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A
Actual Cash Value (ACV)
- The value of your property, based on the current cost to
replace it minus depreciation.
Adjuster - A person who investigates and settles
insurance claims.
Agent - A person who sells insurance policies.
Annuity - A contract in which the buyer deposits
money with a life insurance company for investment. The
contract provides for specific payments to be made at
regular intervals for a fixed period or for life.
Annuity Period - The time span between the benefit
payments made under an annuity contract.
Assignment - The transfer of all or part of a policy
owner´s legal title and rights to a policy to another
person. It is possible to change this type of transfer at a
later date.
B
Beneficiary - The
person, persons or entity designated to receive the death
benefits from a life insurance policy or annuity contract.
Binder - A temporary insurance contract that provides
proof of coverage until you receive a permanent policy.
Bodily Injury (BI) - Physical injury to a person.
C
Cancellation -
Termination of an insurance policy by the company or insured
before the renewal date.
Cash Surrender Option - Nonforfeiture option, which
specifies that the policy owner can cancel the coverage and
receive the entire net cash value in a lump sum.
Cash Value - The amount of money, which the policy
owner will receive as a refund if the policy owner cancels
the coverage and returns the policy to the company. Also
known as cash surrender value.
Co-insurance - The percent of each health care bill
you must pay out of your own pocket. Non-covered charges and
deductibles are in addition to this amount.
Collision Coverage - Pays for damage to your car
without regard to who caused an accident. The company must
pay for the repair or up to the actual cash value of your
vehicle, minus your deductible.
Comprehensive Coverage (Physical Damage Other than
Collision) - Pays for damage to or loss of your automobile
from causes other than accidents. These include hail,
vandalism, flood, fire, and theft.
Contract - In most cases, the term "contract" refers
to an insurance policy. A policy is considered to be a
contract between the insurance company and the policyholder.
D
Death Benefit -
Amount paid to the beneficiary upon the death of the
insured.
Declarations Page - The page in your policy that
shows the name and address of the insurer, the period of
time a policy is in force, a description of the vehicle, the
amount of the premium, and the amount of coverage.
Deductible - The amount the insured must pay in a
loss before any payment is due from the company.
Deferred Annuity - An annuity under which the annuity
payment period is scheduled to begin at some future date.
Depreciation - The act of lowering an item´s value
due to use or wear and tear.
E
Earned Premium - The
portion of a policy premium that has been used to actually
buy coverage, or that the insurance company has "earned."
For instance, if you have a six-month policy that you paid
for in advance, two months into the policy, there would be
two months of earned premium. The remaining four months of
premium is called unearned premium.
Effective Date - The date on which an insurance
policy becomes effective.
Endorsement - A written agreement attached to a
policy expanding or limiting the benefits otherwise payable
under the policy. Same as a "rider."
Escrow - Money placed in the hands of a third party
until specified conditions are met.
Evidence of Insurability - To qualify you for a
particular policy at a particular price, companies have the
right to ask you for information about your health and
lifestyle. An insurance company will use this information -
your evidence of insurability - in deciding if your
application for insurance is acceptable and at what premium
rate.
Exclusion - Provision in an insurance policy that
indicates what is denied coverage.
Experience Period - The period of time that a company
will reference when making evaluations of an insuring
policy. There is not a standardized amount of time. See
annotation for an example of an experience period.
Expiration Date - The date on which an insurance
policy expires.
Extended Term Insurance Option - A nonforfeiture
benefit under which the net cash value of the policy is used
to purchase term insurance for the amount of coverage
available under the original policy.
F
Face Value - The
initial amount of death benefit provided by the policy as
shown on the face page of the contract. The actual death
benefit may be higher or lower depending on the options
selected, outstanding policy loans or premium owed.
G
Gap Insurance -
Insurance that pays the difference between the actual cash
value of a vehicle and the amount still to be paid on the
loan, Some gap policies may also cover the amount of the
deductible.
Grace Period(s) - The time - usually 31 days - during
which a policy remains in force after the premium is due but
not paid. The policy lapses as of the day the premium was
originally due unless the premium is paid before the end of
the 31 days or the insured dies. This is not a
"free-insurance" period.
Group Life Insurance - This type of life insurance
provides coverage to a group of people under one contract.
Most group contracts are sold to businesses that want to
provide life insurance for their employees. Group life
insurance also can be sold to associations to cover their
members and to lending institutions to cover the amounts of
their debtor loans. Most group policies are for term
insurance. Generally, the business will be issued a master
policy and each person in the group will receive a
certificate of insurance.
H
I
Incontestability - A
provision that places a time limit - up to two years - on a
company´s right to deny payment of a claim because of
suicide or a material misrepresentation on your application.
Independent Adjuster - A person who charges a fee to
the insurance company to adjust the company´s claim.
Indexed Life Insurance - A whole life plan of
insurance that provides for the face amount of the policy
and, correspondingly, the premium rate, to automatically
increase every year based on an increase in the Consumer
Price Index (CPI) or another index as defined in the policy.
Insurable Interest - A financial interest in the
property insured, prerequisite to a valid contract of
insurance. In life insurance, a person´s or party´s interest
- financial or emotional - in the continuing life of the
insured. Insured - The person or firm covered by an
insurance policy.
Insurer - The insurance company.
Interpleader - This is a procedure when conflicting
claims are made on a life insurance policy by two or more
people. Using this procedure the insurance company pays the
policy proceeds to a court, stating the company cannot
determine the correct party to whom the proceeds should be
paid.
Irrevocable Beneficiary - A named beneficiary whose
rights to life insurance policy proceeds are vested and
whose rights cannot be canceled by the policy owner unless
the beneficiary consents.
J,
K
L
Lapse - Termination
of a policy due to non-payment of premiums.
Liability - Responsibility to another for one´s
negligence.
Liability Insurance - Pays for injuries to the other
party and damages to the other vehicle resulting from an
accident you caused. It also pays if the accident was caused
by someone covered by your policy, including a driver
operating your car with your permission.
M
Material Misrepresentation
- A significant misstatement in an application form. If a
company had access to the correct information at the time of
application, the company might not have agreed to accept the
application.
Mortality Expenses - The cost of the insurance
protection based upon actuarial tables which are based upon
the incidence of death, by age, among given groups of people
. This cost is based on the amount at risk under the policy,
the insured´s risk classification at the time of policy
purchase, and the insured´s current age.
N
Named Driver Exclusion
- An endorsement that provides that a policy does not cover
accidents when a specifically named person is the driver.
Named Driver Policy - A policy that covers only the
drivers specifically named in the policy. Generally, all
other drivers are excluded from coverage under the policy.
This type of policy is usually written by surplus lines
companies.
Net Cash Value - The cash value amount available to a
policy owner after adjustments have been made to the cash
surrender value to account for policy loans and dividends.
Non-Owners Policy - Insurance coverage that offers
liability, uninsured motorist, and medical payments to a
named insured who does not own a vehicle.
Nonparticipating Policy - A life insurance policy
that does not grant the policy owner the right to policy
dividends.
Non-renewal - A decision by an insurance company not
to renew a policy.
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P
Paid-Up - This event
occurs when a policy will not require any further premiums
to keep the coverage in force.
Paid-Up Additions - Additional amounts of insurance
purchased using dividends; these insurance amounts require
no further premium payments.
Peril - A cause of property losses. Usually used in
the context of "a peril insured against."
Policy - The contract issued by the insurance company
to the insured.
Policy Loan - An advance made by a life insurance
company to a policy owner. The advance is secured by the
cash value of the policy.
Policy Owner - The person or party who owns an
individual insurance policy. This person may be the insured,
the beneficiary or another person. The policy owner usually
is the one who pays the premium and is the only person who
may make changes to a policy.
Policy Period - The period a policy is in force, from
the beginning or effective date to the expiration date.
Preferred Provider Organization (PPO) - Hospital,
physician, or other provider of health care which an insurer
recommends to an insured. A PPO allows insurance companies
to negotiate directly with hospitals and physicians for
health services at a lower price than would be normally
charged.
Premium - The amount paid by an insured to an
insurance company to obtain or maintain an insurance policy.
Premium Expense Charges - An amount deducted from
each premium payment, which reduces the amount credited to
the policy.
Property Damage (PD) - Physical damage to property.
Providers - Usually references doctors or those who are
providing a medical service.
Public Adjuster - A person hired by you to settle the
claim with the insurance company to settle the claim on your
behalf.
Q
R
Rated Policy - A policy
issued at a higher premium to cover a person classified as a
greater-than-average risk, usually due to impaired health or
a dangerous occupation.
Redlining - Refusal by an insurance company to
underwrite or to continue to underwrite questionable risks
in a given geographical area.
Refund - Amount of money being returned to the
policyholder.
Reinstatement - The process by which a life insurance
company puts back in force a policy which had lapsed because
of nonpayment of renewal premiums.
Renewal Policy - A policy issued as a renewal of a
policy expiring in the same company or agency; not new
business.
Rental Reimbursement Coverage - Pays a set daily
amount for a rental car if your car is being repaired
because of damage covered by your auto policy.
Replacement Cost - The cost associated with replacing
property at current market prices.
Rescind - To take away or remove. To avoid so as to
restore the involved parties to the positions they would
have occupied had there been no contract.
Return Premium - The premium returned to an insured
for canceling or amending a policy.
Rider - A written agreement attached to the policy
expanding or limiting the benefits otherwise payable under
the policy. Same as an "endorsement."
Rule of 78 - This is a method for calculating the
amount of unused premium which takes into account the fact
that more insurance coverage is required in the early months
of the loan, since the payoff of the loan is greater. As the
loan is paid off, less coverage is being paid for, so the
refund percentage decreases.
Rule of Anticipation - This is a similar method to
"Rule of 78" where the amount of unused premium takes into
account the fact that more insurance coverage is required in
the early months of the loan, since the payoff of the loan
is greater. As the loan is paid off, less coverage is being
paid for, so the refund percentage decreases.
S
Single Interest Insurance
- Insurance coverage for only one of the parties having an
insurable interest in that property.
Single-Premium Whole Life Policy - A type of
limited-payment policy that requires only one premium
payment.
Staff Adjuster - Employee of the insurance company´s
claim department.
Subrogation - Assignment of rights of recovery from
insured.
Suicide Clause - Life insurance policy wording which
specifies that the proceeds of the policy will not be paid
if the insured takes his or her own life within a specified
period of time after the policy´s date of issue.
Surcharge - An extra charge added to your premium by
an insurance company. For automobile insurance, a surcharge
is usually added if you have at-fault accidents.
Surplus Lines - Coverage from out-of-state companies
not licensed in Texas but legally eligible to sell insurance
on a "surplus lines" basis. Surplus lines companies
generally charge more than licensed companies and often
offer less coverage.
Surrender Charges - Charges that are deducted if your
life insurance policy or annuity is cashed in (surrendered).
These charges also are deducted if you borrow money on your
policy or if your policy lapses for non-payment.
T
Third Party Administrator (TPA)
- An organization that performs managerial and clerical
functions related to an employee benefit insurance plan by
an individual or committee that is not an original party to
the benefit plan.
Third Party Loss - A situation involving a person
other than the insurer and insured; i.e., a person making a
liability claim against the insured.
Towing and Labor Coverage - Pays for towing charges
when your car can´t be driven. Also pays labor charges, such
as changing a flat tire, at the place where your car broke
down.
U
Underwriter - The
person who reviews an application for insurance and decides
if the applicant is acceptable and at what premium rate.
Underwriting - The process an insurance company uses
to decide whether to accept or reject an application for a
policy.
Unearned Premium - The insured´s remaining premium
equity in his policy; that part of the policy premium that
has not been "used up."
Uninsured/Underinsured Motorist (UM/UIM) Coverage -
Pays for your injuries and property damage caused by a
hit-and-run driver or a motorist without liability
insurance. It will also pay when your medical and car repair
bills are higher than the other driver´s liability coverage.
Universal Life Insurance - The key characteristic of
universal life insurance is flexibility. Within limits, you
can choose the amount of insurance and the premium you wish
to pay. The policy will stay in force as long as the policy
value is sufficient to pay the costs and expenses of the
policy. The policy value is "interest-sensitive," which
means that it varies in accordance with the general
financial climate. Lowering the death benefit and raising
the premium will increase the growth rate of your policy.
The opposite also is true. Raising the death benefit and
lowering the premium will slow the growth of your policy. If
insufficient premiums are paid, the policy could lapse
without value before the maturity date is reached. (The
maturity date is the time your policy ceases and cash
surrender value would be payable if the policyholder is
still living.) Therefore, it is your responsibility to pay
consistently a premium that is high enough to ensure that
your policy´s value will be adequate to pay the monthly cost
of the policy. The company is required to send you an annual
report and also to notify you if you are in danger of losing
your policy due to insufficient value.
Usual and Customary - these charges may be based on:
rates usually charged by physicians and providers in your
area; rate averages compiled by independent rating services;
or rate averages compiled by the insurance company.
V
Variable Annuity - A
form of annuity policy under which the amount of each
benefit payment is not guaranteed and specified in the
policy, but which instead fluctuates according to the
earnings of a separate account fund.
Variable Life Insurance - A type of whole life policy
in which the death benefit and the cash value fluctuate
according to the investment performance of a separate
account fund that the policyholder selects. Because the
investment account is regulated by the Securities and
Exchange Commission, you must be presented with a prospectus
before you purchase a variable life policy.
Viatical Settlement Agreements - Viatical settlements
involve the sale of an existing life insurance policy by a
viator (person with a life threatening or terminal illness)
to a viatical settlement company in return for a cash
payment that is a percentage of the policy´s death benefit.
W
Whole Life Insurance -
Whole life insurance policies are one type of cash value
insurance. Whole life policies offer protection through a
lifetime - that is, for a person´s "whole life." From the
day you buy the policy, you pay a scheduled premium,. The
scheduled premium may be level or may increase after a fixed
time period, but it will not change from the amount(s) shown
in the policy schedule. It is important that you look at the
policy schedule to be sure you understand what your premium
payments will be and that you can afford them over time.
This premium is based on your age at the time of purchase.
Initially, it will be higher than the premium paid for a
term policy, but you are likely to end up paying less in
premiums when you are older, if you keep the policy for a
long time. Part of each premium payment will go to cash
value growth, part for the death benefit and part for
expenses (such as commissions and administrative costs).
There is no need to renew whole life policies. As long as
you pay your premium when due, your coverage will continue
in force throughout your life.
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