M - N

M

M&C. See Manufacturers and Contractors Liability Insurance.

Machinery Breakdown Insurance. See Boiler and Machinery Insurance.

Maintenance Bond. A bond guaranteeing against defects in workmanship or materials for a stated time after the acceptance of completed work.

Maintenance, Care and Wages. An admiralty law provision for coverage for injured seamen. Maintenance refers to providing food, shelter and rehabilitation. Care refers to the medical treatment necessary for recovery. Wages, of course, refers to the usual seaman’s wages, which must be paid even during an illness or after an accident.

Major Hospitalization Policy. The same as major medical insurance, except that it applies to expenses incurred only when the insured is hospitalized. See also Major Medical Insurance.

Major Medical Insurance. Health insurance that provides benefits up to a high limit for most medical expenses incurred, subject to a large deductible. Such contracts may contain limits on specific types of charges, like room and board, and a percentage participation clause sometimes called a coinsurance clause. These policies usually pay covered expenses whether an individual is in or out of the hospital.

Malicious Mischief. Purposely damaging the rights or property of another. See also V&MM.

Malinger. To feign a disability in order to continue collecting benefits longer than actually necessary.

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

Malpractice. Professional misconduct or lack of ordinary skill in a professional act which renders the practitioner liable for damages.

Malpractice Insurance. Insurance on a professional practitioner that: 1) defends suits instituted against the insured professional for malpractice; or 2) pays any damages set by a court, subject to policy limits.

Managed Care. A system of health care that delivers quality, cost effective health care through monitoring and recommending utilization of services and cost of services.

Managed Health Care Plan. A plan that involves financing, managing and delivery of health care. Typically, it involves a group of providers who share the financial risk of the plan or who have an incentive to deliver cost effective and quality service.

Management Expense. A charge deducted in a contingent commission formula to cover the reinsurer’s overhead expenses.

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

Mandated Benefits. Benefits required by state or federal law.

Mandated Providers. Providers of medical care whose services must be included by state or federal law.

Mandatory Arbitration. See Arbitration.

Mandatory Provisions. All disability policies contain a group of mandatory provisions required by all states in any life or health insurance contract. In addition, there are some provisions that are common to most disability income policies.

Mandatory Retirement. A provision in a pension plan stating that the member must retire at a specific age even if he or she does not wish to do so.

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

Manor House. A four-unit building (two units downstairs, two upstairs) with one entrance and a four-car garage. Commonly bought as a condo.

Manual. A book giving rates, classifications and underwriting rules for a line of insurance (e.g., the Automobile Manual gives such information for automobile insurance).

Manual Excess. The premium for an amount of insurance in excess of the basic limit of liability. This premium is determined by referring to a table of rate factors which are multiplied by the manual rate in order to arrive at a premium for the higher limit selected.

Manual Rates. (1) The published rate for some unit of insurance. (2) Rates based on average claims data for a large number of groups. These rates are then adjusted for specific groups based on that group’s characteristics, such as the type of industry, changes in benefits from the standard, etc.

Manufacturers and Contractors Liability Insurance (M&C). Premises and operations liability insurance that covers manufacturing or contracting risks. The basis of premiums for this coverage is the payroll.

Manufacturers Output Policy. Coverage for the personal property of a manufacturer on an open perils (all risk) basis. Coverage is usually restricted to property away from the premises.

Manufacturer’s Selling Price Clause. Values unsold finished goods at the price at which they could have been sold at the time of a loss.

Manufacturing Location. A location that manufactures products for delivery to the insured’s customers under a sales contract. One of the four types of dependent properties for which business income coverage may be written.

Manuscript Endorsement. Any endorsement not promulgated on a standard ISO form, changing any conditions, agreements, exclusions or warranties of the insurance contract.

Manuscript Policy. A policy written for specific coverages or conditions not provided in a standard policy. It is often prepared by a large brokerage house for a large account and must conform to state laws.

Map. A geographical map used by a property insurance underwriter to locate the area and character of a risk. Maps also track the number of insureds in a particular area so that an insurer does not subject itself to a possible catastrophic loss.

Map Clerk. A junior underwriter who enters such essential data as policy numbers, amounts of coverage, and property covered on maps to determine its liability or exposure in a given area.

Marine Definition. See Nationwide Definition of Marine Insurance.

Marine Insurance. Insurance primarily concerned with means of transportation and goods in transit. Marine used alone refers to ocean transportation, and inland marine refers to transportation and goods in transit by land. See also Inland Marine Insurance and Ocean Marine Insurance.

Marital Deduction. An unlimited amount of qualifying property that can be passed or transferred upon the death of one spouse to the surviving spouse.

Marital Deduction Trust. An arrangement whereby the surviving spouse is provided with full use of the family’s wealth while minimizing the impact of federal estate taxes.

Market Assistance Plan (MAP). A plan promulgated by the Department of Insurance to assist buyers in obtaining certain types of insurance when they are limited in availability.

Market Conduct. Compliance with state laws regulating the sales and marketing, underwriting and issuance of insurance products. Proper market conduct means conducting insurance business fairly and responsibly.

Market Conduct Examination. When state insurance department investigators examine the business practices and operations of an insurer and its agents in order to determine their authority to conduct insurance business in the state.

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

Market Value. The price for which something would sell, especially the value of certain types of assets, such as stocks and bonds. It is based on what they would sell for under current market conditions. See also Actual Cash Value.

Market Value Clause. A provision in certain property insurance forms that obligates an insurer to pay the established market price of destroyed or damaged stock rather than its cost to the insured, as is usually provided in the standard fire policy. Coverage is only available to manufacturers with finished products, not to wholesalers or retailers.

Marketing Representative. See Special Agent.

Masonry Noncombustible Construction. A building with exterior walls constructed of masonry materials, such as adobe, brick, concrete, gypsum block, hollow concrete block, stone, tile, etc., with floors and roof constructed of metal or other noncombustible materials.

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

Master Contract. In group insurance, the master contract is given to the employer. Individuals insured under the plan receive certificates to evidence their coverage under the plan.

Master Deed or Bylaws. A document that creates a common property (i.e., condominiums, etc.) and its association. It defines homeowners’ undivided shares in the common property, membership and voting rights in the association and covenants and restrictions on the use of units and common property. It also defines the governing regulations dealing with routine operational, administrative and management matters of the property.

Master Policy. (1) The policy contract issued to an employer or other entity authorized by state law for a group insurance plan. See also Certificate of Insurance. (2) A property insurance policy issued to an insured who can issue certificates of coverage to cover the property of others.

Master. The captain of a ship.

Master-Servant Rule. A rule that says all employers are obligated to protect the public from the acts of their employees. Courts hold employers liable for torts committed by employees in the course of their employment.

Material Fact. A fact that is so important that its disclosure would change the decision of an insurance company, either with respect to writing coverage, settling a loss or determining a premium. Usually, the misrepresentation of a material fact voids a policy.

Mature. A policy matures when its face amount becomes payable. This could occur upon the death of the insured, or in some forms of insurance such as endowments, as of a specified date.

Mature Policies. Uninterrupted claims-made coverage continuously in effect for at least five years, and no longer eligible for rating credits given on immature policies.

Maturity Date. The date that the face amount of a life insurance policy becomes payable by reason of death or endowment.

Maturity Value. The amount payable to a living insured at the end of an endowment period or to the owner of a whole life policy if he lives past a certain age.

Maxi Tail or Full Tail. Unlimited extended reporting period allowing for claims to be made after expiration of a “claims-made” liability policy. See also Supplemental Extended Reporting Period.

Maximum Allowable Costs (MAC) List. A list of prescriptions that bases reimbursement on the cost of the generic product.

Maximum Disability Policy. Non-cancelable disability income insurance that limits an insurer’s liability for any one claim but not the aggregate amount of all claims. For one claim there is a maximum amount payable, but there could be any number of separate claims for different disabilities.

Maximum Foreseeable Loss. See Amount Subject.

Maximum Out-of-Pocket Costs. The most a member will pay for co-payments, coinsurance, deductibles, etc.

Maximum Possible Loss. See Amount Subject.

Maximum Retrospective Premium. The most an insured is required to pay under a retrospective rating plan, regardless of the amount of losses incurred. See Retrospective Rating.

McCarran-Ferguson Act. See Public Law 15.

MDO. See Monthly Debit Ordinary.

MDRT. See Million Dollar Round Table.

Mediation. An informal means of settling a dispute that involves a third-party mediator who meets both parties to the dispute and encourages them to agree on a settlement.

Medicaid. A medical benefits program administered by states and subsidized by the federal government. Under this plan, various medical expenses are paid to those who qualify. Also called Title XIX Benefits.

Medical Application. An application consisting of information gained from a physical exam performed by a doctor instead of a simple medical profile.

Medical Benefits. Coverage that pays reasonable medical expenses incurred by an insured, members of the insured’s family and passengers for bodily injuries sustained while riding in the insured’s car. It pays medical bills for an insured and others covered on the policy, regardless of who was at fault. Coverage also applies while riding in another vehicle or if injured as a pedestrian by a vehicle.

Medical Care Insurance. See Medical Expense Insurance.

Medical Examination. The examination of an applicant for insurance or a claimant by a physician who acts in the capacity of the insurer’s agent.

Medical Examiner. The physician who examines an applicant or claimant on behalf of the insurer and as an agent of the insurer.

Medical Expense Insurance. Health insurance that provides benefits for medical, surgical and hospital expenses. This term is used to include coverage under the terms hospital-surgical expense insurance and medical care insurance.

Medical Expense Reimbursement Plan (MERP). A plan which provides for corporate reimbursement of specific health care expenses to employees.

Medical Information Bureau (MIB). A data pool service that stores coded information on the health histories of persons who have applied for insurance from subscribing companies in the past. Most life and health insurers subscribe to this bureau to get more complete underwriting information.

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

Medical Payments Insurance. A form of optional coverage under automobile and other public liability policies that provides for the payment of medical and similar expenses without regard for liability. See Medical Benefits, also Personal Injury Protection.

Medical Profile. Record of an insured’s past medical history and current physical condition. Most disability insurance companies request this information. They also will ask an insured to take a physical exam (usually at the company’s expense).

Medical Savings Account (MSA). An employer-funded account linked to a high deductible medical indemnity plan. Usually, the employer raises the plan deductible (usually by 300 to 400 percent) and in turn returns a portion of the premium savings to employees as contributions to the medical savings account. Employees can use the contributions to pay for health care expenses throughout the year, and at the end of the year may withdraw whatever remains in the account as cash.

Medical Supplies. Any items that are essential in carrying out the treatment of a patient’s illness or injury.

Medically Necessary. A service or treatment that is absolutely necessary in treating a patient and which could adversely affect the patient’s condition if it were omitted.

Medicare. The federal government plan for paying certain hospital and medical expenses for persons qualifying under the plan, usually those over 65. The hospital benefits are Part A, and the medical expense portion is Part B. Part A is compulsory social insurance; Part B is voluntary government-subsidized, government-operated insurance.

Medicare Beneficiary. Anyone entitled to Medicare benefits based on the designation by the Social Security Administration.

Medicare Select Policy. A Medicare supplement policy or certificate that contains restricted network provisions conditioning the payment of benefits on the use of network providers.

Medicare Supplement Insurance. Insurance coverage sold on an individual or group basis that helps to fill the gaps in the protection provided by the Medicare program. Medicare supplements cannot duplicate any benefits provided by Medicare, but may pay part or all of Medicare’s deductibles and co-payments, and may cover some services and expenses not covered by Medicare.

Member. (1) An employee who is qualified for coverage under a pension plan. Also called a “participant.” (2) Anyone covered under a health plan (enrollee or eligible dependent).

Member Certificate. Another term for certificate of coverage.

Member Month. The total number of participants who are members for each month.

Members Per Year. The total number of member months divided by 12.

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

Mental Health Provider. Individuals who are qualified to provide mental health services in accordance with the state or federal law which applies. Includes psychiatrists, social workers and psychologists.

Mental Health Services and Supplies. Items required for treatment of mental illness, including substance abuse and alcoholism.

Mercantile Open Stock Policy. A crime insurance form used by retail establishments to cover merchandise, furniture and equipment after hours while the insured business is closed. It covered losses by burglary or robbery of a watchperson. It has been replaced by modern commercial crime coverage forms.

Mercantile Risk. A retail or wholesale risk as contrasted with a service risk, manufacturing risk or a habitational risk.

Mercantile Robbery and Safe Burglary Policy. A crime insurance form used by retail establishments to insure money and securities. It has been replaced by modern commercial crime coverage forms.

Merchant Marine Act. Also known as the Jones Act. A law that permits an injured seaman to sue his employer for damages and to have a jury trial. Insurance is provided under the employers liability section of a standard workers’ comp policy, but when the exposure exists the insurance company usually requires attachment of the maritime coverage endorsement, which actually limits the insurance and adds a few exclusions to the policy.

Merit Rating. A rating plan used in several forms of insurance but most commonly in personal auto. It is a method whereby the insured’s premium varies up or down depending on the insured’s own past loss record.

MERP. See Medical Expense Reimbursement Plan.

Messenger. Under commercial crime insurance coverages, the named insured or any of the insured’s partners or employees while having care and custody of property outside the insured’s premises.

Messenger Robbery Insurance. Coverage on money and other property in the possession of persons who are away from the premises (e.g., an employee taking a deposit to the bank).

MIB. See Medical Information Bureau.

Midi Tail. Automatic five-year extended reporting period allowing for the making of claims after expiration of a “claims-made” liability policy, but only applies to claims arising from occurrences that were reported no later than 60 days after the end of the policy. See also Extended Reporting Period.

Mill (or Slow-Burning) Construction. Construction meeting certain high specifications and standards. Factories and warehouses, constructed to meet these specifications qualify for reduced fire insurance rates.

Million Dollar Round Table (MDRT). An association of life insurance agents who qualify by selling $1 million worth or more of life insurance coverage. The policies must meet certain qualification standards, and applicants must be members of the National Association of Life Underwriters.

Mini Tail. Automatic 60-day extended reporting period allowing for the making of claims after expiration of a “claims-made” liability policy. See also Extended Reporting Period.

Minimum Amount Policy. A life insurance policy that is sold only with a minimum face amount. It can have a lower rate than other inexpensive coverages because certain insurance company expenses, like those of policy writing, do not increase proportionately with the face amount of the policy sold.

Minimum Compensation Level. The amount of compensation an employee must earn before being eligible to participate in a pension or profit sharing plan.

Minimum Deposit Insurance. See Financed Insurance and Minimum Deposit Policy.

Minimum Deposit Policy. A cash value life insurance policy having a first-year loan value that is available to borrow against immediately upon payment of the first-year premium.

Minimum Guarantee. Guaranteed interest that is the predetermined lowest rate.

Minimum Premium. (1) The smallest amount of premium for which an insurer will issue coverage under a given policy. (2) A cost plus arrangement whereby the employer pays the insurer only a portion of the premium which is to be used for administration costs. The remainder is placed in a “bank account” which is then used by the insurer to pay claims.

Minimum Rate. A rate for low hazard risks.

Minimum Retained Limit. The greater of the deductible shown in the Declarations or the actual amount of underlying insurance available to the insured.

Minimum Retrospective Premium. Used in a retrospective rating plan, the lowest amount the insured can pay under the plan, regardless of the losses incurred.

Miscellaneous Benefits. Benefits provided by a group medical policy that cover most inpatient medical expenses except room and board charges and surgical fees.

Miscellaneous Dwelling Endorsement. An endorsement attached to an insured’s policy that modifies some of the policy provisions, particularly provisions concerning the amount of insurance and the premium.

Miscellaneous Endorsements. Endorsements that increase coverage limits for specified property, limit coverage for specified property or portions of the premises and exclude coverage for specified persons, premises or types of property.

Miscellaneous Expenses. Ancillary expenses, usually hospital charges other than daily room and board (e.g., x-rays, drugs and lab fees). The total amount of such charges that are reimbursed is limited in most basic hospitalization policies.

Miscellaneous Type Vehicle Endorsement. An endorsement that insures types of vehicles that are not normally eligible for personal auto coverage under a standard policy—like cars not designed for road travel and recreational vehicles. The endorsement changes the policy definition of the covered auto to include miscellaneous type vehicles, and states the type of miscellaneous vehicle in the schedule or Declarations. Also covers any miscellaneous type vehicle acquired during the policy period.

Misrepresentation. The use of oral or written statements that do not truly reflect the facts either by an insured on an application for insurance or by an insurer concerning the terms or benefits of an insurance policy. These situations usually involve issues—like reasonable reliance and bad faith refusal to pay, and can be grounds for nullification of the policy—or damages in excess of policy limits.

Misstatement of Age. (1) Providing the wrong age on an application for life and health insurance or for a beneficiary who is to receive benefits on a basis involving his or her life contingency. (2) A provision in most life and health policies setting forth the action to be taken if a misstatement of age is discovered after the policy is issued. This is one of the uniform provisions for individual health insurance policies.

Mixed Insurer (or Company). An insurance company that splits ownership among stockholders and policyowners. The term also indicates an insurer issuing both life and health insurance policies. It is often erroneously used to describe an insurer offering both participating (dividend paying) and nonparticipating plans.

MLIRB. Multi-Line Insurance Rating Bureau.

Mobile Agricultural Machinery and Equipment Coverage Form. A commercial property form specifically designed to insure farm machinery and equipment when it is the only exposure, or when the coverage must be written separately. Similar coverage may also be included in the farm property coverage form.

Mobile Equipment. Land vehicles, including attached machinery and apparatus, whether or not self-propelled, and: 1) not subject to motor vehicle registration; 2) used exclusively on the insured’s premises; 3) principally for use off public roads; or 4) designed or maintained to provide mobility for permanently attached equipment such as cranes, loaders, pumps, generators or welding equipment.

Mobile Home Endorsement/Policy. A homeowners policy written on a mobile home that is permanently situated. Alters certain policy provisions as necessary to provide mobile home coverage. Mobile homes may also be covered with separate, standalone insurance policies designed particularly for that use.

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

Model Year. The auto manufacturer’s model year. Auto manufacturers usually start selling their new models in the fall of the previous year—for example, 1994 models are often introduced in the fall of 1993. It is the model year and not the year of purchase that appears in the Declarations.

Modified. (1) Under a modified coinsurance provision in life reinsurance, the ceding insurer retains and maintains the entire reserve, with the annual increase in reserve being transferred to the ceding insurer by the reinsurer at the end of the year. (2) Under preliminary term insurance, a modified reserving system permits at least part, if not all, of the first year’s net premium on a life insurance policy to be used to meet first-year acquisition costs and claim expenses and requires that part of the renewal loading be added to the policy reserve accumulation. (3) Any premium that is altered from the regular premium for similar life policies, such as the premium for a modified life policy.

Modified Adjusted Gross Income. A worker’s adjusted gross income plus tax exempt interest received during a tax year.

Modified Community Rating. A method of determining rates for medical services based on data from a given geographic area.

Modified Endowment Contract. An endowment contract where the amount payable upon survival of the endowment period is greater than the face amount and the amount payable at death is the greater of the face amount or cash value. Modified endowment contracts are subject to taxation and subsequent penalties.

Modified Fee-for-Service. A situation where reimbursement is made based on the actual fees subject to maximums for each procedure.

Modified Fire-Resistive Construction. A building with exterior walls, floors and roof constructed of masonry or fire-resistive materials.

Modified Life Policy. An ordinary life contract under which the premiums are modified so as to be lower than normal for the first three to five years and higher than normal after that. A special case: a level term policy, under which no part of the premium goes towards savings, that automatically converts to a whole life policy at a designated time.

Money and Securities Broad Form. A once popular crime insurance form used by businesses to protect money and securities against many types of losses that has been replaced by modern commercial crime coverage forms. See Theft, Disappearance and Destruction Coverage Form.

Money Purchase Plan. A pension or retirement plan. A plan where a specified amount of money is used periodically to purchase an annuity for each employee covered by the plan. The total of these annuities is then paid to the employee at retirement.

Money-Purchase Benefit Formula. A pension plan under which contributions of both the employer and the employee are fixed as flat amounts or flat percentages of the employee’s salary. See Defined Contribution Pension Plan.

Monoline Policy. Any insurance coverage written as a single line policy. Contrast with Multiple Line or Package Policy.

Monopolistic State Fund. The state-operated company in those states having laws that require all businesses to buy workers’ compensation insurance from the state. Private insurers cannot compete in these states.

Monthly Administration Fee. In universal life insurance, an administrative fee is charged each month to cover administrative expenses.

Monthly Debit Ordinary (MDO). Ordinary insurance policies whose premiums are collected at the door monthly in the same fashion as industrial policies.

Moral Hazard. A condition of morals or habits that increases the probability of loss from a peril (e.g., an individual who previously burned his or her own property to collect the insurance). Some insurance professionals use the terms moral and morale hazard interchangeably. See Morale Hazard.

Morale Hazard. Hazard arising out of an insured’s indifference to loss because of the existence of insurance (e.g., the attitude, “It’s insured, so why worry.”) If an insurer concludes that a person poses a morale hazard risk, it may add a surcharge to the disability premium or—more likely—will decline the application. See Moral Hazard.

Morbidity. The relative incidence of disease.

Morbidity Rate. The ratio of the incidence of sickness to the number of well persons in a given group of people over a given period of time. It may be the incidence of the number of new cases in the given time or the total number of cases of a given disease or disorder.

Morbidity Table. A table showing the incidence of sickness at specified ages in the same fashion that a mortality table shows the incidence of death at specified ages.

Mortality Charge. The charge for the element of pure insurance protection in a life insurance policy.

Mortality Cost. A factor considered in life insurance premium rates. Insurers have an idea of the probability that any person will die at any particular age; this is the information shown on a mortality table. The pure mortality cost is the face amount of the policy multiplied by the probability that it will have to be paid out as a claim.

Mortality, Experienced. See Experienced Mortality.

Mortality Guarantee. The provision that guarantees an annuitant income for life regardless of changes in the mortality of the population.

Mortality Rate. The number of deaths in a group of people, usually expressed as deaths per thousand. It can be the rate for the total population, called the crude mortality rate, or it can be refined by factors such as age groupings or causes of deaths. Same as Death Rate.

Mortality Savings. The remainder, if any, after subtracting experienced mortality from expected mortality.

Mortality Table. A table showing the incidence of death at specified ages. It shows the number of persons in each age group that die, expressed in terms of deaths per thousand, and based on the deaths in a population of a million persons. Insurance companies use these tables to determine the life expectancy of insureds and possible insureds.

Mortgage. Interest in real property conveyed to mortgagee as security for the loan of money by the mortgagee to the mortgagor, often the money being used by the mortgagor for the purchase of the real property from its seller (also known as a purchase money mortgage).

Mortgage (or Mortgagee) Clause. A provision attached to a fire or other direct damage policy that covers mortgaged property, specifying that the loss reimbursement shall be paid to the mortgagee as the mortgagee’s interest may appear, that the mortgagee’s rights of recovery shall not be defeated by any act or neglect of the insured, and giving the mortgagee other rights, privileges and duties.

Mortgagee. The creditor to whom a mortgage is given and who lends money on the security of the value of the property mortgaged.

Mortgage Holders Errors and Omissions Coverage Form. A commercial property form that protects the interests of mortgage holders from losses resulting from errors and omissions.

Mortgage Insurance. In life and health insurance, a policy covering a mortgagor. The benefits are usually intended (1) to pay off the balance due on a mortgage upon the death of the insured, or (2) to meet the payments on a mortgage as they fall due in the case of the insured’s death or disability. Also called Mortgage Redemption Insurance.

Mortgagor. The debtor who receives money and in turn grants a mortgage on his or her property as security for a loan.

Mortgage Redemption Insurance. (1) See Mortgage Insurance. (2) A monthly reducing term policy used for mortgage insurance.

Motor Carrier Act of 1980. The act requires minimum liability coverage for carriers of certain hazardous substances. In addition to the direct injury and damage that can be caused by a collision involving a commercial carrier, hazardous substances pose a special threat.

Motor Truck Cargo Policy (Carrier’s Form). Indemnifies truckers, for loss or damage resulting from legal liability as a carrier while transporting the property of others. It does not insure against any loss for which the trucker is not legally liable. Statutory law requires a trucker to carry a minimum amount of coverage.

Motor Truck Cargo Policy (Owner’s Form). Insures the owner of a truck against loss to his or her own property while being transported. It pays for the loss or damage of cargo for the perils insured against, regardless of the legal liability.

Motor Vehicle Record (MVR). Record of a driver’s accidents and/or traffic violations.

MPIC. Multiple Peril Insurance Conference.

Multi-Disciplinary. Treatment which involves care provided by a wide range of specialists.

Multiemployer Plan. A plan to which more than one employer contributes, or a plan mandated by a collective bargaining agreement.

Multi-Peril Crop Insurance (MPCI). Crop insurance usually providing coverage against crop losses by adverse weather (hail, wind, etc.), fire, flood, insects, etc.

Multi-Peril Policies. Policies that cover a number of perils, such as fire, burglary and liability, in a single contract.

Multiple Employer Trust (MET). A trust consisting of multiple small employers in the same industry, that is formed for the purpose of purchasing group health insurance or establishing a self-funded plan at a lower cost than any available to the employers individually.

Multiple Employer Welfare Arrangements (MEWA). Employer funds and trusts providing health care benefits to individuals.

Multiple Funding. Providing retirement benefits through the use of a separate fund in addition to insurance cash values.

Multiple Indemnity. A provision that some or all of the benefits under a policy will be increased by a stated multiple, such as 100 or 200 percent, in the event that a peril occurs in a specified way (e.g., double indemnity on life insurance for accidental death).

Multiple Line Law. A law passed by states that allows an insurance company to write both property and casualty insurance. Prior to these laws, it was common for a state to allow some companies to write only property insurance and other companies to write only casualty insurance, depending on which type of insurance the company applied for in its license.

Multiple Line Policy. A policy that includes several different coverages such as property, liability and crime. Any personal or commercial package policy.

Multiple Location Policy. Protection of property in more than one location that is owned or controlled by one person.

Multiple Location Rating Plan. See Premium and Dispersion Credit Plan.

Multiple Option Plan. Under this plan, employees can optionally choose from an HMO, PPO or a major medical plan.

Multiple Protection Insurance. A combination of term and whole life insurance that pays some multiple of the face during the period of the term policy, becoming a regular whole life policy after the term policy expires. The multiple protection period is thus the period during which both the term and the whole life coverages are in effect.

Mutual Atomic Energy Reinsurance Pool. A group of mutual insurance companies that reinsure liability policies written on private nuclear energy reactors. Most insurers exclude this coverage. See also Radioactive Contamination Insurance.

Mutual Benefit Association. An organization offering benefits to members on a plan under which no fixed premiums are paid in advance but assessments are levied on members to meet specific losses as they occur. See also Assessment Company, Society or Insurer.

Mutual Fund. An investment company that raises money by selling its own stock to the public. It then invests the proceeds in other securities and the value of its own stock fluctuates with its experience with the securities in its portfolio. Mutual funds are of two types: 1) open-end, in which capitalization is not fixed and more shares may be sold at any time; and 2) closed-end, in which capitalization is fixed and only the number of shares originally authorized may be sold.

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

Mutual Insurer Policy. Insurance issued by a mutual insurer.

Mutual Investment Trust. See Mutual Fund.

Mutualization. The process of converting a stock insurer to a mutual insurer, accomplished by having the insurer buy stock and retire it.

MVRs. See Motor Vehicle Record.

Mysterious Disappearance. A disappearance of property that cannot be explained. Crime insurance policies use this term to give very broad coverage as opposed to policies which narrow definitions to specific perils such as robbery and burglary.

N

NAIB. See National Association of Insurance Brokers,Inc.

NAIC. See National Association of Insurance Commissioners.

NAII. See National Association of Independent Insurers.

NAIW. National Association of Insurance Women.

NALC. See National Association of Life Companies.

Name Position Bond. A fidelity bond that covers losses caused by the dishonesty of employees holding positions specifically named in the bond. Contrast with Name Schedule Bond and Blanket Bond.

Name Schedule Bond. A fidelity bond that covers losses caused by the dishonesty of employees specifically named in the bond. Contrast with Name Position and Blanket Bond.

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

Named Non-Owner Policy. An automobile policy issued to someone who does not own a vehicle, but who drives borrowed or rented autos.

Named Perils. Perils specifically covered on property insured. Contrast with Open Perils (All Risk) Insurance.

NAMIC. See National Association Of Mutual Insurance Companies.

NAPIA. National Association of Professional Insurance Agents.

NASD. See National Association of Securities Dealers.

National Association of Independent Insurers (NAII). An association comprised of fire, casualty and surety insurers that do not belong to large rating bureaus. It distributes considerable information about legislation and litigation.

National Association of Insurance Brokers, Inc. (NAIB). A voluntary association of insurance brokers that exchange information and make recommendations to state legislatures.

National Association of Insurance Commissioners (NAIC). An association of state insurance commissioners formed for the purpose of exchanging information and for developing uniformity in the regulatory practices of the states through drafting model legislation and regulations. The NAIC has no official power to enforce compliance with its recommendations.

National Association of Life Companies (NALC). A voluntary association of smaller and newer companies for exchange of information and ideas.

National Association of Life Underwriters (NALU). An association of life insurance agents, the activities of which center on the welfare and education of agents and legislation affecting agents.

National Association of Mutual Insurance Companies (NAMIC). A voluntary intercompany organization of mutual property and liability insurers formed for the exchange of information and discussion.

National Association of Securities Dealers (NASD). A voluntary association of brokers and securities dealers handling over-the-counter securities. It serves a quasi-official function in the regulation of licensing and also acts as a bureau that formulates rates, rating plans and policy wording for about half of the states. Many other states subscribe to the various services it provides. It is supported by the insurance companies that belong to it.

National Auto Theft Bureau. An organization engaged in the prevention and reduction of motor vehicle fire and theft losses.

National Council on Compensation Insurance (NCCI). An association of insurers selling compensation coverage and operating as a rating organization. NCCI collects statistics, develops rates and policy forms and makes state filings for its members.

National Crop Insurance Association. A sister organization to the Crop Hail Insurance Actuarial Association (CHIAA). In 1989, these two organizations were consolidated to become National Crop Insurance Services (NCIS).

National Crop Insurance Services (NCIS). A voluntary, nonprofit organization made up of more than 140 member companies that compiles research and statistics in order to develop crop insurance rates and forms.

National Drug Code (NDC). A system for identifying drugs.

National Flood Insurance Program (NFIP). Federal program providing flood insurance for fixed property. Under a “dual” program, coverage may be written directly by the NFIP or by private carriers who may be reimbursed by the NFIP.

National Fraternal Congress of America. A federation of fraternal benefit societies.

National Health Insurance. Any system of socialized insurance benefits covering all or nearly all of the citizens of a country, established by its federal law, administered by its federal government and supported or subsidized by taxation.

National Insurance Association, Inc. An intercompany association of insurers formed to exchange information and ideas on common problems uniqueto the black community.

National Safety Council. A nonprofit organization chartered by Congress in 1913 to disseminate safety education material. It is made up of approximately 12,000 industry members nationwide.

National Service Life Insurance (NSLI). Life insurance made available by the federal government for members of the United States armed forces from 1940 to 1951.

Nationwide Definition of Marine Insurance. A statement recommended by the National Association of Insurance Commissioners indicating the types of insurance written under ocean or inland marine policies. Most states use this definition, subject to some individual exceptions. See also Ocean Marine and Inland Marine Insurance.

Natural Death. Death by means other than accident or homicide.

Natural Premium. The pure mortality cost of life insurance for one year at any given age. See also Pure Premium.

NCCI. See National Council on Compensation Insurance.

Negligence. Failure to use that degree of care which an ordinary person of reasonable prudence would use under the given or similar circumstances. A person may be negligent by acts of omission or commission or both. In order for negligence to exist, four elements must be present: 1) duty to act; 2) breach of the duty to act; 3) occurrence of injury or damage; and 4) negligence as the proximate cause of the injury or damage. If any of these elements is absent, negligence does not exist, and the tortfeasor will not be held liable due to negligence.

Negligence, Comparative. See Comparative Negligence.

Negligence, Contributory. See Contributory Negligence.

Negligence, Gross. See Gross Negligence.

Negligence, Presumed. See Res Ipsa Loquitur.

Net Amount at Risk. The differences between the face amount of a policy and the reserve or cash value that has been built up under that policy.

Net Cost. Premiums paid minus cash value and any policy dividends paid as of the date the calculation is being made. In the life business, it is common to draw up net cost comparisons at the end of 10 and 20 years.

Net Increase. The increase in the total amount of business an insurer has to force over a given period of time. It is figured as the total of new policies issued plus those renewed less policies lapsed and canceled.

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

Net Level Premium. The pure mortality cost of a life insurance policy from its inception to its maturity date, divided by the number of years the policy is to be in force. See Level Premium Insurance.

Net Level Premium Reserve. The reserve needed by an insurer to cover net level policies that are in their later years. Loosely speaking, the level premium system of paying for a long-term life or health policy involves overpayment in the early years and underpayment in the later years.

Net Line. The amount of coverage retained by the ceding company on an individual risk in a surplus reinsurance treaty. It also refers to the maximum amount of loss on a particular risk to which an insurer will expose itself without reinsurance. See also Lines and Retention.

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

Net Premium. (1) The amount of premium minus the agent’s commission. (2) The premium necessary to cover only anticipated losses, before covering other expenses. (3) The original premium minus dividends paid or anticipated in participating life insurance when the insured elects to use dividends toward payment of the premiums. Contrast with Gross Premium.

Net Quick Assets. The difference between allowable current assets and changeable current liabilities. This figure is referred to as the working capital. A contractor must have adequate working capital in order to be bonded.

Net Rate. (1) See Net Premium for the definition applicable to participating life insurance policies. (2) In a nonparticipating policy, the book rate.

Net Retained Line. See Net Line.

Net Retention. The amount of insurance that a ceding company keeps for its own account and does not reinsure.

Net Worth. The amount by which assets exceed liabilities. It is of concern to bond indemnifiers in determining the size of a job a contractor can handle.

Network Model HMO. Under this model, an HMO contracts with several physician groups. Physicians may share in savings, but may provide care for other than HMO members.

New for Old. Replacing old damaged parts or equipment with new ones rather than repairing them.

New York Standard Fire Policy (SFP). The basic fire insurance contract that was used in nearly every state. It provided coverage against loss by fire, lightning and removal, and established policy provisions that became the foundation for property insurance contracts. EC and VMM coverage could be added by endorsement. In recent years, the standard fire policy has become obsolete, except in a few states where its use is still required by law.

Newly Acquired Autos. Any automobile purchased after the effective date but before the end of the term of an automobile policy. Newly acquired autos receive some automatic coverage but the insured must notify the insurance company of the acquisition within 30 days.

Newspaper Policy. A form of limited health insurance often sold by newspapers to build or conserve circulation.

NFIA. National Flood Insurers Association.

NFPA. National Fire Protection Association.

No Benefit to Bailee. A provision in an inland marine form that states that any insurance a person has on property in the possession of a bailee will not be for the direct or indirect benefit of any carrier or other bailee for hire. A bailee is someone who has been entrusted with someone else’s property, usually for the purpose of service, repair or storage (e.g., dry cleaners, television repair shops, garages and public parking lots).

NOC. Not Otherwise Classified. A term used in the classification section of liability or workers’ comp rating manuals. If a listing is followed by an NOC, it means to use this classification if an insured cannot be classified more specifically.

No-Fault Insurance. Many states have passed laws permitting the individual automobile accident victim to collect directly from his or her own insurance company for medical and hospital expenses regardless of who was at fault in the accident.

Nominal Damages. A small amount of money awarded to a plaintiff to verify his or her legal rights, even though no actual damages have been proven.

Non-admitted Assets. Assets that do not qualify under state law for insurance statement purposes (e.g., furniture, fixtures, agents’ debit balances and accounts receivable that are over 90 days old).

Non-admitted Insurer. An insurer not licensed to do business in the jurisdiction in question. Also called unauthorized or unlicensed insurer.

Non-admitted Reinsurance. Reinsurance for which no credit is given in a ceding company’s annual statement because the reinsurer is not licensed or authorized to transact that particular line of business in the jurisdiction in question.

Nonassessable Policy. A policy for which the policyowner pays a set premium. No additional premiums or amounts can be assessed. These are issued primarily by stock insurers, but are also issued by mutual insurers who qualify to do so by meeting certain standards under state laws.

Nonassignable. A policy that cannot be assigned to a third party. Most policies are nonassignable unless approval is given by the insurer.

Non-cancelable (“Non-Can”) Contract. A contract of health insurance that the insured has a right to continue in force by payment of premiums, as set forth in the contract, for a substantial period of time, also as set forth in the contract. During that period, the insurer has no right to make any change to the contract. The NAIC recommends that the term “non-cancelable” not be used to designate any form that is not renewable to at least age 50 or for at least five years if issued after age 44. Note that this is in contrast to guaranteed renewable, on which the premium may be increased by classes. The premium for non-cancelable policies must remain as stated in the policy at the time of issue. Contrast with Guaranteed Renewable.

Nonconcurrency. When a number of insurance policies intended to cover the same property against the same hazards are not identical as to the extent of coverage. Nonconcurrency usually results in an insured not being fully covered for a loss. Modern forms have minimized this problem.

Nonconfining Sickness. Sickness that does not confine the insured indoors.

Noncontributory Retirement Plan. A retirement plan funded entirely by the employer.

Noncontributory. A plan, usually group, for which the employer pays the entire premium and the employee contributes no part of the premium.

Noncupative Will. An oral will given in the presence of witnesses usually at the time when the testator is very near death.

Non-Disabling Injury. An injury that does not qualify the insured for total or partial disability benefits. Disability income policies may contain a provision for a small benefit in the case of such an injury, including medical costs of up to 25 to 50 percent of one month’s disability benefit payment.

Non-Disabling Injury Rider. An optional disability income policy rider that does not pay a disability benefit but rather provides for the payment of medical expenses incurred due to injury that does not result in total disability.

Nonduplication of Benefits. A provision in some health policies specifying that benefits will not be paid for amounts reimbursed by others. In group insurance, it is called coordination of benefits.

Non-Earned Income. Group disability income insurance, interest income, dividends, rental income, deferred compensation and residual commissions, royalties and other miscellaneous income.

Nonforfeitable Benefit. A benefit payable under a pension plan that unconditionally belongs to a participant of the plan.

Nonforfeiture Provisions. Protects the contract holder from total forfeiture or loss of benefits if he stops making the required periodic payments and surrender charges, or penalties for cashing in the annuity before the pay out period.

Nonforfeiture Values. Those values in a life insurance policy that by law the policyowner cannot forfeit even if he ceases to pay the premiums. These benefits are the cash surrender value, the loan value, the paid-up insurance value and the extended term insurance value. The insured may choose one of these nonforfeiture options, but even if he fails to do so, the one specified in the contract for such a case automatically goes into effect.

Noninsurable Risk. A risk that cannot be measured actuarially or in which the chance of loss is so high that insurance cannot be written against it.

Noninsurance. Making no financial preparation for meeting losses.

Nonmedical (Non-Med) Contract. Life or health insurance underwritten on the basis of an insured’s statement of health with no medical examination required.

Non-occupational Insurance. See Unemployment Compensation Disability Insurance.

Non-Occupational Policy. A policy or provision of a policy which excludes accidents occurring on the job, when such employment is covered by workers’ compensation. Policies make these distinctions because occupational disabilities normally are covered through workers’ compensation or similar statutory plans. Most often, group disability income contracts will specify occupational or non-occupational coverage. See Occupational Coverage.

Nonowned Auto. (1) Any auto, pickup, van or trailer that is operated by or in the custody of, but is not owned by or furnished for the regular use of, the named insured or a family member (includes temporary substitute vehicles—borrowed or rented). (2) Any autos not owned, leased, hired or borrowed that are used in connection with the business.

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

Non-Participating Physician. One who is not approved by Medicare for direct payment and may charge more for services. See Participating Physician.

Non-participating Provider. (1) A provider who has not signed a contract with a health plan. (2) A medical or health care provider who is not certified to participate in the Medicare program.

Non-participating Provider Indemnity Benefits. Coverage where services provided by nonparticipating providers are reimbursed under an indemnity basis.

Non-profit Insurers. Insurers organized under special state laws, usually exempting them from some taxes imposed on regular insurers, to supply medical expense reimbursement insurance, usually on a service basis (e.g., “Blue Cross and Blue Shield).

Non-proportional Reinsurance. See Aggregate Excess of Loss Reinsurance.

Non-Qualified Plan. A benefit plan, such as a retirement plan, that may be discriminatory, need not be filed with the IRS and does not provide a current tax deduction for contributions. The employer can choose which employees will participate in this program; any investment income on contributions made to the plan is not tax-deferred (for the employer); the employer does not enjoy a current tax deduction on contributions; and the plan must be in writing and communicated to the employee(s). See Qualified Deferred Compensation Plan.

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

Nonresident Agent. An agent licensed in a state in which he does not live.

Nonvalued Policy. A policy that is not valued; that is, when the policy is written, the amount to be paid in the event of a loss is not stated. Most property policies are nonvalued.

Noon Clause. A provision that says insurance coverage starts at noon, standard time, at the location of the insured’s property. Most property policies have been changed so that the effective time is 12:01 a.m., thus the noon clause is rare.

“Normal” Retirement. Retirement at an age specified by the pension plan as being the standard age for retirement. See Mandatory Retirement.

Normal Retirement Benefit. An employee’s early retirement benefit from a plan, or the benefit payable at the time of his or her normal retirement age, whichever is greater. The value of the benefits are determined without regard to medical and/or disability benefits.

Not Otherwise Classified. See NOC.

Not Taken. Policies applied for and issued but rejected by the proposed owner and not paid for.

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

Notice of Claim. Also known as notice of loss. Notice to an insurer that a loss has occurred. This is a condition of most policies, and it is frequently required within a given time and in a particular manner. Typically an insured has 20 days to notify the insurer of a claim. Notification may take the form of a written communication or a telephone call to the insurance company or agent. If an insured is seriously injured and unable to notify the insurer within 20 days (e.g., due to being in a coma), then notification may occur later.

Notice of Loss. Notice to an insurer that a loss has occurred. Notice of loss is a condition of most policies, and it is frequently required within a given time and in a particular manner.

Notice to Company. Written notice to an insurer of the occurrence of an event.

NPD. No Payroll Division.

NSLI. See National Service Life Insurance.

Nuclear Energy Contamination. See Mutual Atomic Energy Reinsurance Pool and Radioactive Contamination Insurance.

Nuisance Value. An amount that an insurance company pays to settle a claim not because it is a valid claim but because the company considers it worth that amount to dispose of it.

Numerical Rating. An underwriting method of determining the extra rate to be charged for a substandard insured. “Standard” is rated 100. Various impairments are assigned various numerical values. The sum of 100 plus the values of the ratings of the impairments indicates the table to use in determining the rate of the policy.

Nurse Fees. A provision in a medical expense reimbursement policy calling for reimbursement for the fees of nurses other than those employed by the hospital.

Nursing Home. A licensed facility that provides general nursing care to those who are chronically ill or unable to take care of necessary daily living needs. Also called a long-term care facility.