A contract of insurance that may be terminated by the insurer or insured at any time. Practically every form of insurance is cancelable, except Life Insurance and those Health Insurance policies designated as a "guaranteed renewable" or "noncancelable and guaranteed renew-able." Some states also regulate when or if Automobile policies can be cancelled.


Sometimes used to designate the insurer. The term "insurer" is preferred because of the possible confusion of "carrier" with transportation.

Catastrophe Reinsurance

A form of reinsurance that indemnifies the ceding company for the accumulation of losses in excess of a stipulated sum arising from a catastrophic event such as conflagration, earthquake or windstorm. Catastrophe loss generally refers to the total loss of an insurance company arising out of a single catastrophic event.


When a company reinsures its liability with another, it “cedes” business.

Ceding Company

The original or primary insurer; the insurance company which purchases reinsurance.

Certificate of Insurance

A statement of the coverage and provisions of a master contract in group insurance that is issued to individuals covered in the group. A form which verifies that a policy has been written and states the coverage in general, often used as proof of insurance in loan transactions and for other legal requirements.


A demand made by the insured, or the insured's beneficiary, for payment of the benefits provided by the contract.

Claim Expense

The expense of adjusting a claim, such as investigation and attorneys' fees. It does not include the cost of the claim itself.

Claim Report

A report filed by an agent setting forth the facts of a claim. Same as Loss Report.


The person making a demand for payment of benefits.

Claims Reserve

Amounts set aside to meet costs of claims incurred but not yet finally settled. An example might be a Workers Compensation case where benefits are payable for several years. At any given point in time, the reserve would be the funds kept based on the estimate of what the claim will cost when finally settled.

Claims-Made Basis

A form of reinsurance under which the date of the claim report is deemed to be the date of the loss event. Claims reported during the term of the reinsurance agreement are therefore covered, regardless of when they occurred. A claims made agreement is said to “cut off the tail” on liability business by not covering claims reported after the term of the reinsurance agreement - unless extended by special agreement.


A section of a policy contract or endorsement dealing with a particular subject. For instance, a Subrogation Clause deals with the rights of the insurer in the event of payment of a loss under the contract.


An unfair trade practice which occurs when someone in the insurance business applies a physical or mental force to persuade another to transact insurance.


An agreement, usually secret, between two or more persons to defraud or deprive another or others of their property or rights.

Combined Ratio

The sum of an expense ratio and a loss ratio. An underwriting profit occurs when the combined ratio is under 100% and an underwriting loss occurs when the combined ratio is over 100%.


That portion of the premium paid to the agent as compensation for his services.

Contingent Fund

A reserve to cover possible liabilities resulting from an unusual happening.


An agreement entered into by two or more persons under which one or more of them agree, for a consideration, to do or refrain from doing acts in accordance with the wishes of the other party(s). In insurance, the agreement by which an insurer agrees, for a consideration, to provide benefits, reimburse losses or provide services for an insured. A "policy" is the written statement of the terms of the contract. An agreement under which an agency or agent does business with an insurer.

Controlled Business

This term refers to the amount of insurance countersigned, issued or sold by a producer covering the life, property or interests of that producer, members of the producer's immediate family, or the producer's employer or employees. Many states limit the amount of controlled business that may be written, and if the premium or commissions on controlled business exceed a given percentage (usually 50%) of all business, the producer's license may be suspended, revoked, or not renewed.

Cooperative Insurance

Insurance issued by a mutual association such as a fraternal society, an employee association, an industrial association, or a trade union.


The scope of the protection provided under a contract of insurance.

Covered Entity

Includes any health care provider, health plan and healthcare clearinghouse.

Covered Loss

Illness, injury, death, property loss, legal liability, or any other situation or loss for which an insurance company will pay benefits under a policy when such event occurs.