GLOSSARY – LETTER B

Basic Limit
Usually refers to Liability policies and indicates the lowest amount for which a policy can be written. This amount is either prescribed by law or company policy.

Basic Premium
A fixed cost charged in a retrospective rating plan. It is a percentage of the standard premium and is designed to give the insurer the money needed for administrative expenses and the agent’s commission plus an insurance charge.

Basic Rate
The manual rate from which discounts are taken or to which charges are added to reflect the individual circumstances of a risk.

Benefits
Financial reimbursement and other services provided insureds by insurers under the terms of an insurance contract. An example would be the benefits listed under a Life or Health Insurance policy or benefits as prescribed by a Workers Compensation law.

Binder
An agreement executed by an agent or insurer (usually the latter) putting insurance into force before the contract has been written or the premium paid. This term is not usually used in Life Insurance.

Book of Business
A total of all insurance accounts written by a company or agent. It may be treated in different ways. For example: an insurer’s book of automobile business, or an agent’s overall book of business, or an agent’s book of business with each insurer.

Book Value
Refers to the value of assets as shown in the official accounting records of the company.

Borderline Risk
An insurance prospect of doubtful quality from an underwriting point of view.

Broker
One who represents an insured in the solicitation, negotiation or procurement of contracts of insurance, and who may render services incidental to those functions. By law the broker may also be an agent of the insurer for certain purposes such as delivery of the policy or collection of the premium.

Broker of Record
A broker who has been designated to handle certain insurance contracts for the policyholder.

Brokerage
The fee or commission received by a broker. Insurance placed by brokers contrasted with that placed by agents.

Brokerage Business
Business offered to an insurer by a broker. This is sometimes called excess or surplus business.

Burning Ratio
The ratio of losses suffered to the amount of insurance in effect.

Business Associate
An entity which, on behalf of a covered entity, performs or assists in the performance of a function or activity involving the use or disclosure of individually identifiable health information, or provides legal, actuarial, accounting, data aggregation, management, administrative, accreditation, or financial services for the Group Health Plan.

GLOSSARY – LETTER C

Cancelable
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.

Carrier
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.

Cede
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.

Claim
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.

Claimant
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.

Clause
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.

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

Collusion
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%.

Commission
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.

Contract
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.

Coverage
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.

GLOSSARY – LETTER D

Deductible
The portion of an insured loss to be borne by the insured before he is entitled to recovery from the insurer.

Deductible Clause
A contract provision that sets forth the deductible.

Degree of Risk
The amount of uncertainty that exists in a given situation. For instance, if you’ve chosen heads in the flip of a coin, the degree of risk present is 50%, since there is a 50% chance any flip of the coin will come up tails.

Dependent
An individual who depends on another for support and maintenance.

Deposit (or Provisional) Premium
The premium paid at the inception of a contract which provides for future premium adjustments. It is based on an estimate of what the final premium will be.

Disability
A condition that curtails to some degree a person’s ability to carry on his normal pursuits. A disability may be partial or total, and temporary or permanent.

Discrimination
Refusal of an insurer to provide comparable insurance or use comparable rates for certain individuals or groups with basic characteristics the same as those to whom the coverage or rates are offered. Unfair discrimination is prohibited by law.

Dividend
The return of part of the premium paid for a policy issued on a participating basis by either a mutual or a stock insurer. A portion of the surplus paid to the stockholders of a corporation.

GLOSSARY – LETTER E

Earned Premium
The amount of the premium that has been “used up” during the term of a policy. For example, if a one-year policy has been in effect six months, half of the total premium has been earned.

Effective Date
The date on which the protection of an insurance policy or bond goes into effect.

Endorsement
A written or printed form attached to the policy which alters provisions of the contract.

Equifax
Formerly known as the Retail Credit Company. It is an organization widely used by insurers to obtain information on applicants for underwriting purposes and sometimes on claimants. Their reports are known as Retail Credit Reports.

Equity
The money value of an insurance company that is over and above its liabilities. Liabilities include almost all of its reserves.

Estimated Premium
A provisional premium which is adjusted at the end of the year. For example, in Workers Compensation Insurance an estimated premium is based on estimated payrolls for the coming year. At the end of the year, final payrolls are determined and the final premium is computed.

Evidence Clause
A clause in a policy which requires the insured to cooperate in the investigation of a claim by producing records and submitting to examinations. This is required to help an adjuster establish the validity of a claim. An Evidence Clause in a Health policy requires the insured to submit to physical examinations.

Ex Gratia Payment
Latin for “from favor.” A payment by an insurer to an insured for which there is no liability under the contract. In some cases an insurer may feel there has been a mistake or a misunderstanding, and he may pay a claim even though he does not appear to be liable.

Excess Insurance
A coverage designed to be in excess over one or more primary coverages, and which does not pay a loss until the loss amount exceeds a certain sum. Contrast with Primary Coverage.

Excess of Loss
A form of reinsurance under which recoveries are available when a given loss exceeds the cedant’s retention defined in the agreement.

Exclusion
A contractual provision that denies coverage for certain perils, persons, property, or locations.

Exclusions
Specific situations, conditions, or circumstances that are listed in the contract as being not covered.

Expense Allowance
A compensation paid to an insurance agent in excess of prescribed commissions.

GLOSSARY – LETTER F

Face Amount
The amount of insurance provided by the terms of an insurance contract, usually found on the face of the policy. In a Life Insurance policy, the death benefit.

Facultative
Facultative reinsurance means reinsurance of individual risks by offer and acceptance wherein the reinsurer retains the “faculty” to accept or reject each risk offered.

Federal Deposit Insurance Corporation (FDIC)
An agency of the federal government which insures bank deposits up to a stated maximum.

Federal Insurance Administration
A government office, part of HUD, which oversees the handling of FAIR plans, Federal Crime Insurance plans, and the Flood program.

Federal Savings and Loan Insurance Corporation
A United States government instrumentality that insures share accounts in savings and loans and similar institutions up to a maximum per account.

Fictitious Groups
Groups formed primarily for the purpose of buying insurance. Under the law such groups may not be underwritten.

Fiduciary
A person holding the funds or property of another in a position of trust. An example would be the executor of an estate.

Field
See Field Force. A type or line of insurance as “in the Life Insurance field.” (3) An area or territory covered by an agent, agency, or insurer.

Field Force
The agents and supervisory personnel of insurers who operate away from the home office in the branch offices and agencies of the company.

Financial Reinsurance
A form of reinsurance which considers the time value of money and has loss containment provisions. One of its objectives is the enhancement of the cedant’s financial statements or operating ratios, e.g., the combined ratio; loss portfolio transfers; and financial quota shares are examples.

Fine Print
A reference to imaginary small type in a policy contract supposedly containing exclusions, reductions, exemptions, and limitations of coverage. Most state laws include specifications for the minimum type size that can be used in a policy, and they also provide that exclusions cannot be printed in type smaller than that used to print the benefits.

Fire Mark
An insignia, generally metal, once placed on buildings insured by the insurer represented by the mark. Since the insurers had their own fire brigades, they had to check the mark on a burning building to determine whether or not they should extinguish the fire.

“First” Named Insured
The first named insured appearing on a commercial policy. The latest forms permit the insurer to satisfy contractual duties by giving notice to the “first” named insured rather than requiring notice to all named insureds.

First Loss Insurance
Popularly used, an insurance policy which is called upon to pay a loss before others covering the same risk. A contract written in such an amount as to cover only an insured’s expected loss during the policy period with no other insurance in existence.

First Party Insurance
Insurance which applies to coverage for the insured’s own property or person. Contrast with Third Party Insurance.

First Year
The term used to refer to various matters during the first year a policy is in force, such as first year premiums and first year claims.

First Year Commission
The commission paid on the first year’s premium.

Foreign Insurer
An insurer domiciled in a state of the United States other than the one in which the insured’s insurance is written.

GLOSSARY – LETTER G

Graded Commission
A compensation scale for agents which provides for varying commission rates depending upon the class, type, or volume of insurance written. Contract with Flat Commission.

Gross Line
The total limit accepted by an insurer on an individual risk, including the amount to be reinsured.

Gross Premium
The net premium plus operating expenses, commissions and other expenses.

Guaranty Funds
Funds created by state law from contributions by insurance companies operating in the state which are used to make good any unpaid claims or otherwise to make money available to insolvent companies. Each state which has a fund has a different plan.

Guiding Principles
Rules established by major Property and Liability trade associations for the adjustment of losses, particularly with respect to how losses should be apportioned between insurance companies under certain circumstances.

GLOSSARY – LETTER H

Hangarkeepers Legal Liability Insurance
Insurance which the owner of an airplane hanger buys to protect himself from liability for damage or injury to others arising out of the ownership, maintenance, or use of the premises for an aircraft hanger.

Hazard
A specific situation that increases the probability of the occurrence of loss arising from a peril, or that may influence the extent of the loss. For example, accident, sickness, fire, flood, liability, burglary, and explosion are perils. Slippery floors, unsanitary conditions, shingled roofs, congested traffic, unguarded premises, and uninspected boilers are also hazards.

Health Insurance Portability and Accountability Act (HIPAA)
Health Insurance Portability and Accountability Act of 1996.

GLOSSARY – LETTER I

Impaired Insurer
An insurer which is in financial difficulty to the point where its ability to meet financial obligations or regulatory requirements is in question.

Impairment of Capital
A condition in which the surplus account of a stock insurer has been exhausted so that it must invade the capital account (amounts contributed by stockholders) to meet liabilities. Some jurisdictions allow a percentage invasion of capital; some do not.

Implied Authority
Authority of an agent that the public may reasonably believe the agent to have. If the authority to collect and remit premiums is not expressly granted in the agency contract, but the agent does so on a regular basis and the insurer accepts, the agent has implied authority to do so.

Import
Goods or services purchased from another country and brought into one’s own country.

Incurred Loss Ratio
The percentage of losses incurred to premiums earned.

Indemnify
To restore the victim of a loss to the same position as before the loss occurred.

Indemnity
Restoration to the victim of a loss by payment, repair, or replacement.

Independent Adjuster
An adjuster who works as an independent contractor, hiring himself out to insurance companies or other organizations for the investigation and settlement of claims. Independent adjusters represent the interests of insurance companies. Contrast with Public Adjuster. An agent operating as an independent contractor under the independent agency system.

Independent Contractor
One who agrees to perform according to a contract and who is not an employee.

Independent Insurance Agents of America (IIAA)
An association of independent insurance agents historically known to represent stock insurance companies more than mutual companies. Members are also members of their state associations.

Index Bureau Experience
A measure of losses relating to claims reported through a claim office during a 12-month period.

Individual Risk Premium Modification Rating Plan
A plan which modifies the premium on large package policies by considering such factors as reduced expenses for handling costs (Expense Modification) and special characteristics of the risk not contemplated by the basic rate (Risk Modification).

Industrial Risk Insurers
A consortium of major stock property and casualty insurers formed to write large, highly protected risks. The organization was formed in 1975 by the merger of the Factory Insurance Association and the Oil Insurance Association.

Initial Premium
An amount paid at the inception of an insurance contract, usually subject to adjustment at the end of the policy period.

Inspection
Independent checking on facts about an applicant, policyholder, or claimant, usually by a commercial inspection agency.

Inspection Report
A summary statement of the physical, financial, and moral attributes of an insured or an applicant for insurance on his property. Such reports are prepared by inspection bureaus, specialized organizations, and insurers.

Insurability
Acceptability to the insurer of an applicant for insurance.

Insurable Interest
Any interest a person has in a possible subject of insurance, such as a car or home, of such a nature that a certain happening might cause him financial loss.

Insurable Risk
A risk which meets most of the following requisites:

1. The loss insured against must be capable of being defined.
2. It must be accidental.
3. It must be large enough to cause a hardship to the insured.
4. It must belong to a homogeneous group of risks large enough to make losses predictable.
5. It must not be subject to the same loss at the same time as a large number of other risks.
6. The insurance company must be able to determine a reasonable cost for the insurance.
7. The insurance company must be able to calculate the chance of loss.

Insurance
A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to assume, to a specified extent, the losses suffered by the insured.

Insurance Commissioner
The head of a state’s insurance regulatory agency in most jurisdictions. In some states the title of Director or Superintendent is used.

Insurance Company Education Directors Society (ICEDS)
An organization of insurance company educators whose primary purposes are to promote insurance education and exchange information on the subject.

Insurance Department
A governmental bureau in each state and the federal government in Canada charged with the administration of insurance laws, including the licensing of agents and insurers and their regulation and examination. In some jurisdictions the department is a division of another state department or bureau.

Insurance Examiner
The representative of a state insurance department assigned to participate in the official audit and examination of an insurer.

Insurance Guaranty Act
The legislation enacted in many states providing for guaranty funds for the policyholders of insolvent insurers.

Insurance Hall of Fame
An institution created to honor those who have made outstanding contributions to insurance thought and practice. Selections are made on an international basis.

Insurance Institute of America, Inc (IIA)
An organization which develops programs and conducts national examinations in Insurance, Risk Management, Management, Adjusting, Underwriting, Auditing, and Loss Control Management. Diplomas are given to recognize achievement in these areas.

Insurance Policy
The printed form which serves as the contract between an insurer and an insured.

Insurance Regulatory Information System (IRIS)
Information and early-warning system used by the National Association of Insurance Commissioners (NAIC) to keep track of the financial soundness of insurers.

Insurance to Value
Insurance written in an amount approximating the value of the property insured.

Insured
The party to an insurance arrangement whom the insurer agrees to indemnify for losses, provide benefits for, or render services to. This term is preferred to such terms as policyholder, policy owner, and assured.

Insurer
The party to an insurance arrangement who undertakes to indemnify for losses, provide pecuniary benefits, or render services. It is desirable to use the word “insurer” in preference to “carrier” or “company” since it is a functional word applicable without ambiguity to all types of individuals or organizations performing the insurance function. The word insurer is generally used in statutory law.

Insuring Agreement (or Clause)
That portion of an insurance contract which states the perils insured against, the persons and/or property covered, their locations, and the period of the contract.

Interest Rate Risk
A risk faced by investors who invest in bonds characterized by an individual being locked into a lower interest rate when interest rates are generally increasing in the economy.

Intermediary
A third party in the design, negotiation, and administration of a reinsurance agreement. Intermediaries recommend to cedants the type and amount of reinsurance to be purchased and negotiate the placement of coverage with reinsurers.

International Insurance Seminars, Inc (IIS)
An institution established to promote worldwide exchanges of ideas and techniques between insurance people. The major focus of IIS is its annual seminar which brings together academicians and insurance practitioners.

Interstate Carrier
A transportation company which does business across state lines.

Investigative Consumer Report
A report ordered on an insured or applicant under which information about the person’s character, reputation, or lifestyle is obtained through personal interviews with the person’s neighbors, friends, associates or acquaintances. Contrast with Consumer Report.

Investment Company Act of 1940
A federal law which regulates the organization and activities of investment companies and requires the registration of investment companies with the federal government.

Investment Income
The return received by insurers from their investment portfolios, including interest, dividends, and realized capital gains on stocks. Realized capital gains means the profit realized on stocks that have actually been sold for more than their purchase price.

Investment Reserve
An item in the balance sheet of an insurance company which represents a setting aside of assets to compensate for a possible reduction in the market value of securities owned by the company.

Item
A term used to identify a statement in a policy as to what is insured. In a Fire policy one might refer to the contents item, meaning the coverage in the policy which applies to the contents. An individual entry, such as a piece of jewelry, listed with its description and valuation on a schedule by a policy showing items covere.

GLOSSARY – LETTER L

Lapse
Termination of a policy because of failure to pay the premium. In Life Insurance, the term refers to nonpayment before the policy has developed any nonforfeiture values. If it has, and the premium is not paid, it is said to have lapsed “except as to any nonforfeiture benefits that may apply.”

Lapsed Policy
One which has been allowed to expire because of nonpayment of premiums.

Leasehold
An agreement which gives a person the right to use and occupy property.

Legislated Coverages
Coverages provided through creation of facilities legislated into existence by federal or state law. FAIR Plans, the Flood Insurance Program and the assigned risk pools are examples.

Legislative Risk
A risk faced by investors whereby changes in tax laws can result in adverse effects on the individual’s investment results.

Letter of Credit
A financial guaranty issued by a bank that permits the party to which it is issued to draw funds from the bank in the event of a valid unpaid claim against the other party; in reinsurance, typically used to permit reserve credit to be taken with respect to non-admitted reinsurance; and alternative to funds withheld and modified coinsurance.

Level Commission System
A system of commissions in which the first year and all renewal commissions are the same percentage of the premium.

Liabilities
Money owed or expected to be owed. Insurance company financial statements, for instance, show assets and liabilities.

License
A certification of authority for an agent or insurer to operate, given by the appropriate jurisdiction.

Limitations
Exceptions to coverage and limitations of coverage as contained in an insurance contract. For instance, a limit of liability would be one limitation on an Automobile policy. Another example would be policies written to cover only certain described automobiles, or, in the case of Liability Insurance, certain described premises.

Limited Agent
An agent authorized to transact only a limited form of insurance, such as travel-accident or credit insurance. In many states, limited agents are exempt from licensing examination and education requirements.

Limited Partnership
An association of two or more persons who operate and manage a business for profit; at least one the partners does not work in the business but does have some management voice and financial investment. The limited partner has limited liability.

Limits
Ages below or above which the insurer will not issue a policy or above which it will not continue a policy presently in force. The maximum amount of benefits payable for a given situation or occurrence, e.g., a limit of $50,000 on the contents of a home, or a $40,000 per accident limit for Property Damage Liability.

Liquidation of Insurer
Action undertaken by a state Insurance Department to dissolve an impaired or insolvent insurer which cannot be restored to sound financial standing. Contrast with Rehabilitation of Insurer.

Liquidity
The ability of an insurer to convert its assets into cash to pay claims if necessary.

Loading
The amount added to the pure insurance cost to cover the cost of the operations of an insurer, the possibility that losses will be greater than statistically expected, and fluctuating interest rates on the insurer’s investments. The “pure” insurance cost is that portion of the premium estimated to be necessary for losses.

Loss
Generally refers to:

1. the amount of reduction in the value of an insured’s property caused by an insured peril,
2. the amount sought through an insured’s claim, or
3. the amount paid on behalf of an insured under an insurance contract.

Loss Adjustment Expense
The cost of adjusting losses, excluding the amount of the loss itself.

Loss Constant
A flat amount included in the premium for small Workers Compensation policies, for dwellings in some jurisdictions, and for some prescribed Inland Marine Insurance lines. The purpose of the Loss Constant is to offset the greater-than-average loss experience which most small risks have when compared to all other risks in a given classification.

Loss Control
Any combination of actions taken to reduce the frequency or severity of losses. Installing locks, burglar or fire alarms and sprinkler systems are loss control techniques.

Loss Development
The difference between the amount of losses initially estimated by the insurer and the amount reported in an evaluation on a later date.

Loss Expectancy
An underwriter’s estimate of the probable maximum loss to be suffered on an exposure being considered, with attention given to the expected level of loss prevention activities on the part of the insured.

Loss Frequency
The number of times a loss occurs over a specific period of time.

Loss Payee
The party to whom money or insurance proceeds is to be paid in the event of loss, such as the lienholder on an automobile or the mortgagee on real property.

Loss Prevention Service
Engineering and inspection work done by an insurance company or independent organization with the aim of removing or reducing dangerous conditions in order to prevent losses.

Loss Ratio
The losses divided by the premiums paid. The numerator (losses) can be losses incurred or losses paid, and the denominator (premium) can be earned premiums or written premiums, depending on what use is going to be made of the loss ratio.

Loss Reserve
The estimated liability for unpaid insurance claims or losses that have occurred as of a given evaluation date. Usually includes losses incurred but not reported (IBNR), losses due but not yet paid, and amount not yet due. The above describes a loss reserve as it would appear in an insurer’s financial statement. As to individual claims, the loss reserve is the estimate of what will ultimately be paid out on that case.

Loss Severity
The amount of a loss expressed in financial terms.

Losses Incurred
The total losses, whether paid or not, sustained by an insurer during a given period, e.g., 12 months.

Losses Outstanding
A summary statement prepared by Property, Life, and Liability insurers showing claims not yet settled.

Losses Paid
A summary of claims paid.

Lost Policy Release
A statement signed by an insured releasing the insurer from all liability for a lost or mislaid contract of insurance. It is usually signed after the company has issued a replacement policy.

GLOSSARY – LETTER M

Maloney Act
A 1938 amendment to the Securities Exchange Act of 1934. The Maloney Act established the National Association of Security Dealers (NASD) as a self regulatory organization (SRO) for those involved in the sale of securities.

Manager
A common title for the head of an agency that is operated as a branch office, as opposed to being operated as a agency. The manager is a salaried employee, usually with an incentive bonus based on the agency’s volume.

Mandatory Valuation Reserve
A reserve required by a state law to offset any declines in the valuation of securities listed as admitted assets.

Manual
A book giving rates, classifications, and underwriting rules for some line of insurance. An example would be the Automobile Manual which gives such information for Automobile Insurance.

Market Risk
A risk experienced by those who invest in securities which is the risk of possible loss of investment since there are no guarantees associated with such investments.

Market Value
The price for which something would sell, especially the value of certain types of assets, such as stocks and bonds. It is based on what they would sell for under current market conditions. For example, common stock market value would be the price of the stock as of a specified date.

Mass Merchandising
A technique whereby a group of people, usually employees or members of a union or trade association, insure with one company. Premiums are collected and remitted to the insurer in a lump sum.

Master Policy
The policy contract issued to an employer or other entity authorized by state law for a group insurance plan. A Property Insurance policy issued to an insured who can issue certificates of coverage to cover the property of others.

Mental (or Emotional) Distress
Usually not covered if a claimant was a bystander to an accident, but usually covered if he was physically involved.

Merit Rating
A type of rating plan used in several forms of insurance but most commonly in Personal Auto. It is a method whereby the insured’s premium will vary up or down depending on his own past loss record.

Minimum Premium
The smallest amount of premium for which an insurer will issue coverage under a given policy.

Mixed Insurer (or Company)
An insurance company in which the ownership is split among stockholders and policy owners. The term can also be used to indicate an insurer issuing both Life and Health Insurance policies. It is often erroneously used to describe an insurer offering both participating (dividend paying) and nonparticipating plans.

Mode of Premium Payment
The method of premium payment (mode) elected by the policy owner. Modes generally available are monthly, quarterly, semiannually, and annually.

Mutual Benefit Association
An organization offering benefits to members on a plan under which no fixed premiums are paid in advance but assessments are levied on members to meet specific losses as they occur.

Mutual Fund
An investment company that raises money by selling its own stock to the public. It then invests the proceeds in other securities. and the value of its own stock fluctuates with its experience with the securities in its portfolio. Mutual funds are of two types:

1. Open-end, in which capitalization is not fixed and more shares may be sold at any time.
2. Closed-end, in which capitalization is fixed and only the number of shares originally authorized may be sold.

Mutual Insurer
An incorporated insurer without incorporated capital owned by its policyholders. Although mutual insurers do distribute their earnings to their policyholders in the form of dividends, the term should not be used in a sense that makes it synonymous with participating. In most jurisdictions, a mutual insurer is free to issue nonparticipating insurance if it chooses and a stock insurer is free to issue participating insurance. Contrast with Stock Insurer.

GLOSSARY – LETTER N

Named Insured
Any person, firm, or corporation, or any member thereof, specifically designated by name as the insured(s) in a policy. Others may be protected as insureds even though their names do not appear on the policy. A common application of this latter principle is in Automobile policies where, under the definition of insured, protection is extended to cover other drivers using the car with the permission of the named insured.

Natural Death
Death by means other than accident or homicide.

Negligence
Failure to use that degree of care which an ordinary person of reasonable prudence would use under the given or similar circumstances. A person may be negligent by acts of omission or commission or both.

Net Interest Earned
The average interest earned by an insurer on its investments after investment expense but before federal income taxes.

Net Loss
The amount of loss sustained by an insurer after giving effect to all applicable reinsurance, salvage, and subrogation recoveries.

Net Premium
The amount of premium minus the agent’s commission. The premium necessary to cover only anticipated losses, before loading to cover other expenses. The original premium minus dividends paid or anticipated in participating Life Insurance when the insured elects to use his dividends toward payment of the premiums. Contrast with Gross Premium.

Non-Admitted Reinsurance
A Company is “non-admitted” when it has not been licensed and thereby recognized by appropriate insurance governmental authority of a state or country. Reinsurance is “non-admitted” when placed in a non-admitted company and therefore may not be treated as an asset against reinsured losses or unearned premium reserves for insurance company accounting and statement purposes.

Noninsurance
Making no financial preparation for meeting losses.

Nonparticipating (Non-Par)
Insurance contrasts on which no policy dividends are paid because there is no contractual provision for the policy owner to participate in the surplus. Contrast with Participating.

Nonrenewal
Termination of insurance coverage at an expiration date or anniversary date. This action may be taken by an insurer who refuses to renew, or by an insured who rejects a renewal offer.

Notice of Cancellation
Written notice by an insurer of intent to cancel insurance, or written notice by an insured requesting cancellation.

GLOSSARY – LETTER O

Occupational Accident
An accident arising out of or occurring in the course of one’s employment and caused by hazards inherent in or related to it.

Occupational Safety and Health Act (OSHA)
A federal statute which establishes safety and health standards on a nationwide basis. The act is enforced by Labor Department safety inspectors and also provides for the record keeping of statistics relevant to work injuries and illnesses.

Occurrence
An event that results in an insured loss. In some lines of insurance, such as Liability, it is distinguished from accident in that the loss does not have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected nor intended by the insured.

Odds
The probable frequency of incidence of a given occurrence in a statistical sample. It is expressed as a ratio to the probable number of nonoccurrences or as a decimal fraction of the total occurrences. For example, a probability of .25 equals odds of three to one against. A probability of .75 equals odds of three to one for.

Offer
The terms of a contract proposed by one party to another. In Property and Casualty Insurance, submitting an application to the company is usually considered an offer. In Life Insurance, the application plus the initial premium constitutes an offer.

Old Age, Survivors, Disability, and Health Insurance
The system of social insurance benefits for the aged, surviving dependents, and disabled workers set up by the Social Security Act of 1935, plus amendments and additions.

Omnibus Clause
An agreement in most Automobile Liability policies and some others that, by its definition of insured, extends the protection of the policy to others within the definition without the necessity of specifically naming them in the policy. An example would be a policy which covers the named insured and “those residing with him.”

Open Rating
A system whereby a state allows an insurer to use rates without prior approval.

Other Insurance
The existence of other contracts covering the same interest and perils.

Other Insurance Clause
A provision found in almost every insurance policy except Life and sometimes Health stating what is to be done in case any other contract of insurance embraces the same property and/or hazards.

Outstanding Premiums
Premiums due but not yet collected. An allowance paid to a ceding company over and above the acquisition cost to allow for overhead expenses, often including a margin for profit.

Overinsured
A term used to describe the condition that exists when an insured has purchased coverage for more than the actual cash value or replacement cost of a subject of insurance. It is also used to describe a situation where so much insurance is in force as to constitute a moral or morale hazard, such as having so much Disability Income Insurance in force that it becomes profitable to be disabled.

Overlapping Insurance
Coverage from two or more policies or insurers which duplicates coverage of certain risks.

Overline
The amount of insurance or reinsurance exceeding an insurer’s or reinsurer’s normal capacity inclusive of automatic reinsurance facilities. A commitment by an insurer or reinsurer above and beyond normal facilities or capacities.

Overriding Commission
A commission which an agent or broker may receive on any business sold in his exclusive territory by subagents. Also sometimes called “overwriting” or “overriding.”

Ownership of Expirations
An agreement by an insurer that certain information regarding the details of a policy, usually a Property or Liability form, will be revealed to no agent or broker other than the originating agent.

GLOSSARY – LETTER P

Package Policy
Any insurance policy including two or more lines or types of coverages in the same contract. Personal and commercial package policies are very common today. In fact, most policies sold are package policies.

Paid Losses
The amount actually paid in losses during a specified period of time, not including estimates of amounts that will be paid in the future for losses that occurred then.

Paid-For
Insurance on which the premium has been paid.

Paid-In Capital
The amount paid for the stock sold by a corporation.

Paid-In Surplus
Surplus paid in by stockholders, as contrasted with surplus earned through the operations of a business.

Paramedic
A person having professional training in some area of medical care but who is not a doctor. An adjective used to denote training or treatment by paramedical personnel.

Partial Loss
A loss covered by an insurance policy which does not completely destroy or render worthless the insured property.

Participating (Par)
Insurance that pays policy dividends. In other words, it entitles a policy owner to participate in allocations of the insurer’s surplus. In Life Insurance there are several options available for the use of such dividends. Insurance that contributes proportionately with other insurance on the same risk.

PHI
An acronym for Protected Health Information, defined as Identifiable health information that is transmitted or maintained by the group health plan in oral, electronic or written form.

Physical Hazard
Any hazard arising from the material, structural, or operational features of the risk itself apart from the persons owning or managing it.

PIA
Professional Insurance Agents. An association of independent agents involved in educational programs, consumer efforts, and government and industry affairs pertaining to the insurance industry.

Pilferage
Petty theft, particularly theft of articles in less than package lots. This term is associated with the insuring of cargo under an Inland Marine Insurance form.

Plain Language Laws
Mandatory state law that requires policies to be written in everyday language so that the are easily understood. Technical terms with their technical meanings are used only where required by law or substitution would be misleading.

Policy
The written statement of a contract effecting insurance, or certificates thereof, by whatever name called, and including all clauses, riders, endorsements, and papers attached thereto and made a part thereof.

Policy Anniversary
The anniversary of the date of issue of a policy as shown in the policy declarations.

Policy Owner
The person who has ownership rights in an insurance policy and who may or may not be either the policyholder or the insured. Often used loosely to refer to the policyholder and/or the insured.

Policy Period (or Term)
The period during which the policy contract affords protection, e.g., six months or one or three years.

Policy Year Experience
The measure of premiums and losses for each 12-month period a policy is in force. Losses occurring during this 12-month period are assigned to the period regardless of when they are actually paid.

Policyholder
The person in actual possession of an insurance policy. Often used loosely to refer to the policy owner and/or insured.

Pool
An organization of insurers or reinsurers through which particular types of risks are underwritten with premiums, losses, and expenses shared in agreed ratios.

Pool (Association or Syndicate)
An organization of insurers or reinsurers through which particular types of risks are written with the premiums, losses, and expenses shared in agreed amounts among the insurers belonging to the pool. A pool is often the entity to write large values, such as those on commercial aircraft.

Portfolio
All of the insurer’s in-force policies and outstanding losses, respecting described segments of its business. Also, the total securities owned by an insurer.

Portfolio Reinsurance
In transactions of reinsurance, it refers to all the risks of the reinsurance transaction. For example, if one company reinsures all of another’s outstanding Automobile business, the reinsuring company is said to assume the “portfolio” of Automobile business and it is paid the total of the unearned premium on all the risks so reinsured (less some agreed commission).

Power of Attorney
The authority given to one person or corporation to act for and obligate another to the extent set forth in the agreement creating the power. The authority given to the chief administrator of a reciprocal insurance exchange, who is called an attorney in fact, by each subscriber.

Pre-certification Authorization
A cost containment technique which requires physicians to submit a treatment plan and an estimated bill prior to providing treatment. This allows the insurer to evaluate the appropriateness of the procedures, and lets the insured and physican know in advance which procedures are covered and at what rate benefits will be paid.

Preemptive Right
A current stockholder’s right to maintain his or her proportionate ownership in a corporation through the exercising of this right to purchase new issues of stock before the public.

Preferred Risk
Any risk considered to be better than the standard risk on which the premium rate was calculated.

Preliminary Term
The period of a short-term insurance issued to cover a risk to a date which the policy owner wishes to establish as the anniversary date for future premiums.

Premium
The price of insurance protection for a specified risk for a specified period of time.

Premium Discount
A discount allowed on premiums paid in advance of one year, which is based on projected interest to be earned. A discount allowed on certain Workers Compensation and Comprehensive Liability policies to allow for the fact that larger premium policies do not require the same percentage of the premium for basic insurer expenses such as policywriting. The discount percentage increases with the size of the premium. This is not available in all states.

Premium Notice
A form notice from an insurer or agency to a policy owner that a premium will be due on a given date.

Premium Rate
The price per unit of insurance. An example would be a Property Insurance rate of 10 cents per $100 of the value of the property to be insured.

Premium Receipt
The receipt given a policy owner for the payment of a premium.

Present Value
The amount of money that future amounts receivable are currently worth. For example, a Life Insurance policy may provide for payments to be made monthly for 10 years. The present value of that money would be less than the total amount of the monthly payments for 10 years because of the amount of interest that a present lump sum could earn during the term that the payments otherwise would have been made.

Primary Coverage
Insurance coverage that covers from the first dollar, perhaps after a deductible, as distinguished from excess coverage that pays only after some primary coverage has been exhausted. Contrast with Excess Insurance.

Privacy Notice
A notice a company issues to all its customers stating that their PHI (Protected Health Information) will be protected.

Pro Rata Rate
A rate charged for a period of coverage shorter than the normal period. An example, if an insured had coverage for only one quarter of a year, his premium would be only one quarter of the annual premium.

Professional Reinsurer
A term used to designate a company whose business is confined solely to reinsurance and the peripheral services offered by a reinsurer to its customers as opposed to primary insurers who exchange reinsurance or operate reinsurance departments as adjuncts to their basic business of primary insurance. The majority of professional reinsurers provide complete reinsurance and service at one source directly to the ceding company.

Prohibited List
A list of types of business or types of risks that an insurance company will not insure. Also called the “undesirable list,” the “do not solicit list,” and other designations.

Promulgate
To develop, publish and put into effect insurance rates or forms. To make public, by publishing or announcing, the fact that a statute or rule of court is a legal order or direction enforceable by law, and violation of such is punishable as provided by law.

Proof of Loss
A formal statement made by a policy owner to an insurer regarding a loss. It is intended to give information to the insurer to enable it to detemine the extent of its liability.

Prospective Rating
A method used in arriving at the rate and premium for a specified future period, based in whole or in part on the loss experience of a prior specified period.

Prospective Rating Plan
A plan which uses a formula for determining premiums for a specified period on the basis, in whole or in part, of the loss experience of the previous period.

Protection
A term used interchangeably with “coverage” to denote insurance provided under the terms of a policy. The fire-fighting facilities in the area in which a risk is located.

Public Law 15
A Congressional Act of 1945 exempting insurance from federal anti-trust laws to the extent that it is regulated properly by states. This law was passed after the reversal of the Paul versus Virginia case by the SEUA decision.

GLOSSARY – LETTER Q

Quasi-Insurance Institutions
A term sometimes applied to government institutions created to carry out social insurance arrangements that have some, but not all, the characteristics of insurers. An example is the United States Department of Health, Education, and Welfare.

Quick Assets
Assets that are quickly convertible into cash.

Quid Pro Quo
Latin for “this for that,” or “one thing for another.” In insurance it could refer to the consideration in an insurance contract which calls for the exchange of values by both parties to the contract in order for it to be a valid contract.

GLOSSARY – LETTER R

Rate
The cost of a given unit of insurance. For example, in Ordinary Life Insurance, it is the price of $1,000 of the face amount. In Disability Income Insurance, it is usually the price per $10 or per $100 of monthly benefits. In Property Insurance, it is the rate per $100 of value to be insured. The premium, then, is the rate multiplied by the number of units of insurance purchased.

Rating Bureau
A private organization that classifies and promulgates manual rates and in some cases compiles data and measures the hazards of individual risks in terms of rates in geographic areas, the latter being true especially in connection with Property Insurance.

Rebate
A portion of the agent’s commission returned to an insured or anything else of value given an insured as an inducement to buy. The payment of policy dividends, retroactive rate adjustments, and reduced premiums that reflect the savings of direct payment to an agent or home office are not usually considered to be rebates. In most cases rebates are illegal, both for the agent or insurer to give a rebate and for an insured to receive one.

Reinstatement Clause
When the amount of reinsurance coverage provided under a treaty is reduced by the payment of a reinsurance loss as the result of one catastrophe, the reinsurance cover is automatically reinstated usually by the payment of a reinstatement premium.

Reinstatement Premium
A pro rata reinsurance premium is charged for the reinstatement of the amount of reinsurance coverage that was reduced as the result of a reinsurance loss payment under a catastrophe cover.

Reinsurance
The practice whereby one party called the Reinsurer in consideration of a premium paid to him agrees to indemnify another party, called the Reinsured, for part or all of the liability assumed by the latter party under a policy or policies of insurance which it has issued. The reinsured may be referred to as the Original or Primary Insurer, or Direct Writing Company, or the Ceding Company.

Reinsurer
An insurer or reinsurer assuming the risk of another under contract.

Renewal
The reestablishment of the in-force status of a policy, the term of which has expired or will expire unless it is renewed.

Renewal Certificate
A short form certificate which is used to renew a policy. It refers to the original policy, keeping all of its provisions, but does not restate all of its insuring agreements, exclusions, and conditions.

Renewal Commission
A commission paid on premiums subsequent to the first-year commission.

Renewals
The premiums paid for renewed policies. The commissions paid on renewal premiums.

Replacement
A new policy written to take the place of one currently in force.

Representative
An agent or sales person.

Rescission
Repudiation of a contract. A party whose consent to a contract was induced by fraud, misrepresentation or duress may repudiate it. A contract may also be repudiated for failure to perform a duty. The termination of an insurance contract by the insurer when material misrepresentation has occurred.

Reserve
An amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. An amount allocated for a special purpose. Note that a reserve is usually a liability and not an extra fund. On occasion a reserve may be an asset, such as a reserve for taxes not yet due.

Retention
The net amount of risk which the ceding company or the reinsurer keeps for its own account or that of specified others.

Risks
A term used to denote the physical units of property at risk or the object of insurance protection and not Perils or Hazard. Reinsurance by tradition permits each insurance company to frame its own rules for defining units of Risks. The word is also defined as chance of loss or uncertainty of loss.

GLOSSARY – LETTER S

Securities
Evidences of a debt or of ownership, as stocks, bonds, and checks.

Selection
The choosing by an underwriter of risks acceptable to an insurer.

Self-Insurance
Making financial preparations to meet pure risks by appropriating sufficient funds in advance to meet estimated losses, including enough to cover possible losses in excess of those estimated. Few organizations are large or dispersed enough to make this a sound alternative to insurance.

Settlement
Usually, a policy benefit or claim payment. It connotes an agreement between both parties to the policy contract as to the amount and method of payment.

Slip
A paper submitted by a broker to the underwriters at Lloyd’s of London which identifies syndicates accepting the risk and notes the extent of their participation.

Social Insurance
Compulsory insurance legislated to provide minimum economic security for large groups of people, particularly those with low incomes. It is primarily concerned with the costs and loss of income resulting from sickness, accidental injury, old age, unemployment, and the premature death of the head of a family.

Social Security
The programs provided under the United States Social Security Act of 1935, plus amendments and additions thereto. It is now called Old Age, Survivors, Disability, and Health Insurance. Any government program which provides economic security for portions of the public, e.g., Social Insurance, Public Assistance, Family Allowances, and Grants-in-Aid.

Sole Proprietorship
A business enterprise owned by one person who is its manager and employee.

Solicitor
An individual appointed and authorized by an agent to solicit and receive applications for insurance as his representative. Solicitors are not usually given the power to bind coverage but are required to be licensed.

Solvency
With regard to insurers, 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 insurer’s representative in a territory. He services the insurer’s agents and in is responsible for the volume and quality of the business written in that territory. In the Property and Liability fields this person is a special agent or marketing representative, and in the Life field he is known as a sales representative.

Speculative Risk
Uncertainty as to whether a gain or loss will occur. An example would be a business enterprise where there is a chance that the business will make money or lose it. Speculative risks are not normally insurable. Contrast with Pure Risk.

Split Limit
Any insurance coverage which is expressed in different amounts for different types of losses. For example, automobile liability of 50/100/50 means bodily injury limits of $50,000 per person, $100,000 per accident, and a property damage limit of $50,000 per accident. Contrast with Single Limit.

Standard Policy
Coverage which has identical provisions regardless of the issuing insurer. Many common policies are standardized. Insurance issued to a standard risk.

State Agent
An outmoded term meaning an agent who has an exclusive territory of one or more states. Also, an obsolete term for special agent.

State Associations of Insurance Agents
Each state may have one or more associations of insurance agents. These organizations are made up of individual agents who have joined forces to discuss common problems and promote the American agency system.

State Fund
A fund set up by a state government to finance a mandatory insurance system, such as Workers Compensation, nonoccupational disability benefits, or, in Wisconsin, state-offered Life Insurance. Such a fund may be monopolistic, i.e., purchasers of the type of insurance required must place it in the state fund; or it may be competitive, i.e., an alternative to private insurance if the purchaser desires to use it.

Statutory
Required by or having to do with law or statute.

Statutory Accounting Principals (SAP)
Those principals required by statute which must be followed by an insurance company when submitting its financial statement to the state insurance department. Such principles differ from generally accepted accounting principles (GAAP) in some important respects. For one thing SAP requires that expenses must be recorded immediately and cannot be deferred to track with premiums as they are earned and taken into revenue.

Stop Loss
A form of reinsurance under which the reinsurer pays some or all of a cedant’s aggregate retained losses in excess of a predetermined dollar amount or in excess of a percentage of premium.

Stop Loss
Any provision in a policy designed to cut off an insurer’s losses at a given point. In effect, a stop loss agreement guarantees the loss ratio of the insurer.

Sub-Agents
Agents reporting to other agents or agents, and not directly to the company.

Subchapter S Corporation
A corporate form of business in which all profits and losses are shared by the stockholders and thus the corporation is taxed on an individual basis as opposed to corporate taxation.

Sublimit
Any limit of insurance which exists within another limit. For example, special classes of property may be subject to a specified dollar limit per occurrence, even though the policy has a higher overall limit; a health insurance policy may limit certain benefits to fixed dollar amounts or maximum amounts per day, even though the overall coverage limit is higher.

Submitted Business
Applications for insurance submitted to an insurer but not yet acted upon by it.

Subrogation Clause
A clause giving an insurer the right to pursue any course of action, in its own name or the name of a policy owner, against a third party who is liable for a loss which has been paid by the insurer. One of its purposes is to make sure that an insured does not make any profit from his insurance. This clause prevents him from collecting from both his insurer and a third party. It is never part of a Life Insurance policy.

Subrogation Release
A release taken by an insurer upon indemnifying an insured. It contains a provision specifying that the insurer will be subrogated to the rights of recovery that the insured has against any person responsible for the loss.

Subscription Policy
A policy to which two or more insurers may subscribe, indicating in the policy the share of the risk to be borne by each insurer.

Substandard Risk
A risk not measuring up to underwriting standards. It may still be written but usually at a surcharged premium.

Superintendent of Insurance
The title of the head of a state or provincial insurance department used in some jurisdictions. In most states the title “commissioner” is used.

Surplus
The amount by which assets exceed liabilities.

Surplus Lines
A risk or a part of a risk for which there is no market available through the original broker or agent in its jurisdiction. Therefore, it is placed with nonadmitted insurers on an unregulated basis, in accordance with the surplus or excess lines provisions of the state law.

GLOSSARY – LETTER T

Temporary Agent
A person who is licensed to act as an agent for a brief period of time (usually 90 days) without taking a written examination. Temporary licenses are commonly granted to allow someone to continue the business of an agent who has died, become disabled, or entered active military service.

Term
The period of time for which a policy or bond is issued.

Term Rule
The provision in a rating manual which states the periods for which coverages run, and discounts, if any, which apply to the rates or premiums of policies issued for more than one year.

Termination
The time the coverage under an insurance policy ends, either because its term has expired or because it has been cancelled by either party.

Third Party Beneficiary
A person who is not a party to a contract but who has legally enforceable rights under the contract. It might be a Life Insurance beneficiary, or a mortgagee.

Time Limits
The limits of time within which notice of a claim and proof of a loss must be submitted.

Title Insurance
Insurance which indemnifies the owner of real estate in the event that his clear ownership of property is challenged by the discovery of faults in the title that was passed to him.

Total Loss
A loss of sufficient size so that it can be said there is nothing left of value. The complete destruction of the property. The term is also used to mean a loss requiring the maximum amount a policy will pay.

Transfer of Risk
Shifting all or part of a risk to another party. Insurance is the most common method of risk transfer, but other devices, such as hold harmless agreements, also transfer risk. One of the four major risk management techniques.

GLOSSARY – LETTER U

Underinsurance
A condition in which not enough insurance is carried to cover the insurable value.

Underwriter
A technician trained in evaluating risks and determining rates and coverages for them. The term derives from the practice at Lloyd’s of each person willing to accept a portion of the risk writing his name under the description of the risk.

Underwriters Laboratories, Inc. (UL)
A testing laboratory for manufactured items to determine their safety propensities.

Underwriting
The process of selecting risks 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.

Unearned Premium
That portion of the original premium that applies to the unexpired portion of risk. A fire or casualty insurer or reinsurer must carry a reserve against all unearned premiums as a liability in its financial statement, for if the policy should be canceled, the company would have to pay back the unearned part of the original premium.

Unearned Premium
That portion of the written premium applicable to the unexpired or unused part of the period for which the premium has been paid. Thus, in the case of an annual premium, at the end of the first month of the premium period eleven-twelfths of the premium is unearned.

Unearned Premium Reserve
The amount shown in the insurance company’s balance sheet which represents the approximate total of the premiums which have not yet been earned as of a specific point in time.

Unemployment Insurance
Insurance against loss of income due to unemployment. It is funded by payroll taxes and subject to control by both the federal and state governments. Individuals who are willing and able to work qualify for this insurance by working at a job in an eligible classification, earning a minimum amount of money, and being subject to involuntary unemployment.

Unilateral Contract
A contract such as an insurance policy in which only one part to the contract, the insurer, makes any enforceable promise. The insured does not make a promise but pays a premium, which constitutes his part of the consideration.

Unreported Claims
A reserve, based on estimates, to set up claims that have occurred but have not yet been reported to the insurer as of the time when either the policy has expired or the insurer is preparing its annual statement.

GLOSSARY – LETTER W

Waiver
A rider waiving (excluding) liability for a stated cause of injury or sickness. A provision or rider agreeing to waive premium payments during a period of disability of the insured. The act of giving up or surrendering a right or privilege that is known to exist. In Property and Liability fields, it may be effected by an agent, adjuster, company, employee, or company official, and it can be done either orally or in writing.

Written Premiums
The total premiums on all policies written by an insurer during a specified period of time, regardless of what portions have been earned. Contrast with Earned Premium.

GLOSSARY – LETTER Y

You/Your
These words are used to refer to the named insured in many of the modernized/personalized policy forms.