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Glossary of Insurance Terms
 
~A~

Accident
an unexpected, unforeseen event not under the control of an insured and resulting in a loss at a specific time and place.

Accident frequency
the number of times an accident occurs. Used in predicting losses upon which premiums are based

Accidental death
coverage in the event of death due to an accident, usually in combination with dismemberment insurance

Act of God
natural occurrence beyond human control or influence. Such acts of nature include hurricanes, earthquakes, and floods. (A snow storm is an act of God. Driving in a snow storm is an act of man or woman or teenager.)

Actual Cash Value (ACV)
the cost to replace an item of property at the time of loss, less depreciation.
Actuary
a professional trained in the mathematics of insurance and risk management
Additional Insured
An individual or company, in addition to the insured, who is listed in the Declarations. An example is a mortgage company that has an insurable interest in the property insured.

Add-ons
additional coverage to your basic policy

Adjuster
a person employed by a property/casualty insurer to evaluate losses and settle claims

Agents
two types of agents sell insurance. Independent agents are self employed business people who typically represent two or more insurance companies and are paid on a commission basis. Exclusive agents represent only one insurance company and may be salaried employees or work on a commission basis

Aggregate Limit
Type of limit found in Liability policies that limits coverage to a specified amount for all losses in a policy period.
Agreed Value Condition
Condition found in some property insurance policies that stipulates a certain value that will meet the coinsurance requirement. If the policy limit meets or exceeds the agreed value, the insured will not be assessed a coinsurance penalty.
Alien insurance company
an insurance company incorporated under the laws of a foreign country

Annuity
a life insurance company contract that pays a periodic income benefit for a specific period or lifetime

Application
a signed statement by a prospective insured person which becomes part of the health insurance contract

Audit
See "Premium Audit"
Auto insurance premium discounts
a discount offered to drivers for such safeguards as air bags, seat belts, good driving record, anti-theft devices, multiple vehicles, etc.

~B~

Beneficiary
designation by the owner of a life insurance policy indicating to whom the proceeds are to be paid upon the insured's death or when an endowment matures

Binder
temporary insurance contract providing coverage until a permanent policy is issued

Blanket policy
a health insurance contract which protects all members of a certain group against a specific hazard

Broker
a sales and service representative who handles insurance for clients, generally selling insurance of various kinds and for several companies

Business Owners Policy (BOP)
Package policy dsigned to provide broad Property and Liability coverage for small businesses. Eligibility requirements are more strict than Commercial Package Policies.

~C~

Cancellable policy
a policy which may be terminated by the company or the insured by proper notification sent to the other party according to the terms set forth in the policy

Carrier
an insurer or insurance company

Certificate of Insurance
form that provides a summary of the coverages provided under one or more policies for an insured

Claim
(1) A formal request for payment of a loss under an insurance contract or bond. (2) The actual amount of the final settlement

Claimant
one who seeks reimbursement for loss under the terms and conditions of his/her insurance contract

Claims-Made Form
Commercial General Liability coverage form that pays for bodily injury and property damage claims that are made first against the insured within the policy period.

Clause
a section or paragraph in an insurance policy that explains, defines or clarifies the conditions of coverage

COBRA (Consolidated Omnibus Budget Reconciliation Act)
a federal law under which group health plans sponsored by employers with 20 or more employees must offer continuation of coverage to employees who leave their jobs, voluntarily or otherwise, and their dependents; gives individuals and their dependent family members the right to continue their health care coverage for as long as 18 months

Coinsurance
in property insurance, a coinsurance clause requires the policyholder to carry insurance equal to a specified percentage of the value of the property in order to receive full payment of a loss. In health insurance, coinsurance is a percentage of each claim, above the deductible, that is paid by the policyholder

Coinsurance Penalty
The amount not paid by the insurance company during a loss because the insured failed to comply with the cosinurance condition

Collision insurance
insurance coverage which pays (maximum book value) for damage to the policyholder's car caused by collision

Comprehensive insurance
coverage in automobile or boat insurance providing protection in the event of physical damage (other than collision) or theft of the insured car

Comprehensive major medical insurance
a policy designed to give the protection offered by both a basic and major medical health insurance policy. It is characterized by a low "deductible" amount, coinsurance feature, and high maximum benefits - usually $5,000 to $10,000 or higher

Co-payment
the portion, either a percentage or a fixed dollar amount, of a medical bill that a patient pays. The insurer pays the rest

Coverage
a term usually referring to the type and extent of benefits provided by an insurance contract

~D~

Death benefits
amount payable, as stated in a life insurance policy, upon the death of the insured

Declaration page
that page of the insurance policy which lists the insurance company, its address, name of the policyholder, starting and ending dates of coverage, and the actual coverages given in the contract, including the locations and amounts

Deductible
the amount of loss paid by the policyholder before the insurance policy benefits become payable

Defense clause
a provision in a casualty insurance policy that provides additional coverage for expenses of judicial assistance

Dental Insurance
coverage for dental services under a group or individual policy

Depreciation
a decrease in the original value of an item because of wear and tear, obsolescence, and deterioration

Disability insurance
a type of health insurance that pays a monthly income to the policyholder when he or she is unable to work because of illness or accident

Domestic insurance company
an insurer domiciled in this state

Dwelling Policy
Property policy that provides coverage for dwellings, other structures, personal property, and fair rental value. The Dwelling policy is more limited than the Homeowners policy.

~E~

Earned premium
that part of the premium applicable to the expired part of the policy period, including the short-rate charge on cancellation.

Effective date
the date on which an insurance policy coverage starts

Employers Liability
coverage included in the Workers Compensation and Employers Liability policy that covers the employer's liability arising out of work related injuries and occupational diseases

Employment Practices Liability Insurance
Policy that covers a business's losses arising out of wrongful termination, sexual harrassment, discrimination, and other employment-related practices

Endorsement
Document attached to an insurance policy that changes the information or coverages listed on the policy in some way

Evidence of insurability
any statement or proof of a person's physical condition, occupation, etc., affecting his acceptance for insurance

Exclusions
specified hazards for which a policy will not provide benefit payments. They are often called exceptions

Experience Modification Factor
when loss experience is better than expected, the factor applied to reduce the premium

Experience rating
determination of the premium rate for an individual risk, made partially or wholly on the basis of that risk's own past claim experience

~F~

Fire insurance
coverage protecting property against losses caused by fire or lightning

Flat cancellation
cancellation of an insurance policy as of the date of its start with no premium charge

Flood Insurance
See National Flood Insurance Program

Foreign insurance company
an insurer domiciled in another state

~G~

Guaranteed renewable policy
a policy which the insured has the right to continue in force by the timely payment of premiums to a specified age, (usually age 50) during which period the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force but may make changes in premium rates for the entire policyholder classification

Guarantee funds
all 50 states, the District of Columbia and Puerto Rico require licensed insurers to assume some of an insolvent insurance company's policyholder liabilities. These funds (life & health and property & casualty) are the mechanism by which solvent insurers bail out the policyholders of companies that fail

 
~H~

Health insurance
protection against the costs of hospital and medical care or lost income arising from an illness or injury. Sometimes called Accident of Sickness Insurance, Accident and Health Insurance, or Disability Insurance.

Health maintenance organization (HMO)
an organization that provides health care for a monthly payment set in advance. In a traditional HMO, doctors and other providers are salaried employees and the facilities are owned by the organization. In recent years, however, other forms of HMOs have sprung up that contract with doctors and hospitals to care for members at set, negotiated fees. Many HMOs are hybrids, offering both kinds of care to members.

Hired and Non-Owned Liability Endorsement
Businessowners policy or Commercial Package policy endorsement used to cover hired or non-owned autos used by the business

Hold Harmless Agreement
Contractual agreement where one party assumes the liability of a situation and relieves the other party of responsibility

~I~

Inland Marine Insurance
Available as personal or commercial coverage, used to cover property that is transferred

Insurance
a system to protect persons against the risks of financial loss by transferring the risks to a large group who share the financial losses

Insurer
the company offering protection through the sale of an insurance policy to an insured

Insured
the person whose risk is transferred and shared

~L~

Liability insurance
type of insurance that protects insured from financial loss arising out of a libility claim by transferring the financial burden from the insured to the insurance company

Life insurance
Insurance that pays a stipulated sun to a designated beneficiary upon the death of the insured. Protects the insured's beneficiary from against the financial consequences of the insured's death.

Loss of use insurance
insurance against loss due to the insured's inability to use property, such as a vehicle or a store; includes additional living expense, business interruption, rent insurance, rental reimbursement, and rental value

~M~

Managed care
a health plan that places limits on which treatments and which doctors, hospitals and other providers a member can use and still receive full coverage. Generally under managed care an insurer negotiates lower fees with doctors, hospitals, laboratories, for instance, who join in a network that members of the plan are encouraged to use. Frequently, members of a managed care plan can use health care providers outside the network, but they must pay a greater share of the cost.

Malpractice insurance
a professional liability coverage that insures physicians, lawyers and other specialists against suits alleging their negligence

Marine insurance
coverage for goods in transit, and for the vehicles that transport them, over waterways, over land and in air

Maryland Automobile Insurance Fund (MAIF)
a state agency created to provide automobile liability insurance for persons rejected by at least two private insurers

Medicaid
a federal-state program that helps pay for health care for the needy, blind and disabled and for low-income families with children

Medicare
a federal health care insurance program for people age 65 and over, and for the disabled

Medigap
because Medicare does not cover all expenses, private insurers sell "Medigap" policies to supplement federal insurance benefits

Mortgage insurance
life insurance that pays the balance of a mortgage if the mortgagor (insured) dies

~N~

National Flood Insurance Program (NFIP)
program run by the Federal Government to make flood insurance available at subsidized rates to approved communities. Coverage includes building and personal property.

No Fault
a system in which each driver's auto insurance coverage pays for injuries and damage, no matter who caused the accident

Non-cancellable or Non-cancellable and guaranteed renewable policy
a policy which the insured has the right to continue in force by the timely payment of premiums set forth in the policy to a specified age, (usually age 50) during which period the insurer has no right to make unilaterally any change in any provision of the policy while the policy is in force.

Nonrenewal
Decision by an insured or insurance company to discontinue insurance coverage for another policy period after the current policy period expires.

~O~

Occurance
a loss that occurs at a specific time and a specific place

Occurance Form
Commercial General Liability form that covers bodily injury or property damage that occurs during a policy period, regardless of when the claim was made.

roperty coverage to provide coverage for demolition costs and increased construction costs required or regulated by law or ordinance

Other than Collision Coverage (OTC)
See Comprehensive Coverage

~P~

Package Policy
policy that includes more than one line of business for an insured, also refered to as a multi-line policy

Personal injury protection (PIP)
coverage present in no-fault states which pays medical, loss of income, death and/or disability, and loss of services incurred as a result of an automobile accident

Physical damage insurance
property damage coverage for a vehicle under the "collision insurance" and "comprehensive insurance" sections of the policy

Pre-existing conditions
a physical condition of an insured person which existed prior to the issuance of the policy

Premium
the payment for an insurance policy, usually paid periodically, i.e., annually, semi-annually, quarterly or monthly

Property damage liability insurance
coverage in the event that the negligent acts or omissions of an insured result in damage or destruction to another's property

Pro-rata
cancellation of an insurance contract by the insurance company, allowing the policyholder a share of the premium relating to the remainder of the time under the contract that bears to the total contract premium

~R~

Rebate
a reduction of a premium

Red book / Blue book
a publication used for the determination of values for used automobiles and trucks

Reinsurance
a form of insurance that insurance companies buy for their own protection

Rider
an endorsement to an insurance policy that modifies clauses and provisions of the policy, adding or excluding coverage

Risk
a term used to designate an insured or a peril insured against

~S~

Short rate
cancellation of an insurance contract at the request of the policyholder with a refund of premiums to the policyholder of less than would be given under pro-rata consideration

Solvency
one of MIA's primary responsibilities is to make sure insurance companies remain solvent, i.e., have sufficient assets and income, in order to have the ability to pay the claims of their policyholders

~T~

Term Insurance
life insurance issued for a stated temporary period of time

Title Insurance
indemnifies the owner of real estate in the event clear ownership of property is challenged by discovery of faults in the title

~U~

Umbrella liability insurance
a liability policy that covers in excess of primary limits of the basic liability policy

Underwriting
process of examining, accepting, or rejecting insurance risks, and classifying those selected, in order to charge the proper premium for each

Uninsured motorist coverage
endorsement to a personal automobile policy that covers an insured involved in a collision with a driver who does not have liability insurance

Universal life insurance
a flexible premium policy that combines protection against premature death with a savings account that typically earns a money market rate of interest

~W~

Whole life insurance
life insurance payable to a beneficiary at the time of death of the insured whenever that occurs

Workers compensation insurance
pays for medical care and physical rehabilitation of injured workers and replaces their lost wages while they're unable to work