An 'Act of God' refers to violent and catastrophic events caused by natural forces which could not have been prevented or avoided by human foresight or prudence. In legal terms, such events can excuse the performance of a contractual duty if that performance is rendered impossible.
Actual Cash Value (ACV) is an insurance term referring to the amount equivalent to the replacement cost of damaged or lost property, minus depreciation. It is a measure sometimes used as a substitute for market value in insurance claims.
A professional who applies statistics and probability theory to advise on insurance risks, pricing of contracts, and administration of pension funds, regulated by the Institute and Faculty of Actuaries in the UK.
An adjuster is an individual employed by a property and casualty insurance company to assess and settle claims brought by insureds. The adjuster evaluates the merits of each claim and makes recommendations to the insurance company.
Adverse selection refers to a scenario in the insurance industry where individuals more prone to filing claims are more likely to seek insurance coverage, leading to potential imbalances for insurance providers.
An annuity is a financial contract in which the purchaser makes an upfront payment to an insurance company in exchange for regular, structured payments either for a specific period or for the remainder of the purchaser's life.
A technique of risk management where an individual or business assumes expected losses that are not catastrophic, protecting against catastrophic losses through insurance.
In the context of life assurance policies, the 'assured' is the individual who stands to receive the benefit of the policy upon the death of the insured or when the policy matures, ensuring a secure financial future.
Balance sheet reserves are amounts set aside in pension plans and other insurance contracts, expressed as liabilities on the company's balance sheet, to ensure future benefit payments to policy owners.
A binder is a written memorandum of the essential terms of a preliminary contract that gives temporary protection while further investigation or formalization of the contract is performed. It is commonly used in insurance and real estate transactions.
A Blanket Fidelity Bond is an insurance policy that protects businesses from losses caused by fraudulent acts committed by employees.
A budget mortgage is a type of mortgage that necessitates monthly payments covering property taxes and insurance alongside principal and interest.
A captive insurance company is a subsidiary company formed to insure the risks of its parent company or a group of companies. This structure allows the parent company to manage and tailor its own risk management strategy, potentially leading to cost savings and more comprehensive coverage.
A carrying charge is a fee associated with holding an investment or conducting business that includes costs such as interest, storage, and insurance across various sectors like commodities, real estate, retailing, and securities.
Cash value refers to the amount of money a policyholder is entitled to receive upon the cancellation of a life insurance policy or the amount available for loans and withdrawals before the policy matures or is cashed out.
Catastrophe Hazard refers to circumstances where there is a significant deviation of the actual aggregate losses from the expected aggregate losses, such as a major natural disaster where whole units or blocks of businesses are threatened. These hazards are often uninsurable by commercial insurance companies due to the extremity of the risk involved or the prohibitive actuarial premiums.
A major medical expense policy designed to pay all or nearly all expenses above a certain deductible amount, up to the limit of the policy.
Chartered Financial Consultant (ChFC) is a professional designation awarded by The American College in Bryn Mawr, Pennsylvania, recognizing individuals for their expertise and proficiency in financial planning.
The Chartered Property and Casualty Underwriter (CPCU) is a professional designation that signifies expertise in various areas including insurance, risk management, economics, finance, management, accounting, and law. To earn this prestigious designation, candidates must complete 10 national examinations and have at least three years of work experience in the insurance industry or a related field.
A CIF contract of sale includes the cost of the goods, insurance, and freight to the destination in the contract price. The seller’s obligation is fulfilled once the merchandise is delivered to the shipper, and relevant documents including the bill of lading, invoice, insurance policy, and payment receipt for freight are forwarded to the buyer.
A claim is a request by an insured party for compensation or indemnification from an insurance company for loss incurred due to an insured peril.
A Claim Report is a document furnished by the adjuster to the insurance company (insurer) that details the amount of payment the insurer is legally obligated to provide to or on behalf of the insured under the terms of the policy.
Coinsurance is a provision in insurance policies that mandates the insured to cover a certain percentage of the risk or loss, sharing the burden alongside the insurer. This encourages the insured to maintain adequate coverage corresponding to the property’s value.
A Commercial Blanket Bond is an insurance product that covers an employer for losses caused by the dishonest acts of its employees on a blanket basis, offering a maximum limit of coverage for any one loss, regardless of the number of employees involved.
Insurance policies covering various business risks, often tailored to protect businesses from a range of eventualities including property damage, liability, and employee-related risks.
A commercial property policy provides coverage for various business risks such as goods in transit, fire, burglary, and theft. These policies are crucial for protecting the assets of a business against potential losses and damages.
Concealment refers to the intentional withholding or secreting of information. In the context of insurance, if the insured withholds information on a material fact about which the insurance company has no knowledge, the company has grounds to void the contract.
A consignment note is a key document used in shipping to provide details about a consignment of goods in transit. It is signed by the consignee upon delivery, serving as proof of receipt. The document includes information about the consignor and consignee, details about the goods, and typically their gross weight, as well as outlining who is responsible for insuring the goods during transit.
Consumer-driven healthcare (CDHC) encompasses a variety of health insurance plan designs aimed at providing insurance protection while encouraging participants to be cost-conscious about their healthcare choices.
A contract of indemnity in property and liability insurance aims to restore the insured to their original financial condition after suffering a loss, without allowing for profit from the loss.
A credit default swap (CDS) is a financial derivative that allows an investor to swap or offset their credit risk with that of another investor. The buyer of a CDS makes periodic payments to the seller and, in return, receives a payoff if the underlying financial instrument defaults.
A Cross Purchase Plan is a life insurance strategy used among business partners. Each partner buys a life insurance policy on the other partners to ensure business continuity and facilitate buyouts in the event of a partner's death.
Data Processing Insurance offers coverage for data processing equipment, data processing media such as magnetic tapes and disks, and expenses involved in returning to usual business conditions after a loss. Coverage can be obtained on a specified perils basis or on an all risk/all peril basis.
A comprehensive term in law which can refer to formal pleadings, legal documents related to condominium creation, and statements made by an insured for insurance purposes.
In a tax return, applies to an expense that may be subtracted from income, and in insurance, signifies the initial amount the insured must pay before insurance reimbursement is made for a claim.
The Disability Program is one of the five programs within the Social Security System that provides monthly payments to eligible workers with disabilities and, in some cases, their family members.
Loss from a disaster in an area declared by the President as warranting federal assistance.
A disclaimer is a statement or assertion that denies or renounces a claim, right, or responsibility. It is commonly used in various contexts such as legal claims, property rights, insurance policies, and professional opinions.
Distribution overhead, also known as distribution cost or distribution expense, refers to the costs incurred in delivering a product to the customers. These costs are a key component of cost classification in businesses.
The Effective Date refers to the specific date on which an agreement, policy, or offering formally goes into effect and becomes enforceable.
Employers Liability Coverage, also known as Coverage B, is a component of Workers' Compensation insurance that provides coverage for employers against claims not covered by standard workers' compensation policies.
A comprehensive explanation of endorsement, outlining its various forms, significance in financial transactions, legal implications, and usage in insurance policies.
An Endowment Contract is an agreement with an insurance company which provides for a payout especially based on the life expectancy of the insured, and might be payable in full in a single payment during their lifetime.
In both insurance and taxation, exclusion rules determine what items or amounts are not covered by policies or not included in gross income, respectively.
A provision in an insurance policy that indicates what is denied coverage, commonly including hazards deemed catastrophic in nature, wear and tear, property covered by other insurance, liability arising out of contracts, and liability arising out of workers' compensation laws.
Exempt supplies refer to categories of goods or services that are not subject to Value Added Tax (VAT) as stipulated under the Value Added Tax Act 1994.
An experience refund is the return of a percentage of the premium paid by a business firm if its loss record is better than the amount loaded into the basic premium.
An expiration notice is a written notice provided to an insured individual indicating the date on which their insurance policy will terminate.
The Export-Import Bank (EXIM Bank) is an independent U.S. government agency that facilitates international trade by offering financial assistance, including loans, guarantees, and insurance to U.S. exporters and their foreign buyers. Its goal is to support American jobs by leveling the global playing field for U.S. goods and services and mitigating the risks associated with international trade.
The Export-Import Bank of the United States (EXIM) is a government agency established by Congress in 1934 to encourage U.S. trade with foreign countries through various financing programs and risk mitigation services.
A Family Income Policy is an insurance policy that provides extra income during the period when children are growing up. This life insurance contract combines ordinary life and decreasing term insurance.
A niche segment within the advertising industry, focused on the promotion of financial products and services such as mutual fund shares, limited partnership units, and products offered by banks, brokerage firms, and insurance companies.
A professional adviser providing financial counsel in various domains, such as investing, insurance, estate planning, and taxes. Financial advisers can be fee-based, commission-based, or both.
Enacted on November 12, 1999, the Financial Services Modernization Act, also known as the Gramm-Leach-Bliley Act, repealed parts of the Glass-Steagall Act of 1933 and the Bank Holding Company Act of 1956, thereby eliminating remaining firewalls between banks, securities firms, and insurance companies.
A company that offers a wide range of financial services under one roof. For example, some large retail organizations offer stock, insurance, and real estate brokerage as well as banking services.
A fixed annuity is an investment contract sold by an insurance company that guarantees fixed payments, either for life or for a specified period, to an annuitant. It provides a stable and predictable income stream, making it a popular choice for retirees seeking financial security.
A fixed premium is a payment for insurance coverage that remains the same throughout the entire premium-paying period.
Floater coverage provides insurance for property that moves from location to location, whether on a scheduled or unscheduled basis, ensuring protection regardless of its position.
The Free Asset Ratio is a key metric in the insurance industry, quantifying the market value of an insurance company's assets relative to its liabilities. It is used to gauge the financial health and stability of the insurer.
Insurance coverage for loss in the gross earnings of the business (minus expenses that cease while the business is inoperative) as a result of the interruption of normal business activities caused by damage to the premises by an insured peril.
Group Credit Insurance is a coverage issued to a creditor on the lives of multiple debtors for outstanding loans. In the event of a debtor's death before repayment, the policy pays the remaining loan amount to the creditor. This type of insurance contract covers an entire group of debtors instead of individual policies for each debtor.
Group Disability Insurance provides coverage for a group of employees, offering monthly benefits if members are unable to perform their job functions due to illness or accident. Benefits are typically limited to a specified duration and capped at a percentage of pre-disability earnings or a flat dollar amount, whichever is lower.
A Guaranteed Income Contract is a financial instrument commonly used in the investment and insurance industries to provide a stable, guaranteed stream of income over a specified period of time.
A Guaranteed Income Contract (GIC) is a financial instrument typically utilized within corporate profit-sharing or pension plans wherein an insurance company guarantees a specific rate of return on invested capital over the contract's duration.
A hybrid annuity is a contract offered by an insurance company that combines the benefits of both fixed and variable annuities, offering a balance between guaranteed returns and potential for higher earnings.
The Institute of Insurance Brokers (IIB) was a professional body that represented insurance brokers in the United Kingdom. It provided support, education, and resources to its members to promote high standards within the insurance brokerage industry.
Improvements and Betterments Insurance covers tenant modifications to leased spaces, ensuring protection for personalized adaptations and enhancements.
Indemnity is a legal agreement whereby one party agrees to compensate another for any losses or damages that have occurred or might occur in the future. In the context of insurance, it involves securing against potential financial liabilities.
Indemnity refers to the obligation to compensate an individual for loss or damage endured or anticipated. It involves a legal commitment whereby one party agrees to cover the financial consequences caused to another.
An independent adjuster is an independent contractor who assesses and resolves insurance claims for various insurance companies. These professionals provide essential services for companies that either lack sufficient financial resources or have a claims volume that doesn't justify full-time, in-house adjusters.
Insurability is the circumstance in which an insurance company can issue life or health insurance to an applicant based on standards set by the company. It evaluates the risk and determines if the applicant qualifies for coverage.
Insurable value refers to the cost of total replacement of destructible improvements to a property; it is often based on replacement cost rather than market value.
Insurance is a system whereby individuals and companies concerned about potential hazards pay premiums to an insurance company, which reimburses (in whole or part) them in the event of loss. The insurer profits by investing the premiums it receives. Some common forms of insurance cover business risks, automobiles, homes, boats, worker's compensation, and health. Life insurance guarantees payment to the beneficiaries when the insured person dies. In a broad economic sense, insurance transfers risk from individuals to a larger group, which is better able to pay for losses.
An insurance agent is a representative of an insurance company who sells the firm's policies. Independent agents sell the policies of many companies. Agents must be licensed to sell insurance in the states where they solicit customers.
Earnings from international transactions involving services such as insurance, banking, shipping, tourism, and accountancy.
An annuity that provides payments to two or more beneficiaries, typically a husband and wife. When one of the annuitants passes away, the survivor continues to receive annuity payments; however, the payments made to the deceased are not transferred to the survivor.
An annuity that makes a guaranteed fixed payment for the rest of the life of the annuitant. After the annuitant dies, the beneficiaries receive no further payments.
Life expectancy refers to the average age a person is expected to live based on actuarial calculations, which consider several factors including sex, heredity, and health habits. This metric is crucial for insurance companies in projecting benefit payouts and determining rates through actuarial analysis.
Loss exposure in insurance refers to areas in which the risk of loss exists. Four primary loss risk areas are property, income, legal vulnerability, and key personnel within an organization.
Loss of a key person in a business refers to the significant impact on the firm due to the departure of an essential individual from the organization due to death, disability, sickness, resignation, incarceration, or retirement. It can lead to financial instability, loss of market share, and additional expenses in training replacements. Key person insurance helps mitigate these risks.
The loss ratio measures the ratio of losses incurred (or loans losses for banks) to either total premiums earned by an insurer or the overall receivables or debts for a corporation within a specific period, often one year.
Malicious Mischief refers to the intentional damage or destruction of another person's or business's property, often requiring specific insurance coverage for protection against such risks.
Moral hazard refers to the situation where an entity has the incentive to take on excessive risks because it does not fully bear the consequences of those risks. This is a common concern in sectors such as banking, insurance, and finance, particularly when entities are perceived as 'too big to fail' and expect potential government bailouts.
A multi-tied adviser is a type of financial advisor who represents several financial institutions and can offer products from a limited range of providers.
A mutual insurance company is a type of insurance company that is owned by its policyholders. Unlike stock insurance companies, mutual insurance companies do not have stock that is available for purchase on the stock exchange.
The net cost refers to the gross costs of purchasing an asset minus any income received. It provides a monetary value that represents the true cost to the buyer after accounting for rebates, subsidies, or incomes.
A type of coverage in which an insured's own policy indemnifies them for bodily injury and/or property damage without regard to fault. This system is designed to simplify claims and reduce litigation in auto accidents.
An insurance endorsement that provides liability coverage for an insured who is sued due to the negligent acts or omissions of an independent contractor or subcontractor, resulting in bodily injury and/or property damage to a third party.
Coverage for bodily injury and property damage liability resulting from the ownership, use, and/or maintenance of an insured business's premises as well as operations by the business anywhere in the United States or Canada.
An insurance coverage type that allows the insured to receive dividends based on the company's earnings, which can be used to reduce premium payments.
Perils refer to various risks that can cause damage to property, often covered under a homeowner's insurance policy.
A Permit Bond is a type of surety bond required by a government agency to ensure that businesses or individuals comply with laws and regulations governing a specific activity requiring a permit.
PITI is an acronym representing the four primary components that make up a borrower's monthly mortgage payments: Principal, Interest, Taxes, and Insurance. Understanding PITI is crucial for both lenders and borrowers to ensure accurate financial planning and loan repayment.
A policy is a deliberate system of principles to guide decisions and achieve rational outcomes. It is a statement of intent, and is implemented as a procedure or protocol. Policies are generally adopted by a governance body within an organization.
A policy loan is a loan issued by an insurance company that is secured by the cash surrender value of a life insurance policy. The amount available for such a loan is contingent upon various factors.
An individual or entity that owns an insurance policy and has the right to exercise the policy's privileges.
The term 'pool' has various definitions across different industries including corporate finance, industry, insurance, investments, and real estate. It generally refers to a combination of resources or funds for a specific purpose.
Portfolio reinsurance is a coverage mechanism where an insurance company's portfolio is ceded to a reinsurer, who reinsures a given percentage of a particular line of business. This approach allows the primary insurer to mitigate risk exposure by transferring some of its liabilities to the reinsurer.
Preferred risk refers to an insured, or an applicant for insurance, who has a lower expectation of incurring a loss than the standard applicant. For instance, a non-smoker applying for life insurance may receive reduced premium rates due to a longer life expectancy.
In accounting and finance, the term 'premium' can refer to the consideration payable for a contract of insurance, an amount in excess of the nominal value of a share, or an amount in excess of the issue price of a share or other security. Premiums play a significant role in insurance policies and in the valuation of shares and securities.
