Acceleration Clause - The part of a contract that says when a loan may be declared due and payable.

Actuary - A specialist in the mathematics of insurance who calculates rates, reserves, dividends and other statistics. (Americanism: In most other countries the individual is known as "mathematician.")

Adjustable Rate- An interest rate that changes, 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.

Agent - individual who sells and services insurance policies in either of two classifications:
  1. Independent agent represents at least two insurance companies and (at least in theory) services clients by searching the market for the most advantageous price for the most coverage. The agent's commission is a percentage of each premium paid and includes a fee for servicing the insured's policy.
  2. Direct or career agent represents only one company and sells only its policies. This agent is paid on a commission basis in much the same manner as the independent agent.

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

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

Approved for Reinsurance - Indicates the company is approved (or authorized) to write reinsurance on risks in this state. A license to write reinsurance might not be required in these states.

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.

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.

Best's Capital Adequacy Relativity (BCAR) - This percentage measures a company's relative capital strength compared to its industry peer composite. A company's BCAR, which is an important component in determining the appropriateness of its rating, is calculated by dividing a company's capital adequacy ratio by the capital adequacy ratio of the median of its industry peer composite using Best's proprietary capital mode. Capital adequacy ratios are calculated as the net required capital necessary to support components of underwriting, asset, and credit risks in relation to economic surplus.

Broker - Insurance salesperson that searches the marketplace in the interest of clients, not insurance companies.

Broker-Agent - Independent insurance salesperson that represents particular insurers but also might function as a broker by searching the entire insurance market to place an applicant's coverage to maximize protection and minimize cost. This person is licensed as an agent and a broker.

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 also includes such diverse forms as plate glass, insurance against crime, such as robbery, burglary and forgery, boiler and machinery insurance and Aviation insurance. Many casualty companies also write surety business.

Claim - A demand made by the insured, or the insured's beneficiary, for payment of the benefits as provided by the policy.

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.

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.

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 HMOs require a $10 copayment for each office visit, regardless of the type or level of services provided during the visit. Copayments are not usually specified by percentages.

Cost-of-Living Adjustment (COLA) - Automatic adjustment applied to Social Security retirement payments when the consumer price index increases at a rate of at least 3%, the first quarter of one year to the first quarter of the next year.

Coverage Area - The geographic region covered by travel insurance.

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 kicks in.

Developed to Net Premiums Earned - The ratio of developed premiums through the year to net premiums earned. If premium growth was relatively steady, and the mix of business by line didn't materially change, this ratio measures whether or not a company's loss reserves are keeping pace with premium growth.

Direct Premiums Written - The aggregate amount of recorded originated premiums, other than reinsurance, written during the year, whether collected or not, at the close of the year, plus retrospective audit premium collections, after deducting all return premiums.

Disease Management - A system of coordinated health-care interventions and communications for patients with certain illnesses.

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

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.

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. 

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 Issue Right - The right to purchase insurance without physical examination; the present and past physical condition of the applicant are not considered.

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 except for nonpayment of premiums by the policy owner; however, the company can raise rates if they choose.

Hazard - A circumstance that increases the likelihood or probable severity of a loss. For example, the storing of explosives in a home basement is a hazard that increases the probability of an explosion.

Health Maintenance Organization (HMO) - Prepaid group health insurance plan that entitles members to services of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use contracted health-care providers.

Health Reimbursement Arrangement - Owners of high-deductible health plans who are not qualified for a health savings account can use an HRA.

Health Savings Account - Plan that allows you to contribute pre-tax money to be used for qualified medical expenses. HSAs, which are portable, must be linked to a high-deductible health insurance policy.

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.

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

Independent Insurance Agents & Brokers of America (IIABA) - Formerly the Independent Insurance Agents of America (IIAA), this is a member organization of independent agents and brokers monitoring and affecting industry issues. Numerous state associations are affiliated with the IIABA.

Least Expensive Alternative Treatment - The amount an insurance company will pay based on its determination of cost for a particular procedure.

Licensed - Indicates the company is incorporated (or chartered) in another state but is a licensed (admitted) insurer for this state to write specific lines of business for which it qualifies.

Licensed for Reinsurance Only - Indicates the company is a licensed (admitted) insurer to write reinsurance on risks in this state.

Lifetime Reserve Days - Sixty additional days Medicare pays for when you are hospitalized for more than 90 days in a benefit period. These days can only be used once during your lifetime. For each lifetime reserve day, Medicare pays all covered costs except for a daily coinsurance amount.

Liquidity - Liquidity is the ability of an individual or business to quickly convert assets into cash without incurring a considerable loss. There are two kinds of liquidity: quick and current. Quick liquidity refers to funds--cash, short-term investments, and government bonds--and possessions which can immediately be converted into cash in the case of an emergency. Current liquidity refers to current liquidity plus possessions such as real estate which cannot be immediately liquidated, but eventually can be sold and converted into cash. Quick liquidity is a subset of current liquidity. This reflects the financial stability of a company and thus their rating.

Loss Adjustment Expenses - Expenses incurred to investigate and settle losses.

Medical Loss Ratio - Total health benefits divided by total premium.

Member Month - Total number of health plan participants who are members for each month.

Mortality and Expense Risk Fees - A charge that covers such annuity contract guarantees as death benefits.

National Association of Insurance Commissioners (NAIC) - Association of state insurance commissioners whose purpose is to promote uniformity of insurance regulation, monitor insurance solvency and develop model laws for passage by state legislatures.

Net Premium - The amount of premium minus the agent's commission. Also, the premium necessary to cover only anticipated losses, before loading to cover other expenses.

Noncancellable - Contract terms, including costs that can never be changed.

Occurrence - An event that results in an insured loss. In some lines of business, such as liability, an occurrence is distinguished from accident in that the loss doesn't have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected not intended by the insured.

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.

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.

Participation Rate - In equity-indexed annuities, a participation rate determines how much of the gain in the index will be credited to the annuity. For example, the insurance company may set the participation rate at 80%, which means the annuity would only be credited with 80% of the gain experienced by the index.

Peril - The cause of a possible loss.

Personal Injury Protection - Pays basic expenses for an insured and his or her family in states with no-fault auto insurance. No-fault laws generally require drivers to carry both liability insurance and personal injury protection coverage to pay for basic needs of the insured, such as medical expenses, in the event of an accident.

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

Policy - the written contract effecting insurance or the certificate thereof, by whatever name called, and including all clause, riders, endorsements, and papers attached thereto and made a part thereof.

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 Provider Organization - Network of medical providers who charge on a fee-for-service basis, but are paid on a negotiated, discounted fee schedule.

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

Premium Earned - The amount of the premium that as been paid for in advance that has been "earned" by virtue of the fact that time has passed without claim. A three-year policy that has been paid in advance and is one year old would have only partly earned the premium.

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 Versus Non-Qualified Policies - Qualified plans are those employee benefit plans that meet Internal Revenue Service requirements as stated in IRS Code Section 401a. When a plan is approved, contributions made by the employer are tax deductible expenses.

Qualifying Event - An occurrence that triggers an insured's protection.

Re-Entry - Re-entry, which is the allowance for level-premium term policy owners to qualify for another level-premium period, generally with new evidence of insurability.

Reinsurance - In effect, insurance that an insurance company buys for its own protection. The risk of loss is spread so a disproportionately large loss under a single policy doesn't fall on one company. Reinsurance enables an insurance company to expand its capacity; stabilize its underwriting results; finance its expanding volume; secure catastrophe protection against shock losses; withdraw from a line of business or a geographical area within a specified time period. 

Renewal - The automatic re-establishment of in-force status affected by the payment of another premium.

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 - Risk class, in insurance underwriting, is a grouping of insured’s with a similar level of risk. Typical underwriting classifications are preferred, standard and substandard, smoking and nonsmoking, male and female.

Risk Management - Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through practices such as avoiding the risk, retaining the risk, reducing the risk, or transferring the risk, usually by insurance.

Stop Loss - Any provision in a policy designed to cut off an insurer's losses at a given point.

Successive Periods - In hospital income protection, when confinements in a hospital are due to the same or related causes and are separated by less than a contractually stipulated period of time, they are considered part of the same period of confinement.

Surplus - The amount by which assets exceed liabilities.

Term Life Insurance - Life insurance that provides protection for a specified period of time. Common policy periods are one year, five years, 10 years or until the insured reaches age 65 or 70. The policy doesn't build up any of the nonforfeiture values associated with whole life policies.

Underwriter - The individual trained in evaluating risks and determining rates and coverages for them. Also, an insurer.

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.

Universal Life Insurance - A combination flexible premium, adjustable life insurance policy.

Usual, Customary and Reasonable Fees - An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor or required for treatment.

Utilization - How much a covered group uses a particular health plan or program.

Voluntary Reserve - An allocation of surplus not required by law. Insurers often accumulate such reserves to strengthen their financial structure.

Waiting Period - See "elimination period."

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.