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NAHU
National Association of Health Underwriters (NAHU) is organization of health insurance agent that is dedicated to supporting the health insurance industry and to advancing the qualify of service provided by insurance professionals.
NAIC
National Association of Insurance Commissioners (NAIC). Association of state insurance commissioners active in insurance regulatory problems and in forming and recommending model legislation and requirements.
NAIFA
National Association of Insurance Financial and Advisors (NAIFA) is an organization of life insurance agents that is dedicated to supporting the life insurance industry and to advancing the quality of service provided by insurance professionals.
Named Perils
Perils specifically covered on insured property.
Natural Group
A group format for a reason other than to obtain insurance
Needs Approach
A method for determining how much insurance protection a person should have by analyzing a family's or business's needs and objective should the insured die, become disabled or retire.
Net Income
The total after-tax earnings generated from operations and realized capital gains as reported in the company's NAIC annual statement on page 4, line 16.
Net Investment Income
This item represents investment income earned during the year less investment expenses and depreciation on real estate. Investment expenses are the expenses related to generating investment income and capital gains but exclude income taxes.
Net Leverage
The sum of a company's net premium written to policyholder surplus and net liabilities to policyholder surplus. This ratio measures the combination of a company's net exposure to pricing errors in its current book of business and errors of estimation in its net liabilities after reinsurance, in relation to policyholder surplus.
Net Liabilities to Policyholder Surplus
Net liabilities expressed as a ratio to policyholder surplus. Net liabilities equal total liabilities less conditional reserves, plus encumbrances on real estate, less the smaller of receivables from or payable to affiliates. This ratio measures company's exposures to errors of estimation in its loss reserves and all other liabilities. Loss-reserve leverage is generally the key component of net liability leverage. The higher the loss-reserve leverage the more critical a company's solvency depends upon maintaining reserve adequacy.
Net Premium
Calculated on the basis of a given mortality Table and a given interest rate, without any allowance for loading. The amount of premium minus the agent's commission. Also, the premium necessary to cover only anticipated losses, before loading to cover other expenses.
Net Premiums Earned
The adjustment of net premiums written for the increase or decrease of the company's liability for unearned premiums during the year. When an insurance company's business increases from year to year, the earned premiums will usually be less than the written premiums. With the increased volume, the premiums are considered fully paid at the inception of the policy so that, at the end of a calendar period, the company must set up premiums representing the unexpired terms of the policies. On a decreasing volume, the reverse is true.
Net Premiums Written
Represents gross premium written, direct and reinsurance assumed, less reinsurance ceded.
Net Premiums Written to Policyholder Surplus (IRIS)
This ratio measures a company's net retained premiums written after reinsurance assumed and ceded, in relation to its surplus. This ratio measures the company's exposure to pricing errors in its current book of business.
Net Underwriting Income
Net premiums earned less incurred losses, loss-adjustment expenses, underwriting expenses incurred, and dividends to policyholders.
Nonadmitted Insurer
An insurance company that has not been licensed to operate within a given state.
Noncancellable
Contract terms, including costs that can never be changed.
Noncancellable and Guaranteed Renewable Contract
Health Insurance contract that the insured has the right to continue in force by payment of premium set forth in the contract for a substantial period of time, during which the insurer has no right to make unilaterally any change in any contract provision.
Noncontributory Plan
Employee benefit plan under which the employer bears the full cost of the employees' benefits; must insure 100 percent of eligible employees.
Nondisabling Injury
Requires medical care, but does not result in loss of time from work.
Nonduplication Provision
Stipulates that insureds shall be ineligible to collect for charges under a group health plan if the charges are reimbursed under their own or spouse's group plan.
Nonforfeiture Option
Privileges allowed under terms of a life insurance contract after cash value have been created.
Nonforfeiture Values
Those benefits in a life insurance policy that by law, the policyowner does not forfeit even if he or she discontinues premium payments, usually cash value, loan value, paid - up insurance value and extended term insurance value.
Nonmedical Insurance
Issued on a regular basis without requiring a regular medical examination. In passing on the risk, the company relies on the applicant's answers to questions regarding his or her physical condition and on personal references of inspection reports.
Nonparticipating
Insurance under which the insured is not entitled to share in the divisible surplus of the company.
Nonqualified Plan
A retirement plan does not meet federal government requirements and is not eligible for favorable tax treatment.
Non-Recourse Mortgage
A home loan in which the borrower can never owe more than the home's value at the time the loan is repaid.
Nonstandard Auto (High Risk Auto or Substandard Auto)
Insurance for motorists who have poor driving records or have been canceled or refused insurance. The premium is much higher than standard auto due to the additional risks.
Notice of Claims Provision
Policy provision that describes the policyowner's obligation to provide notification of loss to the insurer within a reasonable period of time.
O
Occurrence
An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn't have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.
Offer and Acceptance
The offer may be made by the applicant by signing the application, paying the first premium and, if necessary, submitting to a physical examination. Policy insurance, as applied for constitutes acceptance by the company. Or, the offer may be made by the company when no premium payment is submitted with application. premium payment on the offered policy then constitutes acceptance by the applicant.
Old - Age, Survivor, Disability and Hospital Insurance (OASDI)
Retirement, death, disability income and hospital insurance benefits provided under Social Security.
Open - Panel HMO
A network of physician who work out of their own offices and participate in the HMO on a part - time basis.
Operating Cash Flow
Measures the funds generated from insurance operations, which includes the change in cash and invested assets attributed to underwriting activities, net investment income and federal income taxes. This measure excludes stockholder dividends, capital contributions, unrealized capital gains/losses and various noninsurance related transactions with affiliates. This test measures a company's ability to meet current obligations through the internal generation of funds from insurance operations. Negative balances might indicate unprofitable underwriting results or low yielding assets.
Operating Ratio (IRIS)
Combined ratio less the net investment income ratio (net investment income to net premiums earned). The operating ratio measures a company's overall operational profitability from underwriting and investment activities. This ratio doesn't reflect other operating income/expenses, capital gains or income taxes. An operating ratio of more than 100 indicates a company is unable to generate profits from its underwriting and investment activities.
Optionally Renewable Contract
Health Insurance Policy in which the insurer reserves the right to terminate the coverage at any anniversary or, in some cases at any premium due date, but does not have the right to terminate coverage between such date
Ordinary Insurance
Life insurance of commercial companies not issued on the weekly premium basis: amount of protection usually is $1,000 or more
Other Income/Expenses
This item represents miscellaneous sources of operating income or expenses that principally relate to premium finance income or charges for uncollectible premium and reinsurance business.
Other Insureds Rider
A term rider, covering a family member other than the insured, that is attached to the base policy covering the insured.
Outline of Coverage
Informational material about a specific plan or policy of insurance that describes the policy's features and benefits, in many states, an outline of coverages is required to be given to consumers when certain types of coverages are being considered.
Out-of-Pocket Limit
A predetermined amount of money that an individual must pay before insurance will pay 100% for an individual's health-care expenses.
Overall Liquidity Ratio
Total admitted assets divided by total liabilities less conditional reserves. This ratio indicates a company's ability to cover net liabilities with total assets. This ratio doesn't address the quality and marketability of premium balances, affiliated investments and other uninvested assets.
Overhead Insurance
Type of short - term disability insurance reimbursing the insured for specified, fixed, monthly expenses, normal and customary in operating the insured's business.
Overinsurance
An excessive amount of insurance, an amount of insurance that would result in payment of more than the actual loss or more than incurred expenses
Own Occupation
A definition of total disability that requires that in order to receives disability income benefits the insured must be unable to work at his or her own occupation.
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Paid - Up Additions
Additional life insurance purchased by policy dividends on a net single premium basis at the insured's attained insurance age at the time additions are purchased
Paid - Up Policy
No further premium are to be paid and the company is held liable for the benefits provided by the contract.
Parol Evidence Rule
Rule of contract law that brings all verbal statements into the written contract and disallow any changes or modifications to the contract by oral evidence
Partial Disability
Illness or injury preventing insured from performing at least once or more but not all, of their occupational duties.
Participating
Plan of insurance under which the policyowner receives shares (commonly called dividends) of the divisible surplus of the company.
Participating Physician
A doctor or physician who accepts Medicare's allowable or recognized charges and will not charge more than this amount.
Participation Rate
In equity-indexed annuities, a participation rate determines how much of the gain in the index will be credited to the annuity. For example, the insurance company may set the participation rate at 80%, which means the annuity would only be credited with 80% of the gain experienced by the index.
Participation Standards
Rules that must be followed for determining employee eligibility for a qualified retirement plan.
Partnership
A business entity that allow two or more people to strengthen their effectiveness by working together as co-owners.
Payor Rider
Available under certain juvenile life insurance policies, upon payment of an extra premium. Provides for the waiver of future premiums if the person responsible for paying them dies or is disabled before the policy becomes fully paid or matures as a death claim, or as an endowment, or the child reaches a specific age.
Per Capita Rule
Death proceeds from an insurance policy are divided equally among the living primary beneficiaries.
Per Stirpes Rule
Death proceeds from an insurance policy are divided equally among the named beneficiaries. If a named beneficiary is deceased, his or her share then goes to the living descendants of that individual.
Peril
The immediate specific event causing loss and giving rise to risk
Period Certain Annuity
An annuity income option that guarantees a definitive minimum period of payment
Permanent Flat Extra Premium
A fixed charge added per $1,000 of insurance for substandard risk.
Personal Injury Protection
Pays basic expenses for an insured and his or her family in states with no-fault auto insurance. No-fault laws generally require drivers to carry both liability insurance and personal injury protection coverage to pay for basic needs of the insured, such as medical expenses, in the event of an accident.
Personal Lines
Insurance for individuals and families, such as private-passenger auto and homeowners insurance.
Personal Producing General Agency System (PPGA)
A method of marketing, selling and distributing insurance in which personal producing general agent (PPGA) are compensated for business they personally sell and business sold by agents with whom they subcontract. Subcontracted agent are considered employees of the PPGA, not the insurer.
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
An insurance in written instrument in which a contract of insurance is set forth.
Policy Loan
In life insurance, a loan made by the insurance company to the policyowner with the policy's cash value assigned as security. One of the standard nonforfeiture options. The written contract effecting insurance, or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.
Policy or Sales Illustration
Material used by an agent and insurer to show how a policy may perform under a variety of conditions and over a number of years.
Policy Provisions
The term conditions of an insurance policy as contained in the policy clauses
Policyholder Dividend Ratio
The ratio of dividends to policyholders related to net premiums earned.
Policyholder Surplus
The sum of paid in capital, paid in and contributed surplus, and net earned surplus, including voluntary contingency reserves. It also is the difference between total admitted assets and total liabilities.
Portability
Provision under the Florida Health Care Access Act in which a worker or dependent will have to meet the waiting period for an existing condition.
Precertification
The insurer's approval of an insured's entering a hospital. Many health policies require precertification as part of an effort to control costs.
Pre-Existing Condition
A coverage limitation included in many health policies which states that certain physical or mental conditions, either previously diagnosed or which would normally be expected to require treatment prior to issue, will not be covered under the new policy for a specified period of time. An illness or medical condition that existed before a policy's effective date; usually excluded from coverage, through the policy's standard provisions or by waiver.
Preferred Auto
Auto coverage for drivers who have never had an accident and operates vehicles according to law. Drivers are not a risk for any insurance company that writes auto insurance, and no insurance company would be afraid to take them on as risk.
Preferred Provider Organization (PPO)
Association of health care providers, such as doctors and hospital, that agree to provide health care to members of a particular group at fees negotiated in advance.
Preferred Risk
A risk whose physical condition, occupation, mode of living and other characteristics indicate a prospect for longevity for unimpaired lives of the same age.
Preliminary Term Insurance
Term insurance attached to a newly issued permanent life insurance policy extending term coverage of a preliminary period of 1 to 11 months, until the permanent insurance becomes effective. The purpose is to provide full life insurance premium and the anniversary to a later date.
Premium
The price of insurance protection for a specified risk for a specified period of time. The periodic payment required to keep an insurance policy in force
Premium Balances
Premiums and agents' balances in course of collection; premiums, agents' balances and installments booked but deferred and not yet due; bills receivable, taken for premiums and accrued retrospective premiums.
Premium Earned
The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.
Premium Factors
The three primary factors considered when computing the basic premium for insurance: mortality, expense and interest.
Premium to Surplus Ratio
This ratio is designed to measure the ability of the insurer to absorb above-average losses and the insurer's financial strength. The ratio is computed by dividing net premiums written by surplus. An insurance company's surplus is the amount by which assets exceed liabilities. The ratio is computed by dividing net premiums written by surplus. For example, a company with $2 in net premiums written for every $1 of surplus has a 2-to-1 premium to surplus ratio. The lower the ratio, the greater the company's financial strength. State regulators have established a premium-to-surplus ratio of no higher than 3-to-1 as a guideline.
Premium Unearned
That part of the premium applicable to the unexpired part of the policy period.
Prescription Drug Coverage
Usually offered as an optional benefits to group medical expense plans, this coverage covers some or all of the cost of prescription drugs.
Presumptive Disability Benefits
A disability income policy benefit that provides that if an insured experience a specified disability, such as blindness, he or she is presumed to be totally disabled and entitled to the full amount payable under the policy, whether or not he or she is able to work.
Pretax Operating Income
Pretax operating earnings before any capital gains generated from underwriting, investment and other miscellaneous operating sources.
Pretax Return on Revenue
A measure of a company's operating profitability and is calculated by dividing pretax operating earnings by net premiums earned.
Primary Beneficiary
In life insurance, the beneficiary designated by the insured as the first to received policy benefits.
Primary Insurance Amount (PIA)
Amount equal to a covered worker's full Social Security retirement benefit an age 65 or disability benefits
Principal
An insurance company that having appointed someone as its agent, is bound to contracts the agent completes in its behalf.
Principal Sum
The amount under an AD&D policy that is payable as a death benefit if death is due to an accident.
Private Insurer
An insurer that is not associated with federal or state government.
Private-Passenger Auto Insurance Policyholder Risk Profile
This refers to the risk profile of auto insurance policyholders and can be divided into three categories: standard, nonstandard and preferred. In the eyes of an insurance company, it is the type of business (or the quality of driver) that the company has chosen to taken on.
Probationary Period
Specified number of days after an insurance policy's issue date during which coverage is not afforded for sickness. Standard practice for group coverages.
Proceeds
Net amount of money payable by the company at the insured's death or at policy maturity.
Producer
A general term applied to an agent, broker, personal producing general agent, solicitor or other person who sells insurance.
Profit
A measure of the competence and ability of management to provide viable insurance products at competitive prices and maintain a financially strong company for both policyholders and stockholders.
Profit - Sharing Plan
Any plan whereby a portion of a company's profits is set aside for distribution to employees who qualify under the plan.
Proof of Loss
A mandatory health insurance provision stating that the insured must provide a completed claim form to the insurer within 90 days of the date of loss.
Proper Solicitation
High professional standards that requires an agent to identify himself or herself properly, that is, as an agent soliciting insurance company.
Protected Cell Company (PCC)
A PCC is a single legal entity that operates segregated accounts, or cells, each of which is legally protected from the liabilities of the company's other accounts. An individual client's account is insulated from the gains and losses of other accounts, such that the PCC sponsor and each client are protected against liquidation activities by creditors in the event of insolvency of another client.
Pure Endowment
Contract providing for payment only upon survival of a certain person to a certain date and not in the event of that person's prior death. This type of contract is just the opposite of a term contract, which provides for payment only in the event the injured person dies within the term period specified.
Pure Risk
Type of the risk that involves the chance of loss only; there is no opportunity for gain insurable.
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Qualified High-Deductible Health Plan
A health plan with lower premiums that covers health-care expenses only after the insured has paid each year a large amount out of pocket or from another source. To qualify as a health plan coupled with a Health Savings Account, the Internal Revenue Code requires the deductible to be at least $1,000 for an individual and $2,000 for a family. High-deductible plans are also known as catastrophic plans.
Qualified Plan
A retirement or employee compensation plan established and maintained by an employer that meets specific guidelines spelled out by the IRS and consequently receives favorable tax treatment.
Qualified Versus Non-Qualified Policies
Qualified plans are those employee benefit plans that meet Internal Revenue Service requirements as stated in IRS Code Section 401a. When a plan is approved, contributions made by the employer are tax deductible expenses.
Qualifying Event
An occurrence that triggers an insured's protection.
Quick Assets
Assets that are quickly convertible into cash.
Quick Liquidity Ratio
Quick assets divided by net liabilities plus ceded reinsurance balances payable. Quick assets are defined as the sum of cash, unaffiliated short-term investments, unaffiliated bonds maturing within one year, government bonds maturing within five years, and 80% of unaffiliated common stocks. These assets can be quickly converted into cash in the case of an emergency.
R
Rate - Up in Age
System of rating substandard risks that assumes the insured to be older than he or she really is and charging a correspondingly higher premium.
Rating
The making of insurance also creates the premium classifications given an applicant for life or health insurance.
Reasonable and Customary Charge
Charge for health care service consistent with the going rate of charge in a given geographical area for identical or similar services.
Rebating
Returning part of the commission or giving anything else of value to the insured as an inducement to buy the policy. It is illegal and cause for license revocation in most states. In some states, it is an offensive by both the agent and the person receiving the rebate.
Reciprocal Insurance Exchange
An unincorporated groups of individuals, firms or corporations, commonly termed subscribers, who mutually insure one another, each separately assuming his or her share of each risk. Its chief administrator is an attorney-in-fact.
Reciprocal Insurer
Insurance company characterized by the fact its policyholder insure the risk of other policyholders.
Recurrent Disability Provision
A disability income policy provision that specifies the period of time during which the reoccurrence of a disability is considered a continuation of a prior disability
Reduced Paid - Up Insurance
A nonforfeiture option contained in most life insurance policies providing for the insured to elect to have the cash surrender value of the policy used to purchase a paid - up policy for a reduce amount of insurance.
Re-entry Option
An option in a renewable term life policy under which the policyowner is guaranteed, at the end of the term, to be able to renew his or her coverage without evidence of insurability, at a premium rate specified in the policy.
Refund Annuity
Provide for the continuance of the annuity during the annuitant's lifetime and, in any event, until total payment equal to the purchase price has been made by the company
Reimbursement Approach
Payment of health policy benefits to insured based on actual medical expense incurred.
Reinstatement
Putting a lapsed policy back in force by producing satisfactory evidence of insurability and paying any past - due premiums required.
Reinsurance
In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn't fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period. Acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.
Reinsurance Ceded
The unit of insurance transferred to a reinsurer by a ceding company.
Reinsurance Recoverable to Policyholder Surplus
Measures a company's dependence upon its reinsurers and the potential exposure to adjustments on such reinsurance. Its determined from the total ceded reinsurance recoverable due from non-U.S. affiliates for paid losses, unpaid losses, losses incurred but not reported (IBNR), unearned premiums and commissions less funds held from reinsurers expressed as a percent of policyholder surplus.
Relative Value Scale
Method for determining benefits payable under a basic surgical expense policy. Points are assigned to each surgical procedures and a dollar per point amount, or conversion factor, is used to determine the benefit.
Renewable Options
An option that allows the policyowner to renew a term policy before its termination date without having to provide evidence of insurability.
Renewable Term
Some term policies prove that they may be renewed on the same plans for one or more years without medical examination, but with rates based on the insured's advanced age.
Replacement
Act of replacing one life insurance policy with another; may be done legally under certain conditions.
Replacement Cost
The dollar amount needed to replace damaged personal property or dwelling property without deducting for depreciation but limited by the maximum dollar amount shown on the declarations page of the policy.
Representation
Statements made by applicants on their applications for insurance that they represent as being substantially true to the best of their knowledge and belief, but that are not warranted as exact in every detail.
Reserve
An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability. Fund help by the company to help fulfill future claims
Reserve Basis
Refer to mortality table and assumed interest rate used in computing rates.
Residual Disability Benefits
A disability income payment based on the proportion of income the insured has actually lost, taking into account the fact that he or she is able to earn some income. In disability insurance, a benefit paid when you suffer a loss of income due to a covered disability or if loss of income persists. This benefit is based on a formula specified in your policy and it is generally a percentage of the full benefit. It may be paid up to the maximum benefit period.
Respite Care
Type of health or medical care designed to provides a short rest period for a caregiver. Characterized by its temporary status.
Return on Policyholder Surplus (Return on Equity)
The sum of after-tax net income and unrealized capital gains, to the mean of prior and current year-end policyholder surplus, expressed as a percent. This ratio measures a company's overall after-tax profitability from underwriting and investment activity.
Revocable Beneficiary
Beneficiary whose rights in a policy are subject to the policyowner's reserved right to revoke or change the beneficiary designation and the right to surrender or make a loan on the policy with our the beneficiary's consent.
Rider
Strictly speaking, a rider adds something to a policy. However, the term is used loosely to refer to any supplemental agreement attached to and made a part of the policy, whether the policy's conditions are expanded and additional coverages added, or a coverage of conditions is waived.
Risk
Uncertainty regarding loss; the probability of loss occurring for an insured or prospect.
Risk Class
Risk class, in insurance underwriting, is a grouping of insureds with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.
Risk Management
Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.
Risk Pooling
A basic principle of insurance whereby a large number contribute to cover the losses of a few.
Risk Retention Groups
Liability insurance companies owned by their policyholders. Membership is limited to people in the same business or activity, which exposes them to similar liability risks. The purpose is to assume and spread liability exposure to group members and to provide an alternative risk financing mechanism for liability. These entities are formed under the Liability Risk Retention Act of 1986. Under law, risk retention groups are precluded from writing certain coverages, most notably property lines and workers' compensation. They predominately write medical malpractice, general liability, professional liability, products liability and excess liability coverage. They can be formed as a mutual or stock company, or a reciprocal.
Risk Selection
The method of a home office underwriter used to choose applicants that the insurance company will accept. The underwriter must determine whether risks are standard, substandard or preferred and adjust the premium rates accordingly.
Rollover IRA
An individual retirement account established with funds transferred from another IRA or qualified retirement plan that the owner had terminated.
S
Salary Continuation Plan
An arrangement whereby an income, usually related to an employer's salary, is continued upon employee's retirement, death or disability.
Salary Reduction SEP
A qualified retirement plan limited to companies with 25 or fewer employees. It allows employees to defer part of their pretax income to the plan, lowering their taxable income (SEP - Simplified Employee Pension Plan)
Saving Incentive Match Plan for Employees (SIMPLE)
A qualified employer retirement plan that allows small employers to set up tax-favored retirement saving plans for their employees
Schedule
List of specified amounts payable, usually for surgical operations, dismemberment, fractures etc.
Secondary Beneficiary
An alternative beneficiary designated to receive payment , usually in the event the original beneficiary predeceases the insured
Secondary Market
The secondary market is populated by buyers willing to pay what they determine to be fair market value.
Section 1035 Exchange
This refers to a part of the Internal Revenue Code that allows owners to replace a life insurance or annuity policy without creating a taxable event.
Section 457 Plans
Deferred compensation plans for employees of state and local government in which amounts deferred will not be included in gross income until they are actually received or made available
Section 7702
Part of the Internal Revenue Code that defines the conditions a life policy must satisfy to qualify as a life insurance contract, which has tax advantages.
Self - Employed Individuals Retirement Act
Passed by Congress in 1962 , this Act enables self - employed persons to establish qualified retirement plans similar to those available to corporations.
Self – Insurance
Program for providing insurance financed entirely through the means of the policyowner, in place of purchasing coverage from commercial carriers.
Self - Insured Plan
A health insurance plan characterized by an employer (usually a large one) labor union, fraternal organization or other group retaining the risk of covering its employees medical expenses.
Separate Account
A separate account is an investment option that is maintained separately from an insurer's general account. Investment risk associated with separate-account investments is born by the contract owner.
Service Insurers
Companies that offer prepayment plans for medical or hospital services, such as health maintenance organizations.
Service Provider
An organization that provides health coverage by contracting with service providers, to provide medical services to subscribers, who pay in advance through premiums. Examples of such coverage are HMOs and PPOs.
Settlement Options
Optional modes of settlement provided by most life insurance policies in lieu of lump sum payment. Usual options are: lump - sum cash; interest only, fixed - period; fixed - period; fixed - amount and life income.
Simplified Employee Pension Plan (SEP)
A type of qualified retirement plan under which the employer contributes to an individual retirement account set up and maintained by the employee.
Single - Premium Whole Life Insurance
Whole life insurance for which the entire premium is paid in one sum at the beginning of the contract period
Single Dismemberment
Loss of one hand or one foot, or the sight of one eyes
Skilled Nursing Care
Daily nursing care ordered by a doctor, often medically necessary. It can only be performed by or under the supervision of skilled medical professionals and is available 24 hours a day.
Sliding
The act of telling an insurance applicant that the law requires him to buy a specific ancillary coverage or product with the purchase of insurance when that coverage or product is not required. It is also the act of telling an applicant that a policy includes a specific ancillary coverage or product without additional charge when such a charge is required. Sliding also occurs when an insurer charges for a specific ancillary coverage or product, in addition to the cost of the coverage applied for, without the applicant's informed consent.
Small Employer
An employer who employs not more than 50 employees, the majority of whom are employed in Florida.
Social Security
Program first created by Congress in 1935 and now composed of Old - Age, Survivors and Disability Insurance (OASDI), Medicare, Medicaid and various grants - in - aid, which provide economic security to nearly all employed people.
Sole Partnership
The simple form of business organization whereby one individual owns and controls the entire company
Solvency
Having sufficient assets--capital, surplus, reserves--and being able to satisfy financial requirements--investments, annual reports, examinations--to be eligible to transact insurance business and meet liabilities.
Special Agent
An agent representing an insurance company in a given territory.
Special Class
Applicants who cannot qualify for standard insurance, but may secure policies with riders waiving payment for losses involving certain existing health impairments.
Special Questionnaires
Form used when, for underwriting purposes, the insurer needs more detailed information from an applicant regarding aviation or avocation, foreign residence, finance, military service or occupation.
Special Risk Policy
Provide coverage for unusual hazard normally not covered under accident and health insurance, such as a concert pianist insuring his or her hands for a million dollars
Speculative Risk
A type of risk that involves the chance of both loss and gain, not insurable
Spendthrift Provision
Stipulates that, to the extent permitted by law, policy proceeds shall not be subject to the claim of creditors of the beneficiary or policyowner.
Split - Dollar Life Insurance
An arrangement between two - parties where life insurance is written on the life of one, who names the beneficiary of the net death benefits (death benefits less cash value) and the other is assigned the cash value, with both sharing premium payment.
Spousal IRA
An individual retirement account that persons eligible to set up IRAs for themselves may set up jointly with a nonworking spouse.
Standard Auto
Auto insurance for average drivers with relatively few accidents during lifetime.
Standard Provisions
Forerunners of the Uniform Policy Provisions in health insurance policies today.
Standard Risk
Person who, according to a company's underwriting standards, is entitled to insurance protection without extra rating or special restrictions.
State of Domicile
The state in which the company is incorporated or chartered. The company also is licensed (admitted) under the state's insurance statutes for those lines of business for which it qualifies.
Statutory Reserve
A reserve, either specific or general, required by law.
Stock Bonus Plan
A plan under which bonuses are paid to employees in shares of stock
Stock Insurer
An insurance company owned and controlled by a group of stockholders whose investment in the company provides the safety margin necessary in issuance of guaranteed, fixed premium, nonparticipating policies.
Stock Redemption Plan
An agreement under with a close corporation purchase a deceased Stockholder's interest
Stop - Loss Provision
Designed to stop the company's loss at a given point, as an aggregate payable under a policy, a maximum payable for any one disability or the like; also applies to individuals, placing a limit on the maximum out - of - pocket expense an insured must pay for health car, after which the health policy covers all expenses.
Straight Life Income Annuity (Straight Life Annuity, Life Annuity)
An annuity income options that pays a guaranteed income for the annuitant's lifetime, after which time payment stop
Subaccount Charge
The fee to manage a subaccount, which is an investment option in variable products that is separate from the general account.
Subrogation
The right of an insurer who has taken over another's loss also to take over the other person's right to pursue remedies against a third party.
Subscriber
Policyowner of a health care plan underwritten by a service insurer
Substandard Risk
Person who is considered an under - average or impaired insurance risk because of physical condition, family or personal history of disease, occupation, residence in unhealthy climate or dangerous habits.
Successive Periods
In hospital income protection, when confinements in a hospital are due to the same or related causes and are separated by less than a contractually stipulated period of time, they are considered part of the same period of confinement.
Suicide Provision
Most life insurance policies provide that if the insured commits suicide within a specified period, usually two years after the issue date, the company's liability will be limited to a return of premiums paid.
Supplemental Accident Coverage
Often includes as part of a group basic or major medical plan, this type of coverages is designed to cover expenses associated with accidents to the extend they are not provided under other coverage.
Supplementary Major Medical Policy
A medical expenses health plan that covers expenses not included under a basic policy and expenses that exceed the limits of a basic policy
Surgical Expense Insurance
Provides benefits to pay for the cost of surgical operations.
Surgical Schedule
List of cash allowances payable for various types of surgery, with the respective maximum amounts payable based upon severity of the operations, stipulated maximum usually covers all professional fees involved, e.g,. Surgeon anesthesiologist.
Surplus
The amount by which assets exceed liabilities.
Surrender Charge
Fee charged to a policyholder when a life insurance policy or annuity is surrendered for its cash value. This fee reflects expenses the insurance company incurs by placing the policy on its books, and subsequent administrative expenses.
Surrender Period
A set amount of time during which you have to keep the majority of your money in an annuity contract. Most surrender periods last from five to 10 years. Most contracts will allow you to take out at least 10% a year of the accumulated value of the account, even during the surrender period. If you take out more than that 10%, you will have to pay a surrender charge on the amount that you have withdrawn above that 10%.
T
Tax - Sheltered Annuity
An annuity plan reserved for nonprofit organizations and their employees funds contributed to the annuity are excluded from current taxable income and are only taxed later, when benefits begin to be paid. Also called tax deferred annuity and 403 (b) plan.
Taxable Wage Base
The maximum amount of earning upon which FICA taxes must be paid.
Temporary Flat Extra Premium
A fixed charge per $1,000 of insurance added to substandard risk for specified period of years.
Term Insurance
Protection during limited number of years; expiring without value if the insured survives the stated period, which may be one or more years, but usually is 5 to 20 years, because such periods generally cover the needs for temporary protection.
Term Life Insurance
Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn't build up any of the nonforfeiture values associated with whole life policies.
Term of Policy
Period for which a policy runs. In life insurance, this is to the end of term period for term insurance, to the insured's death (or age 100) for payment insurance. In most other kinds of insurance, it is usually the period for which a premium has been paid in advance; however it may be for a year or more, even though the premium is paid on a semiannual or other basis.
Tertiary Beneficiary
In life insurance, a beneficiary designated as third in line to receive the proceeds or beneficiaries do not survive the insured.
Third - Party Administrator (TPA)
An organization outside the members of a self insurance group which, for a fee, processes claims, completes benefits paperwork and often analyzes claim information.
Third Party Applicant
A policy applicant who is not the prospective insured.
Time Limit on Certain Defense
A provision stating that an insurance policy is incontestable after it has been in forces a certain period of time. It also limits the period during which an insurer can deny a claim on the basis of a preexisting condition.
Tort
A private wrong, independent of contract and committed against an individual, which gives rise to a legal liability and is adjudicated in a civil court. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.
Total Admitted Assets
This item is the sum of all admitted assets, and are valued in accordance with state laws and regulations, as reported by the company in its financial statements filed with state insurance regulatory authorities. This item is reported net as to encumbrances on real estate (the amount of any encumbrances on real estate is deducted from the value of the real estate) and net as to amounts recoverable from reinsurers (which are deducted from the corresponding liabilities for unpaid losses and unearned premiums).
Total Annual Loan Cost
The projected annual average cost of a reverse mortgage including all itemized costs.
Total Disability
Disability preventing in insureds from performing any duty of their usual occupations or any occupations for remuneration; actual definition depends on policy wording.
Total Loss
A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The term also is used to mean a loss requiring the maximum amount a policy will pay.
Traditional Net Cost Method
A method of comparing costs of similar policies that does not take into account the time value of money.
Transacting Insurance
The transaction of any of the following, in addition to other acts included under applicable provisions of the state code; solicitation or inducement; preliminary negotiation; effecting a contract of insurance, transacting matters subsequent to effecting a contract of insurance and arising out of it.
Travel Accident Policies
Limited to indemnities for accident while traveling, usually by common carrier.
Trust
Arrangement in which property is held by a person or corporation (trustee) for the benefit of others (beneficiaries). The grantor (person transferring the property to the trustee) gives legal title to the trustee, subject to terms set forth in a trust agreement. Beneficiaries have equitable title to the trust property.
Trustee
One holding legal title to property for the benefit of another; may be either and individual or a company, such as a bank and trust company.
Twisting
Practice of inducing a policyowner with one company to lapse, forfeit or surrender a life insurance policy for the purpose of taking out a policy in another company. Generally classified as a misdemeanor, subject to fine, revocation of license and sometimes imprisonment.
U
Umbrella Policy
Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance. While it applies to losses over the dollar amount in the underlying policies, terms of coverage are sometimes broader than those of underlying policies.
Unaffiliated Investments
These investments represent total unaffiliated investments as reported in the exhibit of admitted assets. It is cash, bonds, stocks, mortgages, real estate and accrued interest, excluding investment in affiliates and real estate properties occupied by the company.
Unallocated Benefits
Reimbursement provision, usually for miscellaneous hospital and medical expenses, that does not specify how much will be paid for each type of treatment, examination, dressing, etc, but only sets a maximum that will be paid for all such treatments.
Underwriter
Company receiving premiums and accepting responsibility for fulfilling the policy contract. Company employee who decides whether or not the company should assume a particular risk. The agent who sells the policy.
Underwriting
The process of selecting risks for insurance and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify. Process through which an insurer determines whether, and on what basis, an insurance application will be accepted.
Underwriting Expense Ratio
This represents the percentage of a company's net premiums written that went toward underwriting expenses, such as commissions to agents and brokers, state and municipal taxes, salaries, employee benefits and other operating costs. The ratio is computed by dividing underwriting expenses by net premiums written. The ratio is computed by dividing underwriting expenses by net premiums written. A company with an underwriting expense ratio of 31.3% is spending more than 31 cents of every dollar of net premiums written to pay underwriting costs. It should be noted that different lines of business have intrinsically differing expense ratios. For example, boiler and machinery insurance, which requires a corps of skilled inspectors, is a high expense ratio line. On the other hand, expense ratios are usually low on group health insurance.
Underwriting Expenses Incurred
Expenses, including net commissions, salaries and advertising costs, which are attributable to the production of net premiums written.
Underwriting Guide
Details the underwriting practices of an insurance company and provides specific guidance as to how underwriters should analyze all of the various types of applicants they might encounter. Also called an underwriting manual, underwriting guidelines, or manual of underwriting policy.
Unearned Premiums
That part of the premium applicable to the unexpired part of the policy period.
Unfair Trade Practice Act
A model act written by the NAIC and adopted by most states empowering state insurance commissioners to investigate and issue cease and desist orders and penalties to insurers for engaging in unfair or deceptive practices, such as misrepresentation or coercion.
Uniform Individual Accident and Sickness Policy Provision Law
NAIC Model law that established uniform term, provisions and standards for health insurance policies covering loss "resulting from sickness or from bodily injury or death by accident or both"
Uniform Simultaneous Death Act - Model law that states when an insured and beneficiary die at the same time, it is presumed that the insured survived the beneficiary
Unilateral
Distinguishing characteristic of an insurance contract in that it is only the insurance company that pledges anything.
Uninsurable Risk
One not acceptable for insurance due to excessive risk
Uninsured Motorist Coverage
Endorsement to a personal automobile policy that covers an insured collision with a driver who does not have liability insurance.
Universal Life
Flexible premium two - part contract containing renewable term insurance and a cash value account that generally earns interest at a higher rate than a traditional policy. The interest rate varies. Premiums are deposited in the cash value account after the company deducts its fee and a monthly cost for the term coverage.
Usual, Customary and Reasonable Fees
An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor or required for treatment.
Utilization Review
A technique used by health care providers to determine after the fact if health care was appropriate and effective. How much a covered group uses a particular health plan or program.
V
Valuation
A calculation of the policy reserve in life insurance. Also, a mathematical analysis of the financial condition of a pension plan.
Valuation Reserve
A reserve against the contingency that the valuation of assets, particularly investments, might be higher than what can be actually realized or that a liability may turn out to be greater than the valuation placed on it.
Value Contract
A contract of insurance that pay a stated amount in the event of a loss.
Variable Annuity
Similar to a traditional, fixed annuity in that retirement payments will be made periodically to the annuitants, usually over the remaining year of their lives.
Under the variable annuity, there is no guarantee of the dollar amount of the payments; they fluctuate according to the value of an account in invested primarily in common stocks. The act of converting a variable annuity from the accumulation phase to the payout phase.
Variable Life Insurance
Provides a guaranteed minimum death benefits. Actual benefits paid may be more, however, depending on the fluctuating market value of investments behind the contract at the insured's death. The cash surrender value also generally fluctuates with the market value of the investment portfolio. A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products supporting the policy at the time payment is due.
Variable Universal Life Insurance
A life insurance policy combining characteristics of universal and variable life policies. A VUL policy contains unscheduled premium payment and death benefits and a cash value that varies according to the underlying funds whose investment portfolio is managed by the policyowner. A combination of the features of variable life insurance and universal life insurance under the same contract. Benefits are variable based on the value of underlying equity investments, and premiums and benefits are adjustable at the option of the policyholder.
Vesting
Right of employees under retirement plan to retain part or all of the annuities purchased by the employer's contribution on their behalf or, in some plans, to receive cash payments or equivalent value, on termination of their employment, after certain qualifying conditions have been met.
Viatical Broker
An insurance producer licensed to solicit viatical settlement agreements between providers and policyowners of life insurance contracts.
Viatical Provider
A company that buys a life insurance policy from a policyowner who is suffering from a terminal illness or a severe chronic illness.
Viatical Settlement Contract
An agreement under which the owner of a life insurance policy sells the policy to another person in exchange for a bargained - for payment, which is generally less than the expected death benefit under the policy.
Viator
An individual suffering from a terminal illness or severe chronic illness who sells his or her life insurance policy to a viatical company. The company becomes the policyowner and assumes responsibility for paying premiums. When the insured dies the company receives the death benefits.
Vision Insurance
Optional coverage available with a group health insurance plans, vision insurance typically pays for charges incurred during eye exams, eyeglasses and contact lenses are usually excluded.
Void Contract
An agreement without legal effect, an invalid contract.
Voidable Contract
A contract that can be made void at the option of one or more parties to the agreement
Voluntary Group AD&D
A group accidental death and dismemberment policy paid for entirely by employees, rather than an employer.
Voluntary Reserve
An allocation of surplus not required by law. Insurers often accumulate such reserves to strengthen their financial structure.
W
Waiver
Agreement waiving the company's liability for a certain type or types or risk ordinarily covered in the policy; a voluntary giving up of a legal. Given right.
Waiver of Premium
Rider of provision included in most life insurance policies exempting the insured from paying premiums after he or she has been disabled for a specified period of time, usually six month in health policies. A provision in some insurance contracts which enables an insurance company to waive the collection of premiums while keeping the policy in force if the policyholder becomes unable to work because of an accident or injury. The waiver of premium for disability remains in effect as long as the ensured is disabled.
War Clause
Relieves the insurer of liability, or reduces its liability, for specified loss caused by war.
Warranties
Statements made on an application for insurance that are warranted to be true; that is, they are exact in every detail as opposed to representation. Statements on applications for insurance are rarely warranties, unless fraud is involved.
Whole Life Insurance
Permanent level insurance protection for the "whole of life" from policy issue to the death of the insured. Characterized by level premium, level benefits and cash value. Life insurance which might be kept in force for a person's whole life and which pays a benefit upon the person's death, whenever that might be.
Worker's Compensation
Benefits paid workers for injury, disability or disease contracted in the course of their employment. Benefits and conditions are set by law, although in most states the insurance to provide the benefits may be purchased from regular insurance companies. a few states have monopolistic state compensation funds.
Y
Yield on Invested Assets (IRIS)
Annual net investment income after expenses, divided by the mean of cash and net invested assets. This ratio measures the average return on a company's invested assets. This ratio is before capital gains/losses and income taxes.
This page was update: September 10, 2017
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