Dictionary - Insurance
# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Abandonment and Salvage

Abandonment and salvage is a term that refers to one party's relinquishment of an asset and another party's subsequent claim to the asset. Abandonment and salvage frequently appears in insurance contracts. Read more

Abandonment Clause

An abandonment clause is a provision in an insurance contract that ensures full compensation in the event of abandonment. For example, suppose a company has an insurance policy on a machine, and the machine is damaged to such an extent that it is not worthwhile to pay for the repairs. Read more

Accelerated Death Benefit

An accelerated death benefit is a portion of a life insurance policy that allows policyholders to receive their death benefits before they actually die. For example, let's say Jane Doe bought a life insurance policy with an accelerated death benefit. Read more

Accident and Health Benefits

Accident and health benefits are a package of benefits offered by companies to employees and their families covering illness and providing income benefits in the event of accidental death or injury. Companies that offer accident and health benefits provide employees and their families with insurance that covers unanticipated health-related events resulting from either accident or illness. Read more

Accidental Death and Dismemberment Insurance (AD&D)

Accidental death and dismemberment insurance (AD&D) is coverage for accidental death or injury to the insured.“Dismemberment” usually covers the loss of a limb, paralysis, or the loss of hearing or eyesight.  AD&D is typically not offered as part of a standard insurance plan and is considered to be a rider, or an added feature, that the insured must pay extra for. Read more

Adverse Selection

Adverse selection refers to an insurance company's coverage of life insurance applicants whose risk as policyholders, due to their way of life, is significantly higher than the company perceives. Insurance companies grant life insurance coverage to applicants on the basis of such factors as age, health condition, and occupation. Read more

Affordable Care Act (ACA)

The Affordable Care Act (ACA), typically referred to as "Obamacare" but formally known as the Patient Protection and Affordable Care Act (PPACA), is a bill signed into law on March 23, 2010, by President Barack Obama.The Affordable Care Act works in conjunction with the Health Care and Education Reconciliation Act of 2010, which also reforms many aspects of the student loan industry. Read more

Blanket Bond

Blanket bond refers to insurance coverage carried by banks and brokerage houses that protects against any losses incurred by unlawful or dishonest activity on the part of employees. It is also called a blanket fidelity bond or a fidelity bond. A blanket bond is a form of SEC-mandated insurance that protects banks, investment houses, and other financial companies. Read more

Broker of Record

A broker of record is an insurance agent who manages an insurance policy with a carrier on behalf of a policyholder. Let's assume John Doe buys a whole life insurance policy. Read more

Cafeteria Plan

A cafeteria plan, also called a "tax-advantaged benefits plan", is a type of employee-benefit program recognized by section 125 of the Internal Revenue Code. Let's assume Company XYZ employs 100 people and would like to start offering health insurance. Read more

Calendar Year Experience

In the insurance industry, a calendar year experience (also called accident-year experience or underwriting-year experience) is the difference between the premiums earned and the losses incurred during a calendar year. Let's say Company XYZ had 1,000 customers, each of whom has a policy that has a $5,000 annual premium. Read more

Capitated Contract

A capitated contract is a health insurance policy that pays care providers a flat fee for each patient in the plan. For example, a capitated contract issued by Company XYZ might pay Dr. Read more

Cash Flow Underwriting

In the insurance business, cash flow underwriting is the equivalent of selling below cost.  For example, let's assume Insurance Company XYZ decides to engage in cash flow underwriting for its auto insurance policies.If it sells a $100,000 auto policy to a customer for $250 per year for 10 years (for total revenue of $2,500) but knows that the person has a terrible driving record and a DUI and is thereby likely to cause the insurer make payouts of much more than $2,500, Company XYZ is engaging in cash flow underwriting.  Cash flow underwriting is usually a tactic to drive sales in the short-term. Read more

Certificate of Insurance (COI)

A certificate of insurance, or COI, is issued by an insurance company or insurance broker.The COI summarizes the details and conditions of the policy, including effective dates, types and limits of coverage, and ownership. Read more

Coinsurance

Coinsurance, commonly used in health insurance, is the percentage that the insurer pays for a medical claim on behalf of the insured patient after the deductible has been met.  Property coinsurance specifies a minimum percentage of the property’s assessed cash or replacement value that it must be insured for (perhaps 80%).If the insured does not maintain that level of insurance on the property and there is a claim, the insured may be asked to pay a portion of the claim.  In health insurance, coinsurance is similar to the idea of a co-payment or copay, except that the coinsurance amount is expressed as a percentage of the claim, while a copay is expressed as a specific amount.  For example, let's say you need to see a doctor for a medical condition and the bill for the consultation is expected to be $150. Read more

Coinsurance Clause

A coinsurance clause in regards to property insurance specifies a minimum percentage of a property's assessed cash or replacement value that it must be insured for (typically 80% or 90%).If the insured property owner does not maintain that level of insurance on the property and there is a claim, the insured may be asked to pay a portion of the claim. Read more

Collision Insurance

Collision insurance is insurance coverage that helps to cover the costs to repair or replace an automobile after an accident.A vehicle is typically covered if the insured driver is at fault and the damage occurred as a result of a collision with another automobile, an object such as a tree or traffic barrier, or an accident involving just the covered automobile such as a rollover. Read more

Death Benefit

A death benefit is a payment to the beneficiary on an annuity, pension, or life insurance policy upon the death of the annuitant or policyholder. Also called a survivor benefit, a death benefit may come in the form of a one-time payment on a life insurance policy or in a series of income payments that are a percentage of those granted to the annuitant prior to death. Read more

Death Bond

A death bond is a bond backed by life insurance policies. Let's say Company XYZ is a life-settlement provider. Read more

Deferred Annuity

A deferred annuity is a type of annuity that delays monthly or lump-sum payments until an investor-specified date.The interest usually grows tax-deferred before it is withdrawn. Read more

Donut Hole

The donut hole is a situation that occurs as part of Medicare’s Part D prescription coverage.  Let’s assume that John Doe is enrolled in Medicare.He pays his out-of-pocket premiums for his Part D prescription coverage all year. Read more

Earned Premium

An earned premium is the portion of an insurance premium that applies to the expired portion of an insurance policy. For an earned premium example, let's say John purchases a life insurance policy from Company XYZ. Read more

Errors and Omissions Insurance

Errors and omissions (E&O) insurance is a type of professional liability insurance used by professionals and their firms to protect themselves, their companies, and their employees in the event of claims of negligent action or incorrect work.The features of an E&O policy will vary based on the coverage amount, specific professional industry, and the size of the organization being covered. Read more

Full-Time Student

A full-time student is a person enrolled in a post-secondary institution of learning who is taking at least the minimum number of course credit hours according to the institution's requirements. Although the requirements vary depending on the institution, a full-time student typically takes a certain number of course hours during at least five calendar months of the year. Read more

Gap Insurance

Gap insurance is insurance that covers underwater cars or RVs.  By "underwater," we don't mean "submerged in water." We're talking about cases in which the loan outstanding on a car or RV is higher than what the vehicle is worth. Read more

Garage Liability Insurance

Garage liability insurance is insurance that auto dealers and repair shops use to protect themselves from damage and bodily injury incurred in their service centers. Let's say John Doe takes his car to Jane Smith's Auto Body to get the tires changed and the brakes fixed. Read more

Guaranteed Issuance

Guaranteed issuance refers to an insurer’s requirement to sell a product to a customer regardless of health status, age, gender, or other factors that might affect the customer’s use of health care or prospect of death. Let’s assume that John Doe starts his own business selling garage doors. Read more

Hazard Insurance

Hazard insurance covers property that secures a loan.  Let's say John Doe borrows $100,000 to buy a house.Company XYZ lends him the money and requires him to pledge the house as collateral. Read more

Health Insurance

Health insurance is insurance that covers some or all of the costs of an individual's healthcare. Health insurance absorbs or offsets healthcare costs associated with, but not limited to, routine health examinations, specialist referral visits, inpatient and outpatient surgery, unforeseen eventualities such as illnesses or injuries, and prescription medication. Read more

Health Insurance Portability and Accountability Act (HIPAA)

The Health Insurance Portability and Accountability Act (HIPAA) is a federal law that promises continued health insurance coverage and ensures health information privacy for those covered by health insurance plans. HIPAA was passed in 1996 as an amendment to two previous laws: the Public Health Service Act (PHSA) and the Employee Retirement Income Security Act (ERISA). Read more

Health Maintenance Organization (HMO)

A health maintenance organization (HMO) is a health insurance provider with a network of contracted healthcare providers and facilities.Subscribers pay a fee for access to services within the HMO's network. Read more

Health Reimbursement Account (HRA)

A health reimbursement account (HRA) is a sum of money set aside by a company to offset employee healthcare costs not covered by the company's health insurance plan. A company establishes an HRA as a separate discretionary account that it funds on a periodic basis. Read more

Health Savings Account (HSA)

Health savings accounts (HSA) are tax-free savings accounts connected to high-deductible health plans (HDHP).HSAs are used to cover healthcare-related expenses not covered by an HDHP. Read more

High-Deductible Health Plan (HDHP)

The dollar limits on HDHPs change often (the government thresholds are indexed for inflation).HDHPs are growing in popularity because they help employers limit insurance costs (they have lower premiums) and because they allow people to open Health Savings Accounts (HSAs). Read more

Individual Mandate

The individual mandate refers to Section 5000A of the Patient Protection and Affordable Care Act (PPACA), also known as "Obamacare" or the more generic "health care reform." PPACA is a bill signed into law on March 23, 2010, by President Barack Obama in an effort to reform many aspects of the health care industry. Section 5000A requires all taxpayers and their dependents to have health insurance by January 1, 2014. Read more

Insurance Premium

An insurance premium is the price a person or business (the insured) pays for an insurance policy.Insurance premiums are paid for all types of insurance: healthcare, rental, accident, auto, home, life, and more. Read more

Insurance Score

An insurance score is a number generated by insurance companies based on your credit score and claim history to determine the probability that a policyholder will file a claim in the future. There are two factors that comprise an insurance score: a person's claim history and credit score. Read more

Insurance Underwriter

Insurance underwriters are professionals who assess and investigate the risks involved in insuring people and assets.Insurance underwriters typically work for an insurance company. Read more

Key Person Insurance

Also called key man insurance, key person insurance is insurance on an important executive's life. For example, let's say John Doe discovers a cure for cancer. Read more

Kidnap Insurance

People who are famous or who work in high-risk areas are the most likely to warrant kidnap insurance.One of the biggest benefits is access to a team of professionals who can assist the family or company in negotiating releases, investigating the matter, and bringing things to a safe conclusion. Read more

Lapse

Lapse refers to the expiration of an insurance policy or other agreement.   Let's say John Doe has a life insurance policy with a $5,000 annual premium. Read more

Liability Insurance

Liability insurance, also called third-party insurance, protects the insured from claims arising from injuries and damages to other people or property.It covers legal costs and legally required payments resulting from the actions of the insured. Read more

Life Settlement

A life settlement occurs when a person sells his or her whole or universal life insurance policy to a third party, who maintains the premium payments and receives the death benefit when the insured dies. Let's say John Doe has a life insurance policy that he no longer needs. Read more

Life-Plus-Ten Option

The life-plus-ten option, which is generally associated with annuities, describes the contractual arrangement whereby annuity payments are paid out to a beneficiary for ten years after the owner's death. To understand how this works, let's assume you'd like to invest in an annuity that, after you retire, will provide guaranteed monthly payments of $1,000 to you every month for as long as you live. Read more

Malpractice Insurance

Malpractice insurance is liability insurance for doctors and other health care professionals. Let's say John Doe needs surgery to amputate his left foot. Read more

Medicare

Medicare is the United States federal government health insurance program for Americans who are 65 years of age and older. When a U.S. Read more

Mortgage Insurance

Mortgage insurance is insurance for lenders that covers losses resulting from borrower default. Mortgage lenders assume a high degree of risk in connection with home loans. Read more

Mortgage Life Insurance

Mortgage life insurance is an insurance policy which fully repays the balance of a mortgage in the event the borrower dies. Mortgages have long-term horizons -- usually 30 years. Read more

Named Perils Insurance Policy

A named perils insurance policy is a policy that covers losses from events specifically named in the policy. For example, let's say John Doe owns a houseboat. Read more

National Association of Insurance and Financial Advisors (NAIFA)

The National Association of Insurance and Financial Advisors (NAIFA) is a trade organization for insurance professionals and financial advisors. Founded in 1890, the organization originally was called The National Association of Life Underwriters (NALU). Read more

Permanent Life Insurance

Permanent life insurance is a life insurance plan that does not expire as long as the policy is in force.Permanent life insurance differs from term life insurance in that term life insurance covers the insured for a specified period (5, 10, 15, 20 years, etc.). Read more

PMI - Private Mortgage Insurance

Private mortgage insurance (PMI), also called mortgage insurance, is what borrowers must pay on each mortgage payment if they didn't make a 20 percent down payment toward their home loan.The insurance protects the lender financially in case the borrower fails to repay. Read more

Property Insurance

Property insurance is an insurance policy or series of policies that provides insurance coverage for property protection and/or liability.The policy provides reimbursement to the policy owner in the event of theft, damage, and/or injuries to someone on the property. Read more

Public Option

The public option refers to a portion of Obamacare that would have created a Medicare-like health insurance policy that most U.S.residents could purchase as an alternative to purchasing policies from private health insurers. Read more

Qualified Mortgage Insurance Premium

A qualified mortgage insurance premium is a payment to insure a homeowner’s mortgage payments. Let’s say John and Jane Doe buy a house. Read more

Second-to-Die Insurance

Second-to-die insurance is a type of life insurance which grants a death benefit only once the second insured party has died. Also called survivorship insurance, second-to-die insurance is a life insurance policy which covers the lives of two individuals, usually married couples. Read more

Self-Insure

To self-insure means to use one's own money to pay for unexpected losses (rather than insurance). Let's say John Doe owns a restaurant. Read more

Single-Payer System

A single-payer system is a health care system in which the government pays for all health care costs. Though there is considerable debate about how a single-payer system fundamentally works, by many accounts a single-payer system operates much like the Veterans Administration works today in the United States: Hospitals receive a general budget from the government, doctors receive a salary from the hospitals, and the government pays for the cost of care. Read more

Term Life Insurance

Term life insurance is a policy which provides financial coverage during a set amount of time.Often considered the "simplest" form of life insurance, it is best suited for providing coverage or income for a short term and on a limited budget. Read more

Title Insurance

Title insurance is a type of insurance policy that protects property owners and their lenders against losses resulting from problems with a property title.It provides coverage for financial costs caused by pre-existing or future property ownership issues. Read more

Ultimate Mortality Table

An ultimate mortality table lists the probabilities of death for people of different ages and gender. Most mortality tables, like this one from the IRS, show what percentage of a population or number per 100,000 people who will probably be alive when they reach the age indicated in the table. Read more

Umbrella Insurance Policy

An umbrella insurance policy is an insurance policy that covers claims beyond what traditional property and/or liability insurance covers. Businesses also obtain umbrella policies to mitigate any lawsuits or judgments. Read more

Umbrella Personal Liability Policy

An umbrella personal liability policy is an insurance policy that covers claims beyond what traditional property and/or liability insurance covers. Let' say John Doe owns a home and has homeowners insurance as his mortgage lender requires. Read more

Unconditional Probability

Unconditional probability refers to the chance that a particular event will occur without regard to external circumstances. The outcome of a single event can be affected by any number of accompanying conditions. Read more

Underinsured Motorist Coverage

Underinsured motorist coverage protects drivers from other drivers who do not carry any or enough auto insurance. Let's say you're driving your car and are hit by another driver. Read more

Underwriter

Whenever you apply for a major loan or an insurance policy, your personal data will often go before an underwriter.Although you may never meet them, these specialists have a lot of control over whether you’re approved for a mortgage or life insurance policy. Read more

Underwriting

Underwriting is the process that a lender or other financial service uses to assess the creditworthiness or risk of a potential customer.  Underwriting also refers to an investment banker's process of packaging and selling a security on behalf of a client. Read more

Universal Life Insurance

Universal life insurance is a type of life insurance policy that allows the policyholder to alter the policy in response to life changes, by merging the benefits of term life insurance with those of a savings account. Universal life insurance is based on whole life insurance. Read more

Valuable Papers Insurance

Valuable papers insurance is a kind of property insurance that protects documents such as wills, share certificates, or other crucial paper items. Let's say Company XYZ's headquarters burns down. Read more

Variable Life Insurance Policy

A variable life insurance policy allows the account holder to invest a portion of the premium paid for the policy. Let's say John Doe buys a variable life insurance policy and pays $10,000 a year in premiums. Read more

Variable Universal Life Insurance (VUL)

Variable universal life insurance is a type of life insurance policy that allows the account holder to invest a portion of the premium dollars.It is not the same as a variable life insurance policy (though it is similar). Read more

Viatical Settlement

A viatical settlement occurs when a person who is chronically or terminally ill sells his or her whole or universal life insurance policy to a third party that maintains the premium payments and receives the death benefit when the insured dies. Let's say John Doe has a year to live. Read more

Viator

In the insurance world, a viator is a terminally ill person who sells his or her life insurance policy. A viator participates in viatical settlements. Read more

Waiver of Premium Rider

A waiver of premium rider is language in an insurance policy that allows the insured to stop making premium payments if he or she becomes ill or disabled. For example, let's assume that John Doe has a life insurance policy with Company XYZ. Read more

Warranty Deed

A warranty deed is a real estate document which states that the owner owns the purchased property free and clear of any outstanding mortgages, liens, or other types of encumbrances against it.  A general warranty deed legally transfers property from one individual or business to another (in most cases for real estate).They’re usually put in place when a grantee is looking to secure financing for mortgage or title insurance.  Grantor vs. Read more

Water Damage Clause

A water damage clause is the section of an insurance contract that details whether and how much the insurer will pay the insured for damage caused by water. For example, let's assume that John has a homeowner's insurance policy for the house he lives in. Read more

Waterfall Concept

A waterfall concept is an insurance strategy whereby a child or grandchild inherits a tax-exempt whole-life insurance policy. For example, let's assume that John wants to buy life insurance but also wants to give money to his son before he dies. Read more