Glossary/Terms I - P

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IDENTITY THEFT INSURANCE
Coverage for expenses incurred as the result of an identity theft. Can include costs for notarizing fraud affidavits and certified mail, lost income from time taken off from work to meet with law-enforcement personnel or credit agencies, fees for reapplying for loans and attorney's fees to defend against lawsuits and remove criminal or civil judgments.

IMMEDIATE ANNUITY
A product purchased with a lump sum, usually at the time retirement begins or afterwards. Payments begin within about a year. Immediate annuities can be either fixed or variable.

INCURRED BUT NOT REPORTED LOSSES / IBNR
Losses that are not filed with the insurer or reinsurer until years after the policy is sold. Some liability claims may be filed long after the event that caused the injury to occur. Asbestos-related diseases, for example, do not show up until decades after the exposure. IBNR also refers to estimates made about claims already reported but where the full extent of the injury is not yet known, such as a workers compensation claim where the degree to which work-related injuries prevents a worker from earning what he or she earned before the injury unfolds over time. Insurance companies regularly adjust reserves for such losses as new information becomes available.

INCURRED LOSSES
Losses occurring within a fixed period, whether or not adjusted or paid during the same period.

INDEMNIFY
Provide financial compensation for losses.

INDEPENDENT AGENT
Agent who is self-employed, is paid on commission, and represents several insurance companies.

INFLATION GUARD CLAUSE
A provision added to a homeowner’s insurance policy that automatically adjusts the coverage limit on the dwelling each time the policy is renewed to reflect current construction costs.

INLAND MARINE INSURANCE
This broad type of coverage was developed for shipments that do not involve ocean transport. Covers articles in transit by all forms of land and air transportation as well as bridges, tunnels and other means of transportation and communication. Floaters that cover expensive personal items such as fine art and jewelry are included in this category.

INSOLVENCY
Insurer’s inability to pay debts. Insurance insolvency standards and the regulatory actions taken vary from state to state. When regulators deem an insurance company is in danger of becoming insolvent, they can take one of three actions: place a company in conservatorship or rehabilitation if the company can be saved or liquidation if salvage is deemed impossible. The difference between the first two options is one of degree – regulators guide companies in conservatorship but direct those in rehabilitation. Typically the first sign of problems is inability to pass the financial tests regulators administer as a routine procedure.

INSURABLE RISK
Risks for which it is relatively easy to get insurance and that meet certain criteria. These include being definable, accidental in nature, and part of a group of similar risks large enough to make losses predictable. The insurance company also must be able to come up with a reasonable price for the insurance.

INSURANCE
A system to make large financial losses more affordable by pooling the risks of many individuals and business entities and transferring them to an insurance company or other large group in return for a premium.

INSURANCE POOL
A group of insurance companies that pool assets, enabling them to provide an amount of insurance substantially more than can be provided by individual companies to ensure large risks such as nuclear power stations. Pools may be formed voluntarily or mandated by the state to cover risks that can’t obtain coverage in the voluntary market such as coastal properties subject to hurricanes.

INSURANCE REGULATORY INFORMATION SYSTEM / IRIS
Uses financial ratios to measure insurers’ financial strength. Developed by the National Association of Insurance Commissioners. Each individual state insurance department chooses how to use IRIS.

INSURANCE SCORE
Insurance scores are confidential rankings based on credit information. This includes whether the consumer has made timely payments on loans, the number of open credit card accounts and whether a bankruptcy filing has been made. An insurance score is a measure of how well consumers manage their financial affairs, not of their financial assets. It does not include information about income or race.
Studies have shown that people who manage their money well tend also to manage their most important asset, their home, well. And people who manage their money responsibly also tend to handle driving a car responsibly. Some insurance companies use insurance scores as an insurance underwriting and rating tool.

INSURANCE-TO-VALUE
Insurance written in an amount approximating the value of the insured property.

INTEGRATED BENEFITS
Coverage where the distinction between job-related and non-occupational illnesses or injuries is eliminated and workers compensation and general health coverage are combined. Legal obstacles exist, however, because the two coverages are administered separately. Previously called twenty-four hour coverage.

INTERMEDIATION
The process of bringing savers, investors and borrowers together so that savers and investors can obtain a return on their money and borrowers can use the money to finance their purchases or projects through loans.

INTERNET LIABILITY INSURANCE
Coverage designed to protect businesses from liabilities that arise from the conducting of business over the Internet, including copyright infringement, defamation, and violation of privacy.

JOINT AND SURVIVOR ANNUITY
An annuity with two annuitants, usually spouses. Payments continue until the death of the longest living of the two.

JOINT UNDERWRITING ASSOCIATION / JUA
Insurers which join together to provide coverage for a particular type of risk or size of exposure, when there are difficulties in obtaining coverage in the regular market, and which share in the profits and losses associated with the program. JUAs may be set up to provide auto and homeowners insurance and various commercial coverages, such as medical malpractice.

JUNK BONDS
Corporate bonds with credit ratings of BB or less. They pay a higher yield than investment grade bonds because issuers have a higher perceived risk of default. Such bonds involve market risk that could force investors, including insurers, to sell the bonds when their value is low. Most states place limits on insurers’ investments in these bonds. In general, because property/casualty insurers can be called upon to provide huge sums of money immediately after a disaster, their investments must be liquid. Less than 2 percent are in real estate and a similarly small percentage are in junk bonds.

KEY PERSON INSURANCE
Insurance on the life or health of a key individual whose services are essential to the continuing success of a business and whose death or disability could cause the firm a substantial financial loss.

KIDNAP/RANSOM INSURANCE
Coverage up to specific limits for the cost of ransom or extortion payments and related expenses. Often bought by international corporations to cover employees. Most policies have large deductibles and may exclude certain geographic areas. Some policies require that the policyholder not reveal the existence of the coverage.

L-SHARE VARIABLE ANNUITIES
A form of variable annuity contract usually with short surrender periods and higher mortality and expense risk charges.

LADDERING
A technique that consists of staggering the maturity dates and the mix of different types of bonds.

LAW OF LARGE NUMBERS
The theory of probability on which the business of insurance is based. Simply put, this mathematical premise says that the larger the group of units insured, such as sport-utility vehicles, the more accurate the predictions of loss will be.

LIABILITY INSURANCE
Insurance for what the policyholder is legally obligated to pay because of bodily injury or property damage caused to another person.

LIFE INSURANCE
See Ordinary life insurance; Term insurance; Variable life insurance; Whole life insurance

LIMITS
Maximum amount of insurance that can be paid for a covered loss.

LIQUIDATION
Enables the state insurance department as liquidator or its appointed deputy to wind up the insurance company’s affairs by selling its assets and settling claims upon those assets. After receiving the liquidation order, the liquidator notifies insurance departments in other states and state guaranty funds of the liquidation proceedings. Such insurance company liquidations are not subject to the Federal Bankruptcy Code but to each state’s liquidation statutes.

LIQUIDITY
The ability and speed with which a security can be converted into cash.

LIQUOR LIABILITY
Coverage for bodily injury or property damage caused by an intoxicated person who was served liquor by the policyholder.

LLOYD'S OF LONDON
A marketplace where underwriting syndicates, or mini-insurers, gather to sell insurance policies and reinsurance. Each syndicate is managed by an underwriter who decides whether or not to accept the risk. The Lloyd’s market is a major player in the international reinsurance market as well as a primary market for marine insurance and large risks. Originally, Lloyd’s was a London coffee house in the 1600s patronized by ship owners who insured each other’s hulls and cargoes. As Lloyd’s developed, wealthy individuals, called “Names,” placed their personal assets behind insurance risks as a business venture. Increasingly since the 1990s, most of the capital comes from corporations.

LLOYDS
Corporation formed to market services of a group of underwriters. Does not issue insurance policies or provide insurance protection. Insurance is written by individual underwriters, with each assuming a part of every risk. Has no connection to Lloyd’s of London, and is found primarily in Texas.

LONG-TERM CARE INSURANCE
Long-term care (LTC) insurance pays for services to help individuals who are unable to perform certain activities of daily living without assistance, or require supervision due to a cognitive impairment such as Alzheimer’s disease. LTC is available as individual insurance or through an employer-sponsored or association plan.

LOSS
A reduction in the quality or value of a property, or a legal liability.

LOSS ADJUSTMENT EXPENSES
The sum insurers pay for investigating and settling insurance claims, including the cost of defending a lawsuit in court.

LOSS COSTS
The portion of an insurance rate used to cover claims and the costs of adjusting claims. Insurance companies typically determine their rates by estimating their future loss costs and adding a provision for expenses, profit, and contingencies.

LOSS OF USE
A provision in homeowners and renters insurance policies that reimburses policyholders for any extra living expenses due to having to live elsewhere while their home is being restored following a disaster.

LOSS RATIO
Percentage of each premium dollar an insurer spends on claims.

LOSS RESERVES
The company’s best estimate of what it will pay for claims, which is periodically readjusted. They represent a liability on the insurer’s balance sheet.

MALPRACTICE INSURANCE
Professional liability coverage for physicians, lawyers, and other specialists against suits alleging negligence or errors and omissions that have harmed clients.

MANAGED CARE
Arrangement between an employer or insurer and selected providers to provide comprehensive health care at a discount to members of the insured group and coordinate the financing and delivery of health care. Managed care uses medical protocols and procedures agreed on by the medical profession to be cost effective, also known as medical practice guidelines.

MANUAL
A book published by an insurance or bonding company or a rating association or bureau that gives rates, classifications, and underwriting rules.

MARINE INSURANCE
Coverage for goods in transit, and for the commercial vehicles that transport them, on water and over land. The term may apply to inland marine but more generally applies to ocean marine insurance. Covers damage or destruction of a ship’s hull and cargo and perils include collision, sinking, capsizing, being stranded, fire, piracy, and jettisoning cargo to save other property. Wear and tear, dampness, mold, and war are not included.

MEDIATION
Nonbinding procedure in which a third party attempts to resolve a conflict between two other parties.

MEDICAID
A federal/state public assistance program created in 1965 and administered by the states for people whose income and resources are insufficient to pay for health care.

MEDICAL PAYMENTS INSURANCE
A coverage in which the insurer agrees to reimburse the insured and others up to a certain limit for medical or funeral expenses as a result of bodily injury or death by accident. Payments are without regard to fault.

MEDICAL UTILIZATION REVIEW
The practice used by insurance companies to review claims for medical treatment.

MEDICARE
Federal program for people 65 or older that pays part of the costs associated with hospitalization, surgery, doctors’ bills, home health care, and skilled-nursing care.

MINE SUBSIDENCE COVERAGE
An endorsement to a homeowners insurance policy, available in some states, for losses to a home caused by the land under a house sinking into a mine shaft. Excluded from standard homeowners policies, as are other forms of earth movement.

MORTALITY AND EXPENSE (M&E) RISK CHARGE
A fee that covers such annuity contract guarantees as death benefits.

MORTGAGE GUARANTEE INSURANCE
Coverage for the mortgagee (usually a financial institution) in the event that a mortgage holder defaults on a loan. Also called private mortgage insurance (PMI).

MORTGAGE INSURANCE
A form of decreasing term insurance that covers the life of a person taking out a mortgage. Death benefits provide for payment of the outstanding balance of the loan. Coverage is in decreasing term insurance, so the amount of coverage decreases as the debt decreases. A variant, mortgage unemployment insurance pays the mortgage of a policyholder who becomes involuntarily unemployed.

MULTIPLE PERIL POLICY
A package policy, such as a homeowners or business insurance policy that provides coverage against several different perils. It also refers to the combination of property and liability coverage in one policy. In the early days of insurance, coverages for property damage and liability were purchased separately.

MUNICIPAL BOND INSURANCE
Coverage that guarantees bondholders timely payment of interest and principal even if the issuer of the bonds defaults. Offered by insurance companies with high credit ratings, the coverage raises the credit rating of a municipality offering the bond to that of the insurance company. It allows a municipality to raise money at lower interest rates. A form of financial guarantee insurance.

MUNICIPAL LIABILITY INSURANCE
Liability insurance for municipalities.

MUTUAL HOLDING COMPANY
An organizational structure that provides mutual companies with the organizational and capital raising advantages of stock insurers, while retaining the policyholder ownership of the mutual.

MUTUAL INSURANCE COMPANY
A company owned by its policyholders that returns part of its profits to the policyholders as dividends. The insurer uses the rest as a surplus cushion in case of large and unexpected losses.

NAMED PERIL
Peril specifically mentioned as covered in an insurance policy.

NATIONAL FLOOD INSURANCE PROGRAM
Federal government-sponsored program under which flood insurance is sold to homeowners and businesses.

NO-FAULT
Auto insurance coverage that pays for each driver’s own injuries, regardless of who caused the accident. No-fault varies from state to state. It also refers to an auto liability insurance system that restricts lawsuits to serious cases. Such policies are designed to promote faster reimbursement and to reduce litigation.

NO-FAULT MEDICAL
A type of accident coverage in homeowners’ policies.

NO-PAY, NO-PLAY
The idea that people who don’t buy coverage should not receive benefits. Prohibits uninsured drivers from collecting damages from insured drivers. In most states with this law, uninsured drivers may not sue for noneconomic damages such as pain and suffering. In other states, uninsured drivers are required to pay the equivalent of a large deductible ($10,000) before they can sue for property damages and another large deductible before they can sue for bodily harm.

NON-ADMITTED INSURER
Insurers licensed in some states, but not others. States where an insurer is not licensed call that insurer non-admitted. They sell coverage that is unavailable from licensed insurers within the state.

NOTICE OF LOSS
A written notice required by insurance companies immediately after an accident or other loss.
Part of the standard provisions defining a policyholder's responsibilities after a loss.

NUCLEAR INSURANCE
Covers operators of nuclear reactors and other facilities for liability and property damage in the case of a nuclear accident and involves both private insurers and the federal government.

NURSING HOME INSURANCE
A form of long-term care policy that covers a policyholder’s stay in a nursing facility.

OCCUPATIONAL DISEASE
Abnormal condition or illness caused by factors associated with the workplace. Like occupational injuries, this is covered by workers compensation policies.

OCCURRENCE POLICY
Insurance that pays claims arising out of incidents that occur during the policy term, even if they are filed many years later.

OCEAN MARINE INSURANCE
Coverage of all types of vessels and watercraft, for property damage to the vessel and cargo, including such risks as piracy and the jettisoning of cargo to save the property of others. Coverage for marine-related liabilities. War is excluded from basic policies, but can be bought back.

OPEN COMPETITION STATES
States where insurance companies can set new rates without prior approval, although the state’s commissioner can disallow them if they are not reasonable and adequate or are discriminatory.

ORDINANCE OR LAW COVERAGE
Endorsement to a property policy, including homeowners, that pays for the extra expense of rebuilding to comply with ordinances or laws, often building codes that did not exist when the building was originally built. For example, a building severely damaged in a hurricane may have to be elevated above the flood line when it is rebuilt. This endorsement would cover part of the additional cost.

ORDINARY LIFE INSURANCE
A life insurance policy that remains in force for the policyholder’s lifetime.

ORIGINAL EQUIPMENT MANUFACTURER PARTS / OEM
Sheet metal auto parts made by the manufacturer of the vehicle.

PACKAGE POLICY
A single insurance policy that combines several coverages previously sold separately. Examples include homeowners insurance and commercial multiple peril insurance.

PERIL
A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy in contrast to an all-risk policy, which covers all causes of loss except those specifically excluded.

PERSONAL ARTICLES FLOATER
A policy or an addition to a policy used to cover personal valuables, like jewelry or furs.

PERSONAL INJURY PROTECTION COVERAGE / PIP
Portion of an auto insurance policy that covers the treatment of injuries to the driver and passengers of the policyholder’s car.

PERSONAL LINES
Property/casualty insurance products that are designed for and bought by individuals, including homeowners and automobile policies.

POINT-OF-SERVICE PLAN
Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed.

POLICY
A written contract for insurance between an insurance company and policyholder stating details of coverage.

POLITICAL RISK INSURANCE
Coverage for businesses operating abroad against loss due to political upheaval such as war, revolution, or confiscation of property.

POLLUTION INSURANCE
Policies that cover property loss and liability arising from pollution-related damages, for sites that have been inspected and found uncontaminated. It is usually written on a claims-made basis so policies pay only claims presented during the term of the policy or within a specified time frame after the policy expires.

PREFERRED PROVIDER ORGANIZATION
Network of medical providers which charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.

PREMISES
The particular location of the property or a portion of it as designated in an insurance policy.

PREMIUM
The price of an insurance policy, typically charged annually or semiannually.

PREMIUMS IN FORCE
The sum of the face amounts, plus dividend additions, of life insurance policies outstanding at a given time.

PRIMARY COMPANY
In a reinsurance transaction, the insurance company that is reinsured.

PRODUCT LIABILITY
A section of tort law that determines who may sue and who may be sued for damages when a defective product injures someone. No uniform federal laws guide manufacturer’s liability, but under strict liability, the injured party can hold the manufacturer responsible for damages without the need to prove negligence or fault.

PRODUCT LIABILITY INSURANCE
Protects manufacturers’ and distributors’ exposure to lawsuits by people who have sustained bodily injury or property damage through the use of the product.

PROFESSIONAL LIABILITY INSURANCE
Covers professionals for negligence and errors or omissions that injure their clients.

PROOF OF LOSS
Documents showing the insurance company that a loss occurred.

PROPERTY/CASUALTY INSURANCE
Covers damage to or loss of policyholders’ property and legal liability for damages caused to other people or their property. Property/casualty insurance, which includes auto, homeowners and commercial insurance, is one segment of the insurance industry. The other sector is life/health. Outside the United States, property/casualty insurance is referred to as nonlife or general insurance.

PROPERTY/CASUALTY INSURANCE CYCLE
Industry business cycle with recurrent periods of hard and soft market conditions. In the 1950s and 1960s, cycles were regular with three year periods each of hard and soft market conditions in almost all lines of property/casualty insurance. Since then they have been less regular and less frequent.

PURCHASING GROUP
An entity that offers insurance to groups of similar businesses with similar exposures to risk.

PURE LIFE ANNUITY
A form of annuity that ends payments when the annuitant dies. Payments may be fixed or variable.

 

Brock Insurance Agency
823 Chickamauga Avenue | Rossville, GA 30741
706-866-3394

218 Manufacturers Road | Chattanooga, TN 37405
423-362-5745

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