Insurance
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 con...
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...
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...
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. ...
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 hea...
An actuary is a person who evaluates the likelihood of certain events and creates plans to deal with those events. Actuaries must understand business, have good analytical skills, and be aware of ho...
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. In...
An annuitant is the person whose age and life expectancy affect the size of the monthly payments to the owner of an annuity. An annuity is similar to a life insurance product, but there are importan...
To annuitize is to choose to receive a series of payments, usually from an annuity. An annuity is a contract whereby an investor makes a lump-sum payment to an insurance company, bank, or other fina...
An annuity is a financial contract written by an insurance company that provides for a series of guaranteed payments, either for a specific period of time or for the lifetime of one or more individua...
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 calle...
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 pe...
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 duri...
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. Smith, say, ...
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 ...
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 ...
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...
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 ...
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 ...
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. There are two phase...
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 Par...
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 f...
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 o...
An FDIC insured account is a bank account whose balance is covered by the Federal Depository Insurance Corporation (FDIC) in the event of a bank failure. The FDIC is an agency of the U.S. government...
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 highe...
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...
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 ca...
Hazard insurance doesn't just protect the homeowner; it protects the bank that lends to the homeowner. The price of hazard insurance varies depending on what state the house is in, how it is built an...
Health insurance is insurance that covers some or all of the costs of an individuals healthcare. Health insurance absorbs or offsets healthcare costs associated with, but not limited to, routine he...
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 ...
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 ...
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. Individuals w...
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 premi...
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 in...
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, li...
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 a...
Insurance underwriters are professionals who assess and investigate the risks involved in insuring people and assets. Insurance underwriters typically work for an insurance company. They establish pr...
A joint-life payout is a retirement-benefit payout method whereby a retiree receives benefits from the retirement plan until he or she dies, and the retiree's spouse or partner then receives benefits...
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. All the trials show that his new drug ...
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 com...
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. This year, John can't make the payment beca...
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 pay...
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 d...
The life-only option, which is generally associated with annuities, describes the contractual arrangement whereby annuity payments cease upon the owner's death. To understand how this works, let's a...
The life-plus-five option, which is generally associated with annuities, describes the contractual arrangement whereby annuity payments are paid out to a beneficiary for five years after the owner's ...
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 de...
Malpractice insurance pays for the mistakes health care professionals make due to negligence or harmful decisions. The premium can be very high, and these premiums are a controversial cost of doing b...
A market standoff agreement restricts the ability of insiders to sell their holdings following an initial public offering (IPO). When a company issues new shares of stock, it contracts a brokerage h...
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. For this reason, lenders ...
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. Given such a substa...
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. His homeowners insurance policy does no...
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 call...
Objective probability is the chance that a specific thing will occur. For example, let's say John buys a raffle ticket to support a local Girl Scouts troop. The troop sells 1,000 tickets. From an ob...
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 ...
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...
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 fro...
Qualified annuities are annuities purchased with pre-tax dollars. An annuity is a contract whereby an investor makes a lump-sum payment to an insurance company, bank or other financial institution t...
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 in...
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. He buys property and casualty insurance that only covers claim...
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...
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 inco...
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 ca...
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 numbe...
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 la...
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 i...
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 accompanyin...
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. The other driver ca...
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 whet...
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 proces...
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 ...
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. In...
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...
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 ...
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 rece...
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. A viatical settlement occurs when a person who ...
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...
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...