Insurance definitions
Definitions

 

Don't understand an insurance term?  We can help.  Below are definitions of common insurance terms, and as always, if you still have questions, we're here to help.  Call us anytime do discuss any of your insurance questions or needs.

A B C D E F G H I J K L  M N O P Q R S T U V W X Y Z

Accounts Receivable Insurance
Coverage which protects businesses against their liability to collect their accounts receivable because of the loss of supporting records which have been destroyed by a covered cause of loss. Also covered are the extra collection expenses which are incurred because of such loss or damage and other reasonable expenses incurred to re-establish records of accounts receivable after a loss or damage.

Active Participant
Person whose absence from a planned event would trigger a benefit if the event needs to be canceled or postponed.

Activities of Daily Living
Any activity necessary on a daily basis. Bathing, preparing and eating meals, moving from room to room, getting into and out of chairs or beds, dressing, using a toilet.

Actual Cash Value
Cost of replacing damaged or destroyed property with comparable new property, minus depreciation and obsolescence. For example, a 10-year-old couch will not be replaced at current full value because of depreciation.

Actuary
A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics.

Adjustable Rate
An interest rate that changes from time to time, based on changes in a published market-rate index.

Adjuster
A representative of the insurer who seeks to determine the extent of the insurer�s liability for loss when a claim is submitted.

Admitted Assets
Assets of an insurance company which are included on their financial statement. These assets are an important factor when regulators measure insurance company solvency. They include mortgages, stocks, bonds and real estate. Every state has discretion over insurance laws, but these items are typically standard.

Admitted or Not Admitted Insurer
Indicates the company is approved (or not disapproved) to write certain lines of insurance in the state.

Agent

An individual who sells and services insurance policies in either of two classifications:

1.Independent agent represents multiple insurance companies and services clients by searching the market for the most advantageous price for the most coverage.

2.Direct agent represents only one company and sells only its policies.

Aggregate Limit
Refers to the amount of coverage that the insured has under the contract for a specific period of time, usually the contract period, no matter how many separate accidents might occur. If the limit is 2 Million, and the insured already filed a claim for 1 Million and 500,000 if they have another 1 Million dollar loss, only $500,000 will be covered since that exhausts the limit.

Annual Administrative Fee
Charge for expenses associated with administering a group employee benefit plan.

Annual Crediting Cap
The maximum rate that the equity-indexed annuity can be credited in a year. If a contract has an upper limit, or cap, of 5 percent and the index linked to the annuity gained 6 percent, only 5 percent would be credited to the annuity.

Annuitization
Process by which you convert part or all of the money in a qualified retirement plan or nonqualified annuity contract into a stream of regular income payments, either for your lifetime or the lifetimes of you and your joint annuitant. Once you choose to annuitize, the payment schedule and the amount is generally fixed and can�t be altered.

Annuitization Options
Choices in the way to annuitize. For example, life with a 10-year period certain means payouts will last a lifetime, but should the annuitant die during the first 10 years, the payments will continue to beneficiaries through the 10th year. Selection of such an option reduces the amount of the periodic payment in a direct proportion to the certain payout period.

Annuity
An agreement by an insurer to make periodic payments that continue during the survival of the annuitant(s) or for a specified period.

Assault & Battery
This coverage is used to protect against bodily injury and property damage arising our of alleged acts of assault and battery. Depending on the insurance company providing the coverage, assault and battery can be defined differently in the insurance policy. Generally, an assault being an act which creates fear of an imminent battery, and the battery is an unlawful touching.

Assets
Assets refer to �all the available properties of every kind or possession of an insurance company that might be used to pay its debts.� There are three classifications of assets: invested assets, all other assets, and total admitted assets. Invested assets refer to things such as bonds, stocks, cash and income-producing real estate. All other assets refer to non-income producing possessions such as the building the company occupies, office furniture, and debts owed, usually in the form of deferred and unpaid premiums. Total admitted assets refer to everything a company owns. All other plus invested assets equals total admitted assets. By law, some states don�t permit insurance companies to claim certain goods and possessions, such as deferred and unpaid premiums, in the all other assets category, declaring them �non-admissible.�

Attained Age
Insured�s age at a particular time. For example, many term life insurance policies allow an insured to convert to permanent insurance without a physical examination at the insured�s then attained age. Upon conversion, the premium usually rises substantially to reflect the insured�s age and diminished life expectancy.

Automobile Liability Insurance
Coverage if an insured is legally liable for bodily injury or property damage caused by an automobile. These limits are usually subject to a state minimum.

Bailees Liability Coverages
This type of coverage is designed for a bailee to provide coverage for liability for the property of customers in that bailee�s care, custody or control. Although this coverage was designed to cover the bailee�s liability exposure, it can often be endorsed or have options exist to provide a no-fault coverage to protect the customer�s property against any damage, whether or not there is negligence and subsequent liability.

Benefit Period
In health insurance, the number of days for which benefits are paid to the named insured and his or her dependents. For example, the number of days that benefits are calculated for a calendar year consist of the days beginning on Jan. 1 and ending on Dec. 31 of each year.

Boiler and Machinery Insurance (B&M)
Protection against loss from disruption of boilers and machinery by an insured peril: loss to the boiler and machinery itself, damage to other property, business interruption losses, or all three. Also known as machinery breakdown insurance.

Broker
An independent agent who represents the buyer, rather than the insurance company, and tries to find the buyer the best policy by comparison shopping.

Broker/Agent
Independent insurance salesperson who represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant�s coverage to get the most coverage at the best price. This person is licensed as an agent and a broker.

Builder�s Risk Insurance
is a special type of insurance which indemnifies against damage to buildings while they are under construction. Builder�s risk insurance is coverage that protects a person�s or organization�s insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause.

Building and Personal Property Coverage
A commercial property coverage which can be used to cover buildings, personal property, and personal property of others.

Business Income Insurance
A time element coverage which pays for loss of earnings or income when business operations are interrupted, curtailed or suspended due to property loss as a result of an insured cause of loss. Also covered are loss of rents and rental value. Extra expense incurred to continue operations at another location are included as long as they reduce the total amount of loss.

Business Personal Property
The portable property which is owned by an insured business entity, including goods for sale, fixtures, equipment, machines, materials (raw through finished), and similar property. Such property must be used by the business operation.

Casualty
Liability or loss resulting from an accident.

Casualty Insurance
That type of insurance that is primarily concerned with losses caused by injuries to persons and legal liability imposed upon the insured for such injury or for damage to property of others. It is often called liability insurance. It also includes other items such as plate glass, insurance against crime, robbery, burglary and forgery, boiler and machinery insurance (B & M) and Aviation insurance.

Claim
A request made by the insured, or the insured�s beneficiary, for payment of the benefit contracted by the insurance company from an insurable event that occurred.

Coinsurance
In property insurance, requires the policyholder to carry insurance equal to a specified percentage of the value of property to receive full payment on a loss. For health insurance, it is a percentage of each claim above the deductible paid by the policyholder. For a 20% health insurance coinsurance clause, the policyholder pays for the deductible plus 20% of his covered losses. After paying 80% of losses up to a specified ceiling, the insurer starts paying 100% of losses. For property insurance, it is the amount of coverage you need for the insurance company to pay all of the losses. For example, if you have a structure which is going to cost $100,000 to rebuild, and you have $80,000 in replacement cost coverage, the insurance company will pay the costs to rebuild. However if you have less coverage, say $50,000, then the insurance company will only give you $50,000 to rebuild.

Collision Insurance
A type of auto insurance coverage. Collision Insurance will reimburse the insured for any damage sustained to their personal automobile that is due to the fault of the insured driver. This type of insurance is often added as an extension of a basic policy.

Commercial Blanket Bond
A fidelity bond which insures an employer against a loss from dishonest acts committed by employees, covering all employees in the regular service of the employer during the term of the bond. The bond is issued for a fixed amount which is the maximum sum payable for any one embezzlement, whether one or more employees are involved.

Commercial Crime Policy
This policy incorporates most commercial crime coverages into one policy. It is an ala Carte policy which starts with insuring agreements but can be expanded to include up to eleven additional insuring agreements. The insured can choose one or more insuring agreements.

Commercial Lines
Refers to insurance for businesses, professionals and commercial establishments.

Comprehensive Insurance
An �all risk� Auto insurance coverage providing damage protection in the event of physical damage (other than collision) or theft of the insured car, but not collision or upset which may be added. For example, collision with something other than a vehicle, fire damage, a cracked windshield, would be covered under the comprehensive section. This is offered as an extra on your insurance policy.

Computer Fraud Coverage Form
A crime coverage form designed to protect against loss of money, securities and property when conversion occurs via computer fraud.

Concurrent Periods
In hospital income protection, when a patient is confined to a hospital due to more than one injury and/or illness at the same time, benefits are paid as if the total disability resulted from only one cause.

Contingent Liability

1: A liability which may be incurred by an insured as a result of negligence on the part of independent persons engaged to perform work. The most common example is the contingent liability of a principal contractor, which may result from construction operations undertaken by sub-contractors. Also applies to the liability of a principal for the acts of an agent or servant.

2: In property insurance, the possibility of a financial loss to a policy holder resulting from damage or loss to the property of another, such as a supplier or a customer.

Contractors� Tools and Equipment Floater
An Inland marine form which insures the equipment, tools, and materials of a contractor

Contractual Liability Insurance
Insurance coverage to provide protection for the additional liability exposure an insured has assumed in a contract. Only specified contractual liability exposures are covered in standard liability policies for items such as leases and related types of contracts because the assumption of such liability in a contract is not only voluntary, but may be extensive. When contractual liability insurance is purchased, the contracts covered must be individually elevated for the type and amount of exposure posed.

Coverage
The scope of protection provided under an insurance policy. In property insurance, coverage lists perils insured against, properties covered, locations covered, individuals insured, and the limits of indemnification. In life insurance, living and death benefits are listed.

Convertible
Term life insurance coverage that can be converted into permanent insurance regardless of an insured�s physical condition and without a medical examination. The individual cannot be denied coverage or charged an additional premium for any health problems.

Copayment
A predetermined, flat fee an individual pays for health-care services, in addition to what insurance covers. For example, some insurance plans require a $15 copayment for each office visit, regardless of the type or level of services provided during the visit. Copayments are usually made in a straight dollar amount, not a percentage.

Cost-of-Living Adjustment (COLA)
An adjustment made to Social Security and supplemental security income in order to adjust benefits to counteract the effects of inflation. COLAs are generally equal to the percentage increase in the consumer price index for urban wage earners and clerical workers (CPI-W) for a specific period.

Coverage Area
The geographic region covered by travel insurance

Creditable Coverage
Term means that benefits provided by other drug plans are at least as good as those provided by the new Medicare Part D program. This may be important to people eligible for Medicare Part D but who do not sign up at their first opportunity because if the other plans provide creditable coverage, plan members can later convert to Medicare Part D without paying higher premiums than those in effect during their open enrollment period.

Crime Coverage
A generic term used to encompass the variety of crime coverage forms available to protect against losses of money, securities and property by such causes of loss as employee dishonesty, forgery, theft, burglary, robbery, kidnap, extortion and fraud.

Cyber Insurance (Data Breach)
A special form of commercial insurance created to protect businesses against cyber (internet) risks, such as hackers and other breaches of computer system security.

Death Benefit
The limit of insurance or the amount of benefit that will be paid in the event of the death of a covered person.

Deductible
Amount of loss that the insured pays before the insurance company is forced to pay. For example, if the insured has a loss which will cost $10,000 and they have a $1,000 deductible, the insurance company will pay $9,000 for the loss.

Directors and Officers Liability Insurance
Protects officers and directors of a corporation against damages from claims resulting from negligent or wrongful acts in the course of their duties. Also covers the corporation (and even the officers and directors in some cases) for expenses incurred in defending lawsuits arising from alleged wrongful acts of officers and directors. These policies always require the insured to retain part of the risk uninsured.

Drive Other Car Coverage
A provision in an automobile policy designed to protect the policyholder (and insureds other than the policyholder) when driving cars other than the ones in the policy.

Earned Premium
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 six months old would have only partly earned the premium.

Earthquake Insurance
Insurance against damage by earthquakes and earth movement.

Electronic Data Processing Insurance
An �all-risk� policy which provides protection on equipment, software and extra expenses incurred as a result of failure of such equipment caused by a loss and loss of earnings. Coverage may be extended to include liability claims alleging errors and omissions by data processing companies.

Elimination Period (Waiting Period)
The time which must pass after filing a claim before policyholder can collect insurance benefits. Also known as waiting period.

Employee Dishonesty / Fidelity Bond 1st and 3rd party
An insurance policy which reimburses an employer for losses resulting from dishonest acts committed by employees, covering all employees in the regular service of the employer during the term of the bond. The bond is issued for a fixed amount which is the maximum sum payable for any one embezzlement, whether one or more employees are involved.

Employers Liability Insurance
Coverage against common law liability of an employer for accidents to employees, as distinguished from liability imposed by a workers� compensation law.

Employee Retirement Income Security Act of 1974 (ERISA)
This act is sometimes called the �pension reform act.� One of the purposes of this act is to force employers to protect the assets of the business that have been designated as employee pension benefits.

Encumbrance
A claim on property, such as a mortgage or a lien for work and materials. The interest of the property owner is reduced by the amount of the encumbrance.

Exclusions
Items or conditions that are not covered by the general insurance contract.

Exposure
Measure of vulnerability to loss, usually expressed in dollars or units.

Extended Replacement Cost
This option extends replacement cost loss settlement to personal property and to outdoor antennas, carpeting, domestic appliances, cloth awnings, and outdoor equipment, subject to limitations on certain kinds of personal property; includes inflation protection coverage.

Fidelity Bond
An insurance policy which reimburses an employer for employee theft or embezzlement.

Fiduciary Liability Insurance
Protection for those who ad mister pension and welfare funds, profit-sharing and other employee benefit programs against loss for errors and omissions by the administrator. The need for this coverage was created by the Employee Retirement Income Security Act (ERISA) of 1974. Also known as pension trust liability insurance.

File-and-Use Rating Laws
State-based laws which permit insurers to adopt new rates without the prior approval of the state insurance department. Insurers submit their new rates with supporting statistical data.

Fine Arts Insurance
A personal lines coverage on works of art, usually written by inland marine underwriters on an �all risk� and a �valued� basis. The commercial lines equivalent is most often covered under a commercial articles floater which combines not only fine arts coverage, but also camera and musical instruments in one coverage form.

Flood
Overflow of water from its natural boundaries. More specifically defined by the National Flood Act of 1968 as �a general and temporary condition of partial or complete inundation of normally dry land areas from the overflow of land or tidal waters, or the unusual and rapid accumulation of runoff of surface waters from any source.�

Flood Insurance
Coverage against damage from the rising or overflowing of a body of water or �flood�

Forgery / Alteration
False or fraudulent making or altering of a written instrument. Also, the illegal signing of another�s name to a document such as a check.

Garage Keepers Legal Liability
Pays amounts an insured is legally obligated to pay because of damage or loss to property of others that is in the insured�s care, custody or control.

Garage Policy
Protects garage or service station operators, vehicle rental agencies, car washes, auto or vehicle dealers and trailer or RV dealers for claims alleging bodily injury or property damage caused by the operator�s negligence in business operations and the sale and use of automobiles.

General Liability Insurance
Insurance designed to protect business owners and operators from a wide variety of liability exposures and third party liability claim due to negligence. Exposures could include liability from accidents resulting from onsite and jobsite accidents and operations, products sold by the insured, operations completed by the insured, and contractual liability

Grace Period
The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered to have been paid on time. In Universal Life policies, it typically provides for coverage to remain in force for 60 days following the date cash value becomes insufficient to support the payment of monthly insurance costs.

Guaranteed Insurability Option
Life and health insurance provisions that guarantee the insured the right to buy additional coverage without without proving insurability.

Guaranteed Issue Right
The right to purchase insurance without physical examination; the present and past physical condition of the applicant are not considered. This is common with group plans.

Guaranteed Renewable
A policy provision in many products which guarantees the policy owner the right to renew coverage at every policy anniversary date. The company does not have the right to cancel coverage for any reason except for nonpayment of premiums by the policy owner. The rates are subject to changes.

Guaranty Association
An organization funded by life insurance companies within a state responsible for covering the financial obligations of a member company that becomes insolvent.

Hazard
A condition or a situation that increases the likelihood or probability of a loss. For example, storing gas cans next to the furnace would increase the likelihood of a fire or explosion.

Hazardous Activity
Bungee jumping, scuba diving, flying (non commercial), horseback riding and other activities not generally covered by standard insurance policies. For insurers that do provide cover for such activities, it is unlikely they will cover liability and personal accident, which should be provided by the establishment which is organizing the activity.

(HMO)Health Maintenance Organization
A corporation which is financed by insurance premiums and has member physicians and professional staff who provide curative and preventive medicine within a specific geographic and professional limits to policy members and their families.

Health Reimbursement Arrangement
an arrangement for individuals who are covered under high-deductible health plans (HDHP) who are not qualified for a health savings account can use an HRA.

(HSA) Health Savings Account
An account created for individuals who are covered under high-deductible health plans (HDHPs) to save for medical expenses that HDHPs do not cover. Contributions are made into the account by the individual or the individual�s employer and are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified medical expenses, which include most medical care such as dental, vision and over-the-counter drugs.

HO-2 Policy
A package of basic homeowners insurance that covers a number of specified causes of direct losses to a residence, personal property, and offers liability insurance to the insured. It responds to several more causes of loss than a HO-1 form

Ho-3 Policy
A broad package of homeowners insurance that with the exception of earthquake, flood, military and nuclear activity, covers all direct losses to a residence which is not specifically excluded. It also provides personal property protection on a specified cause basis as well as liability insurance.

HO-4 Policy
A package of basic homeowners insurance which covers a number of specified causes of direct loss to personal property and liability insurance. it responds similarly to a HO-2 form and is designed for tenants.

Ho-6 Policy
A package of basic homeowners insurance which covers a number of specified causes of direct losses to certain types of structural and personal property and also offers liability insurance. It also provides some coverage for structural property that is under joint ownership and limited coverage for property loss assessments. It responds similarly to an HO-2 form, and is designed for condominium owners.

Hold Harmless Agreement
A contractual arrangement in which one party agrees to assume certain liability which otherwise would be borne by the other party. For example, an insurer may wish to pay a loss when it is uncertain whether it may be called upon a second time to some other party. The payee may be asked to execute an agreement whereby the company will be reimbursed or held harmless by the payee if such request should happen. Another example is when the principal in a large construction project frequently demands hold harmless agreements from all subcontractors in respect to claims made against the principal arising out of the subcontractors� negligence. The principal often stipulates the purchase of a liability policy by the subcontractor to support the hold harmless agreement.

Homeowners Policy
A package policy for dwelling and contents risks combining fire and allied line coverage with comprehensive personal liability and theft insurance for homeowners and tenants. This policy carries an indivisible premium in that the premium is not separately stated or broken down for the various hazards insured against. There are different homeowners forms, varying in extent of coverage and cost from the broad cause of loss policy (HO-2) to the special cause of loss policy (HO-3), to the renter�s policy (HO-4), (HO-6)

Hurricane Deductible
Amount you must pay out-of-pocket before hurricane insurance will start paying. Many insurers in hurricane-prone states issue homeowners insurance policies with percentage deductibles for storm damage, instead of the traditional dollar deductibles used for claims such as fire and theft. Percentage deductibles vary from 1 percent of the loss to 15 percent, depending on many factors that differ by state and insurer. This is one thing insurance companies are doing to limit their risk in these areas.

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

Inflation Protection
An optional property coverage endorsement offered by insurers that increases the policy�s limits of insurance during the policy term to keep pace with inflation.

Installation Insurance
Protection for the installer of equipment against loss by specified perils or on an �all-risk� basis to property in the course of installation.

Insurable Interest
Insured person derives a financial or other kind of benefit from the continuous existence of the insured object. In all insurance products, the insured would have to have something to lose in order to insure something. Example, you do not have an insurable interest in your neighbor�s car.

Insurance Adjuster
A representative of the insurer who seeks to determine the extent of the insurer�s liability for loss when a claim is submitted. Independent insurance adjusters are hired by insurance companies on an �as needed� basis and might work for several insurance companies at the same time. Public adjusters work for the insured in the settlement of claims and receive a percentage of the claim as their fee.

International Insurance Coverages
Business coverage for companies which conduct businesses outside the USA. The scope of coverages available may include but are not limited to: premises and product liability, automobile liability, workers compensation and employers liability, property including transit, kidnap and ransom, confiscation and civil war, crime, business interruption, difference in limits and conditions, and endemic disease.

Laddering
Purchasing bond investments that mature at different time intervals to avoid reinvestment risk.

Leasehold Insurance
Protection against the leasee�s (tenant�s) loss of value when a lease is canceled because of a fire or other peril which renders the property unusable. The value being the excess of the rental value of the property over the rental payable in the lease. The Insurance against the loss of such value is �leasehold� insurance against whatever perils may be written. more popular with long leases in periods of rising rental values.

Liability
Obligated according to law. Responsible for an action or event.

Liability Insurance
Insurance that pays damages on the behalf of an insured for loss arising out of his responsibility, due to negligence, to others imposed by law or assumed by contract.

License Bond or Permit Bond
A surety bond often required by municipalities and other public authorities to indemnify them against loss from breach of any regulation or ordinance under which the license or permit is issued.

Life Insurance
The promise to pay at the death of the insured, or at another determined time if earlier, an amount larger than the accumulated value of the consideration paid for the promise.

Lifetime Reserve Days
Sixty days in addition to the normal benefit which Medicare pays for when you are hospitalized for more than 90 days in a benefit period. This reserve can only be used once in a lifetime. Coinsurance costs still apply.

Liquor Liability Insurance
Coverage where the basis for legal liability is a dram shop, liquor control, or alcoholic beverage law. The laws vary, but most provide that the owner of an establishment which serves alcoholic beverages is liable for injury or damage caused by an intoxicated person if it can be established that the liquor licensee caused or contributed to the intoxication of the person.

Living Benefits (accelerated death benefits)
This feature allows you to receive the proceeds of your life insurance policy before you die if you suffer from a list of terminal illnesses or circumstances such as, the need for long-term care, terminal or catastrophic illness, or confinement to a nursing home.

Loss Adjustment Expenses
Expenses incurred to investigate and settle losses

Loss Ratio
The ratio of incurred losses and loss-adjustment expenses to net premiums earned. This ratio measures the insurer�s underlying profitability, or loss experience.

Medical Payments Insurance
Protection to pay the cost of medical care to an injured party regardless of whether the policyholder is liable. Written in conjunction with general and personal liability policies. A similar coverage, automobile medical payments insurance is available in automobile liability policies.

Mobile Equipment
Vehicles not normally designed for use on public roads and not normally required to be licensed.

Money and Securities Broad Form Policy
Insured�s a business against �all risks� of loss or destruction of money and securities other than employee dishonesty and forgery. Applies both inside and outside of the policyholder�s premises. Also covers loss of other property and damage to the premises by safe burglary and robbery. This policy has been replaced with the Commercial Crime Coverage Form.

Mortgage Insurance Policy
In life and health insurance, a policy which pays off the balance due on a mortgage upon the insured�s death, or to meet the payments due on a mortgage in case of the insured�s death or disability.

Motorcycle and Motor Scooter Insurance
Physical damage and/or liability insurance specifically to cover the exposures of motorcycles, motor scooters and motor bikes.

Motor Truck Cargo (Carrier�s form)
This inland marine form indemnifies an owner of an operator of a motor truck on which property of others is carried, against what the owner or operator may become liable to pay to the owners of the property carried as the result of loss or damage occurring while transporting the property. The Interstate Commerce Commission as well as the laws of many states require a common carrier to have such insurance before getting licensed.

Motor Truck Cargo (Owner�s form)
Insures the owner of a truck against loss to owned property while being transported.

Mutual Insurance
an insurance company which is owned entirely by its policyholders. Any profits earned by a mutual insurance company are rebated to policyholders in the form of dividend distributions or reduced future premiums. In contrast, a stock insurance company is owned by investors who have purchased company stock; any profits generated by a stock insurance company are distributed to the investors without necessarily benefiting the policyholders.

Named Perils
Perils specifically covered on insured property

Net Investment Income
Before tax income received from investment assets such as bonds, stocks, mutual funds, loans and other investments (less related expenses).

No-Fault Automobile Insurance
Coverage designed to compensate victims of automobile accidents via their own insurance carriers, regardless of fault and without the necessity of proving negligence on anyone�s part. No-fault laws passed by different states vary greatly in their scope and application. Most provide that a victim�s own insurance will allow a victim to sue in tort, once expenses or injuries have passed a stipulated threshold (monetary or otherwise).

Non-Owned / Hired Automobile Liability Insurance
Coverage for the policyholder against liability incurred while driving an automobile not owned or hired by the policyholder or resulting from the use of someone else�s automobile on the insured�s behalf, such as an employee using a personal car for the employer�s business purposes. This coverage is automatically included in personal and most commercial auto policies.

Non-Owned Physical Damage
As used in automobile insurance, actual damage or loss to the non-owned vehicle itself caused by collision, overturn, fire, theft, vandalism, or malicious mischief.

Nonstandard Auto (High Risk Auto)
Insurance for motorists who have poor driving records, have been canceled or refused insurance, or fall into a higher risk classification due to age or other factors.

Non-Recourse Mortgage
A home loan in which the borrower is not personally liable for the loan. The loan is secured by collateral and the risk is limited to the investment down payment, and any cash investment in the property.

Non-cancellable
Contract terms, including costs that can never be changed or cancelled for any reason.

Occurrence
An event that results in an insured loss. If you have $1,000,000 per occurrence $2,000,000 aggregate coverage, you are covered for up to $1,000,000 for each occurrence until the $2,000,000 limit is reached.

Ocean Marine Insurance
The protection of ships, their cargo, and the freight, including protection and indemnity insurance to cover ship owners� liabilities for loss of life to any person, illness or injury to crew, damage to cargoes carried and damages to fixed or floating objects.

Off-premises Service Coverage
Property and time element endorsements designed to cover the insured for losses that result from the interruption of services by an insured cause of loss. The current endorsements allow the insured to select coverage for off-premises services, whether supplied by a private or public utility. Protection may be purchased for the following options: water suppliers, communication suppliers or power supplies.

Ordinance (law) coverage
A property endorsement which provides the insured the option to purchase coverage for three types of common building ordinance or law requirements that apply after an insured has suffered a physical damage loss such as fire. These ordinances or law damages are normally excluded in standard property coverage forms. The coverages available in this endorsement are cost to demolish the undamaged portion of the building, cost to replace with superior construction as required by law, and cost to clear the land of debris after demolition.

Outdoor Signs/ Glass Insurance
Coverage against damage to outdoor signs or the breakage of glass.

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.

Owners and Contractors Protective Liability Insurance
A policy which provides liability coverage protects the insured against the negligent acts of contractors and sub-contractors hired by the insured. May also cover for their own negligent supervision of the work performed.

Own Occupation
Insurance contract provision that allows policyholders to collect benefits if they can no longer work in their own occupation.

Paid-Up Additional Insurance �
An option that allows the policyholder to use policy dividends and/or additional premiums to buy additional insurance on the same plan as the basic policy and at a face amount determined by the insured�s attained age.

Peril
The cause of loss is the event insured against. Examples-fire, lightning, theft, etc. Perils can be specifically named in the policy, or included unless they are specifically excluded from coverage.

Per Location / Jobsite Aggregate Limit
In a policy providing such an aggregate limit, the maximum amount the insurer will pay during the policy period regardless of how many claims, losses, suits, or insureds may be involved. The aggregate amount applies per location or jobsite.

Permit Bond or License Bond
A surety bond often required by municipalities and other public authorities to indemnify them against loss from breach of any regulation or ordinance under which the license or permit is issued.

Personal Injury Protection (PIP)
PIP is an extension of car insurance which covers medical expenses and, lost wages, additional living expenses, and other damages. PIP is sometimes referred to as �no-fault� coverage, because the statutes enacting it are generally known as no-fault laws, and PIP is designed to be paid without regard to �fault,� or more properly, legal liability. PIP is also called �no-fault� because, by definition, a claimant�s, or insured�s, insurance premium should not increase due to a PIP claim.

PIP coverage may vary from state to state in terms of both what is covered and what types of
treatments are considered customary and reasonable. For example, in Utah, acupuncture is a
permissible medical treatment, while in California it is not. Some states also allow for PIP claims even if
a Workers� Compensation claim exists, while others do not.

PIP may cover, within the specified dollar and time limits, the medical and funeral expenses of the
insured, others in its vehicle at the time of the loss, and pedestrians struck by its vehicle. The basic
coverage is for the insured�s own injuries, on a first party basis, without regard to liability. Again, it is
only available in certain states.

Personal Lines �
Insurance for individuals and families, such as auto, homeowners, and renters insurance.

Personal Property of Others
Contents, business personal property, and any other property excluding real property which is not owned by the insured.

Personal Umbrella Liability Insurance
A form of liability insurance protecting policyholders for claims in excess of the limits of their primary personal automobile, residential liability and recreational (boat, RV, Motorcycle, etc.) liability policies. It also provides coverage for some sources of loss which are not covered by their primary policies. Such cases are subject to a deductible (or self insurance retention).

Point-of-Service Plan (POS)
Health insurance policy that allows the employee to choose between in-network and out-of-network care each time medical treatment is needed.

Policy
The written contract effecting insurance, which includes all clauses, riders, endorsements, and papers covered under the agreement.

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.

Preferred Auto
Auto coverage for drivers who have clean driving records and operates vehicles according to law. Drivers which an insurance company prefers to insure.

Preferred Provider Organization

A health care organization composed of physicians, hospitals, or other providers which provides health care services at a reduced fee. A PPO is similar to an HMO, but care is paid for as it is received instead of in advance in the form of a scheduled fee. PPOs may also offer more flexibility by allowing for visits to out-of-network professionals at a greater expense to the policy holder. Visits within the network require only the payment of a small fee. There is often a deductible for out-of-network expenses and a higher co-payment. A policy holder will have a primary physician within the network who will handle referrals to specialists that will be covered by the PPO. After any visit, the policy holder must submit a claim, and will be reimbursed for the visit minus his/her co-payment.

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

Premium Earned
The amount of the pre-paid premium which is earned. For example, you paid $1,200 for a one year homeowners insurance policy, after 3 months $300 is considered earned premium.

Premium Unearned.
That part of the premium applicable to the unexpired part of the policy period. as in the premium earned example, you paid $1,200 for a one year homeowners insurance policy, after 3 months $900 is considered un-earned premium.

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.

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 Plans
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.

Reinsurance
Insurance that an insurance company buys for its own protection (insurance for the insurance company). The risk of loss is spread so a disproportionately large loss under a single event doesn�t fall on one company. Reinsurance enables an insurance company to expand its capacity, stabilize its underwriting results, finance its expanding volume and secure catastrophe protection against shock losses.

Renewal
The automatic re-establishment of an in-force policy secured by the payment of another premium.

Rental Reimbursement Coverage
An optional personal auto coverage endorsement to provide reimbursement for the expenses incurred by an insured when a temporary replacement vehicle is needed following a covered accident to the insured�s vehicle.

Replacement Cost
The actual 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.

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.

Residual Benefit
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.

Risk Class
The grouping of insureds with a similar level of risk. Typical risk classes 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. Transferring risk is easiest accomplished by insurance.

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 (example a trade union, or a group of doctors). 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 coverages. They can be formed as a mutual or stock company, or a reciprocal agreement.

Secondary Market
The secondary market are buyers willing to pay what they determine to be fair market value for existing contracts.

Section 1035 Exchange
The section in the Internal Revenue Code that allows owners to replace a life insurance or annuity policy without creating a taxable event.

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.

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 belongs to the contract owner.

Sexual Abuse / Molestation Coverage
Abuse and Molestation insurance provides defense and indemnity protection against claims arising from allegations of abuse and molestation. The policy shields from claims of abuse and molestation typically excluded in insurance policies. It provides protection for an employer against claims made alleging molestation and abuse.

Snowplowing liability
Liability in case you injure someone of damage someone�s property while snowplowing.

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.

Spoilage Insurance
Insures damage to perishable personal property and stock caused by a change in temperature or humidity resulting from power failure or equipment failure. The coverage may also include damage caused by contamination.

Standard Auto
Auto insurance for average drivers with relatively good driving records and average risk class.

Stock Insurance Company
An incorporated insurer with capital contributed by stockholders, to whom earnings are distributed as dividends on their shares.

Stop Loss
A provision in a policy designed to cut off an insurer�s losses at a given point.

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 to recoup the damages they covered.

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 stated stipulated period of time, they are considered part of the same period of benefits.

Surety Bond
A written agreement wherein one party, called the surety, obligates itself to a second party, called the obligee or beneficiary, to answer for the default of a third party, called the principal.

Surrender Charge
Fee charged to a policyholder when a life insurance policy or annuity is surrendered for its cash value.

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%.

Term Life Insurance
Life insurance that provides protection for a specified period of time. Policy periods are from one year to 30 years or until the insured reaches age 65 or 70. You can get a 30 year term life policy at age 70. The policy doesn�t build up any of the cash values associated with whole life policies.

Tort
A wrongful act, not including a breach of contract or trust, thatresults in injury to another�s person, property, reputation, or thelike, and for which the injured party is entitled to compensation. A tort can be either intentional or unintentional, and liability insurance is mainly purchased to cover unintentional torts.

Total Loss
A loss of sufficient size that it can be said no value is left. The complete destruction of the property. The maximum amount a policy will pay.

Towing Coverage
An extension of an automobile damage policy which covers the cost of towing the insured car or providing emergency road care services.

Truckers Liability
Auto liability exposures experienced by owners and operators of businesses designed to transport the goods of others by land motor vehicles for a fee. Subject to regulations by the Department of Transport (DOT) The insurance services office has designed a special business automobile insurance for this purpose, called truckers liability coverage form. Also available is the motor truck carriers liability coverage form.

Umbrella Policy
Coverage for losses above the limit of an underlying policy or policies such as homeowners and auto insurance (excess insurance). Terms of coverage are sometimes broader than those of underlying policies, and only get paid out if another policy will not cover the loss, or another policy is exhausted.

Under-insured
Coverage an insured may purchase to protect his or her own self from damage or injury caused by a negligent party who does not have adequate limits of insurance to cover the loss.

Underwriter
An employee of the insurance company who evaluates the risks, and determines the premiums payable.

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 to give the insurer a portfolio of risks which fit their model.

Underwriting Expenses
Expenses, including net commissions, salaries and advertising costs, which are attributable to the production of net premiums written.

Unearned Premiums
The part of the pre-paid premium applicable to the unexpired part of the policy period. The opposite of Earned Premiums. Example: you paid $1,200 for a one year policy, after 3 months $900 is considered unearned premium.

Uninsured Motorist Coverage
Endorsement to a personal automobile policy that covers an insured collision with a driver who does not have liability insurance.

Uninsured / Under-insured Motorist Coverage
Under an auto policy, protection for the insured against bodily injury or property damage (in some states) caused by the negligence of an uninsured or under-insured motorist

Universal Life Insurance
A type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup. The death benefit, savings element and premiums can be reviewed and altered as a policyholder�s circumstances change. In addition, unlike whole life insurance, universal life insurance allows the policyholder to use the interest from his or her accumulated savings to help pay premiums.

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.

Valuable Papers and Records Insurance
Provides coverage for the replacement of a commercial operation�s valuable papers, records, forms, and electronic media. Typically, coverage is limited to the cost of recreating or restoring the lost or damaged documentation.

Variable Annuitization
The act of converting a variable annuity from the accumulation phase to the payout phase.

Variable Life Insurance
A form of life insurance whose face value fluctuates depending upon the value of the dollar, securities or other equity products which the insurance policy invests in.

Variable Universal Life Insurance �
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.

Viator
A terminally ill person who sells his or her life insurance policy to get money while they are still alive.

Waiting Period
The time which must pass after filing a claim before policyholder can collect insurance benefits.

Waiver of Premium
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.

Waiver of Subrogation
A condition of an insurance policy which states that the coverage will not be prejudiced if the insured has waived in writing prior to any loss, any rights of recovery from a party responsible for the loss.

Warehousepersons Legal Liability Policy
Covers responsibility for loss or damage to property in the insured�s warehouse.

Whole Life Insurance
Life insurance with level premiums, 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. It usually carries an insurance and an investment component which grows tax deferred, which the insured can borrow against. The insurance component pays a stated amount upon death of the insured.

Workers Compensation Insurance
Protection which provides benefits to employees for any injury or contracted disease arising out of and in the course of employment. All states have laws which require such protection for workers and prescribe the length and amount of such benefits provided. If you have employees, you MUST have workers comp insurance. If you fail to have this coverage, you could be sued for triple the amount in damages if an incident occurs.

 

Sitar Insurance Agency

Joe Allegro
1481 Oak Tre Rd.
Iselin, NJ 08830
732-283-2000 Office
201-988-5534 Cell
Allegro@sitarcompany.com