrophe Bonds.
Activities of Daily Living – ADL: Everyday living functions such as eating, bathing, dressing, walking (sometimes called mobility), moving from place to place, toileting, and continence that serve as coverage triggers for long-term care insurance when the insured is unable to perform a specified number.
Actual Cash Value – ACV: The amount that the property in question could have been sold for by the insured on the date of the loss. Computed on the basis of replacement value less its depreciation by obsolescence or general wear.
Actual Cash Value of the Loss: The replacement cost minus depreciation on the damaged portion of the house.
Actuarial Cost Methods: Technique for distributing the incidence of pension costs, both current and supplemental, over time.
Actuary: A mathematician trained in probability theory, calculus, and other areas that specializes in the field of insurance. The actuary uses existing experience and takes in to account future probable trends to determine, the rate to be charged for various lines of insurance, reserves to be set aside for payment of losses, and other aspects of the business.
Acute Illness: A serious condition, such as pneumonia, from which the body can fully recover with proper medical attention.
ACV: See Actual Cash Value.
AD&D: Accidental Death and Dismemberment.
Add on No Fault Benefits: Provision adding no fault benefits to automobile liability coverages without restricting the right of the victim to sue the wrongdoer.
Additional Insured/Additional Interest: An person or business, other than the named insured on the declarations page, who has a financial interest requiring protection under the terms of the contract. e.g., the lienholder on the loan for a car or a bank for a mortgage.
Additional Living Expense: Pays for the costs of temporary alternate quarters/lodging and extra necessary living costs incurred, while damage from covered loss to the dwelling is being repaired or reconstruction is ongoing. Is included in coverage D in all standard homeowners policies.
Adhesion: A life insurance policy is a contract of adhesion because buyers must adhere to the terms of the contract already in existence. They have no opportunity to negotiate terms, rates, values, etc.
Adjustable Life Insurance: Combines features of both term and whole life coverage and has adjustable lengths of coverage and amounts of accumulated cash value. policyholder can change increase or decrease premiums to fit specific needs, raise or lower the face amount of the policy, and lengthen or shorten the protection period. Such adjustments are not retroactive and apply only to the future.
Adjustable Premium: The contractual right of a company to modify a policyowners premium payments under certain specified conditions.
Adjuster: The salaried employee of an insurance company, or an independent contractor representing an insurance company, who is responsible for determining the cause and amount of a loss, the insurance company’s liability for the loss and satisfactory agreement on such from the parties involved (insured and insurer) Compare Independent Adjusters, Public Adjusters
Adjusting: The process of investigating an alleged loss and determining whether a claim should be paid.
Adjustment: Refers to all of the steps involved in an adjuster’s work of settling a claim against the insurer, i.e., investigation, determining amount of loss, reaching final settlement agreement, etc.
Adjustment Bureau: An organization that contracts with insurers to provide loss settlement services on behalf of those insurers.
Adjustment Income: One of the basic uses for life insurance. Also called ‘Readjustment Income.’ An added, ‘step?down’ income, over and above that required to cover the familys minimum needs, to help adjustment to the shock of lower income following the insureds death.
Administrative Services Only Plan – ASO: An arrangement under which an insurance carrier or an independent organization will, for a fee, handle the administration of claims, benefits, and other administration functions for a self-insured group.
Administrator: A person authorized to administer the estate of a deceased person by the court; his or her duties are to collect assets of the estate, pay its debts, and distribute the residue to those entitled: he or she resembles an executor, who is appointed by the will of the deceased— the administrator is appointed by the court and not by the deceased and therefore must give security for the administration of the estate, called an administration bond.
Admiralty: Involving maritime law; concerning the high seas or navigable waters.
Admitted Assets: Assets recognized and accepted by state insurance laws in determining the solvency of insurers and reinsurers. To make it easier to assess an insurance company’s financial position, state statutory accounting rules do not permit certain assets to be included on the balance sheet. Only assets that can be easily sold in the event of liquidation or borrowed against, and receivables for which payment can be reasonably anticipated, are included in admitted assets. (See Assets )
Admitted Company/Insurer: An insurance company that has met the legal and financial requirements and received authorization and license for operation within a given state. In some cases, a state law may require companies to take out insurance only with an admitted insurer. If an insurer is not admitted in a particular state, yet does business within that state, it does so as a nonadmitted, or excess and surplus lines insurer. Policies issued by nonadmitted insurers in a particular state are not protected by that state’s insurance guaranty fund in the event of insurer insolvency.
ADPL: See Accidental Direct Physical Loss.
Adult Day Care: A type of care offered in care centers (usually custodial) designed for individuals who require assistance with various activities of daily living while their primary caregivers are absent.
Advance Premium Mutual: An insurance company owned by its policyholders that charges an advance premium that is expected to cover losses and expenses; policies may be assessable or nonassessable.
Advance Premium or Deposit Premium: The premium for many policies depends on payroll or some other factor which can only be determined accurately at the end of the policy period. In such cases, an estimated premium is charged in advance and an adjustment is made at the close of the policy term.
Adverse Selection: The tendency of insureds with a higher probability of loss to seek, purchase, or renew more insurance more frequently than those who with a lower probability. Also, the tendency of policyowners to take advantage of favorable options in insurance contracts. Selection against the best interests of the insurance company (e.g., people prone to auto crashes or sickness purchasing more insurance). Adverse selection may result in high loss ratios. Insurers react either by charging higher premiums or not insuring at all, as in the case of floods. (Flood insurance is provided by the federal government but sold mostly through the private market.) In the case of natural disasters, such as earthquakes, adverse selection concentrates risk instead of spreading it. Insurance works best when risk is shared among large numbers of policyholders.
Advertising Code: The rules established by the National Association of Insurance Commissioners (NAIC) to regulate insurance advertising.
Advisory Organization: A cooperative rate-making body that is supported by member companies; advisory organizations collect loss statistics and publish trended loss costs. Age Limit in accident, life, or automobile insurance, the age below which or above which an insurer refuses to insure an applicant.
Affinity Sales: Selling insurance through groups such as professional and business associations.
Affirmative: Form of warranty stating a fact is true now but promising nothing about the future.
Aftermarket Parts: See Crash parts; Generic auto parts
Age Basis: In determining the age for which premiums are charged, the corn pany may set the insuring age based on the age at the nearest birthday or the age at the last birthday basis.
Age Limits: Set age minimum and maximums contained in a specific policy for the insuring of new applicants or for the renewal of that policy.
Agency: 1) A situation wherein one party (an agent) has the power to act for another (the principal) in dealing with third parties. 2) An insurance sales office.
Agency by Ratification: Creation of an agency relationship, in the absence of a formal agreement, by the principal sanctioning the actions of another party after a transaction has been completed.
Agency Companies: Companies that market and sell products via independent agents.
Agent: A deceptively simple concept. An agent is a person authorized by and on behalf of an insurer to transact insurance on its behalf. Agents must be licensed by each state in which they intend to do business. An appointed agent is an agent for whom an insurer has filed a notice of appointment with the insurance department of a particular state. Generally, an appointed agent is presumed to be acting on behalf of the insurer. That means the person you think of as your agent in most cases is legally the agent of the insurer.
Agents Report: The section of an insurance application where the agent reports his or her personal observations about the applicant.
Aggregate: The maximum limit of liability the company is obligated to pay for all claims or on a single project within a specific time period, usually one policy year.
Aggregate Excess Insurance: A form of excess insurance that covers insured losses that exceed a specffic dollar amount during a period of time, normally one year. It protects a company against a series of losses that may be individually small but may have a high total cost. Also known as stop loss excess insurance.
Aggregate Indemnity: In disability insurance, the maximum dollar amount that may be collected for any disability, period of disability, or under the policy.
Agreed Amount Endorsement: A provision in fire insurance whereby the coinsurance clause is suspended if the insured carries an amount of insurance specified by the company (normally 90% or more of the value).
Agreed Value Option: A provision in an insurance policy that suspends the coinsurance provision for a specified period of time. It is useful when insurance is carried near the 80 or 90 percent minimum for coinsurance. It ensures that a rapid rise in property value or replacement cost will not reduce the payment for a loss.
AIDS: Acquired immune deficiency syndrome. A fatal, incurable disease caused by a virus that can damage the brain and destroy the body’s ability to fight off illness.
AIPSO: Automobile Insurance Plans Service Office.
Aircraft Hull Insurance: This provides coverage for direct loss or damage to aircraft.
Aleatory: Feature of insurance contracts in that there is an element of chance for both parties and that the dollar value given by the policyowner (premiums) and the insurer (benefits) may not be equal.
Alien Insurer: An insurance company incorporated and organized under the laws of a foreign nation, state, province or territory, rather than under the laws of the United States.
Alimony Insurance: Insurance designed to protect the insured against default in connection with payment of child support and alimony.
All Risk: A term commonly used by insurance people to describe broad forms of coverage; it is misleading because no property or liability insurance policy is truly an all-risk coverage. There is a concerted effort to eliminate use of this term and to replace it with the term open peril. See Accidental Direct Physical Loss.
Allied Lines Insurance: Coverage for such miscellaneous perils as floods, earthquakes, and sprinkler leakage, all of which have no immediate relationship to fire insurance but are normally associated with it. Some of these perils are written by endorsement to the fire contract; others are written in separate policies.
Allocated Benefits: Benefits for which the maximum amount payable for specific services is itemized in the contract
Allocated Funding Instrument: The deposits made by an employer to an employee retirement plan are segregated and identifiable for each participant.
Allocation Date: The date the funds are reallocated from a money-market type of account to those investments in accordance with your premium allocation instructions then in effect (typically about the twentieth day after the policy has been issued).
Allowable Charge: In health insurance, the lesser of the actual charge, the customary charge and the prevailing charge. It is the amount on which Medicare will base its Part B payment.
Alternate Delivery Systems: Health services provided in other than an inpatient, acute-care hospital, which are designed to provide needed services in a more cost-effective manner.
Alternative Death Benefit: The alternative death benefit is computed by multi plying the policy’s account value on the insured person’s date of death by a percentage specified in the policy. The percentage depends on the insured per son’s age. This death benefit wifi be paid if it is higher than the basic Option A or Option B death benefit the insured has selected.
Alternative Dispute Resolution – ADR: Alternative to going to court to settle disputes. Methods include arbitration, where disputing parties agree to be bound to the decision of an independent third party, and mediation, where a third party tries to arrange a settlement between the two sides.
Alternative Market Mechanisms: Programs established by the laws of states to provide availability of insurance to certain categories of hard to place insureds. Examples include assigned risk auto insurance programs.
Alternative Markets: Mechanisms used to fund self-insurance. This includes captives, which are insurers owned by one or more non-insurers to provide owners with coverage. Risk-retention groups, formed by members of similar professions or businesses to obtain liability insurance, are also a form of self-insurance.
Ambulatory Care: Medical services that are provided on an outpatient (nonhospitalized) basis; services may include diagnosis, treatment, and rehabilitation.
Ambulatory Surgery: Surgery performed on an outpatient basis.
Amendment: A formal document changing the provisions of an insurance policy signed jointly by the insurance company officer and the policyholder or his or her authorized representative.
American Agency System: Independent agents represent one or more insurers rather than an employee of the company, they own all policy records and are compensated by commissions.
Americans with Disabilities Act: A 1992 federal law that prohibits discrimination against disabled individuals.
Amicable Society for a Perpetual Assistance office: England’s first successful life insurance company; founded in 1705.
Amortized Value: The amount at a given point in time to which the purchase price of a bond purchased at a discount or premium has been increased or decreased.
Amount at Risk: The difference between the face amount of the policy and the reserve or policy value at a given time. In other words, the dollar amount over what the policyowner has contributed of cash value toward payment of his or her own claim. Because the cash value increases every year, the net amount at risk decreases until it finally reaches zero, at which time the cash value or reserve becomes the face amount.
Amount Limit (Coinsurance): The amount of insurance specified iii an open stock burglary policy beyond which the coinsurance percentage limit does not apply.
Amount of Risk: The amount at risk (also described in a policy as “net amount at risk”) on any date is the difference between (1) the death benefit that would be payable if the insured person died on that date and (2) the then total account value under the policy.
Amount Subject: The total value which is exposed to loss at any one location or from any one event.
AMTC: Agency Management Training Course.
Anniversary: The year or years measured from the policy’s register date.
Annual Annuity Contract Fee: Covers the cost of administering an annuity contract.
Annual Policy: A policy issued for a 12-month period.
Annual Report: A statement of the complete financial and operating results of an insurance company for a calendar year.
Annual Statement: Summary of a calendar year period of an insurer’s or reinsurer’s financial operations, including a balance sheet. It is filed at the end of the year with the state insurance department of each jurisdiction in which the company is licensed to conduct business, and is made according to a form agreed upon by the National Association of Insurance Commissioners.
Annually Renewable Term – ART: A form of renewable term insurance that provides coverage for one year and allows the policyowner to renew his or her coverage each year without evidence of insurability. Also called yearly renewable term (YRT).
Annuitant: A person to whom an annuity is payable, or upon the continuance of whose life further payment depends.
Annuitization: The conversion of the account balance of a deferred annuity contract to income payments.
Annuity: A life insurance product that pays periodic income benefits for a specific period of time or over the course of the annuitant’s lifetime. There are two basic types of annuities: deferred and immediate: Deferred annuities allow assets to grow tax deferred over time before being converted to payments to the annuitant. Immediate annuities allow payments to begin within about a year of purchase.
Annuity Accumulation Phase or Period: The period during which the owner of a deferred annuity makes payments to build up assets.
Annuity Administrative Charges: Covers the cost of customer services for owners of variable annuities.
Annuity Beneficiary: In certain types of annuities, a person who receives annuity contract payments if the annuity owner or annuitant dies while payments are still due.
Annuity Certain: A contract that provides an income for a specified number of years, regardless of life or death, to the insured if living or to his or her beneficiary if deceased.
Annuity Consideration: The payment, or one of the regular periodic payments, that a policyholder makes for an annuity.
Annuity Contract: An agreement that provides for a periodic payment to be paid over a period of time and/or for the duration of a life or lives.
Annuity Contract Owner: The person or entity that purchases an annuity and has all rights to the contract. Usually, but not always, the annuitant (the person who receives incomes from the contract).
Annuity Death Benefits: The guarantee that if an annuity contract owner dies before annuitization (the switchover from the savings to the payment phase) the beneficiary will receive the value of the annuity that is due.
Annuity Due: Payment is made to the annuitant at the beginning of the first income period.
Annuity Insurance Charges: Covers administrative and mortality and expense risk costs.
Annuity Investment Management Fee: The fee paid for the management of variable annuity invested assets.
Annuity Issuer: The insurance company that issues the annuity.
Annuity Prospectus: Legal document providing detailed information about variable annuity contracts. Must be offered to each prospective buyer.
Annuity Purchase Rate: The cost of an annuity based on such factors as the age and gender of the contract owner.
Annuity Unit: The number of annuity units denotes the share of funds an annuitant wifi receive from a variable annuity account after the accumulation period ends and benefits begin. A formula is used to convert accumulation units to annuity units.
Anti Selection: The result of individuals applying for, or already covered by, insurance, taking advantage of knowledge about their own situation that results in a worse experience for the insurance company.
Antitrust Laws: Laws that prohibit companies from working as a group to set prices, restrict supplies or stop competition in the marketplace. The insurance industry is subject to state antitrust laws but has a limited exemption from federal antitrust laws. This exemption, set out in the McCarran-Ferguson Act, permits insurers to jointly develop common insurance forms and share loss data to help them price policies.
Any Occupation: A definition of total disability that requires that for disability income benefits to be payable, the insured must be unable to perform any job for which he or she is “reasonably suited by reason of education, training or experience.”
Apparent Authority: The authority the general public assumes an agent has due to his or her actions, regardless of whether the authority has been given to the agent by law or contract.
Appeal Bond: Bond guaranteeing payment of original judgment and cost of appeal should the appeal to a court of higher jurisdiction be unsuccessful.
Application: Form supplied by the insurance company, usually filled in the by the agent and medical examiner (if applicable) on the basis of information received from the applicant. It is signed by the applicant and is part of the insurance policy if it is issued. It gives information to the home office underwriting department so it may consider whether an insurance policy will be issued and, if so, in what classification and at what premium rate. For contractual purposes, the application is considered the offer to purchase.
Appointment: The authorization or certffication of an agent to act for or represent an insurance company.
Apportionment: The dividing of a loss proportionately among two or more insurers that cover the same loss.
Apportionment Clause: This clause provides that if there is other insurance covering the loss, the policy to which the clause is attached will not pay more than its pro rata share of the loss. See other insurance clause.
Appraisal: Appraisal provisions appear in the loss settlement portions of property policies and are a contractual arbitration provision intended to resolve disputes over the amount of a loss. Coverage questions cannot be decided in appraisal proceedings.
Appraisal Clause: Used when the insured and insurer agree that the loss is covered, but the amount of the loss is in dispute. In general, each party selects its own appraiser. If the appraisers cannot agree, they select an umpire. An agreement by any two is binding on all parties.
Approval: Acceptance by an officer of the company of an offer from an applicant or policyholder in the form of a contract for new insurance, reinstatement of a terminated policy, request for a policy loan, etc.
Approval Receipt: Rarely used today, this is a type of conditional receipt that provides that coverage is effective as of the date the application is approved (before the policy is delivered).
Appurtenant Structures: Buildings on the same premises as the main building insured under a property policy (e.g., a tool shed).
Arbitration: The process of settling differences relating to loss under an insurance policy between the insured and the insurer. Each party selects a representative who in turn selects a disinterested arbitrator whose decision or award is binding upon both parties to the insurance contract.
Arbitration Clause: In a property insurance contract, a clause that provides that if the policyholder and the company cannot agree on the settlement amount on a claim, they both select a neutral arbitrator. Any differences between the arbitrators are submitted to an umpire. The amount agreed to by any two of the three will be the amount of reimbursement.
ARM: See Associate in Risk Management.
Armstrong Investigation: An investigation of a large number of insurance companies in the United States in 1905 that led to the enactment of stricter state supervision and insurance requirements.
Arson: The criminal act of maliciously burning or attempting to burn any property.
Assault: An intentional, unlawful threat of bodily injury to another by force, or force unlawfully directed toward the person of another, under such circumstances as create well- founded fear of imminent peril, coupled with apparent present ability to execute the attempt; see also Battery.
Assessable: Insurance to which the policyholder may be required to contribute in the event the company becomes unable to pay its losses; confined to certain mutual companies.
Assessment: An additional fixed charge or proportionate share of claims expenses sometimes levied against policyowners by an assessment mutual insurance company when premiums are insufficient to meet its costs of operations.
Assessment Clause: A provision found in the insurance policies of some mutual insurers and reciprocal exchanges, stating the amount member policyholders may be called upon to pay if total losses of the company over a given period exceed funds available to cover their payment. In numerous instances such assessments are limited by policy terms to one extra annual premium deposit per policyholder.
Assessment Insurance: A plan by which either the amount of insurance or the number and amount of the assessments are variable. It is offered by either pure or advance assessment associations.
Assessment Mutual Insurer: An insurance company characterized by member-insureds who are assessed an individual portion of each loss that occurs. No premium payment is payable in advance.
Asset Backed Securities: Bonds that represent pools of loans of similar types, duration and interest rates. Almost any loan with regular repayments of principal and interest can be securitized, from auto loans and equipment leases to credit card receivables and mortgages.
Asset Valuation Reserve – AVR: A reserve that makes provisions for credit-related losses on fixed-income assets (default component) as well as all types of equity investments (equity component).
Assets: Property owned, in this case by an insurance company, including stocks, bonds, and real estate. Insurance accounting is concerned with solvency and the ability to pay claims. State insurance laws therefore require a conservative valuation of assets, prohibiting insurance companies from listing assets on their balance sheets whose values are uncertain, such as furniture, fixtures, debit balances, and accounts receivable that are more than 90 days past due. (See Admitted assets)
Assign/Assignment: The rights in a policy may be assigned (transferred) to someone else as collateral for a loan, to effect a change of ownership, or for some other reason, if agreed to by the issuing insurance company. An absolute assignment is a change of ownership. Consult your tax advisor prior to making a transfer or other assignment.
Assigned Risk: An uninsurable individual or company that is assigned an insurance company from a pool of insurers on the amount of insurance they sell in the regular market (usually all that hold certificates of authority in a specific state). Although the company must accept the risk, it may charge an appropriate premium. See Residual market
Assignee: A person (including a corporation, partnership or other organization) to whom a right or rights under a policy are transferred by means of an assignment
Assignment: The legal transfer of a policyowner’s rights or interests in an insurance policy to another party. The insured requests the assignment, and, barring state law, the company can either accept or reject the request.
Assignment Clause: A provision in an insurance policy allowing an assignment, or the transfer of contract rights, to another party.
Assignor: A person (including a corporation, partnership or other organization or entity) who transfers a right or rights under an insurance policy to another by means of an assignment.
Associate in Risk Management – ARM: A designation granted by the American Institute for Property and Casualty Underwriters to qualified persons who successfully pass a series of examinations.
Association: An underwriting activity whereby a group of participants agrees to share the risks of writing policies. Generally, each member agrees to accept a fixed percentage share of all profits and losses. Also called an insurance association, insurance pool, or insurance syndicate.
Association Captive: An insurance company that provides coverage to a group of companies, frequently in the same line of business.
Association Group: A group formed from members of a trade or a professional association for group insurance under one master health insurance contract.
Assume: To accept the risk of potential loss from another insurer.
Assumed Expense: Refers to the amount of money that will be spent to get a policy into the hands of the policyholder. These costs include such items as commissions, underwriting expenses, salaries for company employees, state insurance filing fees and product development costs.
Assumed Interest: Assumed interest is an estimate of how much a company will earn on the money it receives from policyholders.
Assumed Interest Rate: Minimum interest rate required on variable life policies. Investments backing a policyholder’s cash value account must earn this rate in order to cover the insurance company’s costs and still provide the initial coverage selected by the policyholder.
Assumed Liability: See Contractual Liability.
Assumed Mortality: An estimate of when a policyholder is likely to die and is based primarily on age, but it can be influenced by health. Mortality tables, covering large cross sections of people in varying degrees of health, different occupations and multiple lifestyles, have been developed to help insurance companies determine the average number of people of any given age who will die within a certain year.
Assumption Certificate: An endorsement to an insurance contract that obligates a reinsurer to assume all obligations of the primary insurer in the event of bankruptcy or other inability to pay claims. Also called a cut-through endorsement.
Assumption of Risk: The acceptance of the risk presented to an insured, including full responsibility for any loss that may occur.
Assumption of Risk Doctrine: A defense arguing that the plaintiff consented, expressly or by implication, to relieve the defendant of the duty to protect and accepted the chance of injury from the particular risk causing the injury.
Assumption Reinsurance: A reinsurance agreement in which one company permanently transfers full responsibility for a block of policies to another company. After the transfer, the ceding company is no longer a party to the insurance agreement.
Assurance / Insurance: Terms are synonymous. “Assurance” is used more commonly in England than in the United States.
Assured: A person who has been insured by an insurance company or underwriter against loss. See insured.
Attachment: A statutory legal remedy whereby one party may prevent removal of property belonging to another party, pending determination of a court action.
Attachment Point: The lower limit of the excess insurance coverage.
Attained Age: The age an insured has reached on a given date.
Attorney in Fact: A person given legal authority to act for another party, generally by means of a contract known as a “power of attorney.” In insurance, the chief administrative officer of a reciprocal insurance exchange who is given authority to carry on daily management activities, act on the organization’s behalf, and perform other activities of the exchange. Also, a person authorized to execute a surety bond on behalf of an insurance company. See also reciprocal exchange.
Attractive Nuisance: A dangerous place, condition, or object that is attractive to children and may prove harmful to them. People may be held liable for injuries to children caused by an attractive nuisance, even if the children were trespassing when they got hurt. The courts have frequently held that where “attractiveness” exists, the owner is under a duty to take steps to prevent injury to those who may be attracted and the owner may be held liable for failure to do so.
Audit: A survey or examination of the insureds books (payroll records) or other records to determine the premium due the carrier for coverage provided.
Audit Premium: At the end of the policy term the insurer refigures the base on which the original deposit premium was charged through an audit of the insured. The insurer may be entitled to additional premium or the insured may be entitled to returned premium. Audited contracts typically include liability and workers’ compensation. See also deposit premium.
Authority: The actions and deeds an agent is authorized to conduct on behalf of an insurance company, as specified in the agent’s contract.
Authorization: The amount of insurance which an insurer will accept from a broker; also the limit of authority for a claims adjuster in settling losses on his/her own initiative.
Authorized Company: An insurer that meets the licensing criteria of the state it wishes to do business in and has received a certificate of authority. see admitted company.
Auto Insurance Policy: There are basically six different types of coverages. Some may be required by law. Others are optional. They are: Bodily injury liability, for injuries the policyholder causes to someone else. Medical payments or Personal Injury Protection (PIP) for treatment of injuries to the driver and passengers of the policyholder’s car. Property damage liability, for damage the policyholder causes to someone else’s property. Collision, for damage to the policyholder’s car from a collision. Comprehensive, for damage to the policyholder’s car not involving a collision with another car (including damage from fire, explosions, earthquakes, floods, and riots), and theft. Uninsured motorists coverage, for costs resulting from an accident involving a hit-and-run driver or a driver who does not have insurance.
Auto Insurance Premium: The price an insurance company charges for coverage, based on the frequency and cost of potential accidents, theft and other losses. Prices vary from company to company, as with any product or service. Premiums also vary depending on the amount and type of coverage purchased; the make and model of the car; and the insured’s driving record, years of driving and the number of miles the car is driven per year. Other factors taken into account include the driver’s age and gender, where the car is most likely to be driven and the times of day – rush hour in an urban neighborhood or leisure-time driving in rural areas, for example. Some insurance companies may also use credit history-related information. (See Insurance score)
Automatic Coverage: A common term for coverage provided automatically in property and liability policies (generally for a limited time and amount) for newly acquired property and changing interests and values.
Automatic Premium Loan: An option under some fixed premium policies, whenever a premium is not received by the end of the grace period (usually 30 or 31 days), to create automatically a policy loan for the amount necessary to pay the premium. When the remaining net cash value is no longer sufficient to cover a premium due, the policy will lapse with no (or minimal) net cash value unless premium payments are resumed in cash.
Automatic Premium Loan Provision: This authorizes insurer to pay any premium in default automatically at the end of the grace period and charge the amount so- paid against the life insurance policy as a policy loan.
Automatic Reinstatement Clause: In a property insurance contract, a clause providing for the automatic restoration of the full face value of the policy after the payment of a loss.
Automatic Transfer Service: A dollar-cost-averaging service that enables the poiicy owner to make automatic monthly transfers from a money market option to the other variable investment options available.
Automatic Treaty: A reinsurance contract under which risks written by the reinsured are automatically assumed by the reinsurer subject only to the terms and conditions of the treaty.
Automatically Convertible Term: Term life insurance policies programmed to convert to permanent insurance at a predetermined date without an express direction by the insured at that time.
Automobile Insurance Plan: A state pool in which each automobile insurer in the state accepts a portion of the undesirable automobile insurance applicants; formerly called “assigned risk plans.”
Automobile Liability Insurance: A form of liability insurance that is specifically designed to indemnify for loss incurred through legal liability for bodily injury and damage to property of others caused by accident arising out of ownership or operation of an automobile.
Automobile Physical Damage Insurance: Insurance covering a car and sometimes the property in it. Includes collision and comprehensive coverage.
Average Clause: A coinsurance clause; a clause requiring an insured to purchase insurance for a stipulated portion of the entire value of the thing insured; see General Average; Particular Average.
Average Indexed Monthly Earnings – AIME: Workers average covered monthly wage, after adjusting for the rising national average annual earnings, used in determining the primary insurance amount (PTA) for social security benefits.
Average Monthly Wage – AMW: The average wage base for computing virtually all Social Security benefits prior to 1979.
Average Rate: A rate used in fire insurance to determine the premium for a policy or policies covering more than one location or more than one type of property. It is obtained by multiplying the rate for each location by the value at that location, totaling the premium for all locations, and dividing the sum of the results by the total value.
Average Value Method: A method for determining the claim reserve by taking the average value of claims of various types, adjusting it to trend projections and then multiplying by the number of unsettled claims.
Aviation Exclusion: This excludes from coverage certain deaths or disabilities due to aviation for those, “other than fare-paying passengers.” May be attached by rider or included in standard policy language.
Aviation Insurance: Commercial airlines hold property insurance on airplanes and liability insurance for negligent acts that result in injury or property damage to passengers or others. Damage is covered on the ground and in the air. The policy limits the geographical area and individual pilots covered.