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.
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.
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.
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.
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.
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 how human behavior affects risk.
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.
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 important differences between the two.
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 financial institution that in return agrees to give the investor either a higher lump-sum payment in the future or a series of guaranteed payments.
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 individuals. An annuity is similar to a life insurance product, but there are important differences between the two.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 and other factors.
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 health examinations, specialist referral visits, inpatient and outpatient surgery, unforeseen eventualities such as illnesses or injuries, and prescription medication.
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).
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.
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.
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.
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).
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.
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.
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.
Insurance underwriters are professionals who assess and investigate the risks involved in insuring people and assets.Insurance underwriters typically work for an insurance company.
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 from the same plan until he or she dies too. Let's say John Doe buys an annuity with a joint-life payout.
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.
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.
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.
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.
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.
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 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.
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 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.
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.
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 business that contribute to the cost of medical care.
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 house to serve as an underwriter.
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.
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.
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.
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).
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.
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.).
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.
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.
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 that, in return, agrees to give the investor either a higher lump-sum payment in the future or a series of guaranteed payments. Annuities are either qualified or non-qualified based on the type of funds the investor uses to purchase the contract.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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).
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.
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 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.
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.